Southern States Bancshares, Inc. Announces Fourth Quarter 2022 Financial Results

January 23, 2023 at 8:02 AM EST
PDF Version

Fourth Quarter 2022 Performance and Operational Highlights

  • Net income of $10.6 million, or $1.18 per diluted share

  • Core net income(1) of $8.1 million, or $0.90 per diluted share(1)

  • Net interest income of $20.9 million, an increase of $1.4 million from the prior quarter

  • Net interest margin (“NIM”) of 4.38%, up 23 basis points from the prior quarter

  • NIM of 4.39% on a fully-taxable equivalent basis (“NIM - FTE”)(1)

  • Return on average assets (“ROAA”) of 2.11%; return on average stockholders’ equity (“ROAE”) of 23.77%; and return on average tangible common equity (“ROATCE”)(1) of 26.49%

  • Core ROAA(1) of 1.61%; and core ROATCE(1) of 20.21%

  • Efficiency ratio of 40.81%, an improvement from 48.94% for the prior quarter

  • Linked-quarter loan growth was 18.1% annualized(2)

  • Linked-quarter deposit growth was 4.6% annualized(2)

  • Completed the sale of two branches resulting in a $2.4 million net gain

(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) The sale of two branches on October 1, 2022 resulted in a $7.3 million reduction in loans and a $66.0 million reduction in deposits. The growth percentages are net of the accounts sold.

ANNISTON, Ala., Jan. 23, 2023 (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 $10.6 million, or $1.18 diluted earnings per share, for the fourth quarter of 2022. This compares to net income of $6.7 million, or $0.75 diluted earnings per share, for the third quarter of 2022, and net income of $4.1 million, or $0.44 diluted earnings per share, for the fourth quarter of 2021. The Company reported core net income of $8.1 million, or $0.90 diluted core earnings per share, for the fourth quarter of 2022. This compares to core net income of $6.8 million, or $0.77 diluted core earnings per share, for the third quarter of 2022, and core net income of $4.3 million, or $0.47 diluted core earnings per share, for the fourth quarter of 2021 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary
 
Stephen Whatley, Chairman and Chief Executive Officer of Southern States, said, “We are very pleased with our fourth-quarter and full-year results. Our talented bankers identified compelling opportunities throughout 2022, driving strong new business development. At the same time, we maintained underwriting discipline and excellent credit quality.”

“We grew loans by 18.1% annualized in the fourth quarter and 27.7% for the full year, culminating a year of robust production across our economically dynamic markets. This growth, combined with an increased net interest margin, fueled the expansion of our fourth-quarter net interest income, which increased by 7.5% from the prior quarter and by 48.2% from the fourth quarter of 2021.”

Mr. Whatley continued. “While our markets are healthy and our clients are cautiously optimistic, we are mindful of the slowing economic environment heading into 2023 and the lagging impact of rising interest rates on deposit costs. Our long-term commitment to prudent, selective lending and proactive expense management give us confidence in our ability to navigate the changing landscape and continue to drive strong risk-adjusted returns for our shareholders.”  

“To that end, during the fourth quarter, we completed the sale of two branches as part of an ongoing effort to optimize our physical footprint. The branch sales resulted in a net gain of $2.4 million.”


Net Interest Income and Net Interest Margin

 Three Months Ended % Change December 31, 2022 vs.
December 31,
2022		 September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
 (Dollars in thousands)    
          
Average interest-earning assets$1,893,069  $1,859,104  $1,519,490  1.8% 24.6%
Net interest income$20,884  $19,435  $14,096  7.5% 48.2%
Net interest margin 4.38%  4.15%  3.68% 23bps 70bps
          

Net interest income for the fourth quarter of 2022 was $20.9 million, an increase of 7.5% from $19.4 million for the third quarter of 2022. The increase was primarily attributable to growth, accompanied by an increase in net interest margin.

Relative to the fourth quarter of 2021, net interest income increased $6.8 million, or 48.2%. The increase was substantially the result of growth, accompanied by an increase in net interest margin.

Net interest margin for the fourth quarter of 2022 was 4.38%, compared to 4.15% for the third quarter of 2022. The increase was primarily due to the Company’s asset sensitive balance sheet as rates increased.

Relative to the fourth quarter of 2021, net interest margin increased from 3.68%. The increase was primarily due to the Company’s asset sensitive balance sheet as rates increased, coupled with the deployment of excess liquidity.

Noninterest Income

 Three Months Ended % Change December 31, 2022 vs.
December 31,
2022		 September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
 (Dollars in thousands)    
          
Service charges on deposit accounts$431  $508  $428  (15.2)% 0.7%
Swap fees 2   11   (6) (81.8)% (133.3)%
SBA/USDA fees 70   95   533  (26.3)% (86.9)%
Mortgage origination fees 98   218   269  (55.0)% (63.6)%
Net gain (loss) on securities (86)  (143)  (40) (39.9)% 115.0%
Other operating income 4,088   650   567  528.9% 621.0%
Total noninterest income$4,603  $1,339  $1,751  243.8% 162.9%
          

Noninterest income for the fourth quarter of 2022 was $4.6 million, an increase of 243.8% from $1.3 million for the third quarter of 2022. The fourth quarter 2022 results included a $2.6 million gain on the sale of two branches and a bank owned life insurance ("BOLI") benefit claim of $774,000. This decrease was partially offset by a decrease in mortgage fees.

Relative to the fourth quarter of 2021, noninterest income increased 162.9% from $1.8 million. The fourth quarter 2022 results included a $2.6 million gain on the sale of two branches and a BOLI benefit claim of $774,000. This increase was partially offset by a decrease in SBA/USDA fees and mortgage fees during the fourth quarter of 2022.

Noninterest Expense

 Three Months Ended % Change December 31, 2022 vs.
December 31,
2022		 September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
 (Dollars in thousands)    
          
Salaries and employee benefits$6,738  $6,152  $5,563  9.5% 21.1%
Equipment and occupancy expenses 730   764   943  (4.5)% (22.6)%
Data processing fees 711   599   563  18.7% 26.3%
Regulatory assessments 165   235   263  (29.8)% (37.3)%
Other operating expenses 2,092   2,487   2,280  (15.9)% (8.2)%
Total noninterest expenses$10,436  $10,237  $9,612  1.9% 8.6%
          

Noninterest expense for the fourth quarter of 2022 was $10.4 million, an increase of 1.9% from $10.2 million for the third quarter of 2022. The increase was primarily attributable to an increase in salaries and benefits as a result of expense related to the issuance of restricted stock units in a deferred compensation plan. Also included in the fourth quarter of 2022 was $200,000 in expenses associated with the sale of the branches. The increase was partially offset by a decrease in fraud losses as a portion was recovered in the fourth quarter of 2022.

Relative to the fourth quarter of 2021, noninterest expense increased 8.6% from $9.6 million. The increase was primarily attributable to an increase in salaries and benefits as a result of additional incentive accruals based on operating results along with expense related to the issuance of restricted stock units in a deferred compensation plan.

Loans and Credit Quality

 Three Months Ended % Change December 31, 2022 vs.
December 31,
2022		 September 30,
2022		 December 31,
2021		 September 30,
2022		 December 31,
2021
(Dollars in thousands)    
          
Core loans$1,592,707  $1,530,129  $1,244,914  4.1% 27.9%
PPP loans —   —   9,203  —% NM 
Gross loans 1,592,707   1,530,129   1,254,117  4.1% 27.0%
Unearned income (5,543)  (5,139)  (3,817) 7.9% 45.2%
Loans, net of unearned income (“Loans”)$1,587,164  $1,524,990  $1,250,300  4.1% 26.9%
Average loans, net of unearned (“Average loans”)$1,563,255  $1,480,735  $1,191,688  5.6% 31.2%
          
Nonperforming loans (“NPL”)$2,245  $3,950  $1,972  (43.2)% 13.8%
Provision for loan losses$1,938  $1,663  $732  16.5% 164.8%
Allowance for loan losses (“ALLL”)$20,156  $18,423  $14,844  9.4% 35.8%
Net charge-offs (recoveries)$205  $47  $(15) 336.2% (1466.7)%
NPL to gross loans 0.14%  0.26%  0.16%    
Net charge-offs (recoveries) to average loans(1) 0.05%  —%  —%    
ALLL to loans 1.27%  1.21%  1.19%    
          
(1) Ratio is annualized.         
NM = Not meaningful         
          

Loans, net of unearned income were $1.6 billion at December 31, 2022, up $62.2 million from September 30, 2022 and up $336.9 million from December 31, 2021. The linked-quarter increase in loans was primarily attributable to growth across our footprint.

Nonperforming loans totaled $2.2 million, or 0.14% of gross loans, at December 31, 2022, compared with $4.0 million, or 0.26% of gross loans, at September 30, 2022, and $2.0 million, or 0.16% of gross loans, at December 31, 2021. The $1.7 million net decrease in nonperforming loans in the fourth quarter was primarily attributable to one commercial real estate loan that was moved back to accruing status. The $273,000 net increase in nonperforming loans from December 31, 2021 was primarily attributable to loans being added and removed from nonaccrual status, none of which were significant.

The Company recorded a provision for loan losses of $1.9 million for the fourth quarter of 2022, compared to $1.7 million for the third quarter of 2022. The provision was primarily due to changes in our qualitative economic factors.

Net charge-offs for the fourth quarter of 2022 were $205,000, or 0.05% of average loans, compared to net charge-offs of $47,000, or 0.00% of average loans, for the third quarter of 2022, and net recoveries of $15,000, or 0.00% of average loans, for the fourth quarter of 2021.

The Company’s allowance for loan losses was 1.27% of total loans and 897.82% of nonperforming loans at December 31, 2022, compared with 1.21% of total loans and 466.41% of nonperforming loans at September 30, 2022.

Deposits

 

 Three Months Ended % Change December 31, 2022 vs. 
December 31,
2022		 September 30,
2022		 December 31,
2021		 September 30,
2022		  December 31,
2021
 (Dollars in thousands)     
           
Noninterest-bearing deposits$460,977  $499,613  $541,546  (7.7)% (14.9)%
Interest-bearing deposits 1,259,766   1,267,479   1,014,905  (0.6)% 24.1%
Total deposits$1,720,743  $1,767,092  $1,556,451  (2.6)% 10.6%
           

Total deposits were $1.7 billion at December 31, 2022, compared with $1.8 billion at September 30, 2022 and $1.6 billion at December 31, 2021. The $46.3 million decrease in total deposits in the fourth quarter was substantially due to the sale of two branches in October, which resulted in a $66.0 million reduction in total deposits. Excluding the sale, total deposits had a net increase of $19.7 million due to a $43.7 million increase in interest-bearing account balances that more than offset a decrease of $24.0 million in noninterest-bearing deposits.

Capital

 December 31,
2022		 September 30,
2022		 December 31,
2021
Company Bank Company Bank Company Bank
           
Tier 1 capital ratio to average assets8.82% 12.17% 8.44% 11.49% 9.74% 10.44%
Risk-based capital ratios:           
Common equity tier 1 (“CET1”) capital ratio8.82% 12.17% 8.73% 11.89% 10.35% 11.09%
Tier 1 capital ratio8.82% 12.17% 8.73% 11.89% 10.35% 11.09%
Total capital ratio14.29% 13.18% 12.26% 12.87% 11.33% 12.07%
            

As of December 31, 2022, total stockholders’ equity was $181.7 million, compared with $170.3 million at September 30, 2022. The increase of $11.4 million was substantially due to strong 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 the inflationary environment, the COVID-19 pandemic and governmental responses. 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and in other SEC filings 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 business strategy and prospects for growth, operations, ability to pay dividends, competition, regulation and general economic conditions.

Contact Information 
  
Lynn JoyceKevin Dobbs
(205) 820-8065(310) 622-8245
ljoyce@ssbank.bankssbankir@finprofiles.com



SELECT FINANCIAL DATA
(In thousands, except share and per share amounts)
          
 Three Months Ended Year Ended December 31,
December 31,
2022		 September 30,
2022		 December 31,
2021		  2022   2021 
         
Results of Operations         
Interest income$26,706  $22,520  $15,171  $82,850  $57,777 
Interest expense 5,822   3,085   1,075   11,512   4,864 
Net interest income 20,884   19,435   14,096   71,338   52,913 
Provision for loan losses 1,938   1,663   732   5,605   2,982 
Net interest income after provision 18,946   17,772   13,364   65,733   49,931 
Noninterest income 4,603   1,339   1,751   8,677   10,803 
Noninterest expense 10,436   10,237   9,612   39,614   36,435 
Income tax expense(1) 2,521   2,174   1,445   7,725   5,732 
Net income$10,592  $6,700  $4,058  $27,071  $18,567 
Core net income(2)$8,081  $6,806  $4,256  $24,975  $15,956 
          
Share and Per Share Data         
Shares issued and outstanding 8,706,920   8,705,920   9,012,857   8,706,920   9,012,857 
Weighted average shares outstanding:         
Basic 8,707,026   8,693,745   9,012,857   8,774,860   8,198,188 
Diluted 8,932,585   8,871,116   9,125,872   8,949,669   8,316,536 
Earnings per share:         
Basic$1.22  $0.77  $0.45  $3.08  $2.26 
Diluted$1.18  $0.75  $0.44  $3.02  $2.23 
Core - diluted(2)$0.90  $0.77  $0.47  $2.79  $1.92 
Book value per share$20.87  $19.56  $19.66  $20.87  $19.66 
Tangible book value per share(2)$18.79  $17.48  $17.62  $18.79  $17.62 
Cash dividends declared$0.09  $0.09  $0.09  $0.36  $0.36 
          
Performance and Financial Ratios         
ROAA 2.11%  1.35%  0.99%  1.43%  1.23%
ROAE 23.77%  15.42%  9.15%  15.55%  11.80%
Core ROAA(2) 1.61%  1.37%  1.04%  1.32%  1.06%
ROATCE(2) 26.49%  17.24%  10.22%  17.37%  13.38%
Core ROATCE(2) 20.21%  17.51%  10.72%  16.02%  11.50%
NIM 4.38%  4.15%  3.68%  3.99%  3.78%
NIM - FTE(2) 4.39%  4.17%  3.70%  4.01%  3.80%
Net interest spread 3.84%  3.86%  3.54%  3.68%  3.63%
Yield on loans 6.05%  5.37%  4.75%  5.27%  4.89%
Yield on interest-bearing assets 5.60%  4.81%  3.96%  4.64%  4.13%
Cost of interest-bearing liabilities 1.76%  0.95%  0.42%  0.96%  0.50%
Cost of funds(3) 1.29%  0.69%  0.30%  0.68%  0.36%
Cost of interest-bearing deposits 1.52%  0.82%  0.39%  0.79%  0.47%
Cost of total deposits 1.09%  0.58%  0.27%  0.55%  0.33%
Noninterest deposits to total deposits 26.79%  28.27%  34.79%  26.79%  34.79%
Total loans to total deposits 92.24%  86.30%  80.33%  92.24%  80.33%
Efficiency ratio 40.81%  48.94%  60.50%  49.12%  57.13%
Core efficiency ratio(2) 45.98%  48.94%  59.07%  50.97%  60.13%
          

(1) Three months ended and year ended December 31, 2022 include a $540,000 investment tax credit.
(2) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(3) Includes total interest-bearing liabilities and noninterest deposits.



SELECT FINANCIAL DATA
(In thousands)
          
 Three Months Ended Year Ended December 31,
December 31,
2022		 September 30,
2022		 December 31,
2021		  2022   2021 
         
Financial Condition (ending)         
Total loans$1,587,164  $1,524,990  $1,250,300  $1,587,164  $1,250,300 
Total securities 175,196   170,375   151,844   175,196   151,844 
Total assets 2,044,866   2,052,725   1,782,592   2,044,866   1,782,592 
Total noninterest bearing deposits 460,977   499,613   541,546   460,977   541,546 
Total deposits 1,720,743   1,767,092   1,556,451   1,720,743   1,556,451 
Total borrowings 117,295   93,020   38,448   117,295   38,448 
Total liabilities 1,863,147   1,882,400   1,605,394   1,863,147   1,605,394 
Total shareholders’ equity$181,719  $170,325  $177,198  $181,719  $177,198 
          
Financial Condition (average)         
Total loans$1,563,255  $1,480,735  $1,191,688  $1,421,376  $1,118,386 
Total securities 188,765   185,670   140,201   178,755   122,425 
Other interest-earning assets 141,049   192,699   187,601   187,263   158,243 
Total interest-bearing assets 1,893,069   1,859,104   1,519,490   1,787,394   1,399,054 
Total assets 1,994,087   1,966,556   1,628,804   1,893,044   1,510,114 
Noninterest-bearing deposits 477,301   491,917   439,142   496,486   378,868 
Interest-bearing deposits 1,216,492   1,207,797   965,457   1,127,637   922,870 
Total deposits 1,693,793   1,699,714   1,404,599   1,624,123   1,301,738 
Total borrowings 99,111   75,039   38,448   76,379   41,733 
Total interest-bearing liabilities 1,315,603   1,282,836   1,003,905   1,204,016   964,603 
Total shareholders’ equity$176,769  $172,402  $175,913  $174,107  $157,277 
          
Asset Quality         
Nonperforming loans$2,245  $3,950  $1,972  $2,245  $1,972 
Other real estate owned (“OREO”)$2,930  $2,930  $2,930  $2,930  $2,930 
Nonperforming assets (“NPA”)$5,175  $6,880  $4,902  $5,175  $4,902 
Net charge-offs (recovery) to average loans(1) 0.05%  —%  —%  0.02%  —%
Provision for loan losses to average loans(1) 0.49%  0.45%  0.24%  0.39%  0.27%
ALLL to loans 1.27%  1.21%  1.19%  1.27%  1.19%
ALLL to gross loans 1.27%  1.20%  1.18%  1.27%  1.18%
ALLL to NPL 897.82%  466.41%  752.74%  897.82%  752.74%
NPL to loans 0.14%  0.26%  0.16%  0.14%  0.16%
NPL to gross loans 0.14%  0.26%  0.16%  0.14%  0.16%
NPA to gross loans and OREO 0.32%  0.45%  0.39%  0.32%  0.39%
NPA to total assets 0.25%  0.34%  0.27%  0.25%  0.27%
          
Regulatory and Other Capital Ratios         
Total shareholders’ equity to total assets 8.89%  8.30%  9.94%  8.89%  9.94%
Tangible common equity to tangible assets(2) 8.07%  7.48%  9.00%  8.07%  9.00%
Tier 1 capital ratio to average assets 8.82%  8.44%  9.74%  8.82%  9.74%
Risk-based capital ratios:         
CET1 capital ratio 8.82%  8.73%  10.35%  8.82%  10.35%
Tier 1 capital ratio 8.82%  8.73%  10.35%  8.82%  10.35%
Total capital ratio 14.29%  12.26%  11.33%  14.29%  11.33%
          

(1) Ratio is annualized.
(2) 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
(In thousands)
      
 December 31, 2022
(Unaudited)		 September 30, 2022
(Unaudited)		 December 31, 2021
(Audited)
     
     
Assets     
Cash and due from banks$15,260  $17,394  $6,397 
Interest-bearing deposits in banks 90,198   165,637   203,537 
Federal funds sold 63,041   63,031   74,022 
Total cash and cash equivalents 168,499   246,062   283,956 
      
Securities available for sale, at fair value 155,544   150,718   132,172 
Securities held to maturity, at amortized cost 19,652   19,657   19,672 
Other equity securities, at fair value 5,243   5,694   9,232 
Restricted equity securities, at cost 3,134   2,791   2,600 
Loans held for sale 1,047   1,643   2,400 
      
Loans, net of unearned income 1,587,164   1,524,990   1,250,300 
Less allowance for loan losses 20,156   18,423   14,844 
Loans, net 1,567,008   1,506,567   1,235,456 
      
Premises and equipment, net 27,345   28,585   27,044 
Accrued interest receivable 6,963   5,699   4,170 
Bank owned life insurance 29,186   29,677   22,201 
Annuities 15,478   15,564   12,888 
Foreclosed assets 2,930   2,930   2,930 
Goodwill 16,862   16,862   16,862 
Core deposit intangible 1,226   1,302   1,500 
Other assets 24,749   18,974   9,509 
      
Total assets$2,044,866  $2,052,725  $1,782,592 
      
Liabilities and Stockholders' Equity     
Liabilities:     
Deposits:     
Noninterest-bearing$460,977  $499,613  $541,546 
Interest-bearing 1,259,766   1,267,479   1,014,905 
Total deposits 1,720,743   1,767,092   1,556,451 
      
Other borrowings (19)  19,978   12,498 
FHLB advances 31,000   26,000   25,950 
Subordinated notes 86,314   47,042   — 
Accrued interest payable 584   359   132 
Other liabilities 24,525   21,929   10,363 
      
Total liabilities 1,863,147   1,882,400   1,605,394 
      
Stockholders' equity:     
Common stock 43,714   43,529   45,064 
Capital surplus 76,785   75,835   80,640 
Retained earnings 73,764   63,956   49,858 
Accumulated other comprehensive income (loss) (11,048)  (12,403)  2,113 
Unvested restricted stock (477)  (592)  (477)
Vested restricted stock units (1,019)  —   — 
      
Total stockholders' equity 181,719   170,325   177,198 
      
Total liabilities and stockholders' equity$2,044,866  $2,052,725  $1,782,592 



CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
          
 Three Months Ended Year Ended December 31,
December 31,
2022		 September 30,
2022		 December 31,
2021		  2022   2021 
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Interest income:         
Loans, including fees$23,853  $20,052  $14,280  $74,936  $54,709 
Taxable securities 1,206   1,010   459   3,622   1,593 
Nontaxable securities 322   323   294   1,253   1,023 
Other interest and dividends 1,325   1,135   138   3,039   452 
Total interest income 26,706   22,520   15,171   82,850   57,777 
          
Interest expense:         
Deposits 4,655   2,489   955   8,906   4,310 
Other borrowings 1,167   596   120   2,606   554 
Total interest expense 5,822   3,085   1,075   11,512   4,864 
          
Net interest income 20,884   19,435   14,096   71,338   52,913 
Provision for loan losses 1,938   1,663   732   5,605   2,982 
Net interest income after provision for loan losses 18,946   17,772   13,364   65,733   49,931 
          
Noninterest income:         
Service charges on deposit accounts 431   508   428   1,863   1,528 
Swap fees 2   11   (6)  49   931 
SBA/USDA fees 70   95   533   646   3,968 
Mortgage origination fees 98   218   269   815   1,465 
Net gain (loss) on securities (86)  (143)  (40)  (632)  (57)
Other operating income 4,088   650   567   5,936   2,968 
Total noninterest income 4,603   1,339   1,751   8,677   10,803 
          
Noninterest expenses:         
Salaries and employee benefits 6,738   6,152   5,563   24,597   21,667 
Equipment and occupancy expenses 730   764   943   2,918   3,640 
Data processing fees 711   599   563   2,444   2,128 
Regulatory assessments 165   235   263   925   952 
Other operating expenses 2,092   2,487   2,280   8,730   8,048 
Total noninterest expenses 10,436   10,237   9,612   39,614   36,435 
          
Income before income taxes 13,113   8,874   5,503   34,796   24,299 
          
Income tax expense 2,521   2,174   1,445   7,725   5,732 
          
Net income$10,592  $6,700  $4,058  $27,071  $18,567 
          
Basic earnings per share$1.22  $0.77  $0.45  $3.08  $2.26 
          
Diluted earnings per share$1.18  $0.75  $0.44  $3.02  $2.23 



AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
                  
 Three Months Ended
December 31, 2022 September 30, 2022 December 31, 2021
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)$1,563,255  $23,853  6.05% $1,480,735  $20,052  5.37% $1,191,688  $14,280  4.75%
Taxable securities 132,222   1,206  3.62%  128,932   1,010  3.11%  86,292   459  2.11%
Nontaxable securities 56,543   322  2.26%  56,738   323  2.26%  53,909   294  2.16%
Other interest-earnings assets 141,049   1,325  3.73%  192,699   1,135  2.34%  187,601   138  0.29%
Total interest-earning assets$1,893,069  $26,706  5.60% $1,859,104  $22,520  4.81% $1,519,490  $15,171  3.96%
Allowance for loan losses (19,374)      (17,250)      (14,421)    
Noninterest-earning assets 120,392       124,702       123,735     
Total Assets$1,994,087      $1,966,556      $1,628,804     
                  
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing transaction accounts 98,978   22  0.09%  114,517   26  0.09%  101,863   25  0.10%
Savings and money market accounts 794,692   3,126  1.56%  811,349   1,644  0.80%  599,948   625  0.41%
Time deposits 322,822   1,507  1.85%  281,931   819  1.15%  263,646   305  0.46%
FHLB advances 22,739   147  2.56%  27,380   102  1.47%  25,950   22  0.34%
Other borrowings 76,372   1,020  5.30%  47,659   494  4.12%  12,498   98  3.11%
Total interest-bearing liabilities$1,315,603  $5,822  1.76% $1,282,836  $3,085  0.95% $1,003,905  $1,075  0.42%
                  
Noninterest-bearing liabilities:                 
Noninterest-bearing deposits$477,301      $491,917      $439,142     
Other liabilities 24,414       19,401       9,844     
Total noninterest-bearing liabilities$501,715      $511,318      $448,986     
Stockholders’ Equity 176,769       172,402       175,913     
Total Liabilities and Stockholders’ Equity$1,994,087      $1,966,556      $1,628,804     
                  
Net interest income  $20,884      $19,435      $14,096   
Net interest spread(2)    3.84%     3.86%     3.54%
Net interest margin(3)    4.38%     4.15%     3.68%
Net interest margin - FTE(4)(5)    4.39%     4.17%     3.70%
Cost of funds(6)    1.29%     0.69%     0.30%
Cost of interest-bearing deposits    1.52%     0.82%     0.39%
Cost of total deposits    1.09%     0.58%     0.27%

(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 for the three months ended December 31, 2022 and September 30, 2022 and a 23.5% tax rate for the three months ended December 31, 2021.
(5)   Refer to “Reconciliation of Non-GAAP Financial Measures”.
(6)   Includes total interest-bearing liabilities and noninterest deposits.



AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
            
 Year Ended December 31,
 2022   2021 
Average
Balance		 Interest Yield/
Rate		 Average
Balance		 Interest Yield/
Rate
Assets:           
Interest-earning assets:           
Loans, net of unearned income(1)$1,421,376  $74,936  5.27% $1,118,386  $54,709  4.89%
Taxable securities 122,500   3,622  2.96%  77,281   1,593  2.06%
Nontaxable securities 56,255   1,253  2.23%  45,144   1,023  2.27%
Other interest-earnings assets 187,263   3,039  1.62%  158,243   452  0.29%
Total interest-earning assets$1,787,394  $82,850  4.64% $1,399,054  $57,777  4.13%
Allowance for loan losses (16,883)      (13,276)    
Noninterest-earning assets 122,533       124,336     
Total Assets$1,893,044      $1,510,114     
            
Liabilities and Stockholders’ Equity:           
Interest-bearing liabilities:           
Interest-bearing transaction accounts 109,786   100  0.09%  96,503   91  0.09%
Savings and money market accounts 754,830   5,988  0.79%  527,484   2,680  0.51%
Time deposits 263,021   2,818  1.07%  298,883   1,539  0.51%
FHLB advances 25,264   291  1.15%  30,636   143  0.47%
Other borrowings 51,115   2,315  4.53%  11,097   411  3.72%
Total interest-bearing liabilities$1,204,016  $11,512  0.96% $964,603  $4,864  0.50%
            
Noninterest-bearing liabilities:           
Noninterest-bearing deposits$496,486      $378,868     
Other liabilities 18,435       9,366     
Total noninterest-bearing liabilities$514,921      $388,234     
Stockholders’ Equity 174,107       157,277     
Total Liabilities and Stockholders’ Equity$1,893,044      $1,510,114     
            
Net interest income  $71,338      $52,913   
Net interest spread(2)    3.68%     3.63%
Net interest margin(3)    3.99%     3.78%
Net interest margin - FTE(4)(5)    4.01%     3.80%
Cost of funds(6)    0.68%     0.36%
Cost of interest-bearing deposits    0.79%     0.47%
Cost of total deposits    0.55%     0.33%

(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 for the year ended ended December 31, 2022 and a 23.5% tax rate for the year ended December 31, 2021.
(5)   Refer to “Reconciliation of Non-GAAP Financial Measures”.
(6)   Includes total interest-bearing liabilities and noninterest deposits.



LOAN COMPOSITION
(Dollars in thousands)
            
 December 31, 2022 September 30, 2022 December 31, 2021
Amount % of gross Amount % of gross Amount % of gross
           
Real estate mortgages:           
Construction and development$255,736  16.1% $222,159  14.5% $174,480  13.9%
Residential 167,891  10.5%  164,296  10.7%  147,490  11.8%
Commercial 904,872  56.8%  889,942  58.2%  716,541  57.1%
Commercial and industrial 256,553  16.1%  243,577  15.9%  197,694  15.8%
PPP loans —  —%  —  —%  9,203  0.7%
Consumer and other 7,655  0.5%  10,155  0.7%  8,709  0.7%
Gross loans 1,592,707  100.0%  1,530,129  100.0%  1,254,117  100.0%
Unearned income (5,543)    (5,139)    (3,817)  
Loans, net of unearned income 1,587,164     1,524,990     1,250,300   
Allowance for loan losses (20,156)    (18,423)    (14,844)  
Loans, net$1,567,008    $1,506,567    $1,235,456   


DEPOSIT COMPOSITION
(Dollars in thousands)
            
 December 31, 2022 September 30, 2022 December 31, 2021
Amount % of total Amount % of total Amount % of total
           
            
Noninterest-bearing transaction$460,977  26.8% $499,613  28.3% $541,546  34.8%
Interest-bearing transaction 837,127  48.6%  855,350  48.4%  704,326  45.3%
Savings 49,235  2.9%  78,687  4.5%  56,715  3.6%
Time deposits, $250,000 and under 307,145  17.8%  266,491  15.0%  224,556  14.4%
Time deposits, over $250,000 66,259  3.9%  66,951  3.8%  29,308  1.9%
Total deposits$1,720,743  100.0% $1,767,092  100.0% $1,556,451  100.0%



Nonperfoming Assets
(Dollars in thousands)
      
 December 31,
2022		 September 30,
2022		 December 31,
2021
     
     
Nonaccrual loans$2,245  $3,950  $1,478 
Past due loans 90 days or more and still accruing interest —   —   494 
Total nonperforming loans 2,245   3,950   1,972 
OREO 2,930   2,930   2,930 
Total nonperforming assets$5,175  $6,880  $4,902 
      
Troubled debt restructured loans – nonaccrual(1) 832   1,011   940 
Troubled debt restructured loans - accruing 1,292   1,307   1,072 
Total troubled debt restructured loans$2,124  $2,318  $2,012 
      
Allowance for loan losses$20,156  $18,423  $14,844 
Loans, net of unearned income at the end of the period$1,587,164  $1,524,990  $1,250,300 
Gross loans outstanding at the end of period$1,592,707  $1,530,129  $1,254,117 
Total assets$2,044,866  $2,052,725  $1,782,592 
Allowance for loan losses to nonperforming loans 897.82%  466.41%  752.74%
Nonperforming loans to loans, net of unearned income 0.14%  0.26%  0.16%
Nonperforming loans to gross loans 0.14%  0.26%  0.16%
Nonperforming assets to gross loans and OREO 0.32%  0.45%  0.39%
Nonperforming assets to total assets 0.25%  0.34%  0.27%
      
Nonaccrual loans by category:     
Real estate mortgages:     
Construction & Development$67  $70  $346 
Residential Mortgages 565   550   167 
Commercial Real Estate Mortgages 1,278   2,888   674 
Commercial & Industrial 312   434   285 
Consumer and other 23   8   6 
Total$2,245  $3,950  $1,478 

(1) Troubled debt restructured 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 Loan Losses
(Dollars in thousands)
          
 Three Months Ended Year Ended December 31,
December 31,
2022		 September 30,
2022		 December 31,
2021		  2022   2021 
         
Average loans, net of unearned income$1,563,255  $1,480,735  $1,191,688  $1,421,376  $1,118,386 
Loans, net of unearned income$1,587,164  $1,524,990  $1,250,300  $1,587,164  $1,250,300 
Gross loans$1,592,707  $1,530,129  $1,254,117  $1,592,707  $1,254,117 
Allowance for loan losses at beginning of the period$18,423  $16,807  $14,097  $14,844  $11,859 
Charge-offs:         
Construction and development —   —   —   66   — 
Residential —   —   —   7   44 
Commercial —   —   —   —   — 
Commercial and industrial 210   269   —   479   — 
Consumer and other 18   1   —   26   2 
Total charge-offs 228   270   —   578   46 
Recoveries:         
Construction and development —   —   —   —   — 
Residential 4   11   13   50   25 
Commercial —   —   —   —   — 
Commercial and industrial 1   204   1   205   15 
Consumer and other 18   8   1   30   9 
Total recoveries 23   223   15   285   49 
Net charge-offs (recoveries)$205  $47  $(15) $293  $(3)
          
Provision for loan losses$1,938  $1,663  $732  $5,605  $2,982 
Balance at end of period$20,156  $18,423  $14,844  $20,156  $14,844 
Allowance to loans, net of unearned income 1.27%  1.21%  1.19%  1.27%  1.19%
Allowance to gross loans 1.27%  1.20%  1.18%  1.27%  1.18%
Net charge-offs (recoveries) to average loans, net of unearned income(1) 0.05%  —%  —%  0.02%  —%
Provision for loan losses to average loans, net of unearned income(1) 0.49%  0.45%  0.24%  0.39%  0.27%

(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 Year Ended December 31,
December 31,
2022		 September 30,
2022		 December 31,
2021		  2022   2021 
         
Net income$10,592  $6,700  $4,058  $27,071  $18,567 
Add: Net OREO gains —   —   227   —   219 
Less: Gain on sale of USDA loan —   —   —   —   2,806 
Less: Net gain on sale of branches 2,372   —   —   2,372   — 
Less: BOLI benefit claim 774   —   —   774   742 
Less: Loss on securities (86)  (143)  (40)  (632)  (57)
Less: Tax effect (549)  37   69   (418)  (661)
Core net income$8,081  $6,806  $4,256  $24,975  $15,956 
Average assets$1,994,087  $1,966,556  $1,628,804  $1,893,044  $1,510,114 
Core return on average assets 1.61%  1.37%  1.04%  1.32%  1.06%
          
Net income$10,592  $6,700  $4,058  $27,071  $18,567 
Add: Net OREO gains —   —   227   —   219 
Add: Provision 1,938   1,663   732   5,605   2,982 
Less: Gain on sale of USDA loan —   —   —   —   2,806 
Less: Net gain on sale of branches 2,372   —   —   2,372   — 
Less: BOLI benefit claim 774   —   —   774   742 
Less: Loss on securities (86)  (143)  (40)  (632)  (57)
Add: Income taxes 2,521   2,174   1,445   7,725   5,732 
Pretax pre-provision core net income$11,991  $10,680  $6,502  $37,887  $24,009 
Average assets$1,994,087  $1,966,556  $1,628,804  $1,893,044  $1,510,114 
Pretax pre-provision core return on average assets 2.39%  2.15%  1.58%  2.00%  1.59%
          
Net interest income$20,884  $19,435  $14,096  $71,338  $52,913 
Add: Fully-taxable equivalent adjustments(1) 84   86   77   335   276 
Net interest income - FTE$20,968  $19,521  $14,173  $71,673  $53,189 
          
Net interest margin 4.38%  4.15%  3.68%  3.99%  3.78%
Effect of fully-taxable equivalent adjustments(1) 0.01%  0.02%  0.02%  0.02%  0.02%
Net interest margin - FTE 4.39%  4.17%  3.70%  4.01%  3.80%
          
Total stockholders' equity$181,719  $170,325  $177,198  $181,719  $177,198 
Less: Intangible assets 18,088   18,164   18,362   18,088   18,362 
Tangible common equity$163,631  $152,161  $158,836  $163,631  $158,836 
          
1) Assumes a 24.0% tax rate for the three months ended December 31, 2022 and September 30, 2022 and a 23.5% tax rate for the three months ended December 31, 2021. Assumes a 24.0% tax rate for the year ended December 31, 2022 and a 23.5% tax rate for the year ended December 31, 2021.
          
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts
          
 Three Months Ended Year Ended December 31,
December 31,
2022		 September 30,
2022		 December 31,
2021		  2022   2021 
         
Core net income$8,081  $6,806  $4,256  $24,975  $15,956 
Diluted weighted average shares outstanding 8,932,585   8,871,116   9,125,872   8,949,669   8,316,536 
Diluted core earnings per share$0.90  $0.77  $0.47  $2.79  $1.92 
          
Common shares outstanding at year or period end 8,706,920   8,705,920   9,012,857   8,706,920   9,012,857 
Tangible book value per share$18.79  $17.48  $17.62  $18.79  $17.62 
          
Total assets at end of period$2,044,866  $2,052,725  $1,782,592  $2,044,866  $1,782,592 
Less: Intangible assets 18,088   18,164   18,362   18,088   18,362 
Adjusted assets at end of period$2,026,778  $2,034,561  $1,764,230  $2,026,778  $1,764,230 
Tangible common equity to tangible assets 8.07%  7.48%  9.00%  8.07%  9.00%
          
Total average shareholders equity$176,769  $172,402  $175,913  $174,107  $157,277 
Less: Average intangible assets 18,134   18,203   18,402   18,236   18,501 
Average tangible common equity$158,635  $154,199  $157,511  $155,871  $138,776 
Net income to common shareholders$10,592  $6,700  $4,058  $27,071  $18,567 
Return on average tangible common equity 26.49%  17.24%  10.22%  17.37%  13.38%
Average tangible common equity$158,635  $154,199  $157,511  $155,871  $138,776 
Core net income$8,081  $6,806  $4,256  $24,975  $15,956 
Core return on average tangible common equity 20.21%  17.51%  10.72%  16.02%  11.50%
          
Net interest income$20,884  $19,435  $14,096  $71,338  $52,913 
Add: Noninterest income 4,603   1,339   1,751   8,677   10,803 
Less: Gain on sale of USDA loan —   —   —   —   2,806 
Less: Gain on sale of branches 2,600   —   —   2,600   — 
Less: BOLI benefit claim 774   —   —   774   742 
Less: Loss on securities (86)  (143)  (40)  (632)  (57)
Operating revenue$22,199  $20,917  $15,887  $77,273  $60,225 
          
Expenses:         
Total noninterest expense$10,436  $10,237  $9,612  $39,614  $36,435 
Less: Net OREO gains —   —   227   —   219 
Less: Loss on sale of branches 228   —   —   228   — 
Adjusted noninterest expenses$10,208  $10,237  $9,385  $39,386  $36,216 
Core efficiency ratio 45.98%  48.94%  59.07%  50.97%  60.13%