Southern States Bancshares, Inc. Announces Fourth Quarter 2023 Financial Results

January 22, 2024 at 7:55 AM EST
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Fourth Quarter 2023 Performance and Operational Highlights

  • Core net income(1) of $7.3 million, or $0.81 per diluted share(1)
  • Net income of $8.9 million, or $0.99 per diluted share
  • Net interest income of $20.4 million, a decrease of $327,000 from the prior quarter
  • Net interest margin (“NIM”) of 3.69%, down 9 basis points from the prior quarter
  • NIM of 3.71% on a fully-taxable equivalent basis (“NIM - FTE”)(1)
  • Return on average assets (“ROAA”) of 1.53%; return on average stockholders’ equity (“ROAE”) of 17.02%; and return on average tangible common equity (“ROATCE”)(1) of 18.62%
  • Core ROAA(1) of 1.26%; and core ROATCE(1) of 15.26%
  • Efficiency ratio of 41.48%; and core efficiency ratio of 45.78%
  • Linked-quarter loan growth was 24.7% annualized
  • Linked-quarter total deposits grew 21.1% annualized
  • Linked-quarter total deposits, excluding brokered deposits, grew 8.9% 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., Jan. 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 $8.9 million, or $0.99 diluted earnings per share, for the fourth quarter of 2023. This compares to net income of $6.6 million, or $0.73 diluted earnings per share, for the third quarter of 2023, and net income of $10.6 million, or $1.18 diluted earnings per share, for the fourth quarter of 2022. The Company reported core net income of $7.3 million, or $0.81 diluted core earnings per share, for the fourth quarter of 2023. This compares to core net income of $9.6 million, or $1.06 diluted core earnings per share, for the third quarter of 2023, and core net income of $8.1 million, or $0.90 diluted core earnings per share, for the fourth quarter of 2022 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary

Mark Chambers, Chief Executive Officer and President of Southern States, said, “We produced solid fourth quarter earnings, highlighted by annualized sequential loan growth of 24.7% and annualized deposit growth of 21.1%. Our bankers remain active across our vibrant footprint, cultivating new business relationships and winning market share. We continue to maintain a sharp focus on credit management to ensure the ongoing health of our loan portfolio as evidenced by our low level of nonperforming loans, which totaled just 0.06% of the overall portfolio.”
“Our results were impacted by ongoing funding expense pressure due to elevated interest rates and increased deposit costs. Our net interest margin, while robust at 3.69% to finish the year, declined nine basis points from the prior quarter. Our loan yields increased substantially throughout the year and rose five basis points in the fourth quarter, but this momentum was offset by higher deposit costs.”
“Overall, we delivered exceptional results and returns on behalf of our shareholders throughout 2023, further fortifying our foundation. We enter the new year with strong capital and liquidity positions, as well as pristine credit quality, putting Southern States in excellent position to pursue prudent growth in 2024.”

Net Interest Income and Net Interest Margin

 Three Months Ended % Change December 31, 2023 vs.
December 31,
2023		 September 30,
2023		 December 31,
2022		 September 30,
2023		 December 31,
2022
 (Dollars in thousands)    
          
Average interest-earning assets$2,195,381  $2,175,103  $1,893,069  0.9% 16.0%
Net interest income$20,404  $20,731  $20,884  (1.6)% (2.3)%
Net interest margin 3.69%  3.78%  4.38% (9)bps (69)bps
          

Net interest income for the fourth quarter of 2023 was $20.4 million, a decrease of 1.6% from $20.7 million for the third quarter of 2023. The decrease was primarily driven by a higher cost of interest-bearing deposits due to both rising interest rates and growth, which more than offset a higher yield on interest-earning assets resulting from a combination of rising rates and growth. The yield on loans benefited from significant linked-quarter growth.

Relative to the fourth quarter of 2022, net interest income decreased $480,000, or 2.3%. The decrease was substantially the result of the accelerated rise in the cost of interest-bearing liabilities due to the rapid rise in interest rates and growth, which outpaced a sharp improvement in the yield on interest-earning assets due to both year-over-year growth and higher interest rates. A portion of the growth in interest-bearing deposits is due to migration from noninterest-bearing into interest-bearing deposits.

Net interest margin for the fourth quarter of 2023 was 3.69%, compared to 3.78% for the third 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 fourth quarter of 2022, net interest margin decreased from 4.38%. 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 December 31, 2023 vs.
December 31,
2023		 September 30,
2023		 December 31,
2022		 September 30,
2023		 December 31,
2022
 (Dollars in thousands)    
          
Service charges on deposit accounts$441 $442  $431  (0.2)% 2.3%
Swap fees 70  453   2  (84.5)% 3400.0%
SBA/USDA fees 70  74   70  (5.4)% —%
Mortgage origination fees 87  158   98  (44.9)% (11.2)%
Net loss on securities 98  (12)  (86) (916.7)% (214.0)%
Employee retention credit and related revenue (“ERC”) —  (5,100)  —  N/A  N/A 
Other operating income 2,352  1,091   4,088  115.6% (42.5)%
Total noninterest income$3,118 $(2,894) $4,603  (207.7)% (32.3)%
          

Noninterest income for the fourth quarter of 2023 was $3.1 million, compared to noninterest net expense of $2.9 million for the third quarter of 2023. The third quarter of 2023 included a $5.1 million payment to the IRS for the return of the ERC, which was received during the second quarter of 2023. After reviewing revised IRS guidelines during the third quarter of 2023, the Company determined to return the full $5.1 million to the IRS and recorded a payable. Also contributing to the increase during the fourth quarter of 2023 was a $1.9 million fee related to the early payoff of a $12.0 million purchased loan. As this is unusually large and atypical for the Bank, it was determined to record it as noninterest income instead of interest income, which would have impacted the net interest margin. The increase was partially offset by a $383,000 decrease in swap fees during the fourth quarter of 2023.

Relative to the fourth quarter of 2022, noninterest income decreased 32.3% from $4.6 million. The decrease was substantially due to a $2.6 million gain on the sale of two branches during the fourth quarter of 2022. This decrease was significantly offset by the aforementioned $1.9 million fee related to the early payoff of the $12.0 million loan in the fourth quarter of 2023.

Noninterest Expense

 Three Months Ended % Change December 31, 2023 vs.
December 31,
2023		 September 30,
2023		 December 31,
2022		 September 30,
2023		 December 31,
2022
 (Dollars in thousands)    
          
Salaries and employee benefits$5,739 $5,752  $6,738 (0.2)% (14.8)%
Equipment and occupancy expenses 681  718   730 (5.2)% (6.7)%
Data processing fees 639  650   711 (1.7)% (10.1)%
Regulatory assessments 355  322   165 10.2% 115.2%
Professional fees related to ERC —  (1,243)  — N/A  N/A 
Other operating expenses 2,303  2,370   2,092 (2.8)% 10.1%
Total noninterest expenses$9,717 $8,569  $10,436 13.4% (6.9)%
          

Noninterest expense for the fourth quarter of 2023 was $9.7 million, an increase of 13.4% from $8.6 million for the third quarter of 2023. The increase was substantially related to the aforementioned return of ERC, which also resulted in a $1.2 million refund of professional fees related to the ERC, to which a receivable was recorded.

Relative to the fourth quarter of 2022, noninterest expense decreased 6.9% from $10.4 million. The decrease was primarily due to a decrease in salaries and benefits during the fourth quarter of 2023 and the recognition of a $285,000 credit for provision for unfunded loan commitments, which was not recognized during 2022. The fourth quarter of 2022 included expense associated with the issuance of restricted stock units in a deferred compensation plan which was significantly less in the fourth quarter of 2023. The decrease was partially offset by an increase in legal fees, in addition to an increase in FDIC insurance.

Loans and Credit Quality

 Three Months Ended % Change December 31, 2023 vs.
December 31,
2023		 September 30,
2023		 December 31,
2022		 September 30,
2023		 December 31,
2022
(Dollars in thousands)    
          
Gross loans 1,890,677   1,779,846   1,592,707  6.2% 18.7%
Unearned income (6,169)  (5,698)  (5,543) 8.3% 11.3%
Loans, net of unearned income (“Loans”)$1,884,508  $1,774,148  $1,587,164  6.2% 18.7%
Average loans, net of unearned (“Average loans”)$1,814,484  $1,740,582  $1,563,255  4.2% 16.1%
          
Nonperforming loans (“NPL”)$1,177  $1,082  $2,245  8.8% (47.6)%
Provision for credit losses$2,579  $773  $1,938  233.6% 33.1%
Allowance for credit losses (“ACL”)$24,378  $22,181  $20,156  9.9% 20.9%
Net charge-offs (recoveries)$382  $(23) $205  (1760.9)% 86.3%
NPL to gross loans 0.06%  0.06%  0.14%    
Net charge-offs (recoveries) to average loans(1) 0.08%  (0.01)%  0.05%    
ACL to loans 1.29%  1.25%  1.27%    
          
(1) Ratio is annualized.         
          

Loans, net of unearned income, were $1.9 billion at December 31, 2023, up $110.4 million from September 30, 2023 and up $297.3 million from December 31, 2022. The linked-quarter and year-over-year increases in loans were primarily attributable to new business growth across our footprint.

Nonperforming loans totaled $1.2 million, or 0.06% of gross loans, at December 31, 2023, compared with $1.1 million, or 0.06% of gross loans, at September 30, 2023, and $2.2 million, or 0.14% of gross loans, at December 31, 2022. The $1.1 million net decrease in nonperforming loans from December 31, 2022, was primarily attributable to two loans that were paid-off, one loan that was charged-off and another loan that was moved back to accruing status.

The Company recorded a provision for credit losses of $2.6 million for the fourth quarter of 2023, compared to $773,000 for the third quarter of 2023. Provision in the fourth quarter of 2023 was based on loan growth, qualitative economic factors and individually analyzed loans.

Net charge-offs for the fourth quarter of 2023 were $382,000, or 0.08% of average loans on an annualized basis, compared to net recoveries of $(23,000), or (0.01)% of average loans on an annualized basis, for the third quarter of 2023, and net charge-offs of $205,000, or 0.05% of average loans on an annualized basis, for the fourth quarter of 2022.

The Company’s allowance for credit losses was 1.29% of total loans and 2071.20% of nonperforming loans at December 31, 2023, compared with 1.25% of total loans and 2050.00% of nonperforming loans at September 30, 2023. Allowance for credit losses on unfunded commitments was $1.2 million at December 31, 2023.

Deposits

 Three Months Ended % Change December 31, 2023 vs.
December 31,
2023		 September 30,
2023		 December 31,
2022		 September 30,
2023		 December 31,
2022
 (Dollars in thousands)    
          
Noninterest-bearing deposits$437,959  $418,125  $460,977  4.7% (5.0))%
Interest-bearing deposits 1,580,230   1,498,276   1,259,766  5.5% 25.4%
Total deposits$2,018,189  $1,916,401  $1,720,743  5.3% 17.3%
          
Uninsured deposits$615,651  $568,323  $600,977  8.3% 2.4%
Uninsured deposits to total deposits 30.51%  29.66%  34.93%    
Noninterest deposits to total deposits 21.70%  21.82%  26.79%    
          

Total deposits were $2.0 billion at December 31, 2023, up from $1.9 billion at September 30, 2023 and $1.7 billion at December 31, 2022. The $101.8 million increase in total deposits in the fourth quarter was primarily due to an increase of $82.0 in interest-bearing deposits, which includes a $62.5 million increase in brokered deposits, and an increase of $19.8 million in noninterest-bearing deposits. Total brokered deposits were $230.9 million at December 31, 2023.

Capital

 December 31,
2023		 September 30,
2023		 December 31,
2022
Company Bank Company Bank Company Bank
           
Tier 1 capital ratio to average assets8.99% 12.01% 8.70% 11.71% 8.82% 12.17%
Risk-based capital ratios:           
Common equity tier 1 (“CET1”) capital ratio9.18% 12.28% 9.32% 12.55% 8.86% 12.21%
Tier 1 capital ratio9.18% 12.28% 9.32% 12.55% 8.86% 12.21%
Total capital ratio14.26% 13.42% 14.60% 13.67% 14.34% 13.24%
            

As of December 31, 2023, total stockholders’ equity was $215.0 million, up from $201.9 million at September 30, 2023. The increase of $13.0 million was substantially due to earnings growth, coupled with a decrease in accumulated other comprehensive loss resulting from changes in the value of the available for sale securities portfolio.

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, 2022 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 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 Twelve Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
         
Results of Operations         
Interest income$36,172  $35,204  $26,706  $132,260  $82,850 
Interest expense 15,768   14,473   5,822   52,148   11,512 
Net interest income 20,404   20,731   20,884   80,112   71,338 
Provision for credit losses 2,579   773   1,938   6,090   5,605 
Net interest income after provision 17,825   19,958   18,946   74,022   65,733 
Noninterest income 3,118   (2,894)  4,603   8,874   8,677 
Noninterest expense 9,717   8,569   10,436   41,876   39,614 
Income tax expense 2,330   1,866   2,521   9,068   7,725 
Net income$8,896  $6,629  $10,592  $31,952  $27,071 
Core net income(1)$7,289  $9,563  $8,081  $31,190  $24,975 
          
Share and Per Share Data         
Shares issued and outstanding 8,841,349   8,834,168   8,706,920   8,841,349   8,706,920 
Weighted average shares outstanding:         
Basic 8,864,734   8,846,018   8,707,026   8,809,590   8,774,860 
Diluted 9,021,358   9,040,687   8,932,585   9,038,004   8,949,669 
Earnings per share:         
Basic$1.00  $0.75  $1.22  $3.63  $3.08 
Diluted 0.99   0.73   1.18   3.53   3.02 
Core - diluted(1) 0.81   1.06   0.90   3.45   2.79 
Book value per share 24.31   22.86   20.87   24.31   20.87 
Tangible book value per share(1) 22.30   20.84   18.79   22.30   18.79 
Cash dividends per common share 0.09   0.09   0.09   0.36   0.36 
          
Performance and Financial Ratios         
ROAA 1.53%  1.15%  2.11%  1.44%  1.43%
ROAE 17.02%  12.96%  23.77%  16.16%  15.55%
Core ROAA(1) 1.26%  1.66%  1.61%  1.41%  1.32%
ROATCE(1) 18.62%  14.21%  26.49%  17.78%  17.37%
Core ROATCE(1) 15.26%  20.50%  20.21%  17.35%  16.02%
NIM 3.69%  3.78%  4.38%  3.81%  3.99%
NIM - FTE(2) 3.71%  3.79%  4.39%  3.82%  4.01%
Net interest spread 2.73%  2.84%  3.84%  2.92%  3.68%
Yield on loans 6.91%  6.86%  6.05%  6.70%  5.27%
Yield on interest-earning assets 6.54%  6.42%  5.60%  6.29%  4.64%
Cost of interest-bearing liabilities 3.81%  3.58%  1.76%  3.37%  0.96%
Cost of funds(2) 3.03%  2.80%  1.29%  2.63%  0.68%
Cost of interest-bearing deposits 3.66%  3.43%  1.52%  3.19%  0.79%
Cost of total deposits 2.86%  2.63%  1.09%  2.44%  0.55%
Noninterest deposits to total deposits 21.70%  21.82%  26.79%  21.70%  26.79%
Core deposits to total deposits 83.70%  86.58%  89.73%  83.70%  89.73%
Uninsured deposits to total deposits 30.51%  29.66%  34.93%  30.51%  34.93%
Total loans to total deposits 93.38%  92.58%  92.24%  93.38%  92.24%
Efficiency ratio 41.48%  48.01%  40.81%  47.35%  49.12%
Core efficiency ratio(1) 45.78%  42.79%  45.98%  46.74%  50.97%
          

(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 Twelve Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
         
Financial Condition (ending)         
Total loans$1,884,508  $1,774,148  $1,587,164  $1,884,508  $1,587,164 
Total securities 198,632   189,496   175,196   198,632   175,196 
Total assets 2,446,339   2,296,527   2,045,204   2,446,339   2,045,204 
Total noninterest bearing deposits 437,959   418,125   460,977   437,959   460,977 
Total core deposits(1) 1,689,266   1,659,291   1,543,981   1,689,266   1,543,981 
Total deposits 2,018,189   1,916,401   1,720,743   2,018,189   1,720,743 
Total borrowings 183,673   146,573   117,295   183,673   117,295 
Total liabilities 2,231,375   2,094,603   1,863,485   2,231,375   1,863,485 
Total shareholders’ equity 214,964   201,924   181,719   214,964   181,719 
          
Financial Condition (average)         
Total loans$1,814,484  $1,740,582  $1,563,255  $1,711,006  $1,421,376 
Total securities 209,074   201,830   188,765   200,047   178,755 
Total other interest-earning assets 171,823   232,691   141,049   192,433   187,263 
Total interest-bearing assets 2,195,381   2,175,103   1,893,069   2,103,486   1,787,394 
Total assets 2,303,398   2,282,217   1,994,087   2,211,739   1,893,046 
Total noninterest-bearing deposits 420,019   448,616   477,301   436,571   496,486 
Total interest-bearing deposits 1,502,348   1,472,024   1,216,492   1,422,453   1,127,637 
Total deposits 1,922,367   1,920,640   1,693,793   1,859,024   1,624,123 
Total borrowings 140,790   129,882   99,111   126,853   76,379 
Total interest-bearing liabilities 1,643,138   1,601,906   1,315,603   1,549,306   1,204,016 
Total shareholders’ equity 207,324   202,955   176,769   197,680   174,107 
          
Asset Quality         
Nonperforming loans$1,177  $1,082  $2,245  $1,177  $2,245 
Other real estate owned (“OREO”)$33  $2,903  $2,930  $33  $2,930 
Nonperforming assets (“NPA”)$1,210  $3,985  $5,175  $1,210  $5,175 
Net charge-offs (recovery) to average loans(2) 0.08% (0.01)        %  0.05%  0.03%  0.02%
Provision for credit losses to average loans(2) 0.56%  0.18%  0.49%  0.36%  0.39%
ACL to loans 1.29%  1.25%  1.27%  1.29%  1.27%
ACL to gross loans 1.29%  1.25%  1.27%  1.29%  1.27%
ACL to NPL 2071.20%  2050.00%  897.82%  2071.20%  897.82%
NPL to loans 0.06%  0.06%  0.14%  0.06%  0.14%
NPL to gross loans 0.06%  0.06%  0.14%  0.06%  0.14%
NPA to gross loans and OREO 0.06%  0.22%  0.32%  0.06%  0.32%
NPA to total assets 0.05%  0.17%  0.25%  0.05%  0.25%
          
Regulatory and Other Capital Ratios         
Total shareholders’ equity to total assets 8.79%  8.79%  8.89%  8.79%  8.89%
Tangible common equity to tangible assets(3) 8.12%  8.08%  8.07%  8.12%  8.07%
Tier 1 capital ratio to average assets 8.99%  8.70%  8.82%  8.99%  8.82%
Risk-based capital ratios:         
CET1 capital ratio 9.18%  9.32%  8.86%  9.18%  8.86%
Tier 1 capital ratio 9.18%  9.32%  8.86%  9.18%  8.86%
Total capital ratio 14.26%  14.60%  14.34%  14.26%  14.34%
          

(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)
      
 December 31,
2023		 September 30,
2023		 December 31,
2022
(Unaudited) (Unaudited) (Audited)
     
Assets     
Cash and due from banks$19,710  $31,047  $15,260 
Interest-bearing deposits in banks 134,846   103,646   90,198 
Federal funds sold 96,095   81,487   63,041 
Total cash and cash equivalents 250,651   216,180   168,499 
      
Securities available for sale, at fair value 179,000   169,859   155,544 
Securities held to maturity, at amortized cost 19,632   19,637   19,652 
Other equity securities, at fair value 3,649   3,654   4,444 
Restricted equity securities, at cost 5,684   4,971   3,134 
Loans held for sale 450   1,799   1,047 
      
Loans, net of unearned income 1,884,508   1,774,148   1,587,164 
Less allowance for credit losses 24,378   22,181   20,156 
Loans, net 1,860,130   1,751,967   1,567,008 
      
Premises and equipment, net 26,426   26,694   27,345 
Accrued interest receivable 8,711   8,321   6,963 
Bank owned life insurance 29,884   29,697   29,186 
Annuities 15,036   15,266   15,478 
Foreclosed assets 33   2,903   2,930 
Goodwill 16,862   16,862   16,862 
Core deposit intangible 899   981   1,226 
Other assets 29,292   27,736   25,886 
      
Total assets$2,446,339  $2,296,527  $2,045,204 
      
Liabilities and Stockholders' Equity     
Liabilities:     
Deposits:     
Noninterest-bearing$437,959  $418,125  $460,977 
Interest-bearing 1,580,230   1,498,276   1,259,766 
Total deposits 2,018,189   1,916,401   1,720,743 
      
Other borrowings 26,994   4,991   (19)
FHLB advances 70,000   55,000   31,000 
Subordinated notes 86,679   86,582   86,314 
Accrued interest payable 1,519   1,280   584 
Other liabilities 27,994   30,349   24,863 
      
Total liabilities 2,231,375   2,094,603   1,863,485 
Stockholders' equity:     
Common stock 44,479   44,307   43,714 
Capital surplus 78,361   77,671   76,785 
Retained earnings 102,523   94,429   73,764 
Accumulated other comprehensive loss (8,379)  (13,126)  (11,048)
Unvested restricted stock (466)  (580)  (477)
Vested restricted stock units (1,554)  (777)  (1,019)
      
Total stockholders' equity 214,964   201,924   181,719 
      
Total liabilities and stockholders' equity$2,446,339  $2,296,527  $2,045,204 


 
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
          
 Three Months Ended Twelve Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Interest income:         
Loans, including fees$31,613 $30,084  $23,853  $114,662 $74,936 
Taxable securities 1,986  1,796   1,206   6,806  3,622 
Nontaxable securities 230  227   322   977  1,253 
Other interest and dividends 2,343  3,097   1,325   9,815  3,039 
Total interest income 36,172  35,204   26,706   132,260  82,850 
          
Interest expense:         
Deposits 13,869  12,732   4,655   45,368  8,906 
Other borrowings 1,899  1,741   1,167   6,780  2,606 
Total interest expense 15,768  14,473   5,822   52,148  11,512 
          
Net interest income 20,404  20,731   20,884   80,112  71,338 
Provision for credit losses 2,579  773   1,938   6,090  5,605 
Net interest income after provision for credit losses 17,825  19,958   18,946   74,022  65,733 
          
Noninterest income:         
Service charges on deposit accounts 441  442   431   1,790  1,863 
Swap fees 70  453   2   691  49 
SBA/USDA fees 70  74   70   344  646 
Mortgage origination fees 87  158   98   533  815 
Net gain (loss) on securities 98  (12)  (86)  555  (632)
Employee retention credit and related revenue —  (5,100)  —   —  — 
Other operating income 2,352  1,091   4,088   4,961  5,936 
Total noninterest income 3,118  (2,894)  4,603   8,874  8,677 
          
Noninterest expenses:         
Salaries and employee benefits 5,739  5,752   6,738   25,665  24,597 
Equipment and occupancy expenses 681  718   730   2,776  2,918 
Data processing fees 639  650   711   2,528  2,444 
Regulatory assessments 355  322   165   1,198  925 
Professional fees related to ERC —  (1,243)  —   —  — 
Other operating expenses 2,303  2,370   2,092   9,709  8,730 
Total noninterest expenses 9,717  8,569   10,436   41,876  39,614 
          
Income before income taxes 11,226  8,495   13,113   41,020  34,796 
          
Income tax expense 2,330  1,866   2,521   9,068  7,725 
          
Net income$8,896 $6,629  $10,592  $31,952 $27,071 
          
Basic earnings per share$1.00 $0.75  $1.22  $3.63 $3.08 
          
Diluted earnings per share$0.99 $0.73  $1.18  $3.53 $3.02 


 
AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
                  
 Three Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022
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)$1,814,484  $31,613 6.91% $1,740,582  $30,084 6.86% $1,563,255  $23,853 6.05%
Taxable securities 163,537   1,986 4.82%  156,364   1,796 4.56%  132,222   1,206 3.62%
Nontaxable securities 45,537   230 2.00%  45,466   227 1.98%  56,543   322 2.26%
Other interest-earnings assets 171,823   2,343 5.41%  232,691   3,097 5.28%  141,049   1,325 3.73%
Total interest-earning assets$2,195,381  $36,172 6.54% $2,175,103  $35,204 6.42% $1,893,069  $26,706 5.60%
Allowance for credit losses (22,666)      (21,606)      (19,374)    
Noninterest-earning assets 130,683       128,720       120,392     
Total Assets$2,303,398      $2,282,217      $1,994,087     
                  
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing transaction accounts 86,163   23 0.11%  88,668   20 0.09%  98,978   22 0.09%
Savings and money market accounts 885,548   8,445 3.78%  867,066   7,767 3.55%  794,692   3,126 1.56%
Time deposits 530,637   5,401 4.04%  516,290   4,945 3.80%  322,822   1,507 1.85%
FHLB advances 52,076   645 4.92%  43,261   514 4.72%  22,739   147 2.56%
Other borrowings 88,714   1,254 5.61%  86,621   1,227 5.62%  76,372   1,020 5.30%
Total interest-bearing liabilities$1,643,138  $15,768 3.81% $1,601,906  $14,473 3.58% $1,315,603  $5,822 1.76%
                  
Noninterest-bearing liabilities:                 
Noninterest-bearing deposits$420,019      $448,616      $477,301     
Other liabilities 32,917       28,740       24,414     
Total noninterest-bearing liabilities 452,936       477,356       501,715     
Stockholders’ Equity 207,324       202,955       176,769     
Total Liabilities and Stockholders’ Equity$2,303,398      $2,282,217      $1,994,087     
                  
Net interest income  $20,404     $20,731     $20,884  
Net interest spread(2)    2.73%     2.84%     3.84%
Net interest margin(3)    3.69%     3.78%     4.38%
Net interest margin - FTE(4)(5)    3.71%     3.79%     4.39%
Cost of funds(6)    3.03%     2.80%     1.29%
Cost of interest-bearing deposits    3.66%     3.43%     1.52%
Cost of total deposits    2.86%     2.63%     1.09%

(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.

 
AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
            
 Twelve Months Ended
December 31,
2023		 December 31,
2022
Average
Balance		 Interest Yield/Rate Average
Balance		 Interest Yield/Rate
Assets:           
Interest-earning assets:           
Loans, net of unearned income(1)$1,711,006  $114,662 6.70% $1,421,376  $74,936 5.27%
Taxable securities 152,707   6,806 4.46%  122,500   3,622 2.96%
Nontaxable securities 47,340   977 2.06%  56,255   1,253 2.23%
Other interest-earnings assets 192,433   9,815 5.10%  187,263   3,039 1.62%
Total interest-earning assets$2,103,486  $132,260 6.29% $1,787,394  $82,850 4.64%
Allowance for credit losses (21,233)      (16,883)    
Noninterest-earning assets 129,486       122,535     
Total Assets$2,211,739      $1,893,046     
            
Liabilities and Stockholders’ Equity:           
Interest-bearing liabilities:           
Interest-bearing transaction accounts 90,231   82 0.09%  109,786   100 0.09%
Savings and money market accounts 851,351   28,124 3.30%  754,830   5,988 0.79%
Time deposits 480,871   17,162 3.57%  263,021   2,818 1.07%
FHLB advances 39,830   1,848 4.64%  25,264   291 1.15%
Other borrowings 87,023   4,932 5.67%  51,115   2,315 4.53%
Total interest-bearing liabilities$1,549,306  $52,148 3.37% $1,204,016  $11,512 0.96%
            
Noninterest-bearing liabilities:           
Noninterest-bearing deposits$436,571      $496,486     
Other liabilities 28,182       18,437     
Total noninterest-bearing liabilities$464,753      $514,923     
Stockholders’ Equity 197,680       174,107     
Total Liabilities and Stockholders’ Equity$2,211,739      $1,893,046     
            
Net interest income  $80,112     $71,338  
Net interest spread(2)    2.92%     3.68%
Net interest margin(3)    3.81%     3.99%
Net interest margin - FTE(4)(5)    3.82%     4.01%
Cost of funds(6)    2.63%     0.68%
Cost of interest-bearing deposits    3.19%     0.79%
Cost of total deposits    2.44%     0.55%

(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)
            
 December 31,
2023		 September 30,
2023		 December 31,
2022
Amount % of gross Amount % of gross Amount % of gross
           
Real estate mortgages:           
Construction and development$242,960  12.9% $229,188  12.9% $255,736  16.1%
Residential 224,603  11.9%  224,499  12.6%  167,891  10.5%
Commercial 1,144,867  60.5%  1,049,545  59.0%  904,872  56.8%
Commercial and industrial 269,961  14.3%  268,283  15.0%  256,553  16.1%
Consumer and other 8,286  0.4%  8,331  0.5%  7,655  0.5%
Gross loans 1,890,677  100.0%  1,779,846  100.0%  1,592,707  100.0%
Unearned income (6,169)    (5,698)    (5,543)  
Loans, net of unearned income 1,884,508     1,774,148     1,587,164   
Allowance for credit losses (24,378)    (22,181)    (20,156)  
Loans, net$1,860,130    $1,751,967    $1,567,008   


DEPOSIT COMPOSITION
(Dollars in thousands)
            
 December 31,
2023		 September 30,
2023		 December 31,
2022
Amount % of total Amount % of total Amount % of total
           
            
Noninterest-bearing transaction$437,959 21.7% $418,125 21.8% $460,977 26.8%
Interest-bearing transaction 946,347 46.9%  934,383 48.8%  837,127 48.6%
Savings 35,412 1.7%  38,518 2.0%  49,235 2.9%
Time deposits, $250,000 and under 500,406 24.8%  436,613 22.8%  307,145 17.8%
Time deposits, over $250,000 98,065 4.9%  88,762 4.6%  66,259 3.9%
Total deposits$2,018,189 100.0% $1,916,401 100.0% $1,720,743 100.0%


 
Nonperfoming Assets
(Dollars in thousands)
      
 December 31,
2023		 September 30,
2023		 December 31,
2022
     
     
Nonaccrual loans$1,017  $1,082  $2,245 
Past due loans 90 days or more and still accruing interest 160   —   — 
Total nonperforming loans 1,177   1,082   2,245 
OREO 33   2,903   2,930 
Total nonperforming assets$1,210  $3,985  $5,175 
      
Troubled debt restructured loans – nonaccrual(1) 907   970   832 
Troubled debt restructured loans – accruing 1,095   1,052   1,292 
Total troubled debt restructured loans$2,002  $2,022  $2,124 
      
Allowance for credit losses$24,378  $22,181  $20,156 
Loans, net of unearned income at the end of the period$1,884,508  $1,774,148  $1,587,164 
Gross loans outstanding at the end of period$1,890,677  $1,779,846  $1,592,707 
Total assets$2,446,339  $2,296,527  $2,045,204 
Allowance for credit losses to nonperforming loans 2071.20%  2050.00%  897.82%
Nonperforming loans to loans, net of unearned income 0.06%  0.06%  0.14%
Nonperforming loans to gross loans 0.06%  0.06%  0.14%
Nonperforming assets to gross loans and OREO 0.06%  0.22%  0.32%
Nonperforming assets to total assets 0.05%  0.17%  0.25%
      
Nonaccrual loans by category:     
Real estate mortgages:     
Construction & Development$—  $—  $67 
Residential Mortgages 252   289   565 
Commercial Real Estate Mortgages 765   785   1,278 
Commercial & Industrial —   8   312 
Consumer and other —   —   23 
Total$1,017  $1,082  $2,245 

(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 Credit Losses
(Dollars in thousands)
          
 Three Months Ended Twelve Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022		 December 31,
2023		 December 31, 2022
         
Average loans, net of unearned income$1,814,484  $1,740,582  $1,563,255  $1,711,006  $1,421,376 
Loans, net of unearned income 1,884,508   1,774,148   1,587,164   1,884,508   1,587,164 
Gross loans 1,890,677   1,779,846   1,592,707   1,890,677   1,592,707 
Allowance for credit losses at beginning of the period 22,181   21,385   18,423   20,156   14,844 
Impact of adoption of ASC 326 —   —   —   (1,285)  — 
Charge-offs:         
Construction and development —   3   —   3   66 
Residential —   —   —   —   7 
Commercial —   —   —   —   — 
Commercial and industrial 424   —   210   686   479 
Consumer and other 2   —   18   8   26 
Total charge-offs 426   3   228   697   578 
Recoveries:         
Construction and development —   —   —   —   — 
Residential 4   10   4   41   50 
Commercial —   —   —   —   — 
Commercial and industrial 39   —   1   54   205 
Consumer and other 1   16   18   19   30 
Total recoveries 44   26   23   114   285 
Net charge-offs (recoveries)$382  $(23) $205  $583  $293 
          
Provision for credit losses$2,579  $773  $1,938  $6,090  $5,605 
Balance at end of the period$24,378  $22,181  $20,156  $24,378  $20,156 
          
Allowance for credit losses on unfunded commitments at beginning of the period$1,524  $1,495  $—  $—  $— 
Impact of adoption of ASC 326 —   —   —   1,285   — 
Provision for credit losses on unfunded commitments (285)  29   —   (46)  — 
Balance at the end of the period$1,239  $1,524  $—  $1,239  $— 
          
Allowance to loans, net of unearned income 1.29%  1.25%  1.27%  1.29%  1.27%
Allowance to gross loans 1.29%  1.25%  1.27%  1.29%  1.27%
Net charge-offs (recoveries) to average loans, net of unearned income(1) 0.08%  (0.01)%  0.05%  0.03%  0.02%
Provision for credit losses to average loans, net of unearned income(1) 0.56%  0.18%  0.49%  0.36%  0.39%

(1) Ratio is annualized.

Reconciliation of Non-GAAP Financial Measures

Noninterest Expense

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 Twelve Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
         
Net income$8,896  $6,629  $10,592  $31,952  $27,071 
Add: One-time retirement related expenses —   —   —   1,571   — 
Add: Professional fees related to ERC —   (1,243)  —   —   — 
Add: Net OREO losses (154)  (9)  —   (156)  — 
Less: Employee retention related revenue —   (5,100)  —   —   — 
Less: Fee received on early loan payoff 1,863   —   —   1,863   — 
Less: Net gain on sale of branches —   —   2,372   —   2,372 
Less: BOLI benefit claim —   —   774   —   774 
Less: Net gain (loss) on securities 98   (12)  (86)  555   (632)
Less: Tax effect (508)  926   (549)  (241)  (418)
Core net income$7,289  $9,563  $8,081  $31,190  $24,975 
Average assets$2,303,398  $2,282,217  $1,994,087  $2,211,739  $1,893,046 
Core return on average assets 1.26%  1.66%  1.61%  1.41%  1.32%
          
Net income$8,896  $6,629  $10,592  $31,952  $27,071 
Add: One-time retirement related expenses —   —   —   1,571   — 
Add: Professional fees related to ERC —   (1,243)  —   —   — 
Add: Net OREO losses (154)  (9)  —   (156)  — 
Add: Provision 2,579   773   1,938   6,090   5,605 
Less: Employee retention related revenue —   (5,100)  —   —   — 
Less: Fee received on early loan payoff 1,863   —   —   1,863   — 
Less: Net gain on sale of branches —   —   2,372   —   2,372 
Less: BOLI benefit claim —   —   774   —   774 
Less: Net gain (loss) on securities 98   (12)  (86)  555   (632)
Add: Income taxes 2,330   1,866   2,521   9,068   7,725 
Pretax pre-provision core net income$11,690  $13,128  $11,991  $46,107  $37,887 
Average assets$2,303,398  $2,282,217  $1,994,087  $2,211,739  $1,893,046 
Pretax pre-provision core return on average assets 2.01%  2.28%  2.39%  2.08%  2.00%
          
Net interest income$20,404  $20,731  $20,884  $80,112  $71,338 
Add: Fully-taxable equivalent adjustments(1) 99   70   84   312   335 
Net interest income - FTE$20,503  $20,801  $20,968  $80,424  $71,673 
          
Net interest margin 3.69%  3.78%  4.38%  3.81%  3.99%
Effect of fully-taxable equivalent adjustments(1) 0.02%  0.01%  0.01%  0.01%  0.02%
Net interest margin - FTE 3.71%  3.79%  4.39%  3.82%  4.01%
          
Total stockholders' equity$214,964  $201,924  $181,719  $214,964  $181,719 
Less: Intangible assets 17,761   17,843   18,088   17,761   18,088 
Tangible common equity$197,203  $184,081  $163,631  $197,203  $163,631 
          
(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 Twelve Months Ended
December 31,
2023		 September 30,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
         
Core net income$7,289  $9,563  $8,081  $31,190  $24,975 
Diluted weighted average shares outstanding 9,021,358   9,040,687   8,932,585   9,038,004   8,949,669 
Diluted core earnings per share$0.81  $1.06  $0.90  $3.45  $2.79 
          
Common shares outstanding at year or period end 8,841,349   8,834,168   8,706,920   8,841,349   8,706,920 
Tangible book value per share$22.30  $20.84  $18.79  $22.30  $18.79 
          
Total assets at end of period$2,446,339  $2,296,527  $2,045,204  $2,446,339  $2,045,204 
Less: Intangible assets 17,761   17,843   18,088   17,761   18,088 
Adjusted assets at end of period$2,428,578  $2,278,684  $2,027,116  $2,428,578  $2,027,116 
Tangible common equity to tangible assets 8.12%  8.08%  8.07%  8.12%  8.07%
          
Total average shareholders equity$207,324  $202,955  $176,769  $197,680  $174,107 
Less: Average intangible assets 17,809   17,893   18,134   17,932   18,236 
Average tangible common equity$189,515  $185,062  $158,635  $179,748  $155,871 
Net income to common shareholders$8,896  $6,629  $10,592  $31,952  $27,071 
Return on average tangible common equity 18.62%  14.21%  26.49%  17.78%  17.37%
Average tangible common equity$189,515  $185,062  $158,635  $179,748  $155,871 
Core net income$7,289  $9,563  $8,081  $31,190  $24,975 
Core return on average tangible common equity 15.26%  20.50%  20.21%  17.35%  16.02%
          
Net interest income$20,404  $20,731  $20,884  $80,112  $71,338 
Add: Noninterest income 3,118   (2,894)  4,603   8,874   8,677 
Less: Employee retention related revenue —   (5,100)  —   —   — 
Less: Fee received on early loan payoff 1,863   —   —   1,863   — 
Less: Gain on sale of branches —   —   2,600   —   2,600 
Less: BOLI benefit claim —   —   774   —   774 
Less: Net gain (loss) on securities 98   (12)  (86)  555   (632)
Operating revenue$21,561  $22,949  $22,199  $86,568  $77,273 
          
Expenses:         
Total noninterest expense$9,717  $8,569  $10,436  $41,876  $39,614 
Less: One-time retirement related expenses —   —   —   1,571   — 
Less: Professional fees related to ERC —   (1,243)  —   —   — 
Less: Net OREO losses (154)  (9)  —   (156)  — 
Less: Loss on sale of branches —   —   228   —   228 
Adjusted noninterest expenses$9,871  $9,821  $10,208  $40,461  $39,386 
Core efficiency ratio 45.78%  42.79%  45.98%  46.74%  50.97%