10q10k10q10k.net

What changed in SOUTHERN FIRST BANCSHARES INC's 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of SOUTHERN FIRST BANCSHARES INC's 2024 and 2025 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 2025 report.

+427 added−385 removedSource: 10-K (2026-02-24) vs 10-K (2025-03-03)

Top changes in SOUTHERN FIRST BANCSHARES INC's 2025 10-K

427 paragraphs added · 385 removed · 339 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

145 edited+35 added−18 removed223 unchanged
Biggest changeAs an FDIC-insured bank, the Bank must pay deposit insurance assessments to the FDIC based on its average total assets minus its average tangible equity. The Bank’s assessment rates are currently based on its risk classification (i.e., the level of risk it poses to the FDIC’s deposit insurance fund).
Biggest changeThe Bank’s assessment rates are currently based on its risk classification (i.e., the level of risk it poses to the FDIC’s deposit insurance fund). Institutions classified as higher risk pay assessments at higher rates than institutions that pose a lower risk. The initial base assessment rates currently range from approximately five basis points to approximately 32 basis points.
We believe that by being associated with a shared network of ATMs, we are better able to serve our clients and are able to attract clients who are accustomed to the convenience of using ATMs, although we do not believe that maintaining this association is critical to our success.
We believe that by being associated with a shared network of ATMs, we are better able to serve our clients and to attract clients who are accustomed to the convenience of using ATMs, although we do not believe that maintaining this association is critical to our success.
For instance, under the Reform Act and related rule making: · banks that have less than $10 billion in total consolidated assets and total trading assets and trading liabilities of less than five percent of total consolidated assets is excluded from Section 619 of the Dodd-Frank Act, known as the “Volcker Rule”, which prohibits “proprietary trading” and the ownership or sponsorship of private equity or hedge funds that are referred to as “covered funds”; · the asset threshold for bank holding companies to qualify for treatment under the “Small Bank Holding Company and Savings and Loan Holding Company Policy Statement” was raised from $1 billion to $3 billion, which exempts these institutions from certain regulatory requirements including the Basel III capital rules; · a “community bank leverage ratio” was adopted, which is applicable to certain banks and bank holding companies with total assets of less than $10 billion (as described below under “Basel Capital Standards”); and · banks with up to $3 billion in total consolidated assets may be examined by their federal banking regulator every 18 months (as opposed to every 12 months).
For instance, under the Reform Act and related rule making: · banks that have less than $10 billion in total consolidated assets and total trading assets and trading liabilities of less than five percent of total consolidated assets are excluded from Section 619 of the Dodd-Frank Act, known as the “Volcker Rule”, which prohibits “proprietary trading” and the ownership or sponsorship of private equity or hedge funds that are referred to as “covered funds”; · the asset threshold for bank holding companies to qualify for treatment under the “Small Bank Holding Company and Savings and Loan Holding Company Policy Statement” was raised from $1 billion to $3 billion, which exempts these institutions from certain regulatory requirements including the Basel III capital rules; · a “community bank leverage ratio” was adopted, which is applicable to certain banks and bank holding companies with total assets of less than $10 billion (as described below under “Basel Capital Standards”); and · banks with up to $3 billion in total consolidated assets may be examined by their federal banking regulator every 18 months (as opposed to every 12 months).
Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “Southern First Bank—Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.
Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “Southern First Bank—Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive prior regulatory approval, subject to compliance with federal and state securities laws.
A large and diverse metropolitan area, the Greenville-Anderson MSA is one of the southeast region’s premier areas for business, serving as headquarters for Michelin and Current Lighting (formerly Hubbell Lighting) as well as hosting significant operations for BMW and Lockheed Martin. Charleston . The city of Charleston is located in Charleston County, South Carolina.
A large and diverse metropolitan area, the Greenville-Anderson-Greer MSA is one of the southeast region’s premier areas for business, serving as headquarters for Michelin and Current Lighting (formerly Hubbell Lighting) as well as hosting significant operations for BMW and Lockheed Martin. Charleston . The city of Charleston is located in Charleston County, South Carolina.
The CAST committee, which is comprised of a group of our senior commercial lenders, senior credit administrators, chief risk officer, president, and chief executive officer, has pre-determined lending limits, and any loans in excess of this lending limit will be submitted for approval by our full board.
The CAST committee, which is comprised of a group of our senior commercial lenders, senior credit administrators, chief credit officer, president, and chief executive officer, has pre-determined lending limits, and any loans in excess of this lending limit will be submitted for approval by our full board.
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.
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 (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.
An undercapitalized institution (i) has a total risk-based capital ratio of less than 8%, (ii) has a Tier 1 risk-based capital ratio of less than 6%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 4.5% or greater, or (iv) has a leverage capital ratio of less than 4%. · Significantly Undercapitalized — The institution is significantly below the required minimum level for any relevant capital measure.
An undercapitalized institution (i) has a total risk-based capital ratio of less than 8%, (ii) has a Tier 1 risk-based capital ratio of less than 6%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 4.5%, or (iv) has a leverage capital ratio of less than 4%. · Significantly Undercapitalized — The institution is significantly below the required minimum level for any relevant capital measure.
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.
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.
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.
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.
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.
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 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 final regulations establish deadlines for the submission and review of such safety and soundness compliance plans. The FDIC requested comments on a proposal that would amend the regulations implementing section 29 of the Federal Deposit Insurance Act. Section 29 contains brokered deposits restrictions that apply to less than well capitalized depository institutions.
The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans. The FDIC previously requested comments on a proposal that would amend the regulations implementing section 29 of the Federal Deposit Insurance Act which contains brokered deposits restrictions that apply to less than well capitalized depository institutions.
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.
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.
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.
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, 2025, the Bank was deemed to be “well capitalized.” Standards for Safety and Soundness.
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 SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annual 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; 24 Table of Contents · 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.
(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.
(2) The total market deposits data displayed are as of June 30, 2025 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.
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.
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, 2025, the Bank was well-capitalized, as defined by FDIC regulations.
Under the BHCA, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities: · banking or managing or controlling banks; · furnishing services to or performing services for our subsidiaries; and · any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.
Under the BHCA, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities: · banking or managing or controlling banks; · furnishing services to or performing services for our subsidiaries; and 16 Table of Contents · any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking.
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.
As of December 31, 2025, 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.
The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary.
The Federal Reserve’s policies also require that a bank holding company serve as a source 18 Table of Contents of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary.
The relief, which applies to banks and asset managers that become principal stockholders of banks, will now expire on the earlier of January 1, 2026, or the effective date of a final Federal Reserve rule revising Regulation O.
The relief, which applies to banks and asset managers that become principal stockholders of banks, will now expire on the earlier of January 1, 2027, or the effective date of a final Federal Reserve rule revising Regulation O.
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.
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.
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.
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.
We have eight banking offices located in Greenville, Columbia and Charleston, South Carolina, which are the three largest markets in South Carolina; three banking offices located in Charlotte, Raleigh and Greensboro, North Carolina, which are the three largest markets in North Carolina; and one banking office located in Atlanta, Georgia, which is the largest market in Georgia.
We have eight banking offices located in Greenville, Columbia and Charleston, South Carolina, which are the three largest markets in South Carolina; three banking offices located in Charlotte, Raleigh and Greensboro, North Carolina, which are some of the largest markets in North Carolina; and one banking office located in Atlanta, Georgia, which is the largest market in Georgia.
The SEC has completed the bulk (although not all) of the rulemaking necessary to implement these provisions. However, on October 14, 2021, the SEC signaled a renewed interest in this rulemaking initiative by re-opening the comment period on a proposed rule issued originally in 2015 regarding clawbacks of incentive-based executive compensation.
The SEC has completed the bulk (although not all) of the rulemaking necessary to implement these provisions. However, on October 14, 2021, the SEC signaled a renewed 28 Table of Contents interest in this rulemaking initiative by re-opening the comment period on a proposed rule issued originally in 2015 regarding clawbacks of incentive-based executive compensation.
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.
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.
In March 2022, the FDIC published a Request for Information seeking information and comments regarding the laws, practices, rules, regulations, guidance, and statements of policy that apply to merger transactions involving one or more insured depository institutions, including the merger between an insured depository institution and a noninsured institution.
In March 2022, the FDIC published a Request for Information seeking information and comments regarding the 15 Table of Contents laws, practices, rules, regulations, guidance, and statements of policy that apply to merger transactions involving one or more insured depository institutions, including the merger between an insured depository institution and a noninsured institution.
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.
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.
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.
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.
In January 2023, the OCC revised its “Fair Lending” booklet of the Comptroller’s Handbook to incorporate clarified details and risk factors for a variety of examination scenarios addressing fair lending and to update references to supervisory guidance, sound risk management practices, and applicable legal standards.
In January 2023, the OCC revised its “Fair Lending” booklet of the Comptroller’s Handbook to incorporate clarified details and risk factors for a variety of examination scenarios addressing fair lending and to update references to 23 Table of Contents supervisory guidance, sound risk management practices, and applicable legal standards.
Many of our competitors are well-established, larger financial institutions with substantially greater resources and lending limits, such as, Bank of America, Wells Fargo, and Truist. These institutions offer some services, such as extensive and established branch networks and trust services that we do not provide.
Many of our competitors are well-established, larger financial 12 Table of Contents institutions with substantially greater resources and lending limits, such as, Bank of America, Wells Fargo, and Truist. These institutions offer some services, such as extensive and established branch networks and trust services that we do not provide.
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 employed a total of 315 FTE employees as of December 31, 2025. 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.
The FDIC and the other federal banking regulatory agencies also have issued standards for all insured depository institutions relating, among other things, to the following: · internal controls; · information systems and audit systems; · loan documentation; · credit underwriting; · interest rate risk exposure; and · asset quality. Prompt Corrective Action.
The FDIC and the other federal banking regulatory agencies also have issued standards for all insured depository institutions relating, among other things, to the following: · internal controls; · information systems and audit systems; · loan documentation; · credit underwriting; 19 Table of Contents · interest rate risk exposure; and · asset quality. Prompt Corrective Action.
Multiple states and Congress are considering laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that will impose upon banking organizations and their service providers new notification requirements for significant cybersecurity incidents.
Multiple states and Congress are considering laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that required banking organizations and their service providers to implement new notification requirements for significant cybersecurity incidents.
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.
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, 2025, our average loan size was approximately $382,000.
On September 30, 2024, the Federal Housing Finance Agency issued a notice of proposed rulemaking on that would improve FHLBs ability to provide liquidity to members by aligning the treatment of interest-bearing deposit accounts and other authorized overnight investments with the treatment of Federal Funds sales. Effect of Governmental Monetary Policies.
On September 30, 2024, the Federal Housing Finance Agency issued a notice of proposed rulemaking on that would improve FHLBs ability to provide liquidity to members by aligning the treatment of interest-bearing deposit accounts and other authorized overnight investments with the treatment of Federal Funds sales.
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
Based on the Bank’s loan portfolio as of December 31, 2025, 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. 29 Table of Contents
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.
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.
The OCC concurrently approved a final rule updating its regulations for business combinations involving national banks and federal savings associations, including a policy statement summarizing the principles used during its review of Bank Merger Act applications. Importantly, the Federal Reserve did not join with the FDIC and the OCC in this updated guidance.
The OCC concurrently approved a final rule updating its regulations for business combinations involving national banks and federal savings associations, including a policy statement summarizing the principles used during its review of Bank Merger Act applications. The Federal Reserve did not join with the FDIC and the OCC in issuing comparable guidance.
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.
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.
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.
All advances from the FHLB, which are subject to the oversight of the Federal Housing Finance 27 Table of Contents Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.
The appropriate federal banking agency may take any action authorized for a significantly undercapitalized institution if an undercapitalized institution fails to submit an acceptable capital restoration plan or fails in any material respect to implement a plan accepted by the agency.
The appropriate federal banking agency may take any action authorized for a significantly undercapitalized institution if an undercapitalized institution fails to submit an acceptable capital restoration plan or fails in any material respect to 20 Table of Contents implement a plan accepted by the agency.
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.
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, Julie A. Fairchild, Wesley C. Wilbanks, and Silvia T. King, whose biographies are included below. R.
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 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, 2025, loans secured by first or second mortgages on commercial and consumer real estate made up approximately 82.8% of our loan portfolio.
We may also seek to enter new metropolitan markets contiguous to, or nearby, our current South Carolina footprint, such as our recently opened expansions in Greensboro and Charlotte, North Carolina, but only after careful study and the identification and vetting of a local, senior level banking team with significant experience and reputational strength in that market and receipt of any applicable regulatory approvals.
We may also seek to enter new metropolitan markets contiguous to, or nearby, our current footprint, such as our recent expansion in Charlotte, North Carolina, but only after careful study and the identification and vetting of a local, senior level banking team with significant experience and reputational strength in that market and receipt of any applicable regulatory approvals.
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.
At December 31, 2025, the original balances of our consumer or residential construction loans ranged in size from approximately $195,000 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.
Transactions with Affiliates and Insiders. The Company is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company or its non-bank subsidiaries.
Transactions with Affiliates and Insiders. The Company is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company 21 Table of Contents or its non-bank subsidiaries.
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 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.
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%.
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 a maximum of between 4.25% and 4.50%.
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 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 2.88 million for 2024.
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.
The Charleston-North Charleston MSA is the third most populous market in the state with an estimated population of 869,940 for 2024. 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 $63,280 for 2023. 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 $66,072 for 2024. 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, 2024, we had $550.3 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, 2025, we had $552.9 million in out-of-market, or wholesale, certificates of deposits.
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.
In addition to loans secured by real estate, our loan portfolio includes commercial business loans and other consumer loans which comprised 16.0% and 1.1%, respectively, of our total loan portfolio at December 31, 2025. Interest rates for all real estate loan categories may be fixed or adjustable, and will more likely be fixed for shorter-term loans.
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 .
The median household income for the Charleston-North Charleston MSA was approximately $90,307 for 2024. 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 $96,096 for 2023. 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 $102,144 for 2024. Greensboro .
We believe that the demographics and growth characteristics of these seven markets will provide us with significant opportunities to further develop existing client relationships and expand our client base. Data related to the estimated population and median household income for each of the markets presented above is from the Federal Reserve Economic Data (“FRED”) online database.
We believe that the demographics and growth characteristics of these seven markets will provide us with significant opportunities to further develop existing client relationships and expand our client base. Data related to the estimated population and median household income for each of the markets presented above is from the United States Census Bureau online database.
The federal banking agencies have extended the temporary relief from enforcement actions related to Regulation O multiple times, most recently on December 27, 2024.
The federal banking agencies have extended the temporary relief from enforcement actions related to Regulation O multiple times, most recently on December 19, 2025.
We provide our full-time employees and certain part-time employees with a comprehensive program of benefits, including medical benefits, life insurance, long-term disability coverage and a 401(k) plan. Our employees are not represented by a collective bargaining agreement. Management considers its employee relations to be excellent.
Employees At December 31, 2025, we employed a total of 315 full-time equivalent employees. We provide our full-time employees and certain part-time employees with a comprehensive program of benefits, including medical benefits, life insurance, long-term disability coverage and a 401(k) plan. Our employees are not represented by a collective bargaining agreement. Management considers its employee relations to be excellent.
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 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 Raleigh-Cary MSA is one of the most populous markets in the state with an estimated population of 1.51 million for 2023.
The Raleigh-Cary MSA is one of the most populous markets in the state with an estimated population of 1.56 million for 2024.
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.
As a result, our offices average approximately $263.7 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 64.0% efficiency ratio for the year ended December 31, 2025.
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.
We believe that our current mobile banking, on-line banking and cash management offerings are industry-leading solutions amongst community banks. During 2025, 40% of deposits were acquired through our office network, 43% came through the commercial remote deposit capture channel and the remaining 15% came through consumer mobile deposits.
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.
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, 2025, total commercial and consumer construction loans amounted to $88.7 million, or 2.3% of our loan portfolio.
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.
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 800,722 for 2024.
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.
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-Roswell MSA is $92,344 for 2024.
In October 2023, we announced the opening of the Dream Mortgage Center in Columbia, South Carolina. The Dream Mortgage Center is a loan production center designed to create space for opportunities for homebuyer education, community events, and mortgage lending experts equipped with a variety of loan products. Loan Approval . Certain credit risks are inherent in making loans.
The Dream Mortgage Center is a loan production center designed to create space for opportunities for homebuyer education, community events, and mortgage lending experts equipped with a variety of loan products. Loan Approval . Certain credit risks are inherent in making loans.
As of June 30, 2024, the most recent date for which market data is available, there were 40 financial institutions in our primary market of Greenville County, 27 financial institutions in the Columbia market, 36 financial institutions in the Charleston and Raleigh markets, 25 financial institutions in the Greensboro market, 50 financial institutions in the Charlotte market, and 81 financial institutions in the Atlanta market.
As of June 30, 2025, the most recent date for which market data is available, there were 40 financial institutions in our primary market of Greenville County, 27 financial institutions in the Columbia market, 38 financial institutions in the Charleston and Raleigh markets, 25 financial institutions in the Greensboro market, 49 financial institutions in the Charlotte market, and 80 financial institutions in the Atlanta market.
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.
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.
Seaver held various positions with The Citizens & Southern National Bank of South Carolina. From 1992 until February 1999, he was with Greenville National Bank, which was acquired by Regions Bank in 1998. He was the Senior Vice President in lending and was also responsible for managing Greenville National Bank’s deposit strategies prior to leaving to form the Bank. Mr.
From 1992 until February 1999, he was with Greenville National Bank, which was acquired by Regions Bank in 1998. He was the Senior Vice President in lending and was also responsible for managing Greenville National Bank’s deposit strategies prior to leaving to form the Bank. Mr.
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 of December 31, 2025, we had originated 12 loans utilizing government enhancements and over 26 loans engaged in state-based small business partnerships. · Consumer Real Estate Loans and Home Equity Loans. At December 31, 2025 consumer real estate loans (other than construction loans) amounted to $1.40 billion, or 36.5% of our loan portfolio.
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.
As of December 31, 2025, our executive officers and board of directors owned an aggregate of 567,422 shares of our common stock, including options to purchase shares of our common stock, which represented approximately 7.014% of the fully-diluted amount of our common stock outstanding.
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.
Included in the consumer real estate loans was $1.15 billion, or 30.0% of our loan portfolio, in first and second mortgages on individuals’ homes, while home equity loans represented $248.7 million, or 6.5% of our total loan portfolio.
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.
Based upon the capitalization of the Bank at December 31, 2025, the maximum amount we could lend to one borrower was $65.6 million. However, to mitigate concentration risk, our internal lending limit at December 31, 2025 was $45.9 million and may vary based on our assessment of the lending relationship.
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.
At December 31, 2025, we had net loans of $3.80 billion, representing 86.4% of our total assets. We focus our lending to businesses and individuals that reside in the markets that we serve.
The CRA requires that the FDIC evaluate the record of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria imposes additional requirements and limitations on our Bank.
Community Reinvestment Act. The CRA requires that the FDIC evaluate the record of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility.
Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions.
If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions.
Nine additional states passed some form of consumer privacy protection laws, only some of which include an exemption for entities regulated under GLBA. Congress has proposed significant privacy focused legislation largely targeting technology companies, however, to date, none of these laws have been passed. The CFPB also took additional action related to consumer privacy.
A majority of states have now enacted some form of consumer privacy protection laws, many of which include exemptions or partial exemptions for entities regulated under GLBA. Congress has proposed significant privacy focused legislation largely targeting technology companies, however, to date, none of these laws have been enacted. The CFPB also took additional action related to consumer privacy.
Hurst is a 2005 graduate of Furman University, with a Bachelor’s degree in Business Administration and Economics. Christian J. Zych has served as Chief Financial Officer of our Company and our Bank since May 2024. He has 30 years of experience in the banking industry. Mr.
Hurst is a 2005 graduate of Furman University, with a Bachelor’s degree in Business Administration and Economics. Christian J. Zych has served as Chief Financial Officer of our Company and our Bank since May 2024. Prior to joining us, Mr.

… 118 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

53 edited+17 added−8 removed204 unchanged
Biggest changeThe 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.
Biggest changeIn early 2025, this same manner of turnover and policy realignments within these agencies have further contributed to regulatory uncertainty in the financial services sector. The potential impact of changes in government leadership and agency personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be fully predicted at this time.
This type of fraudulent activity has taken many forms, ranging from check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information or impersonation of our clients through the use of falsified or stolen credentials.
This type of fraudulent activity has taken many forms, ranging from check fraud, mechanical devices attached to ATM machines (“skimming”), social engineering and phishing attacks to obtain personal information or impersonation of our clients through the use of falsified or stolen credentials.
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.
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, harmful, or otherwise ‘hallucinated’ outputs, disclose confidential information, or infringe on intellectual property rights.
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.
Moreover, unexpected shifts in domestic or international economic policies, or abrupt changes in market conditions, could lead to rapid alterations in the yield curve and further impact the broader financial system. 38 Table of Contents Negative public opinion surrounding the Company and the financial institutions industry generally could damage our reputation and adversely impact our earnings.
Moreover, unexpected shifts in domestic or international economic policies, or abrupt changes in market conditions, could lead to rapid alterations in the yield curve and further impact the broader financial system. 39 Table of Contents Negative public opinion surrounding the Company and the financial institutions industry generally could damage our reputation and adversely impact our earnings.
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.
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 40 Table of Contents of promptly finding qualified replacement personnel.
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%.
Thus, an increase in the amount of nonperforming assets could have a material adverse impact on our net interest income. 38 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%.
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.
Under the Biden Administration, Congressional committees with jurisdiction over the banking sector 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.
The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgements, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm. Item 1B. Unresolved Staff Comments. None.
The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm. Item 1B. Unresolved Staff Comments. None.
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.
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 37 Table of Contents institutions to better serve customers and to reduce costs.
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.
As of mid-to-late 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.
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.
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. We rely on other companies to provide key components of our business infrastructure.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
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).
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; · 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 43 Table of Contents 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).
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 35 Table of Contents these third-party vendors carefully, we do not control their actions.
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.
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.
Acts of nature, including hurricanes, tornados, earthquakes, fires and floods, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively affect our financial condition. 29 Table of Contents Risks Related to Lending Activities Our loan portfolio contains a number of real estate loans with relatively large balances.
Acts of nature, including hurricanes, tornadoes, earthquakes, fires and floods, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively affect our financial condition. 30 Table of Contents Risks Related to Lending Activities Our loan portfolio contains a number of real estate loans with relatively large balances.
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.
More recently, in 2025, the FDIC and the Federal Reserve reaffirmed their commitment to stringent oversight of CRE exposures in response to evolving market conditions.
Also, as a member of the Federal Home Loan Bank, the Bank must comply with applicable regulations of the Federal Housing Finance Board and the Federal Home Loan Bank. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders.
Also, as a member of the Federal Home Loan Bank system, the Bank must comply with applicable regulations and guidance of the Federal Housing Finance Agency and the applicable Federal Home Loan Bank. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders.
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.
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, 2025, approximately 83% of our loans had real estate as a primary or secondary component of collateral.
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.
In recent years, 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.
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.
Our level of commercial real estate and multi-family loans represents 236.5% of the Bank’s total risk-based capital at December 31, 2025. 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.
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.
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, 2025, approximately 75% of our loan portfolio was in fixed rate loans, while only 25% was in variable rate loans.
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.
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. 41 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.
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.
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, 2025, commercial business loans comprised 16.0% of our total loan portfolio.
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.
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.
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.
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.
During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations. Inflationary pressures and rising prices may affect our results of operations and financial condition.
During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations. Inflationary pressures and rising prices may affect our results of operations and financial condition. In 2021 and 2022, inflation rose to levels not seen in decades.
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.
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 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.
We may have higher credit losses than we have allowed for in our allowance for credit losses. Our actual loan losses could exceed our allowance for credit losses and therefore our allowance for credit losses may not be adequate. As of December 31, 2025, 45.7% of our loan portfolio was secured by commercial real estate.
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.
Among other sources of funds, in 2025, we relied on brokered deposits to provide funds with which to make loans and provide other liquidity needed. Our brokered deposits were $552.9 million, representing 14.9% of our total deposits at December 31, 2025 and included fixed-rate time deposits with maturities through October 2028.
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.
Stock price volatility may make it more difficult for you to resell 42 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.
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.
Commercial real estate loans increase our exposure to credit risk. At December 31, 2025, 45.7% of our loan portfolio was secured by commercial real estate.
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.
Since mid-2024, as inflation has moderated, the Federal Reserve has gradually recalibrated its policy stance and dropped rates, 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.
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.
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 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.
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.
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.
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.
Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including among other things, changes in market conditions affecting the value of loan collateral, the cash flows of our borrowers and problems affecting borrower credit.
Industry experience shows that a portion of loans will become delinquent and a portion of loans will require partial or entire charge-off. 31 Table of Contents Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including among other things, changes in market conditions affecting the value of loan collateral, the cash flows of our borrowers and problems affecting borrower credit.
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 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.
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.
Other than dividends from the Bank, the Company does not have additional means of generating liquidity without obtaining additional debt or equity funding.
The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations.
The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations. Recent regulatory developments have led to enhanced expectations in areas such as cybersecurity, data privacy, digital asset management, and anti-money laundering.
A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds.
Under these requirements, in the future, we could be required to provide financial assistance to the Bank if the Bank experiences financial distress. 34 Table of Contents A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds.
Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include proceeds from FHLB advances, sales of investment securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits.
Such sources include proceeds from FHLB advances, sales of investment 32 Table of Contents securities and loans, and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits.
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.
We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. The U.S. political landscape remains fluid, and changes in Congressional composition, presidential administrations, and agency leadership may result in shifts in regulatory priorities and policy direction.
The 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.
Because of this kind of oscillation in regulation, the 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.
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.
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. 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.
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.
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.
Loans secured by commercial real estate are generally viewed as having more risk of default than loans secured by residential real estate or consumer loans because repayment of the loans often depends on the successful operation of the property, the income stream of the borrowers, the accuracy of the estimate of the property’s value at completion of construction, and the estimated cost of construction.
Commercial real estate loans may involve distinct credit and collateral risks compared to other loan types because repayment of the loans often depends on the successful operation of the property, the income stream of the borrowers, the accuracy of the estimate of the property’s value at completion of construction, and the estimated cost of construction.
During the latter part of 2024 and into early 2025, the annual inflation rate averaged approximately 4.2%, although some moderation has been observed in early 2025. Nonetheless, persistently higher input costs, wage pressures, and ongoing supply chain disruptions continue to challenge our customers’ ability to service their debt, thereby potentially increasing our credit risk.
While inflation has since moderated, inflationary pressures have remained a factor into 2026, notwithstanding periods of moderation. Nonetheless, persistently higher input costs, wage pressures, and ongoing supply chain disruptions continue to challenge our customers’ ability to service their debt, thereby potentially increasing our credit risk.
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.
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. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations.
Repayment of such loans is generally considered more subject to market risk than residential mortgage loans. Industry experience shows that a portion of loans will become delinquent and a portion of loans will require partial or entire charge- 30 Table of Contents off.
Repayment of such loans is generally considered more subject to market risk than residential mortgage loans.
Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations which could increase our cost of funds. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
If we fail to keep pace with AI-enabled analytics and customer offerings, our competitive positioning could be detrimentally impacted. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
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.
Subsequent changes in administration and Congressional leadership may result in efforts to reverse, suspend, or modify regulatory initiatives adopted in prior periods, promote deregulation by easing regulatory burdens on financial institutions, adopt a technology-forward regulatory approach, or 33 Table of Contents take a more favorable stance on bank mergers and acquisitions.
Removed
Such loans are generally riskier than loans secured by residential real estate or consumer loans because those loans are typically not secured by real estate collateral.
Added
Commercial real estate loans also often involve larger loan balances and borrower relationships, so the deterioration of one or a small number of credits may have a disproportionate impact on asset quality and results of operations.
Removed
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.
Added
Economic uncertainty remains elevated entering 2026, driven by persistent inflationary pressures, higher interest rates, geopolitical conflicts, and the potential for continued volatility in global markets—despite forecasts for moderate growth in the U.S. and abroad.
Removed
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.
Added
In 2024 and early 2025, increased competition for deposits and volatility in wholesale funding markets have added to liquidity pressures. Market volatility increased regulatory scrutiny of financial institutions, or adverse perceptions regarding the banking industry could further constrain capital availability.
Removed
A unified Republican Congress has created conditions for potential shifts in policy, though partisan division may still result in challenges to enacting sweeping reforms.
Added
Likewise, recent bank failures and heightened sensitivity to liquidity risk have increased regulatory and market focus on contingency funding planning and liquidity stress testing. The Company is a stand-alone entity with its own liquidity needs to service its debt or other obligations.
Removed
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.
Added
In addition, the Company and the Bank are each required by federal regulatory authorities to maintain adequate levels of capital to support their operations and to comply with evolving regulatory capital expectations, including stress testing, capital planning, and concentration risk considerations.
Removed
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.
Added
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.
Removed
In 2021 through 2022, inflation rose to levels not seen for over 40 years, reaching 7% and 6.5%, respectively. In 2023, the annual inflation rate decreased to 3.4% but inflationary pressures are currently expected to remain elevated throughout 2024.
Added
Regulators could also limit capital distributions, including dividends or share repurchases. These evolving requirements are increasing our compliance costs and the complexity of our regulatory obligations.
Removed
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. Our growth may entail an increase in overhead expenses if we add new branches and staff.
Added
For example, recent legislative and regulatory actions have included the use of the Congressional Review Act to repeal agency rules affecting bank merger review processes and the enactment of legislation establishing a federal framework for stablecoins and other digital assets.
Added
Since the recent changes in presidential administration, key positions across agencies—including the Comptroller of the Currency, CFPB, CFTC, SEC, and the U.S. Treasury—have experienced significant periods of turnover and transition, leading to ongoing shifts in regulatory priorities and enforcement approaches.
Added
Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
Added
Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations which could increase our cost of funds. Likewise, rapid adoption of AI by competitors, either in financial services or FinTech, could create significant pressure on pricing, automation, or client satisfaction.
Added
Our reliance on third-party vendors for critical systems and services, likewise, increases our exposure to cybersecurity risks. While regulatory expectations for vendor oversight have intensified, requiring enhanced due diligence and ongoing monitoring, failure of third-party controls could result in operational disruptions or data breaches.
Added
Our operational or security systems may experience an interruption or breach in security, including as a result of cyber-attacks. 36 Table of Contents We rely heavily on communications and information systems to conduct our business.
Added
Separately, a Federal Reserve emergency lending facility established in response to the 2023 bank failures ceased making new loans in March 2024.
Added
In 2021, there was a dramatic increase in workers leaving their positions throughout our industry and other industries that is being referred to as the “great resignation,” and the market to build, retain and replace talent then became even more highly competitive.
Added
These trends resulted in labor shortages in many of our markets, which made attracting new employees and replacing existing employees more difficult. However, by 2023, labor shortages began to ease somewhat, and while challenges persisted, the economy showed signs of stabilization in the labor market, improving workforce availability.
Added
While labor conditions have continued to evolve through 2024 and 2025, talent retention and competition for skilled workers remain key concerns for many industries.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+2 added−0 removed6 unchanged
Biggest changeAlthough these specific threats or incidents haven't significantly impacted us thus far, it is possible that future threats and incidents we detect could potentially have a material adverse effect on our business strategy, results of operations, and financial condition. Our management team is tasked with the daily management of the cybersecurity risks we encounter and supervises the EPTRC.
Biggest changeHowever, future cybersecurity incidents or threats could materially affect us, including our business strategy, results of operations, or financial condition. Our management team is tasked with the daily management of the cybersecurity risks we encounter and supervises the EPTRC.
Our EPTRC, in turn, oversees the assessment of information security, the creation of policies, standards, and procedures, as well as testing, training, and security reporting processes for our Company. The EPTRC is comprised of management with the appropriate expertise and authority to ensure effective oversight of the Information Security Program.
Our EPTRC, in turn, oversees the assessment of information security, the development of policies, standards, and procedures, as well as testing, training, and security reporting processes for our Company. The EPTRC is comprised of management with the appropriate expertise and authority to ensure effective oversight of the Information Security Program.
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.
Any of these systems is 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 44 Table of Contents such malicious actors.
To 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.
To 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. 45 Table of Contents Item 2. Properties. Our principal executive offices and the Bank’s main office are located at 6 Verdae Boulevard, Greenville, South Carolina 29607.
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
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.
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.
The incident response team (i) includes subject matter experts to address cyber threats and (ii) includes members of management responsible to monitor threat escalation and identify events that may warrant Board notification and a Form 8-K cybersecurity notice. Occasionally, we have encountered cybersecurity threats necessitating adjustments to our procedures and the integration of extra safeguards.
The incident response team (i) includes subject matter experts to address cyber threats and (ii) includes members of management responsible to monitor threat escalation and identify events that may warrant Board notification and a Form 8-K cybersecurity notice.
Added
From time to time, we have experienced cybersecurity threats and incidents and have made adjustments to our processes and implemented additional safeguards in response. To date, these threats and incidents have not materially affected the Company, including our business strategy, results of operations, or financial condition.
Added
Members of the EPTRC and other members of management with responsibility for cybersecurity risk management possess relevant expertise, which may include prior experience in information security, risk management, information technology operations, incident response, and vendor oversight, as well as relevant education and/or industry certifications.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−2 removed0 unchanged
Biggest changeThe 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.
Biggest changeTrading Plans During the three months ended December 31, 2025, 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. Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections Not applicable PART III
Removed
ITEM 2.03 Creation of a Direct Financial Obligation.
Added
ITEM 2.03 Creation of a Direct Financial Obligation. The relevant disclosure set forth in Item 1.01 above is incorporated herein by reference in response to this Item 2.03.
Removed
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

6 edited+2 added−0 removed7 unchanged
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.
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. 46 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 S&P US BMI Banks – 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.
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.
Equity Compensation Plan Information The following table sets forth information regarding equity compensation plans approved by security holders at December 31, 2025. We had no equity compensation plans that were not approved by security holders at December 31, 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) 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.
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) 24,177 $ 34.53 - 2016 Equity Incentive Plan – options (1) 209,922 38.05 - 2020 Equity Incentive Plan (2) 6,500 53.38 204,531 Total 240,599 $ 38.11 204,531 (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.
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.
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 7,235 beneficial shareholders as of January 20, 2026.
(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.
(2) The 2020 Equity Incentive Plan provides for shares to be issued as either stock options or restricted stock grants.
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.
Period Ending 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Southern First Bancshares $ 100.00 176.78 129.42 104.95 112.45 145.74 S&P US BMI Banks – Southeast Bank Index $ 100.00 142.83 116.18 119.85 155.47 187.40 Russell 2000 Index $ 100.00 114.82 91.35 106.82 119.14 134.40 Sales of Unregistered Equity Securities None Stock Repurchases On June 17, 2025, we announced a share repurchase plan allowing us to repurchase up to $5.0 million of shares of our common stock (the “Repurchase Plan”).
Added
As of December 31, 2025, we have not repurchased any of the shares authorized for repurchase under the Repurchase Plan. The Company is not obligated to purchase any such shares under the Repurchase Plan, and the Repurchase Plan may be discontinued, suspended or restarted at any time.
Added
Additionally, repurchases under the Repurchase Plan after May 22, 2026 would require additional approval of our Board of Directors and the Federal Reserve. 47 Table of Contents The following table reflects share repurchase activity during the fourth quarter of 2025: (d) Maximum (c) Total Number (or Number of Approximate Shares (or Dollar Value) of Units) Shares (or (a) Total Purchased as Units) that May Number of Part of Publicly Yet Be Shares (or (b) Average Announced Purchased Units) Price Paid per Plans or Under the Plans Period Purchased Share (or Unit) Programs or Programs October 1, 2025 – December 31, 2025 - - - $ 5,000,000 Total - - - $ 5,000,000 Item 6. [Reserved] 48 Table of Contents

Item 7. Management's Discussion & Analysis

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

126 edited+31 added−18 removed62 unchanged
Biggest changeThe 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.
Biggest changeAverage Balances, Income and Expenses, Yields and Rates Year Ended December 31, 2025 2024 2023 (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 $ 186,387 $ 7,966 4.27 % $ 160,683 $ 8,537 5.31 % $ 134,495 $ 6,998 5.20 % Investment securities, taxable 141,304 5,206 3.68 % 138,494 5,645 4.08 % 121,739 4,296 3.53 % Investment securities, nontaxable (1) 7,774 213 2.74 % 8,012 217 2.71 % 7,941 217 2.73 % Loans (2) 3,753,665 198,145 5.28 % 3,629,570 186,863 5.15 % 3,497,623 166,137 4.75 % Total interest-earning assets 4,089,130 211,530 5.17 % 3,936,759 201,262 5.11 % 3,761,798 177,648 4.72 % Noninterest-earning assets 153,269 159,441 162,771 Total assets $ 4,242,399 $ 4,096,200 $ 3,924,569 Interest-bearing liabilities NOW accounts $ 332,222 2,930 0.88 % $ 303,580 2,810 0.93 % $ 299,703 2,254 0.75 % Savings & money market 1,575,613 52,188 3.31 % 1,561,925 61,455 3.93 % 1,708,874 61,241 3.58 % Time deposits 948,815 40,506 4.27 % 900,628 44,509 4.94 % 631,967 27,878 4.41 % Total interest-bearing deposits 2,856,650 95,624 3.35 % 2,766,133 108,774 3.93 % 2,640,544 91,373 3.46 % FHLB advances and other borrowings 240,022 9,104 3.79 % 240,344 9,066 3.77 % 169,963 6,382 3.75 % Subordinated debt 24,903 1,802 7.24 % 33,448 2,150 6.43 % 36,265 2,189 6.04 % Total interest-bearing liabilities 3,121,575 106,530 3.41 % 3,039,925 119,990 3.95 % 2,846,772 99,944 3.51 % Noninterest-bearing liabilities 772,806 735,363 775,116 Shareholders’ equity 348,018 320,912 302,681 Total liabilities and shareholders’ equity $ 4,242,399 $ 4,096,200 $ 3,924,569 Net interest spread 1.76 % 1.16 % 1.21 % Net interest income(tax equivalent)/margin $ 105,000 2.57 % $ 81,272 2.06 % $ 77,704 2.07 % Less: tax-equivalent adjustment (1) 49 50 50 Net interest income $ 104,951 $ 81,222 $ 77,654 (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.
We consider these accounting policies and estimates to be critical accounting policies.
We consider these accounting policies and estimates to be critical.
We derived average balances from the daily balances throughout the periods indicated. During the same periods, we had no securities purchased with agreements to resell. All investments were owned at an original maturity of over one year. Nonaccrual loans are included in earning assets in the following tables.
We derived average balances from the daily balances throughout the periods indicated. During the same periods, we had no securities purchased with agreements to resell. All investments were purchased at an original maturity of over one year. Nonaccrual loans are included in earning assets in the following tables.
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.
We also have a line of credit with another financial institution for $15.0 million, which was unused at December 31, 2025. The line of credit was issued on December 28, 2024 at an interest rate of the U.S. Prime Rate plus 0.25% and an original maturity date of February 28, 2025.
We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business types. In addition to traditional residential mortgage loans, we issue second mortgage residential real estate loans and home equity lines of credit.
We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business categories. In addition to traditional residential mortgage loans, we issue second mortgage residential real estate loans and home equity lines of credit.
Our 63 Table of Contents asset/liability management committee (“ALCO”) monitors and considers methods of managing exposure to interest rate risk by repricing assets or liabilities, selling securities available for sale, replacing an asset or liability at maturity, by adjusting the interest rate during the life of an asset or liability, or by the use of derivatives such as interest rate swaps and other hedging instruments.
Our 66 Table of Contents asset/liability management committee (“ALCO”) monitors and considers methods of managing exposure to interest rate risk by repricing assets or liabilities, selling securities available for sale, replacing an asset or liability at maturity, by adjusting the interest rate during the life of an asset or liability, or by the use of derivatives such as interest rate swaps and other hedging instruments.
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.
As of December 31, 2025, 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, 2024.
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, 2025.
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.
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, 2025.
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.
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 63 Table of Contents subject to a high degree of control at the time investment decisions are made.
To be considered “well-capitalized” for purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risked-based capital ratio of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio of at least 5%.
To be considered “well-capitalized” for purposes of certain rules and prompt corrective action requirements, the Bank must maintain a minimum total risk-based capital ratio of at least 10%, a total Tier 1 capital ratio of at least 8%, a common equity Tier 1 capital ratio of at least 6.5%, and a leverage ratio of at least 5%.
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.
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, 2025, compared to $1.6 million and $1.7 million for the years ended December 31, 2024 and 2023, respectively.
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.
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 2025, 2024, and 2023.
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.
As of December 31, 2025, 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.
Assets and liabilities that are measured at fair value using quoted prices in active markets (Level 1) do not require significant judgment while the valuation of assets and liabilities when quoted market prices are not available (Levels 2 and 3) may require significant 49 Table of Contents judgment to assess whether observable or unobservable inputs for those assets and liabilities provide reasonable determination of fair value.
Assets and liabilities that are measured at fair value using quoted prices in active markets (Level 1) do not require significant judgment while the valuation of assets and liabilities when quoted market prices are not available (Levels 2 and 3) may require significant judgment to assess whether observable or unobservable inputs for those assets and liabilities provide reasonable determination of fair value.
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 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, 2025.
The $500,000 provision was driven primarily by $29.1 million in loan growth during the year combined with slightly lower expected loss rates due to historically low charge-offs, while the $375,000 reversal was driven by a $5.5 million decrease in unfunded commitments combined with lower historical loss rates.
The $500,000 provision for credit losses was driven primarily by $29.1 million in loan growth during the year combined with slightly lower expected loss rates due to historically low charge-offs, while the $375,000 reversal was driven by a $5.5 million decrease in unfunded commitments combined with lower historical loss rates.
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.
We derived our balance sheet and income statement data for the years ended December 31, 2025, 2024, and 2023 from our audited consolidated financial statements.
Beginning September 30, 2024, the interest rate on the subordinated debt reset to an interest rate per annum equal to the Three-Month Term SOFR plus 340.8 basis points (8.00% at December 31, 2024), payable quarterly in arrears. See Note 9 to the Consolidated Financial Statements for more information on our subordinated debentures.
Beginning September 30, 2024, the interest rate on the subordinated debt reset to an interest rate per annum equal to the Three-Month Term SOFR plus 340.8 basis points (7.34% at December 31, 2025), payable quarterly in arrears. See Note 9 to the Consolidated Financial Statements for more information on our subordinated debentures.
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.
The principal component of our liabilities is deposits which were $3.72 billion and $3.44 billion at December 31, 2025 and 2024, 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 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.
The unused borrowing capacity currently available from the FHLB at December 31, 2025 was $836.5 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.
We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables to illustrate our interest rate sensitivity with respect to interest-earning and interest-bearing accounts.
We also track the 52 Table of Contents sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables to illustrate our interest rate sensitivity with respect to interest-earning and interest-bearing accounts.
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.
Further, 0.38% and 0.12% of our total home equity lines of credit were over 30 days past due as of December 31, 2025 and 2024, respectively. Following is a summary of our loan composition for each of the last three years ended December 31, 2025.
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.
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 $2.88 billion, $2.66 billion, and $2.81 billion at December 31, 2025, 2024 and 2023, respectively. All of our time deposits are certificates of deposit.
Our investment securities at December 31, 2024 and 2023 amounted to $151.6 million and $154.6 million, or 3.7% and 3.8% of total assets, respectively. Investment securities traditionally provide a secondary source of liquidity since they can be converted into cash in a timely manner.
Our investment securities at December 31, 2025 and 2024 amounted to $147.8 million and $151.6 million, or 3.4% and 3.7% of total assets, respectively. Investment securities traditionally provide a secondary source of liquidity since they can be converted into cash in a timely manner.
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.
At December 31, 2025 and 2024, we estimate that we have approximately $1.5 billion and $1.3 billion, respectively, in uninsured deposits including related interest accrued and unpaid.
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.
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, 93.7% of our interest income related to interest on loans during 2025, compared to 92.9% during 2024 and 93.5% during 2023.
The type of collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate. At December 31, 2024 and 2023, there were $16.2 million and $16.1 million of commitments under letters of credit, respectively.
The type of collateral varies but may include accounts receivable, inventory, property, plant and equipment, and commercial and residential real estate. At December 31, 2025 and 2024, there were $20.4 million and $16.2 million of commitments under letters of credit, respectively.
We maintain six federal funds purchased lines of credit with correspondent banks totaling $128.5 million to meet short-term liquidity needs. There were no borrowings against the lines at December 31, 2024. At December 31, 2024, we had $210.8 million pledged and available with the Federal Reserve Discount Window.
We maintain six federal funds purchased lines of credit with correspondent banks totaling $128.5 million to meet short-term liquidity needs. There were no borrowings against the lines at December 31, 2025. At December 31, 2025, we had $181.2 million pledged and available with the Federal Reserve Discount Window.
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.
In addition, at December 31, 2025 we had $231.9 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.
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.
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 $368.7 million at December 31, 2025 and $330.4 million at December 31, 2024.
(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.
(2) Includes loans held for sale and nonaccrual loans. Our net interest margin, on a tax-equivalent basis (TE), was 2.57%, 2.06% and 2.07% for the years ended December 31, 2025, 2024 and 2023, respectively.
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 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 $127.7 million and amortized cost of $137.2 million for an unrealized loss of $9.4 million at December 31, 2025 compared to 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.
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.
The average home equity loan had a balance of approximately $108,000 and a loan to value of approximately 73% as of December 31, 2025, compared to an average loan balance of $92,000 and a loan to value of approximately 74% as of December 31, 2024.
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.
Average loans for the years ended December 31, 2025 and 2024 were $3.75 billion and $3.63 billion, respectively. Before allowance for credit losses, total loans outstanding at December 31, 2025 and 2024 were $3.85 billion and $3.63 billion, respectively. The principal component of our loan portfolio is loans secured by real estate mortgages.
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.
The following table sets forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the years ended December 31, 2025, 2024 and 2023. 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, 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.
As of December 31, 2025, $769,000 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.
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.
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, 2025, 2024, and 2023, our net interest income was $105.0 million, $81.2 million, and $77.7 million, respectively.
Loan modifications to borrowers experiencing financial difficulty were not material for the twelve months ended December 31, 2024 and December 31, 2023. Allowance for Credit Losses At December 31, 2024 and December 31, 2023, the allowance for credit losses was $39.9 million and $40.7 million, respectively, or 1.10% and 1.13% of outstanding loans, respectively.
Loan modifications to borrowers experiencing financial difficulty were not material for the twelve months ended December 31, 2024. Allowance for Credit Losses At December 31, 2025 and December 31, 2024, the allowance for credit losses was $42.3 million and $39.9 million, respectively, or 1.10% of outstanding loans, respectively.
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.
Home equity lines of credit totaled $248.7 million as of December 31, 2025, of which approximately 47% were in a first lien position, while the remaining balance was second liens, compared to $204.9 million as of December 31, 2024, of which approximately 46% were in first lien positions and the remaining balance was in second liens.
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.
December 31, (dollars in thousands) 2025 2024 Federal Home Loan Bank stock $ 14,540 14,516 Other investments 5,120 4,571 Investment in Trust Preferred subsidiaries 403 403 Total $ 20,063 19,490 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.
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.
There was a $3.0 million provision for credit losses for the year ended December 31, 2025, compared to a provision of $125,000 and $1.3 million for the years ended December 31, 2024, and 2023, respectively. The $3.0 million provision during 2025 included a provision of $2.5 million for credit losses and a $500,000 provision for unfunded commitments.
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.
However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control. At December 31, 2025 and 2024, our cash and cash equivalents amounted to $269.6 million and $162.9 million, or 6.1% and 4.0% of total assets, respectively.
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.
These guidelines allow us to take advantage of the attractive terms that wholesale funding can offer while mitigating the related inherent risk. 62 Table of Contents Our retail deposits represented $3.16 billion, or 85.1% of total deposits, at December 31, 2025 and $2.89 billion, or 84.0% of total deposits, at December 31, 2024.
During 2023, our average interest-bearing liabilities increased by $749.3 million, compared to 2022, while the cost of our interest-bearing liabilities increased by 255 basis points. Our net interest spread was 1.16% for the year ended December 31, 2024, compared to 1.21% for the same period in 2023 and 2.88% for 2022.
During 2024, our average interest-bearing liabilities increased by $193.2 million, compared to 2023, while the cost of our interest-bearing liabilities increased by 44 basis points. Our net interest spread was 1.76% for the year ended December 31, 2025, compared to 1.16% for the same period in 2024 and 1.21% for 2023.
Brokered deposits were $550.3 million, representing 16.0% of our total deposits at December 31, 2024, and $379.4 million, or 12.6%, at December 31, 2023 and are included in time deposits greater than $250,000 in the following table. Our loan-to-deposit ratio was 106%, 107%, and 104% at December 31, 2024, 2023, and 2022, respectively.
Brokered deposits were $552.9 million, representing 14.9% of our total deposits at December 31, 2025, and $550.3 million, or 16.0%, at December 31, 2024 and are included in time deposits greater than $250,000 in the following table. Our loan-to-deposit ratio was 103%, 106%, and 107% at December 31, 2025, 2024, and 2023, respectively.
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.
In addition, our net income available to common shareholders was $13.4 million, or EPS of $1.66 for the year ended December 31, 2023. 49 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.
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.
Year ended December 31, 2025 2024 2023 (dollars in thousands) Amount % Amount % Amount % Net charge-offs: Commercial Non-owner occupied RE $ - - $ (1,029 ) (0.03 )% $ (57 ) 0.00 % Business (166 ) (0.00 )% (468 ) (0.01 )% 279 0.01 % Total commercial (166 ) (0.00 )% (1,497 ) (0.04 )% 222 0.01 % Consumer Real Estate 36 0.00 % - - - - Home equity 42 0.00 % 210 0.01 % (373 ) (0.01 )% Other 4 0.00 % 19 0.00 % (15 ) 0.00 % Total consumer 82 0.00 % 229 0.01 % (388 ) (0.01 )% Net loan charge-offs $ (84 ) $ (1,268 ) $ (166 ) Net loan charge-offs as a % of average loans (0.00 )% (0.04 )% 0.00 % The following table summarizes the allocation of the allowance for credit losses among the various loan categories.
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.
In addition, our nonperforming assets increased to 0.32% as a percentage of total assets at December 31, 2025 from 0.27%, as a percentage of total assets, at December 31, 2024, while our classified assets were 4.22% and 4.25% of total capital (risk based) as of December 31, 2025 and December 31, 2024, respectively.
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.
We consider exceptional client service to be a critical part of our culture, which we refer to as “ClientFIRST.” At December 31, 2025, we had total assets of $4.40 billion, an increase from total assets of $4.09 billion at December 31, 2024.
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.
As of December 31, 2025, our loan portfolio included $3.18 billion, or 82.8%, of loans secured by real estate, compared to $3.03 billion, or 83.5%, as of December 31, 2024. Most of our real estate loans are secured by residential or commercial property.
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 largest components of our total assets are loans, which were $3.85 billion and $3.63 billion at December 31, 2025 and 2024, respectively. Our liabilities and shareholders’ equity at December 31, 2025 totaled $4.03 billion and $368.7 million, respectively, compared to liabilities of $3.76 billion and shareholders’ equity of $330.4 million at December 31, 2024.
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.
At December 31, 2025, individually evaluated loans totaled approximately $15.1 million for which $5.2 million of these loans had a reserve of approximately $1.5 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 had a reserve of approximately $1.9 million allocated in the allowance.
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.
Years Ended December 31, (dollars in thousands, except per share data) 2025 2024 2023 BALANCE SHEET DATA Total assets $ 4,403,494 4,087,593 4,055,789 Investment securities 147,793 151,617 154,641 Loans (1) 3,845,124 3,631,767 3,602,627 Allowance for credit losses 42,280 39,914 40,682 Deposits 3,716,803 3,435,765 3,379,564 FHLB advances and other borrowings 240,000 240,000 275,000 Subordinated debentures 24,903 24,903 36,322 Common equity 368,657 330,444 312,467 Preferred stock - - - Shareholders’ equity 368,657 330,444 312,467 SELECTED RESULTS OF OPERATIONS DATA Interest income $ 211,481 201,212 177,598 Interest expense 106,530 119,990 99,944 Net interest income 104,951 81,222 77,654 Provision for credit losses 2,950 125 1,260 Net interest income after provision for credit losses 102,001 81,097 76,394 Noninterest income 13,138 12,141 9,860 Noninterest expenses 75,534 73,326 68,827 Income before income tax expense 39,605 19,912 17,427 Income tax expense 9,239 4,382 4,001 Net income available to common shareholders $ 30,366 15,530 13,426 PER COMMON SHARE DATA Basic $ 3.75 1.92 1.67 Diluted 3.72 1.91 1.66 Book value 44.89 40.47 38.63 Weighted average number of common shares outstanding: Basic, in thousands 8,091 8,081 8,047 Diluted, in thousands 8,160 8,117 8,078 SELECTED FINANCIAL RATIOS Performance Ratios: Return on average assets 0.72 % 0.38 % 0.34 % Return on average equity 8.73 % 4.84 % 4.44 % Return on average common equity 8.73 % 4.84 % 4.44 % Net interest margin, tax equivalent (2) 2.57 % 2.06 % 2.07 % Efficiency ratio (3) 63.96 % 78.54 % 78.65 % Asset Quality Ratios: Nonperforming assets to total loans (1) 0.37 % 0.30 % 0.11 % Nonperforming assets to total assets 0.32 % 0.27 % 0.10 % Net charge-offs to average total loans 0.00 % 0.04 % 0.00 % Allowance for credit losses to nonperforming loans 305.65 % 366.94 % 1,026.58 % Allowance for credit losses to total loans 1.10 % 1.10 % 1.13 % Holding Company Capital Ratios: Total risk-based capital ratio 12.89 % 12.70 % 12.57 % Tier 1 risk-based capital ratio 11.44 % 11.16 % 10.60 % Leverage ratio 8.93 % 8.55 % 8.14 % Common equity tier 1 ratio (4) 11.06 % 10.75 % 10.19 % Tangible common equity (5) 8.37 % 8.08 % 7.70 % Growth Ratios (6) : Change in assets 7.73 % 0.78 % 9.85 % Change in loans 5.87 % 0.81 % 10.06 % Change in deposits 8.18 % 1.66 % 7.84 % Change in net income to common shareholders 95.53 % 15.67 % -53.89 % Change in earnings per common share - diluted 94.76 % 15.06 % -54.02 % 50 Table of Contents Footnotes to table: (1) Excludes loans held for sale.
Our average interest-earning assets increased by $175.0 million during the year ended December 31, 2024, compared to 2023, while the related yield on our interest-earning assets increased by 39 basis points.
Our average interest-earning assets increased by $152.4 million during the year ended December 31, 2025, compared to 2024, while the related yield on our interest-earning assets increased by six basis points.
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 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.
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.
In comparison, the allowance for credit losses totaled $39.9 million as of December 31, 2024, or 1.10% of gross loans, and $40.7 million as of December 31, 2023, or 1.13% of gross loans.
Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At December 31, 2024, unfunded commitments to extend credit were approximately $719.1 million, of which $57.5 million were at fixed rates and $661.6 million were at variable rates.
Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. At December 31, 2025, unfunded commitments to extend credit were approximately $843.6 million, of which $81.4 million were at fixed rates and $762.2 million were at variable rates.
Actual For capital adequacy purposes minimum (1) To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2024 Total Capital (to risk weighted assets) $ 402,629 12.66 % $ 254,412 8.00 % $ 318,015 10.00 % Tier 1 Capital (to risk weighted assets) 362,875 11.41 % 190,809 6.00 % 254,412 8.00 % Common Equity Tier 1 (to risk weighted assets) 362,875 11.41 % 143,107 4.50 % 206,709 6.50 % Tier 1 Capital (to average assets) 362,875 8.75 % 165,941 4.00 % 207,426 5.00 % As of December 31, 2023 Total Capital (to risk weighted assets) $ 390,197 12.28 % $ 254,278 8.00 % $ 317,847 10.00 % Tier 1 Capital (to risk weighted assets) 350,455 11.03 % 190,708 6.00 % 254,278 8.00 % Common Equity Tier 1 (to risk weighted assets) 350,455 11.03 % 143,031 4.50 % 206,601 6.50 % Tier 1 Capital (to average assets) 350,455 8.47 % 165,414 4.00 % 206,767 5.00 % As of December 31, 2022 Total Capital (to risk weighted assets) $ 366,988 12.45 % $ 235,892 8.00 % $ 294,865 10.00 % Tier 1 Capital (to risk weighted assets) 330,108 11.20 % 176,919 6.00 % 235,892 8.00 % Common Equity Tier 1 (to risk weighted assets) 330,108 11.20 % 132,689 4.50 % 191,662 6.50 % Tier 1 Capital (to average assets) 330,108 9.43 % 140,040 4.00 % 175,050 5.00 % (1) Ratios do not include the capital conservation buffer of 2.5%. 62 Table of Contents On September 30, 2019, we sold and issued $23.0 million in aggregate principal amount of 4.75% Fixed-to-Floating Rate Subordinated Notes due 2029 to eligible purchasers in a private offering.
Actual For capital adequacy purposes minimum (1) To be well capitalized under prompt corrective action provisions minimum (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2025 Total Capital (to risk weighted assets) $ 437,207 12.85 % $ 272,120 8.00 % $ 340,150 10.00 % Tier 1 Capital (to risk weighted assets) 394,927 11.61 % 204,090 6.00 % 272,120 8.00 % Common Equity Tier 1 (to risk weighted assets) 394,927 11.61 % 153,068 4.50 % 221,098 6.50 % Tier 1 Capital (to average assets) 394,927 9.06 % 174,276 4.00 % 217,845 5.00 % As of December 31, 2024 Total Capital (to risk weighted assets) $ 402,629 12.66 % $ 254,412 8.00 % $ 318,015 10.00 % Tier 1 Capital (to risk weighted assets) 362,875 11.41 % 190,809 6.00 % 254,412 8.00 % Common Equity Tier 1 (to risk weighted assets) 362,875 11.41 % 143,107 4.50 % 206,709 6.50 % Tier 1 Capital (to average assets) 362,875 8.75 % 165,941 4.00 % 207,426 5.00 % As of December 31, 2023 Total Capital (to risk weighted assets) $ 390,197 12.28 % $ 254,278 8.00 % $ 317,847 10.00 % Tier 1 Capital (to risk weighted assets) 350,455 11.03 % 190,708 6.00 % 254,278 8.00 % Common Equity Tier 1 (to risk weighted assets) 350,455 11.03 % 143,031 4.50 % 206,601 6.50 % Tier 1 Capital (to average assets) 350,455 8.47 % 165,414 4.00 % 206,767 5.00 % (1) Ratios do not include the capital conservation buffer of 2.5%. 65 Table of Contents On September 30, 2019, we sold and issued $23.0 million in aggregate principal amount of 4.75% Fixed-to-Floating Rate Subordinated Notes due 2029 to eligible purchasers in a private offering.
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.
Year Ended December 31, (dollars in thousands) 2025 2024 2023 Compensation and benefits $ 44,806 43,546 40,275 Occupancy 9,983 10,291 10,255 Outside service and data processing costs 8,528 7,741 7,078 Insurance 3,875 4,022 3,766 Professional fees 2,455 2,404 2,496 Marketing 1,529 1,412 1,357 Other 4,358 3,910 3,600 Total noninterest expenses $ 75,534 73,326 68,827 Noninterest expenses were $75.5 million for the year ended December 31, 2025, a $2.2 million, or 3.0%, increase from noninterest expenses of $73.3 million for 2024.
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 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.
Interest rate scenario Change in net interest income from base Up 300 basis points (12.50 )% Up 200 basis points (7.54 )% Up 100 basis points (3.31 )% Base - Down 100 basis points 5.86 % Down 200 basis points 15.62 % Down 300 basis points 29.42 % Contractual Obligations We have commitments with various investment partners under the Small Business Investment Company (“SBIC”) and the Rural Business Investment Company (“RBIC”) programs for which we have committed to make capital contributions from time to time.
Interest rate scenario Change in net interest income from base Up 300 basis points (11.87 )% Up 200 basis points (7.16 )% Up 100 basis points (3.28 )% Base - Down 100 basis points 2.67 % Down 200 basis points 6.87 % Down 300 basis points 11.52 % Contractual Obligations We have commitments with various investment partners under the Small Business Investment Company (“SBIC”) and the Rural Business Investment Company (“RBIC”) programs for which we have committed to make capital contributions from time to time.
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.
Net interest income was $81.2 million for the year ended December 31, 2024, a $3.6 million increase from net interest income of $77.7 million for the year ended December 31, 2023. 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.
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.
Our efficiency ratio was 64.0% for 2025, 78.5% for 2024 and 78.7% for 2023. 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.
At December 31, 2023, unfunded commitments to extend credit were $724.6 million, of which approximately $145.6 million were at fixed rates and $579.0 million were at variable rates. A majority of the unfunded commitments related to commercial business lines of credit and home equity lines of credit.
At December 31, 2024, unfunded commitments to extend credit were $719.1 million, of which approximately $57.5 million were at fixed rates and $661.6 million were at variable rates. A majority of the unfunded commitments related to commercial business lines of credit and home equity lines of credit.
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.
December 31, (dollars in thousands) 2025 2024 2023 Balance, beginning of period $ 39,914 40,682 38,639 Provision for credit losses 2,450 500 2,209 Loan charge-offs (351 ) (1,734 ) (761 ) Loan recoveries 267 466 595 Net loan charge-offs (84 ) (1,268 ) (166 ) Balance, end of period $ 42,280 39,914 40,682 As of December 31, 2025, the allowance for credit losses totaled $42.3 million, or 1.10% of gross loans.
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.
In addition, nonperforming assets represented 0.32% of total assets while our level of classified assets to total capital (risk based) decreased to 4.22% at December 31, 2025. We reported net charge-offs of $1.3 million and $166,000 for the years ended December 31, 2024, and 2023, respectively, including charge-offs of $1.7 million and $761,000 in 2024 and 2023, respectively.
Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled.
Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The realization of deferred tax assets depends on generating sufficient future taxable income within the applicable carryforward periods.
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.
The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans as of December 31, 2025.
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.
The maturity distribution of our time deposits of $250,000 or more is as follows: December 31, (dollars in thousands) 2025 2024 Three months or less $ 215,650 233,514 Over three through six months 180,050 187,478 Over six through twelve months 271,920 130,568 Over twelve months 110,334 222,468 Total $ 777,954 774,028 Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2025 and December 31, 2024 were $778.0 million and $774.0 million, respectively, including wholesale deposits.
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.
Year ended December 31, 2025 2024 (dollars in thousands) Amount % (1) Amount % (1) Commercial Owner occupied RE $ 3,911 19.2 % $ 5,482 17.9 % Non-owner occupied RE 6,773 24.9 % 10,219 25.5 % Construction 611 1.7 % 940 2.8 % Business 12,148 16.0 % 7,745 15.3 % Total commercial 23,443 61.8 % 24,386 61.5 % Consumer Real estate 15,866 30.0 % 12,359 31.1 % Home equity 1,827 6.5 % 2,655 5.6 % Construction 569 0.6 % 115 0.6 % Other 575 1.1 % 399 1.2 % Total consumer 18,837 38.2 % 15,528 38.5 % Total allowance for credit losses $ 42,280 100.0 % $ 39,914 100.0 % (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.
Although management believes its process for determining the allowance adequately considers all the potential factors that could potentially result in credit losses, the process includes subjective elements and is susceptible to significant change.
Although management believes its process for determining the allowance adequately considers all the potential factors that could result in credit losses, the process includes subjective elements and is susceptible to significant change. Changes in economic conditions, portfolio composition, collateral values, and forecast assumptions could materially affect the ACL.
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.
Interest expense on deposits for 2025 represented 89.8% of total interest expense, compared to 90.7% for 2024, and 91.4% for 2023, while interest expense on borrowings represented the remaining portion of total interest expense.
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.
Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status. 60 Table of Contents December 31, (dollars in thousands) 2025 2024 2023 Commercial Owner occupied RE $ 259 - - Non-owner occupied RE 6,917 7,641 1,423 Business 189 1,016 319 Consumer Real estate 5,763 1,908 985 Home equity 705 312 1,236 Total nonaccrual loans 13,833 10,877 3,963 Other real estate owned 275 - - Total nonperforming assets $ 14,108 10,877 3,963 Asset Quality Ratios: Nonperforming assets/total assets 0.32 % 0.27 % 0.10 % Nonaccrual loans/gross loans 0.36 % 0.30 % 0.11 % Total loans over 90 days past due (1) $ 4,499 2,641 1,300 Loans over 90 days past due and still accruing - - - (1) Loans over 90 days are included in nonaccrual loans At December 31, 2025, nonperforming assets were $14.1 million, or 0.32% of total assets, compared to $10.9 million, or 0.27% of total assets at December 31, 2024.
The increase in noninterest income during 2024, compared to 2023, resulted primarily from an increase in mortgage banking income, service fees on deposit accounts and income from bank owned life insurance. Mortgage banking income increased by $1.5 million, or 37.8%, due to higher mortgage volume during the year.
The increase in noninterest income during 2024, compared to 2023, resulted primarily from an increase in mortgage banking income, service fees on deposit accounts and income from bank owned life insurance.
Since our inception, we have not paid cash dividends. 61 Table of Contents December 31, (dollars in thousands) 2024 2023 2022 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 % Average equity to average assets ratio 7.83 % 7.71 % 8.85 % Tangible common equity to assets ratio 8.08 % 7.70 % 7.98 % Under the capital adequacy guidelines, regulatory capital is classified into two tiers.
December 31, (dollars in thousands) 2025 2024 2023 Return on average assets 0.72 % 0.38 % 0.34 % Return on average equity 8.73 % 4.84 % 4.44 % Return on average common equity 8.73 % 4.84 % 4.44 % Average equity to average assets ratio 8.20 % 7.83 % 7.71 % Tangible common equity to assets ratio 8.37 % 8.08 % 7.70 % 64 Table of Contents Under the capital adequacy guidelines, regulatory capital is classified into two tiers.
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.
Our net income available to common shareholders for the years ended December 31, 2025 and 2024 was $30.4 million and $15.5 million, or diluted earnings per share (“EPS”) of $3.72 and $1.91 for the years ended December 31, 2025 and 2024, respectively. The increase in net income resulted primarily from an increase in net interest income.
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.
During the year ended December 31, 2025, we had net charge-offs of $84,000, consisting of $351,000 of loans charged-off in the current year, partially offset by $267,000 of recoveries on loans previously charged-off. Net charge-offs were 55 Table of Contents 0.00% of the average outstanding loan portfolio for 2025.
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.
December 31, 2025 2024 2023 Amortized Fair Amortized Fair Amortized Fair (dollars in thousands) Cost Value Cost Value Cost Value Available for Sale Corporate bonds $ 1,703 1,600 2,121 1,927 2,147 1,910 US treasuries - - 999 908 9,495 9,394 US government agencies 13,225 12,278 17,540 15,795 20,594 18,656 State and political subdivisions 19,934 17,870 22,387 19,322 22,642 19,741 Asset-backed securities 16,505 16,419 36,613 36,538 33,450 33,236 Mortgage-backed securities 85,798 79,563 66,988 57,637 60,730 51,765 Total $ 137,165 127,730 146,648 132,127 149,058 134,702 57 Table of Contents Contractual maturities and yields on a tax-equivalent basis for our investments are shown in the following table.
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.
The increase in interest income during 2025 was driven by an increase in average loan balances, combined with an increase in loan yield. Interest expense was $106.5 million, $120.0 million, and $99.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.

… 95 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Interest Rate Sensitivity and – Liquidity and Capital Resources. 65 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Interest Rate Sensitivity and – Liquidity and Capital Resources. 68 Table of Contents

Other SFST 10-K year-over-year comparisons