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

Southern States Bancshares, Inc

Mon, Jan 22, 2024, 4:55 AM 16 min read

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 assets	8.99	%	12.01	%	8.70	%	11.71	%	8.82	%	12.17	%
Risk-based capital ratios:
Common equity tier 1 (“CET1”) capital ratio	9.18	%	12.28	%	9.32	%	12.55	%	8.86	%	12.21	%
Tier 1 capital ratio	9.18	%	12.28	%	9.32	%	12.55	%	8.86	%	12.21	%
Total capital ratio	14.26	%	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
[email protected]				[email protected]

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	%


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*	%

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