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What changed in John Marshall Bancorp, Inc.'s 10-K — 2023 vs 2024

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

+237 added−241 removedSource: 10-K (2025-03-28) vs 10-K (2024-03-20)

Top changes in John Marshall Bancorp, Inc.'s 2024 10-K

237 paragraphs added · 241 removed · 201 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

62 edited+8 added−16 removed223 unchanged
Biggest changeOur executive management team brings decades of in-market experience. Christopher W. Bergstrom, our President and Chief Executive Officer, has a banking career spanning nearly 42 years. Mr. Bergstrom joined the Company in 2018. Prior to joining the Company, Mr. Bergstrom served in executive management capacities at banks in our market area that were significantly larger than the Company. Andrew J.
Biggest changePrior to joining the Company, Mr. Bergstrom served in executive management capacities at banks in our market area that were significantly larger than the Company. Andrew J. Peden, our Chief Banking Officer, has over 24 years of banking experience, all of it in the Washington, D.C. MSA. He joined the Company in 2018. Kent D.
Our team of professionals has been an important driver of our organic growth by developing banking relationships with current and potential customers. We believe our ability to recruit and retain talented, customer service-oriented professionals has been at the core of our growing and expanding banking relationships. 5 Table of Contents ● Stable profitability and completive shareholder returns earnings.
Our team of 5 Table of Contents professionals has been an important driver of our organic growth by developing banking relationships with current and potential customers. We believe our ability to recruit and retain talented, customer service-oriented professionals has been at the core of our growing and expanding banking relationships. ● Stable profitability and completive shareholder returns earnings.
A borrower’s 9 Table of Contents ability to repay is carefully analyzed and policy generally calls for an ongoing cash flow to debt service requirement of at least 1.10:1.0. An approved list of commercial real estate appraisers selected on the basis of consistent standards has been established. Each appraisal is scrutinized in an effort to ensure current comparable market values.
A borrower’s ability to repay is carefully analyzed and policy generally calls for an ongoing cash flow to debt service requirement of at 9 Table of Contents least 1.10:1.0. An approved list of commercial real estate appraisers selected on the basis of consistent standards has been established. Each appraisal is scrutinized in an effort to ensure current comparable market values.
The consolidation trend provides an opportunity for the Company to execute a focused strategy of offering personalized services to attract potential customers who are underserved or dissatisfied. 4 Table of Contents Given the Company’s proximity to Washington, D.C., the federal government has both contributed to the growth and played a stabilizing role in our market area’s economy.
The consolidation trend provides an opportunity for the Company to execute a focused strategy of offering personalized services to attract potential customers who are underserved or dissatisfied. 4 Table of Contents Given the Company’s proximity to Washington, D.C., the federal government has contributed to the growth and generally played a stabilizing role in our market area’s economy.
The Interagency Guidance on Sound Incentive Compensation Policies , which covers all employees that have the ability to materially affect the risk profile of financial institutions, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk 21 Table of Contents management, and (iii) be supported by strong corporate governance, including active and effective oversight by the financial institution’s board of directors.
The Interagency Guidance on Sound Incentive Compensation Policies , which covers all employees that have the ability to materially affect the risk profile of financial institutions, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the financial institution’s board of directors.
Our primary service area comprises the majority of the population and household income of the Washington-Arlington-Alexandria, DC-VA-MD-WV (“Washington, D.C.”) Metropolitan Statistical Area (“MSA”). The Washington, D.C. MSA, according to U.S. Bureau of Economic Analysis data, ranked sixth among all MSAs for 2022 gross domestic product.
Our primary service area comprises the majority of the population and household income of the Washington-Arlington-Alexandria, DC-VA-MD-WV (“Washington, D.C.”) Metropolitan Statistical Area (“MSA”). The Washington, D.C. MSA, according to U.S. Bureau of Economic Analysis data, ranked sixth among all MSAs for 2023 gross domestic product.
We intend to execute on this goal by focusing on the following objectives: ● Maintain financial and credit quality discipline. 2023 underscored the importance of consistency of purpose and a conservative balance sheet. We are committed to being a high performing bank and will strive to continue to grow our loan and deposit portfolios in a disciplined manner.
We intend to execute on this goal by focusing on the following objectives: ● Maintain financial and credit quality discipline. 2024 underscored the importance of consistency of purpose and a conservative balance sheet. We are committed to being a high performing bank and will strive to continue to grow our loan and deposit portfolios in a disciplined manner.
The Nasdaq Stock Market, LLC, the exchange on which our common stock is listed, enacted a listing rule that became effective in 2023 requiring listed companies to adopt policies mandating the recovery or “clawback” of excess incentive compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
The Nasdaq Stock Market, LLC, the exchange on which our common stock is listed, enacted a listing rule that became effective in 2023 requiring listed companies to adopt policies mandating the recovery or “clawback” of excess incentive compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material 21 Table of Contents misstatement if the error were corrected in the current period or left uncorrected in the current period.
These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized and critically undercapitalized institutions. The Bank met the definition of being “well capitalized” as of December 31, 2023 and 2022. Deposit Insurance. The deposits of the Bank are insured up to applicable limits by the DIF.
These and additional mandatory and permissive supervisory actions may be taken with respect to significantly undercapitalized and critically undercapitalized institutions. The Bank met the definition of being “well capitalized” as of December 31, 2024 and 2023. Deposit Insurance. The deposits of the Bank are insured up to applicable limits by the DIF.
MSA had $296 billion in deposits. Owing in large part to the presence of the United States government, the unemployment rate in the Washington, D.C. MSA has consistently been lower than that of the country as a whole. The Washington, D.C. MSA has undergone a significant amount of bank consolidation in the past several decades.
MSA had $292 billion in deposits. Owing in large part to the presence of the United States government, the unemployment rate in the Washington, D.C. MSA has consistently been lower than that of the country as a whole. The Washington, D.C. MSA has undergone a significant amount of bank consolidation in the past several decades.
The market area in which we operate has seen considerable population and economic growth over the past several decades. The most recent economic data suggest that the relative economic strength of our market area will continue, enabling us to further grow our customer base and opportunities to grow our market share.
The market area in which we operate has seen considerable population and economic growth over the past several decades. The most recent economic data suggest that the relative economic strength of our market area will continue, enabling us to grow our customer base and find opportunities to grow our market share.
These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing.
These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Service Members Civil Relief Act, laws governing flood insurance, federal and 19 Table of Contents state laws prohibiting unfair and deceptive business practices, foreclosure laws, and various regulations that implement some or all of the foregoing.
Since the Company’s inception, banking assets in excess of $45 billion have been acquired. We believe that as financial institutions are merged with or acquired by remote, larger institutions, their customers can become further removed from the point of decision making.
Since the Company’s inception, banking assets in excess of $55 billion have been acquired. We believe that as financial institutions are merged with or acquired by remote, larger institutions, their customers can become further removed from the point of decision making.
Section 22(h) of the Federal Reserve Act prohibits loans to any of those individuals where the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the bank’s unimpaired capital and unimpaired surplus.
Section 22(h) of the Federal Reserve Act prohibits loans to any of those individuals where 18 Table of Contents the aggregate amount exceeds an amount equal to 15% of an institution’s unimpaired capital and surplus plus an additional 10% of unimpaired capital and surplus in the case of loans that are fully secured by readily marketable collateral, or when the aggregate amount on all of the extensions of credit outstanding to all of these persons would exceed the bank’s unimpaired capital and unimpaired surplus.
Refer to the Loan Portfolio section within Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information regarding the composition of our loan portfolio as of December 31, 2023 and 2022.
Refer to the Loan Portfolio section within Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information regarding the composition of our loan portfolio as of December 31, 2024 and 2023.
The federal bank regulatory agencies expect financial institutions to establish lines of defense and to ensure that their risk management processes address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyberattack.
The federal bank regulatory agencies expect financial institutions to establish lines of defense and to ensure that their risk management processes address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the 20 Table of Contents institution’s operations after a cyberattack.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . ​ ​ 23 Table of Contents
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . ​ ​ 22 Table of Contents
We compete with these institutions by focusing on our position as an independent, commercial business bank and rely upon relationships established by our officers, directors, and employees with our customers, promotional activities and 7 Table of Contents specialized services tailored to meet the needs of the customers we serve.
We compete with these institutions by focusing on our position as an independent, commercial business bank and rely upon relationships established by our officers, directors, and employees with our customers, promotional activities and specialized services tailored to meet the needs of the customers we serve.
We strive to provide innovative products to our customers that are value-driven. We actively cultivate relationships with our customers that extend beyond a single loan to a full suite of products that serve the needs of our commercial customers. Our goal is to develop long-standing connections with our customers and the communities that we serve.
We strive to provide innovative products to our 7 Table of Contents customers that are value-driven. We actively cultivate relationships with our customers that extend beyond a single loan to a full suite of products that serve the needs of our commercial customers. Our goal is to develop long-standing connections with our customers and the communities that we serve.
Interest rate charges on this group of loans generally float at a factor at or above the prime lending rate, subject in many cases to a minimum rate. Generally, personal guarantees are required on these loans. Combined, commercial term loans and lines of credit represent approximately 2.4% of our loan portfolio as of December 31, 2023. Mortgage Lending .
Interest rate charges on this group of loans generally float at a factor at or above the prime lending rate, subject in many cases to a minimum rate. Generally, personal guarantees are required on these loans. Combined, commercial term loans and lines of credit represent approximately 2.6% of our loan portfolio as of December 31, 2024. Mortgage Lending .
The Company implemented the CECL model on January 1, 2023 and elected to apply the provisions of the CECL deferral transition in the determination of its risk based capital ratios. The impact of the application of this deferral transition on the ratios was not significant. Prompt Corrective Action .
The Company implemented the CECL model on January 1, 2023 and elected to apply the provisions of the CECL deferral transition in the determination of its risk based capital ratios. The impact of the application of this deferral transition on the ratios was not significant. 17 Table of Contents Prompt Corrective Action .
In recent years, local governments have made great strides in diversifying their local economies. Virginia Tech selected the City of Alexandria as the site for its innovation campus which aims to graduate 25,000 new bachelor’s and master’s students in computer science and related fields over the next 20 years.
In recent years, local governments have made great strides in diversifying their local economies. Virginia Tech selected the City of Alexandria as the site for its innovation campus which aims to graduate 25,000 new bachelor’s and master’s students in computer science and related fields over the next 20 years. The innovation campus opened February 28, 2025.
Management views purchased mortgages as a managed risk means of diversifying our earning asset portfolio and achieving a yield, net of the amortized premium, superior to that which may be available in the fixed income market. At December 31, 2023, approximately 16.4% of our loan portfolio related to purchased mortgages. Other Loans .
Management views purchased mortgages as a managed risk means of diversifying our earning asset portfolio and achieving a yield, net of the amortized premium, superior to that which may be available in the fixed income market. At December 31, 2024, approximately 16.0% of our loan portfolio related to purchased mortgages. Other Loans .
Although the mortgage loans the Bank originates often carry amortization periods of up to 30 years, interest rate risk is controlled through balloon payments or interest rate adjustments of generally six years or less. At December 31, 2023, Bank originated 1-4 residential mortgage loans represented 7.5% of our loan portfolio.
Although the mortgage loans the Bank originates often carry amortization periods of up to 30 years, interest rate risk is controlled through balloon payments or interest rate adjustments of generally six years or less. At December 31, 2024, Bank originated 1-4 residential mortgage loans represented 3.5% of our loan portfolio.
At December 31, 2023, the Company and the Bank have not been made aware of any instances of noncompliance with this guidance.
At December 31, 2024, the Company and the Bank have not been made aware of any instances of noncompliance with this guidance.
Finally, the Bank works with highly sophisticated sponsors that are experienced, well capitalized, and positioned to manage through a downturn. As of December 31, 2023, construction and development loans made up approximately 9.7% of our loan portfolio. 10 Table of Contents Commercial Term Loans . We provide funds for equipment and general corporate needs.
Finally, the Bank works with highly sophisticated sponsors that are experienced, well capitalized, and positioned to manage through a downturn. As of December 31, 2024, construction and development loans made up approximately 8.8% of our loan portfolio. 10 Table of Contents Commercial Term Loans . We provide funds for equipment and general corporate needs.
The Bank’s capital ratios exceed the thresholds required of a well capitalized institution. As of December 31, 2023, the Bank had the capacity to add over $890 million of risk-weighted assets to its balance sheet and still maintain well capitalized status. The Company has ample liquidity to meet its obligations and fund anticipated loan growth.
The Bank’s capital ratios exceed the thresholds required of a well capitalized institution. As of December 31, 2024, the Bank had the capacity to add $990 million of risk-weighted assets to its balance sheet and still maintain well capitalized status. The Company has ample liquidity to meet its obligations and fund anticipated loan growth.
As of December 31, 2023 and 2022, the capital ratios of the Bank were in excess of the fully phased-in requirements. As discussed below, the Basel III capital reforms also integrated the new capital requirements into the prompt corrective action provisions under Section 38 of the FDIA.
As of December 31, 2024 and 2023, the capital ratios of the Bank were in excess of the requirements. As discussed below, the Basel III capital reforms also integrated the new capital requirements into the prompt corrective action provisions under Section 38 of the FDIA.
According to data sourced from S&P Global Market Intelligence, among the largest MSAs ranked by gross domestic product (Chicago, Dallas, Los Angeles, New York and San Francisco), the Washington D.C.
According to data sourced from S&P Global Market Intelligence, among the largest MSAs ranked by gross domestic product (Chicago, Dallas, Los Angeles, New York, Houston, and Atlanta), the Washington D.C.
The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist 19 Table of Contents financing.
The AML laws and their implementing regulations require insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing.
See Item 1A, Risk Factors, of this Form 10-K for more information on emerging growth companies. Employees As of December 31, 2023, we had 133 full-time employees and 2 part-time employees. None of our employees are covered by a collective bargaining agreement.
See Item 1A, Risk Factors, of this Form 10-K for more information on emerging growth companies. Employees As of December 31, 2024, we had 130 full-time employees and 3 part-time employees. None of our employees are covered by a collective bargaining agreement.
In addition to the $0.22 per share cash dividend paid in July 2023, total return to shareholders when considering the change in book value per share and cash dividend for 2023 was $1.38 per share, an increase of 9.2%. ● Attractive markets. As of June 30, 2023, the most recent FDIC data available, the Washington, D.C.
In addition to the $0.25 per share cash dividend paid in July 2024, total return to shareholders when considering the change in book value per share and cash dividend for 2024 was $1.28 per share, an increase of 7.9%. ● Attractive markets. As of June 30, 2024, the most recent FDIC data available, the Washington, D.C.
As of December 31, 2023, the Bank had over $179 million of liquid assets, defined as cash and unpledged securities, over $459 million of available secured borrowing facilities and $100 million of available unsecured borrowing facilities. Management believes the Company’s balance sheet is well-positioned for organic growth and potential acquisitions. ● Proven ability to grow.
As of December 31, 2024, the Bank had over $228 million of liquid assets, defined as cash and unpledged securities, over $490 million of available secured borrowing facilities and $110 million of available unsecured borrowing facilities. Management believes the Company’s balance sheet is well-positioned for organic growth and potential acquisitions. ● Proven ability to grow.
At June 30, 2023, our deposits were $2.05 billion, ranked 17 th in the MSA and represented a 0.7% market share. Ten of the sixteen banks ranked ahead of the Company are headquartered outside of the Washington, D.C. MSA. Our market area has experienced a significant degree of banking consolidation over the last several decades.
At June 30, 2024, our deposits were $1.92 billion, ranked 18 th in the MSA and represented a 0.7% market share. Ten of the seventeen banks ranked ahead of the Company are headquartered outside of the Washington, D.C. MSA. Our market area has experienced a significant degree of banking consolidation over the last several decades.
Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and discretionary compensation paid to certain officers, based on the amount of the shortfall.
The capital conservation buffer, is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and discretionary compensation paid to certain officers, based on the amount of the shortfall.
At December 31, 2023, the Bank’s statutory lending limit to any single borrower was approximately $42.3 million, subject to certain exceptions provided under applicable law. As of December 31, 2023, the Bank’s credit exposure to its largest borrower was $25.8 million. Commercial Loans .
At December 31, 2024, the Bank’s statutory lending limit to any single borrower was approximately $44.3 million, subject to certain exceptions provided under applicable law. As of December 31, 2024, the Bank’s credit exposure to its largest borrower was $32.6 million. Commercial Loans .
We utilize an independent, nationally recognized independent loan review firm to validate our risk ratings and assess our underwriting and loan administration. We believe that our rigorous underwriting and diligent monitoring of the loan portfolio have created a “credit first” mentality that permeates the Company and is reflected in our asset quality statistics.
We utilize an independent, regionally based loan review firm, that focuses exclusively on community and regional bank, to validate our risk ratings and assess our underwriting and loan administration. We believe that our rigorous underwriting and diligent monitoring of the loan portfolio have created a “credit first” mentality that permeates the Company and is reflected in our asset quality statistics.
Our 10 largest borrowing relationships account for approximately 9.1% of our loans as of December 31, 2023.
Our 10 largest borrowing relationships account for approximately 9.3% of our loans as of December 31, 2024.
MSA ranked second for 2023 median household income at $117,952, second in 2023 to 2028 projected population growth at 2.7% and first in the percentage of inhabitants 25 or older with a bachelor’s degree or higher educational attainment at 53.4%. According to the U.S. Bureau of Labor Statistics, the Washington, D.C.
MSA ranked second for 2024 median household income at $118,391, second in 2024 to 2029 projected population growth at 2.7% and first in the percentage of inhabitants 25 or older with a bachelor’s degree or higher educational attainment at 54.5%. According to the U.S. Bureau of Labor Statistics, the Washington, D.C.
As of December 31, 2023, we had total consolidated assets of $2.24 billion, gross loans of $1.86 billion, total deposits of $1.91 billion and total shareholders’ equity of $229.9 million. Market Area A key factor in our ability to achieve our strategic goals and create shareholder value is the attractiveness of our market area.
As of December 31, 2024, we had total consolidated assets of $2.23 billion, gross loans of $1.87 billion, total deposits of $1.89 billion and total shareholders’ equity of $246.6 million. Market Area A key factor in our ability to achieve our strategic goals and create shareholder value is the attractiveness of our market area.
MSA’s May 2023 unemployment rate was 2.6%, the lowest among the aforementioned MSAs. Based upon Federal Deposit Insurance Corporation (the “FDIC”) data as of June 30, 2023, the Washington D.C. MSA housed $296 billion of deposits, with the top five financial institutions controlling 68.3%.
MSA’s December 2024 unemployment rate was 2.8%, the lowest among the aforementioned MSAs. Based upon Federal Deposit Insurance Corporation (the “FDIC”) data as of June 30, 2024, the Washington D.C. MSA housed $292 billion of deposits, with the top five financial institutions controlling 66.7%.
At December 31, 2023, approximately 19.4% of our loan portfolio related to owner occupied commercial real estate loans, and approximately 37.2% of our loan portfolio related to managed investment commercial real estate. Stress testing remains an important component of our organization, including oversight of commercial real estate loans.
At December 31, 2024, approximately 17.6% of our loan portfolio related to owner occupied commercial real estate loans, and approximately 40.5% of our loan portfolio related to managed investment commercial real estate. Stress testing remains an important component of our organization, including oversight of commercial real estate loans.
We have demonstrated an ability to grow our loans and deposits. For the five year period ended December 31, 2023, the Company’s compound annual growth rates in assets, loans, deposits and non-interest bearing deposits were 10.0%, 9.9%, 10.9% and 13.1%, respectively.
Over the long term we have demonstrated an ability to grow our loans and deposits. For the five year period ended December 31, 2024, the Company’s compound annual growth rates in assets, loans, deposits and non-interest bearing deposits were 7.2%, 7.1%, 7.7% and 14.3%, respectively.
The $1 billion, 600,000 square foot campus will confer over 850 graduate degrees annually and provide talent to spur further technology growth. By 2030, Amazon’s headquarters in Arlington County is expected to occupy at least 4 million square feet of office space. Fairfax County is home to ten Fortune 500 company headquarters.
The $1 billion, 600,000 square foot campus will confer over 600 graduate degrees annually and provide talent to spur further technological growth. By 2030, Amazon’s headquarters in Arlington County is expected to occupy at least 4 million square feet of office space. Phase one of Amazon’s HQ2 was completed in the spring 2023.
With this concentration of credit risk among a limited number of borrowers, we may face a greater risk of material credit losses if any one or several of these borrowers fail to perform in accordance with their loans, compared to a bank with a more diversified loan portfolio. 8 Table of Contents In addition, approximately 59.7% of the loans in our loan portfolio were first originated during the past three years.
With this concentration of credit risk among a limited number of borrowers, we may face a greater risk of material credit losses if any one or several of these borrowers fail to perform in accordance with their loans, compared to a bank with a more diversified loan portfolio.
The CECL model will estimate credit losses over the lifetime of our financial assets measured at amortized cost at the date of origination or acquisition, as opposed to reserving for incurred or probable losses through the balance sheet date. The Company was required to implement ASU 2016-13 on January 1, 2023.
The CECL model estimates credit losses over the lifetime of our financial assets measured at amortized cost at the date of origination or acquisition, as opposed to reserving for incurred or probable losses through the balance sheet date.
While we believe our underwriting standards are designed to manage normal lending risks, it is difficult to assess the future performance of our loan portfolio due to the recent origination of many of our loans.
In addition, approximately 48.1% of the loans in our loan portfolio were first originated during the past three years. While we believe our underwriting standards are designed to manage normal lending risks, it is difficult to assess the future 8 Table of Contents performance of our loan portfolio due to the recent origination of many of our loans.
Peden, our Chief Banking Officer, has over 20 years of banking experience, all of it in the Washington, D.C. MSA. He joined the Company in 2018. Kent D. Carstater, our Chief Financial Officer, has over 25 years of financial services experience as a commercial banker and investment banker. He joined the Company in 2016. Messrs.
Carstater, our Chief Financial Officer, has over 26 years of financial services experience as a commercial banker and investment banker. He joined the Company in 2016. Messrs.
The fourth quarter of 2023 marked the seventeenth consecutive quarter that the Company had no non-performing loans, other real estate owned or loans 30 days or more past due. In each of the past five fiscal years, net charge-offs have not exceeded 0.01% of gross loans. ● Conservative balance sheet. The Company’s balance sheet provides the foundation for prudent growth.
As of December 31, 2024, the Company had no non-accrual loans and no other real estate owned. In each of the past five fiscal years, net charge-offs have not exceeded 0.01% of gross loans. ● Conservative balance sheet. The Company’s balance sheet provides the foundation for prudent growth.
Each institution 20 Table of Contents must conduct an internal risk assessment of its ability to protect customer information. These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated parties without prior notice to and approval from the customer.
These privacy provisions generally prohibit a financial institution from providing a customer’s personal financial information to unaffiliated parties without prior notice to and approval from the customer.
Several laws, including the Right to Financial Privacy Act and the Gramm-Leach-Bliley Act (“GLB Act”), and related regulations issued by the federal bank regulatory agencies, provide protections against the transfer and use of customer information by financial institutions. A financial institution must provide its customers information regarding its policies and procedures with respect to the handling of customers’ personal information.
As a result, the future of the CFPB and its impact on our business are uncertain. Privacy Legislation . Several laws, including the Right to Financial Privacy Act and the Gramm-Leach-Bliley Act (“GLB Act”), and related regulations issued by the federal bank regulatory agencies, provide protections against the transfer and use of customer information by financial institutions.
The reported net loss of $10.1 million for the three months ended September 30, 2023 resulted primarily from the Restructuring. From December 31, 2022 to December 31, 2023, the Company increased book value per share from $15.09 to $16.25.
The Company reported net income of $4.8 million for the three months ended December 31, 2024 and $4.2 million for the three months ended September 30, 2024. From December 31, 2023 to December 31, 2024, the Company increased book value per share from $16.25 to $17.28.
The Company’s SEC filings are posted and available at no cost on its website as soon as reasonably practicable after the reports are filed electronically with the SEC. The Company’s website address is www.johnmarshallbank.com . The information on the Company’s website is not incorporated into this report or any other filing the Company makes with the SEC.
The Company’s website address is www.johnmarshallbank.com . The information on the Company’s website is not incorporated into this report or any other filing the Company makes with the SEC.
For the years ended December 31, 2023 and 2022, the Company recorded expense of $1.0 million and $0.6 million, respectively, for FDIC insurance premiums. Transactions with Affiliates .
CAMELS composite ratings set a maximum insurance assessment for CAMELS 1 and 2 rated banks and set minimum assessments for lower rated institutions. For the years ended December 31, 2024 and 2023, the Company recorded expense of $1.0 million and $1.0 million, respectively, for FDIC insurance premiums. Transactions with Affiliates .
The federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s board of directors.
This legal challenge has since been paused to allow time for the CFPB to assess the rule and determine whether it aligns with the agency’s current policy objectives. ​ Cybersecurity . The federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a financial institution’s board of directors.
A change in statutes, regulations, or regulatory policies applicable to the Company or the Bank could have a material, adverse effect on the business, financial condition, and results of operations of the Company and the Bank. 22 Table of Contents Reporting Obligations under Securities Laws The Company is subject to the periodic and other reporting requirements of the Exchange Act, including the filing of annual, quarterly, and other reports with the SEC.
A change in statutes, regulations, or regulatory policies applicable to the Company or the Bank could have a material, adverse effect on the business, financial condition, and results of operations of the Company and the Bank.
Our growth strategy centers around the hiring of highly experienced, local banking professionals with successful track records and established customer relationships with small to medium-sized businesses, their owners, professionals and non-profits. We anticipate that these officers will be able to attract customers with whom they have built relationships over the years, enhancing our loan and deposit production.
Over the past five years, annual ROAA averaged 0.94% and annual ROAE averaged 9.61%. ● Hire experienced commercial banking officers. Our growth strategy centers around the hiring of highly experienced, local banking professionals with successful track records and established customer relationships with small to medium-sized businesses, their owners, professionals and non-profits.
We believe the size, growth, economic diversity and banking consolidation within the Washington, D.C. MSA, when combined with our business strategy, provide us with excellent opportunities for long-term, sustainable growth. Strengths We believe that we are well-positioned to execute our banking strategy as a result of our competitive strengths: ● Experienced management team.
Prince William County has partnered with George Mason University to found the Prince William Science Accelerator, a fast-growing biotechnology cluster to foster the study of life sciences. ​ We believe the size, growth, economic diversity and banking consolidation within the Washington, D.C. MSA, when combined with our business strategy, provide us with excellent opportunities for long-term, sustainable growth.
Loudoun County is known as “data center alley” as it has the world’s highest concentration of data centers with more than 25 million square feet of data center space. Prince William County has partnered with George Mason University to found the Prince William Science Accelerator, a fast-growing biotechnology cluster to foster the study of life sciences.
Loudoun County is known as “data center alley” as it has the world’s highest concentration of data centers with more than 30 million square feet of data center space. Loudoun County is home to more than 3,500 technology companies.
Competition The banking business is highly competitive, and we face competition in our market area from many other local, regional, and national financial institutions.
For the year ended December 31, 2024, the Company’s overhead-to-average assets ratio was 1.41%. The Company’s overhead-to-average asset ratio is calculated by dividing non-interest expense by average assets. Competition The banking business is highly competitive, and we face competition in our market area from many other local, regional, and national financial institutions.
Further regulatory positions taken by the CFPB may influence how other regulatory agencies may apply the subject consumer financial protection laws and regulations. Privacy Legislation .
Further regulatory positions taken by the CFPB may influence how other regulatory agencies may apply the subject consumer financial protection laws and regulations. In February 2025, the Trump administration halted the CFPB’s operations, and its employees were instructed to cease all supervision and examination activity.
Gross loans net of unearned income grew $70.5 million or 3.9% during 2023, with $39.8 million of the growth taking place during the three months ended December 31, 2023. Excluding Paycheck Protection Program loans, average loan growth over the past five years has been $139.7 million a year.
Gross loans net of unearned income grew $12.2 million or 0.7% during 2024, with $29.6 million of the growth taking place during the three months ended December 31, 2024. Average loan growth over the past five years has been $108.4 million a year. The Company’s asset quality remains outstanding, with no non-accrual loans and no other real estate owned (“OREO”).
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The Company reported net income of $4.5 million for the three months ended December 31, 2023 and three months ended June 30, 2023.
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Amazon will invest more than $2 billion to establish its new headquarters, which will create at least 25,000 high-wage jobs by 2030. Fairfax County is home to ten Fortune 500 company headquarters and 17 Fortune 1000 company headquarters.
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Excluding the non-recurring loss on securities, net of tax and non-recurring taxes and penalties on the early surrender of Bank Owned Life Insurance policies (the “Restructuring”) of $14.6 million in the aggregate, previously disclosed in our second quarter Form 10-Q filed August 9, 2023 , the Company’s core net income (Non-GAAP) for each of the last three quarters was approximately $4.5 million during a challenging economic environment.
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Strengths We believe that we are well-positioned to execute our banking strategy as a result of our competitive strengths: ● Experienced management team. Our executive management team brings decades of in-market experience. Christopher W. Bergstrom, our President and Chief Executive Officer, has a banking career spanning nearly 43 years. Mr. Bergstrom joined the Company in 2018.
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The Company’s asset quality remains outstanding, with the fourth quarter of 2023 marking the 17 th consecutive quarter with no non-performing loans, other real estate owned or loans 30 or more days past due. Over the past five years, ROAA was 1.00% and ROAE was 10.26%. ● Hire experienced commercial banking officers.
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We anticipate that these officers will be able to attract customers with whom they have built relationships over the years, enhancing our loan and deposit production.
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The Company’s successful deployment of technology has enabled us to grow our balance sheet and increase returns by lowering overhead ratios. For the year ended December 31, 2023, the Company’s overhead-to-average assets ratio was 1.33%. The Company’s overhead-to-average asset ratio is calculated by dividing non-interest expense by average assets.
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The final rule has been subject to an injunction since March 29, 2024, and the effective dates will be extended pending resolution of the lawsuit. ​ Anti-Money Laundering Laws and Regulations .
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The capital conservation buffer, which was phased in ratably over a four year period beginning January 1, 2016, is designed to absorb losses during periods of economic stress.
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A financial institution must provide its customers information regarding its policies and procedures with respect to the handling of customers’ personal information. Each institution must conduct an internal risk assessment of its ability to protect customer information.
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As directed by the Economic Growth, Regulatory Relief and Consumer Protection Act, on November 4, 2019, the federal banking agencies jointly issued a final rule that permits qualifying banks that have less than $10 billion in total consolidated assets to elect to be subject to a 9% “community bank leverage ratio” (“CBLR”).
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In October 2024, the CFPB issued a final rule regarding personal financial data rights that is designed to promote “open banking.” The final rule requires, among other things, that data providers, including any financial institution, make available to consumers and certain authorized third parties, upon request, certain covered transaction, account, and payment information.
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Under this rule, which became effective January 1, 2020, a qualifying bank that has chosen the proposed framework would not be required to calculate the existing risk-based and leverage capital requirements and would be considered to have met the capital ratio requirements to be “well capitalized” under prompt corrective action rules provided it has a CBLR greater than 9%.
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Institutions with at least $1.5 billion but less than $3 billion in total assets, including the Company, are required to comply with the final rule by April 1, 2029. On the same day the final rule was released, certain industry participants filed a complaint against the CFPB challenging the final rule.
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Under the final rule, a qualifying community banking organization is any depository institution or depository institution holding company that has less than $10 billion in total consolidated assets, off-balance sheet exposures (excluding derivatives other than sold credit derivatives and unconditionally cancelable commitments) of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets.
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Reporting Obligations under Securities Laws The Company is subject to the periodic and other reporting requirements of the Exchange Act, including the filing of annual, quarterly, and other reports with the SEC. The Company’s SEC filings are posted and available at no cost on its website as soon as reasonably practicable after the reports are filed electronically with the SEC.
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The banking organization also cannot be an advanced 17 Table of Contents approaches banking organization. As of December 31, 2023, the Bank was a qualifying community banking organization, but elected not to measure capital adequacy under the CBLR framework.
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CAMELS composite ratings set a maximum insurance assessment for CAMELS 1 and 2 rated banks and set minimum assessments for lower rated institutions. In March 2016, the FDIC implemented by final rule certain Dodd-Frank Act provisions by raising the DIF’s minimum reserve ratio from 1.15% to 1.35%.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeLiquidity risk can increase due to a number of factors, which include, but are not limited to, an over-reliance on a particular source of funding, changes in the liquidity needs of our depositors, an increase in borrowing by our customers, adverse regulatory actions against us, or a downturn in the markets in which our loans are concentrated. 28 Table of Contents Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences.
Biggest changeMarket conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences.
Non-performing assets held by the Company will adversely affect our net income in various ways: ● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned; ● we must provide for loan credit losses through a current period charge to the provision for loan credit losses; ● non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and ● the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
Non-performing assets held by the Company adversely affect our net income in various ways: ● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned; ● we must provide for loan credit losses through a current period charge to the provision for loan credit losses; ● non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and ● the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
The occurrence of any failures, interruptions or security breaches of the Company’s information systems could damage its reputation, result in a loss of customer business, subject it to additional regulatory scrutiny or expose it to civil litigation and possible financial liability, any of which could have a material adverse effect on results of operations. 34 Table of Contents We are dependent on the use of data and modeling in both our management’s decision-making generally and in meeting regulatory expectations in particular.
The occurrence of any failures, interruptions or security breaches of the Company’s information systems could damage its reputation, result in a loss of customer business, subject it to additional regulatory scrutiny or expose it to civil litigation and possible financial liability, any of which could have a material adverse effect on results of operations. 33 Table of Contents We are dependent on the use of data and modeling in both our management’s decision-making generally and in meeting regulatory expectations in particular.
We are also a “smaller reporting company,” as defined in the federal securities laws, and will remain a smaller reporting company until the fiscal year following the determination that the market value of our common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and the market value of our common stock held 37 Table of Contents by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter.
We are also a “smaller reporting company,” as defined in the federal securities laws, and will remain a smaller reporting company until the fiscal year following the determination that the market value of our common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and the market value of our common stock held 36 Table of Contents by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter.
As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have an adverse effect on our business, financial condition and results of operations. 30 Table of Contents Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have an adverse effect on our business, financial condition and results of operations. 29 Table of Contents Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
Nevertheless, we could be required to maintain higher levels of capital as a result of our commercial real estate concentration, which could limit our 36 Table of Contents growth, require us to obtain additional capital, and have an adverse effect on our business, financial condition and results of operations. Changes in accounting standards could materially impact our financial statements.
Nevertheless, we could be required to maintain higher levels of capital as a result of our commercial real estate concentration, which could limit our 35 Table of Contents growth, require us to obtain additional capital, and have an adverse effect on our business, financial condition and results of operations. Changes in accounting standards could materially impact our financial statements.
The Company did not have any OREO as of December 31, 2023. Risks Related to Funding and Liquidity Our deposit portfolio includes significant concentrations and a large percentage of our deposits are attributable to a relatively small number of customers. We rely on a small number of large deposit customers, including high-average balance municipal deposits, as a source of funds.
The Company did not have any OREO as of December 31, 2024. Risks Related to Funding and Liquidity Our deposit portfolio includes significant concentrations and a large percentage of our deposits are attributable to a relatively small number of customers. We rely on a small number of large deposit customers, including high-average balance municipal deposits, as a source of funds.
The determination of the appropriate level of the allowance for loan credit losses is inherently highly subjective and requires us to use significant judgment to estimate the level of credit risk and probable losses of the institution based on an evaluation the factors and circumstances that exist as of the applicable measurement date, all of which may change materially.
The determination of the appropriate level of the allowance for loan credit losses is inherently highly subjective and requires us to use significant judgment to estimate the level of credit risk and expected losses of the institution based on an evaluation the factors and circumstances that exist as of the applicable measurement date, all of which may change materially.
This may include increasing our reliance on Federal Home Loan Bank of Atlanta (“FHLB”) borrowing, attempting to attract additional non-brokered deposits, and selling loans. There can be no assurance that brokered deposits will be available, or if available, sufficient to support our continued growth.
This may include increasing our reliance on Federal Home Loan Bank of Atlanta (“FHLB”) borrowing, attempting to attract additional non-brokered deposits, and selling loans. There can be no assurance that brokered deposits will be available, or if available, sufficient to support our future growth.
FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations and to support our continued growth. The unavailability of a sufficient funding could have an adverse effect on our business, financial condition and results of operations.
FHLB borrowings and other current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations and to support our future growth. The unavailability of a sufficient funding could have an adverse effect on our business, financial condition and results of operations.
Applicable laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years, and may be subject to significant future changes. Additionally, federal and state 35 Table of Contents regulatory agencies may change the manner in which existing regulations are applied.
Applicable laws, regulations, interpretations, enforcement policies and accounting principles have been subject to significant changes in recent years, and may be subject to significant future changes. Additionally, federal and state 34 Table of Contents regulatory agencies may change the manner in which existing regulations are applied.
Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. 38 Table of Contents Our common stock is subordinate to our existing and future indebtedness.
Additional equity offerings may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. 37 Table of Contents Our common stock is subordinate to our existing and future indebtedness.
As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition and results of operations. Our allowance for loan credit losses may be inadequate to absorb probable losses inherent in the loan portfolio.
As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition and results of operations. Our allowance for loan credit losses may be inadequate to absorb expected losses inherent in the loan portfolio.
Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason, or poor performance of services by a vendor, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business.
Any problems caused by these third parties, including those resulting from breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a vendor, failure of a vendor to provide services for any reason, or poor performance of services by a vendor, could adversely affect our ability to deliver 31 Table of Contents products and services to our customers and otherwise conduct our business.
Legislation excludes reciprocal deposits of up to the lesser of $5 billion or 20.0% of an institution’s deposits from the definition of brokered deposits, where the institution is well capitalized and has a composite supervisory rating of 1 or 2.
Legislation excludes reciprocal deposits of up to the lesser of $5 billion or 20.0% of an institution’s total liabilities from the definition of brokered deposits, where the institution is well capitalized and has a composite supervisory rating of 1 or 2.
Regulatory authorities 39 Table of Contents could impose administratively stricter limitations on the ability of the Bank to pay dividends to us if such limits were deemed appropriate to preserve certain capital adequacy requirements.
Regulatory authorities 38 Table of Contents could impose administratively stricter limitations on the ability of the Bank to pay dividends to us if such limits were deemed appropriate to preserve certain capital adequacy requirements.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values may 27 Table of Contents change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately reflect the net value of the collateral after the loan is made.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately reflect the net value of the collateral after the loan is made.
This spread may be exacerbated by higher prevailing interest rates. In addition, because our available-for-sale investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated.
This spread may be exacerbated by higher prevailing interest rates. In addition, because our available-for-sale investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when 28 Table of Contents interest rates are elevated.
We are dependent on our management team and key employees. We believe that our continued growth and future success will depend on the retention of our management team and key employees. Our management team and other key employees, including those who conduct our loan origination and other 40 Table of Contents business development activities, have significant industry experience.
We are dependent on our management team and key employees. We believe that our growth and future success will depend on the retention of our management team and key employees. Our management team and other key employees, including those who conduct our loan origination and other business 39 Table of Contents development activities, have significant industry experience.
We may also be subject to potentially adverse regulatory consequences. System failure or breaches of our network security, including as a result of cyber-attacks or data security breaches, could subject us to increased operating costs as well as litigation and other liabilities.
We may also be subject to potentially adverse regulatory consequences. 32 Table of Contents System failure or breaches of our network security, including as a result of cyber-attacks or data security breaches, could subject us to increased operating costs as well as litigation and other liabilities.
Our risk management framework may not be effective under all circumstances. Our risk management framework may not 33 Table of Contents adequately mitigate any risk or loss to us. If our risk management framework is not effective, we could suffer unexpected losses and our business, financial condition and results of operations could be adversely affected.
Our risk management framework may not be effective under all circumstances. Our risk management framework may not adequately mitigate any risk or loss to us. If our risk management framework is not effective, we could suffer unexpected losses and our business, financial condition and results of operations could be adversely affected.
These types of loans also involve larger loan balances to a single borrower or groups of related borrowers. These higher credit risks are further heightened when the loans are concentrated in a small number of larger borrowers leading to relationship exposure. As of December 31, 2023, we had 27 relationships with over $10 million of outstanding borrowings with us.
These types of loans also involve larger loan balances to a single borrower or groups of related borrowers. These higher credit risks are further heightened when the loans are concentrated in a small number of larger borrowers leading to relationship exposure. As of December 31, 2024, we had 39 relationships with over $10 million of outstanding borrowings with us.
We require sufficient liquidity to fund asset growth, meet customer loan requests, customer deposit maturities and withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress.
We require sufficient liquidity to fund asset growth, meet customer loan requests, customer deposit 27 Table of Contents maturities and withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress.
We rely on third parties to provide key components for our business operations, such as data processing and storage, recording and monitoring transactions, online banking interfaces and services, internet connections, and network access. 32 Table of Contents While we select these third-party vendors carefully, we do not control their actions.
We rely on third parties to provide key components of our business infrastructure. We rely on third parties to provide key components for our business operations, such as data processing and storage, recording and monitoring transactions, online banking interfaces and services, internet connections, and network access. While we select these third-party vendors carefully, we do not control their actions.
Accordingly, we maintain an allowance for loan credit losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio.
Accordingly, we maintain an allowance for loan credit losses that represents management’s judgment of expected losses and risks inherent in our loan portfolio.
As of December 31, 2023, the allowance for loan credit losses was $19.5 million or 1.05% of total loans, net of unearned income. 24 Table of Contents Deterioration of economic conditions affecting borrowers, new information regarding existing loans, inaccurate management assumptions, identification of additional problem loans, temporary modifications, loan forgiveness, automatic forbearance and other factors, both within and outside of our control, may result in our experiencing higher levels of nonperforming assets and charge-offs, and incurring loan credit losses in excess of our current allowance for loan credit losses, requiring us to make material additions to our allowance for loan credit losses, which could have an adverse effect on our business, financial condition and results of operations.
As of December 31, 2024, the allowance for loan credit losses was $18.7 million or 1.00% of total loans, net of unearned income. 23 Table of Contents Deterioration of economic conditions affecting borrowers, new information regarding existing loans, inaccurate management assumptions, identification of additional problem loans, temporary modifications, loan forgiveness, automatic forbearance and other factors, both within and outside of our control, may result in our experiencing higher levels of nonperforming assets and charge-offs, and incurring loan credit losses in excess of our current allowance for loan credit losses, requiring us to make material additions to our allowance for loan credit losses, which could have an adverse effect on our business, financial condition and results of operations.
Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of other real estate owned (“OREO”) could have an adverse effect on our business, financial condition and results of operations. The Company did not have any OREO as of December 31, 2023.
Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of OREO could have an adverse effect on our business, financial condition and results of operations. The Company did not have any OREO as of December 31, 2024.
The fair value of our investment securities can fluctuate due to factors outside of our control. We maintain an investment portfolio consisting of various high-quality liquid fixed-income securities. The total carrying value of the AFS securities portfolio as of December 31, 2023 was $170.0 million and the estimated duration of the portfolio was approximately 3.0 years.
The fair value of our investment securities can fluctuate due to factors outside of our control. We maintain an investment portfolio consisting of various high-quality liquid fixed-income securities. The total carrying value of the AFS securities portfolio as of December 31, 2024 was $130.3 million and the estimated duration of the portfolio was approximately 3.1 years.
The nature of fixed-income securities is such that changes in market interest rates impact the value of these assets. Based on the duration of our AFS securities portfolio, a one percent increase or decrease in market rates is projected to positively or negatively impact the market value of the AFS securities portfolio by approximately $20.1 million and $11.2 million, respectively.
The nature of fixed-income securities is such that changes in market interest rates impact the value of these assets. Based on the duration of our AFS securities portfolio, a one percent increase or decrease in market rates is projected to negatively or positively impact the market value of the AFS securities portfolio by approximately $3.4 million and $3.4 million, respectively.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.
Scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. We face scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.
Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights.
Investor advocacy groups, investment funds and influential investors may also focus on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights.
Under such circumstances, we may be required to access funding from sources such as the Federal Reserve’s discount window in order to manage our liquidity risk. ​ 29 Table of Contents Unrealized losses in our securities portfolio could affect liquidity. As market interest rates have increased, we have experienced significant unrealized losses on our available for sale securities portfolio.
Under such circumstances, we may be required to access funding from sources such as the Federal Reserve’s discount window in order to manage our liquidity risk. ​ Unrealized losses in our securities portfolio could affect liquidity. As market interest rates increased in 2022 and 2023, we experienced significant unrealized losses on our available for sale securities portfolio.
As of December 31, 2023, commercial real estate loans represented 342.8% of our total risk-based capital and had increased 19.3% during the prior 36 months. We cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our commercial real estate portfolio.
As of December 31, 2024, commercial real estate loans represented 344.6% of our total risk-based capital and had increased 19.4 % during the prior 36 months. We cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our commercial real estate portfolio.
We have used brokered deposits in the past, and we may continue to use brokered deposits as one of our funding sources to support future growth. As of December 31, 2023, brokered deposits represented approximately 17.0% of our total deposits. Reciprocal deposits represented an additional 14.7% of total deposits at December 31, 2023.
We have used brokered deposits in the past, and we may continue to use brokered deposits as one of our funding sources to support future growth. As of December 31, 2024, brokered deposits represented approximately 14.6% of our total deposits. Reciprocal deposits represented an additional 17.3% of total liabilities at December 31, 2024.
While we observed a decrease in exposure year-over-year, as of December 31, 2023, the following loan types accounted for the stated percentages of our loan portfolio: commercial real estate (both owner-occupied and non-owner occupied) - 56.6%; commercial and industrial - 2.4%; and construction and land - 9.7%.
While we observed a decrease in exposure year-over-year, as of December 31, 2024, the following loan types accounted for the stated percentages of our loan portfolio: commercial real estate (both owner-occupied and non-owner occupied) - 63.2%; commercial and industrial - 2.6%; and construction and land - 8.8%.
Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future. As a result of our organic growth over the past several years, as of December 31, 2023, approximately $1.11 billion, or 59.7%, of the loans in our loan portfolio were first originated during the past three years.
Lack of seasoning of our loan portfolio could increase risk of credit defaults in the future. As a result of our organic growth over the past several years, as of December 31, 2024, approximately $0.9 billion, or 48.1%, of the loans in our loan portfolio were first originated during the past three years.
Moreover, the overall market and the price of our common stock may experience volatility due to this lack of liquidity. The market price for our common stock has fluctuated significantly, ranging between $27.70 and $15.65 per share during the 12 months ended December 31, 2023.
Moreover, the overall market and the price of our common stock may experience volatility due to this lack of liquidity. The market price for our common stock has fluctuated significantly, ranging between $26.52 and $15.00 per share during the 12 months ended December 31, 2024.
These concentrations expose us to the risk that adverse developments in the real estate market, or in the general economic conditions in such areas, or the 25 Table of Contents continuation of such adverse developments, could increase the levels of nonperforming loans and charge-offs, and reduce loan demand and deposit growth.
These concentrations expose us to the risk that adverse developments in the real estate market, or in the general economic conditions in such areas, or the 24 Table of Contents continuation of such adverse developments, could increase the levels of nonperforming loans and charge-offs, and reduce loan demand and deposit growth. Actual and proposed spending cuts by the U.S.
Failure to attract and retain a qualified management team and qualified key employees could have an adverse effect on our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
Failure to attract and retain a qualified management team and qualified key employees could have an adverse effect on our business, financial condition and results of operations.
Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans. 26 Table of Contents We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
Our 10 largest depositor relationships accounted for approximately 16.8% of our deposits at December 31, 2023. Our largest depositor relationship accounted for approximately 3.7% of our deposits at December 31, 2023. These deposits can and do fluctuate substantially.
Our 10 largest depositor relationships accounted for approximately 17.5% of our deposits at December 31, 2024. Our largest depositor relationship accounted for approximately 3.7% of our deposits at December 31, 2024. These deposits can and do fluctuate substantially.
Our 10 largest borrowing relationships accounted for approximately 9.1% of our loans at December 31, 2023. Our largest single borrowing relationship accounted for approximately 1.4% of our loans at December 31, 2023.
Our 10 largest borrowing relationships accounted for approximately 9.3% of our loans at December 31, 2024. Our largest single borrowing relationship accounted for approximately 1.8% of our loans at December 31, 2024.
The average age by loan type for loans originated in the past three years is: commercial real estate loans—1.81 years; commercial and industrial loans—1.24 years; commercial construction loans—1.19 years; and consumer residential loans—1.50 years.
The average age by loan type for loans originated in the past three years is: commercial real estate loans—1.76 years; commercial and industrial loans—1.31 years; commercial construction loans—0.86 years; and consumer residential loans—1.84 years.
Deposits that were not insured or not collateralized by securities represented 33.0% of total deposits as of December 31, 2023.
Deposits that were not insured or not collateralized by securities represented 34.7% of total deposits as of December 31, 2024.
Additionally, if economic conditions in the area deteriorate, or there is significant volatility or weakness in the economy or any significant sector of the area’s economy, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, our provision for loan credit losses may increase, the value of collateral may decline and loan demand may be reduced.
Additionally, if economic conditions in the area deteriorate, or there is significant volatility or weakness in the economy or any significant sector of the area’s economy, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, our provision for loan credit losses may increase, the value of collateral may decline and loan demand may be reduced. ​ We are exposed to higher credit risk by commercial real estate, commercial and industrial and construction and development-based lending as well as relationship exposure with a number of large borrowers.
As market interest rates rise, the value of our investment securities generally decreases, although this effect can be less pronounced for floating rate instruments. Higher interest rates reduce the demand for loans and increase the attractiveness of alternative investment and savings products, like U.S. Treasury securities and money market funds, which can make it difficult to attract and retain deposits.
Higher interest 30 Table of Contents rates reduce the demand for loans and increase the attractiveness of alternative investment and savings products, like U.S. Treasury securities and money market funds, which can make it difficult to attract and retain deposits.
The outlook for commercial real estate remains dependent on the broader economic environment and, specifically, how major subsectors respond to a higher interest rate environment and higher prices for commodities, goods and services.
The outlook for commercial real estate remains dependent on the broader economic environment and, specifically, how major subsectors respond to a higher interest rate environment and higher prices for 25 Table of Contents commodities, goods and services. Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans.
Price-wage inflation may cause us to give higher than normal raises to employees 31 Table of Contents and start new employees at a higher wage.
Inflation can have an adverse impact on our business and on our customers. Prevailing price-wage inflation may cause us to give higher than normal raises to employees and start new employees at a higher wage.
Nevertheless, if delinquencies and defaults increase, we may be required to increase our provision for loan credit losses, which could have an adverse effect on our business, financial condition and results of operations.
Nevertheless, if delinquencies and defaults increase, we may be required to increase our provision for loan credit losses, which could have an adverse effect on our business, financial condition and results of operations. 26 Table of Contents The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property and other real estate owned may not accurately reflect the net value of the asset.
We are exposed to higher credit risk by commercial real estate, commercial and industrial and construction and development-based lending as well as relationship exposure with a number of large borrowers. Commercial real estate, commercial and industrial and construction and development based lending usually involve higher credit risks than 1-4 family residential real estate lending.
Commercial real estate, commercial and industrial and construction and development based lending usually involve higher credit risks than 1-4 family residential real estate lending.
The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property and other real estate owned may not accurately reflect the net value of the asset. In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
At December 31, 2023, we had no non-performing assets. Non-performing assets consist of non-accrual loans, loans 90 days or more past due and still accruing interest, and other real estate owned.
At December 31, 2024, we had one non-performing loan that was 90 days past due and still accruing interest. The loan was paid off, in full, on January 7, 2025. We had no non-accrual loans and no OREO at December 31, 2024 or 2023.
Removed
In that event, we could experience lower earnings or losses.
Added
Government, particularly those resulting in job losses in the Washington, D.C. MSA, could have a negative impact on the markets we serve, which could adversely affect our business, financial condition, and results of operations.
Removed
Inflation can have an adverse impact on our business and on our customers. During 2023, the United States experienced the highest level of inflation since the 1980s. In response, the Federal Reserve increased the federal funds target rate four times in 2023 to 5.25% to 5.50% at December 31, 2023. As a result, market interest rates increased during the year.
Added
Liquidity risk can increase due to a number of factors, which include, but are not limited to, an over-reliance on a particular source of funding, changes in the liquidity needs of our depositors, an increase in borrowing by our customers, adverse regulatory actions against us, or a downturn in the markets in which our loans are concentrated.
Removed
We rely on third parties to provide key components of our business infrastructure.
Added
The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact the Company’s business. ​ The Company or its third-party vendors, clients, or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Company’s business.
Added
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.
Added
These evolving laws and regulations could require changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and the risk of non-compliance.
Added
AI models, particularly generative AI models, may produce outputs or take actions that are incorrect, that reflect biases included in the data on which they are trained, that result in the release of private, confidential, or proprietary information, that infringe on the intellectual property rights of others, or that are otherwise harmful.
Added
In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs.
Added
This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous outputs, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made.
Added
Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the outputs of their models, matters over which the Company may have limited visibility.
Added
Any of these risks could expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures. ​ Item 1B. Unresolved Staff Comments None.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Vendor Management Policy contains policies and procedures to follow when utilizing external third-parties and due diligence is performed over new vendors prior to engaging in services. Vendor Management ensures key risk components are mitigated based on acceptable Company standards.
Biggest changeAn annual cyber report is presented to the Board of Directors with monthly cyber reports. ​ Our Vendor Management Policy contains policies and procedures to follow when utilizing external third-parties and due diligence is performed over new vendors prior to engaging in services. Vendor Management ensures key risk components are mitigated based on acceptable Company standards.
The security of the Company’s network infrastructure is maintained via • internal and perimeter firewalls with intrusion detection, • the use of some network segmentation to isolate access to certain applications and systems, • virtual local area networks, • email filtering to identify spam, malware, and phishing messages in received email messages, • malware detection, • data loss prevention controls to prevent the theft, or mass exfiltration of data, • Virtual Private Networks to control remote access to our network, • intrusion detection capabilities, • network access controls are in place to prevent unauthorized assets from connecting to the network, and • web filtering. ​ Security Event Monitoring .
The security of the Company’s network infrastructure is maintained via • internal and perimeter firewalls with intrusion detection, • the use of some network segmentation to isolate access to certain applications and systems, • virtual local area networks, • email filtering to identify spam, malware, and phishing messages in received email messages, • malware detection, • data loss prevention controls to prevent the theft, or mass exfiltration of data, 41 Table of Contents • Virtual Private Networks to control remote access to our network, • intrusion detection capabilities, • network access controls are in place to prevent unauthorized assets from connecting to the network, and • web filtering. ​ Security Event Monitoring .
Our management is directly involved in assessing and managing cybersecurity risks. ​ The Company uses the National Institute of Standards and Technology Cybersecurity framework (“NIST CF”) for improving critical infrastructure by measuring and evaluating the effectiveness of information and cybersecurity controls. We utilize Payment Card Industry Data Security Standards, and other applicable standards, laws, and regulations.
Our management is directly involved in assessing and managing cybersecurity risks. 40 Table of Contents ​ The Company uses the National Institute of Standards and Technology Cybersecurity framework (“NIST CF”) for improving critical infrastructure by measuring and evaluating the effectiveness of information and cybersecurity controls. We utilize Payment Card Industry Data Security Standards, and other applicable standards, laws, and regulations.
Any third parties used in any cybersecurity processes are vetted through our vendor management process. ​ 42 Table of Contents Risks from Cybersecurity threats or previous incidents have not materially affected business strategy, results of operations, or financial condition.
Any third parties used in any cybersecurity processes are vetted through our vendor management process. ​ Risks from Cybersecurity threats or previous incidents have not materially affected business strategy, results of operations, or financial condition.
Using third party vendors to assist, threats are integrated into our monitoring solutions, email filtering, web-browsing controls, malware detection, and perimeter firewalls to proactively prevent, detect and deter threats with the 41 Table of Contents capability to impact the Company environment. We continually enhance the cybersecurity capabilities based on evolving threats.
Using third party vendors to assist, threats are integrated into our monitoring solutions, email filtering, web-browsing controls, malware detection, and perimeter firewalls to proactively prevent, detect and deter threats with the capability to impact the Company environment. We continually enhance the cybersecurity capabilities based on evolving threats.
A vendor management report is presented to the Board of Directors on an annual basis by the Chief Technology and Information Security Officer.
A vendor management report is presented to the Board of Directors on an annual basis by the Chief Technology and Information Security Officer. 42 Table of Contents
Quarterly training is conducted for continuing education for all employees and monthly phishing tests are administered. We also email and post articles on our intranet of common attack schemes for our employees awareness. An annual cyber report is presented to the Board of Directors with monthly cyber reports.
Quarterly training is conducted for continuing education for all employees and monthly phishing tests are administered. We also email and post articles on our intranet of common attack schemes for our employees awareness.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBranch 1625 K St., NW, Ste. 1050 Washington, DC 20006 ​ 2023 Loudoun Branch 842 South King St. Leesburg, VA 20175 ​ 2008 Prince William Branch 12701 Marblestone Dr., Ste. 150 Woodbridge, VA 22192 ​ 2021 Rockville Branch 11 N.
Biggest changeBranch 1625 K St., NW, Ste. 1050 Washington, DC 20006 ​ 2023 Loudoun Branch 540 Fort Evans Road NE, Suite 100 Leesburg, VA 20176 ​ 2024 Prince William Branch 12701 Marblestone Dr., Ste. 150 Woodbridge, VA 22192 ​ 2021 Rockville Branch 11 N.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the ultimate outcome of legal proceedings cannot be ascertained at this time, it is the opinion of management that the liabilities (if any) resulting from such legal proceedings will not have an adverse effect on the Company’s business, including its consolidated financial position, results of operations, or cash flows. 43 Table of Contents Item 4.
Biggest changeAlthough the ultimate outcome of legal proceedings cannot be ascertained at this time, it is the opinion of management that the liabilities (if any) resulting from such legal proceedings will not have an adverse effect on the Company’s business, including its consolidated financial position, results of operations, or cash flows. Item 4.
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Mine Safety Disclosures Not applicable. 43 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeA discussion of applicable regulatory restrictions on dividends by the Company and the Bank is provided in Item 1 (“Business”) under “Supervision and Regulation – The Company – Limits on Dividends and Other Payments.” Item 6. [Reserved]
Biggest changeA discussion of applicable regulatory restrictions on dividends by the Company and the Bank is provided in Item 1 (“Business”) under “Supervision and Regulation – The Company – Limits on Dividends and Other Payments.” On August 18, 2021, the Company’s Board of Directors approved a share repurchase plan (the “Plan”) of up to 5% of outstanding common stock.
Dividends On April 24, 2023, the Company declared an annual cash dividend of $0.22 per outstanding share of common stock paid on July 6, 2023 to shareholders of record as of June 27, 2023.
Dividends On April 24, 2024, the Company declared an annual cash dividend of $0.25 per outstanding share of common stock paid on July 8, 2024 to shareholders of record as of June 28, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of Record Our common stock is currently listed on the Nasdaq Capital Market under the symbol "JMSB." As of March 7, 2024, there were 515 holders of record of our common stock and approximately 1,993 total beneficial shareholders.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders of Record Our common stock is currently listed on the Nasdaq Capital Market under the symbol "JMSB." As of February 26, 2025, there were 456 holders of record of our common stock and approximately 2,524 total beneficial shareholders.
Added
As announced in the Current Report of Form 8-K filed with the SEC on July 25, 2024, the Plan, which was set to expire August 31, 2024, was extended to August 31, 2025. There were no repurchases under the Plan during the three months ended December 31, 2024. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

75 edited+16 added−21 removed44 unchanged
Biggest changeManagement expects net interest income and net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of the Company’s interest-earning assets and interest-bearing liabilities. 48 Table of Contents The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the years ended December 31, 2023 and 2022. ​ Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ Interest Income / Average ​ ​ Interest Income / Average (Dollars in thousands) ​ Average Balance ​ Expense ​ Rate ​ Average Balance ​ Expense ​ Rate Assets: ​ ​ ​ ​ ​ Securities: ​ ​ ​ ​ ​ Taxable ​ $ 368,922 $ 7,506 2.03 % $ 440,899 $ 8,183 1.86 % Tax-exempt (1) ​ 2,351 ​ 68 2.89 % 5,001 ​ 152 3.04 % Total securities ​ $ 371,273 ​ $ 7,574 2.04 % $ 445,900 ​ $ 8,335 1.87 % Loans, net of unearned income (2) : ​ ​ ​ ​ ​ Taxable ​ 1,764,315 ​ 85,515 4.85 % 1,652,940 ​ 73,497 4.45 % Tax-exempt (1) ​ 28,190 ​ 1,164 4.13 % 24,211 ​ 993 4.10 % Total loans, net of unearned income ​ $ 1,792,505 ​ $ 86,679 4.84 % $ 1,677,151 ​ $ 74,490 4.44 % Interest-bearing deposits in other banks ​ $ 126,623 ​ $ 6,776 5.35 % $ 116,092 ​ $ 1,482 1.28 % Total interest-earning assets ​ $ 2,290,401 ​ $ 101,029 4.41 % $ 2,239,143 ​ $ 84,307 3.77 % Total non-interest earning assets ​ 32,430 ​ ​ ​ ​ 36,624 ​ ​ ​ ​ Total assets ​ $ 2,322,831 ​ ​ ​ ​ $ 2,275,767 ​ ​ ​ ​ Liabilities & Shareholders’ Equity: ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ NOW accounts ​ $ 299,468 ​ $ 6,804 2.27 % $ 311,950 ​ $ 1,359 0.44 % Money market accounts ​ 362,243 ​ 10,150 2.80 % 395,369 ​ 3,340 0.84 % Savings accounts ​ 69,742 ​ 831 1.19 % 108,178 ​ 504 0.47 % Time deposits ​ 842,121 ​ 29,383 3.49 % 682,674 ​ 6,575 0.96 % Total interest-bearing deposits ​ $ 1,573,574 ​ $ 47,168 3.00 % $ 1,498,171 ​ $ 11,778 0.79 % Federal funds purchased ​ ​ 302 ​ ​ 15 ​ 4.97 % ​ 386 ​ ​ 15 ​ 3.89 % Subordinated debt, net ​ 24,664 ​ 1,396 5.66 % 26,754 ​ 1,810 6.77 % Federal Reserve Bank borrowings ​ 35,663 ​ 1,707 4.79 % 6,175 ​ 42 0.68 % Total interest-bearing liabilities ​ $ 1,634,203 ​ $ 50,286 3.08 % $ 1,531,486 ​ $ 13,645 0.89 % Demand deposits ​ 447,804 ​ ​ ​ ​ 518,284 ​ ​ ​ ​ Other liabilities ​ 18,791 ​ ​ ​ ​ 16,518 ​ ​ ​ ​ Total liabilities ​ $ 2,100,798 ​ ​ ​ ​ $ 2,066,288 ​ ​ ​ ​ Shareholders’ equity ​ $ 222,033 ​ ​ ​ ​ $ 209,479 ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 2,322,831 ​ ​ ​ ​ $ 2,275,767 ​ ​ ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ ​ 1.33 % ​ ​ ​ ​ ​ 2.88 % Net interest income and margin (Non-GAAP) ​ ​ ​ ​ $ 50,743 ​ 2.22 % ​ ​ ​ $ 70,662 ​ 3.16 % (1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.
Biggest changeAverage Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ December 31, 2023 ​ ​ ​ Interest Income / Average ​ ​ Interest Income / Average (Dollars in thousands) ​ Average Balance ​ Expense ​ Rate ​ Average Balance ​ Expense ​ Rate Assets: ​ ​ ​ ​ ​ Securities: ​ ​ ​ ​ ​ Taxable ​ $ 253,421 $ 5,083 2.01 % $ 368,922 $ 7,506 2.03 % Tax-exempt (1) ​ 1,379 ​ 45 3.26 % 2,351 ​ 68 2.89 % Total securities ​ $ 254,800 ​ $ 5,128 2.01 % $ 371,273 ​ $ 7,574 2.04 % Loans, net of unearned income (2) : ​ ​ ​ ​ ​ Taxable ​ 1,807,547 ​ 95,770 5.30 % 1,764,315 ​ 85,515 4.85 % Tax-exempt (1) ​ 18,389 ​ 712 3.87 % 28,190 ​ 1,164 4.13 % Total loans, net of unearned income ​ $ 1,825,936 ​ $ 96,482 5.28 % $ 1,792,505 ​ $ 86,679 4.84 % Interest-bearing deposits in other banks ​ $ 162,165 ​ $ 8,682 5.35 % $ 126,623 ​ $ 6,776 5.35 % Total interest-earning assets ​ $ 2,242,901 ​ $ 110,292 4.92 % $ 2,290,401 ​ $ 101,029 4.41 % Total non-interest earning assets ​ 15,630 ​ ​ ​ ​ 32,430 ​ ​ ​ ​ Total assets ​ $ 2,258,531 ​ ​ ​ ​ $ 2,322,831 ​ ​ ​ ​ Liabilities & Shareholders’ Equity: ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ NOW accounts ​ $ 322,028 ​ $ 8,848 2.75 % $ 299,468 ​ $ 6,804 2.27 % Money market accounts ​ 342,057 ​ 10,707 3.13 % 362,243 ​ 10,150 2.80 % Savings accounts ​ 48,466 ​ 664 1.37 % 69,742 ​ 831 1.19 % Time deposits ​ 757,494 ​ 34,273 4.52 % 842,121 ​ 29,383 3.49 % Total interest-bearing deposits ​ $ 1,470,045 ​ $ 54,492 3.71 % $ 1,573,574 ​ $ 47,168 3.00 % Federal funds purchased ​ ​ 28 ​ ​ 2 ​ 7.14 % ​ 302 ​ ​ 15 ​ 4.97 % Subordinated debt ​ 24,747 ​ 1,396 5.64 % 24,664 ​ 1,396 5.66 % Federal Reserve Bank borrowings ​ ​ 51,314 ​ ​ 2,451 ​ 4.78 % ​ 34,176 ​ ​ 1,640 ​ 4.80 % Federal Home Loan Bank advances ​ 18,361 ​ 745 4.06 % 1,487 ​ 67 4.51 % Total interest-bearing liabilities ​ $ 1,564,495 ​ $ 59,086 3.78 % $ 1,634,203 ​ $ 50,286 3.08 % Demand deposits ​ 437,694 ​ ​ ​ ​ 447,804 ​ ​ ​ ​ Other liabilities ​ 17,261 ​ ​ ​ ​ 18,791 ​ ​ ​ ​ Total liabilities ​ $ 2,019,450 ​ ​ ​ ​ $ 2,100,798 ​ ​ ​ ​ Shareholders’ equity ​ $ 239,081 ​ ​ ​ ​ $ 222,033 ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 2,258,531 ​ ​ ​ ​ $ 2,322,831 ​ ​ ​ ​ Tax-equivalent net interest income and spread (Non-GAAP)(1) ​ ​ ​ ​ $ 51,206 ​ 1.14 % ​ ​ ​ ​ 50,743 ​ 1.33 % Less: tax-equivalent adjustment ​ ​ ​ ​ ​ 159 ​ ​ ​ ​ ​ ​ $ 259 ​ ​ ​ Net interest income and spread (GAAP) ​ ​ ​ ​ $ 51,047 ​ 1.13 % ​ ​ ​ ​ 50,484 ​ 1.32 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income/earnings assets ​ ​ ​ ​ ​ ​ ​ 4.91 % ​ ​ ​ ​ ​ ​ 4.40 % Interest expense/earning assets ​ ​ ​ ​ ​ ​ ​ 2.63 % ​ ​ ​ ​ ​ ​ 2.20 % Net interest margin ​ ​ ​ ​ ​ ​ ​ 2.28 % ​ ​ ​ ​ ​ ​ 2.20 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax-equivalent interest income/earnings assets (Non-GAAP)(1) ​ ​ ​ ​ ​ ​ ​ 4.92 % ​ ​ ​ ​ ​ ​ 4.41 % Interest expense/earning assets ​ ​ ​ ​ ​ ​ ​ 2.63 % ​ ​ ​ ​ ​ ​ 2.20 % Tax-equivalent net interest margin (Non-GAAP)(3) ​ ​ ​ ​ ​ ​ ​ 2.28 % ​ ​ ​ ​ ​ ​ 2.21 % 49 Table of Contents (1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.
Where the non- 44 Table of Contents GAAP financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure, can be found within this discussion and analysis.
Where the non-GAAP financial measure is used, the comparable GAAP financial measure, as well as reconciliation to that comparable 44 Table of Contents GAAP financial measure, a statement of the company’s reasons for utilizing the non-GAAP financial measure, can be found within this discussion and analysis.
Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur.
Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur.
The Chief Credit Officer is responsible for establishing credit risk policies and procedures, including underwriting and hold guidelines and credit approval authority, and monitoring credit exposure and performance of the Company’s lending-related transactions. 56 Table of Contents The Company’s asset quality remained strong during the year ended December 31, 2023.
The Chief Credit Officer is responsible for establishing credit risk policies and procedures, including underwriting and hold guidelines and credit approval authority, and monitoring credit exposure and performance of the Company’s lending-related transactions. 56 Table of Contents The Company’s asset quality remained strong during the year ended December 31, 2024.
Tax benefit (expense) is calculated using the federal statutory tax rate of 21%. (2) Core earnings per share – diluted is calculated by dividing core net income by the sum of basic weighted average shares outstanding and diluted weighted average shares outstanding for each period presented.
Tax benefit (expense) is calculated using the federal statutory tax rate of 21%. (2) Includes tax benefit (expense) calculated using the federal statutory tax rate of 21% (3) Core earnings per share – diluted is calculated by dividing core net income by the sum of basic weighted average shares outstanding and diluted weighted average shares outstanding for each period presented.
The following table summarizes the Company’s asset quality as of December 31, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) December 31, 2023 December 31, 2022 Nonaccrual loans ​ $ — ​ $ — ​ Loans past due 90 days and accruing interest ​ — ​ — ​ Other real estate owned and repossessed assets ​ — ​ — ​ Total nonperforming assets ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan credit losses to nonperforming assets ​ NM ​ NM ​ Nonaccrual loans to gross loans ​ 0.00 % 0.00 % Nonperforming assets to period end loans and OREO ​ 0.00 % 0.00 % NM – Not meaningful Allowance for Loan Credit Losses Refer to the discussion in the “Critical Accounting Policies and Estimates” section above for management’s approach to estimating the allowance for loan credit losses.
The following table summarizes the Company’s asset quality as of December 31, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands) December 31, 2024 December 31, 2023 Nonaccrual loans ​ $ — ​ $ — ​ Loans past due 90 days and accruing interest ​ 9,978 ​ — ​ Other real estate owned and repossessed assets ​ — ​ — ​ Total nonperforming assets ​ $ 9,978 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan credit losses to nonperforming assets ​ NM ​ NM ​ Nonaccrual loans to gross loans ​ 0.00 % 0.00 % Nonperforming assets to period end loans and OREO ​ 0.53 % 0.00 % NM – Not meaningful Allowance for Loan Credit Losses Refer to the discussion in the “Critical Accounting Policies and Estimates” section above for management’s approach to estimating the allowance for loan credit losses.
The Company did not have any nonaccrual loans as of December 31, 2023 or December 31, 2022 nor were there any loans placed on nonaccrual during those periods.
The Company did not have any nonaccrual loans as of December 31, 2024 or December 31, 2023 nor were there any loans placed on nonaccrual during those periods.
The Company is utilizing a discounted cash flow model to estimate its current expected credit losses. For the purposes of calculating its quantitative reserves, the Company has segmented its loan portfolio based on loans which share similar risk characteristics.
The Company utilizes a discounted cash flow model to estimate its current expected credit losses. For the purposes of calculating its quantitative reserves, the Company has segmented its loan portfolio based on loans which share similar risk characteristics.
The Company’s interest-earning assets include loans, investment securities and interest-bearing deposits in other banks, while our interest-bearing liabilities include interest-bearing deposits and borrowings. Net interest margin represents the difference between interest received and interest paid as a percentage of average total interest-earning assets.
The Company’s interest-earning assets include loans, investment securities and interest-bearing deposits in other banks, while our interest-bearing liabilities include interest-bearing deposits and borrowings. Net interest margin represents the difference between interest 48 Table of Contents received and interest paid as a percentage of average total interest-earning assets.
The following table summarizes the Company’s loan credit loss experience by loan portfolio for the years ended December 31, 2023 and December 31, 2022. 57 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ Net ​ Net ​ Net ​ Net ​ ​ (charge-offs) ​ (charge-off) ​ (charge-offs) ​ (charge-off) (Dollars in thousands) recoveries recovery rate (1) recoveries recovery rate (1) Real estate loans: ​ ​ ​ ​ Commercial ​ $ — ​ — ​ $ (1) (0.00) % Construction and land development ​ — ​ — ​ — — ​ Residential ​ — ​ — ​ — — ​ Commercial loans ​ 2 ​ 0.01 % 2 0.00 % Consumer loans ​ — ​ — ​ — — ​ Total ​ $ 2 ​ ​ ​ ​ $ 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans outstanding during the period ​ $ 1,792,505 ​ ​ ​ ​ $ 1,677,151 ​ Allowance coverage ratio (2) ​ ​ ​ 1.05 % 1.13 % Total net (charge-off) recovery rate ​ ​ ​ 0.00 % (0.00) % Allowance to nonaccrual loans ratio (3) ​ ​ ​ NM ​ NM ​ NM – Not meaningful (1) The net (charge-off) recovery rate is calculated by dividing total net (charge-offs) recoveries during the period by average gross loans outstanding during the period.
The following table summarizes the Company’s loan credit loss experience by loan portfolio for the years ended December 31, 2024 and December 31, 2023. 57 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ December 31, 2023 ​ ​ Net ​ Net ​ Net ​ Net ​ ​ (charge-offs) ​ (charge-off) ​ (charge-offs) ​ (charge-off) (Dollars in thousands) recoveries recovery rate (1) recoveries recovery rate (1) Real estate loans: ​ ​ ​ ​ Commercial ​ $ — ​ — ​ $ — — % Construction and land development ​ — ​ — ​ — — ​ Residential ​ — ​ — ​ — — ​ Commercial loans ​ 2 ​ 0.01 % 2 0.01 % Consumer loans ​ — ​ — ​ — — ​ Total ​ $ 2 ​ ​ ​ ​ $ 2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans outstanding during the period ​ $ 1,825,936 ​ ​ ​ ​ $ 1,792,505 ​ Allowance coverage ratio (2) ​ ​ ​ 1.00 % 1.05 % Total net (charge-off) recovery rate ​ ​ ​ 0.00 % 0.00 % Allowance to nonaccrual loans ratio (3) ​ ​ ​ NM ​ NM ​ NM – Not meaningful (1) The net (charge-off) recovery rate is calculated by dividing total net (charge-offs) recoveries during the period by average gross loans outstanding during the period.
(3) Core return on average assets is calculated by dividing core net income by average assets for each period presented. (4) Core return on average equity is calculated by dividing core net income by average equity for each period presented.
(4) Core return on average assets is calculated by dividing core net income by average assets for each period presented. (5) Core return on average equity is calculated by dividing core net income by average equity for each period presented.
The held-to-maturity investment portfolio had an estimated weighted average remaining life of approximately 6.7 years and 7.3 years as of December 31, 2023 and December 31, 2022, respectively. The following table summarizes the maturity composition of our investment securities as of December 31, 2023, including the weighted average yield of each maturity band.
The held-to-maturity investment portfolio had an estimated weighted average remaining life of approximately 6.0 years and 6.7 years as of December 31, 2024 and December 31, 2023, respectively. The following table summarizes the maturity composition of our investment securities as of December 31, 2024, including the weighted average yield of each maturity band.
The Company’s available-for-sale investment portfolio had an estimated weighted average remaining life of approximately 3.0 years and 3.8 years in the prevailing rate environments as of December 31, 2023 and December 31, 2022, respectively.
The Company’s available-for-sale investment portfolio had an estimated weighted average remaining life of approximately 3.1 years and 3.0 years in the prevailing rate environments as of December 31, 2024 and December 31, 2023, respectively.
As disclosed in our second quarter Form 10-Q filed August 9, 2023, during July, the Company sold certain lower-yielding available-for-sale investment securities with a total par value of $161.2 million and agreed to surrender $21.4 million of bank owned life insurance (“BOLI”) contracts, resulting in a non-recurring, after-tax loss of $14.6 million that was recorded during the third quarter of 2023 (the “Restructuring”).
As disclosed in our 2023 10-K filed March 20, 2024, during July 2023, the Company sold certain lower-yielding available-for-sale investment securities with a total par value of $161.2 million and agreed to surrender $21.4 million of bank owned life insurance (“BOLI”) contracts, resulting in a non-recurring, after-tax loss of $14.6 million that was recorded during the third quarter of 2023 (the “Restructuring”).
The Company’s liquidity position represented 101% of uninsured, non-collateralized deposits at December 31, 2023. In addition to available secured borrowing capacity, the Company had available federal funds lines with correspondent banks of $100.0 million at December 31, 2023. Liquidity is a core pillar of the Company’s operations.
The Company’s liquidity position represented 110.3% of uninsured, non-collateralized deposits at December 31, 2024. In addition to available secured borrowing capacity, the Company had available federal funds lines with correspondent banks of $110.0 million at December 31, 2024. Liquidity is a core pillar of the Company’s operations.
The Company recorded net recoveries of $2 thousand during the year ended December 31, 2023 compared to net recoveries of $1 thousand during the year ended December 31, 2022.
The Company recorded net recoveries of $2 thousand during the year ended December 31, 2024 compared to net recoveries of $2 thousand during the year ended December 31, 2023.
Interest-bearing deposits represented 78.4% and 76.9% of total deposits at December 31, 2023 and December 31, 2022, respectively. The Company focuses on funding asset growth with deposit accounts, with an emphasis on core deposit growth, as its primary source of deposits.
Interest-bearing deposits represented 77.1% and 78.4% of total deposits at December 31, 2024 and December 31, 2023, respectively. The Company focuses on funding asset growth with deposit accounts, with an emphasis on core deposit growth, as its primary source of deposits.
The increase in the cost of interest-bearing liabilities was primarily due to a 2.21% increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the fourth quarter of 2022.
The increase in the cost of interest-bearing liabilities was primarily due to a 71 basis point increase in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with an increase in rates offered on money market, NOW and savings deposit accounts since the fourth quarter of 2023.
To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider qualitative factors, including but not limited to: variability in the economic forecast, changes in volume and 45 Table of Contents severity of adversely classified loans, changes in concentrations of credit, changes in the nature and volume of the loan segments, factors related to credit administration, and other idiosyncratic risks not embedded in the data used in the model.
To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider qualitative factors, including but not limited to: variability in the economic forecast, changes in volume and severity of adversely classified loans, changes in concentrations of credit, changes in the nature and volume of the loan segments, factors related to credit administration, and other idiosyncratic risks not embedded in the data used in the model. 45 Table of Contents Loans that do not share risk characteristics are evaluated on an individual basis.
The cost of interest-bearing liabilities increased 2.19% from 0.89% for the year ended December 31, 2022 to 3.08% for the year ended December 31, 2023. The increase in the cost of interest-bearing liabilities was primarily due to higher interest expense on deposits and other borrowings.
The cost of interest-bearing liabilities increased 0.70% from 3.08% for the year ended December 31, 2023 to 3.78% for the year ended December 31, 2024. The increase in the cost of interest-bearing liabilities was primarily due to higher interest expense on deposits and other borrowings.
Note 16 to the Consolidated Financial Statements, included in Item 8 of this Form 10-K, contains additional discussion and analysis regarding the Company and Bank’s regulatory capital requirements. Shareholders’ equity increased $17.1 million or 8.0% to $229.9 million at December 31, 2023 compared to $212.8 million at December 31, 2022.
Note 16 to the Consolidated Financial Statements, included in Item 8 of this Form 10-K, contains additional discussion and analysis regarding the Company and Bank’s regulatory capital requirements. Shareholders’ equity increased $16.7 million or 7.3% to $246.6 million at December 31, 2024 compared to $229.9 million at December 31, 2023.
The Company also had restricted stock and equity securities within its investment securities portfolio with total carrying values of $5.0 million and $2.8 million, respectively, as of December 31, 2023 and $4.4 million and $2.1 million, respectively, as of December 31, 2022. The Company did not purchase investment securities during the year ended December 31, 2023.
The Company also had restricted stock and equity securities within its investment securities portfolio with total carrying values of $7.6 million and $2.8 million, respectively, as of December 31, 2024 and $5.0 million and $2.8 million, respectively, as of December 31, 2023. The Company did not purchase or sell any investment securities during the year ended December 31, 2024.
Non-interest Income The Company’s recurring sources of non-interest income consist primarily of interchange income, bank owned life insurance income, service charges on deposit accounts and insurance commissions. Generally speaking, loan fees are included in interest income on the loan portfolio and not reported as non-interest income.
Non-interest Income The Company’s recurring sources of non-interest income consist primarily of interchange income, service charges on deposit accounts, gain on sale of government guaranteed loans, and insurance commissions. Generally speaking, loan fees are included in interest income on the loan portfolio and not reported as non-interest income.
Monitoring and managing both liquidity measurements is critical in developing prudent and effective balance sheet management. Management conducts liquidity stress testing on a quarterly basis to prepare for unexpected adverse scenarios and contemporaneously develops mitigating strategies to reduce losses in the event of an economic downturn. The Company’s principal source of liquidity and funding is its deposit base.
Management conducts liquidity stress testing on a quarterly basis to prepare for unexpected adverse scenarios and contemporaneously develops mitigating strategies to reduce losses in the event of an economic downturn. The Company’s principal source of liquidity and funding is its deposit base.
Included in these amounts were $168.7 million and $162.2 million of public fund deposits that are collateralized by securities as of December 31, 2023 and December 31, 2022, respectively. Deposits that were not insured or not collateralized by securities represented 33% and 39% of total deposits, respectively, as of December 31, 2023 and December 31, 2022.
Included in these amounts were $157.4 million and $168.7 million of public fund deposits that are collateralized by securities as of December 31, 2024 and December 31, 2023, respectively. Deposits that were not insured or not collateralized by securities represented 35% and 33% of total deposits, respectively, as of December 31, 2024 and December 31, 2023.
In order to maintain its operations, the Bank incurs various operating expenses which are further described within the “Results of Operations” later in this section. As of December 31, 2023, the Company had total consolidated assets of $2.24 billion, total loans net of unearned income of $1.86 billion, total deposits of $1.91 billion and total shareholders’ equity of $229.9 million.
In order to maintain its operations, the Bank incurs various operating expenses which are further described within the “Results of Operations” later in this section. As of December 31, 2024, the Company had total consolidated assets of $2.23 billion, total loans net of unearned income of $1.87 billion, total deposits of $1.89 billion and total shareholders’ equity of $246.6 million.
The following table reconciles net income to core net income, which is a non-GAAP measure, and outlines reported (GAAP) and core (Non-GAAP) diluted earnings per share, ROAA and ROAE as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ (Dollars in thousands, except per share amounts) December 31, 2023 ​ December 31, 2022 ​ Net income (GAAP) ​ $ 5,158 ​ $ 31,803 ​ Add: Loss on securities sale, net of tax ​ ​ 13,520 ​ ​ - ​ Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies ​ ​ 1,101 ​ ​ - ​ Core net income (Non-GAAP) (1) ​ $ 19,779 ​ $ 31,803 ​ Earnings per share - diluted (GAAP) ​ $ 0.36 ​ $ 2.25 ​ Core earnings per share - diluted (Non-GAAP) (2) ​ $ 1.39 ​ $ 2.25 ​ Return on average assets (GAAP) ​ ​ 0.22 % ​ 1.40 % Core return on average assets (Non-GAAP) (3) ​ ​ 0.85 % ​ 1.40 % Return on average equity (GAAP) ​ ​ 2.32 % ​ 15.18 % Core return on average equity (Non-GAAP) (4) ​ ​ 8.91 % ​ 15.18 % (1) Core net income reflects net income adjusted for the non-recurring tax effected loss recognized on the sale of available-for-sale securities and non-recurring tax expense associated with the surrender of the Company’s BOLI policies in July 2023.
The following table reconciles net income to core net income, which is a non-GAAP measure, and outlines reported (GAAP) and core (Non-GAAP) diluted earnings per share, ROAA and ROAE as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ (Dollars in thousands, except per share amounts) December 31, 2024 ​ December 31, 2023 ​ Net income (GAAP) ​ $ 17,121 ​ $ 5,158 ​ Add: Loss on securities sale, net of tax ​ ​ - ​ ​ 13,520 ​ Add: Non-recurring tax and 10% modified endowment contract penalty on early surrender of BOLI policies ​ ​ - ​ ​ 1,101 ​ Core net income (Non-GAAP) (1) ​ $ 17,121 ​ $ 19,779 ​ Income tax expense (GAAP) ​ $ 4,758 ​ $ 2,823 ​ Adjustment: Tax and 10% modified endowment contract penalty on early surrender of BOLI policies ​ ​ - ​ ​ (1,101) ​ Adjustment: Tax benefit of loss recognized on sale of available-for-sale securities ​ ​ - ​ ​ 3,594 ​ Core income tax expense (Non-GAAP) (2) ​ $ 4,758 ​ $ 5,316 ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - diluted (GAAP) ​ $ 1.20 ​ $ 0.36 ​ Core earnings per share - diluted (Non-GAAP) (3) ​ $ 1.20 ​ $ 1.39 ​ Return on average assets (annualized) (GAAP) ​ ​ 0.76 % ​ 0.22 % Core return on average assets (annualized) (Non-GAAP) (4) ​ ​ 0.76 % ​ 0.85 % Return on average equity (annualized) (GAAP) ​ ​ 7.16 % ​ 2.32 % Core return on average equity (annualized) (Non-GAAP) (5) ​ ​ 7.16 % ​ 8.91 % (1) Core net income reflects net income adjusted for the non-recurring tax effected loss recognized on the sale of available-for-sale securities.
Provision Expense The Company recorded a $3.3 million recovery of provision for credit losses for the year ended December 31, 2023 compared to a $175 thousand provision for the year ended December 31, 2022.
Provision Expense The Company recorded a $0.4 million recovery of provision for credit losses for the year ended December 31, 2024 compared to a $3.3 million recovery of provision for the year ended December 31, 2023.
The following table summarizes non-interest income for the years ended December 31, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (Dollars in thousands) 2023 2022 Service charges on deposit accounts ​ ​ ​ ​ ​ ​ Overdrawn account fees ​ $ 82 ​ $ 88 Account service fees ​ 248 ​ 236 Other service charges and fees ​ ​ Interchange income ​ 403 ​ 409 Other charges and fees ​ 435 ​ 247 Bank owned life insurance ​ 224 ​ 544 Losses on sale of available-for-sale securities ​ (17,316) ​ — Net gains on premises and equipment ​ 16 ​ — Insurance commissions ​ 386 ​ 382 Gain on sale of government guaranteed loans ​ ​ 131 ​ ​ — Non-qualified deferred compensation plan asset gains (losses), net ​ ​ 317 ​ ​ (354) Other operating income ​ 134 ​ 139 Total non-interest income (loss) ​ $ (14,940) ​ $ 1,691 ​ Non-interest income decreased $16.6 million during the year ended December 31, 2023 compared to the same period in 2022.
The following table summarizes non-interest income for the years ended December 31, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (Dollars in thousands) 2024 2023 Service charges on deposit accounts ​ ​ ​ ​ ​ ​ Overdrawn account fees ​ $ 84 ​ $ 82 Account service fees ​ 265 ​ 248 Other service charges and fees ​ ​ Interchange income ​ 363 ​ 403 Other charges and fees ​ 292 ​ 435 Bank owned life insurance ​ — ​ 224 Losses on sale of available-for-sale securities ​ — ​ (17,316) Net gains on premises and equipment ​ 1 ​ 16 Insurance commissions ​ 416 ​ 386 Gain on sale of government guaranteed loans ​ ​ 520 ​ ​ 131 Non-qualified deferred compensation plan asset gains, net ​ ​ 236 ​ ​ 317 Other operating income ​ 94 ​ 134 Total non-interest income ​ $ 2,271 ​ $ (14,940) ​ Non-interest income increased $17.2 million during the year ended December 31, 2024 compared to the same period in 2023.
At December 31, 2023, the allowance for loan credit losses was $19.5 million, or 1.05% of outstanding loans, net of unearned income, compared to $20.2 million, or 1.13% of outstanding loans, net of unearned income, at December 31, 2022.
At December 31, 2024, the allowance for loan credit losses was $18.7 million, or 1.00% of outstanding loans, net of unearned income, compared to $19.5 million, or 1.05% of outstanding loans, net of unearned income, at December 31, 2023.
On a fully tax-equivalent basis, the net interest margin was 2.22% for the year ended December 31, 2023, compared to 3.16% for the same period in 2022. The decrease in net interest margin was primarily due to increases in the cost of interest-bearing deposits, which was partially offset by an increase in yields on the Company’s interest-earning assets.
On a fully tax-equivalent basis, the net interest margin was 2.28% for the year ended December 31, 2024, compared to 2.21% for the same period in 2023. The increase in net interest margin was primarily due to increases in the yield of interest-bearing assets, which was partially offset by an increase in the cost of interest-bearing deposits.
The loan portfolio’s yield for the year ended December 31, 2023 was 4.84% compared to 4.44% for the year ended December 31, 2022.
The loan portfolio’s yield for the year ended December 31, 2024 was 5.28% compared to 4.84% for the year ended December 31, 2023.
For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.
The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to volume.
(2) The Company did not have any loans on non-accrual as of December 31, 2023 or December 31, 2022. ​ Interest Income Interest income increased by $16.7 million or 19.8% to $101.0 million on a fully tax-equivalent basis for the year ended December 31, 2023 compared to $84.3 million for the year ended December 31, 2022, driven by both an increase in rates and volume on interest-earning assets.
(2) The Company did not have any loans on non-accrual as of December 31, 2024 or December 31, 2023. ​ Interest Income Interest income increased by $9.3 million or 9.2% to $110.3 million on a fully tax-equivalent basis for the year ended December 31, 2024 compared to $101.0 million for the year ended December 31, 2023, driven by an increase in rates which was partially offset by decrease in volume on interest-earning assets.
Non-interest bearing demand deposits represented 21.6% and 23.1% of total deposits at December 31, 2023 and December 31, 2022, respectively. Interest-bearing deposits, which include NOW accounts, regular savings accounts, money market accounts, and time deposits, decreased $95.8 million or 6.0% to $1.50 billion as of December 31, 2023 compared to $1.59 billion as of December 31, 2022.
Non-interest bearing demand deposits represented 22.9% and 21.6% of total deposits at December 31, 2024 and December 31, 2023, respectively. Interest-bearing deposits, which include NOW accounts, regular savings accounts, money market accounts, and time deposits, decreased $36.1 million or 2.41% to $1.46 billion as of December 31, 2024 compared to $1.50 billion as of December 31, 2023.
The decrease in total assets is primarily attributable to a decrease in available-for-sale securities and BOLI of $187.6 million and $21.2 million, respectively, partially offset by increases in loans, net of unearned income and interest-bearing deposits in banks of $70.5 million and $36.6 million, respectively.
The decrease in total assets is primarily attributable to a decrease in available-for-sale securities of $39.7 million, partially offset by increases in interest-bearing deposits in banks and loans, net of unearned income of $24.9 million and $12.2 million, respectively.
As a result, the Company did not have any interest income that would have been recognized on nonaccrual loans for the years ended December 31, 2023 or December 31, 2022. The Company did not make any loan modifications to borrowers experiencing financial difficulty during the year ended December 31, 2023.
As a result, the Company did not have any interest income that would have been recognized on nonaccrual loans for the years ended December 31, 2024 or December 31, 2023. The Company made one loan modification to a borrower experiencing financial difficulty during the twelve months ended December 31, 2024.
For further information, see Note 11 to the Consolidated Financial Statements, included in Item 8 of this Form 10-K, for further discussion of the nature, business purpose and elements of risk involved with these off-balance sheet arrangements. 61 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not required for small reporting companies.
For further information, see Note 11 to the Consolidated Financial Statements, included in Item 8 of this Form 10-K, for further discussion of the nature, business purpose and elements of risk involved with these off-balance sheet arrangements.
The selected balance sheet data as of December 31, 2023 and 2022 and the selected income statement data for the years ended December 31, 2023 and 2022 have been derived from our audited consolidated financial statements included elsewhere in this Form 10-K and should be read in conjunction with the other information contained in this Form 10-K, including the information contained within this “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8 – Financial Statements and Supplementary Data.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Years Ended ​ (Dollars in thousands, except per share data) December 31, 2023 December 31, 2022 Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ Loans, net of unearned income ​ $ 1,859,967 ​ $ 1,789,508 ​ Allowance for loan credit losses ​ 19,543 ​ 20,208 ​ Total assets ​ 2,242,549 ​ 2,348,235 ​ Deposits ​ 1,906,600 ​ 2,067,740 ​ Shareholders’ equity ​ 229,914 ​ 212,800 ​ Asset Quality Data: ​ ​ ​ Net (charge-offs) recoveries to average total loans, net of unearned income ​ 0.00 % 0.00 % Allowance for loan credit losses to nonperforming loans ​ NM ​ NM ​ Allowance for loan credit losses to total gross loans net of unearned income ​ 1.05 % 1.13 % Non-performing assets to total assets ​ 0.00 % 0.00 % Non-performing loans to total loans ​ 0.00 % 0.00 % Capital Ratios (Bank level): ​ ​ ​ Equity-to-total assets ratio ​ ​ 11.1 % ​ 10.0 % Total risk-based capital ratio ​ 15.7 % 15.6 % Tier 1 risk-based capital ratio ​ 14.7 % 14.4 % Common equity tier 1 ratio ​ ​ 14.7 % ​ 14.4 % Leverage ratio ​ 11.6 % 11.3 % Income Statement Data: ​ ​ ​ Interest and dividend income ​ $ 100,770 ​ $ 84,066 ​ Interest expense ​ 50,286 ​ 13,645 ​ Net interest income ​ $ 50,484 ​ $ 70,421 ​ Provision for (recovery of) credit losses ​ (3,252) ​ 175 ​ Non-interest income (loss) ​ (14,940) ​ 1,691 ​ Non-interest expense ​ 30,815 ​ 31,874 ​ Income before taxes ​ $ 7,981 ​ $ 40,063 ​ Income tax expense ​ 2,823 ​ 8,260 ​ Net income ​ $ 5,158 ​ $ 31,803 ​ Per Share Data and Shares Outstanding: ​ ​ ​ Weighted average common shares (basic) ​ 14,076,925 ​ 13,931,841 ​ Weighted average common shares (diluted) ​ 14,147,193 ​ 14,084,427 ​ Common shares outstanding ​ 14,148,533 ​ 14,098,986 ​ Earnings per share, basic ​ $ 0.37 ​ $ 2.27 ​ Earnings per share, diluted ​ $ 0.36 ​ $ 2.25 ​ Book value per share ​ $ 16.25 ​ $ 15.09 ​ Performance Ratios: ​ ​ ​ Return on average assets ("ROAA") (1) ​ 0.22 % 1.40 % Return on average equity ("ROAE") (2) ​ 2.32 % 15.18 % Net interest margin (3) ​ 2.22 % 3.16 % Non-interest expense to average assets (4) ​ ​ 1.33 % ​ 1.40 % Efficiency ratio (5) ​ 86.7 % 44.2 % 47 Table of Contents NM – Not meaningful (1) ROAA is calculated by dividing net income by year-to-date average assets.
The selected balance sheet data as of December 31, 2024 and 2023 and the selected income statement data for the years ended December 31, 2024 and 2023 have been derived from our audited consolidated financial statements included elsewhere in this Form 10-K and should be read in conjunction with the other information contained in this Form 10-K, including the information contained within this “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8 – Financial Statements and Supplementary Data.” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Twelve Months Ended ​ (Dollars in thousands, except per share data) December 31, 2024 December 31, 2023 Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ Loans, net of unearned income ​ $ 1,872,173 ​ $ 1,859,967 ​ Allowance for loan credit losses ​ 18,715 ​ 19,543 ​ Total assets ​ 2,234,947 ​ 2,242,549 ​ Deposits ​ 1,892,415 ​ 1,906,600 ​ Shareholders’ equity ​ 246,614 ​ 229,914 ​ Asset Quality Data: ​ ​ ​ Net (charge-offs) recoveries to average total loans, net of unearned income ​ 0.00 % 0.00 % Allowance for loan credit losses to nonperforming loans ​ 0.00 % 0.00 % Allowance for loan credit losses to total gross loans net of unearned income ​ 1.00 % 1.05 % Non-performing assets to total assets ​ 0.45 % 0.00 % Non-performing loans to total loans ​ 0.53 % 0.00 % Capital Ratios (Bank level): ​ ​ ​ Equity-to-total assets ratio ​ ​ 11.9 % ​ 11.1 % Total risk-based capital ratio ​ 16.2 % 15.7 % Tier 1 risk-based capital ratio ​ 15.2 % 14.7 % Common equity tier 1 ratio ​ ​ 15.2 % ​ 14.7 % Leverage ratio ​ 12.4 % 11.6 % Income Statement Data: ​ ​ ​ Interest and dividend income ​ $ 110,133 ​ $ 100,770 ​ Interest expense ​ 59,086 ​ 50,286 ​ Net interest income ​ $ 51,047 ​ $ 50,484 ​ Provision for (recovery of) credit losses ​ (370) ​ (3,252) ​ Non-interest income (loss) ​ 2,271 ​ (14,940) ​ Non-interest expense ​ 31,809 ​ 30,815 ​ Income before taxes ​ $ 21,879 ​ $ 7,981 ​ Income tax expense ​ 4,758 ​ 2,823 ​ Net income ​ $ 17,121 ​ $ 5,158 ​ Per Share Data and Shares Outstanding: ​ ​ ​ Weighted average common shares (basic) ​ 14,172,166 ​ 14,076,925 ​ Weighted average common shares (diluted) ​ 14,206,109 ​ 14,147,193 ​ Common shares outstanding ​ 14,269,469 ​ 14,148,533 ​ Earnings per share, basic ​ $ 1.20 ​ $ 0.37 ​ Earnings per share, diluted ​ $ 1.20 ​ $ 0.36 ​ Book value per share ​ $ 17.28 ​ $ 16.25 ​ Performance Ratios: ​ ​ ​ ​ Return on average assets ("ROAA") (1) ​ 0.76 % 0.22 % Return on average equity ("ROAE") (2) ​ 7.16 % 2.32 % Net interest margin ​ 2.28 % 2.20 % Tax-equivalent net interest margin (Non-GAAP) (3) ​ ​ 2.28 % ​ 2.21 % Non-interest expense to average assets (4) ​ ​ 1.41 % ​ 1.33 % Efficiency ratio (5) ​ 59.7 % 86.7 % 47 Table of Contents (1) ROAA is calculated by dividing net income by year-to-date average assets.
The decrease in the allowance as a percentage of outstanding loans, net of unearned income, was primarily a result of improved economic forecasts used in the quantitative portion of the model and an assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments.
The decrease in the allowance as a percentage of outstanding loans, net of unearned income, was primarily a result of changes in the Company’s loss driver analysis and assumptions, changes in the composition of the loan portfolio, improved economic forecasts used in the quantitative portion of the model and considerations of qualitative factors combined with the continued strong credit performance of our loan portfolio segments.
(3) The allowance to nonaccrual loans ratio is calculated by dividing the allowance for loan credit losses at the end of the period by nonaccrual loans at the end of the period. ​ The following table summarizes the allowance for loan credit losses by portfolio with a comparison of the percentage composition in relation to total allowance for loan credit losses and total loans as of December 31, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Allowance ​ Percent of Allowance ​ Percent of Loans in ​ ​ for Loan Credit ​ in Each Category to ​ Each Category to Total (Dollars in thousands) ​ Losses ​ Total Allocated Allowance ​ Loans Real Estate Loans: ​ ​ ​ Commercial ​ $ 12,841 65.71 % 61.79 % Construction and land development ​ 1,787 9.14 % 9.75 % Residential ​ 4,323 22.12 % 25.99 % Commercial - Non-Real Estate: ​ ​ Commercial loans ​ 495 2.53 % 2.44 % Consumer - Non-Real Estate: ​ ​ Consumer loans ​ 97 0.50 % 0.03 % Total ​ $ 19,543 100.00 % 100.00 % ​ 58 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ Allowance Percent of Allowance Percent of Loans in ​ ​ for Loan ​ in Each Category to ​ Each Category to Total (Dollars in thousands) ​ Losses ​ Total Allocated Allowance ​ Loans Real Estate Loans: ​ ​ Commercial ​ $ 13,205 67.48 % 62.62 % Construction and land development ​ 2,860 14.61 % 10.92 % Residential ​ 3,044 15.55 % 23.91 % Commercial - Non-Real Estate: ​ ​ Commercial loans ​ 456 2.33 % 2.52 % Consumer - Non-Real Estate: ​ ​ Consumer loans ​ 5 0.03 % 0.03 % Unallocated ​ 638 — — ​ Total ​ $ 20,208 100.00 % 100.00 % ​ Management believes that the allowance for loan credit losses is adequate to absorb lifetime credit losses inherent in the portfolio as of December 31, 2023.
(3) The allowance to nonaccrual loans ratio is calculated by dividing the allowance for loan credit losses at the end of the period by nonaccrual loans at the end of the period. ​ The following table summarizes the allowance for loan credit losses by portfolio with a comparison of the percentage composition in relation to total allowance for loan credit losses and total loans as of December 31, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ Allowance ​ Percent of Allowance ​ Percent of Loans in ​ ​ for Loan Credit ​ in Each Category to ​ Each Category to Total (Dollars in thousands) ​ Losses ​ Total Allocated Allowance ​ Loans Real Estate Loans: ​ ​ ​ Commercial ​ $ 11,732 62.69 % 63.24 % Construction and land development ​ 1,761 9.41 % 8.83 % Residential ​ 4,594 24.54 % 25.32 % Commercial - Non-Real Estate: ​ ​ Commercial loans ​ 548 2.93 % 2.56 % Consumer - Non-Real Estate: ​ ​ Consumer loans ​ 80 0.43 % 0.05 % Total ​ $ 18,715 100.00 % 100.00 % ​ 58 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ Allowance Percent of Allowance Percent of Loans in ​ ​ for Loan Credit ​ in Each Category to ​ Each Category to Total (Dollars in thousands) ​ Losses ​ Total Allocated Allowance ​ Loans Real Estate Loans: ​ ​ ​ Commercial ​ $ 12,841 65.71 % 61.79 % Construction and land development ​ 1,787 9.14 % 9.75 % Residential ​ 4,323 22.12 % 25.99 % Commercial - Non-Real Estate: ​ ​ ​ Commercial loans ​ 495 2.53 % 2.44 % Consumer - Non-Real Estate: ​ ​ ​ Consumer loans ​ 97 0.50 % 0.03 % Total ​ $ 19,543 100.00 % 100.00 % ​ Management believes that the allowance for loan credit losses is adequate to absorb lifetime credit losses inherent in the portfolio as of December 31, 2024.
Tax-Equivalent Net Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (Dollars in thousands) 2023 2022 GAAP Financial Measurements: ​ ​ ​ Interest Income - Loans ​ $ 86,435 ​ $ 74,281 Interest Income - Securities and Other Interest-Earning Assets ​ 14,335 ​ 9,785 Interest Expense - Deposits ​ 47,168 ​ 11,778 Interest Expense - Borrowings ​ 3,118 ​ 1,867 Total Net Interest Income (GAAP) ​ $ 50,484 ​ $ 70,421 ​ ​ ​ ​ ​ ​ ​ Non-GAAP Financial Measurements: ​ ​ Add: Tax Benefit on Tax-Exempt Interest Income - Loans ​ 244 ​ 209 Add: Tax Benefit on Tax-Exempt Interest Income - Securities ​ 15 ​ 32 Total Tax Benefit on Tax-Exempt Interest Income (1) ​ $ 259 ​ $ 241 Tax-Equivalent Net Interest Income (Non-GAAP) ​ $ 50,743 ​ $ 70,662 (1) Tax benefit was calculated using the federal statutory tax rate of 21%.
Tax-Equivalent Net Interest Income ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (Dollars in thousands) 2024 2023 GAAP Financial Measurements: ​ ​ ​ Interest Income - Loans ​ $ 96,332 ​ $ 86,435 Interest Income - Securities and Other Interest-Earning Assets ​ 13,801 ​ 14,335 Interest Expense - Deposits ​ 54,492 ​ 47,168 Interest Expense - Borrowings ​ 4,594 ​ 3,118 Total Net Interest Income (GAAP) ​ $ 51,047 ​ $ 50,484 ​ ​ ​ ​ ​ ​ ​ Non-GAAP Financial Measurements: ​ ​ Add: Tax Benefit on Tax-Exempt Interest Income - Loans ​ 150 ​ 244 Add: Tax Benefit on Tax-Exempt Interest Income - Securities ​ 9 ​ 15 Total Tax Benefit on Tax-Exempt Interest Income (1) ​ $ 159 ​ $ 259 Tax-Equivalent Net Interest Income (Non-GAAP) ​ $ 51,206 ​ $ 50,743 (1) Tax benefit was calculated using the federal statutory tax rate of 21%.
Net interest income decreased $19.9 million or 28.3% on a fully tax-equivalent basis for the year ended December 31, 2023. The decrease in net interest income was driven by the increase in the costs of interest-bearing liabilities outpacing the increase in yield on interest-earning assets.
Net interest income increased $0.5 million or 0.9% on a fully tax-equivalent basis for the year ended December 31, 2024. The increase in net interest income was driven by the increase in the yield of interest-earning assets and the reduction in the average balance of interest-bearing liabilities outpacing the increase in the cost on interest-bearing liabilities.
Specifically, the Company has pledged a portion of its commercial real estate and residential real estate loan portfolios to the FHLB and the Reserve Bank. Based on collateral pledged as of December 31, 2023, the total FHLB available borrowing capacity was $436.9 million. Additional borrowing capacity with the Reserve Bank was approximately $22.8 million as of December 31, 2023.
Specifically, the Company has pledged a portion of its loan portfolio to the FHLB and the Reserve Bank. Based on collateral pledged as of December 31, 2024, the total FHLB available borrowing capacity was $462.2 million. Additional borrowing capacity with the Reserve Bank was approximately $104.0 million as of December 31, 2024.
The yield on interest-bearing deposits due from banks for the year ended December 31, 2023 was 5.35% compared to 1.28% for the year ended December 31, 2022.
The decrease was primarily due higher yielding investments maturing during the year ended December 31, 2024. The yield on interest-bearing deposits due from banks for the year ended December 31, 2024 was 5.35% compared to 5.35% for the year ended December 31, 2023.
The following table summarizes non-interest expense for the years ended December 31, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (Dollars in thousands) 2023 2022 Salaries and employee benefits expense ​ $ 19,436 ​ $ 20,190 Occupancy expense of premises ​ 1,811 ​ 1,893 Furniture and equipment expenses ​ 1,178 ​ 1,325 Advertising expense ​ 288 ​ 193 Data processing ​ 1,936 ​ 1,940 FDIC insurance ​ 1,041 ​ 605 Professional fees ​ 329 ​ 1,231 State franchise tax ​ 2,389 ​ 2,092 Bank insurance ​ 174 ​ 204 Vendor services ​ 407 ​ 594 Supplies, printing, and postage ​ 103 ​ 133 Director costs ​ 876 ​ 810 Other operating expenses ​ 847 ​ 664 Total non-interest expense ​ $ 30,815 ​ $ 31,874 ​ Non-interest expense decreased $1.1 million or 3.3% during the year ended December 31, 2023 compared to the same period in 2022 primarily due to decreases in salaries and employee benefits expense.
The following table summarizes non-interest expense for the years ended December 31, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, (Dollars in thousands) 2024 2023 Salaries and employee benefits expense ​ $ 19,240 ​ $ 19,436 Occupancy expense of premises ​ 1,760 ​ 1,811 Furniture and equipment expenses ​ 1,220 ​ 1,178 Advertising expense ​ 386 ​ 288 Data processing ​ 2,192 ​ 1,936 FDIC insurance ​ 1,000 ​ 1,041 Professional fees ​ 1,001 ​ 329 State franchise tax ​ 2,405 ​ 2,389 Bank insurance ​ 238 ​ 174 Vendor services ​ 640 ​ 407 Supplies, printing, and postage ​ 152 ​ 152 Director costs ​ 776 ​ 876 Other operating expenses ​ 799 ​ 798 Total non-interest expense ​ $ 31,809 ​ $ 30,815 ​ Non-interest expense increased $1.0 million or 3.2% during the year ended December 31, 2024 compared to the same period in 2023.
The following table presents the Company’s composition of loans held for investment, net of deferred fees and costs, in dollar amounts and as a percentage of total gross loans as of December 31, 2023 and December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 (Dollars in thousands) Amount Percent Amount Percent Real Estate Loans: ​ ​ ​ ​ Commercial ​ $ 1,146,116 61.79 % $ 1,118,127 62.62 % Construction and land development ​ 180,922 9.75 % 195,027 10.92 % Residential ​ 482,182 25.99 % 426,841 23.91 % Commercial - Non Real Estate: ​ ​ ​ ​ Commercial loans ​ 45,204 2.44 % 44,924 2.52 % Consumer - Non-Real Estate: ​ ​ ​ ​ Consumer loans ​ 560 0.03 % 529 0.03 % Total Gross Loans ​ $ 1,854,984 100.00 % $ 1,785,448 100.00 % Allowance for loan credit losses ​ (19,543) ​ ​ ​ (20,208) ​ Net deferred loan costs ​ 4,983 ​ ​ ​ 4,060 ​ Total net loans ​ $ 1,840,424 ​ ​ ​ $ 1,769,300 ​ ​ The following table summarizes the contractual maturities of the loans as of December 31, 2023 by loan type.
The following table presents the Company’s composition of loans held for investment, net of deferred fees and costs, in dollar amounts and as a percentage of total gross loans as of December 31, 2024 and December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 December 31, 2023 (Dollars in thousands) Amount Percent Amount Percent Real Estate Loans: ​ ​ ​ ​ Commercial ​ $ 1,181,090 63.24 % $ 1,146,116 61.79 % Construction and land development ​ 164,988 8.83 % 180,922 9.75 % Residential ​ 472,932 25.32 % 482,182 25.99 % Commercial - Non Real Estate: ​ ​ ​ ​ ​ Commercial loans ​ 47,736 2.56 % 45,204 2.44 % Consumer - Non-Real Estate: ​ ​ ​ ​ ​ Consumer loans ​ 906 0.05 % 560 0.03 % Total Gross Loans ​ $ 1,867,652 100.00 % $ 1,854,984 100.00 % Allowance for loan credit losses ​ (18,715) ​ ​ ​ (19,543) ​ Net deferred loan costs ​ 4,521 ​ ​ ​ 4,983 ​ Total net loans ​ $ 1,853,458 ​ ​ ​ $ 1,840,424 ​ ​ The following table summarizes the contractual maturities of the loans as of December 31, 2024 by loan type.
Results of Operations – Years Ended December 31, 2023 and December 31, 2022 Overview The Company reported net income of $5.2 million for the year ended December 31, 2023, a decrease of $26.6 million when compared to the same period in 2022.
Results of Operations – Years Ended December 31, 2024 and December 31, 2023 Overview The Company reported net income of $17.1 million for the year ended December 31, 2024, an increase of $12.0 million when compared to the same period in 2023.
The Company had $39.3 million in maturities and principal repayments on securities during the year ended December 31, 2023, which was comprised of $34.1 million of mortgage-backed securities and $5.2 million of collateralized mortgage obligation securities. 54 Table of Contents The following table summarizes the amortized cost and fair value of the Company’s fixed income investment portfolio as of December 31, 2023 and December 31, 2022, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 ​ ​ Amortized ​ Fair ​ Amortized ​ Fair (Dollars in thousands) Cost Value Cost Value Held-to-maturity ​ ​ ​ ​ U.S.
Principal repayments consisted of $18.8 million of mortgage-backed securities and $6.4 million of collateralized mortgage obligation securities. 54 Table of Contents The following table summarizes the amortized cost and fair value of the Company’s fixed income investment portfolio as of December 31, 2024 and December 31, 2023, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 December 31, 2023 ​ ​ Amortized ​ Fair ​ Amortized ​ Fair (Dollars in thousands) Cost Value Cost Value Held-to-maturity ​ ​ ​ ​ U.S.
The increase in rate on interest-earning assets was primarily attributable to the Company’s loan portfolio and interest-bearing deposits due from banks. The increase in volume of average interest-earning assets was primarily attributable to the Company’s loan portfolio. Fully tax-equivalent interest income on loans increased by approximately $12.2 million as a result of volume growth and an increase in rate.
The increase in rate on interest-earning assets 51 Table of Contents was primarily attributable to the Company’s loan portfolio. The decrease in volume of average interest-earning assets was primarily attributable to the Company’s securities portfolio. Fully tax-equivalent interest income on loans increased by approximately $9.9 million or 11.5% primarily as a result of rate.
Deposits Total deposits decreased $161.1 million or 7.8% to $1.91 billion as of December 31, 2023 compared to $2.07 billion as of December 31, 2022. Non-interest bearing demand deposits decreased $65.3 million or 13.7% to $411.4 million as of December 31, 2023 compared to $476.7 million at December 31, 2022.
Deposits Total deposits decreased $14.2 million or 0.7% to $1.89 billion as of December 31, 2024 compared to $1.91 billion as of December 31, 2023. Non-interest bearing demand deposits increased $21.9 million or 5.3% to $433.3 million as of December 31, 2024 compared to $411.4 million at December 31, 2023.
Average loans increased approximately $115.4 million between the years ended December 31, 2023 and December 31, 2022, which was primarily attributable to growth in the investor real estate and residential mortgage portfolios.
Average loans increased approximately $33.4 million between the years ended December 31, 2024 and December 31, 2023, which was primarily attributable to growth in the investor real estate and residential loan portfolios. Fully tax-equivalent interest income on investment securities decreased by approximately $2.4 million.
Treasuries ​ $ 44,793 ​ $ 42,977 ​ $ 63,480 ​ $ 59,210 U.S. government and federal agencies ​ 13,850 ​ 13,275 ​ 38,748 ​ 34,760 Corporate bonds ​ 3,000 ​ 2,523 ​ 3,000 ​ 2,614 Collateralized mortgage obligations ​ 40,806 ​ 34,310 ​ 44,732 ​ 38,474 Tax-exempt municipal ​ 1,380 ​ 1,231 ​ 4,993 ​ 4,645 Taxable municipal ​ 606 ​ 587 ​ 608 ​ 579 Mortgage-backed ​ 81,255 ​ 75,090 ​ 238,652 ​ 217,294 Total Available-for-sale Securities ​ $ 185,690 ​ $ 169,993 ​ $ 394,213 ​ $ 357,576 ​ In the prevailing rate environments as of both December 31, 2023 and December 31, 2022, the Company’s investment portfolio had an estimated weighted average remaining life of approximately 4.2 years and 4.5 years, respectively.
Treasuries ​ $ 27,920 ​ $ 27,137 ​ $ 44,793 ​ $ 42,977 U.S. government and federal agencies ​ 10,966 ​ 10,581 ​ 13,850 ​ 13,275 Corporate bonds ​ 3,000 ​ 2,739 ​ 3,000 ​ 2,523 U.S. agency collateralized mortgage obligations ​ 36,032 ​ 29,611 ​ 40,806 ​ 34,310 Tax-exempt municipal ​ 1,379 ​ 1,171 ​ 1,380 ​ 1,231 Taxable municipal ​ 270 ​ 263 ​ 606 ​ 587 U.S. agency mortgage-backed ​ 64,274 ​ 58,755 ​ 81,255 ​ 75,090 Total Available-for-sale Securities ​ $ 143,841 ​ $ 130,257 ​ $ 185,690 ​ $ 169,993 ​ In the prevailing rate environments as of both December 31, 2024 and December 31, 2023, the Company’s investment portfolio had an estimated weighted average remaining life of approximately 4.2 years.
Investment Securities The Company maintains a primarily fixed income investment securities portfolio that had a total carrying value of $265.5 million at December 31, 2023 and $457.0 million at December 31, 2022.
Book value per share was $17.28 as of December 31, 2024 compared to $16.25 as of December 31, 2023. Investment Securities The Company maintains a primarily fixed income investment securities portfolio that had a total carrying value of $222.3 million at December 31, 2024 and $265.5 million at December 31, 2023.
Treasuries ​ $ 6,001 ​ $ 5,334 ​ $ 6,000 ​ $ 5,160 U.S. government and federal agencies ​ 35,434 ​ 30,334 ​ 35,551 ​ 29,416 Collateralized mortgage obligations ​ 19,395 ​ 15,300 ​ 21,275 ​ 17,048 Taxable municipal ​ 6,057 ​ 4,956 ​ 6,073 ​ 4,709 Mortgage-backed ​ 28,618 ​ 23,608 ​ 30,516 ​ 24,828 Total Held-to-maturity Securities ​ $ 95,505 ​ $ 79,532 ​ $ 99,415 ​ $ 81,161 Available-for-sale ​ ​ ​ ​ U.S.
Treasuries ​ $ 6,001 ​ $ 5,418 ​ $ 6,001 ​ $ 5,334 U.S. government and federal agencies ​ 35,349 ​ 30,606 ​ 35,434 ​ 30,334 U.S. agency collateralized mortgage obligations ​ 17,805 ​ 13,857 ​ 19,395 ​ 15,300 Taxable municipal ​ 6,041 ​ 4,952 ​ 6,057 ​ 4,956 U.S. agency mortgage-backed ​ 26,813 ​ 21,437 ​ 28,618 ​ 23,608 Total Held-to-maturity Securities ​ $ 92,009 ​ $ 76,270 ​ $ 95,505 ​ $ 79,532 Available-for-sale ​ ​ ​ ​ U.S.
These increases were partially offset by a decrease in BOLI income of $320 thousand due to the surrender of all BOLI policies as part of the Restructuring. Non-interest Expense Generally, non-interest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing banking services.
Excluding the impact of the Restructuring, non-interest income decreased $0.1 million or 4.4%. The decrease reflects the surrender of BOLI as part of the Restructuring. 52 Table of Contents Non-interest Expense Generally, non-interest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing banking services.
Interest Expense Interest expense increased by $36.6 million to $50.3 million for the year ended December 31, 2023 compared to $13.6 million for the year ended December 31, 2022, primarily due to an increase in rates and, to a lesser extent, volume of deposits and other borrowed funds.
Interest Expense Interest expense increased by $8.8 million to $59.1 million for the year ended December 31, 2024 compared to $50.3 million for the year ended December 31, 2023, primarily due to an increase in rates. The increase in rates was primarily a result of the repricing of the Company’s time deposits.
Core deposits totaled $1.58 billion or 82.7% of total deposits and $1.69 billion or 81.9% of total deposits at December 31, 2023 and December 31, 2022, respectively. 59 Table of Contents The following table sets forth the average balances of deposits and the average interest rates paid for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ Average ​ Average ​ (Dollars in thousands) ​ Amount ​ Rate ​ Amount ​ Rate Non-interest bearing ​ $ 447,804 ​ ​ $ 518,284 ​ Interest bearing: ​ ​ ​ ​ NOW accounts ​ 299,468 ​ 2.27 % ​ 311,950 0.44 % Money market accounts ​ 362,243 ​ 2.80 % ​ 395,369 0.84 % Savings accounts ​ 69,742 ​ 1.19 % ​ 108,178 0.47 % Time deposits ​ 842,121 ​ 3.49 % ​ 682,674 0.96 % Total interest-bearing ​ 1,573,574 ​ 3.00 % ​ 1,498,171 0.79 % Total ​ $ 2,021,378 ​ ​ $ 2,016,455 ​ ​ The following table sets forth the maturity ranges of certificates of deposit with balances of $250,000 or more as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 (Dollars in thousands) Total Uninsured Three months or less ​ $ 69,684 ​ $ 52,684 Over three through 6 months ​ 60,349 ​ 46,849 Over 6 through 12 months ​ 112,357 ​ 81,357 Over 12 months ​ 85,555 ​ 76,805 Total ​ $ 327,945 ​ $ 257,695 ​ The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was estimated at $802.8 million at December 31, 2023 and $963.9 million at December 31, 2022.
Core deposits totaled $1.62 billion or 85.4% of total deposits and $1.58 billion or 82.7% of total deposits at December 31, 2024 and December 31, 2023, respectively. 59 Table of Contents The following table sets forth the average balances of deposits and the average interest rates paid for the years ended December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ December 31, 2023 ​ Average ​ Average ​ (Dollars in thousands) ​ Amount ​ Rate ​ Amount ​ Rate Non-interest bearing ​ $ 437,694 ​ ​ $ 447,804 ​ Interest bearing: ​ ​ ​ ​ NOW accounts ​ 322,028 ​ 2.75 % ​ 299,468 2.27 % Money market accounts ​ 342,057 ​ 3.13 % ​ 362,243 2.80 % Savings accounts ​ 48,466 ​ 1.37 % ​ 69,742 1.19 % Time deposits ​ 757,494 ​ 4.52 % ​ 842,121 3.49 % Total interest-bearing ​ 1,470,045 ​ 3.71 % ​ 1,573,574 3.00 % Total ​ $ 1,907,739 ​ 2.86 % $ 2,021,378 2.33 % ​ The following table sets forth the maturity ranges of certificates of deposit with balances of $250,000 or more as of December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 (Dollars in thousands) Total Uninsured Three months or less ​ $ 65,443 ​ $ 46,443 Over three through 6 months ​ 120,452 ​ 101,952 Over 6 through 12 months ​ 61,133 ​ 48,383 Over 12 months ​ 68,520 ​ 55,270 Total ​ $ 315,548 ​ $ 252,048 ​ The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was estimated at $816.7 million at December 31, 2024 and $802.8 million at December 31, 2023.
Non-GAAP measures used in this report consist of tax-equivalent net interest income, core non-interest income, core net income, core earnings per share (diluted), core return on average assets and core return on average equity excluding the impact of losses recognized in July 2023 on the sale of available-for-sale securities and taxes paid on the early surrender of bank owned life insurance policies.
Non-GAAP measures used in this report consist of tax-equivalent net interest income, core net income, core earnings per share (diluted), core return on average assets, core return on average equity and core income tax expense.
(2) The Company did not have any loans on non-accrual as of December 31, 2023 or December 31, 2022. 49 Table of Contents ​ Net interest margin as presented above is calculated by dividing tax-equivalent net interest income by total average earning assets.
(2) The Company did not have any loans on non-accrual as of December 31, 2024 or December 31, 2023. (3) Tax-equivalent net interest margin adjusts for differences in tax treatment of interest income sources. The entire tax-equivalent adjustment is attributable to interest income on earning assets.
Core net income (Non-GAAP) defined as reported net income excluding the non-recurring after-tax loss on securities sale and taxes paid in conjunction with the surrender of the Bank’s BOLI policies resulting from the Restructuring, was $19.8 million for the year ended December 31, 2023, a decrease of $12.0 million when compared to the same period in 2022.
Core net income (Non-GAAP) defined as reported net income excluding the non-recurring after-tax loss resulting from the Restructuring, was $19.8 million for the year ended December 31, 2023.
The increase in effective tax rate between the comparative periods was due to changes in temporary differences. 53 Table of Contents Discussion and Analysis of Financial Condition – Years Ended December 31, 2023 and December 31, 2022 Assets, Liabilities, and Shareholders’ Equity The Company’s total assets decreased $105.7 million or 4.5% to $2.24 billion at December 31, 2023 compared to $2.35 billion at December 31, 2022.
Income tax for the twelve months ended December 31, 2024 represents a $0.6 million or 10.5% decrease when compared to the Company’s core income tax expense (Non-GAAP) for the twelve months ended December 31, 2023 of $5.3 million. 53 Table of Contents Discussion and Analysis of Financial Condition – Years Ended December 31, 2024 and December 31, 2023 Assets, Liabilities, and Shareholders’ Equity The Company’s total assets decreased $7.6 million or 0.3% to $2.23 billion at December 31, 2024 compared to $2.24 billion at December 31, 2023.
The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns.
The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).
Excluding the impact of the Restructuring, the effective tax rate for the year ended December 31, 2023 was 21.2% compared to 20.6% for the same period in 2022.
Our effective tax rate for the year ended December 31, 2024 was 21.7% compared to 35.4% for the year ended December 31, 2023 or 21.2% for the year ended December 31, 2023, when excluding the impact of the Restructuring (Non-GAAP). The increase in effective tax rate between the adjusted comparative periods was due to changes in temporary differences.
The BTFP advance has a term of one year, bears interest at a fixed rate of 4.80% and can be prepaid at any time without penalty. Total liquidity, defined as cash and cash equivalents, unencumbered securities at fair value, and available secured borrowing capacity, was $638.9 million at December 31, 2023 compared to $763.5 million at December 31, 2022.
Total borrowings as of December 31, 2024 consisted of subordinated debt totaling $24.8 million and the FHLB advances. Total liquidity, defined as cash and cash equivalents, unencumbered securities at fair value, and available secured borrowing capacity, was $727.3 million at December 31, 2024 compared to $638.9 million at December 31, 2023.
The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Amortized ​ Fair ​ Weighted-Average (Dollars in thousands) Cost Value Yield Held-to-maturity ​ ​ ​ Due in one year or less ​ $ — ​ $ — — ​ Due after one year through five years ​ 22,153 ​ 19,600 1.01 % Due after five years through ten years ​ 23,492 ​ 19,766 1.48 % Due after ten years ​ 49,860 ​ 40,166 1.39 % Total Held-to-maturity Securities ​ $ 95,505 ​ $ 79,532 1.32 % Available-for-sale ​ ​ ​ Due in one year or less ​ $ 22,248 ​ $ 21,933 2.31 % Due after one year through five years ​ 46,393 ​ 44,271 1.63 % Due after five years through ten years ​ 53,890 ​ 50,962 2.33 % Due after ten years ​ 63,159 ​ 52,827 1.74 % Total Available-for-sale Securities ​ $ 185,690 ​ $ 169,993 1.95 % ​ 55 Table of Contents Loan Portfolio Gross loans net of unearned income increased $70.5 million or 3.9% to $1.86 billion as of December 31, 2023 compared to $1.79 billion as of December 31, 2022.
The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2024 ​ ​ Amortized ​ Fair ​ Weighted-Average (Dollars in thousands) Cost Value Yield Held-to-maturity ​ ​ ​ Due in one year or less ​ $ — ​ $ — — ​ Due after one year through five years ​ 27,431 ​ 24,641 1.17 % Due after five years through ten years ​ 21,620 ​ 17,962 1.67 % Due after ten years ​ 42,958 ​ 33,667 1.45 % Total Held-to-maturity Securities ​ $ 92,009 ​ $ 76,270 1.42 % Available-for-sale ​ ​ ​ Due in one year or less ​ $ 21,057 ​ $ 20,798 1.80 % Due after one year through five years ​ 29,996 ​ 28,849 2.14 % Due after five years through ten years ​ 36,750 ​ 34,830 2.66 % Due after ten years ​ 56,038 ​ 45,780 1.56 % Total Available-for-sale Securities ​ $ 143,841 ​ $ 130,257 2.00 % ​ 55 Table of Contents Loan Portfolio Gross loans net of unearned income increased $12.7 million or 0.7% to $1.87 billion as of December 31, 2024 compared to $1.85 billion as of December 31, 2023.
The recovery of provision for credit losses during 2023 was primarily a result of changes in the Company’s loss driver analysis, resulting from a periodic review of our assumptions and improved economic forecasts used in the quantitative portion of the model and assessment of management’s considerations of existing economic versus historical conditions combined with the continued strong credit performance of our loan portfolio segments.
The decreased recovery of provision for credit losses during 2024 was primarily a result of changes in the composition and volume of the loan portfolio, considerations of qualitative factors and the continued strong credit performance of our loan portfolio segments.
Under the stock repurchase program, the Company may repurchase 60 Table of Contents up to 700,000 shares of its outstanding common stock, or 5.0% of outstanding shares as of December 31, 2023. The stock repurchase program will expire on August 31, 2024 or earlier if all the authorized shares have been repurchased.
The stock repurchase program will expire on August 31, 2025 or earlier if all the authorized shares have been repurchased. The Company repurchased 3,003 shares at $16.48 per share during the twelve months ended December 31, 2024. 60 Table of Contents Liquidity Liquidity reflects a financial institution’s ability to fund assets and meet current and future financial obligations.
The Company’s total liabilities decreased $122.8 million or 5.8% to $2.01 billion at December 31, 2023 compared to $2.14 billion at December 31, 2022.
The Company’s total liabilities decreased $24.3 million or 1.2% to $1.99 billion at December 31, 2024 compared to $2.01 billion at December 31, 2023. The decrease in total liabilities was primarily attributable to a decrease in time deposits of $125.5 million and a decrease of Federal Reserve Bank borrowings of $54.0 million.
Rate/Volume Analysis ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2023 and 2022 ​ ​ Increase ​ ​ ​ ​ ​ (Decrease) Due to ​ ​ ​ (Dollars in thousands) Volume Rate Total Increase (Decrease) Interest-earning Assets: ​ ​ ​ Securities: ​ ​ ​ Taxable ​ $ (1,498) ​ $ 821 ​ $ (677) Tax-exempt (1) ​ (76) ​ (8) ​ (84) Total securities ​ $ (1,574) ​ $ 813 ​ $ (761) Loans, net of unearned income: ​ ​ ​ Taxable ​ 5,398 ​ 6,620 ​ 12,018 Tax-exempt (1) ​ 164 ​ ​ 7 ​ 171 Total loans, net of unearned income (2) ​ $ 5,562 ​ $ 6,627 ​ $ 12,189 Interest-bearing deposits in other banks ​ $ 744 ​ $ 4,550 ​ $ 5,294 Total interest-earning assets ​ $ 4,732 ​ $ 11,990 ​ $ 16,722 Interest-bearing Liabilities: ​ ​ ​ Interest-bearing deposits: ​ ​ ​ NOW accounts ​ $ (153) ​ $ 5,598 ​ $ 5,445 Money market accounts ​ (1,000) ​ 7,810 ​ 6,810 Savings accounts ​ (458) ​ 785 ​ 327 Time deposits ​ 5,502 ​ 17,306 ​ 22,808 Total interest-bearing deposits ​ $ 3,891 ​ $ 31,499 ​ $ 35,390 Federal funds purchased ​ — ​ — ​ — Subordinated debt ​ (118) ​ (296) ​ (414) Other borrowed funds ​ 1,429 ​ 236 ​ 1,665 Total interest-bearing liabilities ​ $ 5,202 ​ $ 31,439 ​ $ 36,641 Change in tax equivalent net interest income (Non-GAAP) ​ $ (470) ​ $ (19,449) ​ $ (19,919) (1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.
Rate/Volume Analysis ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2024 and 2023 ​ ​ Increase ​ ​ ​ ​ ​ (Decrease) Due to ​ ​ ​ (Dollars in thousands) Volume Rate Total Increase (Decrease) Interest-earning Assets: ​ ​ ​ Securities: ​ ​ ​ Taxable ​ $ (2,321) ​ $ (102) ​ $ (2,423) Tax-exempt (1) ​ (28) ​ 5 ​ (23) Total securities ​ $ (2,349) ​ $ (97) ​ $ (2,446) Loans, net of unearned income: ​ ​ ​ Taxable ​ 2,292 ​ 7,963 ​ 10,255 Tax-exempt (1) ​ (379) ​ ​ (73) ​ (452) Total loans, net of unearned income (2) ​ $ 1,913 ​ $ 7,890 ​ $ 9,803 Interest-bearing deposits in other banks ​ $ 1,824 ​ $ 82 ​ $ 1,906 Total interest-earning assets ​ $ 1,388 ​ $ 7,875 ​ $ 9,263 Interest-bearing Liabilities: ​ ​ ​ Interest-bearing deposits: ​ ​ ​ NOW accounts ​ $ 1,107 ​ $ 937 ​ $ 2,044 Money market accounts ​ (873) ​ 1,430 ​ 557 Savings accounts ​ (291) ​ 124 ​ (167) Time deposits ​ (3,856) ​ 8,746 ​ 4,890 Total interest-bearing deposits ​ $ (3,913) ​ $ 11,237 ​ $ 7,324 Federal funds purchased ​ (13) ​ — ​ (13) Subordinated debt ​ 5 ​ (5) ​ — Federal Reserve Bank borrowings ​ ​ 819 ​ (8) ​ 811 Federal Home Loan Bank advances ​ 685 ​ (7) ​ 678 Total interest-bearing liabilities ​ $ (2,417) ​ $ 11,217 ​ $ 8,800 Change in tax-equivalent net interest income (Non-GAAP) ​ $ 3,805 ​ $ (3,342) ​ $ 463 (1) Income and yields for all periods presented are reported on a tax-equivalent basis using the federal statutory tax rate of 21%.
The investment securities portfolio’s yield for the year ended December 31, 2023 was 2.04% compared to 1.87% for the year ended December 31, 2022. The increase was primarily due to the Company realizing the full benefit of higher yields on investment securities purchased during the latter part of the second quarter of 2022.
The increase in yield on the Company’s loan portfolio was primarily a result of repricing of assets subsequent to the fourth quarter of 2023 and certain prepayment penalties. 50 Table of Contents The investment securities portfolio’s yield for the year ended December 31, 2024 was 2.01% compared to 2.04% for the year ended December 31, 2023.
These increases were partially offset by a decrease to retained earnings as a result of the Company’s adoption of ASC 326 on January 1, 2023 and dividends declared. In August of 2023, the Company’s Board of Directors authorized the extension of the Company’s stock repurchase program that was originally adopted in August of 2021.
In August of 2023, the Company’s Board of Directors authorized the extension of the Company’s stock repurchase program that was originally adopted in August of 2021. Under the stock repurchase program, the Company may repurchase up to 700,000 shares of its outstanding common stock.
The increase in shareholders’ equity was primarily attributable to a decrease in accumulated other comprehensive loss as a result of the realization of losses on the sale of certain low-yielding investment securities as part of the Restructuring and improvements in market values, net income recorded for the year, and increase in additional paid-in capital as a result of option exercises during the year ended December 31, 2023.
The increase in shareholders’ equity was primarily attributable the Company’s earnings during the year and a decrease in accumulated other comprehensive loss, which was attributable to a decrease in unrealized losses on our available-for-sale portfolio due to market value increases. These increases were partially offset by cash dividends paid.
The Company reduced wholesale deposits by $65.6 million since March 31, 2023. Shareholders’ equity increased $17.1 million or 8.0% to $229.9 million at December 31, 2023 compared to $212.8 million at December 31, 2022.
The decreases were partially offset by an increase in non-interest bearing demand deposits and interest-bearing demand deposits of $21.9 million and $97.1 million, respectively. Shareholders’ equity increased $16.7 million or 7.3% to $246.6 million at December 31, 2024 compared to $229.9 million at December 31, 2023.
The decrease in furniture and equipment expense was due to lower depreciation expense on fixed assets and lower software and equipment service expense due to contract renegotiation efforts. ​ Income Taxes Income tax expense decreased $5.4 million or 65.8% to $2.8 million for the year ended December 31, 2023 compared to $8.3 million for the year ended December 31, 2022.
The decrease in salaries and employee benefits was due to lower incentive accruals and higher direct loan origination costs when compared to the same period of the prior year, partially offset by higher deferred compensation expense as a result of a mark-to-market fluctuations on the Company’s NQDC. ​ Income Taxes Income tax expense increased $1.9 million or 68.5% to $4.8 million for the year ended December 31, 2024 compared to $2.8 million for the year ended December 31, 2023.
Removed
Loans that do not share risk characteristics are evaluated on an individual basis.
Added
Management expects net interest income and net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of the Company’s interest-earning assets and interest-bearing liabilities.
Removed
The increase in yield on the Company’s loan portfolio was primarily attributable to an increase in yield on the Company’s variable rate loans as a result of an increase in interest rates since 2022, coupled with a higher weighted average yield on loans originated since December 31, 2022.
Added
The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the years ended December 31, 2024 and 2023.
Removed
The increase was primarily due to higher federal funds rate during the year ended December 31, 2023 when compared to same period in 2022. 50 Table of Contents The following table presents the effects of changing rates and volumes on net interest income for the periods indicated.

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Other JMSB 10-K year-over-year comparisons