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What changed in SOUTHERN FIRST BANCSHARES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SOUTHERN FIRST 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.

+382 added−389 removedSource: 10-K (2025-03-03) vs 10-K (2024-03-05)

Top changes in SOUTHERN FIRST BANCSHARES INC's 2024 10-K

382 paragraphs added · 389 removed · 300 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

116 edited+42 added−38 removed228 unchanged
Biggest changeManagement monitors exposure to credit risk from potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, as well as concentrations of lending products and practices such as loans 9 Table of Contents that subject borrowers to substantial payment increases (e.g., principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios.
Biggest changeWe do not make any loans to any director or executive officer of the Bank unless the loan is approved by the board of directors of the Bank and all loans to directors, officers and employees are on terms not more favorable to such person than would be available to a person not affiliated with the Bank, consistent with federal banking regulations. 9 Table of Contents Management monitors exposure to credit risk from potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, as well as concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g., principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios.
We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 85%. We also generally require that 10 Table of Contents a borrower’s cash flow exceeds 115% of monthly debt service obligations.
We attempt to reduce credit risk in the 10 Table of Contents commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, does not exceed 85%. We also generally require that a borrower’s cash flow exceeds 115% of monthly debt service obligations.
In addition, many of our non-bank competitors are not subject to the same extensive 12 Table of Contents federal regulations that govern bank holding companies and federally insured banks.
In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that 12 Table of Contents govern bank holding companies and federally insured banks.
In addition, each week is started with a meeting of all Senior and Executive Vice Presidents so that all team members are informed on the latest developments of our Company. Our employees and their ClientFIRST approach to service have been instrumental to our success.
In addition, each week is started with a meeting of all Executive Vice Presidents so that all team members are informed on the latest developments of our Company. Our employees and their ClientFIRST approach to service have been instrumental to our success.
The final rules, among other things, include: (i) applying four new performance tests to evaluate the CRA performance of large banks (assets of $2 billion or more): the Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test; (ii) retaining a strategic plan option, with modifications to reflect the new performance tests and updates to the approval standards; (iii) clarifying community development activities by updating the definition of community development, providing a process by which banks may request confirmation that an activity is eligible for community development consideration, and providing for a publicly available interagency illustrative list of qualifying community development activities; (iv) updating delineation requirements for facility-based assessment areas and establishing new retail lending assessment areas for certain large banks; (v) updating data collection, maintenance, and reporting requirements for large banks, tailoring those requirements 22 Table of Contents based on large bank asset size and leveraging existing data where possible, while not imposing new data collection and reporting requirements for small and intermediate banks; and (vi) continuing public file and public notice disclosure requirements and creating a new public comment process to facilitate public engagement.
The final rules, among other things, include: (i) applying four new performance tests to evaluate the CRA performance of large banks (assets of $2 billion or more): the Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test; (ii) retaining a strategic plan option, with modifications to reflect the new performance tests and updates to the approval standards; (iii) clarifying community development activities by updating the definition of community development, providing a process by which banks may request confirmation that an activity is eligible for community development consideration, and providing for a publicly available interagency illustrative list of qualifying community development activities; (iv) updating delineation requirements for facility-based assessment areas and establishing new retail lending assessment areas for certain large banks; (v) updating data collection, maintenance, and reporting requirements for large banks, tailoring those requirements based on large bank asset size and leveraging existing data where possible, while not imposing new data collection and reporting requirements for small and intermediate banks; and (vi) continuing public file and public notice disclosure requirements and creating a new public comment process to facilitate public engagement.
Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Atlanta, which is one of 12 regional FHLBs that administer home financing credit for depository institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region.
Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank ("FHLB") of Atlanta, which is one of 12 regional FHLBs that administer home financing credit for depository institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region.
We also receive ATM transaction fees from transactions performed by our clients. We are associated with the NYCE, Pulse, STAR, and Cirrus networks, which are available to our clients throughout the country. Since we outsource our ATM services, we are charged related transaction fees from our ATM service provider.
We also receive ATM transaction fees from transactions performed by our non-clients. We are associated with the NYCE, Pulse, STAR, and Cirrus networks, which are available to our clients throughout the country. Since we outsource our ATM services, we are charged related transaction fees from our ATM service provider.
The SAFE Act also prohibits 23 Table of Contents individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator; ● The Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; ● The Fair Housing Act prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; ● The Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and ● Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners.
The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator; · The Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; · The Fair Housing Act prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; · The Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and · Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners.
The final rule will take effect on April 1, 2024; however, compliance with the majority of the final rule’s provisions will not be required until January 1, 2026, and the data reporting requirements of the final rule will not take effect until January 1, 2027.
The final rule took effect on April 1, 2024; however, compliance with the majority of the final rule’s provisions will not be required until January 1, 2026, and the data reporting requirements of the final rule will not take effect until January 1, 2027.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become “undercapitalized” within the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become “undercapitalized” within the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution 17 Table of Contents into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.
The USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S.
The USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and 25 Table of Contents enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S.
The Incentive Compensation Guidance, which covers all employees that have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should comply with the following principles: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
The Incentive Compensation Guidance, which covers all employees that have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should comply with the following principles: (i) provide employees incentives that 27 Table of Contents appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
By focusing on this client base and by serving each client with a consistent relationship team of bankers, we have generated a loan portfolio with larger average loan amounts than we believe is typical for a community bank. As of December 31, 2023, our average loan size was approximately $375,000.
By focusing on this client base and by serving each client with a consistent relationship team of bankers, we have generated a loan portfolio with larger average loan amounts than we believe is typical for a community bank. As of December 31, 2024, our average loan size was approximately $375,000.
Based on the Bank’s loan portfolio as of December 31, 2023, it did not exceed the 300% and 100% guidelines for commercial real estate loans or construction and land development loans. The Bank will continue to monitor its portfolio to manage this increased risk. 28 Table of Contents
Based on the Bank’s loan portfolio as of December 31, 2024, it did not exceed the 300% and 100% guidelines for commercial real estate loans or construction and land development loans. The Bank will continue to monitor its portfolio to manage this increased risk. 28 Table of Contents
Thus, if payment of such a management fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or dividend to the bank holding company. As of December 31, 2023, the Bank was deemed to be “well capitalized.” Standards for Safety and Soundness.
Thus, if payment of such a management fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or dividend to the bank holding company. As of December 31, 2024, the Bank was deemed to be “well capitalized.” Standards for Safety and Soundness.
(2) The total market deposits data displayed are as of June 30, 2023 as reported by the FDIC. Greenville. The city of Greenville is located in Greenville County, South Carolina approximately midway between Atlanta and Charlotte on the heavily traveled I-85 business corridor.
(2) The total market deposits data displayed are as of June 30, 2024 as reported by the FDIC. Greenville. The city of Greenville is located in Greenville County, South Carolina approximately midway between Atlanta and Charlotte on the heavily traveled I-85 business corridor.
In response to the COVID-19 pandemic, in 2020, the Federal Open Market Committee (“FOMC”) reduced the targeted federal funds interest rate range to 0.0% to 0.25%; however, due in part to rising inflation, throughout 2022 the target federal funds rate increased to between 4.25% and 4.50%. Throughout 2023, the target federal funds rate increased to 5.50%. Incentive Compensation.
In response to the COVID-19 pandemic, in 2020, the Federal Open Market Committee (“FOMC”) reduced the targeted federal funds interest rate range to 0.0% to 0.25%; however, due in part to rising inflation, throughout 2022 the target federal funds rate increased to between 4.25% and 4.50%. Throughout 2023, the target federal funds rate increased to 5.50%.
We do not have any immediate plans to elect to use the community bank leverage ratio framework but may make such an election in the future. As of December 31, 2023, the Bank was well-capitalized, as defined by FDIC regulations.
We do not have any immediate plans to elect to use the community bank leverage ratio framework but may make such an election in the future. As of December 31, 2024, the Bank was well-capitalized, as defined by FDIC regulations.
Board and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including; ● security devices and procedures; 18 Table of Contents ● adequacy of capitalization and loss reserves; ● loans; ● investments; ● borrowings; ● deposits; ● mergers; ● issuances of securities; ● payment of dividends; ● interest rates payable on deposits; ● interest rates or fees chargeable on loans; ● establishment of branches; ● corporate reorganizations; ● maintenance of books and records; and ● adequacy of staff training to carry on safe lending and deposit gathering practices.
Board and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including; · security devices and procedures; · adequacy of capitalization and loss reserves; · loans; · investments; · borrowings; · deposits; · mergers; · issuances of securities; · payment of dividends; · interest rates payable on deposits; · interest rates or fees chargeable on loans; · establishment of branches; · corporate reorganizations; · maintenance of books and records; and · adequacy of staff training to carry on safe lending and deposit gathering practices.
As of December 31, 2023, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III rule requirements to be well-capitalized. Acquisition Activity The primary purpose of a bank holding company is to control and manage banks.
As of December 31, 2024, the Company had regulatory capital in excess of the Federal Reserve’s requirements and met the Basel III rule requirements to be well-capitalized. Acquisition Activity The primary purpose of a bank holding company is to control and manage banks.
Any extension of credit to an insider (i) must be made on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable 21 Table of Contents transactions with unrelated third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.
Any extension of credit to an insider (i) must be made on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with unrelated third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.
If there are no comparable transactions, a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies. These requirements apply to all transactions subject to Section 23A as well as to certain other transactions.
If there are 21 Table of Contents no comparable transactions, a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies. These requirements apply to all transactions subject to Section 23A as well as to certain other transactions.
In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. Consumer Protection Regulations.
In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. 23 Table of Contents Consumer Protection Regulations.
If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file 24 Table of Contents a suspicious activity report and notify the FBI. The Bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications.
If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file a suspicious activity report and notify the FBI. The Bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications.
We believe that 7 Table of Contents our officers’ and directors’ experience and local market knowledge are valuable assets and will enable them to guide us successfully in the future. In addition, we believe that we have assembled a group of highly talented employees by being an employer of choice in the markets we serve.
We believe that our officers’ and directors’ experience and local market knowledge are valuable assets and will enable them to guide us successfully in the future. In addition, we believe that we have assembled a group of highly talented employees by being an employer of choice in the markets we serve.
We believe our risk management structure allows our board and senior management to maintain effective oversight of our risks to ensure 8 Table of Contents that our personnel are following prudent and appropriate risk management practices resulting in strong loan quality and minimal credit losses. Attract Talented Banking Professionals With A “ClientFIRST” Focus.
We believe our risk management structure allows our board and senior management to maintain effective oversight of our risks to ensure that our personnel are following prudent and appropriate risk management practices resulting in strong loan quality and minimal credit losses. Attract Talented Banking Professionals With A “ClientFIRST” Focus.
In recent years, we have invested in our internal infrastructure, including support and back office personnel, and we believe that we can continue to add experienced frontline bankers to our existing markets, which will drive our efficient growth. We will continue to expand our franchise, but only in a controlled manner and as permitted by our regulators.
We have carefully invested in our internal infrastructure, including support and back office personnel, and we believe that we can continue to add experienced frontline bankers to our existing markets, which will drive our efficient growth. We will continue to expand our franchise, but only in a controlled manner and as permitted by our regulators.
An adequately capitalized institution (i) has a total risk-based capital ratio of 8% or greater, (ii) has a Tier 1 risk-based capital ratio of 6% or greater, (iii) has a common equity Tier 1 risk-based capital ratio of 4.5% or greater, and (iv) has a leverage capital ratio of 4% or greater. ● Undercapitalized — The institution fails to meet the required minimum level for any relevant capital measure.
An adequately capitalized institution (i) has a total risk-based capital ratio of 8% or greater, (ii) has a Tier 1 risk-based capital ratio of 19 Table of Contents 6% or greater, (iii) has a common equity Tier 1 risk-based capital ratio of 4.5% or greater, and (iv) has a leverage capital ratio of 4% or greater. · Undercapitalized — The institution fails to meet the required minimum level for any relevant capital measure.
A significantly undercapitalized institution (i) has a total risk-based capital ratio of less than 6%, (ii) has a Tier 1 risk-based capital ratio of less than 4%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 3% or greater, or (iv) has a leverage capital ratio of less than 3%. 19 Table of Contents ● Critically Undercapitalized — The institution fails to meet a critical capital level set by the appropriate federal banking agency.
A significantly undercapitalized institution (i) has a total risk-based capital ratio of less than 6%, (ii) has a Tier 1 risk-based capital ratio of less than 4%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 3% or greater, or (iv) has a leverage capital ratio of less than 3%. · Critically Undercapitalized — The institution fails to meet a critical capital level set by the appropriate federal banking agency.
Specifically, the final rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” within the meaning attributed to those terms by the final rule.
Specifically, the final rule requires banking organizations to notify their primary 26 Table of Contents federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” within the meaning attributed to those terms by the final rule.
Board prior to acquiring the capital stock of a national bank, but we must notify them at least 15 days prior to doing so. We must receive the S.C. Board’s approval prior to engaging in the acquisition of a South Carolina state chartered bank or another South Carolina bank holding company.
Board prior to acquiring 18 Table of Contents the capital stock of a national bank, but we must notify them at least 15 days prior to doing so. We must receive the S.C. Board’s approval prior to engaging in the acquisition of a South Carolina state chartered bank or another South Carolina bank holding company.
We employed a total of 296 FTE employees as of December 31, 2023. Our employees are skilled in the areas of banking, information technology, management, sales, advertising and marketing, among others. We strive to provide an “umbrella for great talent,” characterized by a culture of transparency and collaboration which permeates all levels of the organization.
We employed a total of 297 FTE employees as of December 31, 2024. Our employees are skilled in the areas of banking, information technology, management, sales, advertising and marketing, among others. We strive to provide an “umbrella for great talent,” characterized by a culture of transparency and collaboration which permeates all levels of the organization.
We also offer home equity lines of credit. At December 31, 2023, our individual home equity lines of credit ranged in size from $1,000 to $1.8 million, with an average of approximately $86,000. Our underwriting criteria and the risks associated with home equity loans and lines of credit are generally the same as those for first mortgage loans.
We also offer home equity lines of credit. At December 31, 2024, our individual home equity lines of credit ranged in size from $1,000 to $1.8 million, with an average of approximately $93,000. Our underwriting criteria and the risks associated with home equity loans and lines of credit are generally the same as those for first mortgage loans.
King served as senior human resources consultant for FGP International, a professional staffing firm in Greenville, South Carolina, and most recently as a human resources instructor with e-Cornell University. Ms. King holds degrees in Psychology and International Marketing from Clemson University and a Master of Human Resources degree from the University of South Carolina. In addition to Messrs.
King served as senior human resources consultant for FGP International, a professional staffing firm in Greenville, South Carolina, and most recently as a human resources instructor with e-Cornell University. Ms. King holds degrees in Psychology and International Marketing from Clemson University and a Master of Human Resources degree from the University of South Carolina. Julie A.
At December 31, 2023, our individual residential real estate loans ranged in size from $3,000 to $5.6 million, with an average loan size of approximately $472,000. Generally, we limit the loan-to-value ratio on our consumer real estate loans to 85%. We offer fixed and adjustable rate consumer real estate loans with terms of up to 30 years.
At December 31, 2024, our individual residential real estate loans ranged in size from $5,000 to $5.3 million, with an average loan size of approximately $469,000. Generally, we limit the loan-to-value ratio on our consumer real estate loans to 85%. We offer fixed and adjustable rate consumer real estate loans with terms of up to 30 years.
The following summary is qualified by reference to the statutory and regulatory provisions discussed. Legislative and Regulatory Developments Although the 2008 financial crisis has now passed, two legislative and regulatory responses – the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Basel III-based capital rules – will continue to have an impact on our operations.
The following summary is qualified by reference to the statutory and regulatory provisions discussed. Legislative and Regulatory Developments Two legislative and regulatory responses to the 2008 financial crisis – the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Basel III-based capital rules –continue to have an impact on our operations.
The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these required standards.
The agencies also must prescribe standards for asset quality, earnings, 20 Table of Contents and stock valuation, as well as standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these required standards.
Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
We believe our commitment to quality and personalized banking services through our ClientFIRST culture is a factor that contributes to our competitiveness and success. Employees At December 31, 2023, we employed a total of 296 full-time equivalent employees.
We believe our commitment to quality and personalized banking services through our ClientFIRST culture is a factor that contributes to our competitiveness and success. Employees At December 31, 2024, we employed a total of 297 full-time equivalent employees.
We obtain a security interest in real estate whenever possible, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. At December 31, 2023, loans secured by first or second mortgages on commercial and consumer real estate made up approximately 84.8% of our loan portfolio.
We obtain a security interest in real estate whenever possible, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. At December 31, 2024, loans secured by first or second mortgages on commercial and consumer real estate made up approximately 83.5% of our loan portfolio.
We believe that our management’s and board’s incentives are closely aligned with our shareholders through the ownership of a substantial amount of our stock.
We believe that our management’s and board’s incentives are closely aligned with our shareholders through the 7 Table of Contents ownership of a substantial amount of our stock.
The Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Act was signed into law in July 2010 and impacts financial institutions in numerous ways, including: ● The creation of a Financial Stability Oversight Council responsible for monitoring and managing systemic risk, ● Granting additional authority to the Board of Governors of the Federal Reserve (the “Federal Reserve”) to regulate certain types of nonbank financial companies, ● Granting new authority to the FDIC as liquidator and receiver, ● Changing the manner in which deposit insurance assessments are made, ● Requiring regulators to modify capital standards, ● Establishing the Consumer Financial Protection Bureau (the “CFPB”), ● Capping interchange fees that banks charge merchants for debit card transactions, ● Imposing more stringent requirements on mortgage lenders, and 13 Table of Contents ● Limiting banks’ proprietary trading activities.
The Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Act was signed into law in July 2010 and impacts financial institutions in numerous ways, including: · The creation of a Financial Stability Oversight Council responsible for monitoring and managing systemic risk, · Granting additional authority to the Board of Governors of the Federal Reserve (the “Federal Reserve”) to regulate certain types of nonbank financial companies, · Granting new authority to the FDIC as liquidator and receiver, · Changing the manner in which deposit insurance assessments are made, · Requiring regulators to modify capital standards, · Establishing the Consumer Financial Protection Bureau (the “CFPB”), · Capping interchange fees that banks charge merchants for debit card transactions, · Imposing more stringent requirements on mortgage lenders, and · Limiting banks’ proprietary trading activities. 13 Table of Contents There are many provisions in the Dodd-Frank Act mandating regulators to adopt new regulations and conduct studies upon which future regulation may be based.
The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank performs these checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons. Anti-Money Laundering and the USA Patriot Act .
The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank performs these checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.
The city of Charlotte is the largest city in the state and is located in Mecklenburg County, North Carolina. The Charlotte-Concord-Gastonia MSA is the most populous market in the state of North Carolina with an estimated population of 2.75 million for 2022.
The city of Charlotte is the largest city in the state and is located in Mecklenburg County, North Carolina. The Charlotte-Concord-Gastonia MSA is the most populous market in the state of North Carolina with an estimated population of 2.81 million for 2023.
The Charleston-North Charleston MSA is the third most populous market in the state with an estimated population of 830,529 for 2022. Charleston is home to the deepest port in the Southeast and boasts top companies in the aerospace, biomedical and technology fields such as Boeing, the Medical University of South Carolina (MUSC) and Blackbaud.
The Charleston-North Charleston MSA is the third most populous market in the state with an estimated population of 849,417 for 2023. Charleston is home to the deepest port in the Southeast and boasts top companies in the aerospace, biomedical and technology fields such as Boeing, the Medical University of South Carolina (MUSC) and Blackbaud.
Greensboro, along with Winston-Salem and High Point, is commonly referred to as the Triad region of North Carolina and is home to companies such as Honda Aircraft, Lincoln Financial Group and Volvo Trucks of North America. The median household income for the Greensboro-High Point MSA was approximately $60,271 for 2022. Charlotte .
Greensboro, along with Winston-Salem and High Point, is commonly referred to as the Triad region of North Carolina and is home to companies such as Honda Aircraft, Lincoln Financial Group and Volvo Trucks of North America. The median household income for the Greensboro-High Point MSA was approximately $63,280 for 2023. Charlotte .
We offer a full range of deposit services, including checking accounts, commercial checking accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to long-term certificates of deposit. At December 31, 2023, we had $379.4 million in out-of-market, or wholesale, certificates of deposits.
We offer a full range of deposit services, including checking accounts, commercial checking accounts, savings accounts, and other time deposits of various types, ranging from daily money market accounts to long-term certificates of deposit. At December 31, 2024, we had $550.3 million in out-of-market, or wholesale, certificates of deposits.
Atlanta is the state capital of, and largest city in, Georgia and is the world headquarters of corporations such as 6 Table of Contents Coca-Cola, Home Depot, UPS, Delta Airlines and Turner Broadcasting. The median household income for the Atlanta-Sandy Springs-Alpharetta MSA is $84,876 for 2022.
Atlanta is the state capital of, and largest city in, Georgia and is the world headquarters of corporations such as 6 Table of Contents Coca-Cola, Home Depot, UPS, Delta Airlines and Turner Broadcasting. The median household income for the Atlanta-Sandy Springs-Alpharetta MSA is $86,505 for 2023.
Our management team continually analyzes emerging fraud and security risks and utilizes tools, strategies and policies to manage risk while delivering an optimal and appropriate client experience.
Our management team continually analyzes emerging fraud and security risks and utilizes tools, 8 Table of Contents strategies and policies to manage risk while delivering an optimal and appropriate client experience.
All advances from the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. Effect of Governmental Monetary Policies.
All advances from the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.
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 or real property; ● operating a non-bank depository institution, such as a savings association; ● trust company functions; ● financial and investment advisory activities; ● conducting discount 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 agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and ● performing selected insurance underwriting activities. 16 Table of Contents As a bank holding company we also can elect to be treated as a “financial holding company,” which would allow us to engage in a broader array of 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 related activities; · leasing personal or real property; · operating a non-bank depository institution, such as a savings association; · trust company functions; · financial and investment advisory activities; 16 Table of Contents · conducting discount 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 agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and · performing selected insurance underwriting activities.
At December 31, 2023, our consumer or residential construction loans ranged in size from approximately $18,000 to $3.2 million, with an average loan size of approximately $705,000. The duration of our construction loans generally is limited to 18 months, although payments may be structured on a longer amortization basis.
At December 31, 2024, our consumer or residential construction loans ranged in size from approximately $8,000 to $3.1 million, with an average loan size of approximately $580,000. The duration of our construction loans generally is limited to 18 months, although payments may be structured on a longer amortization basis.
The median household income for the Charleston-North Charleston MSA was approximately $78,927 for 2022. One of our retail offices in the Charleston market is located in the city of Mount Pleasant, which is located just north of Charleston in Charleston County and ranks as the fourth largest city in South Carolina. Columbia .
The median household income for the Charleston-North Charleston MSA was approximately $85,165 for 2023. One of our retail offices in the Charleston market is located in the city of Mount Pleasant, which is located just north of Charleston in Charleston County and ranks as the fourth largest city in South Carolina. Columbia .
Raleigh is the state capital and is home to North Carolina State University and is part of the Research Triangle area, together with Durham, North Carolina (home of Duke University) and Chapel Hill, North Carolina (home of the University of North Carolina at Chapel Hill). The median household income for the Raleigh-Cary MSA was approximately $92,739 for 2022. Greensboro .
Raleigh is the state capital and is home to North Carolina State University and is part of the Research Triangle area, together with Durham, North Carolina (home of Duke University) and Chapel Hill, North Carolina (home of the University of North Carolina at Chapel Hill). The median household income for the Raleigh-Cary MSA was approximately $96,096 for 2023. Greensboro .
In addition to loans secured by real estate, our loan portfolio includes commercial business loans and other consumer loans which comprised 13.9% and 1.4%, respectively, of our total loan portfolio at December 31, 2023. Interest rates for all real estate loan categories may be fixed or adjustable, and will more likely be fixed for shorter-term loans.
In addition to loans secured by real estate, our loan portfolio includes commercial business loans and other consumer loans which comprised 15.3% and 1.2%, respectively, of our total loan portfolio at December 31, 2024. Interest rates for all real estate loan categories may be fixed or adjustable, and will more likely be fixed for shorter-term loans.
Seaver, Hurst, Borrmann, Aiken and Ms. King, our executive management team consists of 14 individuals who bring an average of 28 years of experience in the banking industry. The management team is complemented by our dedicated board of directors with extensive local market knowledge and a wide range of experience including accounting, business, banking, manufacturing, insurance, management and finance.
King and Fairchild, our executive management team consists of 14 individuals who bring an average of 30 years of experience in the banking industry. The management team is complemented by our dedicated board of directors with extensive local market knowledge and a wide range of experience including accounting, business, banking, manufacturing, insurance, management and finance.
The deposit operations of the Bank are also subject to federal laws, such as: ● the Federal Deposit Insurance Act (“FDIA”), which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking; ● the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; ● The Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and ● the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.
The deposit operations of the Bank are also subject to federal laws, such as: · the Federal Deposit Insurance Act (“FDIA”), which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking; · the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; · the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; · The Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and · the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts. 24 Table of Contents In light of the growing concern by regulators about relationships between chartered financial institutions and their third-party service providers, the FDIC joined the other federal supervisory agencies in passing the Interagency Guidance on Third-Party Relationships: Risk Management.
The Raleigh-Cary MSA is one of the most populous markets in the state with an estimated population of 1.48 million for 2022.
The Raleigh-Cary MSA is one of the most populous markets in the state with an estimated population of 1.51 million for 2023.
At December 31, 2023, consumer loans other than real estate amounted to $48.8 million, or 1.4% of our loan portfolio, and ranged in size from $1,000 to $17.2 million, with an average loan size of approximately $35,000. Our installment loans typically amortize over periods up to 60 months.
At December 31, 2024, consumer loans other than real estate amounted to $42.1 million, or 1.2% of our loan portfolio, and ranged in size from $1,000 to $17.1 million, with an average loan size of approximately $33,000. Our installment loans typically amortize over periods up to 60 months.
As a result, our offices average approximately $250.0 million in total deposits. We believe this style of banking allows us to deliver exceptional client service, while achieving lower efficiency ratios relative to certain of our local competitors, as evidenced by our 78.7% efficiency ratio for the year ended December 31, 2023.
As a result, our offices average approximately $240.5 million in total deposits. We believe this style of banking allows us to deliver exceptional client service, while achieving lower efficiency ratios relative to certain of our local competitors, as evidenced by our 73.5% efficiency ratio for the year ended December 31, 2024.
We believe that our current mobile banking, on-line banking and cash management offerings are industry-leading solutions amongst community banks. During 2023, 68% of deposits were acquired through our office network, 24% came through the commercial remote deposit capture channel and the remaining 8% came through consumer mobile deposits.
We believe that our current mobile banking, on-line banking and cash management offerings are industry-leading solutions amongst community banks. During 2024, 38% of deposits were acquired through our office network, 44% came through the commercial remote deposit capture channel and the remaining 17% came through consumer mobile deposits.
The city of Greensboro is the third largest city in North Carolina and is located in Guilford County, North Carolina. The Greensboro-High Point MSA is one of the most populous markets in the state of North Carolina with an estimated population of 784,101 for 2022.
The city of Greensboro is the third largest city in North Carolina and is located in Guilford County, North Carolina. The Greensboro-High Point MSA is one of the most populous markets in the state of North Carolina with an estimated population of 789,842 for 2023.
At December 31, 2023, we had net loans of $3.56 billion, representing 87.8% of our total assets. We focus our lending to businesses and individuals that reside in the markets that we serve.
At December 31, 2024, we had net loans of $3.59 billion, representing 87.9% of our total assets. We focus our lending to businesses and individuals that reside in the markets that we serve.
As of December 31, 2023, we had originated seven loans utilizing government enhancements and over 30 loans engaged in state-based small business partnerships. ● Consumer Real Estate Loans and Home Equity Loans. At December 31, 2023 consumer real estate loans (other than construction loans) amounted to $1.27 billion, or 35.1% of our loan portfolio.
As of December 31, 2024, we had originated ten loans utilizing government enhancements and over 35 loans engaged in state-based small business partnerships. · Consumer Real Estate Loans and Home Equity Loans. At December 31, 2024 consumer real estate loans (other than construction loans) amounted to $1.33 billion, or 36.7% of our loan portfolio.
As such, the CFPB may participate in examinations of the Bank. In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules adopted by the CFPB against certain institutions.
In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules adopted by the CFPB against certain institutions.
Experienced Management Team, Dedicated Board of Directors and Talented Employees. Our senior management team is led by R. Arthur Seaver, Jr., Calvin C. Hurst, D. Andrew Borrmann, William M. Aiken, and Silvia T. King, and whose biographies are included below.
Experienced Management Team, Dedicated Board of Directors and Talented Employees. Our senior management team is led by R. Arthur Seaver, Jr., Calvin C. Hurst, Christian J. Zych, William M. Aiken, Silvia T. King, and Julie A. Fairchild, and whose biographies are included below.
We offer adjustable and fixed rate construction real estate loans for commercial and consumer projects, typically to builders and developers and to consumers who wish to build their own homes. At December 31, 2023, total commercial and consumer construction loans amounted to $214.0 million, or 5.9% of our loan portfolio.
We offer adjustable and fixed rate construction real estate loans for commercial and consumer projects, typically to builders and developers and to consumers who wish to build their own homes. At December 31, 2024, total commercial and consumer construction loans amounted to $124.1 million, or 3.4% of our loan portfolio.
The scope and content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. In 2016, federal agencies proposed regulations which could 27 Table of Contents significantly change the regulation of incentive compensation programs at financial institutions.
The scope and content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. In 2016, federal agencies proposed regulations which could significantly change the regulation of incentive compensation programs at financial institutions. The proposal would create four tiers of institutions based on asset size.
Based upon the capitalization of the Bank at December 31, 2023, the maximum amount we could lend to one borrower was $58.5 million. However, to mitigate concentration risk, our internal lending limit at December 31, 2023 was $41.0 million and may vary based on our assessment of the lending relationship.
Based upon the capitalization of the Bank at December 31, 2024, the maximum amount we could lend to one borrower was $60.4 million. However, to mitigate concentration risk, our internal lending limit at December 31, 2024 was $42.3 million and may vary based on our assessment of the lending relationship.
The median household income for the Charlotte-Concord-Gastonia MSA was approximately $77,154 for 2022. Atlanta . The Atlanta-Sandy Springs-Alpharetta MSA has the eighth largest population in the U.S. estimated at 6.22 million for 2022.
The median household income for the Charlotte-Concord-Gastonia MSA was approximately $81,262 for 2023. Atlanta . The Atlanta-Sandy Springs-Alpharetta MSA has the eighth largest population in the U.S. estimated at 6.31 million for 2023.
Included in the consumer real estate loans was $1.08 billion, or 30.0% of our loan portfolio, in first and second mortgages on individuals’ homes, while home equity loans represented $183.0 million, or 5.1% of our total loan portfolio.
Included in the consumer real estate loans was $1.13 billion, or 31.1% of our loan portfolio, in first and second mortgages on individuals’ homes, while home equity loans represented $204.9 million, or 5.6% of our total loan portfolio.
At the same time, we have strived to maintain a diversified loan portfolio and limit the amount of our loans to any single client. As of December 31, 2023, our ten largest client loan relationships represented approximately $314.1 million, or 8.72%, of our loan portfolio.
At the same time, we have strived to maintain a diversified loan portfolio and limit the amount of our loans to any single client. As of December 31, 2024, our ten largest client loan relationships represented approximately $289.0 million, or 7.95%, of our loan portfolio.
The CFPB’s focus on fees was emphasized through its ongoing enforcement activity, including a notable enforcement action taken against Bank of America that required the payment of more than $100 million to customers, with similar size fines paid to both the CFPB and the OCC. The Office of Foreign Assets Control.
The CFPB’s focus on fees was emphasized through its ongoing enforcement activity, including a notable enforcement action taken against Bank of America that required the payment of more than $100 million to customers, with similar size fines paid to both the CFPB and the OCC. In February 2025, President Trump took significant actions affecting the CFPB.
The Bank can be requested, to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the applicable governmental authorities.
The Bank can be requested, to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the applicable governmental authorities. The Office of Foreign Assets Control (“OFAC”), which is a division of the U.S.
If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm.
Institutions in the top two tiers would be subject to rules much more detailed and proscriptive than are currently in effect. If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm.
The Columbia MSA is the second most populous market in the state with an estimated population of 847,804 for 2022. The median household income for the Columbia MSA was $63,933 for 2022. Raleigh . The city of Raleigh is the second largest city in the state of North Carolina and is located in Wake County, North Carolina.
The Columbia MSA is the second most populous market in the state with an estimated population of 856,889 for 2023. The median household income for the Columbia MSA was $67,189 for 2023. Raleigh . The city of Raleigh is the second largest city in the state of North Carolina and is located in Wake County, North Carolina.
As of December 31, 2023, our executive officers and board of directors owned an aggregate of 646,142 shares of our common stock, including options to purchase shares of our common stock, which represented approximately 8.00% of the fully-diluted amount of our common stock outstanding.
As of December 31, 2024, our executive officers and board of directors owned an aggregate of 643,642 shares of our common stock, including options to purchase shares of our common stock, which represented approximately 7.93% of the fully-diluted amount of our common stock outstanding.
At December 31, 2023, commercial owner occupied and non-owner occupied real estate loans (other than construction loans) amounted to $1.57 billion, or 43.7% of our loan portfolio. Of our commercial real estate loan portfolio, $942.5 million in loans were non-owner occupied properties, representing 42.4% of our commercial loan portfolio and 26.2% of our total loan portfolio.
At December 31, 2024, commercial owner occupied and non-owner occupied real estate loans (other than construction loans) amounted to $1.58 billion, or 43.4% of our loan portfolio. Of our commercial real estate loan portfolio, $924.4 million in loans were non-owner occupied properties, representing 41.4% of our commercial loan portfolio and 25.5% of our total loan portfolio.
Dividends. The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company.
The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay.
Commercial construction loans represented $150.7 million, or 4.2%, of our total loan portfolio, while consumer construction loans represented $63.3 million, or 1.7% of our total loan portfolio. At December 31, 2023, our commercial construction real estate loans ranged in size from approximately $15,000 to $13.0 million, with an average loan balance of approximately $2.1 million.
Commercial construction loans represented $103.2 million, or 2.8%, of our total loan portfolio, while consumer construction loans represented $20.9 million, or 0.6% of our total loan portfolio. At December 31, 2024, our commercial construction real estate loans ranged in size from approximately $3,000 to $13.9 million, with an average loan balance of approximately $2.2 million.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMoreover, turnover of the presidential administration in 2020 resulted in certain changes in the leadership and senior staffs of the federal banking agencies, the CFPB, CFTC, SEC, and the Treasury Department, with certain significant leadership positions yet to be permanently filled, including the Comptroller of the Currency.
Biggest changeThe prospects for the enactment of major banking reform legislation remain unclear at this time. Furthermore, leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment. Since the change in presidential administration in 2020, key positions across agencies—including the Comptroller of the Currency, CFPB, CFTC, SEC, and the U.S. Treasury—experienced significant turnover.
Our governing documents: ● authorize a class of preferred stock that may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval; ● authorize 10,000,000 shares of common stock and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval; ● classify our board with staggered three year terms, preventing a change in a majority of the board at any annual meeting; ● require advance notice of proposed nominations for election to the board of directors and business to be conducted at a shareholder meeting; ● grant the board of directors the discretion, when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders, to take into account the effect of the transaction on the employees, clients and suppliers of the Company and upon the communities in which offices of the Company are located, to the extent permitted by South Carolina law; ● provide that the number of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer than five nor more than 25 members; and ● provide that no individual who is or becomes a “business competitor” or who is or becomes affiliated with, employed by, or a representative of any individual, corporation, or other entity which the board of directors, after 42 Table of Contents having such matter formally brought to its attention, determines to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a “business competitor”) shall be eligible to serve as a director if the board of directors determines that it would not be in our best interests for such individual to serve as a director (any financial institution having branches or affiliates within Greenville County, South Carolina is presumed to be a business competitor unless the board of directors determines otherwise).
Our governing documents: · authorize a class of preferred stock that may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval; · authorize 20,000,000 shares of common stock and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval; · classify our board with staggered three year terms, preventing a change in a majority of the board at any annual meeting; · require advance notice of proposed nominations for election to the board of directors and business to be conducted at a shareholder meeting; · grant the board of directors the discretion, when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders, to take into account the effect of the transaction on the employees, clients and suppliers of the Company and upon the communities in which offices of the Company are located, to the extent permitted by South Carolina law; · provide that the number of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer than five nor more than 25 members; and · provide that no individual who is or becomes a "business competitor" or who is or becomes affiliated with, employed by, or a representative of any individual, corporation, or other entity which the board of directors, after having such matter formally brought to its attention, determines to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a "business competitor") shall be eligible to serve as a director if the board of directors determines that it would not be in our best interests for such individual 42 Table of Contents to serve as a director (any financial institution having branches or affiliates within Greenville County, South Carolina is presumed to be a business competitor unless the board of directors determines otherwise).
In addition, the South Carolina business combinations statute provides that a 10% or greater shareholder of a resident domestic corporation cannot engage in a “business combination” (as defined in the statute) with such corporation for a period of two years following the date on which the 10% shareholder became such, unless the business combination or the acquisition of shares is approved by a majority of the disinterested members of such corporation’s board of directors before the 10% shareholder’s share acquisition date.
In addition, the South Carolina business combinations statute provides that a 10% or greater shareholder of a resident domestic corporation cannot engage in a "business combination" (as defined in the statute) with such corporation for a period of two years following the date on which the 10% shareholder became such, unless the business combination or the acquisition of shares is approved by a majority of the disinterested members of such corporation's board of directors before the 10% shareholder's share acquisition date.
Andrew Borrmann, our chief financial officer, announced his resignation on February 27, 2024. Leadership transitions can be inherently difficult to manage, and an inadequate transition to a permanent successor may cause disruptions to our business due to, among other things, diverting management’s attention or causing a deterioration in morale.
In particular, D. Andrew Borrmann, our chief financial officer, announced his resignation on February 27, 2024. Leadership transitions can be inherently difficult to manage, and an inadequate transition to a permanent successor may cause disruptions to our business due to, among other things, diverting management’s attention or causing a deterioration in morale.
While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts. We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.
While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts. We are subject to fair lending laws, and failure to comply with these laws could lead to material penalties.
If our enterprise risk framework is ineffective, either because it fails to keep pace with changes in the financial markets, regulatory requirements, our businesses, our counterparties, clients or service providers or for other reasons, 36 Table of Contents we could incur losses, suffer reputational damage or find ourselves out of compliance with applicable regulatory or contractual mandates.
If our enterprise risk framework is ineffective, either because it fails to keep pace with changes in the financial markets, regulatory requirements, our businesses, our counterparties, clients or service providers or for other reasons, we could incur losses, suffer reputational damage or find ourselves out of compliance with applicable regulatory or contractual mandates.
If we are unable to implement, maintain and use such technologies effectively, we may not be able to offer products or achieve cost-efficiencies necessary to compete in the industry. In addition, some of these competitors have fewer regulatory constraints and lower cost structures. 34 Table of Contents We are subject to environmental risks that could result in losses.
If we are unable to implement, maintain and use such technologies effectively, we may not be able to offer products or achieve cost-efficiencies necessary to compete in the industry. In addition, some of these competitors have fewer regulatory constraints and lower cost structures. We are subject to environmental risks that could result in losses.
In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these 33 Table of Contents requirements, in the future, we could be required to provide financial assistance to the Bank if the Bank experiences financial distress.
In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to the Bank if the Bank experiences financial distress.
A percentage of the loans in our portfolio currently include exceptions to our loan policies and supervisory guidelines. All of the loans that we make are subject to written loan policies adopted by our board of directors and to supervisory guidelines imposed by our regulators.
A percentage of the loans in our portfolio may include exceptions to our loan policies and supervisory guidelines. All of the loans that we make are subject to written loan policies adopted by our board of directors and to supervisory guidelines imposed by our regulators.
At the same time, the 37 Table of Contents marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. An increase (or decrease) in interest rates also requires us to increase (or decrease) the interest rates that we pay on our deposits.
At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. An increase (or decrease) in interest rates also requires us to increase (or decrease) the interest rates that we pay on our deposits.
Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank.
Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such 33 Table of Contents a subsidiary bank.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial 36 Table of Contents institutions to better serve customers and to reduce costs.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; epidemics and pandemics (such as COVID-19); or a combination of these or other factors.
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; epidemics and pandemics; or a combination of these or other factors.
A significant portion of our loan portfolio is secured by real estate, and events that negatively affect the real estate market could hurt our business. As of December 31, 2023, approximately 85% of our loans had real estate as a primary or secondary component of collateral.
A significant portion of our loan portfolio is secured by real estate, and events that negatively affect the real estate market could hurt our business. As of December 31, 2024, approximately 84% of our loans had real estate as a primary or secondary component of collateral.
We may not be successful in retaining key personnel, and the unexpected loss of services of one or more of our key personnel could have a material adverse effect on our business because of their skill, knowledge of our primary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel. In particular, D.
We may not be successful in retaining key personnel, and the unexpected loss of services of one or more of our key personnel could have a material adverse effect 39 Table of Contents on our business because of their skill, knowledge of our primary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.
Arthur Seaver, Jr., our chief executive officer, and Calvin C. Hurst, our president, each have extensive and long-standing ties within our primary market area and substantial experience with our operations, and each has contributed 39 Table of Contents significantly to our growth.
Arthur Seaver, Jr., our chief executive officer, and Calvin C. Hurst, our president, each have extensive and long-standing ties within our primary market area and substantial experience with our operations, and each has contributed significantly to our growth.
Risks Related to Our Industry We are subject to interest rate risk, which could adversely affect our financial condition and profitability. A significant portion of our banking assets are subject to changes in interest rates. As of December 31, 2023, approximately 84% of our loan portfolio was in fixed rate loans, while only 16% was in variable rate loans.
Risks Related to Our Industry We are subject to interest rate risk, which could adversely affect our financial condition and profitability. A significant portion of our banking assets are subject to changes in interest rates. As of December 31, 2024, approximately 81% of our loan portfolio was in fixed rate loans, while only 19% was in variable rate loans.
We rely on other companies to provide key components of our business infrastructure. Third parties provide key components of our business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, internet connections and network access. While we have selected these third-party vendors carefully, we do not control their actions.
Third parties provide key components of our business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, internet connections and network access. While we have selected these third-party vendors carefully, we do not control their actions.
However, Congressional committees with jurisdiction over the banking sector have pursued oversight and legislative initiatives in a variety of areas, including addressing climate-related risks, promoting diversity and equality within the banking industry and addressing other Environmental, Social, and Governance matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, establishing a regulatory framework for digital assets and markets, and oversight of pandemic responses and economic recovery.
Under the Biden Administration, Congressional committees with jurisdiction over the banking sector pursued oversight and legislative 32 Table of Contents initiatives in a variety of areas, including addressing climate-related risks, promoting diversity and equality within the banking industry and addressing other Environmental, Social, and Governance matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, establishing a regulatory framework for digital assets and markets, and oversight of pandemic responses and economic recovery.
We may have higher credit losses than we have allowed for in our allowance for credit losses. Our actual loans losses could exceed our allowance for credit losses and therefore our historic allowance for credit losses may not be adequate. As of December 31, 2023, 47.9% of our loan portfolio was secured by commercial real estate.
We may have higher credit losses than we have allowed for in our allowance for credit losses. Our actual loans losses could exceed our allowance for credit losses and therefore our historic allowance for credit losses may not be adequate. As of December 31, 2024, 55.4% of our loan portfolio was secured by commercial real estate.
Moreover, these types of expansions involve various risks, including: ● the time and costs of evaluating new markets, hiring or retaining experienced local management, and opening new offices and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; ● the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse effects on our results of operations; ● the potential inaccuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to a target institution; ● incurring the time and expense associated with identifying and evaluating potential merger or acquisition targets and other expansion opportunities and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business; ● the possibility that the expected benefits of a transaction may not materialize in the timeframe expected or at all, or may be costlier to achieve; ● the risk that we may be unsuccessful in attracting and retaining deposits and originating high quality loans in new markets; ● difficulty or unanticipated expense associated with converting the operating systems of an acquired or merged company into ours; ● delay in completing a merger, acquisition or other expansion activities due to litigation, closing conditions or the regulatory approval process; and ● the risk of loss of key employees and clients of the Company or the acquired or merged company. 40 Table of Contents There is no assurance that existing branches or future branches, if any, will maintain or achieve deposit levels, loan balances or other operating results necessary to avoid losses or produce profits.
Moreover, these types of expansions involve various risks, including: · the time and costs of evaluating new markets, hiring or retaining experienced local management, and opening new offices and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; · the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse effects on our results of operations; · the potential inaccuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to a target institution; · incurring the time and expense associated with identifying and evaluating potential merger or acquisition targets and other expansion opportunities and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business; · the possibility that the expected benefits of a transaction may not materialize in the timeframe expected or at all, or may be costlier to achieve; · the risk that we may be unsuccessful in attracting and retaining deposits and originating high quality loans in new markets; · difficulty or unanticipated expense associated with converting the operating systems of an acquired or merged company into ours; · delay in completing a merger, acquisition or other expansion activities due to litigation, closing conditions or the regulatory approval process; and · the risk of loss of key employees and clients of the Company or the acquired or merged company.
Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At December 31, 2023, commercial business loans comprised 13.9% of our total loan portfolio.
Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At December 31, 2024, commercial business loans comprised 15.3% of our total loan portfolio.
The potential impact of the 2024 election on additional changes in agency personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
The potential impact of the unified Republican government on additional changes in agency structure, personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
Nevertheless, these investments may prove insufficient and fraudulent activity could result in losses to us or our customers; loss of business and/or customers; damage to our reputation; the incurrence of additional expenses (including the cost of notification to consumers, credit monitoring and forensics, and fees and fines imposed by the card networks); disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability any of which could have a material adverse effect on our business, financial condition and results of operations.
Nevertheless, these investments may prove insufficient and fraudulent activity could result in losses to us or our customers; loss of business and/or customers; damage to our reputation; the incurrence of additional expenses (including the cost of notification to consumers, credit monitoring and forensics, and fees and fines imposed by the card networks); disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability any of which could have a material adverse effect on our business, financial condition and results of operations. 35 Table of Contents Our operational or security systems may experience an interruption or breach in security, including as a result of cyber-attacks.
We may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on our business, results of operations and financial condition. In addition, we are subject to the growing risk of climate change.
We may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have a material adverse effect on our business, results of operations and financial condition.
We could in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management’s attention and resources from our normal business. Future sales of our stock by our shareholders or the perception that those sales could occur may cause our stock price to decline.
Securities litigation could result in substantial costs and divert management’s attention and resources from our normal business. 41 Table of Contents Future sales of our stock by our shareholders or the perception that those sales could occur may cause our stock price to decline.
Any failure, interruption or breach in security of these systems, including as a result of cyber-attacks, could result in failures or disruptions in our client relationship management, deposit, loan, and other systems and also the disclosure or misuse of confidential or proprietary information.
We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems, including as a result of cyber-attacks, could result in failures or disruptions in our client relationship management, deposit, loan, and other systems and also the disclosure or misuse of confidential or proprietary information.
Stock price volatility may make it more difficult for you to resell 41 Table of Contents your common stock when you want and at prices you find attractive. Moreover, in the past, securities class action lawsuits have been instituted against some companies following periods of volatility in the market price of its securities.
Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Moreover, in the past, securities class action lawsuits have been instituted against some companies following periods of volatility in the market price of its securities. We could in the future be the target of similar litigation.
Among other sources of funds, in 2023, we relied on brokered deposits to provide funds with which to make loans and provide other liquidity needed. Our brokered deposits were $379.4 million, representing 11.2% of our total deposits at December 31, 2023 and included fixed-rate time deposits with maturities through October 2028.
Among other sources of funds, in 2024, we relied on brokered deposits to provide funds with which to make loans and provide other liquidity needed. Our brokered deposits were $550.3 million, representing 16.0% of our total deposits at December 31, 2024 and included fixed-rate time deposits with maturities through October 2028.
Commercial real estate loans increase our exposure to credit risk. At December 31, 2023, 47.9% of our loan portfolio was secured by commercial real estate.
Commercial real estate loans increase our exposure to credit risk. At December 31, 2024, 55.4% of our loan portfolio was secured by commercial real estate.
Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
The 2006 “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “CRE Guidance”) provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation, which if successful could adversely impact our rating under the CRA.
Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation, which if successful could adversely impact our rating under the CRA. As of our most recent examination report, the Bank received a “Satisfactory” CRA rating.
In the 2015 Statement, the regulatory agencies, among other things, indicate the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.
In December 2015, the regulatory agencies released a statement on prudent risk management for commercial real estate lending that indicated, among other things, the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.
While we believe that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand. We may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate.
While we believe that these sources are currently adequate, there can be no assurance they will be sufficient to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand.
Our growth may entail an increase in overhead expenses if we add new branches and staff. There are considerable costs involved in opening branches, and new branches generally do not generate sufficient revenues to offset their costs until they have been in operation for at least a year or more.
There are considerable costs involved in opening branches, and new branches generally do not generate sufficient revenues to offset their costs until they have been in operation for at 40 Table of Contents least a year or more.
Our financial condition and results of operations could be negatively affected to the extent we rely on financial statements that do not comply with GAAP or are materially misleading, any of which could be caused by errors, omissions, or fraudulent behavior by our employees, clients, counterparties, or other third parties. 35 Table of Contents In addition, criminals committing fraud increasingly are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective.
Our financial condition and results of operations could be negatively affected to the extent we rely on financial statements that do not comply with GAAP or are materially misleading, any of which could be caused by errors, omissions, or fraudulent behavior by our employees, clients, counterparties, or other third parties.
If we are unable to receive dividends from the Bank or obtain additional funding, we may be unable to pay our debt or other obligations.
Other than dividends from the Bank, the Company does not have additional means of generating liquidity without obtaining additional debt or equity funding. If we are unable to receive dividends from the Bank or obtain additional funding, we may be unable to pay our debt or other obligations.
Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic 31 Table of Contents conditions.
In 2024 and early 2025, increased competition for deposits and volatility in wholesale funding markets have added to liquidity pressures. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic conditions.
Our profitability is dependent on our banking activities. Because we are a bank holding company, our profitability is directly attributable to the success of the Bank. Our banking activities compete with other banking institutions on the basis of products, service, convenience and price, among others.
Because we are a bank holding company, our profitability is directly attributable to the success of the Bank. Our banking activities compete with other banking institutions on the basis of products, service, convenience and price, among others. Due in part to both regulatory changes and consumer demands, banks have experienced increased competition from other entities offering similar products and services.
Imposition of limits by the bank regulators on commercial and multi-family real estate lending activities could curtail our growth and adversely affect our earnings. In 2006, the FDIC, the Federal Reserve and the OCC issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “CRE Guidance”).
Imposition of limits by the bank regulators on commercial and multi-family real estate lending activities could curtail our growth and adversely affect our earnings.
If the FDIC, our primary federal regulator, were to impose restrictions on the amount of commercial real estate loans we can hold in our portfolio, for reasons noted above or otherwise, our earnings would be adversely affected.
Our level of commercial real estate and multi-family loans represents 247.2% of the Bank’s total risk-based capital at December 31, 2024. If the FDIC, our primary federal regulator, were to impose restrictions on the amount of commercial real estate loans we can hold in our portfolio our earnings would be adversely affected.
Additional bank failures could have an adverse effect on our financial condition and results of operations, either directly or through an adverse impact on certain of our customers.
In 2024 and into 2025, continued concerns regarding the stability of certain regional banks and potential liquidity risks have further contributed to market volatility and investor caution. Additional bank failures could have an adverse effect on our financial condition and results of operations, either directly or through an adverse impact on certain of our customers.
The economic conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole.
The economic conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole. In 2024 and early 2025, continued regional economic uncertainty—exacerbated by persistent inflation, supply chain disruptions, and subdued consumer spending—has further increased the risks in our primary markets.
Thus, an increase in the amount of nonperforming assets could have a material adverse impact on our net interest income.
Thus, an increase in the amount of nonperforming assets could have a material adverse impact on our net interest income. 37 Table of Contents In March 2020, in response to the COVID-19 pandemic, the Federal Reserve reduced the target Federal Funds rate to between zero and 0.25%.
Effects on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks.
In mid-2024, as inflation began to moderate, the Federal Reserve signaled a gradual recalibration of its policy stance, though it remains cautious amid ongoing economic uncertainty. Effects on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks.
Due in part to both regulatory changes and consumer demands, banks have experienced increased competition from other entities offering similar products and services. We rely on the profitability of the Bank and dividends received from the Bank for payment of our operating expenses and satisfaction of our obligations.
We rely on the profitability of the Bank and dividends received from the Bank for payment of our operating expenses and satisfaction of our obligations.
In March 2020, in response to the COVID-19 pandemic, the Federal Reserve reduced the target Federal Funds rate to between zero and 0.25%; however, due in part to rising inflation, throughout 2022 the target Federal Funds rate increased to between 4.25% and 4.50%. Throughout 2023, the target Federal Funds rate increased to between 5.25% and 5.50%.
However, starting in March 2022 and continuing through mid-2023, the Federal Reserve raised the target Federal Funds rate to between 5.25% and 5.50% in response to persistent inflationary pressures.
Such factors include significant economic trends or events as well as significant international monetary policies and events. These economic strategies have had, and will continue to have, a significant impact on our business and on many of our clients.
Many external factors may interfere with the effects of these plans or cause them to be changed, sometimes quickly. Such factors include significant economic trends or events as well as significant international monetary policies and events.
The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve. In 2020, in response to economic disruption associated with the COVID-19 pandemic, the Federal Reserve quickly reduced short-term rates to extremely low levels and acted to influence the markets to reduce long-term rates as well.
The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve. In recent years, the Federal Reserve has maintained a relatively tight monetary policy to address persistent inflationary pressures, resulting in elevated short-term interest rates.
Such events could also cause downturns in economic and market conditions generally, which could have an adverse effect on our business and financial results. The potential losses and costs associated with climate change related risks are difficult to predict and could have a material adverse effect on our business, financial condition and results of operation.
Such events could lower the value of our collateral, raise delinquency rates, and trigger broader economic downturns, thereby materially affecting our business and financial results. The potential losses and costs associated with these climate-related risks are difficult to predict. 34 Table of Contents We rely on other companies to provide key components of our business infrastructure.
The Company is a stand-alone entity with its own liquidity needs to service its debt or other obligations. Other than dividends from the Bank, the Company does not have additional means of generating liquidity without obtaining additional debt or equity funding.
We may be required 31 Table of Contents to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate. The Company is a stand-alone entity with its own liquidity needs to service its debt or other obligations.
This sort of phenomenon—where short term rates rise more strongly and rapidly than long-term rates can follow—is relatively uncommon. 38 Table of Contents It is unclear how long it will take for long-term rates to catch up. Many external factors may interfere with the effects of these plans or cause them to be changed, sometimes quickly.
Recent periods have demonstrated that when short-term rates rise more rapidly than long-term rates, the yield curve can invert—an occurrence that, while relatively uncommon, may signal potential economic slowdowns or increased recessionary risks. It is unclear how long it will take for long-term rates to catch up.
Removed
As economic conditions relating to the COVID-19 pandemic have improved, the Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse effects of the extensive pandemic-related government stimulus, which signals the potential for a continued period of economic uncertainty even though the pandemic has subsided.
Added
More recently, in 2024, the FDIC and the Federal Reserve reaffirmed their commitment to stringent oversight of CRE exposures in response to evolving market conditions.
Removed
Our level of commercial real estate and multi-family loans represents 271.4% of the Bank’s total risk-based capital at December 31, 2023. In December 2015, the regulatory agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”).
Added
In early 2025, preliminary guidance from regulators suggested that any further acceleration in CRE loan growth or deterioration in loan performance could prompt the imposition of additional limits or remedial actions, which, if implemented, could curtail our growth and adversely affect our earnings.
Removed
As of our most recent examination report, the Bank received a “Needs to Improve” CRA rating, which results in restrictions on certain expansionary activities, including certain mergers and acquisitions and the establishment and relocation of bank branches.
Added
Recent regulatory developments in 2023 and early 2024 have led to enhanced expectations in areas such as cybersecurity, data privacy, digital asset management, and anti-money laundering. These evolving requirements are increasing our compliance costs and the complexity of our regulatory obligations.
Removed
This rating will also result in a loss of expedited processing of applications to undertake certain activities, and requires the Bank to receive prior regulatory approval for certain activities, including to issue or prepay certain subordinated debt obligations, and open or relocate bank branches.
Added
We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. In 2025, the U.S. political landscape remains uncertain, with the Republicans holding the majority in both the U.S. House of Representatives and the U.S. Senate.
Removed
A “Needs to Improve” rating could have an impact on our relationships with certain states, counties, municipalities or other public agencies to the extent applicable law, regulation or policy limits, restricts or influences whether such entity may do business with a company that has a below “Satisfactory” rating and, in general, could negatively affect our reputation, business, financial condition and results of operations.
Added
A unified Republican Congress has created conditions for potential shifts in policy, though partisan division may still result in challenges to enacting sweeping reforms.
Removed
These restrictions, among others, will remain in place at least until the Bank’s next CRA rating is publicly released by the FDIC. The FDIC may take additional enforcement action, including a possible informal or formal enforcement action and/or civil monetary penalties.
Added
The Trump Administration, alongside a unified Republican Congress, may pursue policies or changes that (i) reverse or suspend key actions implemented under the Biden Administration, (ii) promote deregulation by easing regulatory burdens on financial institutions, (iii) adopt a technology-forward approach, and (iv) take a more favorable stance on bank mergers and acquisitions, potentially streamlining the approval process to encourage consolidation within the banking sector.
Removed
As a result of these limitations and conditions, we may be unable or may fail to pursue, evaluate or complete transactions that might have been strategically or competitively significant. 32 Table of Contents We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.
Added
While some leadership positions were filled, others remained vacant, leading to ongoing shifts in regulatory priorities and enforcement approaches. In early 2025, additional turnover and policy realignments within these agencies have further contributed to regulatory uncertainty in the financial services sector.
Removed
In 2023, Republicans gained control of the U.S. House of Representatives, while Democrats retained control of the U.S. Senate. However slim the majorities, though, the net result was a split Congress, which in the past leads to less sweeping policy changes.
Added
The unified Republican government could further alter the composition of these agencies, introducing new leadership and new policies and rules that could significantly impact the banking sector.
Removed
The prospects for the enactment of major banking reform legislation remain unclear at this time.
Added
We face increasing climate change risks, including more frequent severe weather events—such as hurricanes, tropical storms, tornadoes, winter storms, freezes, and floods—that could damage or destroy residential and multifamily real estate collateral or impair borrowers’ ability to make payments.
Removed
These changes have impacted the rulemaking, supervision, examination and enforcement priorities and policies of the agencies and likely will continue to do so over the next several years.
Added
In addition, criminals committing fraud increasingly are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective.
Removed
The CECL accounting standard resulted in a significant change in how we recognize credit losses and may continue to have a material impact on our financial condition or results of operations.
Added
In 2024 and early 2025, the pace of technological change has accelerated, and the rapid evolution of cybersecurity threats, as well as the need to integrate new digital platforms, has increased the risks associated with failure to adapt. The development and use of AI presents risks and challenges that may adversely impact our business.
Removed
In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model.
Added
The development and use of AI by us or our third-party vendors poses significant risks. The evolving legal and regulatory landscape—covering intellectual property, privacy, consumer protection, employment, and more—could force costly changes and heighten non-compliance risks. AI models, especially generative ones, might produce biased, inaccurate, or harmful outputs, disclose confidential information, or infringe on intellectual property rights.
Removed
While the new CECL standard became effective on January 1, 2023 and for interim periods within that year, we early adopted CECL as of January 1, 2022.
Added
Moreover, their inherent complexity limits transparency, complicating oversight and error reduction. Reliance on third-party models further exposes us to risks associated with unauthorized training data and their risk management practices. Any of these issues could lead to legal liabilities, reputational harm, and adverse impacts on our business. Our profitability is dependent on our banking activities.
Removed
Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected.
Added
As of 2025, interest rates remain elevated, and prolonged higher rates could result in net interest margin compression as interest-bearing liability rates continue to reprice upwards, while interest-earning assets may have already repriced to peak yields.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo fulfill their duties, the Board receives regular updates from the Risk Committee regarding cybersecurity risks and management’s endeavors to prevent, detect, mitigate, and address any cybersecurity incidents, at least quarterly.
Biggest changeTo fulfill their duties, the Board receives regular updates from the Risk Committee regarding cybersecurity risks and management’s endeavors to prevent, detect, mitigate, and address any cybersecurity incidents, at least quarterly. Item 2. Properties. Our principal executive offices and the Bank's main office are located at 6 Verdae Boulevard, Greenville, South Carolina 29607.
Any of these systems are susceptible to compromise, whether by employees, clients, or other authorized individuals, as well as 43 Table of Contents by malicious actors employing sophisticated and continuously evolving software, tools, and strategies. Given our status as a financial services provider and our relative size, we and our business partners are considered high-value targets for such malicious actors.
Any of these systems are susceptible to compromise, whether by employees, clients, or other authorized individuals, as well as by malicious actors employing sophisticated and continuously evolving software, tools, and strategies. Given our status as a financial services provider and our relative size, we and our business partners are considered high-value targets for 43 Table of Contents such malicious actors.
For further details, please refer to the “Risks Related to Information Security and Business Interruption” section of the Risk Factors outlined in Item 1A of this Form 10-K.
For further details, please refer to the "Risks Related to Information Security and Business Interruption" section of the Risk Factors outlined in Item 1A of this Form 10-K.
Added
In addition, we currently operate eight additional offices located in Greenville, Columbia, Summerville and Charleston, South Carolina, one office in Raleigh, North Carolina, one office in Greensboro, North Carolina, one office in Charlotte, North Carolina, and one office in Atlanta, Georgia. We lease eight of our offices and own the remaining five locations. 44 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Removed
Item 2. Properties. Our principal executive offices and the Bank’s main office are located at 6 Verdae Boulevard, Greenville, South Carolina 29607.
Added
ITEM 2.03 Creation of a Direct Financial Obligation.
Removed
In addition, we currently operate eight additional offices located in Greenville, Columbia, Summerville and Charleston, South Carolina, one office in Raleigh, North Carolina, one office in Greensboro, North Carolina, one office in 44 Table of Contents Charlotte, North Carolina, and one office in Atlanta, Georgia. We lease eight of our offices and own the remaining five locations.
Added
The relevant disclosure set forth in Item 1.01 above is incorporated herein by reference in response to this Item 2.03 Trading Plans During the three months ended December 31, 2024, no director or “officer” of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. 110 Table of Contents Item 9C.
Added
Disclosures Regarding Foreign Jurisdictions that Prevent Inspections Not applicable PART III

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(3) The weighted-average exercise prices in this column are based on outstanding options and do not take into account unvested awards of restricted stock as these awards do not have an exercise price. 45 Table of Contents Stock Performance Graph The performance graph below compares the Company’s cumulative total return over the most recent five-year period with the SNL Southeast Bank Index, a banking industry performance index for the southeastern United States, and the Russell 2000 Index, a small-cap stock market index which the Company was added to in June 2016.
Biggest changeStock Performance Graph The performance graph below compares the Company’s cumulative total return over the most recent five-year period with the SNL Southeast Bank Index, a banking industry performance index for the southeastern United States, and the Russell 45 Table of Contents 2000 Index, a small-cap stock market index which the Company was added to in June 2016.
Equity Compensation Plan Information The following table sets forth information regarding equity compensation plans approved by security holders at December 31, 2023. We had no equity compensation plans that were not approved by security holders at December 31, 2023.
Equity Compensation Plan Information The following table sets forth information regarding equity compensation plans approved by security holders at December 31, 2024. We had no equity compensation plans that were not approved by security holders at December 31, 2024.
Item 5. Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Market Information and Holders of Record Our common stock is currently traded on the NASDAQ Global Market under the symbol “SFST.” We had approximately 2,900 shareholders of record on February 5, 2024.
Item 5. Market for Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. Market Information and Holders of Record Our common stock is currently traded on the NASDAQ Global Market under the symbol “SFST.” We had approximately 3,100 shareholders of record on February 13, 2025.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) (3) Number of securities remaining available for future issuance under equity compensation plans (c) (excluding securities reflected in column(a)) Equity compensation plans approved by security holders 2010 Stock Incentive Plan – options (1) 78,802 $ 26.18 - 2016 Equity Incentive Plan – options (1) 245,047 37.99 - 2020 Equity Incentive Plan (2) 7,500 52.85 319,058 Total 331,349 $ 35.51 319,058 (1) Under the terms of the 2010 and 2016 Plans no further incentive stock option awards may be granted; however, the Plans will remain in effect until all awards have been exercised or forfeited and we determine to terminate the Plans.
Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) (3) Number of securities remaining available for future issuance under equity compensation plans (c) (excluding securities reflected in column(a)) Equity compensation plans approved by security holders 2010 Stock Incentive Plan – options (1) 64,177 $ 28.78 - 2016 Equity Incentive Plan – options (1) 240,922 37.98 - 2020 Equity Incentive Plan (2) 7,500 52.85 258,622 Total 312,599 $ 36.34 258,622 (1) Under the terms of the 2010 and 2016 Plans no further incentive stock option awards may be granted; however, the Plans will remain in effect until all awards have been exercised or forfeited and we determine to terminate the Plans.
Period Ending 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Southern First Bancshares 100.00 132.49 110.23 194.86 142.66 115.68 S&P US BMI Banks – Southeast Bank Index 100.00 140.94 126.37 180.49 146.81 151.44 Russell 2000 Index 100.00 125.52 150.58 172.90 137.56 160.85 Sales of Unregistered Equity Securities None Stock Repurchases The Company does not have a current repurchase plan and, as such, future repurchases will require additional approval of our Board of Directors and the Federal Reserve.
Period Ending 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Southern First Bancshares 100.00 83.20 147.07 107.67 87.31 93.55 S&P US BMI Banks – Southeast Bank Index 100.00 89.66 128.06 104.16 107.45 139.40 Russell 2000 Index 100.00 119.96 137.74 109.59 128.14 142.93 Sales of Unregistered Equity Securities None Stock Repurchases The Company does not have a current repurchase plan and, as such, future repurchases will require additional approval of our Board of Directors and the Federal Reserve.
(2) The 2020 Equity Incentive Plan provides for shares to be issued as either stock options or restricted stock grants.
(2) The 2020 Equity Incentive Plan provides for shares to be issued as either stock options or restricted stock grants. (3) The weighted-average exercise prices in this column are based on outstanding options and do not take into account unvested awards of restricted stock as these awards do not have an exercise price.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur average consumer real estate loan currently has a principal balance of $469,000, a term of 23 years, and an average rate of 4.10%. 56 Table of Contents December 31, 2023 2022 2021 (dollars in thousands) Amount %of Total Amount %of Total Amount %of Total Commercial Owner occupied RE $ 631,657 17.5 % $ 612,901 18.7 % $ 488,965 19.6 % Non-owner occupied RE 942,529 26.2 % 862,579 26.3 % 666,833 26.8 % Construction 150,680 4.2 % 109,726 3.4 % 64,425 2.6 % Business 500,161 13.9 % 468,112 14.3 % 333,049 13.4 % Total commercial loans 2,225,027 61.8 % 2,053,318 62.7 % 1,553,272 62.4 % Consumer Real estate 1,082,429 30.0 % 931,278 28.4 % 694,401 27.9 % Home equity 183,004 5.1 % 179,300 5.5 % 154,839 6.2 % Construction 63,348 1.7 % 80,415 2.5 % 59,846 2.4 % Other 48,819 1.4 % 29,052 0.9 % 27,519 1.1 % Total consumer loans 1,377,600 38.2 % 1,220,045 37.3 % 936,605 37.6 % Total gross loans, net of deferred fees 3,602,627 100.0 % 3,273,363 100.0 % 2,489,877 100.0 % Less – allowance for credit losses (40,682 ) (38,639 ) (30,408 ) Total loans, net $ 3,561,945 $ 3,234,724 $ 2,459,469 Maturities and Sensitivity of Loans to Changes in Interest Rates The information in the following table is based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity.
Biggest changeDecember 31, 2024 2023 2022 % of % of % of (dollars in thousands) Amount Total Amount Total Amount Total Commercial Owner occupied RE $ 651,597 17.9 % $ 631,657 17.5 % $ 612,901 18.7 % Non-owner occupied RE 924,367 25.5 % 942,529 26.2 % 862,579 26.3 % Construction 103,204 2.8 % 150,680 4.2 % 109,726 3.4 % Business 556,117 15.3 % 500,161 13.9 % 468,112 14.3 % Total commercial loans 2,235,285 61.5 % 2,225,027 61.8 % 2,053,318 62.7 % Consumer Real estate 1,128,629 31.1 % 1,082,429 30.0 % 931,278 28.4 % Home equity 204,897 5.6 % 183,004 5.1 % 179,300 5.5 % Construction 20,874 0.6 % 63,348 1.7 % 80,415 2.5 % Other 42,082 1.2 % 48,819 1.4 % 29,052 0.9 % Total consumer loans 1,396,482 38.5 % 1,377,600 38.2 % 1,220,045 37.3 % Total gross loans, net of deferred fees 3,631,767 100.0 % 3,602,627 100.0 % 3,273,363 100.0 % Less – allowance for credit losses (39,914 ) (40,682 ) (38,639 ) Total loans, net $ 3,591,853 $ 3,561,945 $ 3,234,724 We have included the table below to provide additional clarity on our commercial real estate exposure.
The decrease in net income resulted primarily from a decrease in net interest income and an increase in noninterest expenses, partially offset by a decrease in the provision for credit losses.
The increase in net income resulted primarily from an increase in net interest income and an increase in noninterest income, partially offset by an increase in noninterest expenses and a decrease in the provision for credit losses.
In addition, to loan growth, 52 Table of Contents the provision for credit losses was impacted by slightly lower expected loss rates due to historically low charge-offs during the 12 months ended December 31, 2022 while minor adjustments to two internal qualitative factors increased the qualitative component of the allowance and related provision expense.
In addition, to loan growth, the provision for credit losses was impacted by 52 Table of Contents slightly lower expected loss rates due to historically low charge-offs during the 12 months ended December 31, 2022 while minor adjustments to two internal qualitative factors increased the qualitative component of the allowance and related provision expense.
We have both an internal ALCO consisting of senior management that meets no less than quarterly and a board risk committee that meets quarterly. These committees are responsible for maintaining the level of interest rate sensitivity of our interest sensitive assets and liabilities within board-approved limits.
We have both an internal ALCO consisting of senior management that meets no less than quarterly and a board risk committee that meets quarterly, and both committees are responsible for maintaining the level of interest rate sensitivity of our interest sensitive assets and liabilities within board-approved limits.
Our average interest-earning assets increased by $695.1 million during the year ended December 31, 2023, compared to 2022, while the related yield on our interest-earning assets increased by 88 basis points.
During the year ended December 31, 2023, our average interest-earning assets increased by $695.1 million, compared to 2022, while the yield on our interest-earning assets increased by 88 basis points.
As of December 31, 2023, the following table summarizes the forecasted impact on net interest income using a base case scenario given upward and downward movements in interest rates of 100, 200, and 300 basis points based on forecasted assumptions of prepayment speeds, nominal interest rates and loan and deposit repricing rates.
As of December 31, 2024, the following table summarizes the forecasted impact on net interest income using a base case scenario given upward and downward movements in interest rates of 100, 200, and 300 basis points based on forecasted assumptions of prepayment speeds, nominal interest rates and loan and deposit repricing rates.
Option periods that we have not yet exercised are not included in this analysis as they do not represent contractual obligations until exercised. The following table provides payments due by period for obligations under long-term borrowings and operating lease obligations as of December 31, 2023.
Option periods that we have not yet exercised are not included in this analysis as they do not represent contractual obligations until exercised. The following table provides payments due by period for obligations under long-term borrowings and operating lease obligations as of December 31, 2024.
We also have a line of credit with another financial institution for $15.0 million, which was unused at December 31, 2023. The line of credit was issued on December 28, 2023 at an interest rate of the U.S. Prime Rate plus 0.25% and a maturity date of February 28, 2025.
We also have a line of credit with another financial institution for $15.0 million, which was unused at December 31, 2024. The line of credit was issued on December 28, 2024 at an interest rate of the U.S. Prime Rate plus 0.25% and a maturity date of February 28, 2025.
For example, the “Average Balances, Income and Expenses, Yields and Rates” table shows the average balance of each category of our assets and liabilities as well as the yield we earned or the rate we paid with respect to each category during 2023, 2022, and 2021.
For example, the “Average Balances, Income and Expenses, Yields and Rates” table shows the average balance of each category of our assets and liabilities as well as the yield we earned or the rate we paid with respect to each category during 2024, 2023, and 2022.
The following table sets forth information related to our average balance sheet, average yields on assets, and average costs of liabilities at December 31, 2023, 2022 and 2021. We derived these yields or costs by dividing income or expense by the average balance of the corresponding assets or liabilities.
The following table sets forth information related to our average balance sheet, average yields on assets, and average costs of liabilities at December 31, 2024, 2023 and 2022. We derived these yields or costs by dividing income or expense by the average balance of the corresponding assets or liabilities.
As of December 31, 2023, our capital ratios exceed these ratios and we remain “well capitalized.” The following table summarizes the capital amounts and ratios of the Bank and the regulatory minimum requirements. See Note 21 to the Consolidated Financial Statements for ratios of the Company.
As of December 31, 2024, our capital ratios exceed these ratios and we remain “well capitalized.” The following table summarizes the capital amounts and ratios of the Bank and the regulatory minimum requirements. See Note 21 to the Consolidated Financial Statements for ratios of the Company.
In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied 62 Table of Contents by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for credit losses, subject to certain limitations.
In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for credit losses, subject to certain limitations.
We adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.
We adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan 58 Table of Contents modifications to borrowers experiencing financial difficulty.
The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), equity to assets ratio (average equity divided by average assets), and tangible common equity ratio (total equity less preferred stock divided by total assets) for the three years ended December 31, 2023.
The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), equity to assets ratio (average equity divided by average assets), and tangible common equity ratio (total equity less preferred stock divided by total assets) for the three years ended December 31, 2024.
The increase in average interest-earning assets was driven by a $626.9 million increase in average loan balances and a $46.4 million increase in federal funds sold and interest-bearing deposits with banks.
The increase in average interest-earning assets was driven primarily by a $626.9 million increase in average loan balances combined with a $46.4 million increase in federal funds sold and interest-bearing deposits with banks.
Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control at the time investment decisions are made.
Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree 60 Table of Contents of control at the time investment decisions are made.
We derived our balance sheet and income statement data for the years ended December 31, 2023, 2022, and 2021 from our audited consolidated financial statements.
We derived our balance sheet and income statement data for the years ended December 31, 2024, 2023, and 2022 from our audited consolidated financial statements.
The principal component of our liabilities is deposits which were $3.38 billion and $3.13 billion at December 31, 2023 and 2022, respectively. Like most community banks, we derive the majority of our income from interest received on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we pay interest.
The principal component of our liabilities is deposits which were $3.44 billion and $3.38 billion at December 31, 2024 and 2023, respectively. Like most community banks, we derive the majority of our income from interest received on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, on which we pay interest.
Core deposits exclude out-of-market deposits and time deposits of $250,000 or more and provide a relatively stable funding source for our loan portfolio and other earning assets. Our core deposits were $2.81 billion, $2.76 billion, and $2.48 billion at December 31, 2023, 2022 and 2021, respectively. All of our time deposits are certificates of deposits.
Core deposits exclude out-of-market deposits and time deposits of $250,000 or more and provide a relatively stable funding source for our loan portfolio and other earning assets. Our core deposits were $2.66 billion, $2.81 billion, and $2.76 billion at December 31, 2024, 2023 and 2022, respectively. All of our time deposits are certificates of deposits.
As of December 31, 2023, $1.4 million remained outstanding under these commitments. We utilize a variety of short-term and long-term borrowings to supplement our supply of lendable funds, to assist in meeting deposit withdrawal requirements, and to fund growth of interest-earning assets in excess of traditional deposit growth.
As of December 31, 2024, $1.2 million remained outstanding under these commitments. We utilize a variety of short-term and long-term borrowings to supplement our supply of lendable funds, to assist in meeting deposit withdrawal requirements, and to fund growth of interest-earning assets in excess of traditional deposit growth.
See Note 4 to the Consolidated Financial Statements for more information on our allowance for credit losses. 59 Table of Contents The following table summarizes the net charge-off detail as a percentage of average loans by loan composition for the three years ended December 31, 2023.
See Note 4 to the Consolidated Financial Statements for more information on our allowance for credit losses. The following table summarizes the net charge-off detail as a percentage of average loans by loan composition for the three years ended December 31, 2024.
Further, 0.8% and 0.6% of our total home equity lines of credit were over 30 days past due as of December 31, 2023 and 2022, respectively. Following is a summary of our loan composition for each of the last three years ended December 31, 2023.
Further, 0.12% and 0.8% of our total home equity lines of credit were over 30 days past due as of December 31, 2024 and 2023, respectively. Following is a summary of our loan composition for each of the last three years ended December 31, 2024.
Our significant accounting policies are described in Note 1 to our Consolidated Financial Statements as of December 31, 2023.
Our significant accounting policies are described in Note 1 to our Consolidated Financial Statements as of December 31, 2024.
Also, included in interest income on loans was $1.7 million related to the net amortization of loan fees and capitalized loan origination costs for the year ended December 31, 2023, compared to $1.7 million and $1.4 million for the years ended December 31, 2022 and 2021, respectively.
Also, included in interest income on loans was $1.6 million related to the net amortization of loan fees and capitalized loan origination costs for the year ended December 31, 2024, compared to $1.7 million for the years ended December 31, 2023 and 2022, respectively.
The bank failures in the first five months of 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institutions ability to satisfy its obligations to depositors.
The several large bank failures across the United States in the first five months of 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institutions ability to satisfy its obligations to depositors.
(2) Includes loans held for sale and nonaccrual loans. Our net interest margin, on a tax-equivalent basis (TE), was 2.07%, 3.19% and 3.45% for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) Includes loans held for sale and nonaccrual loans. Our net interest margin, on a tax-equivalent basis (TE), was 2.06%, 2.07% and 3.19% for the years ended December 31, 2024, 2023 and 2022, respectively.
However, as short-term liquidity needs arise, we have the ability to sell a portion of our investment securities portfolio should we be required to meet those needs. Total shareholders’ equity was $312.5 million at December 31, 2023 and $294.5 million at December 31, 2022.
However, as short-term liquidity needs arise, we have the ability to sell a portion of our investment securities portfolio should we be required to meet those needs. Total shareholders’ equity was $330.4 million at December 31, 2024 and $312.5 million at December 31, 2023.
The increase in interest income during 2023 was driven by an increase in average interest-earning assets, combined with higher yields on those assets. Interest expense was $99.9 million, $20.0 million, and $5.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.
The increase in interest income during 2024 was driven by an increase in average interest-earning assets, combined with higher yields on those assets. Interest expense was $120.0 million, $99.9 million, and $20.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.
In addition, at December 31, 2023 we had $388.3 million of letters of credit outstanding with the FHLB to secure client deposits. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000.
In addition, at December 31, 2024 we had $205.4 million of letters of credit outstanding with the FHLB to secure client deposits. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000.
RESULTS OF OPERATIONS Net Interest Income and Margin Our level of net interest income is determined by the level of earning assets and the management of our net interest margin. For the years ended December 31, 2023, 2022, and 2021, our net interest income was $77.7 million, $97.6 million, and $87.7 million, respectively.
RESULTS OF OPERATIONS Net Interest Income and Margin Our level of net interest income is determined by the level of earning assets and the management of our net interest margin. For the years ended December 31, 2024, 2023, and 2022, our net interest income was $81.2 million, $77.7 million, and $97.6 million, respectively.
A significant portion of our interest income relates to our strategy to maintain a large portion of our assets in higher earning loans compared to lower yielding investments and federal funds sold. As such, 93.5% of our interest income related to interest on loans during 2023, compared to 97.1% during 2022 and 98.3% during 2021.
A significant portion of our interest income relates to our strategy to maintain a large portion of our assets in higher earning loans compared to lower yielding investments and federal funds sold. As such, 92.9% of our interest income related to interest on loans during 2024, compared to 93.5% during 2023 and 97.1% during 2022.
However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control. At December 31, 2023 and 2022, our cash and cash equivalents amounted to $156.2 million and $170.9 million, or 3.9% and 4.6% of total assets, respectively.
However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control. At December 31, 2024 and 2023, our cash and cash equivalents amounted to $162.9 million and $156.2 million, or 4.0% and 3.9% of total assets, respectively.
Average loans for the years ended December 31, 2023 and 2022 were $3.50 billion and $2.87 billion, respectively. Before allowance for credit losses, total loans outstanding at December 31, 2023 and 2022 were $3.60 billion and $3.27 billion, respectively. The principal component of our loan portfolio is loans secured by real estate mortgages.
Average loans for the years ended December 31, 2024 and 2023 were $3.63 billion and $3.50 billion, respectively. Before allowance for credit losses, total loans outstanding at December 31, 2024 and 2023 were $3.63 billion and $3.60 billion, respectively. The principal component of our loan portfolio is loans secured by real estate mortgages.
In addition, nonperforming assets increased to 0.10% of total assets while our level of classified assets decreased to 4.25% at December 31, 2023. We reported net recoveries of $1.4 million and net charge-offs of $1.3 million for the years ended December 31, 2022 and 2021, respectively, including charge-offs of $485,000 and recoveries of $825,000 in 2022 and 2021, respectively.
In addition, nonperforming assets increased to 0.27% of total assets while our level of classified assets decreased to 4.25% at December 31, 2024. We reported net charge-offs of $166,000 and net recoveries of $1.4 million for the years ended December 31, 2023 and 2022, respectively, including charge-offs of $761,000 and $485,000 in 2023 and 2022, respectively.
The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans for the five years ended December 31, 2023.
The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans for the three years ended December 31, 2024.
Home equity lines of credit totaled $183.0 million as of December 31, 2023, of which approximately 46% were in a first lien position, while the remaining balance was second liens, compared to $179.3 million as of December 31, 2022, of which approximately 48% were in first lien positions and the remaining balance was in second liens.
Home equity lines of credit totaled $204.9 million as of December 31, 2024, of which approximately 46% were in a first lien position, while the remaining balance was second liens, compared to $183.0 million as of December 31, 2023, of which approximately 46% were in first lien positions and the remaining balance was in second liens.
Please see the discussion below under “Results of Operations – Allowance for Credit Losses” for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance.
We review the adequacy of the allowance for credit losses on a quarterly basis. Please see the discussion below under “Results of Operations – Allowance for Credit Losses” for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance.
Interest expense on deposits for 2023 represented 91.4% of total interest expense, compared to 90.3% for 2022, and 71.9% for 2021, while interest expense on borrowings represented 8.6% of total interest expense for 2023, compared to 9.7% for 2022, and 28.1% for 2021.
Interest expense on deposits for 2024 represented 90.7% of total interest expense, compared to 91.4% for 2023, and 90.3% for 2022, while interest expense on borrowings represented 9.3% of total interest expense for 2024, compared to 8.6% for 2023, and 9.7% for 2022.
Income Taxes Income tax expense was $4.0 million, $9.0 million and $14.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our effective tax rate was 23.0% for the year ended December 31, 2023, compared to 23.6% for 2022, and 23.2% for 2021.
Income Taxes Income tax expense was $4.4 million, $4.0 million and $9.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Our effective tax rate was 22.0% for the year ended December 31, 2024, compared to 23.0% for 2023, and 23.6% for 2022.
The average home equity loan had a balance of approximately $85,000 and a loan to value of approximately 73% as of December 31, 2023, compared to an average loan balance of $84,000 and a loan to value of approximately 73% as of December 31, 2022.
The average home equity loan had a balance of approximately $92,000 and a loan to value of approximately 74% as of December 31, 2024, compared to an average loan balance of $85,000 and a loan to value of approximately 73% as of December 31, 2023.
In addition, nonperforming assets were 0.07% and 0.17% of total assets for 2022 and 2021, respectively, and classified assets were 4.72% and 12.61% at December 31, 2022 and 2021, respectively. Noninterest Income The following table sets forth information related to our noninterest income.
In addition, nonperforming assets were 0.10% and 0.07% of total assets for 2023 and 2022, respectively, and classified assets were 4.25% and 4.72% at December 31, 2023 and 2022, respectively. Noninterest Income The following table sets forth information related to our noninterest income.
The unused borrowing capacity currently available from the FHLB at December 31, 2023 was $542.8 million, based on the Bank’s $16.1 million investment in FHLB stock, as well as qualifying mortgages available to secure any future borrowings. However, we are able to pledge additional securities to the FHLB in order to increase our available borrowing capacity.
The unused borrowing capacity currently available from the FHLB at December 31, 2024 was $807.5 million, based on the Bank’s $14.5 million investment in FHLB stock, as well as qualifying mortgages available to secure any future borrowings. However, we are able to pledge additional securities to the FHLB in order to increase our available borrowing capacity.
At December 31, 2023, individually evaluated loans totaled approximately $4.8 million for which $3.7 million of these loans have a reserve of approximately $688,000 allocated in the allowance. At December 31, 2022, individually evaluated loans totaled approximately $7.1 million for which $6.8 million of these loans had a reserve of approximately $1.3 million allocated in the allowance.
At December 31, 2024, individually evaluated loans totaled approximately $12.2 million for which $4.5 million of these loans have a reserve of approximately $1.9 million allocated in the allowance. At December 31, 2023, individually evaluated loans totaled approximately $4.8 million for which $3.7 million of these loans had a reserve of approximately $688,000 allocated in the allowance.
Our available for sale investment portfolio included corporate bonds, US treasuries, US agency securities, SBA securities, state and political subdivisions, asset-backed securities, and mortgage-backed securities with a fair value of $134.7 million and amortized cost of $149.1 million for an unrealized loss of $14.4 million at December 31, 2023 compared to a fair value of $93.3 million and amortized cost of $110.3 million for an unrealized loss of $17.0 million at December 31, 2022.
Our available for sale investment portfolio included corporate bonds, US treasuries, US agency securities, SBA securities, state and political subdivisions, asset-backed securities, and mortgage-backed securities with a fair value of $132.1 million and amortized cost of $146.6 million for an unrealized loss of $14.5 million at December 31, 2024 compared to a fair value of $134.7 million and amortized cost of $149.1 million for an unrealized loss of $14.4 million at December 31, 2023.
Our net income available to common shareholders for the years ended December 31, 2023 and 2022 was $13.4 million and $29.1 million, or diluted earnings per share (“EPS”) of $1.66 and $3.61 for the years ended December 31, 2023 and 2022, respectively.
Our net income available to common shareholders for the years ended December 31, 2024 and 2023 was $15.5 million and $13.4 million, or diluted earnings per share (“EPS”) of $1.91 and $1.66 for the years ended December 31, 2024 and 2023, respectively.
The increase in noninterest income during 2023, compared to 2022, resulted primarily from a loss on disposal of assets during the prior year. Offsetting the increases in noninterest income were decreases in mortgage banking income and other income. Other income decreased due to a decrease in loan fee income during 2023 as compared to 2022 due to fewer loan originations.
The increase in noninterest income during 2023, compared to 2022, resulted primarily from a loss on disposal of assets during the prior year. Offsetting the increases in noninterest income were decreases in mortgage banking income and other income.
In addition, our net income available to shareholders was $46.7 million, or EPS of $5.85 for the year ended December 31, 2021. 47 Table of Contents SELECTED FINANCIAL DATA The following table sets forth our selected historical consolidated financial information for the periods and as of the dates indicated.
In addition, our net income available to shareholders was $29.1 million, or EPS of $3.61 for the year ended December 31, 2022. 47 Table of Contents SELECTED FINANCIAL DATA The following table sets forth our selected historical consolidated financial information for the periods and as of the dates indicated.
The net recoveries of $1.4 million and charge-offs of $1.3 million during 2022 and 2021, respectively, represented 0.05% and 0.06% of the average outstanding loan portfolios for 2022 and 2021, respectively.
The net charge-offs of $166,000 and net recoveries of $1.4 million during 2023 and 2022, respectively, represented 0.0.% and 0.05% of the average outstanding loan portfolios for 2023 and 2022, respectively.
The essential purposes of asset/liability management are to seek to ensure adequate liquidity and to maintain an appropriate balance between interest sensitive assets and liabilities in order to minimize potentially adverse impacts on earnings from changes in market interest rates. Our asset/liability management committee (“ALCO”) monitors and considers methods of managing exposure to interest rate risk.
The essential purposes of asset/liability management are to seek to ensure adequate liquidity and to maintain an appropriate balance between interest sensitive assets and liabilities in order to minimize potentially adverse impacts on earnings from changes in market interest rates.
Year ended December 31, 2023 2022 2021 (dollars in thousands) Amount % Amount % Amount % Net charge-offs: Commercial Owner occupied RE $ - - $ - - $ 94 0.00 % Non-owner occupied RE (57 ) 0.00 % 1,540 0.05 % (573 ) 0.03 % Business 279 0.01 % 153 0.01 % (943 ) 0.04 % Total commercial 222 0.01 % 1,693 0.06 % (1,422 ) 0.06 % Consumer Real estate - 0.00 % - 0.00 % 18 0.00 % Home equity (373 ) (0.01 %) (247 ) 0.01 % 62 0.00 % Other (15 ) 0.00 % (90 ) 0.00 % 1 0.00 % Total consumer (388 ) (0.01 %) (337 ) 0.00 % 81 0.00 % Net loan (charge-offs) recoveries $ (166 ) $ 1,356 $ (1,341 ) Net loan (charge-offs) recoveries as a % of average loans 0.00 % (0.05 %) 0.06 % The following table summarizes the allocation of the allowance for credit losses among the various loan categories.
Year ended December 31, 2024 2023 2022 (dollars in thousands) Amount % Amount % Amount % Net charge-offs: Commercial Non-owner occupied RE $ (1,029 ) (0.03 )% $ (57 ) 0.00 % $ 1,540 0.05 % Business (468 ) (0.01 )% 279 0.01 % 153 0.01 % Total commercial (1,497 ) (0.04 )% 222 0.01 % 1,693 0.06 % Consumer Home equity 210 0.01 % (373 ) (0.01 )% (247 ) 0.01 % Other 19 0.00 % (15 ) 0.00 % (90 ) 0.00 % Total consumer 229 0.01 % (388 ) (0.01 )% (337 ) 0.00 % Net loan (charge-offs) recoveries $ (1,268 ) $ (166 ) $ 1,356 Net loan (charge-offs) recoveries as a % of average loans (0.04 )% 0.00 % (0.05 )% The following table summarizes the allocation of the allowance for credit losses among the various loan categories.
December 31, (dollars in thousands) 2023 2022 Federal Home Loan Bank stock $ 16,063 9,250 Other investments 3,473 1,180 Investment in Trust Preferred subsidiaries 403 403 Total $ 19,939 10,833 Loans Since loans typically provide higher interest yields than other types of interest-earning assets, a substantial percentage of our earning assets are invested in our loan portfolio.
December 31, (dollars in thousands) 2024 2023 Federal Home Loan Bank stock $ 14,516 16,063 Other investments 4,571 3,473 Investment in Trust Preferred subsidiaries 403 403 Total $ 19,490 19,939 Loans Since loans typically provide higher interest yields than other types of interest-earning assets, a substantial percentage of our earning assets are invested in our loan portfolio.
The largest components of our total assets are loans which were $3.60 billion and $3.27 billion at December 31, 2023 and 2022, respectively. Our liabilities and shareholders’ equity at December 31, 2023 totaled $3.74 billion and $312.5 million, respectively, compared to liabilities of $3.40 billion and shareholders’ equity of $294.5 million at December 31, 2022.
The largest components of our total assets are loans which were $3.63 billion and $3.60 billion at December 31, 2024 and 2023, respectively. Our liabilities and shareholders’ equity at December 31, 2024 totaled $3.76 billion and $330.4 million, respectively, compared to liabilities of $3.74 billion and shareholders’ equity of $312.5 million at December 31, 2023.
The 255 basis point increase in the cost of our interest- 51 Table of Contents bearing liabilities, partially offset by an 88 basis point increase in yield on our interest-earning assets resulted in a 167 basis point decrease in our net interest spread for the 2023 period.
The 44 basis point increase in the cost of our interest-bearing liabilities, partially offset by a 39 basis point increase in yield on our interest-earning assets resulted in a 5 basis point 51 Table of Contents decrease in our net interest spread for the 2024 period.
These guidelines allow us to take advantage of the attractive terms that wholesale funding can offer while mitigating the related inherent risk. Our retail deposits represented $3.00 billion, or 88.8% of total deposits at December 31, 2023. At December 31, 2022, retail deposits represented $2.90 billion, or 92.5% of our total deposits.
These guidelines allow us to take advantage of the attractive terms that wholesale funding can offer while mitigating the related inherent risk. 59 Table of Contents Our retail deposits represented $2.89 billion, or 84.0% of total deposits, at December 31, 2024 and $3.00 billion, or 88.8% of total deposits, at December 31, 2023.
Years Ended December 31, (dollars in thousands, except per share data) 2023 2022 2021 BALANCE SHEET DATA Total assets $ 4,055,789 3,691,981 2,925,548 Investment securities 154,641 104,180 124,302 Loans (1) 3,602,627 3,273,363 2,489,877 Allowance for credit losses 40,682 38,639 30,408 Deposits 3,379,564 3,133,864 2,563,826 FHLB advances and other borrowings 275,000 175,000 - Subordinated debentures 36,322 36,214 36,106 Common equity 312,467 294,512 277,901 Preferred stock - - - Shareholders’ equity 312,467 294,512 277,901 SELECTED RESULTS OF OPERATIONS DATA Interest income $ 177,598 117,662 93,167 Interest expense 99,944 20,041 5,435 Net interest income 77,654 97,621 87,732 Provision for credit losses 1,260 6,155 (12,400 ) Net interest income after provision for credit losses 76,394 91,466 100,132 Noninterest income 9,860 9,580 17,101 Noninterest expenses 68,827 62,933 56,430 Income before income tax expense 17,427 38,113 60,803 Income tax expense 4,001 8,998 14,092 Net income 13,426 29,115 46,711 Preferred stock dividends - - - Net income available to common shareholders $ 13,426 29,115 46,711 PER COMMON SHARE DATA Basic $ 1.67 3.66 5.96 Diluted 1.66 3.61 5.85 Book value 38.63 36.76 35.07 Weighted average number of common shares outstanding: Basic, in thousands 8,047 7,958 7,844 Diluted, in thousands 8,078 8,072 7,989 SELECTED FINANCIAL RATIOS Performance Ratios: Return on average assets 0.34 % 0.90 % 1.75 % Return on average equity 4.44 % 10.20 % 18.64 % Return on average common equity 4.44 % 10.20 % 18.64 % Net interest margin, tax equivalent (2) 2.07 % 3.19 % 3.45 % Efficiency ratio (3) 78.65 % 58.71 % 53.83 % Asset Quality Ratios: Nonperforming assets to total loans (1) 0.11 % 0.08 % 0.20 % Nonperforming assets to total assets 0.10 % 0.07 % 0.17 % Net charge-offs to average total loans 0.00 % (0.05 %) 0.06 % Allowance for credit losses to nonperforming loans 1,026.58 % 1,470.74 % 625.16 % Allowance for credit losses to total loans 1.13 % 1.18 % 1.22 % Holding Company Capital Ratios: Total risk-based capital ratio 12.57 % 12.91 % 14.90 % Tier 1 risk-based capital ratio 10.60 % 10.88 % 12.65 % Leverage ratio 8.14 % 9.17 % 10.19 % Common equity tier 1 ratio (4) 10.19 % 10.44 % 12.09 % Tangible common equity (5) 7.70 % 7.98 % 9.50 % Growth Ratios: Change in assets 9.85 % 26.20 % 17.84 % Change in loans 10.06 % 31.47 % 16.19 % Change in deposits 7.84 % 22.23 % 19.65 % Change in net income to common shareholders -53.89 % -37.67 % 154.86 % Change in earnings per common share - diluted -54.02 % -38.29 % 150.00 % 48 Table of Contents Footnotes to table: (1) Excludes loans held for sale.
Years Ended December 31, (dollars in thousands, except per share data) 2024 2023 2022 BALANCE SHEET DATA Total assets $ 4,087,593 4,055,789 3,691,981 Investment securities 151,617 154,641 104,180 Loans (1) 3,631,767 3,602,627 3,273,363 Allowance for credit losses 39,914 40,682 38,639 Deposits 3,435,765 3,379,564 3,133,864 FHLB advances and other borrowings 240,000 275,000 175,000 Subordinated debentures 24,903 36,322 36,214 Common equity 330,444 312,467 294,512 Preferred stock - - - Shareholders’ equity 330,444 312,467 294,512 SELECTED RESULTS OF OPERATIONS DATA Interest income $ 201,212 177,598 117,662 Interest expense 119,990 99,944 20,041 Net interest income 81,222 77,654 97,621 Provision for credit losses 125 1,260 6,155 Net interest income after provision for credit losses 81,097 76,394 91,466 Noninterest income 12,141 9,860 9,580 Noninterest expenses 73,326 68,827 62,933 Income before income tax expense 19,912 17,427 38,113 Income tax expense 4,382 4,001 8,998 Net income available to common shareholders $ 15,530 13,426 29,115 PER COMMON SHARE DATA Basic $ 1.92 1.67 3.66 Diluted 1.91 1.66 3.61 Book value 40.47 38.63 36.76 Weighted average number of common shares outstanding: Basic, in thousands 8,081 8,047 7,958 Diluted, in thousands 8,117 8,078 8,072 SELECTED FINANCIAL RATIOS Performance Ratios: Return on average assets 0.38 % 0.34 % 0.90 % Return on average equity 4.84 % 4.44 % 10.20 % Return on average common equity 4.84 % 4.44 % 10.20 % Net interest margin, tax equivalent (2) 2.06 % 2.07 % 3.19 % Efficiency ratio (3) 78.54 % 78.65 % 58.71 % Asset Quality Ratios: Nonperforming assets to total loans (1) 0.30 % 0.11 % 0.08 % Nonperforming assets to total assets 0.27 % 0.10 % 0.07 % Net charge-offs to average total loans 0.04 % 0.00 % (0.05 %) Allowance for credit losses to nonperforming loans 366.94 % 1,026.58 % 1,470.74 % Allowance for credit losses to total loans 1.10 % 1.13 % 1.18 % Holding Company Capital Ratios: Total risk-based capital ratio 12.70 % 12.57 % 12.91 % Tier 1 risk-based capital ratio 11.16 % 10.60 % 10.88 % Leverage ratio 8.55 % 8.14 % 9.17 % Common equity tier 1 ratio (4) 10.75 % 10.19 % 10.44 % Tangible common equity (5) 8.08 % 7.70 % 7.98 % Growth Ratios: Change in assets 0.78 % 9.85 % 26.20 % Change in loans 0.81 % 10.06 % 31.47 % Change in deposits 1.66 % 7.84 % 22.23 % Change in net income to common shareholders 15.67 % -53.89 % -37.67 % Change in earnings per common share - diluted 15.06 % -54.02 % -38.29 % 48 Table of Contents Footnotes to table: (1) Excludes loans held for sale.
We typically charge-off a portion or create a specific reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement.
As of December 31, 2024, we do not have any individually evaluated loans carried at a value in excess of the appraised value. We typically charge-off a portion or create a specific reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement.
We consider exceptional client service to be a critical part of our culture, which we refer to as “ClientFIRST.” At December 31, 2023, we had total assets of $4.06 billion, a 9.9% increase from total assets of $3.69 billion at December 31, 2022.
We consider exceptional client service to be a critical part of our culture, which we refer to as "ClientFIRST." At December 31, 2024, we had total assets of $4.09 billion, a slight increase from total assets of $4.06 billion at December 31, 2023.
In comparison, the allowance for credit losses totaled $38.6 million as of December 31, 2022, or 1.18% of gross loans, and $30.4 million as of December 31, 2021, or 1.22% of gross loans.
In comparison, the allowance for credit losses totaled $40.7 million as of December 31, 2023, or 1.13% of gross loans, and $38.6 million as of December 31, 2022, or 1.18% of gross loans.
December 31, (dollars in thousands) 2023 2022 2021 Balance, beginning of period $ 38,639 30,408 44,149 Adjustment for CECL - 1,500 - Provision for (reversal of) credit losses 2,209 5,375 (12,400 ) Loan charge-offs (761 ) (485 ) (2,166 ) Loan recoveries 595 1,841 825 Net loan (charge-offs) recoveries (166 ) 1,356 (1,341 ) Balance, end of period $ 40,682 38,639 30,408 As of December 31, 2023, the allowance for credit losses totaled $40.7 million, or 1.13% of gross loans.
December 31, (dollars in thousands) 2024 2023 2022 Balance, beginning of period $ 40,682 38,639 30,408 Adjustment for CECL - - 1,500 Provision for credit losses 500 2,209 5,375 Loan charge-offs (1,734 ) (761 ) (485 ) Loan recoveries 466 595 1,841 Net loan (charge-offs) recoveries (1,268 ) (166 ) 1,356 Balance, end of period $ 39,914 40,682 38,639 As of December 31, 2024, the allowance for credit losses totaled $39.9 million, or 1.10% of gross loans.
As of December 31, 2023, our loan portfolio included $3.05 billion, or 84.8%, of real estate loans, compared to $2.78 billion, or 84.8%, as of December 31, 2022. Most of our real estate loans are secured by residential or commercial property.
As of December 31, 2024, our loan portfolio included $3.03 billion, or 83.5%, of real estate loans, compared to $3.05 billion, or 84.8%, as of December 55 Table of Contents 31, 2023. Most of our real estate loans are secured by residential or commercial property.
During the year ended December 31, 2023, we had net charge-offs of $166,000, consisting of $761,000 of loans charged-off in the current year, partially offset by $595,000 of recoveries on loans previously charged-off. Net charge-offs were 0.00% of the average outstanding loan portfolio for 2023.
During the year ended December 31, 2024, we had net charge-offs of $1.3 million, consisting of $1.7 million of loans charged-off in the current year, partially offset by $466,000 of recoveries on loans previously charged-off. Net charge-offs were 0.04% of the average outstanding loan portfolio for 2024.
Year ended December 31, 2023 2022 (dollars in thousands) Amount % (1) Amount % (1) Commercial Owner occupied RE $ 6,118 17.5 % $ 5,867 18.7 % Non-owner occupied RE 11,167 26.2 % 10,376 26.3 % Construction 1,594 4.2 % 1,292 3.4 % Business 7,385 13.9 % 7,861 14.3 % Total commercial 26,264 61.8 % 25,396 62.7 % Consumer Real estate 10,647 30.0 % 9,487 28.4 % Home equity 2,600 5.1 % 2,551 5.5 % Construction 677 1.7 % 893 2.5 % Other 494 1.4 % 312 0.9 % Total consumer 14,418 38.2 % 13,243 37.3 % Total allowance for credit losses $ 40,682 100.0 % $ 38,639 100.0 % (1) Percentage of loans in each category to total loans Deposits and Other Interest-Bearing Liabilities Our primary source of funds for loans and investments is our deposits and advances from the FHLB.
Year ended December 31, 2024 2023 (dollars in thousands) Amount % (1) Amount % (1) Commercial Owner occupied RE $ 5,482 17.9 % $ 6,118 17.5 % Non-owner occupied RE 10,219 25.2 % 11,167 26.2 % Construction 940 2.8 % 1,594 4.2 % Business 7,745 15.3 % 7,385 13.9 % Total commercial 24,386 61.5 % 26,264 61.8 % Consumer Real estate 12,359 31.1 % 10,647 30.0 % Home equity 2,655 5.6 % 2,600 5.1 % Construction 115 0.6 % 677 1.7 % Other 399 1.2 % 494 1.4 % Total consumer 15,528 38.5 % 14,418 38.2 % Total allowance for credit losses $ 39,914 100.0 % $ 40,682 100.0 % (1) Percentage of loans in each category to total loans Deposits and Other Interest-Bearing Liabilities Our primary source of funds for loans and investments is our deposits and advances from the FHLB.
We use third party appraisers to determine the fair value of collateral dependent loans. Our current loan and appraisal policies require us to review individually evaluated loans at least annually and determine whether it is necessary to obtain an updated appraisal, either through a new external appraisal or an internal appraisal evaluation.
Our current loan and appraisal policies require us to review individually evaluated loans at least annually and determine whether it is necessary to obtain an updated appraisal, either through a new external appraisal or an internal appraisal evaluation. We review each of our individually evaluated loans on a quarterly basis to determine the level of impairment.
We plan to meet our future cash needs through the liquidation of temporary investments, the generation of deposits, and from additional borrowings. In addition, we will receive cash upon the maturity and sale of loans and the maturity of investment securities.
Our ability to maintain and expand our deposit base and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the liquidation of temporary investments, the generation of deposits, and from additional borrowings. In addition, we will receive cash upon the maturity and sale of loans and the maturity of investment securities.
The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income. The increase during the 2023 period relates primarily to the decrease in net interest income compared to the prior year.
The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income.
Years ended December 31, (dollars in thousands) 2023 2022 2021 Compensation and benefits $ 40,275 38,790 36,103 Occupancy 10,255 9,105 6,956 Other real estate owned expenses, net - - 385 Outside service and data processing costs 7,078 6,112 5,468 Insurance 3,766 1,686 1,149 Professional fees 2,496 2,635 2,589 Marketing 1,357 1,216 905 Other 3,600 3,389 2,875 Total noninterest expenses $ 68,827 62,933 56,430 Noninterest expenses were $68.8 million for the year ended December 31, 2023, a $5.9 million, or 9.4%, increase from noninterest expense of $62.9 million for 2022.
Year Ended December 31, (dollars in thousands) 2024 2023 2022 Compensation and benefits $ 43,546 40,275 38,790 Occupancy 10,291 10,255 9,105 Outside service and data processing costs 7,741 7,078 6,112 Insurance 4,022 3,766 1,686 Professional fees 2,404 2,496 2,635 Marketing 1,412 1,357 1,216 Other 3,910 3,600 3,389 Total noninterest expenses $ 73,326 68,827 62,933 Noninterest expenses were $73.3 million for the year ended December 31, 2024, a $4.5 million, or 6.5%, increase from noninterest expense of $68.8 million for 2023.
We believe that our existing stable base of core deposits, federal funds purchased lines of credit with correspondent banks, availability with the Federal Reserve’s Bank Term Funding Program and Discount Window, and borrowings from the FHLB will enable us to successfully meet our long-term liquidity needs.
The line was renewed under the same terms with a new maturity date of March 5, 2026. We believe that our existing stable base of core deposits, federal funds purchased lines of credit with correspondent banks, availability with the Federal Reserve’s Discount Window, and borrowings from the FHLB will enable us to successfully meet our long-term liquidity needs.
The maturity distribution of our time deposits of $250,000 or more is as follows: December 31, (dollars in thousands) 2023 2022 Three months or less $ 169,419 235,216 Over three through six months 86,342 76,778 Over six through twelve months 58,293 35,681 Over twelve months 254,011 27,076 Total $ 568,065 374,751 Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2023 and December 31, 2022 were $568.1 million and $374.8 million, respectively, including wholesale deposits.
The maturity distribution of our time deposits of $250,000 or more is as follows: December 31, (dollars in thousands) 2024 2023 Three months or less $ 233,514 169,419 Over three through six months 187,478 86,342 Over six through twelve months 130,568 58,293 Over twelve months 222,468 254,011 Total $ 774,028 568,065 Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2024 and December 31, 2023 were $774.0 million and $568.1 million, respectively, including wholesale deposits.
Net interest income was $97.6 million for the year ended December 31, 2022, a $9.9 million increase from net interest income of $87.7 million for the year ended December 31, 2021. The increase in net interest income was driven by a $24.5 million increase in interest income, partially offset by a $14.6 million increase in interest expense.
Net interest income was $77.7 million for the year ended December 31, 2023, a $20.0 million decrease from net interest income of $97.6 million for the year ended December 31, 2022. The decrease in net interest income was driven by a $79.9 million increase in interest expense, partially offset by a $59.9 million increase in interest income.
There was a $1.3 million provision for credit losses for the year ended December 31, 2023, compared to a provision of $6.2 million and a reversal of $12.4 million for the years ended December 31, 2022 and 2021, respectively.
There was a $125,000 provision for credit losses for the year ended December 31, 2024, compared to a provision of $1.3 million and $6.2 million for the years ended December 31, 2023 and 2022, respectively. The $125,000 provision during 2024 included a provision of $500,000 for credit losses and a reversal of $375,000 for unfunded commitments.
In addition, our nonperforming assets increased to 0.10% compared to 0.07%, as a percentage of total assets, at December 31, 2023 and 2022, respectively. Our classified assets decreased to 4.25% of capital as of December 31, 2023, compared to 4.72% of capital as of December 31, 2022.
In addition, our nonperforming assets increased to 0.27% as a percentage of total assets at December 31, 2024 from 0.10%, as a percentage of total assets, at December 31, 2023, while our classified assets were 4.25% of capital as of December 31, 2024 and December 31, 2023.
The net of capitalized loan costs and fees are amortized into interest income on loans. 50 Table of Contents Average Balances, Income and Expenses, Yields and Rates For the Year Ended December 31, 2023 2022 2021 (dollars in thousands) Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Interest-earning assets Federal funds sold and interest-bearing deposits with banks $ 134,495 $ 6,998 5.20 % $ 88,077 $ 1,439 1.63 % $ 123,379 $ 233 0.19 % Investment securities, taxable 121,739 4,296 3.53 % 97,328 1,793 1.84 % 92,812 1,110 1.20 % Investment securities, nontaxable (1) 7,941 217 2.73 % 10,604 256 2.41 % 11,331 292 2.58 % Loans (2) 3,497,623 166,137 4.75 % 2,870,733 114,233 3.98 % 2,314,257 91,599 3.96 % Total interest-earning assets 3,761,798 177,648 4.72 % 3,066,742 117,721 3.84 % 2,541,779 93,234 3.67 % Noninterest-earning assets 162,771 157,380 126,654 Total assets $ 3,924,569 $ 3,224,122 $ 2,668,433 Interest-bearing liabilities NOW accounts $ 299,703 2,254 0.75 % $ 374,956 816 0.22 % $ 306,669 204 0.07 % Savings & money market 1,708,874 61,241 3.58 % 1,364,961 13,138 0.96 % 1,176,820 2,454 0.21 % Time deposits 631,967 27,878 4.41 % 301,793 4,148 1.37 % 176,301 1,251 0.71 % Total interest-bearing deposits 2,640,544 91,373 3.46 % 2,041,710 18,102 0.89 % 1,659,790 3,909 0.24 % FHLB advances and other borrowings 169,963 6,382 3.75 % 19,614 209 1.07 % 704 11 1.56 % Subordinated debt 36,265 2,189 6.04 % 36,156 1,730 4.78 % 36,049 1,515 4.20 % Total interest-bearing liabilities 2,846,772 99,944 3.51 % 2,097,498 20,041 0.96 % 1,696,543 5,435 0.32 % Noninterest-bearing liabilities 775,116 841,233 721,267 Shareholders’ equity 302,681 285,409 250,623 Total liabilities and shareholders’ equity $ 3,924,569 $ 3,224,122 $ 2,668,433 Net interest spread 1.21 % 2.88 % 3.35 % Net interest income(tax equivalent)/margin $ 77,704 2.07 % $ 97,680 3.19 % $ 87,799 3.45 % Less: tax-equivalent adjustment (1) (50 ) (59 ) (67 ) Net interest income $ 77,654 $ 97,621 $ 87,732 (1) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
The net of capitalized loan costs and fees are amortized into interest income on loans. 50 Table of Contents Average Balances, Income and Expenses, Yields and Rates Year Ended December 31, 2024 2023 2022 (dollars in thousands) Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Average Balance Income/ Expense Yield/ Rate Interest-earning assets Federal funds sold and interest-bearing deposits with banks $ 160,683 $ 8,537 5.31 % $ 134,495 $ 6,998 5.20 % $ 88,077 $ 1,439 1.63 % Investment securities, taxable 138,494 5,645 4.08 % 121,739 4,296 3.53 % 97,328 1,793 1.84 % Investment securities, nontaxable (1) 8,012 217 2.71 % 7,941 217 2.73 % 10,604 256 2.41 % Loans (2) 3,629,570 186,863 5.15 % 3,497,623 166,137 4.75 % 2,870,733 114,233 3.98 % Total interest-earning assets 3,936,759 201,262 5.11 % 3,761,798 177,648 4.72 % 3,066,742 117,721 3.84 % Noninterest-earning assets 159,441 162,771 157,380 Total assets $ 4,096,200 $ 3,924,569 $ 3,224,122 Interest-bearing liabilities NOW accounts $ 303,580 2,810 0.93 % $ 299,703 2,254 0.75 % $ 374,956 816 0.22 % Savings & money market 1,561,925 61,455 3.93 % 1,708,874 61,241 3.58 % 1,364,961 13,138 0.96 % Time deposits 900,628 44,509 4.94 % 631,967 27,878 4.41 % 301,793 4,148 1.37 % Total interest-bearing deposits 2,766,133 108,774 3.93 % 2,640,544 91,373 3.46 % 2,041,710 18,102 0.89 % FHLB advances and other borrowings 240,344 9,066 3.77 % 169,963 6,382 3.75 % 19,614 209 1.07 % Subordinated debt 33,448 2,150 6.43 % 36,265 2,189 6.04 % 36,156 1,730 4.78 % Total interest-bearing liabilities 3,039,925 119,990 3.95 % 2,846,772 99,944 3.51 % 2,097,480 20,041 0.96 % Noninterest-bearing liabilities 735,363 775,116 841,233 Shareholders’ equity 320,912 302,681 285,409 Total liabilities and shareholders’ equity $ 4,096,200 $ 3,924,569 $ 3,224,122 Net interest spread 1.16 % 1.21 % 2.88 % Net interest income(tax equivalent)/margin $ 81,272 2.06 % $ 77,704 2.07 % $ 97,680 3.19 % Less: tax-equivalent adjustment (1) (50 ) (50 ) (59 ) Net interest income $ 81,222 $ 77,654 $ 97,621 (1) The tax-equivalent adjustment to net interest income adjusts the yield for assets earning tax-exempt income to a comparable yield on a taxable basis.
December 31, 2023 2022 2021 (dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Available for Sale Corporate bonds $ 2,147 1,910 2,172 1,883 2,198 2,188 US treasuries 9,495 9,394 999 871 999 992 US government agencies 20,594 18,656 13,007 10,617 14,504 14,169 SBA securities - - - - 429 438 State and political subdivisions 22,642 19,741 22,910 18,906 24,887 25,176 Asset-backed securities 33,450 33,236 6,435 6,229 10,136 10,164 Mortgage-backed securities 60,730 51,765 64,800 54,841 68,065 67,154 Total $ 149,058 134,702 110,323 93,347 121,218 120,281 Contractual maturities and yields on our investments are shown in the following table.
December 31, 2024 2023 2022 Amortized Fair Amortized Fair Amortized Fair (dollars in thousands) Cost Value Cost Value Cost Value Available for Sale Corporate bonds $ 2,121 1,927 2,147 1,910 2,172 1,883 US treasuries 999 908 9,495 9,394 999 871 US government agencies 17,540 15,795 20,594 18,656 13,007 10,617 State and political subdivisions 22,387 19,322 22,642 19,741 22,910 18,906 Asset-backed securities 36,613 36,538 33,450 33,236 6,435 6,229 Mortgage-backed securities 66,988 57,637 60,730 51,765 64,800 54,841 Total $ 146,648 132,127 149,058 134,702 110,323 93,347 Contractual maturities and yields on our investments are shown in the following table.
Year ended December 31, (dollars in thousands) 2023 2022 2021 Mortgage banking income $ 4,036 4,198 11,376 Service fees on deposit accounts 1,382 1,265 1,174 ATM and debit card income 2,245 2,163 2,037 Income from bank owned life insurance 1,379 1,289 1,231 Net lender fees on PPP loan sale - - 268 Gain (loss) on disposal of fixed assets - (394 ) 10 Gain on sale of securities - 12 (3 ) Other income 818 1,047 1,008 Total noninterest income $ 9,860 9,580 17,101 Noninterest income was $9.9 million for the year ended December 31, 2023, a $280,000, or 2.9%, increase compared to noninterest income of $9.6 million for the year ended December 31, 2022.
Year Ended December 31, (dollars in thousands) 2024 2023 2022 Mortgage banking income $ 5,560 4,036 4,198 Service fees on deposit accounts 1,764 1,382 1,265 ATM and debit card income 2,337 2,245 2,163 Income from bank owned life insurance 1,569 1,379 1,289 Gain (loss) on disposal of fixed assets 28 - (394 ) Other income 883 818 1,059 Total noninterest income $ 12,141 9,860 9,580 Noninterest income was $12.1 million for the year ended December 31, 2024, a $2.3 million, or 23.1%, increase compared to noninterest income of $9.9 million for the year ended December 31, 2023.
December 31, (dollars in thousands) 2023 2022 2021 Commercial Non-owner occupied RE $ 1,423 247 270 Business 319 182 - Consumer Real estate 985 207 989 Home equity 1,236 195 653 Nonaccruing troubled debt restructurings (TDRs) - 1,796 2,952 Total nonaccrual loans, including nonaccruing TDRs 3,963 2,627 4,864 Total nonperforming assets $ 3,963 2,627 4,864 Asset Quality Ratios: Nonperforming assets/total assets 0.10 % 0.07 % 0.17 % Nonaccrual loans/gross loans 0.11 % 0.08 % 0.20 % Total loans over 90 days past due (1) $ 1,300 402 554 Loans over 90 days past due and still accruing - - - Accruing troubled debt restructurings - 4,503 3,299 (1) Loans over 90 days are included in nonaccrual loans At December 31, 2023, nonperforming assets were $4.0 million, or 0.10% of total assets and 0.11% of gross loans, compared to $2.6 million, or 0.07% of total assets and 0.08% of gross loans at December 31, 2022.
Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status. 57 Table of Contents December 31, (dollars in thousands) 2024 2023 2022 Commercial Non-owner occupied RE $ 7,641 1,423 247 Business 1,016 319 182 Consumer Real estate 1,908 985 207 Home equity 312 1,236 195 Nonaccruing troubled debt restructurings (TDRs) - - 1,796 Total nonaccrual loans, including nonaccruing TDRs 10,877 3,963 2,627 Total nonperforming assets $ 10,877 3,963 2,627 Asset Quality Ratios: Nonperforming assets/total assets 0.27 % 0.10 % 0.07 % Nonaccrual loans/gross loans 0.30 % 0.11 % 0.08 % Total loans over 90 days past due (1) $ 2,641 1,300 402 Loans over 90 days past due and still accruing - - - Accruing troubled debt restructurings - - 4,503 (1) Loans over 90 days are included in nonaccrual loans At December 31, 2024, nonperforming assets were $10.9 million, or 0.27% of total assets and 0.30% of gross loans, compared to $4.0 million, or 0.10% of total assets and 0.11% of gross loans at December 31, 2023.
The $18.0 million increase during 2023 is due primarily to net income to common shareholders of $13.4 million, stock option exercises and expenses of $2.5 million and $2.1 million gain in other comprehensive income.
The $18.0 million increase during 2024 is due primarily to net income to common shareholders of $15.5 million, stock option exercises and expenses of $2.6 million combined with a $130,000 loss in other comprehensive income.
The decrease in net interest income was driven by a $79.9 million increase in interest expense, partially offset by a $59.9 million increase in interest income.
The increase in net interest income was driven by a $23.6 million increase in interest income, partially offset by a $20.0 million increase in interest expense.
December 31, 2023 2022 2021 (dollars in thousands) Amount Rate Amount Rate Amount Rate Noninterest bearing demand deposits $ 717,275 -% $ 788,960 -% $ 671,223 - % Interest bearing demand deposits 299,703 0.75 % 374,956 0.22 % 306,669 0.07 % Money market accounts 1,672,550 3.66 % 1,323,487 0.99 % 1,143,904 0.21 % Savings accounts 36,324 0.11 % 41,474 0.05 % 32,916 0.05 % Time deposits less than $250,000 106,169 3.88 % 81,664 1.17 % 78,487 0.80 % Time deposits greater than $250,000 525,798 4.52 % 220,192 1.45 % 97,814 0.59 % Total deposits $ 3,357,819 2.72 % $ 2,830,733 0.64 % $ 2,331,013 0.17 % During the 12 months ended December 31, 2023, our average transaction account balances increased by $197.0 million, or 7.8%, while our average time deposit balances increased by $330.1 million, or 109.4%.
December 31, 2024 2023 2022 (dollars in thousands) Amount Rate Amount Rate Amount Rate Noninterest bearing demand deposits $ 676,792 - % $ 717,275 - % $ 788,960 - % Interest bearing demand deposits 303,580 0.93 % 299,703 0.75 % 374,956 0.22 % Money market accounts 1,531,994 4.00 % 1,672,550 3.66 % 1,323,487 0.99 % Savings accounts 29,931 0.25 % 36,324 0.11 % 41,474 0.05 % Time deposits less than $250,000 211,494 4.59 % 106,169 5.04 % 81,664 1.17 % Time deposits greater than $250,000 689,134 5.03 % 525,798 4.30 % 220,192 1.45 % Total deposits $ 3,442,925 3.15 % $ 3,357,819 2.72 % $ 2,830,733 0.64 % During the 12 months ended December 31, 2024, our average transaction account balances decreased by $183.7 million, or 6.7%, while our average time deposit balances increased by $268.8 million, or 42.5%.
At December 31, 2023 and 2022, the Company estimates that it has approximately $1.3 billion and $1.4 billion, respectively, in uninsured deposits including related interest accrued and unpaid.
At December 31, 2024 and 2023, we estimate that we have approximately $1.3 billion, respectively, in uninsured deposits including related interest accrued and unpaid.
The $20.0 million, or 20.5%, decrease in net interest income during 2023, compared to 2022, was driven by a $79.9 million increase in interest expense, primarily related to our interest-bearing deposits, partially offset by a $59.9 million increase in interest income.
The $3.6 million, or 4.6%, increase in net interest income during 2024, compared to 2023, was driven by a $23.6 million increase in interest income, partially offset by a $20.0 million increase in interest expense. During 2023, our net interest income decreased $20.0 million, or 20.5%, compared to 2022.

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