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What changed in MetroCity Bankshares, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MetroCity Bankshares, Inc.'s 2022 and 2023 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 2023 report.

+388 added−359 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-10)

Top changes in MetroCity Bankshares, Inc.'s 2023 10-K

388 paragraphs added · 359 removed · 285 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

69 edited+26 added−11 removed164 unchanged
Biggest changeWe consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements. Of the 216 full-time equivalent employees as of December 31, 2022, 80.1% identify as a female and 96.8% are persons of color. Included in the 216 full-time equivalent employees are 46 employment who have management roles.
Biggest changeAs of December 31, 2023, we had approximately 220 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.
As of December 31, 2022, these rules have not been implemented, although the SEC did adopt final rules implementing the clawback provisions of the Dodd-Frank Act in 2022.
As of December 31, 2023, these rules have not been implemented, although the SEC did adopt final rules implementing the clawback provisions of the Dodd-Frank Act in 2022.
As of December 31, 2022 and 2021, the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”) signed into law in May 2018 scaled back certain requirements of the Dodd-Frank Act and provided other regulatory relief.
As of December 31, 2023 and 2022, the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”) signed into law in May 2018 scaled back certain requirements of the Dodd-Frank Act and provided other regulatory relief.
Our Markets We are located primarily in the Atlanta metropolitan area with our headquarters in Doraville, Georgia. Our 19 full-service branch locations in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia are located in growing multi-ethnic communities. Additionally, we continue to monitor attractive markets where we would like to expand our presence.
Our Markets We are located primarily in the Atlanta metropolitan area with our headquarters in Doraville, Georgia. Our 20 full-service branch locations in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia are located in growing multi-ethnic communities. Additionally, we continue to monitor attractive markets where we would like to expand our presence.
This change will result in earlier recognition of credit losses that the Company deems expected but not yet probable. For SEC reporting companies with emerging growth company designation and December 31 fiscal-year ends, such as the Company, CECL will become effective beginning with the first quarter of 2023.
This change will result in earlier recognition of credit losses that the Company deems expected but not yet probable. For SEC reporting companies with emerging growth company designation and December 31 fiscal-year ends, such as the Company, CECL became effective beginning with the first quarter of 2023.
We are willing to maintain higher LTVs on our SBA portfolio than the remainder of our commercial loans because the effect of the SBA guarantee is to lower overall risk. 9 Table of Contents We retain the servicing rights on the sold portions of the SBA loans we originate.
We are willing to maintain higher LTVs on our SBA portfolio than the remainder of our commercial loans because the effect of the SBA guarantee is to lower overall risk. 9 Table of Contents We retain the servicing rights on the sold portions of the SBA and USDA loans we originate.
FinCEN is required to implement regulations to specify how covered financial institutions, such as the Company, should incorporate these national priorities into their AML programs. As of December 31, 2022, no such regulations have been proposed. Economic Sanctions.
FinCEN is required to implement regulations to specify how covered financial institutions, such as the Company, should incorporate these national priorities into their AML programs. As of December 31, 2023, no such regulations have been proposed. Economic Sanctions.
These consumer protections under the CARES Act continued during the COVID 19 pandemic emergency, and while most of these protections expired in 2022, on January 18, 2023, in its revised Mortgage Servicing Examination Procedures, the CFPB stated it expected servicers to continue to utilize these safeguards, regardless of their expiration. Non-Discrimination Policies.
These consumer protections under the CARES Act continued during the COVID 19 pandemic 22 Table of Contents emergency, and while most of these protections expired in 2022, on January 18, 2023, in its revised Mortgage Servicing Examination Procedures, the CFPB stated it expected servicers to continue to utilize these safeguards, regardless of their expiration. Non-Discrimination Policies.
In addition, the Federal Deposit 19 Table of Contents Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company.
In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company.
We offer a suite of loan and deposit products tailored to meet the needs of the businesses and individuals already established in our communities, as well as first generation immigrants who desire to establish and grow their own businesses, purchase a home, or educate their children in the United States.
We offer a suite of loan and deposit products tailored to meet the needs of the businesses and individuals already established in our communities, as well as first generation immigrants 6 Table of Contents who desire to establish and grow their own businesses, purchase a home, or educate their children in the United States.
These buffer requirements must be met for a bank to be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction.
These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks or make discretionary bonus payments to executive management without restriction.
These loans represent a very small portion of our overall portfolio and primarily consists of purchased auto loan pools, overdrafts, and consumer lines of credit. Consumer loans carry a greater amount of risk and collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.
Consumer and Other Loans. These loans represent a very small portion of our overall portfolio and primarily consists of overdrafts and consumer lines of credit. Consumer loans carry a greater amount of risk and collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.
If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or transaction requested, and we must notify the appropriate authorities. 20 Table of Contents Concentrations in Lending.
If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or transaction requested, and we must notify the appropriate authorities. Concentrations in Lending.
Bank regulators are focusing their examinations on anti-money laundering compliance, and we continue to monitor and augment, where necessary, our anti-money laundering compliance programs. Banking regulators will consider compliance with the Act’s money laundering provisions in acting upon acquisition and merger proposals.
Bank regulators are focusing their 20 Table of Contents examinations on anti-money laundering compliance, and we continue to monitor and augment, where necessary, our anti-money laundering compliance programs. Banking regulators will consider compliance with the Act’s money laundering provisions in acting upon acquisition and merger proposals.
Payment of Dividends We are a legal entity separate and distinct from the Bank and our other subsidiaries. Our primary source of cash, other than securities offerings, is dividends from the Bank. We are a legal entity separate and distinct from the Bank and our 17 Table of Contents other subsidiaries.
Payment of Dividends We are a legal entity separate and distinct from the Bank and our other subsidiaries. Our primary source of cash, other than securities offerings, is dividends from the Bank.
As of June 30, 2020, the DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%. The FDIC, as required under the Federal Deposit Insurance Act, established a plan on September 15, 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.
The FDIC, as required under the Federal Deposit Insurance Act, established a plan on September 15, 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.
The Bank is subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
The Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
Our deposits with directors and affiliated entities totaled $9.2 million for the same period. 11 Table of Contents Competition We operate in a highly competitive market. Competitors include other banks, credit unions, mortgage companies, personal and commercial financing companies, investment brokerage and advisory firms, mutual fund companies and insurance companies. Competitors range in both size and geographic footprint.
Our deposits with directors and affiliated entities totaled $10.2 million for the same period. Competition We operate in a highly competitive market. Competitors include other banks, credit unions, mortgage companies, personal and commercial financing companies, investment brokerage and advisory firms, mutual fund companies and insurance companies. Competitors range in both size and geographic footprint.
On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to (i) address the upcoming implementation of the “current expected credit losses” (“CECL”) accounting standard under GAAP; (ii) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations.
On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to (i) address the upcoming implementation of the “current expected credit losses” (“CECL”) accounting standard under GAAP; (ii) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL (the Company did not elect to utilze this phase-in period); and (iii) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain 17 Table of Contents banking organizations.
Our LTV policy limits are 85% for commercial real estate loans. In addition, we limit our lending on non-owner occupied commercial real estate to 100% of total bank capital. The total balance of commercial real estate loans on nonaccrual status was $4.9 million and $3.7 million as of December 31, 2022 and 2021, respectively. Commercial and Industrial Loans.
Our LTV policy limits are 85% for commercial real estate loans. In addition, we limit our lending on non-owner occupied commercial real estate to 100% of total bank capital. The total balance of commercial real estate loans on nonaccrual status was $991,000 and $4.9 million as of December 31, 2023 and 2022, respectively. Commercial and Industrial Loans.
Our conventional commercial real estate loans, or non-SBA guaranteed commercial real estate loans, carried a weighted average maturity of 6.71 years as of December 31, 2022. Non-SBA commercial real estate loan amounts generally do not exceed 65% of the lesser of the appraised value or the purchase price depending on the property appraisals we utilize.
Our conventional commercial real estate loans, or non-SBA guaranteed commercial real estate loans, carried a weighted average maturity of 5.52 years as of December 31, 2023. Non-SBA commercial real estate loan amounts generally do not exceed 65% of the lesser of the appraised value or the purchase price depending on the property appraisals we utilize.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if: ● its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; ● its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or ● it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. 18 Table of Contents Regulation of the Bank The Bank is subject to comprehensive supervision and regulation by the FDIC and is subject to its regulatory reporting requirements.
As a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if: ● its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; ● its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or ● it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
Capital Requirements The Bank is required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets.
Capital Requirements The Company and the Bank are each required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets.
Higher allowances for loan losses and capital levels may also be required.
Higher allowances for credit losses and capital levels may also be required.
Our ability to gather deposits, particularly core deposits, is an important aspect of our business and we believe core deposits are a significant driver of value as a cost efficient and stable source of funding to support our growth. As of December 31, 2022, we had $2.67 billion of total deposits with a total weighted average deposit cost of 0.97%.
Our ability to gather deposits, particularly core deposits, is an important aspect of our business and we believe core deposits are a significant driver of value as a cost efficient and stable source of funding to support our growth. As of December 31, 2023, we had $2.73 billion of total deposits with a total weighted average deposit cost of 3.04%.
These loans carry a fixed interest rate and have maturities of less than 18 months. Our loan-to-value, or LTV, policy limit for our construction and development loans is 65%. The risks inherent in construction lending may affect adversely our results of operations.
Interest reserves are generally established on real estate construction loans. These loans typically carry a fixed interest rate and have maturities of less than 18 months. Our loan-to-value, or LTV, policy limit for our construction and development loans is 65%. The risks inherent in construction lending may affect adversely our results of operations.
A significant portion of our commercial real estate portfolio consists of SBA loans. Our SBA loans are typically made to retail businesses including, car wash stations, grocery stores, poultry farms, warehouses, convenience stores, hospitality and service businesses, car dealers, beauty supplies, restaurants, and beer, wine, and liquor stores for acquisition of business properties, working capital needs and business expansions.
Our SBA loans are typically made to retail businesses including, car wash stations, grocery stores, poultry farms, warehouses, convenience stores, hospitality and service businesses, car dealers, beauty supplies, restaurants, and beer, wine, and liquor stores for acquisition of business properties, working capital needs and business expansions.
As of December 31, 2022, 77.2%, or $2.06 billion, of our deposits were considered core deposits. While we are focused on growing our low-cost deposits, we also utilize brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network.
As of December 31, 2023, 67.3%, or $1.84 billion, of our deposits were considered core deposits. While we are focused on growing our low-cost deposits, we also utilize brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network.
We provide a mix of variable and fixed rate commercial and industrial loans. Commercial and industrial loans represented $53.2 million, or 1.7%, of our total loan portfolio as of December 31, 2022, compared to $73.1 million, or 2.9%, of our total loan portfolio at December 31, 2021.
We provide a mix of variable and fixed rate commercial and industrial loans. Commercial and industrial loans represented $65.9 million, or 2.1%, of our total loan portfolio held for investment as of December 31, 2023, compared to $53.2 million, or 1.7%, of our total loan portfolio held for investment at December 31, 2022.
Our future success depends on our ability to attract, retain and develop employees. Our talent acquisition teams partner with hiring managers in sourcing and presenting a diverse slate of qualified candidates to strengthen our organization. Professional development is a key priority, which is facilitated through our many corporate development initiatives including training programs, corporate mentoring, and educational reimbursement.
Our talent acquisition teams partner with hiring managers in sourcing and presenting a diverse slate of qualified candidates to strengthen our organization. Professional development is a key priority, which is facilitated through our many corporate development initiatives including training programs, corporate mentoring, and educational reimbursement.
Federal CRA regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation. The Bank has a rating of “Satisfactory” in its most recent CRA evaluation.
Federal CRA regulations require, among other things, that evidence of discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation.
We had approximately $136,000 and $152,000 of commercial and industrial loans on nonaccrual status as of December 31, 2022 and 2021, respectively. 8 Table of Contents Our commercial and industrial loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing.
We had approximately $1.3 million and $136,000 of commercial and industrial loans on nonaccrual status as of December 31, 2023 and 2022, respectively. Our commercial and industrial loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing.
We recognized servicing income on residential mortgage loans of $561,000 (expense balance), $564,000 (expense balance), and $1.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. The servicing income recognized is net of amortization of our mortgage servicing rights which caused the expense balance for the years ended December 31, 2022 and 2021. Consumer and Other Loans.
We recognized servicing income on residential mortgage loans of $193,000 (expense balance), $561,000 (expense balance), and $564,000 (expense balance) for the years ended December 31, 2023, 2022 and 2021, respectively. The servicing income recognized is net of amortization of our mortgage servicing rights which caused the expense balance for the years ended December 31, 2023, 2022 and 2021.
Advances on construction loans are made relative to the overall percentage of completion on the project in an effort to remain adequately secured. We had no construction and development loans that were classified as nonaccrual as of December 31, 2022 and 2021. Commercial Real Estate Loans.
Advances on construction loans are made relative to the overall percentage of completion on the project in an effort to remain adequately secured. We had approximately $548,000 of construction and development loans on nonaccrual status as of December 31, 2023. We had no construction and development loans that were classified as nonaccrual as of December 31, 2022.
Of our total deposits as of December 31, 2022, $761.7 million, or 28.6%, of total deposits were held in demand deposit accounts. As a bank focusing on successful businesses and their owners, many of our depositors choose to leave large deposits with us.
Of our total deposits as of December 31, 2023, $639.5 million, or 23.4%, of total deposits were held in demand deposit accounts. As a bank focusing on successful businesses and their owners, many of our depositors choose to leave large deposits with us.
We originate mainly non-conforming residential mortgage loans through our branch network. During 2022, our primary loan products offered were 15-year and 30-year fixed rate products, as well as a five-year and ten-year hybrid adjustable rate mortgages which reprice annually after the initial term based on the weekly average of the one year constant maturity treasury (CMT) plus a fixed spread.
During 2023, our primary loan products offered were 15-year and 30-year fixed rate products, as well as a three-year, five-year and ten-year hybrid adjustable rate mortgages which reprice annually after the initial term based on the weekly average of the one year constant maturity treasury (CMT) plus a fixed spread.
We also provide trade finance-related services to our customers such as domestic and international letters of credit, international collection (documents against acceptance and documents against payment) and export advice. We issue standby letters of credit on behalf of our customers to facilitate trade and other financial guarantees. The Bank has a correspondent relationship with banks in Korea, China and India.
We also provide trade finance-related services to our customers such as domestic and international letters of credit, international collection (documents against acceptance and documents against payment) and export advice. We issue standby letters of credit on behalf of our customers to facilitate trade and other financial guarantees.
The FDIC calculates quarterly deposit insurance assessments based on an institution’s average total consolidated assets less its average tangible equity, and applies one of four risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors. The assessment rate schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.
The FDIC calculates quarterly deposit insurance assessments based on an institution’s average total consolidated assets less its average tangible equity, 19 Table of Contents and applies one of four risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors.
Of the balance outstanding as of December 31, 2022, $17.3 million, or 50.3%, of our commercial and industrial SBA portfolio carried a guarantee from the SBA while the remaining $17.2 million, or 49.7%, of the portfolio was unguaranteed.
Of the balance outstanding as of December 31, 2023, $17.1 million, or 52.3%, of our commercial and industrial SBA portfolio carried a guarantee from the SBA while the remaining $15.6 million, or 47.7%, of the portfolio was unguaranteed.
Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth. The Bank was well capitalized at December 31, 2022, and brokered deposits are not restricted.
Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
Adjustable-rate loans are generally based on the Wall Street Journal Prime Rate (“WSJPR”) or London Interbank Offered Rate (“LIBOR”), and as of December 31, 2022, most of our loans were based on WSJPR. At December 31, 2022, approximately 25.2% of the commercial real estate loan portfolio consisted of fixed rate loans.
Adjustable-rate loans are generally based on the Wall Street Journal Prime Rate (“WSJPR”) or the Secured Overnight Financing Rate (“SOFR”), and as of December 31, 2023, most of our loans were based on WSJPR. At December 31, 2023, approximately 28.9% of the commercial real estate loan portfolio consisted of fixed rate loans.
As of December 31, 2022, we had $2.31 billion of residential real estate loans, representing 75.3% of our total loan portfolio compared to $1.88 billion, or 74.8%, of our total loan portfolio at December 31, 2021. We had no residential mortgage loans held for sale as of December 31, 2022 and 2021.
As of December 31, 2023, we had $2.35 billion of residential real estate loans, representing 74.6% of our total loan portfolio held for investement compared to $2.31 billion, or 75.3%, of our total loan portfolio held for investment at December 31, 2022. Residential mortgage loans held for sale totaled $22.3 million as of December 31, 2023.
We currently operate 19 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of December 31, 2022, we had total assets of $3.43 billion, total loans of $3.06 billion, total deposits of $2.67 billion and total shareholders’ equity of $349.4 million.
We currently operate 20 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. As of December 31, 2023, we had total assets of $3.50 billion, total loans held for investment of $3.14 billion, total deposits of $2.73 billion and total shareholders’ equity of $381.5 million.
As of December 31, 2022, we serviced $465.1 million in SBA loans for others, a decrease of $77.9 million, or 14.3%, when compared to December 31, 2021. We recognized servicing income on SBA loans of $1.8 million, $5.9 million, and $6.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Residential Real Estate Loans.
As of December 31, 2023, we serviced $508.0 million in SBA/USDA loans for others, an increase of $42.9 million, or 9.2%, when compared to December 31, 2022. We recognized servicing income on SBA loans of $4.8 million, $1.8 million, and $5.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. Residential Real Estate Loans.
The Bank also is subject to certain Federal Reserve regulations. In addition, as discussed in more detail below, the Bank and any other of our subsidiaries that offer consumer financial products and services are subject to regulation and potential supervision by the CFPB.
In addition, as discussed in more detail below, the Bank and any other of our subsidiaries that offer consumer financial products and services are subject to regulation and potential supervision by the CFPB. Authority to supervise and examine the Company and the Bank for compliance with federal consumer laws remains largely with the Federal Reserve and the FDIC, respectively.
As of December 31, 2022 and 2021 our loan portfolio consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 (Dollars in thousands) Amount % of Total Amount % of Total Construction and Development ​ $ 47,779 1.6 % $ 38,857 1.6 % Commercial Real Estate ​ 657,246 21.4 ​ 520,488 20.7 ​ Commercial and Industrial ​ 53,173 1.7 ​ 73,072 2.9 ​ Residential Real Estate ​ 2,306,915 75.3 ​ 1,879,012 74.8 ​ Consumer and other ​ 216 — ​ 79 — ​ Gross loans ​ $ 3,065,329 100.0 ​ $ 2,511,508 100.0 ​ Less unearned income ​ (9,640) ​ (6,438) ​ Total loans held for investment ​ $ 3,055,689 ​ $ 2,505,070 ​ ​ Construction and Development Loans.
As of December 31, 2023 and 2022 our loan portfolio held for investment consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 (Dollars in thousands) Amount % of Total Amount % of Total Construction and Development ​ $ 23,262 0.7 % $ 47,779 1.6 % Commercial Real Estate ​ 711,177 22.6 ​ 657,246 21.4 ​ Commercial and Industrial ​ 65,904 2.1 ​ 53,173 1.7 ​ Residential Real Estate ​ 2,350,299 74.6 ​ 2,306,915 75.3 ​ Consumer and other ​ 319 — ​ 216 — ​ Gross loans ​ $ 3,150,961 100.0 ​ $ 3,065,329 100.0 ​ Less unearned income ​ (8,856) ​ (9,640) ​ Total loans held for investment ​ $ 3,142,105 ​ $ 3,055,689 ​ ​ Construction and Development Loans.
As of December 31, 2022, $589.0 million, or 89.6%, of our commercial real estate loans were secured by owner occupied properties and the remaining $68.2 million, or 10.4%, of loans in this category were secured by non-owner occupied properties.
As of December 31, 2023, $656.9 million, or 92.4%, of our commercial real estate loans were secured by owner occupied properties and the remaining $54.3 million, or 7.6%, of loans in this category were secured by non-owner occupied properties.
In addition, as part of our commercial and industrial loan product offering, we originate SBA loans to provide working capital and to finance inventory, equipment and machinery purchases and acquisitions.
In addition, as part of our commercial and industrial loan product offering, we originate SBA loans to provide working capital and to finance inventory, equipment and machinery purchases and acquisitions. As of December 31, 2023 and 2022, the outstanding balance of our commercial and industrial SBA loans was $32.7 million and $34.5 million respectively.
Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position.
Prior approval by the FDIC is required if the total of all dividends declared by a bank in any calendar year exceeds the bank’s profits for that year combined with its retained net profits for the preceding two calendar years. 18 Table of Contents Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider different factors to ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position.
The final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act. 22 Table of Contents
The final rule identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act. The Company had no loans with interest rates tied to LIBOR as of December 31, 2023.
Excluding PPP loans, as of December 31, 2022, $22.0 million, or 42.0%, of our commercial and industrial loans were extended to businesses in warehousing, wholesale and retail trade; $12.4 million, or 23.7%, were loans made to hotels and restaurants; and the remaining $18.0 million, or 34.3%, of loans were distributed across various industries and sectors.
As of December 31, 2023, $27.0 million, or 41.0%, of our commercial and industrial loans were extended to businesses in warehousing, wholesale and retail trade; $11.2 million, or 17.0%, were loans made to hotels and restaurants; 8 Table of Contents and the remaining $27.7 million, or 42.0%, of loans were distributed across various industries and sectors.
Our construction and development loans are comprised of commercial construction and land acquisition and development construction loans. As of December 31, 2022, the outstanding balance of our construction and development loans was $47.8 million, or 1.6%, of our total loan portfolio, compared to $38.9 million, or 1.6%, of our total loan portfolio at December 31, 2021.
As of December 31, 2023, the outstanding balance of our construction and development loans was $23.3 million, or 0.7%, of our total loan portfolio held for investment, compared to $47.8 million, or 1.6%, of our total loan portfolio held for investment at December 31, 2022.
As of December 31, 2022, our commercial real estate SBA portfolio, net of any sold portions, totaled $269.8 million. This represents an increase of $55.5 million when compared to the December 31, 2021 balance of $214.3 million.
As of December 31, 2023, our commercial real estate SBA and USDA portfolio, net of any sold portions, totaled $254.2 million. This represents a decrease of $15.6 million when compared to the December 31, 2022 balance of $269.8 million.
We have a proven track record of opening these new branches in a disciplined, cost efficient manner, without compromising the quality of our customer service or our profitability. Our consistent expansion efforts have given us the know-how and expertise to lower the cost of opening and operating de novo branches, allowing each of these branches to quickly become profitable.
Our consistent expansion efforts have given us the know-how and expertise to lower the cost of opening and operating de novo branches, allowing each of these branches to quickly become profitable.
Of the balance outstanding at December 31, 2022, $120.5 million, or 44.7%, of the loans in this portfolio carried an SBA guarantee while the remaining $149.3 million, or 55.3%, of the portfolio was unguaranteed.
Of the balance outstanding at December 31, 2023, $99.3 million, or 39.1%, of the loans in this portfolio carried an SBA guarantee while the remaining $154.9 million, or 60.9%, of the portfolio was unguaranteed.
Within our commercial real estate loans, $241.7 million, or 36.8%, were to hotels and restaurants; $169.3 million, or 25.8%, were made to wholesalers or retailers; $123.7 million, or 18.8%, were to general service business; $67.0 million, or 10.2%, were to commercial rental properties; and the remaining $55.5 million, or 8.4%, were distributed amongst various sectors and industries.
Within our commercial real estate loans, $310.7 million, or 43.7%, were to hotels and restaurants; $149.7 million, or 21.1%, were made to wholesalers or retailers; $113.0 million, or 15.9%, were to general service business; $69.8 million, or 9.8%, were to commercial rental properties; and the remaining $68.0 million, or 9.5%, were distributed amongst various sectors and industries.
Nonaccrual residential mortgage loans were $5.0 million and $4.9 million at December 31, 2022 and 2021, respectively. On occasion, we sell a portion of our non-conforming residential mortgage loans to third party investors. The loans are sold with no representation or warranties if the loan pays off early.
We had no residential mortgage loans held for sale as of December 31, 2022. Nonaccrual residential mortgage loans were $11.9 million and $5.0 million at December 31, 2023 and 2022, respectively. On occasion, we sell a portion of our non-conforming residential mortgage loans to third party investors.
To be well-capitalized, the Bank must maintain at least the following capital ratios: ● 6.5% CET1 to risk-weighted assets; 16 Table of Contents ● 8.0% Tier 1 capital to risk-weighted assets; ● 10.0% Total capital to risk-weighted assets; and ● 5.0% leverage ratio.
FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. 16 Table of Contents To be well-capitalized, the Bank must maintain at least the following capital ratios: ● 6.5% CET1 to risk-weighted assets; ● 8.0% Tier 1 capital to risk-weighted assets; ● 10.0% Total capital to risk-weighted assets; and ● 5.0% leverage ratio.
Of these 46 management roles, 67.4% of the managers identify as a female and 93.5% are persons of color. Talent Acquisition, Development, and Retention Our culture emphasizes our longstanding dedication to being respectful to others and having a workforce that is representative of the communities we serve. Diversity and inclusion are fundamental to our culture.
Talent Acquisition, Development, and Retention Our culture emphasizes our longstanding dedication to being respectful to others and having a workforce that is representative of the communities we serve. Diversity and inclusion are fundamental to our culture. Our future success depends on our ability to attract, retain and develop employees.
As of December 31, 2022, $20.1 million, or 42.0%, of construction and development loans were for the construction of hotels and restaurants; $17.5 million, or 36.6%, were for the construction of physician’s offices and nursing homes; $4.7 million, or 9.9%, were for the construction of office buildings and commercial rental properties; and the remaining $5.5 million, or 11.5%, were loans distributed amongst various industries and sectors. 7 Table of Contents Interest reserves are generally established on real estate construction loans.
As of December 7 Table of Contents 31, 2023, $14.3 million, or 61.7%, of construction and development loans were for the construction of office buildings and commercial rental properties; $3.5 million, or 15.0%, were for the construction of physician’s offices and nursing homes; $1.9 million, or 8.2%, were for the construction of liquor stores; $1.7 million, or 7.2%, were for the construction of hardware stores; and the remaining $1.9 million, or 7.9%, were loans distributed amongst various industries and sectors.
During 2022, we originated $833.6 million of non-conforming residential mortgage loans and sold $94.9 million to our investors. During 2021, we originated $1.20 billion of non-conforming residential mortgage loans, but did not sell any loans to investors during this period. Residential mortgage loans held for sale are sold with the servicing rights retained by the Bank.
The loans are sold with no representation or warranties if the loan pays off early. During 2023, we originated $337.0 million of non-conforming residential mortgage loans, but did not sell any loans to investors during this period. During 2022, we originated $833.6 million of non-conforming residential mortgage loans and sold $94.9 million to our investors.
Through our diverse and experienced management team and talented employees, we are able to speak the language of our customers and provide them with services and products in a culturally competent manner. 6 Table of Contents We have successfully grown our franchise since our founding primarily through de novo branch openings in vibrant, diverse markets where we feel our banking products and services will be well-received.
Through our diverse and experienced management team and talented employees, we are able to speak the language of our customers and provide them with services and products in a culturally competent manner.
The CFPB also may participate in examinations of our other direct or indirect subsidiaries that offer consumer financial products or services.
However, the CFPB may participate in examinations on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. The CFPB also may participate in examinations of our other direct or indirect subsidiaries that offer consumer financial products or services.
We offer commercial real estate loans collateralized by real estate, which may be owner occupied or non-owner occupied real estate. Commercial real estate loans made up $657.2 million, or 21.4%, of our total portfolio at December 31, 2022, compared to $520.5 million, or 20.7%, of our total loan portfolio as of December 31, 2021.
Commercial real estate loans made up $711.2 million, or 22.6%, of our total loan portfolio held for investment at December 31, 2023, compared to $657.2 million, or 21.4%, of our total loan portfolio held for investment as of December 31, 2022.
No final rule has been issued, but the rulemaking may affect the Bank’s CRA compliance obligations in the future. Privacy and Data Security. The GLB generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.
The final rules may make it more challenging and/or costly for the Bank to receive a rating of at least “satisfactory” on its CRA exam. Privacy and Data Security. The GLB generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.
On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” 21 Table of Contents Consumer Regulation.
The federal banking agencies require banks to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers.
As of December 31, 2022, the amount of residential mortgage loans serviced for others fell to $526.7 million representing a decrease of $81.5 million, or 13.4%, when compared to December 31, 2021.
Residential mortgage loans held for sale are sold with the servicing rights retained by the Bank. As of December 31, 2023, the amount of residential mortgage loans serviced for others fell to $443.1 million representing a decrease of $83.6 million, or 15.9%, when compared to December 31, 2022.
We were in compliance with both limits for each period presented. 12 Table of Contents Human Capital Resources We recognize that our most valuable asset is our people. One of our top strategic priorities is the retention and development of our talent.
Human Capital Resources We recognize that our most valuable asset is our people. One of our top strategic priorities is the retention and development of our talent. This includes providing career development opportunities for all associates; increasing our diversity and inclusion; training our next generation of leaders; and succession planning.
As of December 31, 2022, our net loans were 88.8% of total assets and net loans were 114.1% of total deposits. As of December 31, 2021, our net loans were 80.7% of total assets and net loans were 110.7% of total deposits.
As of December 31, 2023, our net loans were 12 Table of Contents 89.2% of total assets and net loans were 114.4% of total deposits. As of December 31, 2022, our net loans were 88.8% of total assets and net loans were 114.1% of total deposits. We were in compliance with both limits for each period presented.
Removed
Included in commercial and industrial loans as of December 31, 2022 and 2021 were PPP loans totaling $713,000 and $31.0 million, respectively.
Added
We have successfully grown our franchise since our founding primarily through de novo branch openings in vibrant, diverse markets where we feel our banking products and services will be well-received. We have a proven track record of opening these new branches in a disciplined, cost efficient manner, without compromising the quality of our customer service or our profitability.
Removed
As of December 31, 2022 and 2021, the outstanding balance of our commercial and industrial SBA loans was $34.5 million (includes PPP loans of $713,000) and $55.5 million (includes PPP loans of $31.0 million), respectively.
Added
Our construction and development loans are comprised of commercial construction and land acquisition and development construction loans.
Removed
As of December 31, 2022, we had brokered deposits of $523.7 million compared to $425.1 million of brokered deposits at December 31, 2021. As of December 31, 2022, our fifteen largest depositor relationships, excluding brokered deposits, totaled $535.0 million, or 20.1%, of total deposits.
Added
Commercial Real Estate Loans. We offer commercial real estate loans collateralized by real estate, which may be owner occupied or non-owner occupied real estate.
Removed
This includes providing career development opportunities for all associates; increasing our diversity and inclusion; training our next generation of leaders; and succession planning. As of December 31, 2022, we had approximately 216 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or is a party to a collective bargaining agreement.
Added
A significant portion of our commercial real estate portfolio consists of SBA and USDA loans.
Removed
FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized.
Added
We originate mainly non-conforming residential mortgage loans through our branch network.
Removed
Our primary source of cash, other than securities offerings, is dividends from the Bank.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOther primary sources of funds consist of cash from operations, investment maturities and sales, sale of loans and proceeds from the issuance and sale of our equity securities to investors. Additional liquidity is provided by our ability to borrow from the Federal Reserve Bank of Atlanta and the Federal Home Loan Bank of Atlanta.
Biggest changeThis may cause our deposit accounts to decrease in the future, and any such decrease could have a material adverse impact on our sources of funding. 26 Table of Contents Other primary sources of funds consist of cash from operations, investment maturities and sales, sale of loans and proceeds from the issuance and sale of our equity securities to investors.
Our provision and allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio. We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these assumptions and judgments when determining the provision and allowance for credit losses.
Our provision and allowance for credit losses may prove to be insufficient to absorb potential losses in our loan portfolio. We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these assumptions and judgments when determining the provision and allowance for credit losses.
Our future success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which requires them to, among other things: maintain and enhance our reputation; attract and retain experienced and talented bankers in each of our markets; maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; enhance our market penetration in our metropolitan markets and maintain our leadership position in our community markets; improve our operating efficiency; implement new technologies to enhance the client experience and keep pace with our competitors; attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; attract sufficient loans that meet prudent credit standards; originate residential mortgage loans for resale into secondary market to provide mortgage banking income; maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; manage our credit, interest rate and liquidity risks; 24 Table of Contents develop new, and grow our existing, streams of noninterest income; oversee the performance of third-party service providers that provide material services to our business; and control expenses in line with current projections.
Our future success, including our ability to achieve our growth and profitability goals, is dependent on the ability of our management team to execute on our long-term business strategy, which requires them to, among other things: maintain and enhance our reputation; attract and retain experienced and talented bankers in each of our markets; maintain adequate funding sources, including by continuing to attract stable, low-cost deposits; enhance our market penetration in our metropolitan markets and maintain our leadership position in our community markets; improve our operating efficiency; implement new technologies to enhance the client experience and keep pace with our competitors; attract and maintain commercial banking relationships with well-qualified businesses, real estate developers and investors with proven track records in our market areas; attract sufficient loans that meet prudent credit standards; originate residential mortgage loans for resale into secondary market to provide mortgage banking income; maintain adequate liquidity and regulatory capital and comply with applicable federal and state banking regulations; manage our credit, interest rate and liquidity risks; develop new, and grow our existing, streams of noninterest income; oversee the performance of third-party service providers that provide material services to our business; and control expenses in line with current projections.
Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment.
Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, operational, interest rate and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment.
Interest rates are highly sensitive to many factors including, without limitation: the rate of inflation; economic conditions; federal monetary policies; and stability of domestic and foreign markets. Interest rates increased significantly in 2022 as the Federal Reserve attempted to slow economic growth and counteract rising inflation.
Interest rates are highly sensitive to many factors including, without limitation: the rate of inflation; economic conditions; federal monetary policies; and stability of domestic and foreign markets. Interest rates increased significantly in 2022 and 2023 as the Federal Reserve attempted to slow economic growth and counteract rising inflation.
Such computer break-ins, breaches and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and inhibit the use of our internet banking services by current and potential customers, any of which may result in a material adverse impact on our financial condition, results of operations or the market price of our common stock.
Such computer break-ins, breaches and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, reputational damage and inhibit the use of our internet banking services by current and potential customers, any of which may result in a material adverse impact on our financial condition, results of operations or the market price of our common stock.
These cyber risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers.
These cyber risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our and our third-party vendors’ information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity, equity, inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations. ​ Furthermore, as a result of our diverse base of clients and business partners, we may face potential negative publicity based on the identity of our clients or business partners and the public’s (or certain segments of the public’s) view of those entities.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity, equity, 36 Table of Contents inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations. ​ Furthermore, as a result of our diverse base of clients and business partners, we may face potential negative publicity based on the identity of our clients or business partners and the public’s (or certain segments of the public’s) view of those entities.
Failure to achieve and maintain an effective internal control environment could prevent us from accurately reporting our financial results, preventing or 32 Table of Contents detecting fraud or providing timely and reliable financial information pursuant to our reporting obligations, which could result in a material weakness in our internal controls over financial reporting and the restatement of previously filed financial statements and could have a material adverse effect on our business, financial condition and results of operations.
Failure to achieve and maintain an effective internal control environment could prevent us from accurately reporting our financial results, preventing or detecting fraud or providing timely and reliable financial information pursuant to our reporting obligations, which could result in a material weakness in our internal controls over financial reporting and the restatement of previously filed financial statements and could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to attract and retain 23 Table of Contents banking and mortgage loan customers and expand our sales market for such loans, we may be unable to continue to grow our business, and our financial condition and results of operations may be adversely affected.
If we are unable to attract and retain 24 Table of Contents banking and mortgage loan customers and expand our sales market for such loans, we may be unable to continue to grow our business, and our financial condition and results of operations may be adversely affected.
When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These nonperforming loans and OREO also increase our risk profile and the level of capital our regulators believe is appropriate for us to maintain in light of such risks.
When we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. These nonperforming loans and OREO also increase our risk profile 29 Table of Contents and the level of capital our regulators believe is appropriate for us to maintain in light of such risks.
The Company cannot predict the nature or timing of future changes in monetary, economic, or other policies or the effect that they may have on the Company's business activities, financial condition and results of operations. 34 Table of Contents We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.
The Company cannot predict the nature or timing of future changes in monetary, economic, or other policies or the effect that they may have on the Company's business activities, financial condition and results of operations. We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.
Even if we are able to replace our service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations. 31 Table of Contents We depend on the accuracy and completeness of information provided by customers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
Even if we are able to replace our service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations. We depend on the accuracy and completeness of information provided by customers and counterparties and any misrepresented information could adversely affect our business, financial condition and results of operations.
Our exposure and the exposure of our customers to fraud may increase our financial risk and reputation risk as it may result in unexpected loan losses that exceed those that have been provided for in our allowance for loan losses.
Our exposure and the exposure of our customers to fraud may increase our financial risk and reputation risk as it may result in unexpected credit losses that exceed those that have been provided for in our allowance for credit losses.
When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities may fluctuate. This may cause decreases in our spread and may adversely affect our earnings and financial condition.
When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities fluctuates. This may cause decreases in our spread and may adversely affect our earnings and financial condition.
External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls.
External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business 30 Table of Contents and/or new product or service could have a significant impact on the effectiveness of our system of internal controls.
If the SBA establishes that a loss on an SBA 26 Table of Contents guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us.
If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us.
Although our customers’ business and financial interests may extend well beyond these 29 Table of Contents communities, adverse economic conditions that affect these communities could reduce our growth rate, affect the ability of our customers to repay their loans to us and generally affect our financial condition and results of operations.
Although our customers’ business and financial interests may extend well beyond these communities, adverse economic conditions that affect these communities could reduce our growth rate, affect the ability of our customers to repay their loans to us and generally affect our financial condition and results of operations.
In addition, even if we comply with the greater 37 Table of Contents obligations of public companies that are not emerging growth companies, we may avail ourselves of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as we are an emerging growth company.
In addition, even if we comply with the greater obligations of public companies that are not emerging growth companies, we may avail ourselves of the reduced requirements applicable to emerging growth companies from time to time in the future, so long as we are an emerging growth company.
If the models that management uses for interest rate risk and asset liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models that management uses for determining our probable credit losses are inadequate, the ALL may not be sufficient to support future charge offs.
If the models that management uses for interest rate risk and asset liability management are inadequate, we may incur increased or unexpected losses upon changes in market interest rates or other market measures. If the models that management uses for determining our expected credit losses are inadequate, the ACL may not be sufficient to support future charge offs.
Processes that management uses to estimate our probable incurred credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon the use of analytical and/or forecasting models.
Processes that management uses to estimate our current expected credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon the use of analytical and/or forecasting models.
Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of these representations or warranties, in which case we may record a loss.
Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of 28 Table of Contents these representations or warranties, in which case we may record a loss.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
As cyber threats continue to evolve and become more frequent, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and riskier. The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage loans.
The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage loans.
Fluctuations in interest rates may impact net interest income and otherwise negatively impact our financial condition and results of operations.
Fluctuations in interest rates have impacted net interest income and may otherwise negatively impact our financial condition and results of operations.
We are under continuous threat of loss due to hacking and cyberattacks especially as we continue to expand client capabilities to utilize internet and other remote channels to transact business.
We and our third-party vendors are under continuous threat of loss due to hacking and cyberattacks especially as we continue to expand client capabilities to utilize internet and other remote channels to transact business.
At December 31, 2022, approximately 98.3% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio.
At December 31, 2023, approximately 97.9% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, security breaches, litigation, investigations and other preceedings, and questionable or fraudulent activities of our customers.
For example, interest must be paid to the lender before dividends can be paid to the shareholders, and loans must be paid off before any assets can be distributed to shareholders if we were to liquidate.
For example, 37 Table of Contents interest must be paid to the lender before dividends can be paid to the shareholders, and loans must be paid off before any assets can be distributed to shareholders if we were to liquidate.
However, no assurances can be provided that we may not suffer from such an attack in the future that may cause us material harm, especially in light of the risks being posed by changing technologies as well as criminal intent on committing cyber-crime.
However, no assurances can be provided that we (or our third-party 32 Table of Contents vendors) may not suffer from such an attack in the future that may cause us material harm, especially in light of the risks being posed by changing technologies as well as criminal intent on committing cyber-crime.
As of December 31, 2022, our directors and their families and affiliated entities collectively had a 31.5% ownership interest in the Company.
As of December 31, 2023, our directors and their families and affiliated entities collectively had a 31.9% ownership interest in the Company.
A prolonged period of volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Inflation could negatively impact our business, our profitability and our stock price. Inflation has continued rising in 2022 at levels not seen for over 40 years.
A prolonged period of volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Inflation could negatively impact our business, our profitability and our stock price. Inflation over the past two years were at levels not seen for over 40 years.
As a result, our directors initially may be able to elect the majority of our entire board of directors, control the management and policies of the Company and, in general, determine, without the consent of the other shareholders, the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of the assets of the Company, and will be able to prevent or cause a change in control of the Company.
As a result, our directors may have significant influence over the election of board of directors, control the management and policies of the Company and, in general, determine the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of the assets of the Company, and will be able to prevent or cause a change in control of the Company.
If the national, regional and local economies experience worsening economic conditions, including inflation, elevated levels of unemployment, the U.S. government’s decisions regarding its debt ceiling and the possibility that the U.S. could default on its debt obligations, fluctuations in debt and equity capital markets, increased delinquencies on mortgage, commercial and consumer loans, residential and commercial real estate price declines, and lower home sales and commercial activity, our growth and profitability could be constrained.
If the national, regional and local economies experience worsening economic conditions (including inflation), elevated levels of unemployment, adverse effects of the U.S. government’s failure to raise its debt ceiling (including defaulting on its debt obligations or experiencing credit downgrades), fluctuations in debt and equity capital markets, increased delinquencies on mortgage, commercial and consumer loans, residential and commercial real estate price declines, and lower home sales and commercial activity, our growth and profitability could be constrained.
We may not achieve target timetables for the introduction and development of new lines of business and new products or services and price and profitability goals may not prove feasible.
In developing and marketing new lines of business and new products and services we may invest significant time and resources. We may not achieve target timetables for the introduction and development of new lines of business and new products or services and price and profitability goals may not prove feasible.
Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area. 30 Table of Contents Many of our larger competitors have substantially greater resources to invest in technological improvements.
Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area.
Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such as foreclosure.
Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such as foreclosure. If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected.
Further changes in interest rates and monetary policy reportedly are dependent upon the Federal Reserve’s assessment of economic data as it becomes available, though the rising interest rate environment is expected to continue in 2023.
Further changes in interest rates and monetary policy reportedly are dependent upon the Federal Reserve’s assessment of economic data as it becomes available.
Inflationary pressures are currently expected to remain elevated throughout 2022 and are likely to continue into 2023. Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services.
Prolonged periods of inflation may impact our profitability by negatively impacting our fixed costs and expenses, including increasing funding costs and expense related to talent acquisition and retention, and negatively impacting the demand for our products and services.
As a result, they may be able to offer additional or more convenient products compared to those that we will be able to provide, which would put us at a competitive disadvantage.
Many of our larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or more convenient products compared to those that we will be able to provide, which would put us at a competitive disadvantage.
We may also be subject to potentially adverse regulatory consequences. We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology. The financial services industry is continually undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
We may also be subject to potentially adverse regulatory consequences. 31 Table of Contents We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.
Any regulatory action against us could have an adverse effect on our business, financial condition and results of operations.
Any regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Changes to monetary policy by the Federal Reserve could adversely impact our results of operations.
New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we would utilize to sell mortgage loans may be introduced and may increase costs and make it more difficult to operate a residential mortgage origination business. 28 Table of Contents We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we would utilize to sell mortgage loans may be introduced and may increase costs and make it more difficult to operate a residential mortgage origination business.
We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders. Holders of our common stock are only entitled to receive such cash dividends as our board of directors, in its discretion, may declare out of funds legally available for such payments.
Holders of our common stock are only entitled to receive such cash dividends as our board of directors, in its discretion, may declare out of funds legally available for such payments.
These requirements, and any other new regulations, could adversely affect our ability to pay dividends, or could require us to reduce business levels or to raise capital, including in ways that may adversely affect our financial condition or results of operations.
These requirements, and any other new regulations, could adversely affect our ability to pay dividends, or could require us to reduce business levels or to raise capital, including in ways that may adversely affect our financial condition or results of operations. 35 Table of Contents We could face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
In addition, our access to deposits may be affected by the liquidity and/or cash flow needs of depositors, which may be exacerbated in an inflationary, recessionary, or elevated rate environment. This may cause our deposit accounts to decrease in the future, and any such decrease could have a material adverse impact on our sources of funding.
In addition, our access to deposits may be affected by the liquidity and/or cash flow needs of depositors, which may be exacerbated in an inflationary, recessionary, or elevated rate environment.
If borrowers fail to repay their loans, our financial condition and results of operations would be adversely affected. 25 Table of Contents Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
Because a significant portion of our loan portfolio is comprised of commercial and residential real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer. Our future success is largely dependent upon our ability to successfully execute our business strategy.
These inflationary pressures could result in missed earnings and budgetary projections causing our stock price to suffer.
Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities or otherwise negatively impact our operations. 35 Table of Contents Risks Related to Our Common Stock The Company’s directors may have interests that differ from other shareholders, and such directors have ownership interests in the Company that, when aggregated with holdings of their extended families and their affiliated entities, may allow such individuals and entities to take certain corporate actions without the consent of other shareholders.
Risks Related to Our Common Stock The Company’s directors may have interests that differ from other shareholders, and such directors have ownership interests in the Company that, when aggregated with holdings of their extended families and their affiliated entities, may allow such individuals and entities to take certain corporate actions without the consent of other shareholders.
The inability to utilize brokered deposits as a source of funding could have an adverse effect on our financial position, results of operations and liquidity. 27 Table of Contents We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects.
We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects. Our success depends, in large part, on our ability to attract and retain key personnel.
Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings. The Federal Reserve, the FDIC, and the DBF periodically examine our business, including our compliance with laws and regulations.
The Federal Reserve, the FDIC, and the DBF periodically examine our business, including our compliance with laws and regulations.
These trends were accelerated by the COVID-19 pandemic, increasing demand for mobile banking solutions. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs.
In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs.
In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations.
In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these 33 Table of Contents standards should be applied.
Changes in interest rates may negatively affect both the returns on and market value of our investment securities. Interest rate volatility can reduce unrealized gains or increase unrealized losses in our portfolio. Interest rates are highly sensitive to many factors including monetary policies, domestic and international economic and political issues, and other factors beyond our control.
We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate. Changes in interest rates may negatively affect both the returns on and market value of our investment securities. Interest rate volatility can reduce unrealized gains or increase unrealized losses in our portfolio.
These changes can negatively impact our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized gains and losses on our investment securities. Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position.
Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position.
It is also possible that the pandemic and its aftermath will lead to a prolonged economic slowdown in sectors disproportionately affected by the pandemic or recession in the U.S. economy or the world economy in general. 33 Table of Contents Risks Related to Legislative and Regulatory Events We are subject to extensive government regulation that could limit or restrict our activities, which in turn may adversely impact our ability to increase our assets and earnings.
Risks Related to Legislative and Regulatory Events We are subject to extensive government regulation that could limit or restrict our activities, which in turn may adversely impact our ability to increase our assets and earnings.
New lines of business or new products and services may subject us to additional risks. From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. In developing and marketing new lines of business and new products and services we may invest significant time and resources.
These occurrences could have a material adverse effect on our net interest income or our results of operations. New lines of business or new products and services may subject us to additional risks. From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business.
If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may also require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.
If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for personal injury and property damage.
In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. ​ If equity research analysts do not publish research or reports about our business, or if they do publish such reports but issue unfavorable commentary or downgrade our common stock the price and trading volume of our common stock could decline.
In addition, ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs. ​ Our dividend policy may change, and consequently, your only opportunity to achieve a return on your investment may be if the price of our common stock appreciates.
Our dividend policy may change, and consequently, your only opportunity to achieve a return on your investment may be if the price of our common stock appreciates. We have paid quarterly dividends to our shareholders for the past nine years.
We have paid quarterly dividends to our shareholders for the past nine years. We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders.
We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.
We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities or otherwise negatively impact our operations.
Removed
Our success depends, in large part, on our ability to attract and retain key personnel.
Added
Negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations. ​ The bank failures in 2023 and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
Removed
These occurrences could have a material adverse effect on our net interest income or our results of operations. The current expected credit loss standard established by the Financial Accounting Standards Board will require significant data requirements and changes to methodologies.
Added
These developments have negatively impacted customer confidence in regional banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin.
Removed
In the aftermath of the 2007-2008 financial crisis, the Financial Accounting Standards Board, or FASB, decided to review how banks estimate losses in the ALL calculation, and it issued the final Current Expected Credit Loss, or CECL, standard on June 16, 2016.
Added
If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital.
Removed
Currently, the impairment model used by financial institutions is based on incurred losses, and loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms.
Added
If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby negatively 25 Table of Contents impacting book value and profitability. While we have taken actions to improve our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.
Removed
This model will be replaced by the CECL model that will become effective for us for the fiscal year beginning after December 15, 2022 in which financial institutions will be required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan.
Added
We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.
Removed
The Company to date has selected the software vendor of choice for implementation, sourced and tested required data from the Company’s loan systems, tested data feeds to the model, contracted for and received results from independent third parties of model validation, performed an internal review of the CECL model and process, testing and finalization of internal controls, determined appropriate segmentations of its portfolio, selected a forecast period, as well as macroeconomic and qualitative assumptions, for reasonable and supportable forecasts, and has performed multiple parallel runs of the model.
Added
Among other things, there may be an increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, losses embedded in the held-to-maturity portion of our securities portfolio, contingent liquidity, CRE composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing.
Removed
The transition to the CECL model will require significantly greater data requirements and changes to methodologies to accurately account for expected loss. There can be no assurance that we will not be required to increase our reserves and ALL as a result of the implementation of CECL.
Added
As primarily a commercial bank, the Bank has an elevated degree of uninsured deposits compared to larger national banks or smaller community banks with a stronger focus on retail deposits, and also maintains a robust CRE portfolio. As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.
Removed
Interest rates on our outstanding financial instruments might be subject to change based on regulatory developments, which could adversely affect our revenue, expenses, and the value of those financial instruments. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.
Added
In addition, bank failures have and could in the future prompt the FDIC to increase deposit insurance costs. Increases in funding, deposit insurance, or other costs as a result of these types of events have and could in the future materially adversely affect our financial condition and results of operations.
Removed
The ICE Benchmark Administration (IBA), the administrator of LIBOR, announced on November 30, 2020, that it would cease publishing the one-week and two-month LIBOR rates on December 31, 2021, but would continue publishing the one-, three-, six-, and twelve-month LIBOR rates until June 30, 2023.
Added
Further, the disruption following these types of events have and could in the future generate significant market trading volatility among publicly traded bank holdings companies and, in particular, regional banks like the Company. Our future success is largely dependent upon our ability to successfully execute our business strategy.
Removed
Regardless, the federal banking agencies also issued guidance on November 30, 2020, encouraging banks to: (i) stop using LIBOR in new financial contracts no later than December 31, 2021; and (ii) either use a rate other than LIBOR or include clear language defining the alternative rate that will be applicable after LIBOR’s discontinuation.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Company’s corporate headquarters and Metro City Bank’s main office is located at 5114 Buford Highway NE, Atlanta, GA 30340. Metro City Bank owns this property. We also currently operate 18 additional full service-branches, which are all leased, located in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia.
Biggest changeItem 2. Properties The Company’s corporate headquarters and Metro City Bank’s main office is located at 5114 Buford Highway NE, Atlanta, GA 30340. Metro City Bank owns this property. We also currently operate 19 additional full service-branches, which are all leased, located in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, one or more unfavorable outcomes in any legal action against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. Item 4.
Biggest changeHowever, one or more unfavorable outcomes in any legal action against us could have a material adverse effect for the period in which they are resolved.
Added
In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor. 39 Table of Contents Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe historical price of our common stock represented in this graph represents past performance and is not necessarily indicative of future performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Index December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 MetroCity Bankshares, Inc. ​ $ 100.00 ​ $ 107.39 ​ $ 123.02 ​ $ 148.21 ​ $ 195.73 ​ $ 167.93 ​ $ 146.32 $ 142.54 ​ $ 158.06 Nasdaq Composite Index ​ 100.00 ​ 102.78 ​ 112.54 ​ 112.11 ​ 121.39 ​ 110.34 ​ 85.57 82.06 ​ 81.21 S&P U.S.
Biggest changeThe historical price of our common stock represented in this graph represents past performance and is not necessarily indicative of future performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Index 2019 2020 2021 2022 2023 MetroCity Bankshares, Inc. ​ $ 100.00 ​ $ 84.82 ​ $ 166.02 ​ $ 134.07 ​ $ 154.66 Nasdaq Composite Index ​ 100.00 ​ 143.64 ​ 174.36 ​ 116.65 ​ 167.30 S&P U.S.
Business - Regulation and Supervision - Regulation of the Company - Payment of Dividends.” Equity Compensation Plan Information Please see Item 12 of this Annual Report for information with respect to shares of common stock that are authorized for issuance under the Company’s equity compensation plans as of December 31, 2022.
Business - Regulation and Supervision - Regulation of the Company - Payment of Dividends.” Equity Compensation Plan Information Please see Item 12 of this Annual Report for information with respect to shares of common stock that are authorized for issuance under the Company’s equity compensation plans as of December 31, 2023.
Dividends It has been our policy to pay quarterly dividends to holders of our common stock. We have paid quarterly dividends to our shareholders in amounts up to 30% of our net income over the past nine years. We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders.
Dividends It has been our policy to pay quarterly dividends to holders of our common stock. We have paid quarterly dividends to our shareholders in amounts up to 40% of our net income over the past ten years. We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders.
Small Cap Bank Index for the period beginning on December 31, 2020 through December 31, 2022. The following reflects index values as of close of trading, assumes $100.00 invested on December 31, 2020, in our common stock, the Nasdaq Composite Index and the S&P U.S. Small Cap Bank Index, and assumes the reinvestment of dividends, if any.
Small Cap Bank Index for the period beginning on December 31, 2019 through December 31, 2023. The following reflects index values as of close of trading, assumes $100.00 invested on December 31, 2019, in our common stock, the Nasdaq Composite Index and the S&P U.S. Small Cap Bank Index, and assumes the reinvestment of dividends, if any.
The repurchases were made in compliance with all SEC rules, including Rule 10b-18, and other legal requirements and may be made in part under Rule 10b5-1 plans, which permits share repurchases when the Company might otherwise be precluded from doing so.
The repurchases are made in compliance with all SEC rules, including Rule 10b-18, and other legal requirements and may be made in part under Rule 10b5-1 plans, which permits share repurchases when the Company might otherwise be 40 Table of Contents precluded from doing so.
Prior to that date, our common stock was traded on the OTCQX Market under the same symbol. As of March 3, 2023, there were 25,143,675 shares of common stock outstanding held by approximately 174 shareholders of record of our common stock as reported by our transfer agent.
Prior to that date, our common stock was traded on the OTCQX Market under the same symbol. As of March 4, 2023, there were 25,205,506 shares of common stock outstanding held by approximately 175 shareholders of record of our common stock as reported by our transfer agent.
As a Georgia corporation, the Company is subject to certain restrictions on dividends under the Georgia Business Corporation Code. We are also subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies. See “Item 1.
We are also subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies. See “Item 1.
Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital 38 Table of Contents requirements, banking regulations, contractual restrictions and any other factors that our board of directors may deem relevant.
Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our board of directors may deem relevant. As a Georgia corporation, the Company is subject to certain restrictions on dividends under the Georgia Business Corporation Code.
The following table summarizes the repurchases of our common shares for the three months ended December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ ​ ​ ​ ​ ​ ​ ​ Shares Repurchased ​ Maximum Number of ​ ​ ​ ​ ​ ​ ​ as Part of Publicly ​ Shares That May Yet Be ​ ​ Total Number of ​ Average Price Paid ​ Announced ​ Purchased Under ​ Shares Repurchased Per Share Plans or Programs the Plans or Programs October 1, 2022 to October 31, 2022 56,807 $ 20.94 56,807 ​ 436,468 November 1, 2022 to November 30, 2022 ​ 38,303 ​ $ 21.80 ​ 38,303 ​ 398,165 December 1, 2022 to December 31, 2022 105,598 $ 21.61 105,598 ​ 292,567 Total 200,708 ​ $ 21.40 ​ 200,708 ​ 292,567 39 Table of Contents Stock Performance Graph The following graph compares the cumulative total return on our common stock with the cumulative total return of the Nasdaq Composite Index and the S&P U.S.
The following table summarizes the repurchases of our common shares for the three months ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ ​ ​ ​ ​ ​ ​ ​ Shares Repurchased ​ Maximum Number of ​ ​ ​ ​ ​ ​ ​ as Part of Publicly ​ Shares That May Yet Be ​ ​ Total Number of ​ Average Price Paid ​ Announced ​ Purchased Under ​ Shares Repurchased Per Share Plans or Programs the Plans or Programs October 1, 2023 to October 31, 2023 31,822 $ 19.76 31,822 ​ 929,489 November 1, 2023 to November 30, 2023 ​ 3,829 ​ $ 19.99 ​ 3,829 ​ 925,660 December 1, 2023 to December 31, 2023 — $ — — ​ 925,660 Total 35,651 ​ $ 19.78 ​ 35,651 ​ 925,660 ​ Stock Performance Graph The following graph compares the cumulative total return on our common stock with the cumulative total return of the Nasdaq Composite Index and the S&P U.S.
Small Cap Bank Index ​ 100.00 ​ 128.27 ​ 126.63 ​ 131.68 ​ 139.21 ​ 135.57 ​ 117.16 119.45 ​ 122.74 ​ ​ Item 6. [Reserved] ​ ​ 40 Table of Contents
Small Cap Bank Index ​ 100.00 ​ 90.82 ​ 126.43 ​ 111.47 ​ 112.03 ​ ​ Item 6. [Reserved] ​ 41 Table of Contents
Added
On September 5, 2023, the Company announced that the Board of Directors of the Company approved the adoption of a share repurchase program authorizing the Company to repurchase up to 1,000,000 shares of the Company’s outstanding shares of common stock. The share repurchase program began on September 6, 2023 and will end on September 30, 2024.

Item 6. [Reserved]

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

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Biggest changeItem 6. ​ [Reserved] ​ 40 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 41 Item 7A. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 62 Item 8. ​ Financial Statements and Supplementary Data ​ 65
Biggest changeItem 6. ​ [Reserved] ​ 41 Item 7. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 42 Item 7A. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 65 Item 8. ​ Financial Statements and Supplementary Data ​ 68

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe inclusion of PPP loan average balances, interest and fees had an 11 basis points impact on the yield on average loans and a 12 basis point impact on the net interest margin for 2021. 43 Table of Contents Average Balances, Interest and Yields The following tables present, for the years ended December 31, 2022, 2021 and 2020, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 2020 ​ ​ Average ​ Interest and ​ Yield / ​ Average ​ Interest and ​ Yield / Average ​ Interest and ​ Yield / (Dollars in thousands) Balance Fees Rate Balance Fees Rate Balance Fees Rate Earning Assets: ​ ​ ​ ​ ​ ​ ​ ​ Federal funds sold and other investments (1) ​ $ 225,154 ​ $ 3,524 1.57 % $ 207,771 ​ $ 500 0.24 % $ 147,431 ​ $ 1,056 0.72 % Securities purchased under agreements to resell ​ — ​ — — ​ — ​ — — ​ 29,932 ​ 271 0.91 ​ Investment securities ​ 35,188 ​ 881 2.50 ​ 21,573 ​ 390 1.81 ​ 17,806 ​ 410 2.30 ​ Total investments ​ 260,342 ​ 4,405 1.69 ​ 229,344 ​ 890 0.39 ​ 195,169 ​ 1,737 0.89 ​ Construction and development ​ 35,562 ​ 1,898 5.34 ​ 48,076 ​ 2,513 5.23 ​ 31,658 ​ 1,685 5.32 ​ Commercial real estate ​ 589,017 ​ 38,582 6.55 ​ 503,968 ​ 29,750 5.90 ​ 478,481 ​ 27,316 5.71 ​ Commercial and industrial ​ 55,516 ​ 3,920 7.06 ​ 119,640 ​ 8,407 7.03 ​ 112,313 ​ 5,301 4.72 ​ Residential real estate ​ 2,090,389 ​ 98,277 4.70 ​ 1,437,377 ​ 67,058 4.67 ​ 763,136 ​ 41,391 5.42 ​ Consumer and Other ​ 193 ​ 138 71.50 ​ 188 ​ 123 65.43 ​ 989 ​ 179 18.10 ​ Gross loans (2) ​ 2,770,677 ​ 142,815 5.15 ​ 2,109,249 ​ 107,851 5.11 ​ 1,386,577 ​ 75,872 5.47 ​ Total earning assets ​ 3,031,019 ​ 147,220 4.86 ​ 2,338,593 ​ 108,741 4.65 ​ 1,581,746 ​ 77,609 4.91 ​ Noninterest-earning assets ​ 156,185 ​ ​ ​ 122,038 ​ ​ ​ 98,504 ​ ​ Total assets ​ 3,187,204 ​ ​ ​ 2,460,631 ​ ​ ​ 1,680,250 ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW and savings deposits ​ 186,061 ​ ​ 1,046 0.56 ​ 112,943 ​ 222 0.20 ​ 68,610 ​ 166 0.24 ​ Money market deposits ​ 1,130,439 ​ ​ 16,067 1.42 ​ 726,268 ​ 1,693 0.23 ​ 248,633 ​ 1,731 0.70 ​ Time deposits ​ 513,867 ​ ​ 6,445 1.25 ​ 499,856 ​ 2,033 0.41 ​ 596,325 ​ 9,021 1.51 ​ Total interest-bearing deposits ​ 1,830,367 ​ 23,558 1.29 ​ 1,339,067 ​ 3,948 0.29 ​ 913,568 ​ 10,918 1.20 ​ Borrowings ​ 373,238 ​ ​ 4,051 1.09 ​ 223,027 ​ 624 0.28 ​ 82,955 ​ 571 0.69 ​ Total interest-bearing liabilities ​ 2,203,605 ​ 27,609 1.25 ​ 1,562,094 ​ 4,572 0.29 ​ 996,523 ​ 11,489 1.15 ​ Noninterest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing deposits ​ 599,340 ​ ​ ​ 559,797 ​ ​ ​ 394,338 ​ ​ Other noninterest-bearing liabilities ​ 63,997 ​ ​ ​ 76,727 ​ ​ ​ 62,153 ​ ​ Total noninterest-bearing liabilities ​ 663,337 ​ ​ ​ 636,524 ​ ​ ​ 456,491 ​ ​ Shareholders' equity ​ 320,262 ​ ​ ​ 262,013 ​ ​ ​ 227,236 ​ ​ Total liabilities and shareholders' equity ​ $ 3,187,204 ​ ​ ​ $ 2,460,631 ​ ​ ​ $ 1,680,250 ​ ​ Net interest income ​ ​ $ 119,611 ​ ​ ​ $ 104,169 ​ ​ ​ $ 66,120 ​ Net interest spread ​ ​ 3.61 ​ ​ 4.36 ​ ​ 3.76 ​ Net interest margin ​ ​ 3.95 ​ ​ 4.45 ​ ​ 4.18 ​ (1) Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets.
Biggest changeAverage interest-bearing liabilities increased by $641.5 million as average interest-bearing deposits increased by $491.3 million and average borrowings increased by $150.2 million. 45 Table of Contents Average Balances, Interest and Yields The following tables present, for the years ended December 31, 2023, 2021 and 2021, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 2021 ​ ​ Average ​ Interest and ​ Yield / ​ Average ​ Interest and ​ Yield / Average ​ Interest and ​ Yield / (Dollars in thousands) Balance Fees Rate Balance Fees Rate Balance Fees Rate Earning Assets: ​ ​ ​ ​ ​ ​ ​ ​ Federal funds sold and other investments (1) ​ $ 167,024 ​ $ 9,995 5.98 % $ 225,154 ​ $ 3,524 1.57 % $ 207,771 ​ $ 500 0.24 % Investment securities ​ 32,330 ​ 949 2.94 ​ 35,188 ​ 881 2.50 ​ 21,573 ​ 390 1.81 ​ Total investments ​ 199,354 ​ 10,944 5.49 ​ 260,342 ​ 4,405 1.69 ​ 229,344 ​ 890 0.39 ​ Construction and development ​ 31,955 ​ 1,864 5.83 ​ 35,562 ​ 1,898 5.34 ​ 48,076 ​ 2,513 5.23 ​ Commercial real estate ​ 659,432 ​ 57,710 8.75 ​ 589,017 ​ 38,582 6.55 ​ 503,968 ​ 29,750 5.90 ​ Commercial and industrial ​ 54,100 ​ 5,110 9.45 ​ 55,516 ​ 3,920 7.06 ​ 119,640 ​ 8,407 7.03 ​ Residential real estate ​ 2,299,246 ​ 117,071 5.09 ​ 2,090,389 ​ 98,277 4.70 ​ 1,437,377 ​ 67,058 4.67 ​ Consumer and Other ​ 195 ​ 128 65.64 ​ 193 ​ 138 71.50 ​ 188 ​ 123 65.43 ​ Gross loans (2) ​ 3,044,928 ​ 181,883 5.97 ​ 2,770,677 ​ 142,815 5.15 ​ 2,109,249 ​ 107,851 5.11 ​ Total earning assets ​ 3,244,282 ​ 192,827 5.94 ​ 3,031,019 ​ 147,220 4.86 ​ 2,338,593 ​ 108,741 4.65 ​ Noninterest-earning assets ​ 198,938 ​ ​ ​ 156,185 ​ ​ ​ 122,038 ​ ​ ​ Total assets ​ 3,443,220 ​ ​ ​ 3,187,204 ​ ​ ​ 2,460,631 ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NOW and savings deposits ​ 146,543 ​ ​ 2,264 1.54 ​ 186,061 ​ ​ 1,046 0.56 ​ 112,943 ​ 222 0.20 ​ Money market deposits ​ 1,006,360 ​ ​ 42,347 4.21 ​ 1,130,439 ​ ​ 16,067 1.42 ​ 726,268 ​ 1,693 0.23 ​ Time deposits ​ 940,911 ​ ​ 35,996 3.83 ​ 513,867 ​ ​ 6,445 1.25 ​ 499,856 ​ 2,033 0.41 ​ Total interest-bearing deposits ​ 2,093,814 ​ 80,607 3.85 ​ 1,830,367 ​ 23,558 1.29 ​ 1,339,067 ​ 3,948 0.29 ​ Borrowings ​ 353,149 ​ ​ 10,741 3.04 ​ 373,238 ​ ​ 4,051 1.09 ​ 223,027 ​ 624 0.28 ​ Total interest-bearing liabilities ​ 2,446,963 ​ 91,348 3.73 ​ 2,203,605 ​ 27,609 1.25 ​ 1,562,094 ​ 4,572 0.29 ​ Noninterest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing deposits ​ 555,840 ​ ​ ​ 599,340 ​ ​ ​ 559,797 ​ ​ ​ Other noninterest-bearing liabilities ​ 74,254 ​ ​ ​ 63,997 ​ ​ ​ 76,727 ​ ​ ​ Total noninterest-bearing liabilities ​ 630,094 ​ ​ ​ 663,337 ​ ​ ​ 636,524 ​ ​ ​ Shareholders' equity ​ 366,163 ​ ​ ​ 320,262 ​ ​ ​ 262,013 ​ ​ ​ Total liabilities and shareholders' equity ​ $ 3,443,220 ​ ​ ​ $ 3,187,204 ​ ​ ​ $ 2,460,631 ​ ​ ​ Net interest income ​ ​ $ 101,479 ​ ​ ​ $ 119,611 ​ ​ ​ $ 104,169 ​ ​ Net interest spread ​ ​ 2.21 ​ ​ 3.61 ​ ​ 4.36 ​ Net interest margin ​ ​ 3.13 ​ ​ 3.95 ​ ​ 4.45 ​ (1) Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets.
Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale deposits and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window.
Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale/brokered deposits and additional borrowings from correspondent banks, FHLB advances, and the Federal Reserve discount window.
Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ ​ One Year or Less ​ More Than One Year Through Five Years ​ More Than Five Years Through Ten Years ​ More Than Ten Years ​ Total ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ (Dollars in thousands) Fair Value Average Yield Fair Value Average Yield Fair Value Average Yield Fair Value Average Yield Fair Value Average Yield ​ Obligations of U.S.
Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ ​ One Year or Less ​ More Than One Year Through Five Years ​ More Than Five Years Through Ten Years ​ More Than Ten Years ​ Total ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ (Dollars in thousands) Fair Value Average Yield Fair Value Average Yield Fair Value Average Yield Fair Value Average Yield Fair Value Average Yield ​ Obligations of U.S.
We did not experience the level of credit deterioration for these loans that we had initially anticipated. Our allowance for loan losses as a percentage of gross loans for the periods ended December 31, 2022 and 2021 was 0.45% and 0.67%, respectively. None of the ALL balance was allocated to our PPP loan portfolio at December 31, 2022 and 2021.
We did not experience the level of credit deterioration for these loans that we had initially anticipated. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2022 and 2021 was 0.45% and 0.67%, respectively. None of the ACL balance was allocated to our PPP loan portfolio at December 31, 2022 and 2021.
The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2022 and 2021. As of December 31, 2022, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2022 that management believes would change this classification.
The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2023 and 2022. As of December 31, 2023, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2023 that management believes would change this classification.
The decrease is mainly attributable to lower underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume declined during the year ended December 31, 2022 compared to the year ended December 31, 2021. 46 Table of Contents Mortgage loan originations totaled $833.6 million during the year ended December 31, 2022 compared to $1.20 billion during the year ended December 31, 2021.
The decrease is mainly attributable to lower underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume declined during the year ended December 31, 2022 compared to the year ended December 31, 2021. 49 Table of Contents Mortgage loan originations totaled $833.6 million during the year ended December 31, 2022 compared to $1.20 billion during the year ended December 31, 2021.
We currently operate 19 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in markets, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas.
We currently operate 20 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in markets, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas.
All of the debt securities in our investment portfolio were classified as available-for-sale as of December 31, 2022. All available-for-sale securities are carried at fair value. Securities available-for-sale consist primarily of U.S. government-sponsored agency securities, home mortgage-backed securities and state and municipal bonds.
All of the debt securities in our investment portfolio were classified as available-for-sale as of December 31, 2023. All available-for-sale securities are carried at fair value. Securities available-for-sale consist primarily of U.S. government-sponsored agency securities, home mortgage-backed securities and state and municipal bonds.
(2) Average loan balances include nonaccrual loans and loans held for sale. 44 Table of Contents Rate/Volume Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.
(2) Average loan balances include nonaccrual loans and loans held for sale. 46 Table of Contents Rate/Volume Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates.
The following table presents the amortized cost and fair value of our available-for-sale securities portfolio as of the dates presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 (Dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Obligations of U.S.
The following table presents the amortized cost and fair value of our available-for-sale securities portfolio as of the dates presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 (Dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Obligations of U.S.
We sold $31.5 million in SBA loans during the year ended December 31, 2022 with average premiums of 8.45% compared to the sale of $124.7 million in SBA loans with an average premium of 10.67% in the same period in 2021.
We sold $31.5 million in SBA loans during the year ended December 31, 2022 with average premiums of 8.45% compared to the sale of $124.7 million in SBA loans with an average premium of 10.67% in the year ended December 31, 2021.
Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur. For more information, see “Item 1 – Business – Lending Activities.” 51 Table of Contents The principal categories of our loan portfolios are discussed below: Construction and development loans.
Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur. For more information, see “Item 1 – Business – Lending Activities.” The principal categories of our loan portfolios are discussed below: Construction and development loans.
The credit provision for loan losses 45 Table of Contents recorded during the year ended December 31, 2022 was due to the release of additional reserves allocated for the uncertainties in our loan portfolio caused by the COVID-19 pandemic as certain loans that were modified during the COVID-19 pandemic returned to their contractual payment terms.
The credit provision for loan losses recorded during the year ended December 31, 2022 was due to the release of additional reserves allocated for the uncertainties in our loan portfolio caused by the COVID-19 pandemic as certain loans that were modified during the COVID-19 pandemic returned to their contractual payment terms.
As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of December 31, 2022 and 2021, we had $47.5 million of unsecured federal funds lines with no amounts advanced.
As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of December 31, 2023 and 2022, we had $47.5 million of unsecured federal funds lines with no amounts advanced.
This decrease was partially due to lower maintenance and repairs expense and rent expense. Data processing expense for the years ended December 31, 2022 and 2021 remained flat at $1.1 million. Advertising expense for the year ended December 31, 2022 was $606,000 compared to $541,000 for 2021, an increase of $65,000, or 12.0%.
This decrease was partially due to lower maintenance and repairs expense and rent expense. 51 Table of Contents Data processing expense for the years ended December 31, 2022 and 2021 remained flat at $1.1 million. Advertising expense for the year ended December 31, 2022 was $606,000 compared to $541,000 for 2021, an increase of $65,000, or 12.0%.
The increase from December 31, 2021 to December 31, 2022 was primarily attributable to a $1.2 million increase in nonaccrual commercial real estate loans and a $7.2 million increase in accruing troubled debt restructured loans.
The increase from December 31, 2021 to December 31, 2022 was primarily attributable to a $1.2 million increase in nonaccrual commercial real estate loans and a $7.2 million increase in accruing restructured loans.
See Note 10 of our consolidated financial statements as of December 31, 2022, included elsewhere in this Annual Report on Form 10-K, for additional information.
See Note 10 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K, for additional information.
The average number of full-time equivalent employees was 216 for the year ended December 31, 2022 compared to 213 for the year ended December 31, 2021. Occupancy expense for the year ended December 31, 2022 was $4.9 million compared to $5.0 million for the same period during 2021, a decrease of $171,000, or 3.4%.
The average number of full-time equivalent employees was 216 for the year ended December 31, 2022 compared to 213 for the year ended December 31, 2021. Occupancy expense for the year ended December 31, 2022 was $4.9 million compared to $5.0 million for year ended December 31, 2021, a decrease of $171,000, or 3.4%.
No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of December 31, 2022, 2021 or 2020.
No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of December 31, 2023, 2022 or 2021.
We recognized PPP loan fee income of $1.0 million during 2022 compared to PPP loan fee income of $5.4 million during 2021. Average earning assets increased by $692.4 million, primarily due to an increase of $661.4 million in average loans and $31.0 million in average investment securities, fed funds sold and interest-bearing cash accounts.
We recognized Paycheck Protection Program (“PPP”) loan fee income of $1.0 million during 2022 compared to PPP loan fee income of $5.4 million during 2021. Average earning assets increased by $692.4 million, primarily due to an increase of $661.4 million in average loans and $31.0 million in average investment securities, fed funds sold and interest-bearing cash accounts.
The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes.
The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts 54 Table of Contents receivable and inventory financing, machinery and equipment purchases, and other business purposes.
At December 31, 2022 and 2021, approximately 25.2% and 20.9% of the commercial real estate portfolio consisted of fixed-rate loans, respectively. Our policy maximum LTV is 85% for commercial real estate loans. However, our weighted average LTV is well below this policy maximum.
At December 31, 2023 and 2022, approximately 28.9% and 25.2% of the commercial real estate portfolio consisted of fixed-rate loans, respectively. Our policy maximum LTV is 85% for commercial real estate loans. However, our weighted average LTV is well below this policy maximum.
The portfolio serves the following purposes: (i) to optimize the Bank’s income consistent with the investment portfolio’s liquidity and risk objectives; (ii) to balance market and credit risks of other assets and the Bank’s liability structure; (iii) to profitably deploy funds which are not needed to fulfill loan demand, deposit redemptions or other liquidity purposes; and (iv) to provide collateral which the Bank is required to pledge against public funds.
The portfolio serves the following purposes: (i) to optimize the Bank’s income consistent with the investment portfolio’s liquidity and risk objectives; (ii) to balance market and credit risks of other assets and the Bank’s liability structure; (iii) to profitably deploy funds which are not needed to fulfill loan demand, deposit redemptions or other liquidity purposes; (iv) to provide collateral which the Bank is required to pledge against public funds; and (v) to provide investments for Community Reinvestment Act (CRA) purposes.
The significant increase in the effective tax rate for the year ended December 31, 2022 was due to the re-allocation of state income tax apportionment schedules from prior year tax returns, as well as corrections for the treatment of prior year’s state tax credits.
The elevated effective tax rate for the year ended December 31, 2022 was due to the re-allocation of state income tax apportionment schedules from prior year tax returns, as well as corrections for the treatment of prior year’s state tax credits.
Non-owner occupied commercial real estate loans were 10.4%, 12.4%, and 13.6%, as a percentage of commercial real estate loans for the years ending December 31, 2022, 2021, and 2020, respectively. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on LIBOR, prime rate or constant maturity treasury (“CMT”).
Non-owner occupied commercial real estate loans were 7.6%, 10.4%, and 12.4%, as a percentage of commercial real estate loans for the years ending December 31, 2023, 2022, and 2021, respectively. We originate both fixed and adjustable rate loans. Adjustable rate loans are based on SOFR, prime rate or constant maturity treasury (“CMT”).
Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal and interest payments are past due 90 days or more or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business.
Typically, the accrual of interest on loans is discontinued when principal and interest payments are past due 90 days or more or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business.
Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2022, our SBA portfolio totaled $304.3 million compared to $269.8 million as of December 31, 2021.
Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2023, our SBA portfolio totaled $286.9 million compared to $304.3 million as of December 31, 2022.
Nonperforming loans include loans 90 days or more past due and still accruing, loans accounted for on a nonaccrual basis and accruing restructured loans. Nonperforming assets consist of nonperforming loans plus OREO. Nonperforming loans were $20.2 million at December 31, 2022 compared to $11.8 million at December 31, 2021 and $13.1 million at December 31, 2020.
Nonperforming loans include loans 90 days or more past due and still accruing, loans accounted for on a nonaccrual basis and accruing restructured loans. Nonperforming assets consist of nonperforming loans plus OREO. Nonperforming loans were $36.9 million at December 31, 2023 compared to $20.2 million at December 31, 2022 and $11.8 million at December 31, 2021.
This amount includes unrealized losses on our available for sale securities portfolio and significant unrealized gains on our interest rate derivatives. Excluding the average accumulated other comprehensive income balance, the return on average equity was 20.02% for the year ended December 31, 2022.
This amount includes unrealized losses on our available for sale securities portfolio and significant unrealized gains on our interest rate derivatives. Excluding the average accumulated other comprehensive income balance, the return on average equity was 15.00% and 20.02% for the years ended December 31, 2023 and 2022, respectively.
We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective rate. These swap agreements are designated as cash flow hedges. As of December 31, 2022, the total amount of deposits tied to the Federal Funds Effective rate was $951.9 million.
We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective rate. These swap agreements are designated as cash flow hedges. As of December 31, 2023, the total amount of deposits tied to the Federal Funds Effective rate was $929.2 million.
The increase was primarily due to higher FDIC deposit insurance premiums, professional fees, communication expenses, and fair value losses on our equity investments, offset by lower loan and other real estate owned expenses. Included in other expenses were directors’ fees of $565,000 and $455,000 for the years ended December 31, 2022 and 2021, respectively.
The increase was primarily due to higher FDIC deposit insurance premiums, professional fees, and communication expenses, offset by lower loan and other real estate owned expenses. Included in other expenses were directors’ fees of $565,000 and $455,000 for the years ended December 31, 2022 and 2021, respectively.
Newly originated and renewed non-SBA commercial real estate loans for the years ending December 31, 2022 and 2021 carried a weighted average LTV of 57.7% and 59.5%, respectively. Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans.
Newly originated and renewed non-SBA commercial real estate loans for the years ending December 31, 2023 and 2022 carried a weighted average LTV of 46.4% and 57.7%, respectively. Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans.
Results of Operations Net Income Year ended December 31, 2022 compared to year ended December 31, 2021 We recorded net income of $62.6 million for the year ended December 31, 2022 compared to $61.7 million for the same period in 2021, an increase of $901,000, or 1.5%.
Year ended December 31, 2022 compared to year ended December 31, 2021 We recorded net income of $62.6 million for the year ended December 31, 2022 compared to $61.7 million for the year ended December 31, 2021, an increase of $901,000, or 1.5%.
The following table provides information related to our FHLB Advances for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Year Ended December 31, ​ (Dollars in thousands) 2022 2021 2020 ​ Maximum amount outstanding at any month-end during the period ​ $ 500,000 ​ $ 500,000 ​ $ 110,000 ​ Balance outstanding at end of period ​ ​ 375,000 ​ ​ 500,000 ​ ​ 110,000 ​ Average outstanding balance during the period ​ ​ 368,333 ​ ​ 237,500 ​ ​ 82,500 ​ Weighted average interest rate during the period ​ ​ 1.16 % ​ 0.26 % ​ 0.69 % Weighted average interest rate at end of period ​ 1.94 ​ 0.12 ​ 0.58 ​ ​ In addition to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks.
The following table provides information related to our FHLB Advances for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of or for the Year Ended December 31, ​ (Dollars in thousands) 2023 2022 2021 ​ Maximum amount outstanding at any month-end during the period ​ $ 425,000 ​ $ 500,000 ​ $ 500,000 ​ Balance outstanding at end of period ​ ​ 325,000 ​ ​ 375,000 ​ ​ 500,000 ​ Average outstanding balance during the period ​ ​ 350,000 ​ ​ 368,333 ​ ​ 237,500 ​ Weighted average interest rate during the period ​ ​ 3.06 % ​ 1.16 % ​ 0.26 % Weighted average interest rate at end of period ​ 3.66 ​ 1.94 ​ 0.12 ​ ​ In addition to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks.
We had a net deferred tax liability of $1.6 million at December 31, 2022, a net deferred tax asset of $2.2 million at December 31, 2021 and net deferred tax liability of $1.0 million at December 31, 2020.
We had a net deferred tax liability of $2.3 million at December 31, 2023, a net deferred tax liability of $1.6 million at December 31, 2022 and net deferred tax asset of $2.2 million at December 31, 2021.
The increase was due to a $15.4 million increase in net interest income and a $9.7 decrease in provision for loan losses, offset by a $14.6 million decrease in noninterest income, a $1.9 million increase in noninterest expense and a $7.7 million increase in provision for income taxes.
The increase was due to a $15.4 million increase in net 43 Table of Contents interest income and a $9.7 decrease in provision for credit losses, offset by a $14.6 million decrease in noninterest income, a $1.9 million increase in noninterest expense and a $7.7 million increase in provision for income taxes.
This increase is primarily attributable to a $491.3 million increase in average deposit balances and a 100 basis points increase in deposit costs, which includes a 119 basis points 42 Table of Contents increase in the average yield on money market deposits and an 84 basis points decrease in the average yield on time deposits.
This increase is primarily attributable to a $491.3 million increase in average interest-bearing deposits and a 100 basis points increase in deposit costs, which includes a 119 basis points increase in the average yield on money market deposits and an 84 basis points decrease in the average yield on time deposits.
Our ALL as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for loan loss ratios compared to other commercial or consumer loans.
Our allowance for credit losses as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.
The following table provides an analysis of the allowance for loan losses, provision for loan losses and net charge-offs for the periods presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (Dollars in thousands) 2022 2021 2020 2019 2018 ​ Balance, beginning of period ​ $ 16,952 ​ $ 10,135 ​ $ 6,839 ​ $ 6,645 ​ $ 6,925 ​ Charge-offs: ​ ​ ​ ​ ​ ​ Construction and development ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate ​ — ​ 67 ​ 109 ​ 237 ​ 88 ​ Commercial and industrial ​ 390 ​ 64 ​ 51 ​ 14 ​ 39 ​ Residential real estate ​ — ​ — ​ — ​ — ​ — ​ Consumer and other ​ — ​ — ​ 97 ​ 525 ​ 1,939 ​ Total charge-offs ​ 390 ​ 131 ​ 257 ​ 776 ​ 2,066 ​ Recoveries: ​ ​ ​ ​ ​ ​ Construction and development ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate ​ 7 ​ 12 ​ 10 ​ 752 ​ 22 ​ Commercial and industrial ​ 81 ​ — ​ 25 ​ — ​ — ​ Residential real estate ​ — ​ — ​ — ​ — ​ — ​ Consumer and other ​ 5 ​ 7 ​ 51 ​ 218 ​ 527 ​ Total recoveries ​ 93 ​ 19 ​ 86 ​ 970 ​ 549 ​ Net charge-offs/(recoveries) ​ 297 ​ 112 ​ 171 ​ (194) ​ 1,517 ​ Provision for loan losses ​ (2,767) ​ 6,929 ​ 3,467 ​ — ​ 1,237 ​ Balance, end of period ​ $ 13,888 ​ $ 16,952 ​ $ 10,135 ​ $ 6,839 ​ $ 6,645 ​ Total loans at end of period ​ $ 3,065,329 ​ $ 2,511,508 ​ $ 1,634,939 ​ $ 1,163,207 ​ $ 1,145,714 ​ Average loans (1) ​ 2,761,195 ​ 2,109,249 ​ 1,365,129 ​ 1,218,219 ​ 1,110,451 ​ Net charge-offs to average loans ​ 0.01 % 0.01 % 0.01 % (0.02) % 0.14 % Allowance for loan losses to total loans ​ 0.45 % 0.67 % 0.62 % 0.59 % 0.58 % (1) Excludes loans held for sale. ​ Management believes the allowance for loan losses is adequate to provide for losses inherent in the loan portfolio as of December 31, 2022. 56 Table of Contents The following table presents a summary of the allocation of the allowance for loan losses by loan portfolio segment for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ ​ ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ (Dollars in thousands) Loan Losses Total Loans Loan Losses Total Loans Loan Losses Total Loans Loan Losses Total Loans Loan Losses Total Loans ​ Construction and Development ​ $ 124 1.6 % $ 100 1.6 % $ 178 2.8 % $ 131 2.7 % $ 235 3.7 % Commercial Real Estate ​ 2,811 21.4 ​ 4,146 20.7 ​ 5,161 29.2 ​ 2,320 36.5 ​ 2,601 34.6 ​ Commercial and Industrial ​ 1,326 1.7 ​ 4,989 2.9 ​ 438 8.4 ​ 448 4.6 ​ 380 2.9 ​ Residential Real Estate ​ 9,626 75.3 ​ 7,717 74.8 ​ 4,350 59.6 ​ 3,457 56.0 ​ 3,042 58.5 ​ Consumer and other ​ ​ 1 ​ — ​ ​ — ​ — ​ ​ 8 ​ — ​ ​ 91 ​ 0.2 ​ ​ 387 ​ 0.3 ​ Unallocated ​ — — ​ — — ​ — — ​ 392 — ​ — — ​ Total allowance for loan losses ​ $ 13,888 100.0 % $ 16,952 100.0 % $ 10,135 100.0 % $ 6,839 100.0 % $ 6,645 100.0 % ​ Investment Securities Our securities portfolio is the third largest component of our interest earning assets.
The following table provides an analysis of the allowance for credit losses, provision for loan losses and net charge-offs for the periods presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (Dollars in thousands) 2023 2022 2021 2020 2019 ​ Balance, beginning of period ​ $ 13,888 ​ $ 16,952 ​ $ 10,135 ​ $ 6,839 ​ $ 6,645 ​ CECL adoption (Day 1) impact ​ ​ 5,055 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Charge-offs: ​ ​ ​ ​ ​ ​ Construction and development ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate ​ 455 ​ — ​ 67 ​ 109 ​ 237 ​ Commercial and industrial ​ 309 ​ 390 ​ 64 ​ 51 ​ 14 ​ Residential real estate ​ — ​ — ​ — ​ — ​ — ​ Consumer and other ​ — ​ — ​ — ​ 97 ​ 525 ​ Total charge-offs ​ 764 ​ 390 ​ 131 ​ 257 ​ 776 ​ Recoveries: ​ ​ ​ ​ ​ ​ Construction and development ​ — ​ — ​ — ​ — ​ — ​ Commercial real estate ​ 5 ​ 7 ​ 12 ​ 10 ​ 752 ​ Commercial and industrial ​ 20 ​ 81 ​ — ​ 25 ​ — ​ Residential real estate ​ — ​ — ​ — ​ — ​ — ​ Consumer and other ​ — ​ 5 ​ 7 ​ 51 ​ 218 ​ Total recoveries ​ 25 ​ 93 ​ 19 ​ 86 ​ 970 ​ Net charge-offs/(recoveries) ​ 739 ​ 297 ​ 112 ​ 171 ​ (194) ​ Provision for credit losses ​ (92) ​ (2,767) ​ 6,929 ​ 3,467 ​ — ​ Balance, end of period ​ $ 18,112 ​ $ 13,888 ​ $ 16,952 ​ $ 10,135 ​ $ 6,839 ​ Total loans at end of period ​ $ 3,150,961 ​ $ 3,065,329 ​ $ 2,511,508 ​ $ 1,634,939 ​ $ 1,163,207 ​ Average loans (1) ​ 3,039,361 ​ 2,761,195 ​ 2,109,249 ​ 1,365,129 ​ 1,218,219 ​ Net charge-offs to average loans ​ 0.02 % 0.01 % 0.01 % 0.01 % (0.02) % Allowance for credit losses to total loans ​ 0.57 % 0.45 % 0.67 % 0.62 % 0.59 % (1) Excludes loans held for sale. ​ Management believes the allowance for credit losses is adequate to provide for losses inherent in the loan portfolio as of December 31, 2023. 58 Table of Contents The following table presents a summary of the allocation of the allowance for credit losses by loan portfolio segment for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ ​ ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ Allowance for ​ % of Loans to ​ (Dollars in thousands) Credit Losses Total Loans Credit Losses Total Loans Credit Losses Total Loans Credit Losses Total Loans Credit Losses Total Loans ​ Construction and Development ​ $ 46 0.7 % $ 124 1.6 % $ 100 1.6 % $ 178 2.8 % $ 131 2.7 % Commercial Real Estate ​ 6,876 22.6 ​ 2,811 21.4 ​ 4,146 20.7 ​ 5,161 29.2 ​ 2,320 36.5 ​ Commercial and Industrial ​ 588 2.1 ​ 1,326 1.7 ​ 4,989 2.9 ​ 438 8.4 ​ 448 4.6 ​ Residential Real Estate ​ 10,597 74.6 ​ 9,626 75.3 ​ 7,717 74.8 ​ 4,350 59.6 ​ 3,457 56.0 ​ Consumer and other ​ ​ 5 ​ — ​ ​ 1 ​ — ​ ​ — ​ — ​ ​ 8 ​ — ​ ​ 91 ​ 0.2 ​ Unallocated ​ — — ​ — — ​ — — ​ — — ​ 392 — ​ Total allowance for credit losses ​ $ 18,112 100.0 % $ 13,888 100.0 % $ 16,952 100.0 % $ 10,135 100.0 % $ 6,839 100.0 % ​ Investment Securities Our securities portfolio is the third largest component of our interest earning assets.
Our available borrowings under these agreements were $47.5 million at December 31, 2022 and 2021. We did not have any advances outstanding under these agreements for any of the periods presented. We also have access to the Federal Reserve’s discount window in the amount of $10.0 million with no borrowings outstanding as of December 31, 2022 and 2021.
Our available borrowings under these agreements were $47.5 million at December 31, 2023 and 2022. We did not have any advances outstanding under these agreements for any of the periods presented. We also have access to the Federal Reserve’s discount window in the amount of $446.3 million and $28.0 million at December 31, 2023 and 2022, respectively.
This increase was due to consistent loan production and market demand for these types of loans. Commercial real estate loans were $477.4 million, or 29.2%, of our portfolio as of December 31, 2020. Our non-owner occupied commercial real estate loans make up a small percentage of our overall commercial real estate loan portfolio.
This increase was due to consistent loan production and market demand for these types of loans. Commercial real estate loans were $520.5 million, or 20.7%, of our portfolio as of December 31, 2021. Our non-owner occupied commercial real estate loans make up a small percentage of our overall commercial real estate loan portfolio.
The increase was primarily attributable to increased analysis fees and overdraft fees. Other service charges, commissions and fees decreased $4.7 million, or 32.6%, to $9.7 million for year ended December 31, 2022 compared to $14.4 million for the year ended December 31, 2021.
Other service charges, commissions and fees decreased $4.7 million, or 32.6%, to $9.7 million for year ended December 31, 2022 compared to $14.4 million for the year ended December 31, 2021.
Basic and diluted earnings per common share for the year ended December 31, 2021 was $2.41 and $2.39, respectively, compared to $1.42 and $1.41 for the basic and diluted earnings per common share for the same period in 2020. Net Interest Income The management of interest income and expense is fundamental to our financial performance.
Basic and diluted earnings per common share for the year ended December 31, 2022 was $2.46 and $2.44, respectively, compared to $2.41 and $2.39 for the basic and diluted earnings per common share for the year ended December 31, 2021. Net Interest Income The management of interest income and expense is fundamental to our financial performance.
Return on Equity and Assets The following table sets forth our return on average assets, return on average equity, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 ​ 2020 Return on average assets ​ 1.96 % ​ 2.51 % ​ 2.17 % Return on average equity ​ 19.55 % ​ 23.55 % ​ 16.02 % Dividend payout ratio ​ 24.52 % ​ 19.17 % ​ 28.32 % Average shareholders' equity to average assets ​ 10.05 % ​ 10.65 % ​ 13.52 % ​ For the year ended December 31, 2022, our average equity includes $7.6 million of average accumulated other comprehensive income.
Return on Equity and Assets The following table sets forth our return on average assets, return on average equity, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ 2021 Return on average assets ​ 1.50 % ​ 1.96 % ​ 2.51 % Return on average equity ​ 14.10 % ​ 19.55 % ​ 23.55 % Dividend payout ratio ​ 35.43 % ​ 24.52 % ​ 19.17 % Average shareholders' equity to average assets ​ 10.63 % ​ 10.05 % ​ 10.65 % ​ For the year ended December 31, 2023 and 2022, our average equity includes $22.1 million and $7.6 million, respectively, of average accumulated other comprehensive income.
The following table presents outstanding financial commitments whose contractual amount represents credit risks as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (Dollars in thousands) 2022 2021 Commitments to extend credit $ 62,334 ​ $ 61,345 Standby letters of credit ​ ​ 6,303 ​ ​ 4,674 Total off-balance sheet commitments ​ $ 68,637 ​ $ 66,019 ​ ​
The following table presents outstanding financial commitments whose contractual amount represents credit risks as of the dates indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (Dollars in thousands) 2023 2022 Commitments to extend credit $ 68,083 ​ $ 62,334 Standby letters of credit ​ ​ 4,908 ​ ​ 6,303 Total off-balance sheet commitments ​ $ 72,991 ​ $ 68,637 ​ ​
For more information, see “Item 1. Business – Regulation and Supervision – Regulation of the Company – Capital Requirements.” The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of December 31, 2022 and 2021.
Business – Regulation and Supervision – Regulation of the Company – Capital Requirements.” 63 Table of Contents The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of December 31, 2023 and 2022.
We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of the amortized cost basis, which may be at maturity.
Furthermore, the Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity.
We put continued effort into gathering 58 Table of Contents noninterest-bearing demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets. Total deposits increased $403.8 million, or 17.8%, to $2.67 billion at December 31, 2022 compared to $2.26 billion at December 31, 2021.
We put continued effort into gathering noninterest-bearing demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets. 60 Table of Contents Total deposits increased $64.1 million, or 2.4%, to $2.73 billion at December 31, 2023 compared to $2.67 billion at December 31, 2022.
Equity Securities ​ As of December 31, 2022 and December 31, 2021, the Company had equity securities with carrying values totaling $10.3 million and $11.4 million, respectively.
Equity Securities ​ As of both December 31, 2023 and December 31, 2022, the Company had equity securities with carrying values totaling $10.3 million.
As of December 31, 2022, our construction and development loans comprised $47.8 million, or 1.6%, of total loans, compared to $38.9 million, or 1.6%, of total loans as of December 31, 2021. This compares to $45.7 million, or 2.8%, of total loans as of December 31, 2020. Commercial real estate loans.
As of December 31, 2023, our construction and development loans comprised $23.3 million, or 0.7%, of total loans held for investment, compared to $47.8 million, or 1.6%, of total loans held for investment as of December 31, 2022. This compares to $38.9 million, or 1.6%, of total loans held for investment as of December 31, 2021. Commercial real estate loans.
Our noninterest-bearing demand accounts were 31.3% of total deposits and our interest-bearing deposits accounted for the remaining 68.7% of our deposits as of December 31, 2020. As of December 31, 2022 and 2021, the Company had estimated uninsured deposits of $874.7 million and $619.5 million, respectively.
Our noninterest-bearing demand accounts were 26.2% of total deposits and our interest-bearing deposits accounted for the remaining 73.8% of our deposits as of December 31, 2021. As of December 31, 2023 and 2022, the Company had estimated uninsured deposits of $730.5 million and $874.7 million, respectively.
Government entities and agencies ​ $ 5,059 ​ $ 5,059 ​ $ 6,949 ​ $ 6,949 ​ $ 9,306 ​ $ 9,306 States and political subdivisions ​ ​ 8,121 ​ 6,403 ​ ​ 8,169 ​ 8,361 ​ ​ 7,182 ​ 7,429 Mortgage-backed GSE residential ​ 9,540 7,783 ​ 10,562 10,423 ​ 1,368 1,382 Total securities available for sale ​ $ 22,720 $ 19,245 ​ $ 25,680 $ 25,733 ​ $ 17,856 $ 18,117 ​ 57 Table of Contents Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses.
Government entities and agencies ​ $ 4,637 ​ $ 4,637 ​ $ 5,059 ​ $ 5,059 ​ $ 6,949 ​ $ 6,949 States and political subdivisions ​ ​ 8,072 ​ 6,782 ​ ​ 8,121 ​ 6,403 ​ ​ 8,169 ​ 8,361 Mortgage-backed GSE residential ​ 8,669 7,074 ​ 9,540 7,783 ​ 10,562 10,423 Total securities available for sale ​ $ 21,378 $ 18,493 ​ $ 22,720 $ 19,245 ​ $ 25,680 $ 25,733 ​ 59 Table of Contents Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses.
The weighted average LTV of nonaccrual residential real estate loans was approximately 51.4% at December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ (Dollars in thousands) 2022 2021 2020 2019 2018 Nonaccrual loans ​ $ 10,065 ​ $ 8,759 ​ $ 10,203 ​ $ 12,236 ​ $ 5,667 ​ Past due loans 90 days or more and still accruing ​ 180 ​ 342 ​ — ​ — ​ — ​ Accruing troubled debt restructured loans ​ 9,919 ​ 2,697 ​ 2,891 ​ 2,459 ​ 3,298 ​ Total nonperforming loans ​ 20,164 ​ 11,798 ​ 13,094 ​ 14,695 ​ 8,965 ​ Other real estate owned ​ 4,328 ​ 3,618 ​ 3,844 ​ 423 ​ — ​ Total nonperforming assets ​ $ 24,492 ​ $ 15,416 ​ $ 16,938 ​ $ 15,118 ​ $ 8,965 ​ Nonperforming loans to gross loans ​ 0.66 % 0.47 % 0.80 % 1.26 % 0.78 % Nonperforming assets to total assets ​ 0.71 % 0.50 % 0.89 % 0.93 % 0.63 % Allowance for loan losses to nonperforming loans ​ 68.88 % 143.69 % 77.40 % 46.54 % 74.12 % ​ 54 Table of Contents Allowance for loan losses The allowance for loan losses is an estimate of probable incurred losses in the loan portfolio.
The weighted average LTV of nonaccrual residential real estate loans was approximately 52.8% at December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ (Dollars in thousands) 2023 2022 2021 2020 2019 Nonaccrual loans ​ $ 14,682 ​ $ 10,065 ​ $ 8,759 ​ $ 10,203 ​ $ 12,236 ​ Past due loans 90 days or more and still accruing ​ — ​ 180 ​ 342 ​ — ​ — ​ Accruing restructured loans ​ 22,233 ​ 9,919 ​ 2,697 ​ 2,891 ​ 2,459 ​ Total nonperforming loans ​ 36,915 ​ 20,164 ​ 11,798 ​ 13,094 ​ 14,695 ​ Other real estate owned ​ 1,466 ​ 4,328 ​ 3,618 ​ 3,844 ​ 423 ​ Total nonperforming assets ​ $ 38,381 ​ $ 24,492 ​ $ 15,416 ​ $ 16,938 ​ $ 15,118 ​ Nonperforming loans to gross loans ​ 1.17 % 0.66 % 0.47 % 0.80 % 1.26 % Nonperforming assets to total assets ​ 1.10 % 0.71 % 0.50 % 0.89 % 0.93 % Allowance for credit losses to nonperforming loans ​ 49.06 % 68.88 % 143.69 % 77.40 % 46.54 % ​ 56 Table of Contents Allowance for credit losses The allowance for credit losses was $18.1 million at December 31, 2023 compared to $13.9 million at December 31, 2022, an increase of $4.2 million, or 30.4%.
The increase was consistent with the continued growth of our loans and deposit. Other expenses for the year ended December 31, 2022 were $13.3 million compared to $11.6 million for the year ended December 31, 2021, an increase of $1.7 million, or 14.3%.
The increase was consistent with the continued growth of our loans and deposit. Other expenses for the year ended December 31, 2022 were $12.2 million compared to $11.5 million for the year ended December 31, 2021, an increase of $690,000, or 6.0%.
Other noninterest income was $2.1 million for the year ended December 31, 2022 compared to $1.4 million for the year ended December 31, 2021, an increase of $741,000, or 53.0%.
Other noninterest income was $2.7 million for the year ended December 31, 2023 compared to $1.1 million for the year ended December 31, 2022, an increase of $1.7 million, or 159.0%.
The average accumulated other comprehensive icome balance had little to no impact on the return on average equity for the years ended December 31, 2021 and 2020. Financial Condition Total assets increased $321.1 million, or 10.3%, to $3.43 billion at December 31, 2022 as compared to $3.11 billion at December 31, 2021.
The average accumulated other comprehensive income balance had little to no impact on the return on average equity for the years ended December 31, 2021. Financial Condition Total assets increased $75.6 million, or 2.2%, to $3.50 billion at December 31, 2023 as compared to $3.43 billion at December 31, 2022.
Year ended December 31, 2021 compared to year ended December 31, 2020 Salaries and employee benefits expense for the year ended December 31, 2021 was $30.1 million compared to $25.5 million for the year ended December 31, 2020, an increase of $4.6 million, or 18.1%.
Year ended December 31, 2022 compared to year ended December 31, 2021 Salaries and employee benefits expense for the year ended December 31, 2022 was $30.5 million compared to $30.1 million for the year ended December 31, 2021, an increase of $390,000, or 1.3%.
The determination of the amount is complex and involves a high degree of judgment and subjectivity. Year ended December 31, 2022 compared to year ended December 31, 2021 We recorded a credit provision for loan losses of $2.8 million during the year ended December 31, 2022 compared to $6.9 million provision expense recorded during the year ended December 31, 2021.
Year ended December 31, 2022 compared to year ended December 31, 2021 We recorded a credit provision for loan losses of $2.8 million during the year ended December 31, 2022 compared to $6.9 million provision expense recorded during the year ended December 31, 2021.
Included in commercial and industrial loans were PPP loans with outstanding balances totaling $713,000 and $31.0 million as of December 31, 2022 and 2021, respectively. 50 Table of Contents The following table presents the ending balance of each major category in our loan portfolio at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ (Dollars in thousands) Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total ​ Construction and Development ​ $ 47,779 ​ 1.6 % $ 38,857 ​ 1.6 % $ 45,653 2.8 % $ 31,739 2.7 % $ 42,718 3.7 % Commercial Real Estate ​ 657,246 ​ 21.4 ​ 520,488 ​ 20.7 ​ 477,419 29.2 ​ 424,950 36.5 ​ 396,598 34.6 ​ Commercial and Industrial ​ 53,173 ​ 1.7 ​ 73,072 ​ 2.9 ​ 137,239 8.4 ​ 53,105 4.6 ​ 33,100 2.9 ​ Residential Real Estate ​ 2,306,915 ​ 75.3 ​ 1,879,012 ​ 74.8 ​ 974,445 59.6 ​ 651,645 56.0 ​ 670,341 58.5 ​ Consumer and other ​ 216 ​ 0.0 ​ 79 ​ 0.0 ​ 183 0.0 ​ 1,768 0.2 ​ 2,957 0.3 ​ Total gross loans ​ ​ 3,065,329 100.0 % ​ 2,511,508 100.0 % ​ 1,634,939 100.0 % ​ 1,163,207 100.0 % ​ 1,145,714 100.0 % Unearned income ​ (9,640) ​ (6,438) ​ (4,595) ​ (2,045) ​ (2,139) ​ Allowance for loan losses ​ ​ (13,888) ​ ​ ​ ​ (16,952) ​ ​ ​ ​ (10,135) ​ ​ ​ ​ (6,839) ​ ​ ​ ​ (6,645) ​ ​ ​ Total loans, net ​ $ 3,041,801 ​ $ 2,488,118 ​ $ 1,620,209 ​ $ 1,154,323 ​ $ 1,136,930 ​ ​ The following table presents the maturity distribution of our loans as of December 31, 2022.
The following table presents the ending balance of each major category in our loan portfolio held for investment as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ (Dollars in thousands) Amount % of Total Amount % of Total Amount % of Total Amount % of Total Amount % of Total ​ Construction and Development ​ $ 23,262 ​ 0.7 % $ 47,779 ​ 1.6 % $ 38,857 ​ 1.6 % $ 45,653 2.8 % $ 31,739 2.7 % Commercial Real Estate ​ 711,177 ​ 22.6 ​ 657,246 ​ 21.4 ​ 520,488 ​ 20.7 ​ 477,419 29.2 ​ 424,950 36.5 ​ Commercial and Industrial ​ 65,904 ​ 2.1 ​ 53,173 ​ 1.7 ​ 73,072 ​ 2.9 ​ 137,239 8.4 ​ 53,105 4.6 ​ Residential Real Estate ​ 2,350,299 ​ 74.6 ​ 2,306,915 ​ 75.3 ​ 1,879,012 ​ 74.8 ​ 974,445 59.6 ​ 651,645 56.0 ​ Consumer and other ​ 319 ​ 0.0 ​ 216 ​ 0.0 ​ 79 ​ 0.0 ​ 183 0.0 ​ 1,768 0.2 ​ Total gross loans ​ ​ 3,150,961 100.0 % ​ 3,065,329 100.0 % ​ 2,511,508 100.0 % ​ 1,634,939 100.0 % ​ 1,163,207 100.0 % Unearned income ​ (8,856) ​ (9,640) ​ (6,438) ​ (4,595) ​ (2,045) ​ Allowance for credit losses ​ ​ (18,112) ​ ​ ​ ​ (13,888) ​ ​ ​ ​ (16,952) ​ ​ ​ ​ (10,135) ​ ​ ​ ​ (6,839) ​ ​ ​ Total loans, net ​ $ 3,123,993 ​ $ 3,041,801 ​ $ 2,488,118 ​ $ 1,620,209 ​ $ 1,154,323 ​ ​ The following table presents the maturity distribution of our loans held for investment as of December 31, 2023.
As of December 31, 2022, 22.9% of total deposits were comprised of noninterest-bearing demand accounts and 77.1% of interest-bearing deposit accounts compared to 26.2% and 73.8% as of December 31, 2021, respectively. Total deposits increased $783.1 million, or 52.9%, to $2.26 billion at December 31, 2021 compared to $1.48 billion at December 31, 2020.
As of December 31, 2023, 18.7% of total deposits were comprised of noninterest-bearing demand accounts and 81.3% of interest-bearing deposit accounts compared to 22.9% and 77.1% as of December 31, 2022, respectively. Total deposits increased $403.8 million, or 17.8%, to $2.67 billion at December 31, 2022 compared to $2.26 billion at December 31, 2021.
During the year ended December 31, 2022 and 2021, we recognized an unrealized loss of $1.1 million and $114,000, respectively, in net income on our equity securities. No unrealized gains or losses on equity securities were recognized in net income during the year ended December 31, 2020.
During the years ended December 31, 2023, 2022 and 2021, we recognized an unrealized gain of $35,000, an unrealized loss of $1.1 million and an unrealized loss of $114,000, respectively, in net income on our equity securities.
Basic and diluted earnings per common share for the year ended December 31, 2022 was $2.46 and $2.44, respectively, compared to $2.41 and $2.39 for the basic and diluted earnings per common share for the same period in 2021.
Basic and diluted earnings per common share for the year ended December 31, 2023 was $2.05 and $2.02, respectively, compared to $2.46 and $2.44 for the basic and diluted earnings per common share for the year ended December 31, 2022.
Noninterest Income Noninterest income is an important component of our total revenues. A portion of our noninterest income is associated with SBA and residential mortgage lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing rights retained.
An important portion of our noninterest income is associated with SBA and residential mortgage lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. Other sources of noninterest income include service charges on deposit accounts and other service charges, commissions and fees.
Year ended December 31, 2021 compared to year ended December 31, 2020 Service charges on deposit accounts were $1.7 million for the year ended December 31, 2021 compared to $1.3 million for the year ended December 31, 2020, an increase of $384,000, or 29.3%. The increase was primarily attributable to increased analysis fees and wire transfer fees.
Year ended December 31, 2022 compared to year ended December 31, 2021 Service charges on deposit accounts were $2.0 million for the year ended December 31, 2022 compared to $1.7 million for the year ended December 31, 2021, an increase of $295,000, or 17.4%. The increase was primarily attributable to increased analysis fees and overdraft fees.
Nonaccrual loans at December 31, 2021 comprised of $3.7 million of commercial real estate loans, $152,000 in commercial and industrial loans and $4.9 million in residential real estate loans.
Nonaccrual loans at December 31, 2022 comprised of $4.9 million of commercial real estate loans, $136,000 in commercial and industrial loans and $5.0 million in residential real estate loans.
The increase was due to a $38.1 million increase in net interest income and a $6.6 million increase in noninterest income, offset by a $3.5 million increase in provision for loan losses, a $7.3 million increase in noninterest expense and a $8.6 million increase in provision for income taxes.
The decrease was due to a $18.1 million decrease in net interest income and a $2.8 million increase in provision for credit losses, offset by a $8.3 million decrease in provision for income taxes, a $1.6 million decrease in noninterest expense and an $86,000 increase noninterest income.
The decrease in mortgage loan servicing income was due to the decrease in capitalized mortgage servicing assets and mortgage servicing fees and increased servicing asset amortization.
The change in mortgage loan servicing income was primarily due to the decrease in mortgage servicing amortization, offset by decreases in mortgage servicing fees and capitalized mortgage servicing assets.
At December 31, 2022, approximately 89.6% of our commercial real estate loans were owner-occupied. As of December 31, 2022, our loans secured by commercial real estate were $657.2 million, or 21.4%, of total loans compared to $520.5 million, or 20.7%, as of December 31, 2021.
At December 31, 2023, approximately 92.4% of our commercial real estate loans were owner-occupied. As of December 31, 2023, our loans secured by commercial real estate were $711.2 million, or 22.6%, of total loans held for investment compared to $657.2 million, or 21.4%, as of December 31, 2022.
The advances from the FHLB are collateralized by residential real estate loans. At December 31, 2022 and 2021, we had $375.0 million and $500.0 million, respectively, of outstanding advances from the FHLB.
The advances from the FHLB are collateralized by our residential real estate loans. At December 31, 2023 and December 31, 2022, we had available borrowing capacity from the FHLB of $721.1 million and $633.6 million, respectively. At December 31, 2023 and 2022, we had $325.0 million and $375.0 million, respectively, of outstanding advances from the FHLB.
We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts. Liquidity Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost.
Liquidity Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost.
The following table summarizes our average deposit balances and weighted average rates for the years ended December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ Average ​ Average ​ Average ​ Average ​ Average ​ Average ​ (Dollars in thousands) Balance Rate Balance Rate Balance Rate ​ Noninterest-bearing demand deposits ​ $ 599,340 ​ — % $ 559,797 ​ — % $ 394,338 ​ — % Interest-bearing demand deposits ​ ​ 159,277 0.62 ​ ​ 84,502 0.19 ​ ​ 48,702 0.20 ​ Savings and money market deposits ​ 695,758 ​ 1.21 ​ 394,553 ​ 0.34 ​ 250,605 ​ 0.71 ​ Brokered money market deposits ​ ​ 461,465 ​ 1.66 ​ ​ 360,156 ​ 0.11 ​ ​ 17,936 ​ 0.12 ​ Time deposits ​ 513,867 ​ 1.25 ​ 499,856 ​ 0.41 ​ 596,325 ​ 1.51 ​ Total interest-bearing deposits ​ ​ 1,830,367 ​ 1.29 ​ ​ 1,339,067 ​ 0.29 ​ ​ 913,568 ​ 1.20 ​ Total deposits ​ $ 2,429,707 0.97 % $ 1,898,864 0.21 % $ 1,307,906 0.83 % ​ The following table sets forth the scheduled maturities of time deposits of $250,000 or greater as of December 31, 2022: ​ ​ ​ ​ ​ (Dollars in thousands) December 31, 2022 Remaining maturity: ​ ​ Three months or less ​ $ 11,814 Over three through six months ​ 22,020 Over six through twelve months ​ 282,165 Over twelve months ​ 75,634 Total time deposits $250,000 or greater ​ $ 391,633 ​ 59 Table of Contents Borrowed Funds Other than deposits, the Company utilizes FHLB advances as a supplementary funding source to finance our operations.
The following table summarizes our average deposit balances and weighted average rates for the years ended December 31, 2023, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ Average ​ Average ​ Average ​ Average ​ Average ​ Average ​ (Dollars in thousands) Balance Rate Balance Rate Balance Rate ​ Noninterest-bearing demand deposits ​ $ 555,840 ​ — % $ 599,340 ​ — % $ 559,797 ​ — % Interest-bearing demand deposits ​ ​ 132,033 1.70 ​ ​ 159,277 0.62 ​ ​ 84,502 0.19 ​ Savings and money market deposits ​ 509,443 ​ 2.82 ​ 695,758 ​ 1.21 ​ 394,553 ​ 0.34 ​ Brokered money market deposits ​ ​ 511,427 ​ 5.47 ​ ​ 461,465 ​ 1.66 ​ ​ 360,156 ​ 0.11 ​ Time deposits ​ 940,911 ​ 3.83 ​ 513,867 ​ 1.25 ​ 499,856 ​ 0.41 ​ Total interest-bearing deposits ​ ​ 2,093,814 ​ 3.85 ​ ​ 1,830,367 ​ 1.29 ​ ​ 1,339,067 ​ 0.29 ​ Total deposits ​ $ 2,649,654 3.04 % $ 2,429,707 0.97 % $ 1,898,864 0.21 % ​ The following table sets forth the scheduled maturities of time deposits of $250,000 or greater as of December 31, 2023: ​ ​ ​ ​ ​ (Dollars in thousands) December 31, 2023 Remaining maturity: ​ ​ Three months or less ​ $ 148,923 Over three through six months ​ 95,782 Over six through twelve months ​ 227,496 Over twelve months ​ 14,697 Total time deposits $250,000 or greater ​ $ 486,898 ​ 61 Table of Contents Borrowed Funds Other than deposits, the Company utilizes FHLB advances as a supplementary funding source to finance our operations.
Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2022, included elsewhere in this Annual Report on Form 10-K. Allowance for Loan Losses The ALL is a valuation allowance for probable incurred credit losses.
Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K. Reserve for Credit Losses A consequence of lending activities is that we may incur credit losses.
During the year ended December 31, 2021, we recorded fair value impairment recovery of $478,000 on our mortgage servicing assets compared to a fair value impairment of $641,000 recorded during the year ended December 31, 2020. Our total residential mortgage loan servicing portfolio was $608.2 million at December 31, 2021 compared to $961.7 million at December 31, 2020.
During the year ended December 31, 2022, we recorded a fair value impairment recovery of $163,000. Our total residential mortgage loan servicing portfolio was $443.1 million at December 31, 2023 compared to $526.7 million at December 31, 2022.
Average earning assets increased by $692.4 million, primarily due to an increase of $661.4 million in average loans and an increase of $31.0 million in average total investments. Average interest-bearing liabilities increased by $641.5 million as average interest-bearing deposits increased by $491.3 million and average borrowings increased by $150.2 million.
Average earning assets increased by $692.4 million, primarily due to an increase of $661.4 million in average loans and an increase of $31.0 million in average total investments.
The Company’s effective tax rates for the years ended December 31, 2022, 2021 and 2020 were 31.4%, 25.3% and 25.4%, respectively.
Income Tax Expense Income tax expense for the years ended December 31, 2023, 2022 and 2021 was $20.4 million, $28.6 million and $20.9 million, respectively. The Company’s effective tax rates for the years ended December 31, 2023, 2022 and 2021 were 28.3%, 31.4% and 25.3%, respectively.
The increase is mainly attributable to higher underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume significantly increased during the year ended December 31, 2021 compared to the year ended December 31, 2020.
The decrease is mainly attributable 48 Table of Contents to lower underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume declined during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Our loan growth during the year ended December 31, 2022 was comprised of an increase of $8.9 million, or 23.0%, in construction and development loans, an increase of $136.8 million, or 26.3%, in commercial real estate loans, a decrease of $19.9 million, or 27.2 %, in commercial and industrial loans, an increase of $427.9 million, or 22.8%, in residential real estate loans and an increase of $137,000, or 173.4%, in consumer and other loans.
Our loan growth during the year ended December 31, 2023 was comprised of a decrease of $24.5 million, or 51.3%, in construction and development loans, an increase of $53.9 million, or 8.2%, in commercial real estate loans, an increase of $12.7 million, or 23.9%, in commercial and industrial loans, an increase of $43.4 million, or 1.9%, in residential real estate loans and an increase of $103,000, or 47.7%, in consumer and other loans.
Loans Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.
Our investment securities portfolio made up only 0.82% of our total assets at December 31, 2023 compared to 0.86% at December 31, 2022. 52 Table of Contents Loans Our loans represent the largest portion of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition.
This decrease is primarily attributable to a 91 basis points decrease in deposit costs, which includes a 47 basis points decrease in the average yield on money market deposits and a 110 basis points decrease in the average yield on time deposits.
This increase is primarily attributable to a $263.4 million increase in average deposit balances and a 256 basis points increase in deposit costs, which includes a 279 basis points increase in the average yield on money market deposits and an 258 basis points increase in the average yield on time deposits.
Included in mortgage loan servicing income for the year ended December 31, 2021 was $4.7 million in mortgage servicing fees compared to $6.4 million for 2020, and capitalized mortgage servicing assets of $0 for the year ended December 31, 2021 compared to $1.0 million for 2020.
Included in mortgage loan servicing income for the year ended December 31, 2023 was $2.5 million in mortgage servicing fees compared to $3.2 million for 2022, and capitalized mortgage servicing assets of $0 for the year ended December 31, 2023 compared to $761,000 for 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−0 removed18 unchanged
Biggest changeThe results of the model are presented in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of Equity Sensitivity (Shock in basis points) +300 +200 +100 -100 December 31, 2022 ​ (17.80) % (11.90) % (5.90) % 6.90 % December 31, 2021 (8.90) % (3.60) % (0.20) % (11.90) % December 31, 2020 ​ 3.90 % 4.20 % 2.60 % (10.30) % ​ Our simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities.
Biggest changeThe results of the model for rate shakes of +/- 100 and 200 basis points are presented in the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of Equity Sensitivity (Shock in basis points) +200 +100 -100 -200 December 31, 2023 ​ (15.00) % (7.50) % 9.40 % 18.60 % December 31, 2022 (11.90) % (5.90) % 6.90 % 13.10 % December 31, 2021 ​ (3.60) % (0.20) % (11.90) % (11.90) % ​ Our simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (i) the timing of changes in interest rates; (ii) shifts or rotations in the yield curve; (iii) re-pricing characteristics for market-rate-sensitive instruments; (iv) varying loan prepayment speeds for different interest rate scenarios; and (v) the overall growth and mix of assets and liabilities.
These rate scenarios are considered appropriate as they are neither too modest (e.g. +/- 100 basis points) or too extreme (e.g. +/- 400 basis points) given the economic and rate cycles which have unfolded in the last 25 years. This 63 Table of Contents analysis also provides the foundation for historical tracking of interest rate risk.
These rate scenarios are considered appropriate as they are neither too modest (e.g. +/- 100 basis points) or too extreme (e.g. +/- 400 basis points) given the economic and rate cycles which have unfolded in the last 25 years. This 66 Table of Contents analysis also provides the foundation for historical tracking of interest rate risk.
Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk. ​ 64 Table of Contents
Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk. ​ 67 Table of Contents
Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of December 31, 2022, 2021 and 2020 are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity ​ ​ 12 Month Projection ​ 24 Month Projection ​ (Ramp in basis points) +200 -100 +200 -100 December 31, 2022 (1.60) % 2.50 % 21.60 % 12.90 % December 31, 2021 (3.60) % (1.20) % (8.70) % (10.30) % December 31, 2020 1.90 % 0.50 % (2.00) % (7.10) % ​ We also model the impact of rate changes on our Economic Value of Equity, or EVE.
Potential changes to our net interest income in hypothetical rising and declining rate scenarios calculated as of December 31, 2023, 2022 and 2021 are presented in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income Sensitivity ​ ​ 12 Month Projection ​ 24 Month Projection ​ (Ramp in basis points) +200 -200 +200 -200 December 31, 2023 (0.90) % 0.00 % 1.50 % 7.80 % December 31, 2022 (1.60) % 2.50 % 21.60 % 12.90 % December 31, 2021 (3.60) % (1.20) % (8.70) % (10.30) % ​ We also model the impact of rate changes on our Economic Value of Equity, or EVE.
Our simulation model incorporates interest rate shocks of +/- 100, 200, and 300 basis points.
Our simulation model incorporates interest rate shocks of +/- 100, 200, 300 and 400 basis points.
We have identified interest rate risk as our primary source of market risk. 62 Table of Contents Interest Rate Risk Interest rate risk is the risk to earnings and value arising from changes in market interest rates.
We have identified interest rate risk as our primary source of market risk. 65 Table of Contents Interest Rate Risk Interest rate risk is the risk to earnings and value arising from changes in market interest rates.

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