Southern States Bancshares, Inc. Announces First Quarter 2024 Financial Results

April 22, 2024 at 7:30 AM EDT
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First Quarter 2024 Performance and Operational Highlights

  • Net income of $8.1 million, or $0.90 per diluted share
  • Core net income(1) of $8.1 million, or $0.90 per diluted share(1)
  • Net interest income of $20.8 million, an increase of $435,000 from the prior quarter
  • Net interest margin (“NIM”) of 3.59%, down 10 basis points from the prior quarter
  • NIM of 3.60% on a fully-taxable equivalent basis (“NIM - FTE”)(1)
  • Return on average assets (“ROAA”) of 1.33%; return on average stockholders’ equity (“ROAE”) of 14.87%; and return on average tangible common equity (“ROATCE”)(1) of 16.17%
  • Core ROAA(1) of 1.34%; and core ROATCE(1) of 16.19%
  • Efficiency ratio of 46.90%
  • Linked-quarter loan growth of 17.2% annualized
  • Linked-quarter total deposits grew 18.3% annualized
  • Linked-quarter total deposits, excluding brokered deposits, grew 7.1% annualized

(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

ANNISTON, Ala., April 22, 2024 (GLOBE NEWSWIRE) -- Southern States Bancshares, Inc. (NASDAQ: SSBK) (“Southern States” or the “Company”), the holding company for Southern States Bank, an Alabama state-chartered commercial bank (the “Bank”), today reported net income of $8.1 million, or $0.90 diluted earnings per share, for the first quarter of 2024. This compares to net income of $8.9 million, or $0.99 diluted earnings per share, for the fourth quarter of 2023, and net income of $7.7 million, or $0.85 diluted earnings per share, for the first quarter of 2023. The Company reported core net income of $8.1 million, or $0.90 diluted core earnings per share, for the first quarter of 2024. This compares to core net income of $7.3 million, or $0.81 diluted core earnings per share, for the fourth quarter of 2023, and core net income of $7.3 million, or $0.80 diluted core earnings per share, for the first quarter of 2023 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary


Mark Chambers, Chief Executive Officer and President of Southern States, said, “We built on our momentum in 2023 and continued strong lending activity in the first quarter, selectively identifying compelling opportunities while carefully managing risk and maintaining solid credit quality.”
 
“We grew our total loans by 17.2% annualized from the prior quarter, while our non-performing loans as a percentage of the total portfolio was just 0.18%. Our portfolio is in excellent shape. In addition to loan growth, we grew total non-brokered deposits by 7.1% annualized, and net interest income expanded by 2.1% as we benefited from higher yields on earning assets. While funding expenses remained elevated amid the higher-for-longer interest rate environment, resulting in continued pressure on our net interest margin, the rate of cost increases leveled off during the first quarter, and our NIM remained healthy at 3.59%.”
 
“With liquidity and capital levels, Southern States is well well-positioned to drive further growth across our footprint, which includes economically dynamic markets throughout Alabama and Georgia. Importantly, our previously announced acquisition of CBB Bancorp, the holding company for Century Bank of Georgia, will further fortify our deposit base and provide an excellent platform for loan growth in new markets. It gives us added confidence in our ability to deliver long-term value for our shareholders.”


Net Interest Income and Net Interest Margin


 Three Months Ended % Change March 31, 2024 vs.
March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2023 March 31, 2023
 (Dollars in thousands)    
          
Average interest-earning assets$2,336,369  $2,195,381  $1,947,957  6.4% 19.9%
Net interest income$20,839  $20,404  $19,546  2.1% 6.6%
Net interest margin 3.59%  3.69%  4.07% (10)bps (48)bps
          

Net interest income for the first quarter of 2024 was $20.8 million, an increase of 2.1% from $20.4 million for the fourth quarter of 2023. The increase was primarily driven by a higher yield on interest-earning assets resulting from growth at higher interest rates, which more than offset a higher cost of interest-bearing deposits due to both higher interest rates and competition.

Relative to the first quarter of 2023, net interest income increased $1.3 million, or 6.6%. The increase was substantially due to growth, which offset the decline in net interest margin.

Net interest margin for the first quarter of 2024 was 3.59%, compared to 3.69% for the fourth quarter of 2023. The decrease was primarily due to an increase in the cost of interest-bearing deposits, which was greater than the increase in the yield on interest-earning assets.

Relative to the first quarter of 2023, net interest margin decreased from 4.07%. The decrease was primarily the result of the rapid increase in interest rates, which accelerated the cost of interest-bearing liabilities at a greater pace than the yield received on interest-earning assets. A shift from noninterest-bearing deposits into interest-bearing deposits also had a negative impact on net interest margin.

Noninterest Income


 Three Months Ended % Change March 31, 2024 vs.
March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2023 March 31, 2023
 (Dollars in thousands)    
          
Service charges on deposit accounts$463  $441 $450  5.0% 2.9%
Swap fees 15   70  (4) (78.6)% (475.0)%
SBA/USDA fees 64   70  134  (8.6)% (52.2)%
Mortgage origination fees 96   87  100  10.3% (4.0)%
Net (loss) gain on securities (12)  98  514  (112.2)% (102.3)%
Other operating income 642   2,352  592  (72.7)% 8.4%
Total noninterest income$1,268  $3,118 $1,786  (59.3)% (29.0)%
          

Noninterest income for the first quarter of 2024 was $1.3 million, a decrease of 59.3% from $3.1 million for the fourth quarter of 2023. The fourth quarter of 2023 included a $1.9 million fee related to the early payoff of a $12.0 million purchased loan. As this was unusually large and atypical for the Bank, it was recorded as noninterest income instead of interest income, which would have impacted the net interest margin.

Relative to the first quarter of 2023, noninterest income decreased 29.0% from $1.8 million. The decrease was primarily due to a realized net loss on securities during the first quarter of 2024 compared to a net gain on securities during the first quarter of 2023.

Noninterest Expense


 Three Months Ended % Change March 31, 2024 vs.
March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2023 March 31, 2023
 (Dollars in thousands)    
          
Salaries and employee benefits$6,231 $5,739 $6,311 8.6% (1.3)%
Equipment and occupancy expenses 689  681  683 1.2% 0.9%
Data processing fees 643  639  593 0.6% 8.4%
Regulatory assessments 360  355  342 1.4% 5.3%
Other operating expenses 2,452  2,303  2,229 6.5% 10.0%
Total noninterest expenses$10,375 $9,717 $10,158 6.8% 2.1%
          

Noninterest expense for the first quarter of 2024 was $10.4 million, an increase of 6.8% from $9.7 million for the fourth quarter of 2023. The increase was primarily due to an increase in salaries and benefits, substantially as a result of higher payroll taxes brought about by incentive expense paid during the first quarter of 2024. In addition, other operating expense increased primarily as a result of the recognition of a $49,000 provision for credit losses on unfunded loan commitments during the first quarter of 2024, compared to a $334,000 credit for credit losses on unfunded loan commitments during the fourth quarter of 2023. These increases were partially offset by net forgery/fraud recoveries and a decrease in legal fees incurred during the first quarter of 2024.

Relative to the first quarter of 2023, noninterest expense increased 2.1% from $10.2 million. The increase was primarily attributable to increases in other operating expense, including marginal increases in insured deposit program expense, provision for credit losses on unfunded commitments and expense associated with a new market tax credit.

Loans and Credit Quality


 Three Months Ended % Change March 31, 2024 vs.
March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2023 March 31, 2023
(Dollars in thousands)    
          
Gross loans$1,971,396  $1,890,677  $1,650,929  4.3% 19.4%
Unearned income (6,247)  (6,169)  (5,614) 1.3% 11.3%
Loans, net of unearned income (“Loans”) 1,965,149   1,884,508   1,645,315  4.3% 19.4%
Average loans, net of unearned (“Average loans”)$1,916,288  $1,814,484  $1,609,564  5.6% 19.1%
          
Nonperforming loans (“NPL”)$3,446  $1,177  $1,646  192.8% 109.4%
Provision for credit losses$1,236  $2,579  $1,181  (52.1)% 4.7%
Allowance for credit losses (“ACL”)$25,144  $24,378  $19,855  3.1% 26.6%
Net charge-offs$470  $382  $197  23.0% 138.6%
NPL to gross loans 0.17%  0.06%  0.10%    
Net charge-offs to average loans(1) 0.10%  0.08%  0.05%    
ACL to loans 1.28%  1.29%  1.21%    
          
(1) Ratio is annualized.         
          

Loans, net of unearned income, were $2.0 billion at March 31, 2024, up $80.6 million from December 31, 2023 and up $319.8 million from March 31, 2023. The linked-quarter and year-over-year increases in loans were primarily attributable to new business growth across our footprint.

Nonperforming loans totaled $3.4 million, or 0.17% of gross loans, at March 31, 2024, compared with $1.2 million, or 0.06% of gross loans, at December 31, 2023, and $1.6 million, or 0.10% of gross loans, at March 31, 2023. The $2.3 million net increase in nonperforming loans in the first quarter was primarily attributable to one significant commercial real estate loan and one significant commercial and industrial loan each being placed on nonaccrual status. The $1.8 million net increase in nonperforming loans from March 31, 2023 was primarily attributable to the two significant aforementioned loans. These increases were partially offset by one significant commercial real estate loan being paid off.

The Company recorded a provision for credit losses of $1.2 million for the first quarter of 2024, compared to $2.6 million for the fourth quarter of 2023. Provision in the first quarter of 2024 was based on loan growth, qualitative economic factors and individually analyzed loans.

Net charge-offs for the first quarter of 2024 were $470,000, or 0.10% of average loans on an annualized basis, compared to net charge-offs of $382,000, or 0.08% of average loans on an annualized basis, for the fourth quarter of 2023, and net charge-offs of $197,000, or 0.05% of average loans on an annualized basis, for the first quarter of 2023.

The Company’s allowance for credit losses was 1.28% of total loans and 729.66% of nonperforming loans at March 31, 2024, compared with 1.29% of total loans and 2071.20% of nonperforming loans at December 31, 2023. Allowance for credit losses on unfunded commitments was $1.3 million at March 31, 2024.

Deposits


 Three Months Ended % Change March 31, 2024 vs.
March 31, 2024 December 31, 2023 March 31, 2023 December 31, 2023 March 31, 2023
 (Dollars in thousands)    
          
Noninterest-bearing deposits$416,704  $437,959  $433,833  (4.9)% (3.9)%
Interest-bearing deposits 1,693,094   1,580,230   1,355,658  7.1% 24.9%
Total deposits$2,109,798  $2,018,189  $1,789,491  4.5% 17.9%
          
Uninsured deposits$610,122  $615,651  $567,709  (0.9)% 7.5%
Uninsured deposits to total deposits 28.92%  30.51%  31.72%    
Noninterest deposits to total deposits 19.75%  21.70%  24.24%    
          

Total deposits were $2.1 billion at March 31, 2024, up from $2.0 billion at December 31, 2023 and $1.8 billion at March 31, 2023. The $91.6 million increase in total deposits in the first quarter was primarily due to an increase of $112.9 million in interest-bearing deposits, which includes a $60.2 million increase in brokered deposits, partially offset by a $21.3 million decrease in noninterest-bearing deposits. Total brokered deposits were $291.0 million at March 31, 2024.

Capital


 March 31,
2024		 December 31,
2023		 March 31,
2023
Company Bank Company Bank Company Bank
           
Tier 1 capital ratio to average assets8.79% 11.67% 8.99% 12.01% 8.89% 12.19%
Risk-based capital ratios:           
Common equity tier 1 (“CET1”) capital ratio9.39% 12.47% 9.20% 12.30% 9.00% 12.34%
Tier 1 capital ratio9.39% 12.47% 9.20% 12.30% 9.00% 12.34%
Total capital ratio14.42% 13.63% 14.29% 13.45% 14.41% 13.38%
            

As of March 31, 2024, total stockholders’ equity was $222.9 million, up from $215.0 million at December 31, 2023. The increase of $7.9 million was substantially due to earnings growth.

About Southern States Bancshares, Inc.

Headquartered in Anniston, Alabama, Southern States Bancshares, Inc. is a bank holding company that operates primarily through its wholly-owned subsidiary, Southern States Bank. The Bank is a full service community banking institution, which offers an array of deposit, loan and other banking-related products and services to businesses and individuals in its communities. The Bank operates 13 branches in Alabama and Georgia and two loan production offices in Atlanta.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, which reflect our current expectations and beliefs with respect to, among other things, future events and our financial performance. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. This may be especially true given recent events and trends in the banking industry and the inflationary environment. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the dates made, we cannot give any assurance that such expectations will prove correct and actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 under the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.

These statements are often, but not always, made through the use of words or phrases such as “may,” “can,” “should,” “could,” “to be,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “likely,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “target,” “project,” “would” and “outlook,” or the negative version of those words or other similar words or phrases of a future or forward-looking nature. Forward-looking statements appear in a number of places in this press release and may include statements about our acquisition of Century Bank of Georgia, business strategy and prospects for growth, operations, ability to pay dividends, competition, regulation and general economic conditions.

Contact Information


Lynn Joyce   Kevin Dobbs
(205) 820-8065   (310) 622-8245
ljoyce@ssbank.bank    ssbankir@finprofiles.com 


SELECT FINANCIAL DATA
(Dollars in thousands, except share and per share amounts)
      
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
     
Results of Operations     
Interest income$38,736  $36,172  $28,699 
Interest expense 17,897   15,768   9,153 
Net interest income 20,839   20,404   19,546 
Provision for credit losses 1,236   2,579   1,181 
Net interest income after provision 19,603   17,825   18,365 
Noninterest income 1,268   3,118   1,786 
Noninterest expense 10,375   9,717   10,158 
Income tax expense 2,377   2,330   2,322 
Net income$8,119  $8,896  $7,671 
Core net income(1)$8,128  $7,289  $7,280 
      
Share and Per Share Data     
Shares issued and outstanding 8,894,794   8,841,349   8,723,763 
Weighted average shares outstanding:     
Basic 8,913,477   8,864,734   8,762,450 
Diluted 9,043,122   9,021,358   9,044,490 
Earnings per share:     
Basic$0.91  $1.00  $0.87 
Diluted 0.90   0.99   0.85 
Core - diluted(1) 0.90   0.81   0.80 
Book value per share 25.06   24.31   21.74 
Tangible book value per share(1) 23.07   22.30   19.68 
Cash dividends per common share 0.09   0.09   0.09 
      
Performance and Financial Ratios     
ROAA 1.33%  1.53%  1.51%
ROAE 14.87%  17.02%  16.67%
Core ROAA(1) 1.34%  1.26%  1.44%
ROATCE(1) 16.17%  18.62%  18.45%
Core ROATCE(1) 16.19%  15.26%  17.51%
NIM 3.59%  3.69%  4.07%
NIM - FTE(1) 3.60%  3.71%  4.09%
Net interest spread 2.63%  2.73%  3.33%
Yield on loans 7.06%  6.91%  6.38%
Yield on interest-earning assets 6.67%  6.54%  5.97%
Cost of interest-bearing liabilities 4.04%  3.81%  2.64%
Cost of funds(2) 3.27%  3.03%  2.01%
Cost of interest-bearing deposits 3.92%  3.66%  2.42%
Cost of total deposits 3.12%  2.86%  1.81%
Noninterest deposits to total deposits 19.75%  21.70%  24.24%
Core deposits to total deposits 81.45%  83.70%  88.57%
Uninsured deposits to total deposits 28.92%  30.51%  31.72%
Total loans to total deposits 93.14%  93.38%  91.94%
Efficiency ratio 46.90%  41.48%  48.79%
Core efficiency ratio(1) 46.90%  45.78%  48.79%
      

(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(2) Includes total interest-bearing liabilities and noninterest deposits.

SELECT FINANCIAL DATA
(Dollars in thousands)
      
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
     
Financial Condition (ending)     
Total loans$1,965,149  $1,884,508  $1,645,315 
Total securities 197,006   198,632   183,197 
Total assets 2,510,975   2,446,663   2,135,622 
Total noninterest bearing deposits 416,704   437,959   433,833 
Total core deposits(1) 1,718,333   1,689,266   1,584,915 
Total deposits 2,109,798   2,018,189   1,789,491 
Total borrowings 146,773   183,673   131,372 
Total liabilities 2,288,094   2,231,699   1,945,959 
Total shareholders’ equity 222,881   214,964   189,663 
      
Financial Condition (average)     
Total loans$1,916,288  $1,814,484  $1,609,564 
Total securities 208,954   209,074   192,348 
Total other interest-earning assets 211,127   171,823   146,045 
Total interest-bearing assets 2,336,369   2,195,381   1,947,957 
Total assets 2,447,278   2,303,398   2,057,005 
Total noninterest-bearing deposits 416,141   420,019   438,735 
Total interest-bearing deposits 1,633,307   1,502,348   1,300,632 
Total deposits 2,049,448   1,922,367   1,739,367 
Total borrowings 148,771   140,790   104,901 
Total interest-bearing liabilities 1,782,078   1,643,138   1,405,533 
Total shareholders’ equity 219,622   207,324   186,639 
      
Asset Quality     
Nonperforming loans$3,446  $1,177  $1,646 
Other real estate owned (“OREO”)$33  $33  $2,930 
Nonperforming assets (“NPA”)$3,479  $1,210  $4,576 
Net charge-offs to average loans(2) 0.10%  0.08%  0.05%
Provision for credit losses to average loans(2) 0.26%  0.56%  0.30%
ACL to loans 1.28%  1.29%  1.21%
ACL to gross loans 1.28%  1.29%  1.20%
ACL to NPL 729.66%  2071.20%  1206.26%
NPL to loans 0.18%  0.06%  0.10%
NPL to gross loans 0.17%  0.06%  0.10%
NPA to gross loans and OREO 0.18%  0.06%  0.28%
NPA to total assets 0.14%  0.05%  0.21%
      
Regulatory and Other Capital Ratios     
Total shareholders’ equity to total assets 8.88%  8.79%  8.88%
Tangible common equity to tangible assets(3) 8.23%  8.12%  8.11%
Tier 1 capital ratio to average assets 8.79%  8.99%  8.89%
Risk-based capital ratios:     
CET1 capital ratio 9.39%  9.20%  9.00%
Tier 1 capital ratio 9.39%  9.20%  9.00%
Total capital ratio 14.42%  14.29%  14.41%
      

(1) We define core deposits as total deposits excluding brokered deposits and time deposits greater than $250,000.
(2) Ratio is annualized.
(3) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
      
 March 31, 2024 December 31, 2023 March 31, 2023
(Unaudited) (Audited) (Unaudited)
     
Assets     
Cash and due from banks$20,470  $19,710  $17,245 
Interest-bearing deposits in banks 129,917   134,846   99,541 
Federal funds sold 86,736   96,095   76,010 
Total cash and cash equivalents 237,123   250,651   192,796 
      
Securities available for sale, at fair value 177,379   179,000   163,550 
Securities held to maturity, at amortized cost 19,627   19,632   19,647 
Other equity securities, at fair value 3,638   3,649   3,806 
Restricted equity securities, at cost 5,108   5,684   3,862 
Loans held for sale 425   450   2,376 
      
Loans, net of unearned income 1,965,149   1,884,508   1,645,315 
Less allowance for credit losses 25,144   24,378   19,855 
Loans, net 1,940,005   1,860,130   1,625,460 
      
Premises and equipment, net 26,262   26,426   27,098 
Accrued interest receivable 9,561   8,711   7,077 
Bank owned life insurance 30,075   29,884   29,350 
Annuities 15,939   15,036   15,489 
Foreclosed assets 33   33   2,930 
Goodwill 16,862   16,862   16,862 
Core deposit intangible 817   899   1,144 
Other assets 28,121   29,616   24,175 
      
Total assets$2,510,975  $2,446,663  $2,135,622 
      
Liabilities and Stockholders' Equity     
Liabilities:     
Deposits:     
Noninterest-bearing$416,704  $437,959  $433,833 
Interest-bearing 1,693,094   1,580,230   1,355,658 
Total deposits 2,109,798   2,018,189   1,789,491 
      
Other borrowings 7,997   26,994   (16)
FHLB advances 52,000   70,000   45,000 
Subordinated notes 86,776   86,679   86,388 
Accrued interest payable 1,805   1,519   844 
Other liabilities 29,718   28,318   24,252 
      
Total liabilities 2,288,094   2,231,699   1,945,959 
      
Stockholders' equity:     
Common stock 44,746   44,479   43,798 
Capital surplus 79,282   78,361   77,053 
Retained earnings 109,838   102,523   80,642 
Accumulated other comprehensive loss (8,401)  (8,379)  (9,846)
Unvested restricted stock (1,030)  (466)  (965)
Vested restricted stock units (1,554)  (1,554)  (1,019)
      
Total stockholders' equity 222,881   214,964   189,663 
      
Total liabilities and stockholders' equity$2,510,975  $2,446,663  $2,135,622 
            


CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
      
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
(Unaudited) (Unaudited) (Unaudited)
Interest income:     
Loans, including fees$33,628  $31,613 $25,335 
Taxable securities 1,981   1,986  1,383 
Nontaxable securities 229   230  291 
Other interest and dividends 2,898   2,343  1,690 
Total interest income 38,736   36,172  28,699 
      
Interest expense:     
Deposits 15,906   13,869  7,768 
Other borrowings 1,991   1,899  1,385 
Total interest expense 17,897   15,768  9,153 
      
Net interest income 20,839   20,404  19,546 
Provision for credit losses 1,236   2,579  1,181 
Net interest income after provision for credit losses 19,603   17,825  18,365 
      
Noninterest income:     
Service charges on deposit accounts 463   441  450 
Swap fees 15   70  (4)
SBA/USDA fees 64   70  134 
Mortgage origination fees 96   87  100 
Net (loss) gain on securities (12)  98  514 
Other operating income 642   2,352  592 
Total noninterest income 1,268   3,118  1,786 
      
Noninterest expenses:     
Salaries and employee benefits 6,231   5,739  6,311 
Equipment and occupancy expenses 689   681  683 
Data processing fees 643   639  593 
Regulatory assessments 360   355  342 
Other operating expenses 2,452   2,303  2,229 
Total noninterest expenses 10,375   9,717  10,158 
      
Income before income taxes 10,496   11,226  9,993 
      
Income tax expense 2,377   2,330  2,322 
      
Net income$8,119  $8,896 $7,671 
      
Basic earnings per share$0.91  $1.00 $0.87 
      
Diluted earnings per share$0.90  $0.99 $0.85 
           


AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
                  
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
Average
Balance		 Interest Yield/Rate Average
Balance		 Interest Yield/Rate Average
Balance		 Interest Yield/Rate
Assets:                 
Interest-earning assets:                 
Loans, net of unearned income(1)$1,916,288  $33,628 7.06% $1,814,484  $31,613 6.91% $1,609,564  $25,335 6.38%
Taxable securities 163,586   1,981 4.87%  163,537   1,986 4.82%  139,516   1,383 4.02%
Nontaxable securities 45,368   229 2.03%  45,537   230 2.00%  52,832   291 2.24%
Other interest-earnings assets 211,127   2,898 5.52%  171,823   2,343 5.41%  146,045   1,690 4.69%
Total interest-earning assets$2,336,369  $38,736 6.67% $2,195,381  $36,172 6.54% $1,947,957  $28,699 5.97%
Allowance for credit losses (24,313)      (22,666)      (20,493)    
Noninterest-earning assets 135,222       130,683       129,541     
Total Assets$2,447,278      $2,303,398      $2,057,005     
                  
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing transaction accounts 85,858   26 0.12%  86,163   23 0.11%  93,951   20 0.08%
Savings and money market accounts 902,361   8,804 3.92%  885,548   8,445 3.78%  806,001   5,040 2.54%
Time deposits 645,088   7,076 4.41%  530,637   5,401 4.04%  400,680   2,708 2.74%
FHLB advances 53,121   655 4.96%  52,076   645 4.92%  18,578   159 3.47%
Other borrowings 95,650   1,336 5.62%  88,714   1,254 5.61%  86,323   1,226 5.76%
Total interest-bearing liabilities$1,782,078  $17,897 4.04% $1,643,138  $15,768 3.81% $1,405,533  $9,153 2.64%
                  
Noninterest-bearing liabilities:                 
Noninterest-bearing deposits$416,141      $420,019      $438,735     
Other liabilities 29,437       32,917       26,098     
Total noninterest-bearing liabilities$445,578      $452,936      $464,833     
Stockholders’ Equity 219,622       207,324       186,639     
Total Liabilities and Stockholders’ Equity$2,447,278      $2,303,398      $2,057,005     
                  
Net interest income  $20,839     $20,404     $19,546  
Net interest spread(2)    2.63%     2.73%     3.33%
Net interest margin(3)    3.59%     3.69%     4.07%
Net interest margin - FTE(4)(5)    3.60%     3.71%     4.09%
Cost of funds(6)    3.27%     3.03%     2.01%
Cost of interest-bearing deposits    3.92%     3.66%     2.42%
Cost of total deposits    3.12%     2.86%     1.81%
                     

(1) Includes nonaccrual loans.
(2) Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest-bearing liabilities.
(3) Net interest margin is a ratio of net interest income to average interest earning assets for the same period.
(4) Net interest margin - FTE is a ratio of fully-taxable equivalent net interest income to average interest earning assets for the same period. It assumes a 24.0% tax rate.
(5) Refer to “Reconciliation of Non-GAAP Financial Measures”.
(6) Includes total interest-bearing liabilities and noninterest deposits.

LOAN COMPOSITION
 
(Dollars in thousands)
            
 March 31, 2024 December 31, 2023 March 31, 2023
Amount % of gross Amount % of gross Amount % of gross
           
Real estate mortgages:           
Construction and development$252,934  12.8% $242,960  12.9% $227,560  13.8%
Residential 238,702  12.1%  224,603  11.9%  196,923  11.9%
Commercial 1,182,634  60.0%  1,144,867  60.5%  948,251  57.5%
Commercial and industrial 288,701  14.7%  269,961  14.3%  270,825  16.4%
Consumer and other 8,425  0.4%  8,286  0.4%  7,370  0.4%
Gross loans 1,971,396  100.0%  1,890,677  100.0%  1,650,929  100.0%
Unearned income (6,247)    (6,169)    (5,614)  
Loans, net of unearned income 1,965,149     1,884,508     1,645,315   
Allowance for credit losses (25,144)    (24,378)    (19,855)  
Loans, net$1,940,005    $1,860,130    $1,625,460   
                  


DEPOSIT COMPOSITION
(Dollars in thousands)
            
 March 31, 2024 December 31, 2023 March 31, 2023
Amount % of total Amount % of total Amount % of total
           
            
Noninterest-bearing transaction$416,704 19.7% $437,959 21.7% $433,833 24.2%
Interest-bearing transaction 974,079 46.2%  946,347 46.9%  877,166 49.0%
Savings 33,909 1.6%  35,412 1.7%  47,742 2.7%
Time deposits, $250,000 and under 584,658 27.7%  500,406 24.8%  366,271 20.5%
Time deposits, over $250,000 100,448 4.8%  98,065 4.9%  64,479 3.6%
Total deposits$2,109,798 100.0% $2,018,189 100.0% $1,789,491 100.0%
                  


Nonperfoming Assets
(Dollars in thousands)
      
 March 31, 2024 December 31, 2023 March 31, 2023
     
     
Nonaccrual loans$3,446  $1,017  $1,646 
Past due loans 90 days or more and still accruing interest —   160   — 
Total nonperforming loans 3,446   1,177   1,646 
OREO 33   33   2,930 
Total nonperforming assets$3,479  $1,210  $4,576 
      
Financial difficulty modification loans– nonaccrual(1) 675   907   805 
Financial difficulty modification loans – accruing 1,283   1,095   1,272 
Financial difficulty modification loans$1,958  $2,002  $2,077 
      
Allowance for credit losses$25,144  $24,378  $19,855 
Loans, net of unearned income at the end of the period$1,965,149  $1,884,508  $1,645,315 
Gross loans outstanding at the end of period$1,971,396  $1,890,677  $1,650,929 
Total assets$2,510,975  $2,446,663  $2,135,622 
Allowance for credit losses to nonperforming loans 729.66%  2071.20%  1206.26%
Nonperforming loans to loans, net of unearned income 0.18%  0.06%  0.10%
Nonperforming loans to gross loans 0.17%  0.06%  0.10%
Nonperforming assets to gross loans and OREO 0.18%  0.06%  0.28%
Nonperforming assets to total assets 0.14%  0.05%  0.21%
      
Nonaccrual loans by category:     
Real estate mortgages:     
Construction & Development$—  $—  $64 
Residential Mortgages 246   252   267 
Commercial Real Estate Mortgages 2,422   765   1,263 
Commercial & Industrial 778   —   51 
Consumer and other —   —   1 
Total$3,446  $1,017  $1,646 
            

(1) Financial difficulty modification loans are excluded from nonperforming loans unless they otherwise meet the definition of nonaccrual loans or are more than 90 days past due.

Allowance for Credit Losses
(Dollars in thousands)
      
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
     
Average loans, net of unearned income$1,916,288  $1,814,484  $1,609,564 
Loans, net of unearned income 1,965,149   1,884,508   1,645,315 
Gross loans 1,971,396   1,890,677   1,650,929 
Allowance for credit losses at beginning of the period 24,378   22,181   20,156 
Impact of adoption of ASC 326 —   —   (1,285)
Charge-offs:     
Construction and development —   —   — 
Residential 11   —   — 
Commercial 27   —   — 
Commercial and industrial 442   424   218 
Consumer and other 15   2   6 
Total charge-offs 495   426   224 
Recoveries:     
Construction and development —   —   — 
Residential 8   4   11 
Commercial —   —   — 
Commercial and industrial 16   39   14 
Consumer and other 1   1   2 
Total recoveries 25   44   27 
Net charge-offs$470  $382  $197 
      
Provision for credit losses$1,236  $2,579  $1,181 
Balance at end of the period$25,144  $24,378  $19,855 
      
Allowance for credit losses on unfunded commitments at beginning of the period$1,239  $1,524  $— 
Impact of adoption of ASC 326 —   —   1,285 
Provision (credit) for credit losses on unfunded commitments 49   (285)  — 
Balance at the end of the period$1,288  $1,239  $1,285 
      
Allowance to loans, net of unearned income 1.28%  1.29%  1.21%
Allowance to gross loans 1.28%  1.29%  1.20%
Net charge-offs to average loans, net of unearned income(1) 0.10%  0.08%  0.05%
Provision for credit losses to average loans, net of unearned income(1) 0.26%  0.56%  0.30%

(1) Ratio is annualized.

Reconciliation of Non-GAAP Financial Measures

In addition to reporting GAAP results, the Company reports non-GAAP financial measures in this earnings release and other disclosures. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors to view our performance using the same tools that our management uses to evaluate our performance. While we believe that these non-GAAP financial measures are useful in evaluating our performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.

The following table provides a reconciliation of the non-GAAP financial measures to their most directly comparable financial measure presented in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts
      
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
     
Net income$8,119  $8,896  $7,671 
Add: Net OREO gains —   (154)  — 
Less: Provision fee received on early loan payoff —   1,863   — 
Less: Net (loss) gain on securities (12)  98   514 
Less: Tax effect 3   (508)  (123)
Core net income$8,128  $7,289  $7,280 
Average assets$2,447,278  $2,303,398  $2,057,005 
Core return on average assets 1.34%  1.26%  1.44%
      
Net income$8,119  $8,896  $7,671 
Add: Net OREO gains —   (154)  — 
Add: Provision for credit losses 1,236   2,579   1,181 
Less: Provision fee received on early loan payoff —   1,863   — 
Less: Net (loss) gain on securities (12)  98   514 
Add: Income taxes 2,377   2,330   2,322 
Pretax pre-provision core net income$11,744  $11,690  $10,660 
Average assets$2,447,278  $2,303,398  $2,057,005 
Pretax pre-provision core return on average assets 1.93%  2.01%  2.10%
      
Net interest income$20,839  $20,404  $19,546 
Add: Fully-taxable equivalent adjustments(1) 73   99   85 
Net interest income - FTE$20,912  $20,503  $19,631 
      
Net interest margin 3.59%  3.69%  4.07%
Effect of fully-taxable equivalent adjustments(1) 0.01%  0.02%  0.02%
Net interest margin - FTE 3.60%  3.71%  4.09%
      
Total stockholders' equity$222,881  $214,964  $189,663 
Less: Intangible assets 17,679   17,761   18,006 
Tangible common equity$205,202  $197,203  $171,657 
      
(1) Assumes a 24.0% tax rate.
      
      
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts
      
 Three Months Ended
March 31, 2024 December 31, 2023 March 31, 2023
     
Core net income$8,128  $7,289  $7,280 
Diluted weighted average shares outstanding 9,043,122   9,021,358   9,044,490 
Diluted core earnings per share$0.90  $0.81  $0.80 
      
Common shares outstanding at year or period end 8,894,794   8,841,349   8,723,763 
Tangible book value per share$23.07  $22.30  $19.68 
      
Total assets at end of period$2,510,975  $2,446,663  $2,135,622 
Less: Intangible assets 17,679   17,761   18,006 
Adjusted assets at end of period$2,493,296  $2,428,902  $2,117,616 
Tangible common equity to tangible assets 8.23%  8.12%  8.11%
      
Total average shareholders equity$219,622  $207,324  $186,639 
Less: Average intangible assets 17,730   17,809   18,055 
Average tangible common equity$201,892  $189,515  $168,584 
Net income to common shareholders$8,119  $8,896  $7,671 
Return on average tangible common equity 16.17%  18.62%  18.45%
Average tangible common equity$201,892  $189,515  $168,584 
Core net income$8,128  $7,289  $7,280 
Core return on average tangible common equity 16.19%  15.26%  17.51%
      
Net interest income$20,839  $20,404  $19,546 
Add: Noninterest income 1,268   3,118   1,786 
Less: Provision fee received on early loan payoff —   1,863   — 
Less: Net (loss) gain on securities (12)  98   514 
Operating revenue$22,119  $21,561  $20,818 
      
Expenses:     
Total noninterest expense$10,375  $9,717  $10,158 
Less: Net OREO gains —   (154)  — 
Adjusted noninterest expenses$10,375  $9,871  $10,158 
Core efficiency ratio 46.90%  45.78%  48.79%