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

July 24, 2023 at 7:56 AM EDT
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Second Quarter 2023 Performance and Operational Highlights

  • Net income of $8.8 million, or $0.98 per diluted share
  • Core net income(1) of $7.1 million, or $0.79 per diluted share(1)            
  • Net interest income of $19.4 million, a decrease of $114,000 from the prior quarter
  • Net interest margin (“NIM”) of 3.73%, down 34 basis points from the prior quarter
  • NIM of 3.74% on a fully-taxable equivalent basis (“NIM - FTE”)(1) 
  • Return on average assets (“ROAA”) of 1.60%; return on average stockholders’ equity (“ROAE”) of 18.15%; and return on average tangible common equity (“ROATCE”)(1) of 20.01%
  • Core ROAA(1) of 1.29%; and core ROATCE(1) of 16.13%
  • Efficiency ratio of 51.00%
  • Linked-quarter loan growth was 17.4% annualized
  • Linked-quarter total deposit growth was 30.1% annualized and 20.7% annualized, net of brokered deposits
  • Repurchased $405,000 of common stock, representing 19,202 shares at an average price of $21.07 during the quarter   
(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., July 24, 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 $8.8 million, or $0.98 diluted earnings per share, for the second quarter of 2023. This compares to net income of $7.7 million, or $0.85 diluted earnings per share, for the first quarter of 2023, and net income of $5.2 million, or $0.59 diluted earnings per share, for the second quarter of 2022. The Company reported core net income of $7.1 million, or $0.79 diluted core earnings per share, for the second quarter of 2023. This compares to core net income of $7.3 million, or $0.80 diluted core earnings per share, for the first quarter of 2023, and core net income of $5.3 million, or $0.59 diluted core earnings per share, for the second quarter of 2022 (see “Reconciliation of Non-GAAP Financial Measures”).


CEO Commentary
     
Mark Chambers, Chief Executive Officer and President of Southern States, said, “Our team continued to identify attractive lending opportunities and build deposits across our footprint, prudently growing and delivering strong earnings while maintaining our unwavering focus on risk management and excellent credit quality.’’

“Our total loans grew 4.3% from the prior quarter and 20.0% from the second quarter of 2022. We more than funded our loan growth with an increase in our core deposits as we continued to expand our customer base. Meanwhile, our non-performing loans as a percentage of the overall portfolio totaled just 0.06%, down from both the first quarter and a year earlier. We continue to build upon the momentum we generated over the past several years across some of the most economically resilient markets in the South.’’

“While our funding costs rose during the quarter alongside higher interest rates, impacting our net interest margin, we have robust liquidity and capital levels that give Southern States the financial strength to drive ongoing growth. We are well-positioned to cultivate new business through superior customer service, giving gives us confidence in our ability to deliver long-term value for our shareholders.”


Net Interest Income and Net Interest Margin
  
    
 Three Months Ended % Change June 30, 2023 vs.
June 30,
2023		 March 31,
2023		 June 30,
2022		 March 31,
2023		 June 30,
2022
 (Dollars in thousands)    
          
Average interest-earning assets$2,091,998  $1,947,957  $1,710,022  7.4% 22.3%
Net interest income$19,432  $19,546  $16,365  (0.6)% 18.7%
Net interest margin 3.73%  4.07%  3.84% (34)bps (11)bps
          

Net interest income for the second quarter of 2023 was $19.4 million, a decrease of 0.6% from $19.5 million for the first quarter of 2023. The decrease was primarily driven by the impact of higher interest rates paid on deposits, which more than offset an increase in the yield on interest-earning assets.

Relative to the second quarter of 2022, net interest income increased $3.1 million, or 18.7%. The increase was partially the result of improvement in the yield on interest-earning assets, which outpaced the rise in costs of deposits and other borrowings. In addition, we benefited from the significant organic growth in interest-earning assets year over year.

Net interest margin for the second quarter of 2023 was 3.73%, compared to 4.07% for the first quarter of 2023. The decrease was primarily due to higher interest rates paid on interest-bearing liabilities, which outpaced the increase in yield on interest-earning assets.

Relative to the second quarter of 2022, net interest margin decreased from 3.84%. The decrease was primarily due to a rapid increase in interest rates, which accelerated cost on interest-bearing liabilities at a faster pace than the yield received on interest-earning assets. A shift from noninterest-bearing deposits to interest-bearing deposits also had a negative impact on net interest margin.


Noninterest Income   
    
 Three Months Ended % Change June 30, 2023 vs.
June 30,
2023		 March 31,
2023		 June 30,
2022		 March 31,
2023		 June 30,
2022
 (Dollars in thousands)    
          
Service charges on deposit accounts$456  $450  $480  1.3% (5.0)%
Swap fees 173   (4)  21  (4425.0% 723.8%
SBA/USDA fees 66   134   93  (50.7)% (29.0)%
Mortgage origination fees 188   100   213  88.0% (11.7)%
Net gain (loss) on securities (45)  514   (42) (108.8)% 7.1%
Other operating income 6,024   592   639  917.6% 842.7%
Total noninterest income$6,862  $1,786  $1,404  284.2% 388.7%
          

Noninterest income for the second quarter of 2023 was $6.9 million, an increase of 284.2% from $1.8 million for the first quarter of 2023. The second quarter included $5.1 million in employee retention credits (“ERC”) and interest from the Federal government as well as $264,000 in fees related to ERC from a third party.

Relative to the second quarter of 2022, noninterest income increased 388.7% from $1.4 million. The second quarter of 2023 included $5.1 million in ERC and interest from the Federal government as well as $264,000 in fees related to ERC from a third party.


Noninterest Expense   
 Three Months Ended % Change June 30, 2023 vs.
June 30,
2023		 March 31,
2023		 June 30,
2022		 March 31,
2023		 June 30,
2022
 (Dollars in thousands)    
          
Salaries and employee benefits$7,863 $6,311 $5,982 24.6% 31.4%
Equipment and occupancy expenses 694  683  719 1.6% (3.5)%
Data processing fees 646  593  570 8.9% 13.3%
Regulatory assessments 180  342  262 (47.4)% (31.3)%
Other operating expenses 4,049  2,229  2,119 81.7% 91.1%
Total noninterest expenses$13,432 $10,158 $9,652 32.2% 39.2%
          

Noninterest expense for the second quarter of 2023 was $13.4 million, an increase of 32.2% from $10.2 million for the first quarter of 2023. The increase was primarily attributable to an increase in salaries and benefits, substantially as a result of one-time retirement related expenses of our former CEO in May 2023 and professional fees paid to a third party during the second quarter related to ERC.

Relative to the second quarter of 2022, noninterest expense increased 39.2% from $9.7 million. The increase was primarily attributable to an increase in salaries and benefits, substantially as a result of one-time retirement related expenses of our former CEO in May 2023 and professional fees paid to a third party during the second quarter related to ERC.

 


Loans and Credit Quality
  
    
 Three Months Ended % Change June 30, 2023 vs.
June 30,
2023		 March 31,
2023		 June 30,
2022		 March 31,
2023		 June 30,
2022
(Dollars in thousands)    
          
Gross loans 1,722,278   1,650,929   1,435,089  4.3% 20.0%
Unearned income (5,766)  (5,614)  (4,884) 2.7% 18.1%
Loans, net of unearned income (“Loans”)$1,716,512  $1,645,315  $1,430,205  4.3% 20.0%
Average loans, net of unearned (“Average loans”)$1,676,816  $1,609,564  $1,359,320  4.2% 23.4%
          
Nonperforming loans (“NPL”)$1,010  $1,646  $3,550  (38.6)% (71.5)%
Provision for credit losses$1,557  $1,181  $1,304  31.8% 19.4%
Allowance for credit losses (“ACL”)$21,385  $19,855  $16,807  7.7% 27.2%
Net charge-offs (recoveries)$27  $197  $(11) (86.3)% (345.5)%
NPL to gross loans 0.06%  0.10%  0.25%    
Net charge-offs (recoveries) to average loans(1) 0.01%  0.05%  0.00%    
ACL to loans 1.25%  1.21%  1.18%    
          
(1) Ratio is annualized.         
          

Loans, net of unearned income, were $1.7 billion at June 30, 2023, up $71.2 million from March 31, 2023 and up $286.3 million from June 30, 2022. The linked-quarter and year-over-year increases in loans were primarily attributable to new business growth across our footprint.

Nonperforming loans totaled $1.0 million, or 0.06% of gross loans, at June 30, 2023, compared with $1.6 million, or 0.10% of gross loans, at March 31, 2023, and $3.6 million, or 0.25% of gross loans, at June 30, 2022. The $636,000 net decrease in nonperforming loans in the second quarter of 2023 was primarily attributable to a commercial real estate loan that was paid-off. The $2.5 million net decrease in nonperforming loans from June 30, 2022, was primarily attributable to a significant commercial real estate loan being moved back to accruing status, two loans that were charged-off and one loan that was paid-off.

The Company recorded a provision for credit losses of $1.6 million for the second quarter of 2023, compared to $1.2 million for the first quarter of 2023. The increase in provision was primarily due to changes in our qualitative economic factors and modest loan growth for the quarter.

Net charge-offs for the second quarter of 2023 were $27,000, or 0.01% of average loans on an annualized basis, compared to net charge-offs of $197,000, or 0.05% of average loans on an annualized basis, for the first quarter of 2023, and net recoveries of $11,000, or 0.00% of average loans on an annualized basis, for the second quarter of 2022.

The Company’s allowance for credit losses was 1.25% of total loans and 2117.33% of nonperforming loans at June 30, 2023, compared with 1.21% of total loans and 1206.26% of nonperforming loans at March 31, 2023. Allowance for credit losses on unfunded commitments was $1.5 million at June 30, 2023.


Deposits   
    
 Three Months Ended % Change June 30, 2023 vs.
June 30,
2023		 March 31,
2023		 June 30,
2022		 March 31,
2023		 June 30,
2022
 (Dollars in thousands)    
          
Noninterest-bearing deposits$449,433  $433,832  $512,598  3.6% (12.3)%
Interest-bearing deposits 1,474,478   1,355,659   1,132,348  8.8% 30.2%
Total deposits$1,923,911  $1,789,491  $1,644,946  7.5% 17.0%
          
Uninsured deposits$553,084  $567,709  $660,115  (2.6)% (16.2)%
Uninsured deposits to total deposits 28.75%  31.72%  40.13%    
Noninterest deposits to total deposits 23.36%  24.24%  31.16%    
          

Total deposits were $1.9 billion at June 30, 2023, up from $1.8 billion at March 31, 2023 and $1.6 billion at June 30, 2022. The $134.4 million increase in total deposits in the second quarter was due to an increase of $118.8 million in interest-bearing deposits and by a $15.6 million increase in noninterest-bearing deposits. Included in the increase was $49.1 million in brokered deposits.


Capital     
      
 June 30,
2023		 March 31,
2023		 June 30,
2022
Company Bank Company Bank Company Bank
           
Tier 1 capital ratio to average assets8.70% 11.82% 8.89% 12.19% 8.78% 10.97%
Risk-based capital ratios:           
Common equity tier 1 (“CET1”) capital ratio9.11% 12.37% 9.00% 12.34% 8.92% 11.14%
Tier 1 capital ratio9.11% 12.37% 9.00% 12.34% 8.92% 11.14%
Total capital ratio14.42% 13.47% 14.41% 13.38% 12.58% 12.09%
            

As of June 30, 2023, total stockholders’ equity was $197.2 million, up from $189.7 million at March 31, 2023. The increase of $7.6 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 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 Six Months Ended
June 30,
2023		 March 31,
2023		 June 30,
2022		 June 30,
2023		 June 30,
2022
         
Results of Operations         
Interest income$32,185  $28,699  $17,752  $60,884  $33,624 
Interest expense 12,753   9,153   1,387   21,906   2,605 
Net interest income 19,432   19,546   16,365   38,978   31,019 
Provision for credit losses 1,557   1,181   1,304   2,738   2,004 
Net interest income after provision 17,875   18,365   15,061   36,240   29,015 
Noninterest income 6,862   1,786   1,404   8,648   2,737 
Noninterest expense 13,432   10,158   9,652   23,590   18,942 
Income tax expense 2,549   2,322   1,590   4,871   3,030 
Net income$8,756  $7,671  $5,223  $16,427  $9,780 
Core net income(1)$7,058  $7,280  $5,255  $14,339  $10,086 
          
Share and Per Share Data         
Shares issued and outstanding 8,738,814   8,723,763   8,691,620   8,738,814   8,691,620 
Weighted average shares outstanding:         
Basic 8,763,635   8,762,450   8,740,295   8,763,046   8,818,327 
Diluted 8,950,847   9,044,490   8,894,577   9,001,600   8,960,565 
Earnings per share:         
Basic$1.00  $0.87  $0.60  $1.87  $1.11 
Diluted$0.98  $0.85  $0.59  $1.82  $1.09 
Core - diluted(1)$0.79  $0.80  $0.59  $1.59  $1.13 
Book value per share$22.57  $21.74  $19.32  $22.57  $19.32 
Tangible book value per share(1)$20.52  $19.68  $17.23  $20.52  $17.23 
Cash dividends per common share$0.09  $0.09  $0.09  $0.18  $0.18 
          
Performance and Financial Ratios         
ROAA 1.60%  1.51%  1.15%  1.56%  1.09%
ROAE 18.15%  16.67%  12.32%  17.43%  11.36%
Core ROAA(1) 1.29%  1.44%  1.16%  1.36%  1.13%
ROATCE(2) 20.01%  18.45%  13.80%  19.25%  12.70%
Core ROATCE(1) 16.13%  17.51%  13.89%  16.80%  13.10%
NIM 3.73%  4.07%  3.84%  3.89%  3.69%
NIM - FTE(2) 3.74%  4.09%  3.86%  3.90%  3.70%
Net interest spread 2.86%  3.33%  3.67%  3.08%  3.53%
Yield on loans 6.61%  6.38%  4.80%  6.50%  4.74%
Yield on interest-earning assets 6.17%  5.97%  4.16%  6.08%  4.00%
Cost of interest-bearing liabilities 3.31%  2.64%  0.49%  3.00%  0.47%
Cost of funds(2) 2.58%  2.01%  0.34%  2.31%  0.33%
Cost of interest-bearing deposits 3.12%  2.42%  0.34%  2.79%  0.34%
Cost of total deposits 2.38%  1.81%  0.23%  2.11%  0.23%
Noninterest deposits to total deposits 23.36%  24.24%  31.16%  23.36%  31.16%
Core deposits to total deposits 86.43%  88.57%  94.86%  86.43%  94.86%
Uninsured deposits to total deposits 28.75%  31.72%  40.13%  28.75%  40.13%
Total loans to total deposits 89.22%  91.94%  86.95%  89.22%  86.95%
Efficiency ratio 51.00%  48.79%  54.19%  50.02%  55.45%
Core efficiency ratio(1) 49.96%  48.79%  54.19%  49.38%  55.45%
          

(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 Six Months Ended
June 30,
2023		 March 31,
2023		 June 30,
2022		 June 30,
2023		 June 30,
2022
         
Financial Condition (ending)         
Total loans$1,716,512  $1,645,315  $1,430,205  $1,716,512  $1,430,205 
Total securities 182,717   183,197   171,411   182,717   171,411 
Total assets 2,277,803   2,135,622   1,902,495   2,277,803   1,902,495 
Total noninterest bearing deposits 449,433   433,832   512,598   449,433   512,598 
Total core deposits(1) 1,662,855   1,584,915   1,560,390   1,662,855   1,560,390 
Total deposits 1,923,911   1,789,491   1,644,946   1,923,911   1,644,946 
Total borrowings 131,472   131,372   72,013   131,472   72,013 
Total liabilities 2,080,554   1,945,959   1,734,548   2,080,554   1,734,548 
Total shareholders’ equity 197,249   189,663   167,947   197,249   167,947 
          
Financial Condition (average)         
Total loans$1,676,816  $1,609,564  $1,359,320  $1,643,376  $1,319,090 
Total securities 196,731   192,348   178,527   194,552   170,151 
Total other interest-earning assets 218,451   146,045   172,175   182,447   207,990 
Total interest-bearing assets 2,091,998   1,947,957   1,710,022   2,020,375   1,697,231 
Total assets 2,200,843   2,057,005   1,821,437   2,129,328   1,804,321 
Total noninterest-bearing deposits 438,987   438,735   502,728   438,862   508,560 
Total interest-bearing deposits 1,412,047   1,300,632   1,059,362   1,356,648   1,041,728 
Total deposits 1,851,034   1,739,367   1,562,090   1,795,510   1,550,288 
Total borrowings 131,411   104,901   72,066   118,229   65,506 
Total interest-bearing liabilities 1,543,458   1,405,533   1,131,428   1,474,877   1,107,234 
Total shareholders’ equity 193,516   186,639   170,038   190,096   173,621 
          
Asset Quality         
Nonperforming loans$1,010  $1,646  $3,550  $1,010  $3,550 
Other real estate owned (“OREO”)$2,870  $2,930  $2,930  $2,870  $2,930 
Nonperforming assets (“NPA”)$3,880  $4,576  $6,480  $3,880  $6,480 
Net charge-offs (recovery) to average loans(2) 0.01%  0.05%  —%  0.03%  0.01%
Provision for credit losses to average loans(2) 0.37%  0.30%  0.38%  0.34%  0.31%
ACL to loans 1.25%  1.21%  1.18%  1.25%  1.18%
ACL to gross loans 1.24%  1.20%  1.17%  1.24%  1.17%
ACL to NPL 2117.33%  1206.26%  473.44%  2117.33%  473.44%
NPL to loans 0.06%  0.10%  0.25%  0.06%  0.25%
NPL to gross loans 0.06%  0.10%  0.25%  0.06%  0.25%
NPA to gross loans and OREO 0.22%  0.28%  0.45%  0.22%  0.45%
NPA to total assets 0.17%  0.21%  0.34%  0.17%  0.34%
          
Regulatory and Other Capital Ratios         
Total shareholders’ equity to total assets 8.66%  8.88%  8.83%  8.66%  8.83%
Tangible common equity to tangible assets(3) 7.94%  8.11%  7.95%  7.94%  7.95%
Tier 1 capital ratio to average assets 8.70%  8.89%  8.78%  8.70%  8.78%
Risk-based capital ratios:         
CET1 capital ratio 9.11%  9.00%  8.92%  9.11%  8.92%
Tier 1 capital ratio 9.11%  9.00%  8.92%  9.11%  8.92%
Total capital ratio 14.42%  14.41%  12.58%  14.42%  12.58%
          

(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)
        
 June 30,
2023		 March 31,
2023		 December 31,
2022		 June 30,
2022
(Unaudited) (Unaudited) (Audited) (Unaudited)
       
Assets       
Cash and due from banks$21,299  $17,245  $15,260  $22,167 
Interest-bearing deposits in banks 159,818   99,541   90,198   95,156 
Federal funds sold 84,812   76,010   63,041   73,024 
Total cash and cash equivalents 265,929   192,796   168,499   190,347 
        
Securities available for sale, at fair value 163,075   163,550   155,544   151,749 
Securities held to maturity, at amortized cost 19,642   19,647   19,652   19,662 
Other equity securities, at fair value 3,762   3,806   4,444   6,958 
Restricted equity securities, at cost 3,862   3,862   3,134   2,825 
Loans held for sale 1,589   2,376   1,047   2,709 
        
Loans, net of unearned income 1,716,512   1,645,315   1,587,164   1,430,205 
Less allowance for credit losses 21,385   19,855   20,156   16,807 
Loans, net 1,695,127   1,625,460   1,567,008   1,413,398 
        
Premises and equipment, net 26,957   27,098   27,345   28,467 
Accrued interest receivable 7,372   7,077   6,963   4,839 
Bank owned life insurance 29,521   29,350   29,186   29,509 
Annuities 15,359   15,489   15,478   15,540 
Foreclosed assets 2,870   2,930   2,930   2,930 
Goodwill 16,862   16,862   16,862   16,862 
Core deposit intangible 1,062   1,144   1,226   1,368 
Other assets 24,814   24,175   25,886   15,332 
        
Total assets$2,277,803  $2,135,622  $2,045,204  $1,902,495 
        
Liabilities and Stockholders' Equity       
Liabilities:       
Deposits:       
Noninterest-bearing$449,433  $433,832  $460,977  $512,598 
Interest-bearing 1,474,478   1,355,659   1,259,766   1,132,348 
Total deposits 1,923,911   1,789,491   1,720,743   1,644,946 
        
Other borrowings (13)  (16)  (19)  — 
FHLB advances 45,000   45,000   31,000   25,000 
Subordinated notes 86,485   86,388   86,314   47,013 
Accrued interest payable 1,063   844   584   88 
Other liabilities 24,108   24,252   24,863   17,501 
        
Total liabilities 2,080,554   1,945,959   1,863,485   1,734,548 
        
Stockholders' equity:       
Common stock 43,830   43,798   43,714   43,458 
Capital surplus 77,101   77,053   76,785   75,597 
Retained earnings 88,603   80,642   73,764   58,039 
Accumulated other comprehensive loss (10,799)  (9,846)  (11,048)  (8,439)
Unvested restricted stock (709)  (965)  (477)  (708)
Vested restricted stock units (777)  (1,019)  (1,019)  — 
        
Total stockholders' equity 197,249   189,663   181,719   167,947 
        
Total liabilities and stockholders' equity$2,277,803  $2,135,622  $2,045,204  $1,902,495 


CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
          
 Three Months Ended Six Months Ended
June 30,
2023		 March 31,
2023		 June 30,
2022		 June 30,
2023		 June 30,
2022
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income:         
Loans, including fees$27,630  $25,335  $16,265  $52,965 $31,031 
Taxable securities 1,641   1,383   788   3,024  1,407 
Nontaxable securities 228   291   309   519  608 
Other interest and dividends 2,686   1,690   390   4,376  578 
Total interest income 32,185   28,699   17,752   60,884  33,624 
          
Interest expense:         
Deposits 10,998   7,768   889   18,766  1,762 
Other borrowings 1,755   1,385   498   3,140  843 
Total interest expense 12,753   9,153   1,387   21,906  2,605 
          
Net interest income 19,432   19,546   16,365   38,978  31,019 
Provision for credit losses 1,557   1,181   1,304   2,738  2,004 
Net interest income after provision for credit losses 17,875   18,365   15,061   36,240  29,015 
          
Noninterest income:         
Service charges on deposit accounts 456   450   480   906  925 
Swap fees 173   (4)  21   169  36 
SBA/USDA fees 66   134   93   200  481 
Mortgage origination fees 188   100   213   288  499 
Net gain (loss) on securities (45)  514   (42)  469  (403)
Other operating income 6,024   592   639   6,616  1,199 
Total noninterest income 6,862   1,786   1,404   8,648  2,737 
          
Noninterest expenses:         
Salaries and employee benefits 7,863   6,311   5,982   14,174  11,707 
Equipment and occupancy expenses 694   683   719   1,377  1,424 
Data processing fees 646   593   570   1,239  1,134 
Regulatory assessments 180   342   262   522  525 
Other operating expenses 4,049   2,229   2,119   6,278  4,152 
Total noninterest expenses 13,432   10,158   9,652   23,590  18,942 
          
Income before income taxes 11,305   9,993   6,813   21,298  12,810 
          
Income tax expense 2,549   2,322   1,590   4,871  3,030 
          
Net income$8,756  $7,671  $5,223  $16,427 $9,780 
          
Basic earnings per share$1.00  $0.87  $0.60  $1.87 $1.11 
          
Diluted earnings per share$0.98  $0.85  $0.59  $1.82 $1.09 


AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
                  
 Three Months Ended
June 30,
2023		 March 31,
2023		 June 30,
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)$1,676,816  $27,630 6.61% $1,609,564  $25,335 6.38% $1,359,320  $16,265 4.80%
Taxable securities 151,107   1,641 4.36%  139,516   1,383 4.02%  121,677   788 2.60%
Nontaxable securities 45,624   228 2.00%  52,832   291 2.24%  56,850   309 2.18%
Other interest-earnings assets 218,451   2,686 4.93%  146,045   1,690 4.69%  172,175   390 0.91%
Total interest-earning assets$2,091,998  $32,185 6.17% $1,947,957  $28,699 5.97% $1,710,022  $17,752 4.16%
Allowance for credit losses (20,154)      (20,493)      (15,815)    
Noninterest-earning assets 128,999       129,541       127,230     
Total Assets$2,200,843      $2,057,005      $1,821,437     
                  
Liabilities and Stockholders’ Equity:                 
Interest-bearing liabilities:                 
Interest-bearing transaction accounts 92,245   20 0.09%  93,951   20 0.08%  114,743   27 0.09%
Savings and money market accounts 845,742   6,872 3.26%  806,001   5,040 2.54%  735,845   625 0.34%
Time deposits 474,060   4,106 3.47%  400,680   2,708 2.74%  208,774   237 0.46%
FHLB advances 45,000   529 4.72%  18,578   159 3.47%  25,000   21 0.33%
Other borrowings 86,411   1,226 5.69%  86,323   1,226 5.76%  47,066   477 4.07%
Total interest-bearing liabilities$1,543,458  $12,753 3.31% $1,405,533  $9,153 2.64% $1,131,428  $1,387 0.49%
                  
Noninterest-bearing liabilities:                 
Noninterest-bearing deposits$438,987      $438,735      $502,728     
Other liabilities 24,882       26,098       17,243     
Total noninterest-bearing liabilities 463,869       464,833       519,971     
Stockholders’ Equity 193,516       186,639       170,038     
Total Liabilities and Stockholders’ Equity$2,200,843      $2,057,005      $1,821,437     
                  
Net interest income  $19,432     $19,546     $16,365  
Net interest spread(2)    2.86%     3.33%     3.67%
Net interest margin(3)    3.73%     4.07%     3.84%
Net interest margin - FTE(4)(5)    3.74%     4.09%     3.86%
Cost of funds(6)    2.58%     2.01%     0.34%
Cost of interest-bearing deposits    3.12%     2.42%     0.34%
Cost of total deposits    2.38%     1.81%     0.23%

(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)
            
 Six Months Ended
June 30,
2023		 June 30,
2022
Average
Balance		 Interest Yield/Rate Average
Balance		 Interest Yield/Rate
Assets:           
Interest-earning assets:           
Loans, net of unearned income(1)$1,643,376  $52,965 6.50% $1,319,090  $31,031 4.74%
Taxable securities 145,344   3,024 4.20%  114,289   1,407 2.48%
Nontaxable securities 49,208   519 2.13%  55,862   608 2.19%
Other interest-earnings assets 182,447   4,376 4.84%  207,990   578 0.56%
Total interest-earning assets$2,020,375  $60,884 6.08% $1,697,231  $33,624 4.00%
Allowance for credit losses (20,315)      (15,430)    
Noninterest-earning assets 129,268       122,520     
Total Assets$2,129,328      $1,804,321     
            
Liabilities and Stockholders’ Equity:           
Interest-bearing liabilities:           
Interest-bearing transaction accounts 93,093   40 0.09%  112,874   53 0.09%
Savings and money market accounts 825,982   11,911 2.91%  705,841   1,217 0.35%
Time deposits 437,573   6,815 3.14%  223,013   492 0.45%
FHLB advances 31,862   688 4.35%  25,472   43 0.34%
Other borrowings 86,367   2,452 5.73%  40,034   800 4.03%
Total interest-bearing liabilities$1,474,877  $21,906 3.00% $1,107,234  $2,605 0.47%
            
Noninterest-bearing liabilities:           
Noninterest-bearing deposits$438,862      $508,560     
Other liabilities 25,493       14,906     
Total noninterest-bearing liabilities$464,355      $523,466     
Stockholders’ Equity 190,096       173,621     
Total Liabilities and Stockholders’ Equity$2,129,328      $1,804,321     
            
Net interest income  $38,978     $31,019  
Net interest spread(2)    3.08%     3.53%
Net interest margin(3)    3.89%     3.69%
Net interest margin - FTE(4)(5)    3.90%     3.70%
Cost of funds(6)    2.31%     0.33%
Cost of interest-bearing deposits    2.79%     0.34%
Cost of total deposits    2.11%     0.23%

(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)
                
 June 30,
2023		 March 31,
2023		 December 31,
2022		 June 30,
2022
Amount % of Amount % of Amount % of Amount % of
               
Real estate mortgages:               
Construction and$228,236  13.3% $227,560  13.8% $255,736  16.1% $185,164  12.9%
Residential 214,897  12.5%  196,923  11.9%  167,891  10.5%  153,275  10.7%
Commercial 1,011,815  58.7%  948,251  57.5%  904,872  56.8%  867,815  60.4%
Commercial and industrial 259,195  15.0%  270,825  16.4%  256,553  16.1%  219,284  15.3%
Consumer and other 8,135  0.5%  7,370  0.4%  7,655  0.5%  9,551  0.7%
Gross loans 1,722,278  100.0%  1,650,929  100.0%  1,592,707  100.0%  1,435,089  100.0%
Unearned income (5,766)    (5,614)    (5,543)    (4,884)  
Loans, net of unearned income 1,716,512     1,645,315     1,587,164     1,430,205   
Allowance for credit losses (21,385)    (19,855)    (20,156)    (16,807)  
Loans, net$1,695,127    $1,625,460    $1,567,008    $1,413,398   


DEPOSIT COMPOSITION
(Dollars in thousands)
                
 June 30,
2023		 March 31,
2023		 December 31,
2022		 June 30,
2022
Amount % of total Amount % of total Amount % of total Amount % of total
               
                
Noninterest-bearing transaction$449,433 23.3% $433,833 24.2% $460,977 26.8% $512,598 31.2%
Interest-bearing transaction 922,835 48.0%  877,166 49.0%  837,127 48.6%  836,230 50.8%
Savings 41,574 2.2%  47,742 2.7%  49,235 2.9%  67,583 4.1%
Time deposits, $250,000 and under 438,228 22.8%  366,271 20.5%  307,145 17.8%  188,682 11.5%
Time deposits, over $250,000 71,841 3.7%  64,479 3.6%  66,259 3.9%  39,853 2.4%
Total deposits$1,923,911 100.0% $1,789,491 100.0% $1,720,743 100.0% $1,644,946 100.0%


Nonperfoming Assets
(Dollars in thousands)
        
 June 30,
2023		 March 31,
2023		 December 31,
2022		 June 30,
2022
       
       
Nonaccrual loans$1,010  $1,646  $2,245  $3,550 
Past due loans 90 days or more and still accruing interest —   —   —   — 
Total nonperforming loans 1,010   1,646   2,245   3,550 
OREO 2,870   2,930   2,930   2,930 
Total nonperforming assets$3,880  $4,576  $5,175  $6,480 
        
Troubled debt restructured loans – nonaccrual(1) 724   805   832   676 
Troubled debt restructured loans – accruing 1,328   1,272   1,292   1,323 
Total troubled debt restructured loans$2,052  $2,077  $2,124  $1,999 
        
Allowance for credit losses$21,385  $19,855  $20,156  $16,807 
Loans, net of unearned income at the end of the period$1,716,512  $1,645,315  $1,587,164  $1,430,205 
Gross loans outstanding at the end of period$1,722,278  $1,650,929  $1,592,707  $1,435,089 
Total assets$2,277,803  $2,135,622  $2,045,204  $1,902,495 
Allowance for credit losses to nonperforming loans 2117.33%  1206.26%  897.82%  473.44%
Nonperforming loans to loans, net of unearned income 0.06%  0.10%  0.14%  0.25%
Nonperforming loans to gross loans 0.06%  0.10%  0.14%  0.25%
Nonperforming assets to gross loans and OREO 0.22%  0.28%  0.32%  0.45%
Nonperforming assets to total assets 0.17%  0.21%  0.25%  0.34%
        
Nonaccrual loans by category:       
Real estate mortgages:       
Construction & Development$33  $64  $67  $73 
Residential Mortgages 297   267   565   563 
Commercial Real Estate Mortgages 671   1,263   1,278   2,135 
Commercial & Industrial 9   51   312   768 
Consumer and other —   1   23   11 
Total$1,010  $1,646  $2,245  $3,550 

(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 Six Months Ended
June 30,
2023		 March 31,
2023		 June 30,
2022		 June 30,
2023		 June 30, 2022
         
Average loans, net of unearned income$1,676,816  $1,609,564  $1,359,320  $1,643,376  $1,319,090 
Loans, net of unearned income$1,716,512  $1,645,315  $1,430,205  $1,716,512  $1,430,205 
Gross loans$1,722,278  $1,650,929  $1,435,089  $1,722,278  $1,435,089 
Allowance for credit losses at beginning of the period$19,855  $20,156  $15,492  $20,156  $14,844 
Impact of adoption of ASC 326$—  $(1,285) $—  $(1,285) $— 
Charge-offs:         
Construction and development —   —   7   —   66 
Residential —   —   —   —   7 
Commercial —   —   —   —   — 
Commercial and industrial 44   218   —   262   — 
Consumer and other —   6   1   6   7 
Total charge-offs 44   224   8   268   80 
Recoveries:         
Construction and development —   —   —   —   — 
Residential 17   11   18   28   35 
Commercial —   —   —   —   — 
Commercial and industrial —   14   —   14   — 
Consumer and other —   2   1   2   4 
Total recoveries 17   27   19   44   39 
Net charge-offs (recoveries)$27  $197  $(11) $224  $41 
          
Provision for credit losses$1,557  $1,181  $1,304  $2,738  $2,004 
Balance at end of the period$21,385  $19,855  $16,807  $21,385  $16,807 
          
Allowance for credit losses on unfunded commitments at beginning of the period$1,285  $—  $—  $—  $— 
Impact of adoption of ASC 326 —   1,285   —   1,285   — 
Provision for credit losses on unfunded commitments 210   —   —   210   — 
Balance at the end of the period$1,495  $1,285  $—  $1,495  $— 
          
Allowance to loans, net of unearned income 1.25%  1.21%  1.18%  1.25%  1.18%
Allowance to gross loans 1.24%  1.20%  1.17%  1.24%  1.17%
Net charge-offs (recoveries) to average loans, net of unearned income(1) 0.01%  0.05%  —%  0.03%  0.01%
Provision for credit losses to average loans, net of unearned income(1) 0.37%  0.30%  0.38%  0.34%  0.31%
          

(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 Six Months Ended
June 30,
2023		 March 31,
2023		 June 30,
2022		 June 30,
2023		 June 30,
2022
         
Net income$8,756  $7,671  $5,223  $16,427  $9,780 
Add: One-time retirement related expenses 1,571   —   —   1,571   — 
Add: Professional fees related to ERC 1,243   —   —   1,243   — 
Add: Net OREO gains 7   —   —   7   — 
Less: Employee retention related revenue 5,100   —   —   5,100   — 
Less: Gain (loss) on securities (45)  514   (42)  469   (403)
Less: Tax effect (536)  (123)  10   (660)  97 
Core net income$7,058  $7,280  $5,255  $14,339  $10,086 
Average assets$2,200,843  $2,057,005  $1,821,437  $2,129,328  $1,804,321 
Core return on average assets 1.29%  1.44%  1.16%  1.36%  1.13%
          
Net income$8,756  $7,671  $5,223  $16,427  $9,780 
Add: One-time retirement related expenses 1,571   —   —   1,571   — 
Add: Professional fees related to ERC 1,243   —   —   1,243   — 
Add: Net OREO gains 7   —   —   7   — 
Add: Provision 1,557   1,181   1,304   2,738   2,004 
Less: Employee retention related revenue 5,100   —   —   5,100   — 
Less: Gain (loss) on securities (45)  514   (42)  469   (403)
Add: Income taxes 2,549   2,322   1,590   4,871   3,030 
Pretax pre-provision core net income$10,628  $10,660  $8,159  $21,288  $15,217 
Average assets$2,200,843  $2,057,005  $1,821,437  $2,129,328  $1,804,321 
Pretax pre-provision core return on average assets 1.94%  2.10%  1.80%  2.02%  1.70%
          
Net interest income$19,432  $19,546  $16,365  $38,978  $31,019 
Add: Fully-taxable equivalent adjustments(1) 65   85   83   143   161 
Net interest income - FTE$19,497  $19,631  $16,448  $39,121  $31,180 
          
Net interest margin 3.73%  4.07%  3.84%  3.89%  3.69%
Effect of fully-taxable equivalent adjustments(1) 0.01%  0.02%  0.02%  0.01%  0.01%
Net interest margin - FTE 3.74%  4.09%  3.86%  3.90%  3.70%
          
Total stockholders' equity$197,249  $189,663  $167,947  $197,249  $167,947 
Less: Intangible assets 17,924   18,006   18,230   17,924   18,230 
Tangible common equity$179,325  $171,657  $149,717  $179,325  $149,717 
          
(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 Six Months Ended
June 30,
2023		 March 31,
2023		 June 30,
2022		 June 30,
2023		 June 30,
2022
         
Core net income$7,058  $7,280  $5,255  $14,339  $10,086 
Diluted weighted average shares outstanding 8,950,847   9,044,490   8,894,577   9,001,600   8,960,565 
Diluted core earnings per share$0.79  $0.80  $0.59  $1.59  $1.13 
          
Common shares outstanding at year or period end 8,738,814   8,723,763   8,691,620   8,738,814   8,691,620 
Tangible book value per share$20.52  $19.68  $17.23  $20.52  $17.23 
          
Total assets at end of period$2,277,803  $2,135,622  $1,902,495  $2,277,803  $1,902,495 
Less: Intangible assets 17,924   18,006   18,230   17,924   18,230 
Adjusted assets at end of period$2,259,879  $2,117,616  $1,884,265  $2,259,879  $1,884,265 
Tangible common equity to tangible assets 7.94%  8.11%  7.95%  7.94%  7.95%
          
Total average shareholders equity$193,516  $186,639  $170,038  $190,096  $173,621 
Less: Average intangible assets 17,974   18,055   18,270   18,014   18,304 
Average tangible common equity$175,542  $168,584  $151,768  $172,082  $155,317 
Net income to common shareholders$8,756  $7,671  $5,223  $16,427  $9,780 
Return on average tangible common equity 20.01%  18.45%  13.80%  19.25%  12.70%
Average tangible common equity$175,542  $168,584  $151,768  $172,082  $155,317 
Core net income$7,058  $7,280  $5,255  $14,339  $10,086 
Core return on average tangible common equity 16.13%  17.51%  13.89%  16.80%  13.10%
          
Net interest income$19,432  $19,546  $16,365  $38,978  $31,019 
Add: Noninterest income 6,862   1,786   1,404   8,648   2,737 
Less: Employee retention related revenue 5,100   —   —   5,100   — 
Less: Gain (loss) on securities (45)  514   (42)  469   (403)
Operating revenue$21,239  $20,818  $17,811  $42,057  $34,159 
          
Expenses:         
Total noninterest expense$13,432  $10,158  $9,652  $23,590  $18,942 
Less: One-time retirement related expenses 1,571   —   —   1,571   — 
Less: Professional fees related to ERC 1,243   —   —   1,243   — 
Less: Net OREO gains 7   —   —   7   — 
Adjusted noninterest expenses$10,611  $10,158  $9,652  $20,769  $18,942 
Core efficiency ratio 49.96%  48.79%  54.19%  49.38%  55.45%