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What changed in ServisFirst Bancshares, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ServisFirst Bancshares, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+399 added−415 removedSource: 10-K (2025-03-03) vs 10-K (2024-03-01)

Top changes in ServisFirst Bancshares, Inc.'s 2024 10-K

399 paragraphs added · 415 removed · 316 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

101 edited+38 added−25 removed165 unchanged
Biggest changeWe draw most of our deposits from, and conduct most of our lending transactions in, these markets. 6 According to Federal Deposit Insurance Corporation (“FDIC”) reports, total deposits in each of our primary market areas have expanded from 2013 to 2023 (deposit data reflects totals as reported by financial institutions as of June 30 th of each year) as follows: 2023 2013 Compound Annual Growth Rate (Dollars in Billions) Alabama: Jefferson/Shelby County, Alabama $ 44.03 $ 27.3 4.9 % Mobile County, Alabama 9.7 6.0 5.0 % Madison County, Alabama 10.0 6.1 5.0 % Montgomery County, Alabama 7.8 6.5 1.9 % Baldwin County, Alabama 6.8 3.4 7.2 % Houston County, Alabama 3.4 2.2 4.5 % Florida: Orange County, Florida 47.4 24.3 6.9 % Hillsborough County, Florida 41.7 25.7 5.0 % Sarasota County, Florida 19.3 11.7 5.2 % Leon County, Florida 8.3 4.8 5.6 % Escambia County, Florida 7.4 3.5 7.8 % Okaloosa County, Florida 5.3 3.5 4.3 % Bay County, Florida 4.7 2.5 6.5 % Georgia: Cobb County, Georgia 29.7 10.3 11.2 % Muscogee County, Georgia 7.4 5.5 3.0 % Douglas County, Georgia 2.5 1.2 7.4 % North Carolina: Mecklenburg County, North Carolina 357.0 199.0 6.0 % South Carolina: Charleston County, South Carolina 16.4 8.0 7.5 % Dorchester County, South Carolina 2.4 1.1 8.2 % Tennessee: Davidson County, Tennessee 55.9 23.3 9.2 % Virginia: Virginia Beach (City), Virginia 8.4 5.6 4.2 % Our bank is subject to intense competition from various financial institutions and other financial service providers.
Biggest changeAccording to Federal Deposit Insurance Corporation (“FDIC”) reports, total deposits in each of our primary market areas have expanded from 2014 to 2024 (deposit data reflects totals as reported by financial institutions as of June 30th of each year) as follows: 6 2024 2014 Compound Annual Growth Rate (Dollars in Billions) Alabama: Jefferson/Shelby County, Alabama $ 45.2 $ 30.2 4.13 % Mobile County, Alabama 9.7 6.3 4.47 % Madison County, Alabama 10.2 6.0 5.33 % Montgomery County, Alabama 7.8 6.1 2.47 % Baldwin County, Alabama 6.7 3.5 6.53 % Houston County, Alabama 3.4 2.2 4.45 % Florida: Orange County, Florida 48.0 27.0 5.92 % Hillsborough County, Florida 41.9 25.6 5.04 % Sarasota County, Florida 19.0 11.8 4.93 % Leon County, Florida 8.2 5.1 4.85 % Escambia County, Florida 6.5 3.6 6.03 % Okaloosa County, Florida 5.4 3.4 4.70 % Bay County, Florida 4.5 2.7 5.34 % Georgia: Cobb County, Georgia 28.5 10.9 10.06 % Muscogee County, Georgia 8.0 5.5 3.72 % Douglas County, Georgia 2.4 1.2 7.37 % North Carolina: Mecklenburg County, North Carolina 432.3 188.2 8.67 % Buncombe-Asheville, North Carolina 7.4 4.2 5.83 % South Carolina: Charleston County, South Carolina 16.9 8.3 7.38 % Dorchester County, South Carolina 2.5 1.2 7.97 % Tennessee: Davidson County, Tennessee 53.8 25.6 7.71 % Virginia: Virginia Beach (City), Virginia 8.2 5.4 4.31 % Our bank is subject to intense competition from various financial institutions and other financial service providers.
Hiring, Promotion & Talent Development We are always looking to build our workforce from within and promote from our current talent pool whenever possible. When this is not the case, we look to career fairs and local colleges to network on an ongoing basis, as well as utilizing professional networking platforms, such as LinkedIn.
Hiring, Promotion and Talent Development We are always looking to build our workforce from within and promote from our current talent pool whenever possible. When this is not the case, we look to career fairs and local colleges to network on an ongoing basis, as well as utilizing professional networking platforms, such as LinkedIn.
The BHC Act expressly lists the following activities as financial in nature: lending, trust and other banking activities; insuring, guaranteeing, or indemnifying against loss or harm, or providing and issuing annuities, and acting as principal, agent, or broker for these purposes, in any state; providing financial, investment, or advisory services; issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly; underwriting, dealing in or making a market in securities; other activities that the Federal Reserve may determine to be so closely related to banking or managing or controlling banks as to be a proper incident to managing or controlling banks; activities permitted outside of the United States if the Federal Reserve has determined them to be usual in connection with banking operations abroad; merchant banking through securities or insurance affiliates; and insurance company portfolio investments.
The BHC Act expressly lists the following activities as financial in nature: lending, trust and other banking activities; insuring, guaranteeing, or indemnifying against loss or harm, or providing and issuing annuities, and acting as principal, agent, or broker for these purposes, in any state; providing financial, investment, or economic advisory services; issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly; underwriting, dealing in or making a market in securities; other activities that the Federal Reserve may determine to be so closely related to banking or managing or controlling banks as to be a proper incident to managing or controlling banks; activities permitted outside of the United States if the Federal Reserve has determined them to be usual in connection with banking operations abroad; merchant banking through securities or insurance affiliates; and insurance company portfolio investments.
Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include: factoring accounts receivable; making, acquiring, brokering or servicing loans and usual related activities; leasing personal property; operating a non-bank depository institution, such as a savings association; trust company functions; financial and investment advisory activities; certain agency securities brokerage activities; underwriting and dealing in government obligations and money market instruments; providing specified management consulting and counseling activities; performing selected data processing services and support services; acting as an agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and performing selected insurance underwriting activities.
Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include: factoring accounts receivable; making, acquiring, brokering or servicing loans and usual lending-related activities; leasing personal property; operating a non-bank depository institution, such as a savings association; trust company functions; financial and investment advisory activities; certain agency securities brokerage activities; underwriting and dealing in government obligations and money market instruments; providing specified management consulting and counseling activities; performing selected data processing services and support services; and acting as an agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions.
The bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice.
Our and the Bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice.
We and the Bank are currently in compliance with Basel III Capital Rules. Since the initial implementation of the Basel III Capital Rules, the U.S. federal banking agencies and other interested parties have proposed and, in certain cases, made changes to the rules based on a number of factors, including prevailing economic conditions and policy initiatives.
We and the Bank are currently in compliance with Basel III Capital Rules. 16 Since the initial implementation of the Basel III Capital Rules, the U.S. federal banking agencies and other interested parties have proposed and, in certain cases, made changes to the rules based on a number of factors, including prevailing economic conditions and policy initiatives.
Loans secured by certain readily marketable collateral are exempt from these limitations, as are loans secured by deposits and certain government securities. 18 Commercial Real Estate Concentration Limits The Federal Reserve and other federal banking agencies promulgated guidance governing financial institutions with concentrations in commercial real estate lending entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices”.
Loans secured by certain readily marketable collateral are exempt from these limitations, as are loans secured by deposits and certain government securities. Commercial Real Estate Concentration Limits The Federal Reserve and other federal banking agencies promulgated guidance governing financial institutions with concentrations in commercial real estate lending entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices”.
The CFPB now has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets for four consecutive quarters.
The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets for four consecutive quarters.
Federal Laws Applicable to Consumer Credit and Deposit Transactions The Bank’s loan and deposit operations are subject to a number of federal consumer protection laws and regulations, including, among others: ● the Truth-In-Lending Act, as implemented by Regulation Z issued by the CFPB, governing, among other things, the disclosure of credit terms to consumers; 14 ● the Real Estate Settlement Procedures Act, as implemented by Regulation X issued by the CFPB, prescribing, among other things, requirements in connection with residential mortgage loan applications, settlements, and servicing; ● the Home Mortgage Disclosure Act, as implemented by Regulation C issued by the CFPB, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● the Equal Credit Opportunity Act, as implemented by Regulation B issued by the CFPB, prohibiting discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or certain other prohibited factors in all aspects of credit transactions, imposing certain requirements regarding credit applications, and prescribing certain disclosure obligations; ● the Fair Credit Reporting Act, as implemented in part by Regulation V issued by the CFPB, governing the use and provision of information to credit reporting agencies by imposing, among other things, requirements for financial institutions to develop policies and procedures to identify potential identity theft, requirements for entities that furnish information to consumer reporting agencies (which would include the Bank) to implement procedures and policies regarding the accuracy and integrity of the furnished information and respond to disputes from consumers regarding credit reporting issues, requirements for mortgage lenders to disclose credit scores to consumers, and limitations on the ability of a business that receives consumer information from an affiliate to use that information for marketing purposes; ● the Fair Debt Collection Practices Act, as implemented in part by Regulation F issued by the CFPB, governing the manner in which consumer debts may be collected by debt collectors; ● the Servicemembers’ Civil Relief Act, governing the repayment terms of, and property rights underlying, secured obligations of persons in military service; ● the Right to Financial Privacy Act, imposing a duty to maintain the confidentiality of consumer financial records and prescribing procedures for complying with administrative subpoenas of financial records; ● the Electronic Funds Transfer Act, as implemented by Regulation E issued by the CFPB, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; ● the Truth in Savings Act, as implemented by Regulation DD issued by the CFPB, governing, among other things, the disclosure of deposit terms to consumers; ● the Fair Housing Act, prohibiting discrimination in most housing-related activities, including financing, based on race, color, sex, national origin or religion; and ● the Equal Credit Opportunity Act, as implemented by Regulation B issued by the CFPB, prohibiting discrimination in any aspect of a credit transaction.
Federal Laws Applicable to Consumer Credit and Deposit Transactions The Bank’s loan and deposit operations are subject to a number of federal consumer protection laws and regulations, including, among others: ● the Truth-In-Lending Act, as implemented by Regulation Z issued by the CFPB, governing, among other things, the disclosure of credit terms to consumers; ● the Real Estate Settlement Procedures Act, as implemented by Regulation X issued by the CFPB, prescribing, among other things, requirements in connection with residential mortgage loan applications, settlements, and servicing; ● the Home Mortgage Disclosure Act, as implemented by Regulation C issued by the CFPB, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● the Equal Credit Opportunity Act, as implemented by Regulation B issued by the CFPB, prohibiting discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or certain other prohibited factors in all aspects of credit transactions, imposing certain requirements regarding credit applications, and prescribing certain disclosure obligations; ● the Fair Credit Reporting Act, as implemented in part by Regulation V issued by the CFPB, governing the use and provision of information to credit reporting agencies by imposing, among other things, requirements for financial institutions to develop policies and procedures to identify potential identity theft, requirements for entities that furnish information to consumer reporting agencies (which would include the Bank) to implement procedures and policies regarding the accuracy and integrity of the furnished information and respond to disputes from consumers regarding credit reporting issues, requirements for mortgage lenders to disclose credit scores to consumers, and limitations on the ability of a business that receives consumer information from an affiliate to use that information for marketing purposes; ● the Fair Debt Collection Practices Act, as implemented in part by Regulation F issued by the CFPB, governing the manner in which consumer debts may be collected by debt collectors; ● the Servicemembers’ Civil Relief Act, governing the repayment terms of, and property rights underlying, secured obligations of persons in military service; ● the Right to Financial Privacy Act, imposing a duty to maintain the confidentiality of consumer financial records and prescribing procedures for complying with administrative subpoenas of financial records; ● the Electronic Funds Transfer Act, as implemented by Regulation E issued by the CFPB, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; 15 ● the Truth in Savings Act, as implemented by Regulation DD issued by the CFPB, governing, among other things, the disclosure of deposit terms to consumers; and ● the Fair Housing Act, prohibiting discrimination in most housing-related activities, including financing, based on race, color, sex, national origin or religion.
To mitigate this risk, we have strict collateral underwriting standards, including valuations and general acceptability based on our ability to monitor its ongoing condition and value. 8 We underwrite our commercial loans primarily on the basis of the borrower’s cash flow, ability to service debt, and degree of management expertise.
To mitigate this risk, we have strict collateral underwriting standards, including valuations and general acceptability based on our ability to monitor its ongoing condition and value. We underwrite our commercial loans primarily on the basis of the borrower’s cash flow, ability to service debt, and degree of management expertise.
The CFPB’s supervisory focus primarily involves an institution’s compliance with federal consumer protection laws. The results of examination activity by any of our federal or state bank regulators potentially can result in the imposition of significant limitations on our activities and growth.
The CFPB’s supervisory focus primarily involves an institution’s compliance with federal consumer protection laws. 11 The results of examination activity by any of our federal or state bank regulators potentially can result in the imposition of significant limitations on our activities and growth.
The Federal Reserve has adopted an exception to this approval requirement for well-capitalized bank holding companies that meet certain conditions. Bank Supervision and Regulation Generally The Bank is an Alabama state-chartered bank and, as such, is subject to examination and regulation by the Alabama Banking Department.
The Federal Reserve has adopted an exception to this approval requirement for well-capitalized bank holding companies that meet certain conditions. 13 Bank Supervision and Regulation Generally The Bank is an Alabama state-chartered bank and, as such, is subject to examination and regulation by the Alabama Banking Department.
The bank must also comply with other provisions designed to avoid the taking of low-quality assets. An affiliate for purposes of Sections 23A and 23B includes a bank’s parent holding company and any subsidiary owned by the parent holding company.
The bank must also comply with other provisions designed to avoid the taking of low-quality assets from an affiliate. An affiliate for purposes of Sections 23A and 23B includes a bank’s parent holding company and any subsidiary owned by the parent holding company.
Applications to establish such branches must still be filed with the appropriate primary state and federal banking agencies. On March 30, 2023, the CFPB issued a final rule implementing Section 1071 of the Dodd-Frank Act.
Applications to establish such branches must still be filed with the appropriate primary state and federal banking agencies. 22 On March 30, 2023, the CFPB issued a final rule implementing Section 1071 of the Dodd-Frank Act.
We also seek to capitalize on the extensive relationships that our management, directors, advisory directors and stockholders have with the businesses and professionals in our markets. 5 Focus on Core Banking Business. We deliver a broad array of core banking products to our customers.
We also seek to capitalize on the extensive relationships that our management, directors, advisory directors and stockholders have with the businesses and professionals in our markets. Focus on Core Banking Business. We deliver a broad array of core banking products to our customers.
On October 8, 2019, the agencies finalized revisions to the Volcker rule that simplified and streamlined compliance requirements for banking entities that do not have significant trading activities, while banking entities with significant trading activity would become subject to more stringent compliance requirements.
On October 8, 2019, the agencies finalized revisions to the Volcker rule that simplified and streamlined compliance requirements for banking entities that do not have significant trading activities, while banking entities with significant trading activities would become subject to more stringent compliance requirements.
The rule prohibits financial institutions from charging fees for paying overdrafts on ATM and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. There has been an enhanced focus by federal bank regulatory agencies with respect to industry practices relating to overdraft fees and non-sufficient funds fees.
The rule prohibits financial institutions from charging fees for paying overdrafts on ATM and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. 20 There has been an enhanced focus by federal bank regulatory agencies with respect to industry practices relating to overdraft fees, credit card fees and non-sufficient funds fees.
Our ability to pay dividends is also subject to the provisions of Delaware corporate law. 17 The Alabama Banking Department also regulates the Bank’s dividend payments.
Our ability to pay dividends is also subject to the provisions of Delaware corporate law. The Alabama Banking Department also regulates the Bank’s dividend payments.
The assessment base for the special assessment equals an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods.
The assessment base for the special assessment equals an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion. The special assessment will be collected at an annual rate of approximately 13.4 basis points for an initial total of eight quarterly assessment periods.
An institution that has (i) experienced rapid growth in CRE lending, (ii) notable exposure to a specific type of CRE, (iii) total reported loans for construction, land development, and other land representing 100% or more of the institution’s capital, or (iv) total CRE loans representing 300% or more of the institution’s capital, and the outstanding balance of the institution’s CRE portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of the level and nature of its CRE concentration risk.
An institution that has (i) experienced rapid growth in CRE lending, (ii) notable exposure to a specific type of CRE, (iii) total reported loans for construction, land development, and other land representing 100% or more of the institution’s capital, or (iv) total non-owner occupied CRE loans representing 300% or more of the institution’s capital, and the outstanding balance of the institution’s CRE portfolio has increased by 50% or more in the prior 36 months, may be identified for further supervisory analysis of the level and nature of its CRE concentration risk.
Broughton has served as our President and Chief Executive Officer and a director since 2007 and as President, Chief Executive Officer and a director of the Bank since its inception in May 2005. Mr. Broughton was appointed Chairman of the Board effective January 1, 2019, following the retirement of our former Chairman. Mr.
Broughton, III (69) – Mr. Broughton has served as our President and Chief Executive Officer and a director since 2007 and as President, Chief Executive Officer and a director of the Bank since its inception in May 2005. Mr. Broughton was appointed Chairman of the Board effective January 1, 2019, following the retirement of our former Chairman. Mr.
All securities held are traded in liquid markets, and we have no auction-rate securities. We had no investments in any one security, restricted or liquid, in excess of 10% of our stockholders’ equity at December 31, 2023.
All securities held are traded in liquid markets, and we have no auction-rate securities. We had no investments in any one security, restricted or liquid, in excess of 10% of our stockholders’ equity at December 31, 2024.
The U.S. bank regulatory agencies issued additional guidance entitled “Statement on Prudent Risk Management for Commercial Real Estate Lending” to remind financial institutions of existing guidance on prudent risk management practices for CRE lending activity.
In 2015, the U.S. bank regulatory agencies issued additional guidance entitled “Statement on Prudent Risk Management for Commercial Real Estate Lending” to remind financial institutions of existing guidance on prudent risk management practices for CRE lending activity.
ITEM 1. BUSINESS Overview We are a bank holding company within the meaning of the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Through our wholly-owned subsidiary bank, we operate 30 full-service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. We also operate loan production offices in Florida.
ITEM 1. BUSINESS. Overview We are a bank holding company within the meaning of the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Through our wholly-owned subsidiary bank, we operate 33 full-service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. We also operate a loan production office in Florida.
For example, the Consumer Financial Protection Bureau issued a Request for Information in January 2022 seeking public input with respect to financial institution practices relating to, among other areas, credit card fees, overdraft fees and non-sufficient funds fees and stated its intent to reduce these types of fees through crafting rules, issuing industry guidance and focusing supervision and enforcement resources to achieve this goal.
For example, the CFPB issued a Request for Information in January 2022 seeking public input with respect to financial institution practices relating to, among other areas, credit card fees, overdraft fees and non-sufficient funds fees and stated its intent to reduce these types of fees through crafting rules, issuing industry guidance and focusing supervision and enforcement resources to achieve this goal.
Our banking regulators evaluate the effectiveness of our policies and procedures when determining whether to approve certain proposed banking activities, including branch application. We believe the policies and procedures implemented by our board of directors are sufficient to be compliant with these laws.
Our banking regulators evaluate the effectiveness of our policies and procedures when determining whether to approve certain proposed banking activities, including acquisitions and branch applications. We believe the policies and procedures implemented by our Board of Directors are sufficient to be compliant with these laws.
This structure assigns significant responsibility and accountability to our regional chief executive officers, who we believe will drive our growth and success. We have developed a business culture whereby our management team, from the top down, is actively involved in sales, which we believe is a key differentiator from our competition.
This structure assigns significant responsibility and accountability to our regional chief executive officers, who we believe will drive our growth and success. We have developed a business culture whereby our management team, from the top down, is actively involved in sales, which we believe is a key differentiator from our competition. Identify Opportunities in Vibrant Markets.
We analyze these statements, looking for weaknesses and trends, and will assign the loan a risk grade accordingly. Based on this risk grade, the loan may receive an increased degree of scrutiny by management. Real Estate Loans We make commercial real estate loans, construction and development loans and residential real estate loans. Commercial Real Estate.
We analyze these statements, looking for weaknesses and trends, and will assign the loan a risk grade accordingly. Based on this risk grade, the loan may receive an increased degree of scrutiny by management. 8 Real Estate Loans We make commercial real estate loans, 1-4 family residential real estate loans, and construction and development loans. Commercial Real Estate .
Deposit Services We seek to establish solid core deposits, including checking accounts, money market accounts, savings accounts and a variety of certificates of deposit and IRA accounts. To attract deposits, we employ an aggressive marketing plan throughout our service areas that features a broad product line and competitive services.
Deposit Services We seek to establish solid core deposits, including checking accounts, money market accounts, savings accounts and a variety of certificates of deposit and individual retirement arrangements, or IRA accounts. To attract deposits, we employ an aggressive marketing plan throughout our service areas that features a broad product line and competitive services.
In many instances the EGRRCPA increased the Dodd-Frank mandated asset thresholds, to which enhanced supervision and prudential standards are applied. Previously, bank holding companies with assets of $10 billion or more were subject to stress testing.
In many instances the EGRRCPA increased the Dodd-Frank mandated asset thresholds, to which enhanced supervision and prudential standards are applied. Previously, bank holding companies with assets of $10 billion or more were subject to stress testing. The asset threshold has been increased to $250 billion.
In addition, unlike many traditional community banks, we place a strong emphasis on originating commercial and industrial loans, which comprised approximately 24.2% of our total loan portfolio as of December 31, 2023. Scalable, Decentralized Business Model. We emphasize local decision-making by experienced bankers supported by centralized risk and credit oversight.
In addition, unlike many traditional community banks, we place a strong emphasis on originating commercial and industrial loans, which comprised approximately 22.8% of our total loan portfolio as of December 31, 2024. Scalable, Decentralized Business Model. We emphasize local decision-making by experienced bankers supported by centralized risk and credit oversight.
At December 31, 2023, the Bank was well-capitalized under the regulatory framework for prompt corrective action.
At December 31, 2024, the Bank was well-capitalized under the regulatory framework for prompt corrective action.
We believe that this approach more appropriately addresses our customers’ banking needs and reflects a best-of-class delivery strategy for commercial banking services. Our principal business is to accept deposits from the public and to make loans and other investments.
We believe that this approach more appropriately addresses our customers’ banking needs and reflects a best-of-class delivery strategy for commercial banking services. Our business is conducted through a single reportable segment, and our principal business is to accept deposits from the public and to make loans and other investments.
In October 2022, the Consumer Financial Protection Bureau issued guidance with respect to certain practices relating to overdraft fees and bounced check fees. The FDIC issued guidance in August 2022 with respect to bank practices involving charging multiple non-sufficient funds fees on the representment of items on a deposit account.
In October 2022, the CFPB issued guidance with respect to certain practices relating to overdraft fees and bounced check fees. The FDIC issued guidance in August 2022 with respect to bank practices involving charging multiple non-sufficient funds fees on the representment of items on a deposit account.
Based on this, our bank would be limited to paying $573.9 million in dividends as of December 31, 2023, subject to maintaining certain required capital levels. In addition, no dividends, withdrawals or transfers may be made from the bank’s surplus without the prior written approval of the Superintendent.
Based on this, our bank would be limited to paying $548.7 million in dividends as of December 31, 2024, subject to maintaining certain required capital levels. In addition, no dividends, withdrawals or transfers may be made from the bank’s surplus without the prior written approval of the Superintendent.
If, in the opinion of the federal banking agencies, the bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking agencies could require, after notice and a hearing, that the bank stop or refrain from engaging in the questioned practice.
If, in the opinion of the federal banking agencies, we or the Bank were engaged in or about to engage in an unsafe or unsound practice (such as paying an excessive dividend), the federal banking agencies could require, after notice and a hearing, that we or the Bank stop or refrain from engaging in the questioned practice.
Since opening our original banking facility in Birmingham in 2005, we have expanded into ten additional markets as of December 31, 2023.
Since opening our original banking facility in Birmingham in 2005, we have expanded into thirteen additional markets as of December 31, 2024.
In February 2021, the federal banking agencies adopted final rules implementing a Net Stable Funding Ratio requirement, also for larger U.S. banking organizations. Neither we nor the Bank is subject to either set of rules.
However, in September 2014, the federal banking agencies adopted final rules implementing a Liquidity Coverage Ratio requirement in the United States for larger banking organizations. In February 2021, the federal banking agencies adopted final rules implementing a Net Stable Funding Ratio requirement, also for larger U.S. banking organizations. Neither we nor the Bank is subject to either set of rules.
Broughton’s experience in banking has afforded him opportunities to work in many areas of banking and has given him exposure to all bank functions. Mr. Broughton served on the Board of Directors of Cavalier Homes, Inc. from 1986 until 2009, when the company was sold to a subsidiary of Berkshire Hathaway. William M. Foshee (69) – Mr.
Broughton’s experience in banking has afforded him opportunities to work in many areas of banking and has given him exposure to all bank functions. Mr. Broughton served on the Board of Directors of Cavalier Homes, Inc. from 1986 until 2009, when the company was sold to a subsidiary of Berkshire Hathaway. Edison K. Woodie, III (57) – Mr.
Legislation and regulatory action to revise federal and state banking laws and regulations, sometimes in a substantial manner, are continually under consideration by the U.S. Congress, state legislatures and federal and state regulatory agencies.
Legislation and regulatory action to revise federal and state banking laws and regulations, sometimes in a substantial manner, are continually under consideration by the U.S. Congress, state legislatures and federal and state regulatory agencies. The recent changes in the U.S. presidential administration and the composition of the U.S.
We will originate fixed-rate mortgages with long-term maturities. The majority of our fixed-rate loans are sold in the secondary mortgage market. All loans are made in accordance with our appraisal policy, with the ratio of the loan principal to the value of collateral as established by independent appraisal generally not exceeding 85%.
We will originate fixed-rate mortgages with long-term maturities; however, most of these fixed-rate loans are sold in the secondary mortgage market. All 1-4 family mortgage loans are made in accordance with our appraisal policy, with the ratio of the loan principal to the value of the collateral established by an independent appraisal generally not exceeding 85%.
The Bank became subject to the large bank scorecard methodology in the second quarter of 2021. In November 2023, the FDIC issued a final rule implementing a special assessment to recover the loss to the Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.
In November 2023, the FDIC issued a final rule implementing a special assessment to recover the loss to the Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.
As of December 31, 2023, we had 591 full-time equivalent employees. We have 205 employees located in our corporate office, including sales and operations, and 386 in our regional offices and branches. Our management believes that we have good relations with our employees.
As of December 31, 2024, we had 630 full-time equivalent employees. We have 215 employees located in our corporate office, including sales and operations, and 415 in our regional offices and branches. Our management believes that we have good relations with our employees.
Any future increases could have a negative impact on our bank’s earnings. 13 Termination of Deposit Insurance The FDIC may terminate its insurance of deposits of a bank if it finds that the bank has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Termination of Deposit Insurance The FDIC may terminate its insurance of deposits of a bank if it finds that the bank has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
In addition, any person or group of persons must obtain the approval of the Federal Reserve before acquiring 25% (5% in the case of an acquirer that is already a bank holding company) or more of the outstanding common stock of a bank holding company, or otherwise obtaining control or a “controlling influence” over the bank holding company.
In addition, any person or group of persons acting in concert must obtain the approval of the Federal Reserve before acquiring 25% or more of the outstanding common stock of a bank holding company or otherwise obtaining control or a “controlling influence” over the bank holding company.
Commercial real estate loans are generally limited to terms of five years or less, although payments are usually structured on the basis of a longer amortization. Interest rates may be fixed or adjustable, although rates generally will not be fixed for a period exceeding five years.
We make both owner-occupied and non-owner-occupied commercial real estate loans. Commercial real estate loans are generally limited to terms of five years or less, although payments are usually structured based on a longer amortization. Interest rates may be fixed or adjustable, although rates generally will not be fixed for a period exceeding five years.
Additionally, we must file an election with the Federal Reserve to become a financial holding company and must provide the Federal Reserve with 30 days written notice prior to engaging in a permitted financial activity.
Additionally, we must file an election with the Federal Reserve to become a financial holding company and must provide the Federal Reserve with 30 days written notice after engaging in a permitted financial activity. We have not elected to become a financial holding company at this time.
To date, the prohibitions under the Volcker Rule and the final rule adopted thereunder have not had, and we do not currently expect them to have in the future, a material effect on our businesses or revenue, but they do limit the scope of permissible activities in which we might engage.
These revisions became effective on January 1, 2020, with a required compliance date of January 1, 2021. 21 To date, the prohibitions under the Volcker Rule and the final rule adopted thereunder have not had, and we do not currently expect them to have in the future, a material effect on our businesses or revenue, but they do limit the scope of permissible activities in which we might engage.
Permissible Activities Under the BHC Act Under the BHC Act, a bank holding company is generally permitted to engage in or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in the following activities: ● banking or managing or controlling banks; and ● any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.
(certain presumptions of control may apply once an acquiror owns 5% or more of the common stock and certain other factors are present). 12 Permissible Activities Under the BHC Act Under the BHC Act, a bank holding company is generally permitted to engage in or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in the following activities: ● banking or managing or controlling banks; and ● any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.
We cannot predict whether, as a result of an adverse change in economic conditions or other reasons, the FDIC will take similar extraordinary actions or otherwise increase deposit insurance assessment levels in the future.
The FDIC also has established a higher long-term target Deposit Insurance Fund ratio of 2%. We cannot predict whether, as a result of an adverse change in economic conditions or other reasons, the FDIC will take similar extraordinary actions or otherwise increase deposit insurance assessment levels in the future.
In addition, we provide correspondent banking services to more than 370 community banks located in 30 states throughout the United States. We provide a source of clearing and liquidity to our correspondent bank customers, as well as a wide array of account, credit, settlement and international services. Commercial Bank Emphasis. We have historically focused on people as opposed to places.
In addition, we provide correspondent banking services to more than 380 community banks located in 30 states throughout the United States (“U.S.”). We provide a source of clearing and liquidity to our correspondent bank customers, as well as a wide array of account, credit, settlement and international services. 5 Commercial Bank Emphasis.
We have not elected to become a financial holding company at this time. 12 Support of Subsidiary Institutions The Federal Deposit Insurance Act and Federal Reserve policy require a bank holding company to act as a source of financial and managerial strength to its bank subsidiaries.
Support of Subsidiary Institutions The Federal Deposit Insurance Act and Federal Reserve policy require a bank holding company to act as a source of financial and managerial strength to its bank subsidiaries.
Seasonality and Cycles We do not consider our commercial banking business to be seasonal. 10 Supervision and Regulation Both we and our bank are subject to extensive state and federal banking laws and regulations that impose restrictions on, and provide for general regulatory oversight of, our operations.
Supervision and Regulation Both we and our bank are subject to extensive state and federal banking laws and regulations that impose restrictions on, and provide for general regulatory oversight of, our operations.
The second metric is the “Net Stable Funding Ratio,” and its objective is to require a financial institution to maintain a minimum amount of stable sources relative to the liquidity profiles of the institution’s assets, as well as the potential for contingent liquidity needs arising from off-balance sheet commitments, over a one-year horizon.
The second metric is the “Net Stable Funding Ratio,” and its objective is to require a financial institution to maintain a minimum amount of stable sources relative to the liquidity profiles of the institution’s assets, as well as the potential for contingent liquidity needs arising from off-balance sheet commitments, over a one-year horizon. 17 In the Basel III Capital Rules, the federal banking agencies did not address either the Liquidity Coverage Ratio or the Net Stable Funding Ratio.
The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items. 15 Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business.
Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business.
In addition to organic expansion, we may seek to expand through targeted acquisitions. Markets and Competition Our primary markets are broadly defined in the tables below.
In addition to organic expansion, we may seek to expand through targeted acquisitions. Markets and Competition Our primary markets are broadly defined in the tables below. We draw most of our deposits from, and conduct most of our lending transactions in, these markets.
The controlling holding company’s obligation to fund a capital restoration plan is limited to the lesser of (i) 5% of an undercapitalized subsidiary’s assets at the time it became undercapitalized and (ii) the amount required to meet regulatory capital requirements.
A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to various limitations. The controlling holding company’s obligation to fund a capital restoration plan is limited to the lesser of (i) 5% of an undercapitalized subsidiary’s assets at the time it became undercapitalized and (ii) the amount required to meet regulatory capital requirements.
We are also subject to Section 23B of the Federal Reserve Act, which, among other things, prohibits an institution from engaging in these transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.
We are also subject to Section 23B of the Federal Reserve Act, which, among other things, prohibits a bank from engaging in these transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies. 18 The bank is also subject to restrictions on extensions of credit to its executive officers, directors, principal shareholders and their related interests.
This strategy translates into a smaller number of brick and mortar branch locations relative to our size, but larger overall branch sizes in terms of total deposits. As a result, as of December 31, 2023, our branches averaged approximately $442.5 million in total deposits.
We have historically focused on people as opposed to places. This strategy translates into a smaller number of brick and mortar branch locations relative to our size, but larger overall branch sizes in terms of total deposits. As a result, as of December 31, 2024, our branches averaged approximately $410.4 million in total deposits.
We are required by our regulators to maintain policies and procedures to comply with the foregoing restrictions. 19 Failure to comply with these statutes, rules and regulations, or failure to maintain an adequate compliance program, could lead to monetary penalties and reputational damage to our bank.
They also prohibit us from engaging in transactions with certain designated restricted countries and persons. We are required by our regulators to maintain policies and procedures to comply with the foregoing restrictions. Failure to comply with these statutes, rules and regulations, or failure to maintain an adequate compliance program, could lead to monetary penalties and reputational damage to our bank.
To support the Deposit Insurance Fund in response to those circumstances, the FDIC took several extraordinary actions, including imposing a one-time special assessment on insured institutions and requiring institutions to prepay quarterly assessments attributable to a three-year period. The FDIC also has established a higher long-term target Deposit Insurance Fund ratio of 2%.
To support the Deposit Insurance Fund in response to those circumstances, the FDIC took several extraordinary actions, including imposing a one-time special assessment on insured institutions in 2023, with an updated assessment in 2024, and requiring institutions to prepay quarterly assessments attributable to a three-year period.
The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios: ● 4.5% based upon CET1; ● 6.0% based upon tier 1 capital; and ● 8.0% based upon total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of total assets) of 4.0% is also required under the Basel III Capital Rules.
The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios: ● 4.5% based upon CET1; ● 6.0% based upon tier 1 capital; and ● 8.0% based upon total regulatory capital (tier 1 plus tier 2).
The asset threshold has been increased to $250 billion. 21 A number of the effects of the Dodd-Frank Act are described or otherwise accounted for in various parts of this Supervision and Regulation section.
A number of the effects of the Dodd-Frank Act are described or otherwise accounted for in various parts of this Bank Supervision and Regulation section.
Specifically, we chart assets and liabilities on a matrix by maturity, effective duration, and interest adjustment period, and endeavor to manage any gaps in maturity ranges.
Specifically, we chart assets and liabilities on a matrix by maturity, effective duration, and interest adjustment period, and endeavor to manage any gaps in maturity ranges. Seasonality and Cycles We do not consider our commercial banking business to be seasonal.
In October 2023, the Federal Reserve requested comment on a proposal to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction.
In October 2023, the Federal Reserve requested comment on a proposal to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward.
Repayment is dependent upon successful management and marketing of properties and on the level of expense necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy. Also, commercial real estate loans typically involve relatively large loan balances to a single borrower.
Commercial real estate lending presents risks not found in traditional residential real estate lending. Repayment is dependent upon successful management and marketing of properties and on the level of expense necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.
This guidance is designed to ensure that a financial institution’s incentive compensation structure does not encourage imprudent risk taking, which may undermine the safety and soundness of the institution.
Compensation Practices Our compensation practices are subject to guidance provided by federal banking agencies. The federal banking agencies have issued comprehensive guidance on incentive compensation policies. This guidance is designed to ensure that a financial institution’s incentive compensation structure does not encourage imprudent risk taking, which may undermine the safety and soundness of the institution.
The Federal Reserve’s consideration of financial resources generally focuses on capital adequacy, which is discussed in the section below titled “Supervision and Regulation—Bank Supervision and Regulation – Capital Adequacy.” The consideration of convenience and needs of the community to be served includes the institution’s performance under the Community Reinvestment Act (the “CRA”). 11 Additionally, the BHC Act provides that the Federal Reserve may not approve a merger or other acquisition transaction if the transaction would result in or tend to create a monopoly or substantially lessen competition or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served.
Additionally, the BHC Act provides that the Federal Reserve may not approve a merger or other acquisition transaction if the transaction would result in or tend to create a monopoly or substantially lessen competition or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the community to be served.
Under the final rule, a banking organization must notify its primary federal regulator within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector.
Under the final rule, a banking organization must notify its primary federal regulator within 36 hours of incidents that have materially disrupted or degraded, or are reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. 19 From an operational standpoint, cyberattacks and similar attempts to gain access to confidential customer information maintained by banks and other financial institutions have prompted the federal banking agencies to issue extensive guidance on cybersecurity.
Development loans are generally limited to 75% of appraised value. Loan proceeds will be disbursed based on the percentage of completion and only after the project has been inspected by an experienced construction lender or third-party inspector. During times of economic stress, construction and development loans typically have a greater degree of risk than other loan types.
Loan proceeds are disbursed proportionally with construction progress and only after the project has been inspected by either an experienced construction lender or a qualified third-party inspector. Construction and development loans generally carry a higher degree of risk than other loan types during times of economic stress.
However, compliance with the Dodd-Frank Act and its implementing regulations has resulted in, and is expected to continue to result in, additional operating and compliance costs that could have a material adverse effect on our business, financial condition and results of operations. 22 Regulation Extends Beyond Banking Agencies In addition to regulations issued by the Alabama Banking Department and federal banking agencies, we are subject to regulations issued by other state and federal agencies with respect to certain financial products and services we offer and our operations generally.
However, compliance with the Dodd-Frank Act and its implementing regulations has resulted in, and is expected to continue to result in, additional operating and compliance costs that could have a material adverse effect on our business, financial condition and results of operations.
Petersburg-Clearwater MSA 1 364.7 123,859.1 28 0.29 % Panama City MSA 1 112.5 4,655.8 12 2.42 % Crestview-Fort Walton Beach-Destin MSA 1 86.4 7,770.3 15 1.11 % Tallahassee MSA 1 56.7 9,473.1 15 0.60 % Orlando-Kissimmee-Sanford MSA 1 35.0 72,941.6 42 0.05 % Georgia: Atlanta-Sandy Springs-Alpharetta MSA 2 872.2 237,133.6 23 0.37 % Columbus, GA-AL MSA 1 24.2 8,755.6 14 0.28 % North Carolina: Charlotte-Concord-Gastonia, NC-SC MSA 1 69.8 382,301.8 37 0.02 % South Carolina: Charleston-North Charleston MSA 2 344.0 22,657.0 14 1.46 % Tennessee: Nashville-Davidson-Murfreesboro MSA 1 416.2 92,625.5 23 0.67 % Virginia: Virginia Beach-Norfolk-Newport News, VA-NC 1 2.3 33,275.8 21 0.01 % 7 The following table illustrates the combined total deposits for all financial institutions in the counties in which we operate as a percent of the total of all deposits in each state at June 30, 2023, as reported by the FDIC: Alabama 60.5 % Florida 16.1 % Georgia 11.6 % North Carolina 58.9 % South Carolina 15.1 % Tennessee 25.2 % Virginia 2.8 % Our retail and commercial divisions operate in highly competitive markets.
Petersburg-Clearwater MSA 1 344.1 122,693.7 29 0.28 % Panama City MSA 1 129.5 4,842.6 12 2.67 % Crestview-Fort Walton Beach-Destin MSA 1 87.8 7,871.7 19 1.12 % Tallahassee MSA 1 93.7 9,438.6 15 0.99 % Orlando-Kissimmee-Sanford MSA 1 60.1 73,725.6 36 0.08 % Georgia: Atlanta-Sandy Springs-Alpharetta MSA 2 1,021.4 236,728.1 23 0.43 % Columbus, GA-AL MSA 1 26.2 9,377.1 14 0.28 % North Carolina: Charlotte-Concord-Gastonia, NC-SC MSA 2 93.9 457,313.9 35 0.02 % Buncombe-Asheville, NC-SC MSA 1 26.8 10,169.4 16 0.26 % South Carolina: Charleston-North Charleston MSA 2 325.6 21,601.5 15 1.51 % Tennessee: Nashville-Davidson-Murfreesboro MSA 1 687.9 92,976.5 22 0.74 % Virginia: Virginia Beach-Norfolk-Newport News, VA-NC 1 22.8 31,194.3 22 0.07 % 7 The following table illustrates the combined total deposits for all financial institutions in the counties in which we operate as a percent of the total of all deposits in each state at June 30, 2024, as reported by the FDIC: Alabama 60.5 % Florida 16.1 % Georgia 11.4 % North Carolina 62.3 % South Carolina 15.2 % Tennessee 24.1 % Virginia 2.8 % Our retail and commercial divisions operate in highly competitive markets.
Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers. The Basel III Capital Rules became effective as applied to us and the Bank on January 1, 2015, with a phase in period that generally extended from January 1, 2015 through January 1, 2019.
The Basel III Capital Rules became effective as applied to us and the Bank on January 1, 2015, with a phase in period that generally extended from January 1, 2015 through January 1, 2019.
Construction and development loans are generally made with a term of 12 to 36 months, with interest payable monthly. The ratio of the loan principal to the value of the collateral as established by independent appraisal typically will not exceed 80% of residential construction loans. Speculative construction loans will be based on the borrower’s financial strength and cash flow position.
The ratio of loan principal to the value of collateral, as determined by an independent appraisal, typically does not exceed 80% for residential construction loans. Speculative construction loans are underwritten based on the borrower’s financial strength and cash flow position, while development loans are generally limited to 75% of the appraised value.
An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to various limitations.
Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency.
New proposals to change the laws and regulations governing the banking industry are frequently introduced in the United States Congress, in the state legislatures and before the various bank regulatory agencies. The likelihood and timing of any such changes and the impact such changes might have on us and the Bank, however, cannot be determined at this time.
New proposals to change the laws and regulations governing the banking industry are frequently introduced in the United States Congress, in the state legislatures and before the various bank regulatory agencies.
As of December 31, 2023, we had total assets of approximately $16.13 billion, total loans of approximately $11.66 billion, total deposits of approximately $13.27 billion, and total stockholders’ equity of approximately $1.44 billion.
As of December 31, 2024, we had total assets of approximately $17.35 billion, total loans of approximately $12.61 billion, total deposits of approximately $13.54 billion, and total stockholders’ equity of approximately $1.62 billion.
The following table illustrates our market share, by insured deposits, in our primary service areas at June 30, 2023 as most recently reported by the FDIC: Market Number of Branches Our Market Deposits Total Market Deposits Ranking Market Share Percentage (Dollars in Millions) Alabama: Birmingham-Hoover MSA 3 $ 4,094.4 $ 47,048.6 3 8.70 % Huntsville MSA 2 1,661.6 10,269.5 2 16.18 % Montgomery MSA 2 1,185.7 11,127.2 2 10.66 % Dothan MSA 2 896.7 4,229.7 1 21.20 % Mobile MSA 2 548.0 9,938.3 6 5.51 % Daphne-Fairhope-Foley MSA 1 99.4 6,793.1 17 1.46 % Florida: Pensacola-Ferry Pass-Brent MSA 2 592.7 9,368.2 7 6.33 % North Port-Sarasota-Bradenton MSA 1 577.7 29,873.6 13 1.93 % Tampa-St.
The following table illustrates our market share, by insured deposits, in our primary service areas at June 30, 2024 as most recently reported by the FDIC: Market Number of Branches Our Market Deposits Total Market Deposits Ranking Market Share Percentage (Dollars in Millions) Alabama: Birmingham-Hoover MSA 3 $ 4,275.7 $ 49,424.0 3 8.65 % Huntsville MSA 2 1,258.0 11,404.1 2 11.03 % Montgomery MSA 2 1,796.1 10,052.6 2 17.87 % Dothan MSA 2 927.5 4,253.7 1 21.80 % Mobile MSA 2 560.8 9,700.0 5 5.78 % Daphne-Fairhope-Foley MSA 1 107.2 6,656.5 17 1.61 % Florida: Pensacola-Ferry Pass-Brent MSA 2 669.2 8,424.2 5 7.94 % North Port-Sarasota-Bradenton MSA 1 768.7 29,961.1 9 2.57 % Tampa-St.
These factors are also considered in evaluating mergers, acquisitions, and applications to open an office or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, we must publicly disclose the terms of various CRA-related agreements. On October 24, 2023, the federal banking agencies adopted a final rule to modernize the CRA regulations.
These factors are also considered in evaluating mergers, acquisitions, and applications to open an office or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank.
Banks that are not well capitalized may not accept or renew brokered deposits without a waiver from the FDIC. Liquidity Financial institutions are subject to significant regulatory scrutiny regarding their liquidity positions. This scrutiny has increased over the last decade, as the economic downturn in the late 2000’s negatively affected the liquidity of many financial institutions.
Banks that are not well capitalized may not accept or renew brokered deposits without a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on deposits. Liquidity Financial institutions are subject to significant regulatory scrutiny regarding their liquidity positions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. We believe that we presently have sufficient capital to meet our needs for our immediate growth plans. However, we will continue to need capital to support our longer-term growth plans.
Biggest changeFurther, even if we enter into new markets, we may not be able to successfully manage our growth or compete in new markets due to limitations in human resources, training and operational, financial and technological resources. 26 While we believe that we presently have sufficient capital to meet our needs for our immediate growth plans, our growth plans require capital, and our growth plans could be further limited by federal and state regulatory requirements to maintain adequate levels of capital to support our operations.
There are many factors that may impact the market price and trading volume of our common stock, including, without limitation: ● actual or anticipated fluctuations in our operating results, financial condition or asset quality; ● changes in economic or business conditions; ● the effects of, and changes in, trade, monetary and fiscal policies, including the interest rate policies of the Federal Reserve; 34 ● publication of research reports about us, our competitors, or the financial services industry generally, or changes in, or failure to meet, securities analysts’ estimates of our financial and operating performance, or lack of research reports by industry analysts or ceasing of coverage; ● operating and stock price performance of companies that investors deemed comparable to us; ● future issuances of our common stock or other securities; ● additions to or departures of key personnel; ● proposed or adopted changes in laws, regulations or policies affecting us; ● perceptions in the marketplace regarding our competitors and/or us; ● significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving our competitors or us; ● other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services; and ● other news, announcements or disclosures (whether by us or others) related to us, our competitors, our core market or the financial services industry.
There are many factors that may impact the market price and trading volume of our common stock, including, without limitation: ● actual or anticipated fluctuations in our operating results, financial condition or asset quality; ● changes in our dividends; ● changes in economic or business conditions; ● the effects of, and changes in, trade, monetary and fiscal policies, including the interest rate policies of the Federal Reserve; ● publication of research reports about us, our competitors, or the financial services industry generally, or changes in, or failure to meet, securities analysts’ estimates of our financial and operating performance, or lack of research reports by industry analysts or ceasing of coverage; ● operating and stock price performance of companies that investors deemed comparable to us; ● future issuances of our common stock or other securities; ● additions to or departures of key personnel; ● proposed or adopted changes in laws, regulations or policies affecting us; ● perceptions in the marketplace regarding our competitors and/or us; ● significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving our competitors or us; ● other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services; and ● other news, announcements or disclosures (whether by us or others) related to us, our competitors, our core market or the financial services industry.
Those premiums and/or assessments could have a material adverse effect on the Bank’s earnings, thereby reducing the availability of funds to pay dividends to us. 33 We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
Those premiums and/or assessments could have a material adverse effect on the Bank’s earnings, thereby reducing the availability of funds to pay dividends to us. We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
We do not have any control over monetary policies implemented by the Federal Reserve or otherwise and any changes in these policies could have a material adverse effect on our business, financial condition, results of operations and prospects. Federal and state regulators periodically examine our business and we may be required to remediate adverse examination findings.
We do not have any control over monetary policies implemented by the Federal Reserve or otherwise and any changes in these policies could have a material adverse effect on our business, financial condition, results of operations and prospects. 32 Federal and state regulators periodically examine our business and we may be required to remediate adverse examination findings.
These provisions may discourage potential acquisition proposals and could delay or prevent a change in control, including under circumstances in which our stockholders might otherwise receive a premium over the market price of our shares. General Risk Factors Financial disruption or a prolonged economic downturn could materially and adversely affect our business.
These provisions may discourage potential acquisition proposals and could delay or prevent a change in control, including under circumstances in which our stockholders might otherwise receive a premium over the market price of our shares. 35 General Risk Factors Financial disruption or a prolonged economic downturn could materially and adversely affect our business.
Accordingly, our success depends in large part on the performance of our key personnel, as well as on our ability to attract, motivate and retain highly qualified senior and middle management. Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business plan may be lengthy.
Our success depends in large part on the performance of our key personnel, as well as on our ability to attract, motivate and retain highly qualified senior and middle management. Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business plan may be lengthy.
These losses or defaults could have a material adverse effect on our business, financial condition, results of operations and prospects. We are subject to environmental liability risk associated with our lending activities. In the course of our business, we may purchase real estate, or we may foreclose on and take title to real estate.
These losses or defaults could have a material adverse effect on our business, financial condition, results of operations and prospects. 31 We are subject to environmental liability risk associated with our lending activities. In the course of our business, we may purchase real estate, or we may foreclose on and take title to real estate.
Management regularly reviews and updates our internal controls and procedures that are designed to identify, measure, monitor, report and analyze the types of risk to which we are subject, including liquidity risk, credit risk, market risk, legal risk, compliance risk, strategic risk, reputational risk and operational risk related to our employees, systems and vendors, among others.
Management regularly reviews and updates our internal controls and procedures that are designed to identify, measure, monitor, report and analyze the types of risk to which we are subject, including liquidity risk, credit risk, market risk, legal risk, compliance risk, strategic risk, cybersecurity risk, reputational risk and operational risk related to our employees, systems and vendors, among others.
These include risks related to our investments portfolio, the competitive environment and regulatory developments. 36 As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions. Our businesses and operations are sensitive to general business and economic conditions in the United States.
These include risks related to our investments portfolio, the competitive environment and regulatory developments. As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions. Our businesses and operations are sensitive to general business and economic conditions in the United States.
As can be seen from events in 2023 regarding the operations and failures of other banks in the U.S., an inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity.
As can be seen from events in 2023 regarding the operations and failures of other banks in the U.S., an inability to raise funds through deposits, borrowings, correspondent banks, the sale of loans and other sources could have a substantial negative effect on our liquidity.
Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, and other institutional clients.
Financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including correspondent banks, brokers and dealers, commercial banks, investment banks, and other institutional clients.
Federal regulation of the banking industry, along with tax and accounting laws, regulations, rules, and standards, may limit our operations significantly and control the methods by which we conduct business, as they limit those of other banking organizations.
Federal and state regulation of the banking industry, along with tax and accounting laws, regulations, rules, and standards, may limit our operations significantly and control the methods by which we conduct business, as they limit those of other banking organizations.
The current economic environment is characterized by high interest rates, which may impact our ability to generate attractive earnings through our investment portfolio. While certain factors point to improving economic conditions, including moderating inflation, uncertainty remains regarding the path of economic recovery and the mitigating impacts of government interventions.
The current economic environment is characterized by elevated interest rates, which may impact our ability to generate attractive earnings through our investment portfolio. While certain factors point to improving economic conditions, including moderating inflation, uncertainty remains regarding the path of economic recovery and the mitigating impacts of government interventions.
Any increase in interest rates could further increase competition for deposits, decrease customer demand for loans due to the higher cost of obtaining credit, result in an increased number of delinquent loans and defaults or reduce the value of securities held for investment.
An increase in interest rates could increase competition for deposits, decrease customer demand for loans due to the higher cost of obtaining credit, result in an increased number of delinquent loans and defaults or reduce the value of securities held for investment.
Under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the bank’s surplus is equal to at least 20% of its capital (our bank’s surplus currently exceeds 20% of its capital).
For example, under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the bank’s surplus is equal to at least 20% of its capital (our bank’s surplus currently exceeds 20% of its capital).
However, the payment of dividends is also subject to declaration by our board of directors, which takes into account our financial condition, earnings, general economic conditions and other factors, including statutory and regulatory restrictions.
The payment of dividends is also further subject to declaration by our Board of Directors, which takes into account our financial condition, earnings, general economic conditions and other factors, including statutory and regulatory restrictions.
These provisions, and the corporate and banking laws and regulations applicable to us: ● provide that special meetings of stockholders may be called at any time by the Chairman of our board of directors, by the President or by order of the board of directors; ● enable our board of directors to issue preferred stock up to the authorized amount, with such preferences, limitations and relative rights, including voting rights, as may be determined from time to time by the board of directors;; ● enable our board of directors to increase the number of persons serving as directors and to fill the vacancies created as a result of the increase by a majority vote of the directors present at the meeting; ● enable our board of directors to amend our bylaws without stockholder approval; and ● do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose).
These provisions, and the corporate and banking laws and regulations applicable to us: ● provide that special meetings of stockholders may be called at any time only by the Chairman of our Board of Directors, by the President or by order of the Board of Directors; ● enable our Board of Directors to issue preferred stock up to the authorized amount, with such preferences, limitations and relative rights, including voting rights, as may be determined from time to time by the Board of Directors; ● enable our Board of Directors to increase the number of persons serving as directors and to fill the vacancies created as a result of the increase by a majority vote of the directors present at the meeting; ● enable our Board of Directors to amend our bylaws without stockholder approval; ● do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); and ● require approval of federal and state regulatory agencies.
Limitations on our ability to receive dividends from our bank subsidiary could have a material adverse effect on our liquidity and ability to pay dividends on our common stock or interest and principal on our debt. 35 An investment in our common stock is not an insured deposit and is subject to risk of loss.
Limitations on our ability to receive dividends from the Bank could have a material adverse effect on our liquidity and ability to pay dividends on our common stock or interest and principal on our debt. An investment in our common stock is not an insured deposit and is subject to risk of loss.
We have positioned our asset portfolio to perform adequately in both a higher or lower interest rate environment, but this may not remain true in the future. Our interest sensitivity profile was somewhat liability sensitive as of December 31, 2023, generally meaning that our net interest income would decrease more from rising interest rates than from falling interest rates.
We seek to position our asset portfolio to perform adequately in both a higher or lower interest rate environment, but this may not remain true in the future. Our interest sensitivity profile was somewhat liability sensitive as of December 31, 2024, generally meaning that our net interest income would decrease more from rising interest rates than from falling interest rates.
As of September 30, 2021, we exceeded $10 billion in total assets and were reclassified as a large financial institution by the FDIC, and now are subject to additional requirements including, but not limited to, establishing a dedicated risk committee of our board of directors, calculating our FDIC deposit insurance assessment using the large bank pricing rule, and more frequent regulatory examinations.
As of September 30, 2021, we exceeded $10 billion in total assets and were reclassified as a large financial institution by the FDIC, and now are subject to additional requirements including, but not limited to, calculating our FDIC deposit insurance assessment using the large bank pricing rule, and more frequent regulatory examinations.
In tandem with rising interest rates, continued inflationary pressures in the U.S. economy generally, and in our local markets specifically, may negatively impact our operations and profitability. Inflation drives down consumer spending, which could negatively impact the businesses we serve. Rising mortgage rates may also negatively impact our mortgage lending business.
In tandem with elevated interest rates, re-emerging inflationary pressures in the U.S. economy generally, and in our local markets specifically, may negatively impact our operations and profitability. Inflation drives down consumer spending, which could negatively impact the businesses we serve. Elevated mortgage rates may also negatively impact our mortgage lending business.
The process for determining whether a security is impaired usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.
The process for determining whether impairment of a security is other-than-temporary usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.
The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value after the time the credit is initially extended.
The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower, but could deteriorate in value after the time the credit is initially extended.
We have been, and may in the future be, negatively impacted by general business and economic conditions in the U.S., including inflation, recession, pandemic, political issues, regulatory issues and changes in the U.S. economy as a whole.
We have been, and may in the future be, negatively impacted by general business and economic conditions in the U.S., including inflation, recession, tariffs, trade wars, pandemics, political issues, regulatory issues and changes in the U.S. economy as a whole.
Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we are exposed to the risks inherent in the ownership of real estate. As of December 31, 2023, we held $955,000 in other real estate owned.
Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we are exposed to the risks inherent in the ownership of real estate. As of December 31, 2024, we held $2.5 million in other real estate owned.
In particular, approximately 75% of the Bank’s liabilities as of December 31, 2023 were checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, 72% of the assets of the Bank were loans, which cannot be called or sold in the same time frame.
Approximately 70% of the Bank’s liabilities as of December 31, 2024 were checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, 73% of the assets of the Bank were loans, which cannot be called or sold in the same time frame.
As a bank holding company, we are subject to federal regulation under the BHC Act, as amended, and the examination and reporting requirements of various federal and state agencies, including the FDIC, CFPB, and the Alabama Banking Department.
As a bank holding company, we and the Bank are subject to federal regulation, and the examination and reporting requirements of various federal and state agencies, including the Federal Reserve, FDIC, CFPB, and the Alabama Banking Department.
Increased market volatility may materially and adversely affect the market price of our common stock, which could make it difficult to sell your shares at the volume, prices and times desired.
Any of these events may materially and adversely affect the market price of our common stock, which could make it difficult to sell your shares at the volume, prices and times desired.
In addition, the Bank must maintain certain capital levels, which may restrict the ability of the Bank to pay dividends to us and our ability to pay dividends to our stockholders. As of December 31, 2023, our bank could pay approximately $573.9 million of dividends to us without prior approval of the Superintendent.
In addition, the Bank must maintain certain capital levels, which may restrict the ability of the bank to pay dividends to us and our ability to pay dividends to our stockholders. As of December 31, 2024, our Bank could pay approximately $548.7 million of dividends to us without prior approval of the Superintendent.
A prolonged downturn in the real estate market, especially in our primary markets, could result in losses and adversely affect our profitability. As of December 31, 2023, 62.2% of our loan portfolio was composed of commercial and consumer real estate loans, of which 48.4% was owner-occupied commercial or 1-4 family mortgage loans.
A prolonged downturn in the real estate market, especially in our primary markets, could result in losses and adversely affect our profitability. As of December 31, 2024, 64.8% of our loan portfolio was composed of commercial and consumer real estate loans, of which 31.7% was owner-occupied commercial or 1-4 family mortgage loans.
If our assumptions are inaccurate, we may incur loan losses in excess of our current allowance for credit losses and be required to make material additions to our allowance for credit losses, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If our assumptions and judgments are inaccurate, particularly with respect to creditworthiness of borrowers and value of collateral, we may incur loan losses in excess of our current allowance for credit losses and be required to make material additions to our allowance for credit losses, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If we are required to re-value the collateral securing a loan to satisfy the debt during a period of reduced real estate values or to increase our allowance for credit losses, our profitability could be adversely affected, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 25 Our largest loan relationships currently make up a significant percentage of our total loan portfolio.
If we are required to re-value the collateral securing a loan to satisfy the debt during a period of reduced real estate values or to increase our allowance for credit losses, our profitability could be adversely affected, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
The occurrence of any failures or interruptions impacting our information systems could damage our reputation, result in a loss of customer business, and expose us to additional regulatory scrutiny, civil litigation, and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations. 28 We use information technology in our operations and offer online banking services to our customers.
The occurrence of any failures or interruptions impacting our information systems could damage our reputation, result in a loss of customer business, and expose us to additional regulatory scrutiny, civil litigation, and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.
A decline in real estate values, either in the regions we serve or across the country as occurred in the U.S. recession from 2007 to 2009, could impair the value of our collateral and our ability to sell the collateral upon foreclosure, which would likely require us to increase our provision for credit losses.
A decline in real estate values, either in the regions we serve or across the country, could impair the value of our collateral and our ability to sell the collateral upon foreclosure, which would likely require us to increase our provision for credit losses.
The allowance for credit losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance could have a material adverse effect on our business, financial condition, results of operations and prospects.
The allowance for credit losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance could have a material adverse effect on our business, financial condition, results of operations and prospects. 25 Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate, which could have a material adverse effect on our business, financial condition, results of operations and future prospects.
We rely on software developed by third-party vendors to process various transactions. In some cases, we have contracted with third parties to run their proprietary software on our behalf. These systems include, but are not limited to, general ledger, payroll, employee benefits, loan and deposit processing, and securities portfolio accounting.
In some cases, we have contracted with third parties to run their proprietary software on our behalf. These systems include, but are not limited to, general ledger, payroll, employee benefits, loan and deposit processing, and securities portfolio accounting.
However, even if our assumptions are accurate, federal and state regulators periodically review our allowance for credit losses and could require us to materially increase our allowance for credit losses or recognize further loan charge-offs based on judgments different than those of our management.
Furthermore, federal and state regulators periodically review our allowance for credit losses and could require us to materially increase our allowance for credit losses or recognize further loan charge-offs based on judgments different than those of our management.
Information security risks for financial institutions have increased in recent years, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. We are under continuous threat of loss due to hacking and cyber-attacks.
Information security risks for financial institutions have increased in recent years, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties.
Any substantial, unexpected or prolonged change in the level or cost of liquidity could have a material adverse effect on our ability to meet deposit withdrawals and other customer needs, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Any substantial, unexpected or prolonged change in the level or cost of liquidity could have a material adverse effect on our ability to meet deposit withdrawals and other customer needs, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 30 The fair value of our investment securities can fluctuate due to factors outside of our control.
The occurrence of any cyber-attack or information security breach could result in potential liability to clients, reputational damage, damage to our competitive position, and the disruption of our operations, all of which could adversely affect our financial condition or results of operations. We are dependent upon outside third parties for the processing and handling of our records and data.
The occurrence of any cyber-attack or information security breach could result in potential liability to clients, reputational damage, damage to our competitive position, and the disruption of our operations, all of which could adversely affect our financial condition or results of operations.
Any unauthorized access to our or our customers ’ confidential or proprietary information exposes us to reputational harm and litigation and could adversely affect our ability to attract and retain customers.
We use information technology in our operations and offer online banking services to our customers. Any unauthorized access to our or our customers ’ confidential or proprietary information exposes us to reputational harm and litigation and could adversely affect our ability to attract and retain customers.
Accordingly, any regional or local economic downturn that affects any of the markets in which we operate, including existing or prospective property or borrowers in such markets may affect us and our profitability more significantly and more adversely than our more geographically-diversified competitors, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Accordingly, any regional or local economic downturn that affects any of the markets in which we operate, including existing or prospective property or borrowers in such markets may affect us and our profitability more significantly and more adversely than our more geographically-diversified competitors, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 27 Our operations and financial performance could be adversely affected by natural disasters, and climate change can increase those risks while adding regulatory, compliance, reputational and other risks.
As a bank holding company, we are subject to supervision and regulation by the Federal Reserve, including risk-based and leverage capital requirements. We must maintain certain risk-based and leverage capital ratios as required by the Federal Reserve, which can change depending on certain economic conditions and our risk profile and growth plans.
We must maintain certain risk-based and leverage capital ratios as required by the Federal Reserve, which can change depending on certain economic conditions and our risk profile and growth plans.
Our agreements with outside third parties include indemnification obligations in the event of any such security breaches; however, there is no assurance that such third-parties will have sufficient resources to provide full indemnification of all of their customers in the event such a security breach occurs. 29 Our recent results may not be indicative of our future results and may not provide guidance to assess the risk of an investment in our common stock.
Our agreements with outside third parties include indemnification obligations in the event of any such security breaches; however, there is no assurance that such third-parties will have sufficient resources to provide full indemnification of all of their customers in the event such a security breach occurs.
Although U.S. lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States as a result of such disputes over the debt ceiling. 31 In addition to causing economic and financial market disruptions, any future downgrade, failure to continue to raise the U.S. statutory debt limit as needed, or deterioration in the fiscal outlook of the U.S. federal government, could, among other things, materially adversely affect the market value of the U.S. and other government and governmental agency securities that we hold, the availability of those securities as collateral for borrowing, and our ability to access capital markets on favorable terms.
In addition to causing economic and financial market disruptions, any future downgrade, failure to continue to raise the U.S. statutory debt limit as needed, or deterioration in the fiscal outlook of the U.S. federal government, could, among other things, materially adversely affect the market value of the U.S. and other government and governmental agency securities that we hold, the availability of those securities as collateral for borrowing, and our ability to access capital markets on favorable terms.
Any material changes in the composition of our board of directors or the respective advisory boards of the Bank could have a material adverse effect on our business, financial condition, results of operations and prospects. We may not be able to expand successfully into new markets.
Any material changes in the composition of our Board of Directors or the respective advisory boards of the Bank could have a material adverse effect on our business, financial condition, results of operations and prospects. We are subject to heightened regulatory requirements .
We provide services to our local communities; thus, our ability to diversify our economic risks is limited by our own local markets and economies. We lend primarily to small to medium-sized businesses, which may expose us to greater lending risks than those faced by other banks that lend to larger, better-capitalized businesses with longer operating histories.
We lend primarily to small to medium-sized businesses within our communities, which may expose us to greater lending risks than those faced by other banks that lend to larger, better-capitalized and more diversified businesses with longer operating histories.
Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
As of December 31, 2024, the fair value of our investment securities portfolio was approximately $1.88 billion. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.
Climate change may result in new or increased regulatory burdens, which could materially affect our results of operations by requiring us to implement costly measures to comply with any new laws and regulations related to climate change.
Increased burdens associated with environmental regulations could materially affect our results of operations by requiring us to implement costly measures to comply with any new laws and regulations.
The banking and financial services industries are undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. Our success will depend in part on our ability to address our customers’ needs by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations.
Our success will depend in part on our ability to address our customers’ needs by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations.
A failure of our employees to follow our internal policies, or actions taken by our employees that are negligent could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our local bankers may not follow our internal procedures or otherwise act in our best interests with respect to their decision-making. A failure of our employees to follow our internal policies, or actions taken by our employees that are negligent could have a material adverse effect on our business, financial condition, results of operations and prospects.
Risks Related to Our Common Stock The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired.
Any of these results could have a material adverse effect on our business, financial condition, results of operations and prospects. 33 Risks Related to Our Common Stock The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition, results of operations and prospects. 30 In addition, an increase in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations.
In addition, an increase in interest rates could also have a negative impact on our results of operations by reducing the ability of borrowers to repay their current loan obligations.
Our board of directors has the authority to issue in the aggregate up to 1,000,000 shares of preferred stock, and to determine the terms of each issue of preferred stock, without stockholder approval. Accordingly, you should assume that any shares of preferred stock that we may issue in the future will also be senior to our common stock.
Our Board of Directors has the authority to issue in the aggregate up to 1,000,000 shares of preferred stock, and to determine the terms of each issue of preferred stock, without stockholder approval.
If Congress does not raise the debt ceiling and if the U.S. government defaults on its payment obligations or experiences delays in making payments when due, such payment default or delay by the U.S. government, as well as continued uncertainty surrounding the U.S. debt ceiling or the U.S.
If Congress does not raise the debt ceiling and if the U.S. government defaults on its payment obligations or experiences delays in making payments when due, such payment default or delay by the U.S. government, as well as continued uncertainty surrounding the U.S. debt ceiling or the U.S. government’s ability to pay its debts, could result in a variety of adverse effects for financial markets, market participants and U.S. and global economic conditions.
Competition from financial institutions and other financial service providers may adversely affect our profitability. The banking business is highly competitive, and we experience competition in our markets from many other financial institutions. We compete with these other financial institutions both in attracting deposits and in making loans.
The banking business is highly competitive, and we experience competition in our markets from many other financial institutions. We compete with these other financial institutions both in attracting deposits and in making loans. Our profitability depends upon our continued ability to successfully compete with an array of financial institutions in our service areas and attract new customers.
A failure in our internal controls could have a significant negative impact not only on our earnings, but also on our reputation with our customers, regulators and investors.
A failure in our internal controls could have a significant negative impact not only on our earnings, but also on our reputation with our customers, regulators and investors. In addition, a failure of our internal controls, or a circumvention of such controls, could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our failure to compete effectively in our markets could restrain our growth or cause us to lose market share, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 27 Unpredictable economic conditions, including inflation, recession, pandemic or changes in other economic conditions in the U.S. economy generally or in any of our market areas may have a material adverse effect on our financial performance.
Our failure to compete effectively in our markets could restrain our growth or cause us to lose market share, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
As of December 31, 2023, our 10 largest borrowing relationships totaled $791.8 million in commitments (including unfunded commitments), or approximately 6.8% of our total loan portfolio.
Our largest loan relationships currently make up a significant percentage of our total loan portfolio. As of December 31, 2024, our 10 largest borrowing relationships totaled $816.3 million in commitments (including unfunded commitments), or approximately 6.5% of our total loan portfolio.
Our business strategy includes the continuation of our growth plans, and our business, financial condition, results of operations and prospects could be negatively affected if we fail to grow or fail to manage our growth effectively. Our current strategy is to grow organically and, if appropriate, supplement that growth with select acquisitions.
Our business, financial condition, results of operations and prospects could be negatively affected if we fail to grow or fail to manage our growth effectively.
Failure to manage our growth effectively could adversely affect our ability to successfully implement our business strategy, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Any of the factors described above could adversely affect our ability to successfully implement our growth strategy, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Competition from financial institutions and other financial service providers may adversely affect our profitability.
Our ability to access the capital markets, if needed, on a timely basis or at all, will depend on a number of factors, such as the state of the financial markets, including prevailing interest rates, a loss of confidence in financial institutions generally, negative perceptions of our business or our financial strength, or other factors that would increase our cost of borrowing.
If we require capital for our growth plans, our access to capital will depend on a number of factors, such as the state of the financial markets, including prevailing interest rates, confidence in financial institutions generally, perceptions of our business or our financial strength, and other factors, and we may not be able to obtain capital on favorable terms or at all.
Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which has been exacerbated by the COVID-19 pandemic, resulting in heightened credit risk, reduced valuation of investments, supply chain issues and labor constraints, high rates of inflation and decreased economic activity.
Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, resulting in heightened credit risk, reduced valuation of investments, supply chain issues and labor constraints, high rates of inflation and decreased economic activity. Moreover, many companies have experienced reduced liquidity and uncertainty as to their ability to raise capital during such periods of market disruption and volatility.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition, results of operations and prospects.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.
The failure by Congress to raise the federal debt ceiling could have severe repercussions within the U.S. and to global credit and financial markets.
The long-term outlook for the fiscal position of the U.S. federal government is uncertain. From time to time, the U.S. government approaches its statutory debt limit. The failure by Congress to raise the federal debt ceiling could have severe repercussions within the U.S. and to global credit and financial markets.
Changes to statutes, regulations, accounting standards or regulatory policies, including changes in their interpretation or implementation by regulators, could affect us in substantial and unpredictable ways.
Changes to statutes, regulations, accounting standards or regulatory policies, including changes in their interpretation or implementation by regulators, could affect us in substantial and unpredictable ways. For example, in February 2025, the Trump administration directed the CFPB to, among other things, suspend rule implementations and cease supervision activities.
If any of our or the Bank’s executive officers, other key personnel, or directors leaves us or the Bank, our operations may be adversely affected. In particular, we believe that our named executive officers and our regional chief executive officers are extremely important to our success and the success of our bank.
If any of our or the Bank’s executive officers, other key personnel, or directors leaves us or the Bank, our operations may be adversely affected. Additionally, our directors’ and advisory board members’ community involvement and diverse and extensive local business relationships are important to our success.
We and our bank are subject to capital and other requirements which restrict our ability to pay dividends. In 2014, we began paying quarterly cash dividends. Future declarations of quarterly dividends will be subject to the approval of our board of directors, subject to limits imposed on us by our regulators.
Future declarations of quarterly dividends are subject to the approval of our Board of Directors and subject to limits imposed on us by our regulators. In order to pay any dividends, we will need to receive dividends from our bank or have other sources of funds. We and the Bank are subject to restrictions on the payment of dividends.
We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs associated with the ownership of the real property.
Deterioration in economic conditions, housing conditions and commodity and real estate values in certain states or locations could result in materially higher credit losses if loans are concentrated in those locations. 29 We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs associated with the ownership of the real property.
We may not be able to sustain our historical rate of growth and may not be able to further expand our business. Various factors, such as economic conditions, regulatory and legislative considerations and competition, may impede or prohibit our ability to expand our market presence. We have different lending risks than larger banks.
Various factors, such as economic conditions, regulatory and legislative considerations and competition, may impede or prohibit our ability to expand our market presence.
Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.
Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, a failure of our internal controls, or a circumvention of such controls, could have a material adverse effect on our business, financial condition, results of operations and prospects. 26 Our corporate structure provides for decision-making authority by our regional chief executive officers and banking teams.
Our corporate structure provides for decision-making authority by our regional chief executive officers and banking teams. Our business, financial condition, results of operations and prospects could be negatively affected if our employees do not follow our internal policies or are negligent in their decision-making.
Many of the other risk factors discussed herein identify risks that result from, or are exacerbated by, financial economic downturn.
In the event that these conditions recur or result in a prolonged economic downturn, our results of operations, financial position and/or liquidity could be materially and adversely affected. Many of the other risk factors discussed herein identify risks that result from, or are exacerbated by, financial economic downturn.
Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control. Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on our business, financial condition, results of operations and prospects. ITEM 1B. UNRESOLVED STAFF COMMENTS. None.
Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on our business, financial condition, results of operations and prospects. Changes in U.S. trade policies may also adversely impact our business and operations.
Changes to regulations or market shifts in response to climate change may also impact the businesses of some of our customers, which may require us to adjust our lending portfolios and business strategies with respect to such customers. We encounter technological change continually and have fewer resources than many of our competitors to invest in technological improvements.
Changes to regulations or market shifts in response may also impact the businesses of some of our customers, which may require us to adjust our lending portfolios and business strategies with respect to such customers. In addition, the investing public is increasingly focused on the financial services industry’s ability to manage environmental impact.
All of these factors can individually or in the aggregate be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Our business also is significantly affected by monetary and related policies of the U.S. federal government and its agencies.
Our business also is significantly affected by monetary and related policies of the U.S. federal government and its agencies. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control.
We have opened new offices in Fort Walton, Florida, Venice, Florida, Sarasota, Florida, Orlando, Florida, Tallahassee, Florida, Columbus, Georgia, Charlotte and Asheville, North Carolina, and Virginia Beach, Virginia in the past five years. We may not be able to successfully manage this growth with sufficient human resources, training and operational, financial and technological resources.
We have opened new offices in Auburn, Alabama, Fort Walton, Florida, Venice, Florida, Sarasota, Florida, Orlando, Florida, Tallahassee, Florida, Columbus, Georgia, Charlotte and Asheville, North Carolina, Memphis, Tennessee, and Virginia Beach, Virginia in the past five years. Our current strategy is to grow organically and, if appropriate, supplement that growth with select acquisitions.
Our operations and financial performance could be adversely affected by natural disasters, and climate change can increase those risks while adding regulatory, compliance, reputational and other risks. Natural disasters could have a material adverse effect on our financial position and results of operations.
Natural disasters could have a material adverse effect on our financial position and results of operations.
In determining the size of our allowance for credit losses, we rely on an analysis of our loan portfolio based on historical loss experience, current conditions, reasonable and supportable forecasts, and other pertinent information. We target small and medium-sized businesses as loan customers.
In determining the size of our allowance for credit losses, management makes various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans, as well as historical loss experience, current conditions, reasonable and supportable forecasts, and other pertinent information.
This allocation of resources, as well as any failure to comply with applicable requirements, may negatively impact our financial condition and results of operations. 32 As a bank holding company, we are subject to certain capital requirements that may limit our operations.
As a bank holding company, we are subject to certain capital requirements that may limit our operations. As a bank holding company, we are subject to supervision and regulation by the Federal Reserve, including risk-based and leverage capital requirements.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our Information Security Program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program. 37 We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and to the Information Technology Steering Committee.
Biggest changeWe maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate Board-approved management committees, as discussed further below, and to the Information Technology Steering Committee. The Incident Response Plan is coordinated through the Information Security Officer.
The Information Security Program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions and maturing our Information Security Program. We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology.
The Information Security Program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions and maturing our Information Security Program. 36 We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology.
We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls. We also employ a variety of tools and processes to identify, protect against, detect, respond, recover from, and govern cybersecurity risks and threats.
We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls. We also employ a variety of tools and processes to identify, protect against, detect, respond, recover from, and govern the cybersecurity risks and threats.
The structure of our information security program is designed around the National Institute of Standards and Technology Cybersecurity Framework, Federal Financial Institution Examination Council Cybersecurity Assessment Tool, regulatory guidance, and other industry standards. In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness.
The structure of our information security program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, Federal Financial Institution Examination Council (“FFIEC”) Cybersecurity Assessment Tool, regulatory guidance, and other industry standards. In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of internal and external threat events or other efforts to penetrate, disrupt or misuse our systems or information.
Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information.
The Incident Response Plan is coordinated through the Information Security Officer. Key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe.
Key members of management are embedded into the Incident Response Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe.
Our Information Security Officer and our Chief Information and Operations Officer, along with key members of their teams, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices.
Our Information Security Officer and our Chief Information and Operations Officer, along with key members of his team, regularly collaborate with peer banks, industry groups, and policymakers to discuss cybersecurity trends and issues and identify best practices.
The Information Security Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, discussed at committee meetings and the actions taken to the Information Technology Steering Committee on a monthly basis (or more frequently as may be required by the Incident Response Plan).
The Information Security Officer informs the Information Technology Steering Committee by reporting on key issues, including significant cybersecurity and/or privacy incidents, discussed at committee meetings and the actions taken in response. The Information Technology Steering Committee meets on a monthly basis (or more frequently as may be required by the Incident Response Plan).
Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our company. Governance Our Information Security Officer is accountable for overseeing and directing our Information Security Program.
Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks and, while we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected our company.
We maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain. We actively monitor our email traffic for malicious phishing email campaigns, provide ongoing training for employees to help them detect possible malicious emails and monitor remote connections.
We also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with third parties, external service providers and our supply chain. We also actively monitor our email traffic for malicious phishing email campaigns and monitor remote connections as a significant portion of our workforce has the option to work remotely.
The Information Technology Steering Committee and Risk Management Committee each provide a report of their activities to the full board of directors at each board meeting. 38
The Information Technology Steering Committee and Risk Management Committee each provide a report of their activities to the full Board of Directors at each board meeting. The principal individuals on the Information Technology Steering Committee responsible for the foregoing activities are the Chief Information and Operations Officer (Chairman of the Committee); the Information Security Officer; and the Chief Risk Officer.
In particular, our Information Security Officer has over ten years of information security experience and four cybersecurity related certifications. Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact, and the Risk Management Committee, which focuses on business impact.
Our Board of Directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact, and the Risk Management Committee, which focuses on business impact. These committees provide oversight and governance of the technology program and the information security program.
These committees provide oversight and governance of the technology program and the information security program. These committees generally meet monthly and quarterly, respectively, to provide oversight of our risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks.
These committees generally meet monthly and quarterly, respectively, to provide oversight of our risk management strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. More frequent meetings occur from time to time in accordance with the Incident Response Plan in order to facilitate timely informing and monitoring efforts.
Removed
More frequent meetings occur from time to time in accordance with the Incident Response Plan in order to facilitate timely informing and monitoring efforts.
Added
We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.
Added
For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption or Breach In Security” in Item 1A. Risk Factors. Governance Our Information Security Officer is accountable for overseeing and directing our Information Security Program.
Added
In particular, our Information Security Officer has over 20 years of information security experience in the Banking, Government, Military, Energy, and Insurance sectors and has the following cybersecurity certifications: Certified Information Systems Security Professional (CISSP), BS in Information Systems with a focus in Cyber Security, CompTIA Security+, CCNA (Security), CCNA (Route/Switch), CCNA (Collaboration), CompTIA Net+, Microsoft Certified System Engineer MCSE (win2000).
Added
The experience of Chief Information and Operations Officer; Information Security Officer; and Chief Risk Officer are as follows: 35 years of experience in bank operations, systems development, payments, and information technology in Financial Services sector; 20 years of information security experience in the Banking, Government, Military, Energy, and Insurance sectors; and 29 years of experience in audit and risk management in the Financial Services Sector (banking) as an FDIC Examiner; Internal Audit Director; and Chief Risk Officer, respectively. 37

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed3 unchanged
Biggest changeTampa 33607 Leased 1/4/2016 485 North Keller Road Orlando 32751 Leased 7/1/2021 247 Tamiami Trail South Suite 100 Venice 34285 Leased 1/3/2021 1718 Main Street, Suite 100 (1) Sarasota 34236 Leased 7/1/2022 3375 Capital Circle NE, Bldg B 1 (1) Tallahassee 32308 Leased 3/29/2023 Total Offices in Florida 10 Offices Georgia: 300 Galleria Parkway SE, Suite 100 Atlanta 30339 Leased 7/1/2015 2801 Chapel Hill Road Douglasville 30135 Owned 1/28/2008 700 Brookstone Centre Parkway, Suite 400 Columbus 31904 Leased 2/1/2023 Total Offices in Georgia 3 Offices North Carolina: 14891 Ballantyne Village Way Suite 1000 Charlotte 28277 Leased 12/19/2022 1200 Ridgefield Boulevard Suite 254 Asheville 28806 Leased 9/19/2022 9624 Bailey Road, Suite I Cornelius 28031 Leased 7/1/2023 Total Offices in North Carolina 3 Offices South Carolina: 701 East Bay Street Suite 503 Charleston 29403 Leased 4/20/2015 100 S Main Street Suite I Summerville 29483 Leased 7/1/2016 Total Offices in South Carolina 2 Offices Tennessee: 1600 West End Avenue, Suite 200 Nashville 37203 Leased 5/1/2021 Total Offices in Tennessee 1 Office Virginia: 4505 Columbus Street, Suite 100 Virginia Beach 23462 Leased 9/1/2022 Total Offices in Virginia 1 Office Total Offices 32 Offices (1) Property serves as a loan production office. 39
Biggest changeTampa 33607 Leased 1/4/2016 485 North Keller Road Orlando 32751 Leased 7/1/2021 247 Tamiami Trail South Venice 34285 Leased 1/3/2021 1718 Main Street, Suite 100 Sarasota 34236 Leased 7/1/2022 3375 Capital Circle NE, Bldg B 1 (1) Tallahassee 32308 Leased 3/29/2023 Total Offices in Florida 10 Offices Georgia: 300 Galleria Parkway SE, Suite 100 Atlanta 30339 Leased 7/1/2015 2801 Chapel Hill Road Douglasville 30135 Owned 1/28/2008 700 Brookstone Centre Parkway, Suite 400 Columbus 31904 Leased 2/1/2023 Total Offices in Georgia 3 Offices North Carolina: 14891 Ballantyne Village Way Suite 1000 Charlotte 28277 Leased 12/19/2022 1200 Ridgefield Boulevard Suite 254 Asheville 28806 Leased 9/19/2022 9624 Bailey Road, Suite I Cornelius 28031 Leased 7/1/2023 Total Offices in North Carolina 3 Offices South Carolina: 701 East Bay Street Suite 503 Charleston 29403 Leased 4/20/2015 100 S Main Street Suite I Summerville 29483 Leased 7/1/2016 Total Offices in South Carolina 2 Offices Tennessee: 1600 West End Avenue, Suite 200 Nashville 37203 Leased 5/1/2021 5384 Poplar Ave Memphis 38119 Leased 12/2/2024 Total Offices in Tennessee 2 Offices Virginia: 4505 Columbus Street, Suite 100 Virginia Beach 23462 Leased 9/1/2022 Total Offices in Virginia 1 Offices Total Offices 34 Offices (1) Property serves as a loan production office. 38
ITEM 2. PROPERTIES. As of December 31, 2023, we operated through 30 banking offices and 2 loan production offices. Our Woodcrest Place office also includes our corporate headquarters. Due to our focus on service-oriented banking with limited branch locations, each of these locations serves as a hub in our banking markets.
ITEM 2. PROPERTIES. As of December 31, 2024, we operated through 33 banking offices and one loan production office. Our Woodcrest Place office also includes our corporate headquarters. Due to our focus on service-oriented banking with limited branch locations, each of these locations serves as a hub in our banking markets.
Suite 101 Fairhope 36532 Leased 9/29/2017 Total Offices in Alabama 12 Offices Florida: 219 East Garden Street Suite 100 Pensacola 32502 Leased 4/1/2011 4980 North 12th Avenue Pensacola 32504 Owned 8/27/2012 316 Racetrack RD NE Ft.
Suite 101 Fairhope 36532 Leased 9/29/2017 2272 Moores Mill Rd Auburn 36830 Leased 11/4/2024 Total Offices in Alabama 13 Offices Florida: 219 East Garden Street Suite 100 Pensacola 32502 Leased 4/1/2011 4980 North 12th Avenue Pensacola 32504 Owned 8/27/2012 316 Racetrack RD NE Ft.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSubject to the board of directors’ approval and applicable regulatory requirements, we expect to continue paying cash dividends on a quarterly basis. The principal source of our cash flow, including cash flow to pay dividends, comes from dividends that the Bank pays to us as its sole shareholder.
Biggest changeThe principal source of our cash flow, including cash flow to pay dividends, comes from dividends that the Bank pays to us as its sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us, as well as our payment of dividends to our stockholders.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers We made no repurchases of our equity securities, and no “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our equity securities during the fourth quarter of the fiscal year ended December 31, 2023.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers We made no repurchases of our equity securities, and no “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our equity securities during the fourth quarter of the fiscal year ended December 31, 2024.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the New York Stock Exchange under the symbol “SFBS.” As of February 27, 2024, there were 466 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the New York Stock Exchange under the symbol “SFBS.” As of February 26, 2025, there were 453 holders of record of our common stock.
Performance Graph The following graph shows a comparison of the five-year cumulative total stockholder return for the Company, the KBW Nasdaq Regional Banking Index (KRX), and the Standard and Poor's 600 (S&P 600).
Performance Graph The following graph shows a comparison of the five-year cumulative total stockholder return for the Company, the KBW Nasdaq Regional Banking Index (“KRX”), and the Standard and Poor's 600 (“S&P 600”).
Recent Sales of Unregistered Securities We had no sales of unregistered securities in 2023 other than those previously reported in our reports filed with the SEC.
For a more complete discussion on the restrictions on dividends, see “Bank Supervision and Regulation - Payment of Dividends” in Item 1. Recent Sales of Unregistered Securities We had no sales of unregistered securities in 2024 other than those previously reported in our reports filed with the SEC.
The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates the performance graph by reference therein. 40 ITEM 6. [Reserved].
The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates the performance graph by reference therein. 39 Date Index: 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 ServisFirst Bancshares, Inc. 100.00 108.50 223.96 185.63 182.25 230.99 S&P 600 100.00 109.57 137.26 113.35 129.09 137.90 KRX 100.00 87.90 117.08 106.01 101.77 111.52 ITEM 6. [Reserved].
As of the close of business on February 27, 2024, the price of our common stock was $62.44 per share. Dividends On December 19, 2023, our board of directors increased our quarterly cash dividend from $0.28 per share to $0.30 per share.
Dividends On December 16, 2024, our Board of Directors increased our quarterly cash dividend from $0.30 per share to $0.335 per share. Subject to the Board of Directors’ approval and applicable regulatory requirements, we expect to continue paying cash dividends on a quarterly basis.
Removed
Statutory and regulatory limitations apply to the Bank’s payment of dividends to us, as well as our payment of dividends to our stockholders. For a more complete discussion on the restrictions on dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+1 added−0 removed0 unchanged
Biggest changeITEM 6. [RESERVED] 41 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 41 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 60 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 62 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 104 ITEM 9A. CONTROLS AND PROCEDURES 104
Biggest changeITEM 6. [RESERVED] 40 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS 40 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 58 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 60 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 101 ITEM 9A. CONTROLS AND PROCEDURES 101 ITEM 9B.
Added
OTHER INFORMATION 101 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 101 PART III. 101

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

103 edited+22 added−46 removed46 unchanged
Biggest changeYear Ended December 31, 2023 2022 Change from the Prior Year (Dollars in Thousands) Interest income $ 813,246 $ 559,315 45.4 % Interest expense 402,309 88,423 355.0 % Net interest income 410,937 470,892 (12.7 )% Provision for credit losses 18,715 37,607 (50.2 )% Net interest income after provision for credit losses 392,222 433,285 (9.5 )% Noninterest income 30,417 33,359 (8.8 )% Noninterest expense 178,051 157,816 12.8 % Income before income taxes 244,588 308,828 (20.8 )% Income taxes 37,735 57,324 (34.2 )% Net income 206,853 251,504 (17.8 )% Dividends on preferred stock 62 62 - % Net income available to common stockholders $ 206,791 $ 251,442 (17.8 )% 42 Year Ended December 31, 2022 2021 Change from the Prior Year (Dollars in Thousands) Interest income $ 559,315 $ 416,305 34.4 % Interest expense 88,423 31,802 178.0 % Net interest income 470,892 384,503 22.5 % Provision for credit losses 37,607 31,517 19.3 % Net interest income after provision for credit losses 433,285 352,986 22.7 % Noninterest income 33,359 33,452 (0.3 )% Noninterest expense 157,816 133,089 18.6 % Income before income taxes 308,828 253,349 21.9 % Income taxes 57,324 45,615 25.7 % Net income 251,504 207,734 21.1 % Dividends on preferred stock 62 62 - % Net income available to common stockholders $ 251,442 $ 207,672 21.1 % Performance Ratios The following table presents selected ratios of our results of operations for the years ended December 31, 2023, 2022 and 2021.
Biggest changeThe following tables present a summary of our statements of income, including the percent change in each category, for the years ended December 31, 2024 compared to 2023, and for the years ended December 31, 2023 compared to 2022, respectively: Year Ended December 31, 2024 2023 Change from the Prior Year (Dollars in Thousands) Interest income $ 946,121 $ 813,246 16.3 % Interest expense 499,462 402,309 24.1 % Net interest income 446,659 410,937 8.7 % Provision for credit losses 21,587 18,715 15.3 % Net interest income after provision for credit losses 425,072 392,222 8.4 % Noninterest income 35,056 30,417 15.3 % Noninterest expense 181,146 178,051 1.7 % Income before income taxes 278,982 244,588 14.1 % Income taxes 51,740 37,735 37.1 % Net income 227,242 206,853 9.9 % Dividends on preferred stock 62 62 - % Net income available to common stockholders $ 227,180 $ 206,791 9.9 % Year Ended December 31, 2023 2022 Change from the Prior Year (Dollars in Thousands) Interest income $ 813,246 $ 559,315 45.4 % Interest expense 402,309 88,423 355.0 % Net interest income 410,937 470,892 (12.7 )% Provision for credit losses 18,715 37,607 (50.2 )% Net interest income after provision for credit losses 392,222 433,285 (9.5 )% Noninterest income 30,417 33,359 (8.8 )% Noninterest expense 178,051 157,816 12.8 % Income before income taxes 244,588 308,828 (20.8 )% Income taxes 37,735 57,324 (34.2 )% Net income 206,853 251,504 (17.8 )% Dividends on preferred stock 62 62 - % Net income available to common stockholders $ 206,791 $ 251,442 (17.8 )% 41 Performance Ratios The following table presents selected ratios of our results of operations for the years ended December 31, 2024, 2023 and 2022: For the Years Ended December 31, 2024 2023 2022 Return on average assets 1.39 % 1.37 % 1.71 % Return on average stockholders' equity 14.98 % 15.13 % 20.73 % Dividend payout ratio 29.82 % 30.06 % 19.17 % Net interest margin (1) 2.82 % 2.81 % 3.32 % Efficiency ratio (2) 37.60 % 40.34 % 31.30 % Average stockholders' equity to average total assets 9.29 % 9.07 % 7.33 % (1) Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.
Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors.
Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors.
Overview The Company We are a bank holding company within the meaning of the BHC Act headquartered in Birmingham, Alabama. Through our wholly-owned subsidiary bank, we operate full service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. We also operate loan production offices in Florida.
Overview The Company We are a bank holding company within the meaning of the BHC Act headquartered in Birmingham, Alabama. Through our wholly-owned subsidiary bank, we operate full service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia. We also operate a loan production office in Florida.
The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations. Loan Portfolio The following is a condensed overview of changes in our loan portfolio.
The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations. 47 Loan Portfolio The following is a condensed overview of changes in our loan portfolio.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Our primary permanent differences are related to tax exempt income on debt securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance. We have invested $292.8 million in bank-owned life insurance for certain officers of the Bank.
Our primary permanent differences are related to tax exempt income on debt securities, state income tax benefit on real estate investment trust dividends, various qualifying tax credits and change in cash surrender value of bank-owned life insurance. We have invested $299.8 million in bank-owned life insurance for certain officers of the Bank.
At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Capital Adequacy As of December 31, 2023, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action.
At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Capital Adequacy As of December 31, 2024, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action.
The Company considers factors that are relevant within the qualitative framework, which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system; and other economic conditions and new markets.
The Company considers factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.
At December 31, 2023, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2022.
At December 31, 2024, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2023. At December 31, 2023, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2022.
To remain categorized as well-capitalized, we must maintain minimum common equity tier 1 risk-based, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of December 31, 2023.
To remain categorized as well-capitalized, we must maintain minimum Common Equity Tier 1 risk-based, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below. Our management believes that we are well-capitalized under the prompt corrective action provisions as of December 31, 2024.
From 2022 to 2023, our volume component was favorable as asset volumes increased primarily as a result of the growth in loan balances as well as an increase in taxable debt securities, while the volume change from our liabilities was primarily driven by growth in money market balances.
From 2023 to 2024, our volume component was favorable as asset volumes increased primarily as a result of the growth in loan balances as well as an increase in taxable debt securities, while the volume change from our liabilities was primarily driven by growth in money market balances.
During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect net interest income. 56 Our asset liability and investment committee is charged with monitoring our liquidity and funds position.
During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect net interest income. Our asset liability committee is charged with monitoring our liquidity and funds position.
We also recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during 2023 of $1.5 million, compared to $1.3 million during 2022.
We also recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during 2024 of $1.3 million, compared to $1.5 million during 2023.
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section of the Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section of the Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Results of Operations The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2023 and 2022 and results of operations for each of the years then ended.
Results of Operations The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2024 and 2023 and results of operations for each of the years then ended.
The following table shows, for the years ended December 31, 2023, 2022 and 2021, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue, and the change in interest income and interest expense segregated into amounts attributable to changes in volume and changes in rates.
The following table shows, for the years ended December 31, 2024, 2023 and 2022, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest income, and the change in interest income and interest expense segregated into amounts attributable to changes in volume and changes in rates.
The ACL on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The allowance for credit losses on unfunded commitments was $575,000 as of December 31, 2023 and December 31, 2022.
The ACL on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense. The allowance for credit losses on unfunded commitments was $608,000 as of December 31, 2024 and $575,000 as of December 31, 2023.
Additionally, the Bank had available to us approximately $888.0 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs. As a separate entity from the bank, we also have separate liquidity obligations.
Additionally, we had available to us approximately $537 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs. 56 As a separate entity from the bank, we also have separate liquidity obligations.
In the table above, changes in net interest income are attributable to (a) changes in average balances (volume variance), (b) changes in rates (rate variance), or (c) changes in rate and average balances (rate/volume variance). The volume variance is calculated as the change in average balances times the previous period average balance.
In the table above, changes in net interest income are attributable to (a) changes in average balances (volume variance), (b) changes in rates (rate variance), or (c) changes in rate and average balances (rate/volume variance). The volume variance is calculated as the change in average balances multiplied by the previous period average balance.
Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as TDRs.
Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans.
(2) Weighted Average Yield is calculated by taking the sum of each category of securities multiplied by the respective tax-equivalent yield for a given maturity, and dividing by the sum of the securities for the same maturity. 48 As of December 31, 2023, we had $100.6 million in federal funds sold, compared with $1.5 million at December 31, 2022.
(2) Weighted average yield is calculated by taking the sum of each category of securities multiplied by the respective tax-equivalent yield for a given maturity, and dividing by the sum of the securities for the same maturity. As of December 31, 2024, we had $1.0 million in federal funds sold, compared with $100.6 million at December 31, 2023.
Specific allocations of the ACL for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
Specific allocations of the ACL are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.
The uninsured deposit data for 2023 and 2022 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.
The uninsured deposit data for 2024 and 2023 reflects the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but does not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.
Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings. Net interest income decreased 12.7% for the year ended December 31, 2023 from the year ended December 31, 2022.
Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings. Net interest income increased 8.7% for the year ended December 31, 2024 from the year ended December 31, 2023.
Net credit charge-offs to average loans were 0.10% for the year ended December 31, 2023, compared to 0.08% and 0.03% for the years ended December 31, 2022 and 2021, respectively.
Net credit charge-offs to average loans were 0.09% for the year ended December 31, 2024, compared to 0.10% and 0.08% for the years ended December 31, 2023 and 2022, respectively.
However, our ultimate source of liquidity consists of dividends from the Bank, which are limited by applicable law and regulations. In 2023 and 2022, the Bank paid dividends of $62.5 million and $57.5 million, respectively. For a detailed discussion on the regulatory limitation on Bank dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1.
However, our ultimate source of liquidity consists of dividends from the Bank, which are limited by applicable law and regulations. In 2024 and 2023, the Bank paid dividends of $71.9 million and $62.5 million, respectively, to us. For a detailed discussion on the regulatory limitation on Bank dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1.
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 25, 2023 ( 2022 FORM 10-K ) for a discussion and analysis of the more significant factors that affected periods prior to 2022.
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 1, 2024 for a discussion and analysis of the more significant factors that affected periods prior to 2023.
The rate variance is calculated as the change in rates times the previous period average balance. The rate/volume variance is calculated as the change in rates times the change in average balances.
The rate variance is calculated as the change in rates multiplied by the previous period average balance. The rate/volume variance is calculated as the change in rates multiplied by the change in average balances.
For the Year Ended 2023 2022 2021 Sources of Funds: Deposits: Non-interest-bearing 18.9 % 32.1 % 27.3 % Interest-bearing 62.2 48.7 55.5 Federal funds purchased 8.5 10.4 8.6 Long term debt and other borrowings 0.6 0.4 0.5 Other liabilities 0.4 0.3 0.3 Equity capital 9.4 8.1 7.8 Total sources 100.0 % 100.0 % 100.0 % Uses of Funds: Loans 77.1 % 67.0 % 64.4 % Securities 12.5 11.2 7.3 Interest-bearing balances with banks 7.1 18.1 24.7 Federal funds sold 0.4 0.2 0.1 Other assets 3.0 3.5 3.4 Total uses 100.0 % 100.0 % 100.0 % Liquidity Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, or other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.
Average assets totaled $16.33 billion in 2024, compared to $15.07 billion in 2023, and to $14.70 billion in 2022: For the Year Ended 2024 2023 2022 Sources of Funds: Deposits: Non-interest-bearing 15.9 % 18.9 % 32.1 % Interest-bearing 64.7 62.2 48.7 Federal funds purchased 8.8 8.5 10.4 Long term debt and other borrowings 0.4 0.6 0.4 Other liabilities 0.6 0.4 0.3 Equity capital 9.5 9.4 8.1 Total sources 100.0 % 100.0 % 100.0 % Uses of Funds: Loans 74.5 % 77.1 % 67.0 % Securities 12.0 12.5 11.2 Interest-bearing balances with banks 10.4 7.1 18.1 Federal funds sold 0.1 0.4 0.2 Other assets 3.0 3.0 3.5 Total uses 100.0 % 100.0 % 100.0 % Liquidity Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, or other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.
The rate component was unfavorable as average rates paid on interest-bearing liabilities increased 275 basis points while yields on average earning assets increased 162 basis points. 45 The two primary factors that make up the spread are the interest rates received on loans and the interest rates paid on deposits.
The rate component was favorable as average rates paid on interest-bearing liabilities increased 39 basis points while yields on average earning assets increased 41 basis points. The two primary factors that make up the spread are the interest rates received on loans and the interest rates paid on deposits.
The committee regularly reviews the rate sensitivity position on a three-month, six-month and one-year time horizon; loans-to-deposits ratios; and average maturities for certain categories of liabilities. The asset liability committee uses a model to analyze the maturities of rate-sensitive assets and liabilities. Gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities.
The committee regularly reviews the rate sensitivity position on a three-month, six-month and one-year time horizon; loans-to-deposits ratios; and average maturities for certain categories of liabilities. The asset liability committee uses a model to analyze the maturities of rate-sensitive assets and liabilities.
When a workout is not achievable, we move to collection/foreclosure proceedings to obtain control of the underlying collateral as rapidly as possible to minimize the deterioration of collateral and/or the loss of its value. ● We require updated financial information, global inventory aging and interest carry analysis for existing customers to help identify potential future loan payment problems. ● We generally limit loans for new construction to established builders and developers that have an established record of turning their inventories, and we restrict our funding of undeveloped lots and land. 53 Nonperforming Assets The table below summarizes our nonperforming assets at December 31, 2023, 2022 and 2021: 2023 2022 2021 Number Number Number Balance of Loans Balance of Loans Balance of Loans (Dollars in Thousands) Nonaccrual loans: Commercial, financial and agricultural $ 7,217 35 $ 7,108 18 $ 4,343 17 Real estate - construction 111 1 - - - - Real estate - mortgage: Owner-occupied commercial 7,089 14 3,312 3 1,021 2 1-4 family mortgage 4,426 41 1,524 16 1,398 12 Other mortgage 506 2 506 2 - - Total real estate - mortgage 12,021 57 5,342 21 2,419 14 Consumer - - - - - - Total nonaccrual loans $ 19,349 93 $ 12,450 39 $ 6,762 31 90+ days past due and accruing: Commercial, financial and agricultural $ 170 8 $ 195 26 $ 39 4 Real estate - construction - - - - - - Real estate - mortgage: Owner-occupied commercial - - - - - - 1-4 family mortgage 1,909 9 594 5 611 3 Other mortgage - - 4,512 1 4,656 1 Total real estate - mortgage 1,909 9 5,106 6 5,267 4 Consumer 105 16 90 44 29 22 Total 90+ days past due and accruing $ 2,184 33 $ 5,391 76 $ 5,335 30 Total nonperforming loans $ 21,533 126 $ 17,841 115 $ 12,097 61 Plus: Other real estate owned and repossessions 995 7 248 2 1,208 5 Total nonperforming assets $ 22,528 133 $ 18,089 117 $ 13,305 66 Restructured accruing loans: Commercial, financial and agricultural $ - - $ 2,480 5 $ 431 2 Real estate - construction - - - - - - Real estate - mortgage: Owner-occupied commercial - - - - - - 1-4 family mortgage - - - - - - Other mortgage - - - - - - Total real estate - mortgage - - - - - - Consumer - - - - - - Total restructured accruing loans $ - - $ 2,480 5 $ 431 2 Total nonperforming assets and restructured accruing loans $ 22,528 133 $ 20,569 122 $ 13,736 68 Ratios: Nonperforming loans to total loans 0.18 % 0.15 % 0.13 % Nonperforming assets to total loans plus other Nonperforming assets to total loans plus other real estate owned and repossessions 0.19 % 0.15 % 0.14 % Nonperforming assets and restructured accruing loans to total loans plus other real estate owned and repossessions 0.19 % 0.18 % 0.14 % The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past due, unless the loan is both well-collateralized and in the process of collection.
When a workout is not achievable, we move to collection/foreclosure proceedings to obtain control of the underlying collateral as rapidly as possible to minimize the deterioration of collateral and/or the loss of its value. ● We require updated financial information, global inventory aging and interest carry analysis for existing customers to help identify potential future loan payment problems. ● We generally limit loans for new construction to established builders and developers that have an established record of turning their inventories, and we restrict our funding of undeveloped lots and land. 52 Nonperforming Assets The table below summarizes our nonperforming assets at December 31, 2024, 2023 and 2022: 2024 2023 2022 Number Number Number Balance of Loans Balance of Loans Balance of Loans (Dollars in Thousands) Nonaccrual loans: Commercial, financial and agricultural $ 25,692 54 $ 7,217 35 $ 7,108 18 Real estate - construction - - 111 1 - - Real estate - mortgage: Owner-occupied commercial 8,744 14 7,089 14 3,312 3 1-4 family mortgage 3,051 24 4,426 41 1,524 16 Non-owner occupied commercial 1,259 2 506 2 506 2 Total real estate - mortgage 13,054 40 12,021 57 5,342 21 Consumer 755 1 - - - - Total nonaccrual loans $ 39,501 95 $ 19,349 93 $ 12,450 39 90+ days past due and accruing: Commercial, financial and agricultural $ 38 4 $ 170 8 $ 195 26 Real estate - construction 661 2 - - - - Real estate - mortgage: Owner-occupied commercial - - - - - - 1-4 family mortgage 2,240 7 1,909 9 594 5 Non-owner occupied commercial - - - - 4,512 1 Total real estate - mortgage 2,240 7 1,909 9 5,106 6 Consumer 26 21 105 16 90 44 Total 90+ days past due and accruing $ 2,965 34 $ 2,184 33 $ 5,391 76 Total nonperforming loans $ 42,466 129 $ 21,533 126 $ 17,841 115 Plus: Other real estate owned and repossessions 2,531 8 995 7 248 2 Total nonperforming assets $ 44,997 137 $ 22,528 133 $ 18,089 117 Restructured accruing loans: Commercial, financial and agricultural $ - - $ - - $ 2,480 5 Real estate - construction - - - - - - Real estate - mortgage: Owner-occupied commercial - - - - - - 1-4 family mortgage - - - - - - Non-owner occupied commercial - - - - - - Total real estate - mortgage - - - - - - Consumer - - - - - - Total restructured accruing loans $ - - $ - - $ 2,480 5 Total nonperforming assets and restructured accruing loans $ 44,997 137 $ 22,528 133 $ 20,569 122 Ratios: Nonperforming loans to total loans 0.34 % 0.18 % 0.15 % Nonperforming assets to total loans plus other real estate owned and repossessions 0.36 % 0.19 % 0.15 % Nonperforming assets and restructured accruing loans to total loans plus other real estate owned and repossessions 0.36 % 0.19 % 0.18 % The accrual of interest on loans is discontinued when there is a significant deterioration in the financial condition of the borrower and full repayment of principal and interest is not expected or the principal or interest is more than 90 days past due, unless the loan is both well-collateralized and in the process of collection.
We generally do not hold, and did not have at December 31, 2023, any structured investment vehicles or any private-label mortgage-backed securities. The amortized cost of securities in our portfolio totaled $1.95 billion at December 31, 2023, compared to $1.74 billion at December 31, 2022.
All of our investments in mortgage-backed securities are pass-through mortgage-backed securities. We generally do not hold, and did not have at December 31, 2024, any structured investment vehicles or any private-label mortgage-backed securities. The amortized cost of securities in our portfolio totaled $1.92 billion at December 31, 2024, compared to $1.95 billion at December 31, 2023.
Nonaccrual loans increased to $19.3 million, or 0.17% of total loans, at December 31, 2023 from $12.5 million, or 0.11% of total loans, at December 31, 2022, and were $6.8 million, or 0.07% of total loans, at December 31, 2021.
Nonaccrual loans increased to $39.5 million, or 0.31% of total loans, at December 31, 2024 from $19.3 million, or 0.17% of total loans, at December 31, 2023, and were $12.5 million, or 0.11% of total loans, at December 31, 2022.
The net interest spread measures the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest spread eliminates the effect of noninterest-earning assets as well as noninterest-bearing deposits and other noninterest-bearing funding sources and gives a direct perspective on the effect of market interest rate movements.
The net interest spread eliminates the effect of noninterest-earning assets as well as noninterest-bearing deposits and other noninterest-bearing funding sources and gives a direct perspective on the effect of market interest rate movements.
The trusts are majority-owned subsidiaries of a trust holding company, which in turn is an indirect, wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities.
The trusts are majority-owned subsidiaries of a trust holding company, which in turn is an indirect, wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.
The ratio of net charged-off loans to average loans was 0.10% for 2023 compared to 0.08% for 2022. The ACL at December 31, 2023 totaled $153.3 million, or 1.32% of loans, net of unearned income. The ACL totaled $146.3 million, or 1.25% of loans, net of unearned income, at December 31, 2022.
The ratio of net charged-off loans to average loans was 0.09% for 2024 compared to 0.10% for 2023. The ACL for December 31, 2024 totaled $164.5 million, or 1.30% of loans, net of unearned income. The ACL totaled $153.3 million, or 1.32% of loans, net of unearned income, at December 31, 2023.
Please see Note 3 - “ Loans ” in the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report for a more detailed analysis of our loan portfolio by type of loan.
Please see Note 3 - “ Loans ” in the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this report for a more detailed analysis of our loan portfolio by type of loan. We had total loans of approximately $12.61 billion at December 31, 2024.
Our regulators may disagree with our assumptions and could require us to materially increase our allowance for credit losses. Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method.
Our regulators may disagree with our assumptions and could require us to materially increase our allowance for credit losses. 57 Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a DCF, PD/LGD, or remaining life method.
The following table presents the average balance and average rate paid on each of the following deposit categories at the bank level for years ended December 31, 2023, 2022 and 2021: For Year Ended December 31, 2023 2022 2021 Average Balance Yields/Rates Average Balance Yields/Rates Average Balance Yields/Rates Types of Deposits: (Dollars in Thousands) Non-interest-bearing demand deposits $ 2,857,831 - % $ 4,415,972 - % $ 3,689,311 - % Interest-bearing demand deposits 1,928,133 2.24 % 1,695,738 0.36 % 1,394,678 0.19 % Money market accounts 6,347,456 3.95 % 4,770,568 0.91 % 5,202,374 0.26 % Savings accounts 119,049 1.39 % 138,917 0.30 % 110,968 0.18 % Time deposits 1,010,683 3.58 % 757,327 1.17 % 755,982 1.24 % Brokered time deposits - - % 50,000 1.68 % 50,000 1.68 % Total deposits $ 12,263,152 $ 11,828,522 $ 11,203,313 At December 31, 2023 and December 31, 2022, we estimate that we had approximately $8.76 billion and $7.66 billion, respectively, in total uninsured deposits.
The following table presents the average balance and average rate paid on each of the following deposit categories at the bank level for years ended December 31, 2024, 2023 and 2022: 53 For Year Ended December 31, 2024 2023 2022 Average Balance Yields/Rates Average Balance Yields/Rates Average Balance Yields/Rates Types of Deposits: (Dollars in Thousands) Non-interest-bearing demand deposits $ 2,609,137 - % $ 2,857,831 - % $ 4,415,972 - % Interest-bearing demand deposits 2,282,599 2.81 % 1,928,133 2.24 % 1,695,738 0.36 % Money market accounts 7,005,057 4.30 % 6,347,456 3.95 % 4,770,568 0.91 % Savings accounts 104,581 1.69 % 119,049 1.39 % 138,917 0.30 % Time deposits 1,201,756 4.45 % 1,010,683 3.58 % 757,327 1.17 % Brokered time deposits - - % - - % 50,000 1.68 % Total deposits $ 13,203,130 $ 12,263,152 $ 11,828,522 At December 31, 2024, 2023, and 2022 we estimate that we had approximately $9.03 billion, $8.76 billion and $7.66 billion, respectively, in total uninsured deposits.
Generally, payments received on nonaccrual loans are applied directly to principal. There are not any loans, outside of those included in the table above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms.
Generally, payments received on nonaccrual loans are applied directly to principal. There are not any loans, outside of those included in the table above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms. Deposits We rely on increasing our deposit base to fund loan and other asset growth.
Basic and diluted net income per common share were $3.80 and $3.79, respectively, for the year ended December 31, 2023, compared to $4.63 and $4.61, respectively, for the year ended December 31, 2022.
Basic and diluted net income per common share was $4.17 and $4.16, respectively, for the year ended December 31, 2024, compared to $3.80 and $3.79, respectively, for the year ended December 31, 2023.
The increase in stockholders’ equity resulted primarily from net income of $206.9 million during the year ended December 31, 2023, less dividends paid or declared on our common stock of $62.0 million during the year ended December 31, 2023.
The increase in stockholders’ equity resulted primarily from net income of $227.2 million during the year ended December 31, 2024, less dividends paid or declared on our common stock of $67.4 million during the year ended December 31, 2024.
All such credit arrangements bear interest at variable rates and we have no such credit arrangements which bear interest at fixed rates. 55 Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments.
Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments.
Liquidity and Capital Adequacy Sources and Uses of Funds The following table illustrates, during the years presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated.
See “—Quantitative and Qualitative Analysis of Market Risk” below in Item 7A for additional information. 55 Liquidity and Capital Adequacy Sources and Uses of Funds The following table illustrates, during the years presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated.
The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest revenue as a percentage of total average interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity. 43 The net interest margin is impacted by the average volumes of interest-sensitive assets and interest-sensitive liabilities and by the difference between the yield on interest-sensitive assets and the cost of interest-sensitive liabilities (spread).
The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest income as a percentage of total average interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity.
Earning assets as of December 31, 2023 were $15.85 billion, or 98.2% of total assets of $16.13 billion. Earning assets as of December 31, 2022 were $14.37 billion, or 98.4% of total assets of $14.60 billion. We believe this ratio is expected to generally continue at these levels, although it may be affected by economic factors beyond our control.
Earning assets as of December 31, 2023 were $15.85 billion, or 98.25% of total assets of $16.13 billion. We believe this ratio is expected to generally continue at these levels, although it may be affected by economic factors beyond our control. 46 Investment Portfolio We view the investment portfolio as a source of income and liquidity.
Average Balance Sheets and Net Interest Analysis On a Fully Taxable-Equivalent Basis For the Year Ended December 31, (In thousands, except Average Yields and Rates) 2023 2022 2021 Average Balance Interest Earned / Paid Average Yield / Rate Average Balance Interest Earned / Paid Average Yield / Rate Average Balance Interest Earned / Paid Average Yield / Rate Assets: Interest-earning assets: Loans, net of unearned income (1)(2): Taxable $ 11,584,541 $ 698,177 6.03 % $ 10,544,193 $ 498,810 4.73 % $ 8,698,782 $ 384,675 4.42 % Tax-exempt (3) 18,271 834 4.56 22,026 1,055 4.79 26,779 1,094 4.09 Total loans, net of unearned income 11,602,812 699,011 6.02 10,566,219 499,865 4.73 8,725,561 385,769 4.42 Mortgage loans held for sale 4,293 259 6.03 1,460 43 2.95 8,242 155 1.88 Debt securities: Taxable 1,881,074 53,456 2.84 1,712,715 40,767 2.38 980,462 25,413 2.59 Tax-exempt (3) 2,716 79 2.91 6,658 172 2.58 14,983 369 2.46 Total debt securities (4) 1,883,790 53,535 2.84 1,719,373 40,939 2.38 995,445 25,782 2.59 Federal funds sold 53,376 2,844 5.33 58,307 1,556 2.67 17,091 29 0.17 Restricted equity securities 9,359 673 7.19 7,637 353 4.62 220 7 3.18 Interest-bearing balances with banks 1,066,159 57,064 5.35 1,832,215 16,811 0.92 3,351,462 4,840 0.14 Total interest-earning assets $ 14,619,789 $ 813,386 5.56 % $ 14,185,211 $ 559,567 3.94 % 13,098,021 416,582 3.18 % Non-interest-earning assets: Cash and due from banks 105,140 162,855 81,539 Net premises and equipment 60,335 60,586 60,798 Allowance for loan losses, accrued interest and other assets 281,946 294,823 314,863 Total assets $ 15,067,210 $ 14,703,475 $ 13,555,221 Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand deposits $ 1,928,133 43,265 2.24 % 1,695,738 6,157 0.36 % 1,394,678 2,687 0.19 % Savings 119,049 1,656 1.39 138,917 421 0.30 110,968 197 0.18 Money market 6,347,456 250,674 3.95 4,770,568 43,335 0.91 5,202,374 13,697 0.26 Time deposits (5) 1,010,683 36,144 3.58 807,327 9,483 1.17 805,982 9,988 1.24 Total interest-bearing deposits 9,405,321 331,739 3.53 7,412,550 59,396 0.80 7,514,002 26,569 0.35 Federal funds purchased 1,288,877 66,730 5.18 1,528,866 26,267 1.72 1,160,745 2,473 0.21 Other borrowings 86,102 3,839 4.46 64,716 2,760 4.26 64,696 2,760 4.27 Total interest-bearing liabilities $ 10,780,300 $ 402,308 3.73 % $ 9,006,132 $ 88,423 0.98 % 8,739,443 31,802 0.36 % Non-interest-bearing liabilities: Non-interest-bearing checking 2,857,831 4,415,972 3,689,311 Other liabilities 62,369 68,393 48,392 Stockholders' equity 1,418,189 1,232,460 1,059,317 Unrealized gains on securities (51,479 ) (19,482 ) 18,758 Total liabilities and stockholders' equity $ 15,067,210 $ 14,703,475 $ 13,555,221 Net interest income $ 411,078 $ 471,144 $ 384,780 Net interest spread 1.83 % 2.96 % 2.82 % Net interest margin (6) 2.81 % 3.32 % 2.94 % (1) Non-accrual loans are included in average loan balances in all periods.
This table is presented on a taxable equivalent basis, if applicable. 42 Average Balance Sheets and Net Interest Analysis On a Fully Taxable-Equivalent Basis For the Year Ended December 31, (In thousands, except Average Yields and Rates) 2024 2023 2022 Average Balance Interest Earned / Paid Average Yield / Rate Average Balance Interest Earned / Paid Average Yield / Rate Average Balance Interest Earned / Paid Average Yield / Rate Assets: Interest-earning assets: Loans, net of unearned income (1)(2): Taxable $ 12,134,929 $ 787,361 6.49 % $ 11,584,541 $ 698,177 6.03 % $ 10,544,193 $ 498,810 4.73 % Tax-exempt (3) 15,896 434 2.73 18,271 834 4.56 22,026 1,055 4.79 Total loans, net of unearned income 12,150,825 787,795 6.48 11,602,812 699,011 6.02 10,566,219 499,865 4.73 Mortgage loans held for sale 7,974 401 5.03 4,293 259 6.03 1,460 43 2.95 Debt securities: Taxable 1,959,488 66,443 3.39 1,881,074 53,456 2.84 1,712,715 40,767 2.38 Tax-exempt (3) 980 39 3.98 2,716 79 2.91 6,658 172 2.58 Total debt securities (4) 1,960,468 66,482 3.39 1,883,790 53,535 2.84 1,719,373 40,939 2.38 Federal funds sold 19,770 1,128 5.71 53,376 2,844 5.33 58,307 1,556 2.67 Restricted equity securities 11,073 800 7.22 9,359 673 7.19 7,637 353 4.62 Interest-bearing balances with banks 1,698,962 89,522 5.27 1,066,159 57,064 5.35 1,832,215 16,811 0.92 Total interest-earning assets $ 15,849,072 $ 946,128 5.97 % $ 14,619,789 $ 813,386 5.56 % $ 14,185,211 $ 559,567 3.94 % Non-interest-earning assets: Cash and due from banks 100,639 105,140 162,855 Net premises and equipment 60,276 60,335 60,586 Allowance for loan losses, accrued interest and other assets 323,396 281,946 294,823 Total assets $ 16,333,383 $ 15,067,210 $ 14,703,475 Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand deposits $ 2,282,599 $ 64,151 2.81 % $ 1,928,133 $ 43,265 2.24 % $ 1,695,738 $ 6,157 0.36 % Savings 104,581 1,763 1.69 119,049 1,656 1.39 138,917 421 0.30 Money market 7,005,057 301,212 4.30 6,347,456 250,674 3.95 4,770,568 43,335 0.91 Time deposits (5) 1,201,756 53,525 4.45 1,010,683 36,144 3.58 807,327 9,483 1.17 Total interest-bearing deposits 10,593,993 420,651 3.97 9,405,321 331,739 3.53 7,412,550 59,396 0.80 Federal funds purchased 1,444,463 76,064 5.27 1,288,877 66,730 5.18 1,528,866 26,267 1.72 Other borrowings 64,737 2,655 4.10 86,102 3,839 4.46 64,716 2,760 4.26 Total interest-bearing liabilities $ 12,103,193 $ 499,370 4.13 % $ 10,780,300 $ 402,308 3.73 % $ 9,006,132 $ 88,423 0.98 % Non-interest-bearing liabilities: Non-interest-bearing checking 2,609,137 2,857,831 4,415,972 Other liabilities 104,198 62,369 68,393 Stockholders' equity 1,559,213 1,418,189 1,232,460 Unrealized gains on securities (42,358 ) (51,479 ) (19,482 ) Total liabilities and stockholders' equity $ 16,333,383 $ 15,067,210 $ 14,703,475 Net interest income $ 446,758 $ 411,078 $ 471,144 Net interest spread 1.84 % 1.83 % 2.96 % Net interest margin (5) 2.82 % 2.81 % 3.32 % (1) Non-accrual loans are included in average loan balances in all periods.
Return on average assets was 1.37% in 2023, compared to 1.71% in 2022, and return on average common stockholders’ equity was 15.13% in 2023, compared to 20.73% in 2022.
Return on average assets was 1.39% in 2024, compared to 1.37% in 2023, and return on average common stockholders’ equity was 14.98% in 2024, compared to 15.13% in 2023.
Treasury Securities 2.39 % 1.31 % 1.64 % - % 1.89 % Mortgage-backed securities - - 2.65 2.40 2.41 State and municipal securities 3.21 1.93 1.97 - 1.99 Total weighted average yield (2) 2.39 % 1.33 % 1.87 % 2.40 % 2.14 % (1) Yields on tax-exempt securities are computed on a fully tax-equivalent basis using a tax rate of 21% and are net of the effects of certain disallowed interest deductions.
Treasury Securities - % 1.38 % - % - % 1.38 % Mortgage-backed securities - - 2.52 2.72 2.72 State and municipal securities 3.21 1.96 1.77 - 1.99 Total weighted average yield (2) 3.21 % 1.39 % 2.49 % 2.72 % 2.24 % (1) Yields on tax-exempt securities are computed on a fully tax-equivalent basis using a tax rate of 21% and are net of the effects of certain disallowed interest deductions.
The net yield on earning assets is an indicator of effectiveness of our ability to manage the net interest margin by managing the overall yield on assets and cost of funding those assets.
Net interest spread can be affected by economic conditions, the competitive environment, loan demand, and deposit flows. The net yield on earning assets is an indicator of effectiveness of our ability to manage the net interest margin by managing the overall yield on assets and cost of funding those assets.
Our average interest-bearing liabilities increased $1.77 billion, or 19.7%, to $10.78 billion for the year ended December 31, 2023 from $9.01 billion for the year ended December 31, 2022.
Our average interest-bearing liabilities increased $1.32 billion, or 12.3%, to $12.10 billion for the year ended December 31, 2024 from $10.78 billion for the year ended December 31, 2023.
At December 31, 2022, we forecasted a moderately higher national unemployment rate and significantly lower national GDP compared to December 31, 2021. 52 Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method.
Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method.
See the section captioned “Allowance for Credit Losses” located elsewhere in this item for additional discussion related to provision for credit losses. The provision expense for credit losses decreased 50.2% for the year ended December 31, 2023 when compared to the year-ended December 31, 2022.
See the section captioned “Allowance for Credit Losses” located elsewhere in this item for additional discussion related to provision for credit losses. The provision expense for credit losses for the year ended December 31, 2024 increased compared to the year-ended December 31, 2023. The increase in provision expense is primarily the result of loan growth during 2024 compared to 2023.
The following table sets forth our credit arrangements and financial instruments whose contract amounts represent credit risk as of December 31, 2023, 2022 and 2021: 2023 2022 2021 (In Thousands) Commitments to extend credit $ 3,410,283 $ 4,230,485 $ 3,515,818 Credit card arrangements 381,524 480,983 366,525 Standby letters of credit and financial guarantees 86,065 67,285 61,856 Total $ 3,877,872 $ 4,778,753 $ 3,944,199 Commitments to extend credit beyond current fundings are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. 54 The following table sets forth our credit arrangements and financial instruments whose contract amounts represent credit risk as of December 31, 2024, 2023 and 2022: 2024 2023 2022 (In Thousands) Commitments to extend credit $ 3,552,958 $ 3,410,283 $ 4,230,485 Credit card arrangements 366,843 381,524 368,749 Standby letters of credit and financial guarantees 125,147 86,065 67,285 Total $ 4,044,948 $ 3,877,872 $ 4,666,519 Commitments to extend credit beyond current fundings are agreements to lend to a customer as long as there is no violation of any condition established in the contract.
Our average interest-earning assets for the year ended December 31, 2023 increased $434.6 million, or 3.1%, to $14.62 billion from $14.19 billion for the year ended December 31, 2022. Average loans grew $1.04 billion, or 9.8%, average debt securities grew $164.4 million, or 9.6%, and average federal funds sold and interest-bearing balances with banks decreased $771.0 million, or 40.8%.
Our average interest-earning assets for the year ended December 31, 2024 increased $1.23 billion, or 8.4%, to $15.85 billion from $14.62 billion for the year ended December 31, 2023. Average loans grew $548.0 million, or 4.7%, average debt securities increased $76.7 million, or 4.1%, and average federal funds sold and interest-bearing balances with banks increased $599.2 million, or 53.5%.
The fair values of our agreements with investors and rate lock commitments to customers as of December 31, 2023 and 2022 were not material.
The interest rate lock commitments to customers related to loans that are originated for later sale are classified as derivatives. The fair values of our agreements with investors and rate lock commitments to customers as of December 31, 2024 and 2023 were not material.
Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations. 58 Allowance for Credit Losses The Company assesses the adequacy of its allowance for credit losses at the end of each calendar quarter.
Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations.
At year-end 2023, there were no holdings of securities of any issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity. During the first two quarters of 2022, the bank added $100 million per month, net of paydowns and maturities, of U.S. Treasury Securities.
At year-end 2024, there were no holdings of securities of any issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.
The ratio of our average interest-earning assets to average interest-bearing liabilities decreased from 157.5% for the year ended December 31, 2022 to 135.6% for the year ended December 31, 2023, as average noninterest-bearing deposits and stockholders’ equity decreased by a combined $1.4 billion, or 24.9%, from 2022 to 2023.
The ratio of our average interest-earning assets to average interest-bearing liabilities decreased from 135.6% for the year ended December 31, 2023 to 130.9% for the year ended December 31, 2024, as average noninterest-bearing deposits and stockholders’ equity decreased by a combined $107.8 million, or 2.52%, from 2023 to 2024. 44 Our average interest-earning assets produced a taxable equivalent yield of 5.97% for the year ended December 31, 2024, compared to 5.56% for the year ended December 31, 2023.
Net Income Available to Common Stockholders Net income available to common stockholders was $206.8 million for the year ended December 31, 2023, compared to $251.4 million for the year ended December 31, 2022.
Net Income Available to Common Stockholders Net income available to common stockholders was $227.2 million for the year ended December 31, 2024, compared to $206.8 million for the year ended December 31, 2023. The increase in net income was primarily attributable to an increase in net interest income.
Income Tax Expense Income tax expense was $37.7 million for the year ended December 31, 2023 compared to $57.3 million in 2022. Our effective tax rates for 2023 and 2022 were 15.4% and 18.6%, respectively. We recognized $17.7 million in credits related to new investments in Federal New Market Tax Credits during 2023 and $12.6 million during 2022.
Income Tax Expense Income tax expense was $51.7 million for the year ended December 31, 2024 compared to $37.7 million in 2023. Our effective tax rates for 2024 and 2023 were 18.5% and 15.4%, respectively.
Earning assets include loans, securities, short-term investments and bank-owned life insurance contracts. We maintain a higher level of earning assets in our business model than do our peers because we allocate fewer of our resources to facilities, ATMs, and cash and due-from-bank accounts used for transaction processing.
We maintain a higher level of earning assets in our business model than do our peers because we allocate fewer of our resources to facilities, ATMs, and cash and due-from-bank accounts used for transaction processing. Earning assets as of December 31, 2024 were $17.05 billion, or 98.27% of total assets of $17.35 billion.
We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines.
We are subject to general FDIC guidelines which require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines. Our management is not currently aware of any trends or demands that are reasonably likely to result in liquidity increasing or decreasing in any material manner.
Maturity of Debt Securities - Weighted Average Yield One Year or Less After One Year through Five Years After Five Years through Ten Years More Than Ten Years Total At December 31, 2023: (In Thousands) Securities Available for Sale: U.S.
The following table presents the amortized cost and weighted average yield of our securities as of December 31, 2024 by their stated maturities (this maturity schedule excludes security prepayment and call features): Maturity of Debt Securities - Weighted Average Yield One Year or Less After One Year through Five Years After Five Years through Ten Years More Than Ten Years Total At December 31, 2024: (In Thousands) Securities Available for Sale: U.S.
Well-Capitalized Actual at December 31, 2023 CET 1 Capital Ratio 6.50 % 11.37 % Tier 1 Capital Ratio 8.00 % 11.38 % Total Capital Ratio 10.00 % 12.52 % Leverage ratio 5.00 % 9.50 % For a description of capital ratios see Note 14 - “ Regulatory Matters ” to the Consolidated Financial Statements.
The following table sets forth (i) the capital ratios of the Bank required by the FDIC to maintain “well-capitalized” status and (ii) our actual ratios of capital to total regulatory or risk-weighted assets, as of December 31, 2024: Well-Capitalized Actual at December 31, 2024 CET 1 Capital Ratio 6.50 % 11.83 % Tier 1 Capital Ratio 8.00 % 11.84 % Total Capital Ratio 10.00 % 12.99 % Leverage ratio 5.00 % 9.94 % For a description of capital ratios see Note 14 - “ Regulatory Matters ” to the Consolidated Financial Statements.
We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a similar methodology to the one used to determine the ACL, modified to account for the probability of a drawdown on the commitment.
The allowance is computed using a similar methodology to the one used to determine the ACL, modified to account for the probability of a drawdown on the commitment.
Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. Liquidity is also available from funding sources consisting primarily of federal funds purchased, FHLB loan advances and available-for-sale securities.
The Bank’s main source of liquidity is customer interest-bearing and noninterest bearing deposit accounts. Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits.
For the Year Ended December 31, 2023 Compared to 2022 Increase (Decrease) in Interest Income and Expense Due to Changes in: 2022 Compared to 2021 Increase (Decrease) in Interest Income and Expense Due to Changes in: Volume Rate Total Volume Rate Total Interest-earning assets: Loans, net of unearned income: Taxable $ 52,785 $ 146,582 $ 199,367 $ 85,891 $ 28,244 $ 114,135 Tax-exempt (173 ) (48 ) (221 ) (211 ) 172 (39 ) Total loans, net of unearned income 52,612 146,534 199,146 85,680 28,416 114,096 Mortgage loans held for sale 140 76 216 (171 ) 59 (112 ) Debt securities: Taxable 4,268 8,421 12,689 17,582 (2,228 ) 15,354 Tax-exempt (113 ) 20 (93 ) (214 ) 17 (197 ) Total debt securities 4,155 8,441 12,596 17,368 (2,211 ) 15,157 Federal funds sold (142 ) 1,430 1,288 215 1,312 1,527 Restricted equity securities 59 261 320 336 10 346 Interest-bearing balances with banks (9,734 ) 49,987 40,253 (3,111 ) 15,082 11,971 Total interest-earning assets 47,090 206,729 253,819 100,317 42,668 142,985 Interest-bearing liabilities: Interest-bearing demand deposits 957 36,151 37,108 681 2,789 3,470 Savings (68 ) 1,303 1,235 59 165 224 Money market 18,633 188,706 207,339 (1,228 ) 30,866 29,638 Time deposits 2,925 23,736 26,661 17 (522 ) (505 ) Total interest-bearing deposits 22,447 249,896 272,343 (471 ) 33,298 32,827 Federal funds purchased (4,723 ) 45,186 40,463 1,022 22,772 23,794 Other borrowed funds 949 130 1,079 1 (1 ) - Total interest-bearing liabilities 18,673 295,212 313,885 552 56,069 56,621 Increase (decrease) in net interest income $ 28,417 $ (88,483 ) $ (60,066 ) $ 99,765 $ (13,401 ) $ 86,364 * The rate/volume variance is allocated on a pro rata basis between the volume variance and the rate variance in the table above.
(5) Net interest margin is net interest income divided by average interest-earning assets. 43 The following table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-bearing assets and liabilities: For the Year Ended December 31, 2024 Compared to 2023 Increase (Decrease) in Interest Income and Expense Due to Changes in: 2023 Compared to 2022 Increase (Decrease) in Interest Income and Expense Due to Changes in: Volume Rate Total Volume Rate Total Interest-earning assets: Loans, net of unearned income: Taxable $ 34,143 $ 55,041 $ 89,184 $ 52,785 $ 146,582 $ 199,367 Tax-exempt (98 ) (302 ) (400 ) (173 ) (48 ) (221 ) Total loans, net of unearned income 34,045 54,739 88,784 52,612 146,534 199,146 Mortgage loans held for sale 191 (49 ) 142 140 76 216 Debt securities: Taxable 2,304 10,683 12,987 4,268 8,421 12,689 Tax-exempt (62 ) 22 (40 ) (113 ) 20 (93 ) Total debt securities 2,242 10,705 12,947 4,155 8,441 12,596 Federal funds sold (1,903 ) 188 (1,715 ) (142 ) 1,430 1,288 Restricted equity securities 20 107 127 59 261 320 Interest-bearing balances with banks 33,357 (899 ) 32,458 (9,734 ) 49,987 40,253 Total interest-earning assets 67,952 64,791 132,743 47,090 206,729 253,819 Interest-bearing liabilities: Interest-bearing demand deposits 8,800 12,086 20,886 957 36,151 37,108 Savings (217 ) 324 107 (68 ) 1,303 1,235 Money market 27,212 23,326 50,538 18,633 188,706 207,339 Time deposits 7,563 9,818 17,381 2,925 23,736 26,661 Total interest-bearing deposits 43,358 45,554 88,912 22,447 249,896 272,343 Federal funds purchased 8,176 1,158 9,334 (4,723 ) 45,186 40,463 Other borrowed funds (895 ) (289 ) (1,184 ) 949 130 1,079 Total interest-bearing liabilities 50,639 46,423 97,062 18,673 295,212 313,885 Increase (decrease) in net interest income $ 17,313 $ 18,368 $ 35,681 $ 28,417 $ (88,483 ) $ (60,066 ) * The rate/volume variance is allocated on a pro rata basis between the volume variance and the rate variance in the table above.
Noninterest Expense Noninterest expense for the years ended December 31, 2023 and 2022 were as follows. 2023 2022 Change Percentage change Salaries and employee benefits $ 80,965 $ 77,952 $ 3,013 3.9 % Equipment and occupancy expense 14,295 12,319 1,976 16.0 % Third party processing and other services 27,872 27,333 539 2.0 % Professional services 5,916 4,277 1,639 38.3 % FDIC and other regulatory assessments 15,614 4,565 11,049 242.0 % Other real estate owned expense 47 295 (248 ) (84.1 )% Other operating expenses 33,342 31,075 2,267 7.3 % Total noninterest expenses $ 178,051 $ 157,816 $ 20,235 12.8 % Noninterest expenses increased $20.2 million, or 12.8%, to $178.1 million in 2023 compared to $157.8 million in 2022.
Noninterest Expense Noninterest expense for the years ended December 31, 2024 and 2023 was as follows: 2024 2023 Change Percentage Change Salaries and employee benefits $ 96,318 $ 80,965 $ 15,353 19.0 % Equipment and occupancy expense 14,519 14,295 224 1.6 % Third party processing and other services 31,181 27,872 3,309 11.9 % Professional services 6,901 5,916 985 16.6 % FDIC and other regulatory assessments 10,687 15,614 (4,927 ) (31.6 )% Other real estate owned expense 199 47 152 323.4 % Other operating expenses 21,341 33,342 (12,001 ) (36.0 )% Total noninterest expenses $ 181,146 $ 178,051 $ 3,095 1.7 % 45 Noninterest expenses increased $3.1 million, or 1.7%, to $181.1 million for the year ended December 31, 2024 compared to $178.1 million for the same period in 2023.
The Bank has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis. When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for our customer for a 30-day period.
When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for that loan for a 30-day period. In the event the loan is not delivered to the investor, the Bank has no risk or exposure with the investor.
At December 31, 2023, mortgage-backed securities represented 34.9% of the investment portfolio, corporate debt represented 18.5% of the investment portfolio, state and municipal securities represented 1.0% of the investment portfolio, and U.S. Treasury securities represented 45.7% of the investment portfolio. All of our investments in mortgage-backed securities are pass-through mortgage-backed securities.
Our investment strategy is to accept a lower immediate yield in the investment portfolio by targeting shorter term investments. At December 31, 2024, mortgage-backed securities represented 34.5% of the investment portfolio, corporate debt represented 17.5% of the investment portfolio, state and municipal securities represented 0.9% of the investment portfolio, and U.S. Treasury securities represented 47.0% of the investment portfolio.
Our average interest-earning assets produced a taxable equivalent yield of 5.56% for the year ended December 31, 2023, compared to 3.94% for the year ended December 31, 2022. The average rate paid on interest-bearing liabilities was 3.73% for the year ended December 31, 2023, compared to 0.98% for the year ended December 31, 2022.
The average rate paid on interest-bearing liabilities was 4.13% for the year ended December 31, 2024, compared to 3.73% for the year ended December 31, 2023.
Our net interest spread and net interest margin were 1.83% and 2.81%, respectively, for the year ended December 31, 2023, compared to 2.96% and 3.32%, respectively, for the year ended December 31, 2022. The decrease in net interest spread and net interest margin was primarily attributable to increases in average interest-bearing liabilities, which increased $1.77 billion in 2023.
Our net interest spread and net interest margin were 1.84% and 2.82%, respectively, for the year ended December 31, 2024, compared to 1.83% and 2.81%, respectively, for the year ended December 31, 2023.
Equipment and occupancy expense increased $2.0 million, or 16.0%, to $14.30 million in 2023 compared to $12.30 million in 2022. Third party processing and other services increased $539,000, or 2.0%, to $27.9 million in 2023 compared to $27.3 million in 2022. Professional services expense increased $1.6 million, or 38.3%, to $5.9 million in 2023 compared to $4.3 million in 2022.
Third party processing and other services increased $3.3 million, or 11.9%, to $31.2 million for the year ended December 31, 2024 compared to $27.9 million for the same period in 2023. Professional services expense increased $985,000, or 16.6%, to $6.9 million for the year ended December 31, 2024 compared to $5.9 million for the same period in 2023.
The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. In the event of compression in liquidity due to a run-off in deposits, we have a liquidity policy and procedure that provides for certain actions under varying liquidity conditions.
In the event of compression in liquidity due to a run-off in deposits, we have a liquidity policy and procedure that provides for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans and the curtailment of loan commitments and funding.
FDIC assessments increased $11.0 million, or 242.0%, to $15.6 million in 2023 compared to $4.6 million in 2022. The FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an expense of $7.2 million during 2023. Expenses on other real estate owned decreased $248,000, or 84.1%, to $47,000 in 2023 compared to $295,000 in 2022.
FDIC assessments decreased $4.9 million, or 31.6%, to $10.7 million for the year ended December 31, 2024 compared to $15.6 million for the same period in 2023. The FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an expense of $1.8 million during 2024, and $7.2 million during 2023.
Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges.
Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses, and other overhead expenses. Our business is conducted through a single reportable segment.
The fair value of the interest rate cap was carried on the Consolidated Balance Sheets in other assets and the change in fair value was recognized in noninterest income each quarter. The interest rate cap had a fair value of $4.2 million and remaining term of 0.3 years at December 31, 2022, and expired on May 4, 2023.
The fair value of the interest rate cap was carried on the Consolidated Balance Sheets in other assets and the change in fair value was recognized in noninterest income each quarter. The interest rate cap contract expired May 4, 2023. The Bank has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis.
Other operating expenses increased $2.3 million, or 7.3%, to $33.3 million in 2023 compared to $31.1 million in 2022. Changes in other operating expenses from 2022 to 2023 are detailed in Note 15 - “ Other Operating Income and Expenses, ” to the Consolidated Financial Statements.
Previously the amortization of the investment was included in other non-interest expenses. Changes in other operating expenses from 2023 to 2024 are detailed in Note 15 - “ Other Operating Income and Expenses, ” to the Consolidated Financial Statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−1 removed12 unchanged
Biggest changeEconomic Value of Equity Under Rate Shock At December 31, 2023 0 bps -400 bps -300 bps -200 bps -100 bps +100 bps +200 bps +300 bps +400 bps (Dollars in Thousands) Economic value of equity $ 1,440,405 $ 1,148,003 $ 1,270,437 $ 1,361,183 $ 1,420,239 $ 1,428,882 $ 1,398,633 $ 1,389,991 $ 1,377,027 Actual dollar change $ (292,402 ) $ (169,968 ) $ (79,222 ) $ (20,166 ) $ (11,523 ) $ (41,772 ) $ (50,414 ) $ (63,378 ) Percent change (20.30 )% (11.80 )% (5.50 )% (1.40 )% (0.80 )% (2.90 )% (3.50 )% (4.40 )% The one-year gap ratio of (10.26) indicates that net interest income would decrease in a rising rate environment, and the EVE rate shock shows that the EVE would decrease less in a rising rate environment.
Biggest changeEconomic Value of Equity Under Rate Shock At December 31, 2024 0 bps -400 bps -300 bps -200 bps -100 bps +100 bps +200 bps +300 bps +400 bps (Dollars in Thousands) Economic value of equity $ 1,616,772 $ 1,472,879.27 $ 1,534,316.60 $ 1,584,436.53 $ 1,616,448.62 $ 1,616,448.62 $ 1,597,370.71 $ 1,587,670.08 $ 1,574,735.90 Actual dollar change $ (143,893 ) $ (82,455 ) $ (32,335 ) $ (323 ) $ (323 ) $ (19,401 ) $ (29,102 ) $ (42,036 ) Percent change -8.9 % -5.1 % -2.0 % -0.02 % -0.02 % -1.2 % -1.8 % -2.6 % The one-year gap ratio of negative (10.08)% indicates that we would show an decrease in net interest income in a rising rate environment, and the EVE rate shock shows that the EVE would increase in a rising rate environment.
If the ratio is greater than “one,” the dollar value of assets exceeds the dollar value of liabilities; the balance sheet is “asset sensitive.” Conversely, if the value of liabilities exceeds the value of assets, the ratio is less than one and the balance sheet is “liability sensitive.” Our internal policy requires management to maintain the gap such that net interest margins will not change more than 10% if interest rates change 100 basis points or more than 15% if interest rates change 200 basis points.
If the ratio is greater than “one,” the dollar value of assets exceeds the dollar value of liabilities; and the balance sheet is “asset sensitive.” Conversely, if the value of liabilities exceeds the value of assets, the ratio is less than one and the balance sheet is “liability sensitive.” Our internal policy requires management to maintain the gap such that net interest margins will not change more than 10% if interest rates change 100 basis points or more than 15% if interest rates change 200 basis points.
Our asset liability committee develops its view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators, examining the views of economists and other experts, and understanding the current status of our balance sheet. Our annual budget reflects the anticipated rate environment for the next twelve months.
Our asset liability committee develops their view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators, examining the views of economists and other experts, and understanding the current status of our balance sheet. Our annual budget reflects the anticipated rate environment for the next twelve months.
Our asset liability committee develops its view of future rate trends by monitoring economic indicators, examining the views of economists and other experts, and understanding the current status of our balance sheet and conducts a quarterly analysis of the rate sensitivity position. The results of the analysis are reported to our board of directors on a quarterly basis. 61
Our asset liability committee develops its view of future rate trends by monitoring economic indicators, examining the views of economists and other experts, and understanding the current status of our balance sheet and conducts a quarterly analysis of the rate sensitivity position. The results of the analysis are reported to our Board of Directors on a quarterly basis. 59
After starting the year 2022 at a rate of 0.15%, the Federal Reserve increased its targeted federal funds rate by 525 basis points and ended the year 2023 at 5.40%. As of December 31, 2023, the model shows decreases in our EVE for all rate shock scenarios.
After starting the year 2023 at a rate of 0.15%, the Federal Reserve increased its targeted federal funds rate by 525 basis points and ended the year 2024 at 5.40%. As of December 31, 2024, the model shows decreases in our EVE for all rate shock scenarios.
If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the impact on the net interest margin will be favorable.
If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the net interest margin will be favorable.
As of December 31, 2023, our gap was within such ranges. The interest rate risk model measures scheduled maturities in periods of three months, four to twelve months, one to five years and over five years. The chart below illustrates our rate-sensitive position at December 31, 2023. Management uses the one-year gap as the appropriate time period for setting strategy.
As of December 31, 2024, our gap was within such ranges. The interest rate risk model measures scheduled maturities in periods of three months, four to twelve months, one to five years and over five years. The chart below illustrates our rate-sensitive position at December 31, 2024.
Removed
Rate Sensitive Gap Analysis 1-3 Months 4-12 Months 1-5 Years Over 5 Years Total (Dollars in Thousands) Interest-earning assets: Loans, including mortgages held for sale $ 5,558,992 $ 1,674,176 $ 4,003,951 $ 426,784 $ 11,663,903 Securities 202,834 592,306 812,661 285,271 1,893,073 Federal funds sold 100,575 - - - 100,575 Interest bearing balances with banks 1,907,083 - - - 1,907,083 Total interest-earning assets $ 7,769,484 $ 2,266,483 $ 4,816,612 $ 712,055 $ 15,564,634 Interest-bearing liabilities: Deposits: Interest-bearing checking $ 2,396,078 $ - $ - $ - $ 2,396,078 Money market and savings 7,078,990 - - - 7,078,990 Time deposits 296,906 604,146 254,290 - 1,155,342 Federal funds purchased - - 30,000 34,735 64,735 Other borrowings 1,256,724 - - - 1,256,724 Total interest-bearing liabilities 11,028,698 604,146 284,290 34,735 11,951,869 Interest sensitivity gap $ (3,259,214 ) $ 1,662,336 $ 4,532,322 $ 677,320 $ 3,612,765 Cumulative sensitivity gap $ (3,259,214 ) $ (1,596,877 ) $ 2,935,445 $ 3,612,765 $ - Percent of cumulative sensitivity Gap to total interest-earning assets (20.94 )% (10.26 )% 18.86 % 23.21 % 60 The interest rate risk model that defines the gap position also performs a “rate shock” test of the balance sheet.
Added
Management uses the one-year gap as the appropriate time period for setting strategy. 58 Rate Sensitive Gap Analysis 1-3 Months 4-12 Months 1-5 Years Over 5 Years Total (Dollars in Thousands) Interest-earning assets: Loans, including mortgages held for sale $ 6,733,862 $ 1,478,639 $ 3,834,818 $ 567,728 $ 12,615,047 Securities 143,779 377,009 1,095,748 269,534 1,886,070 Federal funds sold 1,045 - - - 1,045 Interest bearing balances with banks 2,374,580 - - - 2,374,580 Total interest-earning assets $ 9,253,266 $ 1,855,648 $ 4,930,566 $ 837,262 $ 16,876,742 Interest-bearing liabilities: Deposits: Interest-bearing checking $ 2,570,673 $ - $ - $ - $ 2,570,673 Money market and savings 7,042,577 - - - 7,042,577 Time deposits 509,534 692,762 108,222 4 1,310,522 Federal funds purchased - - 30,000 34,743 64,743 Other borrowings 1,993,728 - - - 1,993,728 Total interest-bearing liabilities 12,116,512 692,762 138,222 34,747 Interest sensitivity gap $ (2,863,245 ) $ 1,162,886 $ 4,792,343 $ 802,515 $ 3,894,499 Cumulative sensitivity gap $ (2,863,245 ) $ (1,700,359 ) $ 3,091,984 $ 3,894,499 $ - Percent of cumulative sensitivity Gap to total interest-earning assets (16.97 )% (10.08 )% 18.32 % 23.08 % The interest rate risk model that defines the gap position also performs a “rate shock” test of the balance sheet.

Other SFBS 10-K year-over-year comparisons