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

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 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	%

<sub>⁽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.</sub>

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	%

<sub>⁽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.</sub>

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	%

<sub>⁽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.</sub>

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	%

<sub>⁽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.</sub>

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	%