10q10k10q10k.net

What changed in FIRST COMMUNITY CORP /SC/'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of FIRST COMMUNITY CORP /SC/'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+493 added−556 removedSource: 10-K (2026-03-16) vs 10-K (2025-03-14)

Top changes in FIRST COMMUNITY CORP /SC/'s 2025 10-K

493 paragraphs added · 556 removed · 399 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+40 added−40 removed184 unchanged
Biggest changeUnder the final rules, which went into effect on January 1, 2020, depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets, and trading assets plus trading liabilities of 5% or less of total consolidated assets, are deemed “qualifying community banking organizations” and are eligible to opt into the “community bank leverage ratio framework.” A qualifying community banking organization that elects to use the community bank leverage ratio framework and that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III rules and, if applicable, is considered to have met the “well capitalized” ratio requirements for purposes of its primary federal regulator’s prompt corrective action rules, discussed below.
Biggest changeA qualifying community banking organization that elects the CBLR framework and maintains a leverage ratio at or above the applicable threshold is deemed to satisfy the generally applicable risk-based and leverage capital requirements under Basel III and, if applicable, the “well capitalized” requirements for prompt corrective action purposes.
As a bank holding company, the Company’s ability to declare and pay dividends is dependent on certain federal and state regulatory considerations, including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies.
Dividends . As a bank holding company, the Company’s ability to declare and pay dividends is dependent on certain federal and state regulatory considerations, including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies.
Financial Subsidiaries. Under the Gramm-Leach-Bliley Act, otherwise referred to as the GLBA, subject to certain conditions imposed by their respective banking regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible.
Under the Gramm-Leach-Bliley Act, otherwise referred to as the GLBA, subject to certain conditions imposed by their respective banking regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible.
The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as: · the Dodd-Frank Act that created the Consumer Financial Protection Bureau (“CFPB”), an independent regulatory authority housed within the Federal Reserve, which has broad rule-making authority over a wide range of consumer laws that apply to insured depository institutions; · the Truth-In-Lending Act (“TILA”) and Regulation Z, governing disclosures of credit terms to consumer borrowers and including substantial requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act; · the Home Mortgage Disclosure Act (“HMDA”) and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves, and requiring collection and disclosure of data about applicant and borrower characteristics to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes; · the Equal Credit Opportunity Act (“ECOA”) and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other prohibited factors in any aspect of a credit transaction; · the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, and Regulation V, governing the use of consumer reports, provision of information to credit reporting agencies, certain identity theft protections, and certain credit and other disclosures, and requiring banks to have in place an “identity theft red flags” program to detect, prevent and mitigate identity theft. · the Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending to eliminate abusive, deceptive, and unfair debt collection practices; · the Real Estate Settlement Procedures Act (“RESPA”) and Regulation X, which governs various aspects of residential mortgage loans, including the settlement and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to compensation of service providers, insurance escrow accounts, and loss mitigation procedures; · The Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) which mandates a nationwide licensing and registration system for residential mortgage loan originators.
The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as: · the Dodd-Frank Act that created the Consumer Financial Protection Bureau (“CFPB”), an independent regulatory authority housed within the Federal Reserve, which has broad rule-making authority over a wide range of consumer laws that apply to insured depository institutions; · the Truth-In-Lending Act (“TILA”) and Regulation Z, governing disclosures of credit terms to consumer borrowers and including substantial requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act; · the Home Mortgage Disclosure Act (“HMDA”) and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves, and requiring collection and disclosure of data about applicant and borrower characteristics to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes; 17 · the Equal Credit Opportunity Act (“ECOA”) and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other prohibited factors in any aspect of a credit transaction; · the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, and Regulation V, governing the use of consumer reports, provision of information to credit reporting agencies, certain identity theft protections, and certain credit and other disclosures, and requiring banks to have in place an “identity theft red flags” program to detect, prevent and mitigate identity theft. · the Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending to eliminate abusive, deceptive, and unfair debt collection practices; · the Real Estate Settlement Procedures Act (“RESPA”) and Regulation X, which governs various aspects of residential mortgage loans, including the settlement and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to compensation of service providers, insurance escrow accounts, and loss mitigation procedures; · The Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) which mandates a nationwide licensing and registration system for residential mortgage loan originators.
The deposit operations of the Bank also are subject to laws, such as the following federal laws: · the FDIA, which, among other things, imposes a minimum amount of deposit insurance available per account to $250,000 and imposes other limits on deposit-taking; · the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; · the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; · the Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; · The Expedited Funds Availability Act (“EFA Act”) and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and · the Truth in Savings Act (“TISA”) and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.
The deposit operations of the Bank also are subject to laws, such as the following federal laws: · the FDIA, which, among other things, imposes a minimum amount of deposit insurance available per account to $250,000 and imposes other limits on deposit-taking; · the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; · the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; 18 · the Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; · The Expedited Funds Availability Act (“EFA Act”) and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and · the Truth in Savings Act (“TISA”) and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.
Board and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including: · security devices and procedures; · adequacy of capitalization and allowance for credit losses; · loans; · investments; · borrowings; · deposits; · mergers; · issuances of securities; · payment of dividends; · interest rates payable on deposits; · interest rates or fees chargeable on loans; · establishment of branches; · corporate reorganizations; · maintenance of books and records; and · adequacy of staff training to carry on safe lending and deposit gathering practices.
Board and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including: · security devices and procedures; · adequacy of capitalization and allowance for credit losses; · loans; · investments; · borrowings; · deposits; 13 · mergers; · issuances of securities; · payment of dividends; · interest rates payable on deposits; · interest rates or fees chargeable on loans; · establishment of branches; · corporate reorganizations; · maintenance of books and records; and · adequacy of staff training to carry on safe lending and deposit gathering practices.
The federal banking regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to the following: · internal controls; · information systems and audit systems; · loan documentation; · credit underwriting; · interest rate risk exposure; and · asset quality. Dividends.
The federal banking regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to the following: · internal controls; · information systems and audit systems; · loan documentation; · credit underwriting; · interest rate risk exposure; and · asset quality. 15 Dividends.
The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator; · The Homeowners Protection Act (“HPA”), or the PMI Cancellation Act, provides requirements relating to private mortgage insurance (PMI) on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; · The Fair Housing Act (“FHA”) prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; 18 · The Servicemembers Civil Relief Act (“SCRA”) and Military Lending Act (“MLA”), providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; · Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners; and · the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annual registration as either a federal or state licensed mortgage loan originator; · The Homeowners Protection Act (“HPA”), or the PMI Cancellation Act, provides requirements relating to private mortgage insurance (PMI) on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; · The Fair Housing Act (“FHA”) prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; · The Servicemembers Civil Relief Act (“SCRA”) and Military Lending Act (“MLA”), providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; · Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners; and · the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
These limitations require disclosure of privacy policies and notices to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. Consumers must be notified in the event of a data breach under applicable state laws.
These limitations require disclosure of privacy policies and notices to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. 20 Consumers must be notified in the event of a data breach under applicable state laws.
Two statutes, the Change in Bank Control Act and the Bank Holding Company Act, together with regulations promulgated under them, require some form of regulatory review before any company may acquire “control” of a bank or a bank holding company.
Two statutes, the Change in Bank Control Act (“CBCA”) and the Bank Holding Company Act, together with regulations promulgated under them, require some form of regulatory review before any company may acquire “control” of a bank or a bank holding company.
The comment period closed on August 5, 2022. On October 24, 2023, the OCC, the FDIC, and the Federal Reserve issued the final rule to strengthen and modernize regulations implementing the CRA.
The comment period closed on August 5, 2022. On October 24, 2023, the OCC, the FDIC, and the Federal Reserve issued a final rule to strengthen and modernize regulations implementing the CRA.
The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and state supervisor when applicable.
The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and state supervisor whenever applicable.
On the same day that the OCC announced its plans to rescind the CRA final rule, the OCC, the FDIC, and the Federal Reserve announced that they are working together to “strengthen and modernize the rules implementing the CRA.” On May 5, 2022, the OCC, FDIC, and Federal Reserve released a notice of proposed rulemaking regarding the CRA and invited public comment on the proposed rules.
On the same day that the OCC announced its plans to rescind the CRA final rule, the OCC, the FDIC, and the Federal Reserve announced that they were working together to “strengthen and modernize the rules implementing the CRA.” On May 5, 2022, the OCC, FDIC, and Federal Reserve released a notice of proposed rulemaking regarding the CRA and invited public comment on the proposed rules.
The Federal Reserve also has the authority under the Bank Holding Company Act to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company.
The Federal Reserve also has the authority under the Bank Holding Company Act to require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary (other than a non-bank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company.
We refer to the three-county area of Aiken County (South Carolina), Richmond County (Georgia) and Columbia County (Georgia) as the “CSRA” region. On March 14, 2022, we opened a loan production office in York County, South Carolina, which has the second highest county median household income in South Carolina.
We refer to the three-county area of Aiken County (South Carolina), Richmond County (Georgia) and Columbia County (Georgia) as the “CSRA” region. On March 14, 2022, we opened a loan production office in York County, South Carolina, which has the fourth highest county median household income in South Carolina.
The Bank is subject to certain requirements and reporting obligations under the CRA, which requires federal banking regulators to evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate- income neighborhoods.
Community Reinvestment Act. The Bank is subject to certain requirements and reporting obligations under the CRA, which requires federal banking regulators to evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate- income neighborhoods.
Further, federal law grants federal bank regulatory authorities’ additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.
Further, federal law grants federal bank regulatory authorities’ additional discretion to require a bank holding company to divest itself of any bank or non-bank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.
We made this opt-out election and, as a result, retained our pre-existing treatment for AOCI. Proposed new rules for U.S. implementation of capital requirements under Basel IV rules, more recently referred to as the “Basel III Endgame,” were issued by the U.S. federal banking agencies on July 27, 2023.
We made this opt-out election and, as a result, retained our pre-existing treatment for AOCI. 9 Proposed new rules for U.S. implementation of capital requirements under Basel IV rules, referred to as the “Basel III Endgame,” were issued by the U.S. federal banking agencies on July 27, 2023.
In summary, a financial holding company can engage in activities that are financial in nature or incidental or complimentary to financial activities, including insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and limited merchant banking activities.
In summary, a financial holding company can engage in activities that are financial in nature or incidental or complementary to financial activities, including insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and limited merchant banking activities.
In light of the growing concern by regulators about relationships between chartered financial institutions and their third-party service providers, the FDIC joined the other federal supervisory agencies in passing the Interagency Guidance on Third-Party Relationships: Risk Management. This new guidance provided risk management oversight guidelines for financial institutions to incorporate in their ongoing relationships with third party vendors.
In light of the growing concern by regulators about relationships between chartered financial institutions and their third-party service providers, the FDIC joined the other federal supervisory agencies in issuing the Interagency Guidance on Third-Party Relationships: Risk Management. This guidance provided risk management oversight guidelines for financial institutions to incorporate in their ongoing relationships with third-party vendors.
Thus, if payment of such a management fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or dividend to the bank holding company. 15 As of December 31, 2024, the Bank was deemed to be “well capitalized.” Standards for Safety and Soundness .
Thus, if payment of such a management fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or dividend to the bank holding company. As of December 31, 2025, the Bank was deemed to be “well capitalized.” Standards for Safety and Soundness .
Proposed Legislation and Regulatory Action . From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.
From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system.
For example, in November 2023, the FDIC implemented a special assessment to recover the approximately $16.3 billion loss to the Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank earlier in the year.
For example, in November 2023, the FDIC implemented a special assessment to recover the approximately $16.3 billion loss to the Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank, New York, NY earlier in the year.
They must adhere to know your customer and enhanced due diligence requirements, particularly for high-risk customers and foreign institutions, to prevent money laundering and terrorism financing. Institutions must also report suspicious activities to law enforcement and ensure compliance with risk-based customer due diligence procedures.
They must adhere to “knowing your customer” and enhanced due diligence requirements, particularly for high-risk customers and foreign institutions, to prevent money laundering and terrorism financing. Institutions must also report suspicious activities to law enforcement and ensure compliance with risk-based customer due diligence procedures.
Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “First Community Bank—Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws. 13 Dividends .
Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “First Community Bank—Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without prior regulatory approval, subject to compliance with federal and state securities laws.
These agencies, and the federal and state laws applicable to the Bank’s operations, extensively regulate various aspects of our banking business, including, among other things, permissible types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and on deposits, the maintenance of reserves on demand deposit liabilities, and the safety and soundness of our banking practices. 14 Prompt Corrective Action.
These agencies, and the federal and state laws applicable to the Bank’s operations, extensively regulate various aspects of our banking business, including, among other things, permissible types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and on deposits, the maintenance of reserves on demand deposit liabilities, and the safety and soundness of our banking practices.
Multiple states and Congress are considering laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that will impose upon banking organizations and their service providers new notification requirements for significant cybersecurity incidents.
Multiple states and Congress are considering laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that required banking organizations and their service providers to implement new notification requirements for significant cybersecurity incidents.
In January 2025, Acting FDIC Chairman Travis Hill announced plans to withdraw the proposed amendments to Section 29 of the FDIC. The decision to withdraw these proposals aligns with the administration’s broader deregulatory agenda, which includes revisiting and potentially rescinding various financial regulations established during the previous administration. Regulatory Examination .
In January 2025, Acting FDIC Chairman Travis Hill announced plans to withdraw the proposed amendments to Section 29 of the Federal Deposit Insurance Act. The decision to withdraw these proposals aligns with the current administration’s broader deregulatory agenda, which includes revisiting and potentially rescinding various financial regulations established during the previous administration. Regulatory Examination .
These proposed rules include broad-based changes to the risk-weighting framework for various credit exposures and operational risk capital requirements. However, the proposed rules generally apply only to large banking organizations with total assets of $100 billion or more, and are expected to not be applicable to us.
These proposed rules include broad-based changes to the risk-weighting framework for various credit exposures and operational risk capital requirements. The proposed rules are generally intended to apply only to large banking organizations with total assets of $100 billion or more, and, if finalized as proposed, are not expected to be applicable to us.
Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities: · banking or managing or controlling banks; · furnishing services to or performing services for our subsidiaries; and · any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking; Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include: · factoring accounts receivable; · making, acquiring, brokering or servicing loans and usual related activities; · leasing personal or real property; · operating a non-bank depository institution, such as a savings association; · trust company functions; · financial and investment advisory activities; · conducting discount securities brokerage activities; · underwriting and dealing in government obligations and money market instruments; · providing specified management consulting and counseling activities; · performing selected data processing services and support services; · acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and · performing selected insurance underwriting activities. 12 As a bank holding company, we also can elect to be treated as a “financial holding company,” which would allow us to engage in a broader array of activities.
Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities: · banking or managing or controlling banks; · furnishing services to or performing services for our subsidiaries; and · any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking; Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include: · factoring accounts receivable; · making, acquiring, brokering or servicing loans and usual related activities; · leasing personal or real property; · operating a non-bank depository institution, such as a savings association; · trust company functions; · financial and investment advisory activities; · conducting discount securities brokerage activities; · underwriting and dealing in government obligations and money market instruments; · providing specified management consulting and counseling activities; · performing selected data processing services and support services; · acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and · performing selected insurance underwriting activities.
The current executive officers, and persons chosen to become executive officers, and their ages, positions with us over the past five years, and terms of office as of March 14, 2025, are as follows: Name (age) Position and Five Year History with Company With the Company Since Michael C. Crapps (66) Chief Executive Officer and President, Director 1994 J.
The current executive officers, and persons chosen to become executive officers, and their ages, positions with us over the past five years, and terms of office as of March 16, 2026, are as follows: Name (age) Position and Five Year History with Company With the Company Since Michael C. Crapps (67) Chief Executive Officer and President, Director 1994 J.
In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks. Human Capital At December 31, 2024, we had 260 full-time, 10 part-time, and eight seasonal/on-call employees.
In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks. Human Capital At December 31, 2025, we had 265 full-time, 10 part-time, and seven seasonal/on-call employees.
In addition, the prior approval of the FDIC is required for a bank to merge with another bank or purchase the assets or assume the deposits of another bank.
In addition, the FDIC’s prior approval is generally required for a bank to merge with another bank or to purchase the assets of, or assume the deposits of, another bank.
The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans. The FDIC requested comments on a proposal that would amend the regulations implementing Section 29 of the FDIC. Section 29 contains brokered deposits restrictions that apply to less than well capitalized depository institutions.
The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans. The FDIC previously requested comments on a proposal that would amend the regulations implementing Section 29 of the Federal Deposit Insurance Act which contains brokered deposits restrictions that apply to less than well capitalized depository institutions.
As a result, our lending limit will increase or decrease in response to increases or decreases in the Bank’s level of capital. Based upon the capitalization of the Bank at December 31, 2024, the maximum amount we could lend to one borrower is $26.6 million.
As a result, our lending limit will increase or decrease in response to increases or decreases in the Bank’s level of capital. Based upon the capitalization of the Bank at December 31, 2025, the maximum amount we could lend to one borrower is $29.0 million.
The USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S.
Regulators actively enforce compliance, imposing penalties on institutions failing to meet AML/CFT obligations. 19 The USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S.
Ted Nissen (63) Executive Vice President, Chief Banking Officer, and Director; Chief Executive Officer, President, and Director of First Community Bank 1995 Robin D. Brown (57) Chief Human Resources and Marketing Officer 1994 Sarah T. Donley (59) Chief Operations Officer/Chief Risk Officer; formerly Senior Vice President and Controller of First Community Bank 1997 John F.
Ted Nissen (64) Executive Vice President, Chief Banking Officer, and Director; Chief Executive Officer, President, and Director of First Community Bank 1995 Robin D. Brown (58) Chief Human Resources and Marketing Officer 1994 Sarah T. Donley (60) Chief Operations Officer/Chief Risk Officer; formerly Senior Vice President and Controller of First Community Bank 1997 John F.
(Jack) Walker (59) Chief Credit Officer 2009 D. Shawn Jordan (57) Chief Financial Officer 2019 Vaughan R. Dozier, Jr. (44) Co-Chief Commercial and Retail Banking Officer, formerly Senior Vice President and Regional Market President of First Community Bank 2008 Joseph A.
(Jack) Walker (60) Chief Credit Officer 2009 D. Shawn Jordan (58) Chief Financial Officer 2019 Vaughan R. Dozier, Jr. (45) Co-Chief Commercial and Retail Banking Officer; formerly Senior Vice President and Regional Market President of First Community Bank 2008 Joseph A.
At December 31, 2024, we had approximately $2.0 billion in assets, $1.2 billion in loans, $1.7 billion in deposits, and $144.5 million in shareholders’ equity. We offer a wide range of traditional banking products and services for professionals and small-to medium-sized businesses, including consumer and commercial, mortgage, brokerage and investment, and insurance services.
At December 31, 2025, we had approximately $2.1 billion in assets, $1.3 billion in loans, $1.7 billion in deposits, and $167.6 million in shareholders’ equity. We offer a wide range of traditional banking products and services for professionals and small-to medium-sized businesses, including consumer and commercial, mortgage, brokerage and investment, and insurance services.
If there are no comparable transactions, a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies.
If there are no comparable transactions, a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies. These requirements apply to all transactions subject to Section 23A as well as to certain other transactions.
In May 2020, the OCC issued its final CRA rule, which was later rescinded in December 2021, replacing it with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended and superseded by an updated joint framework.
This guidance reflects efforts to modernize CRA evaluations in light of evolving banking practices. In May 2020, the OCC issued its final CRA rule, which was later rescinded in December 2021, replacing it with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended and superseded by an updated joint framework.
The Incentive Compensation Guidance, which covers all employees that have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should comply with the following principles: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. 22 The scope and content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future.
The Incentive Compensation Guidance, which covers all employees that have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should comply with the following principles: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
These requirements apply to all transactions subject to Section 23A as well as to certain other transactions. 11 The affiliates of a bank include any holding company of the bank, any other company under common control with the bank (including any company controlled by the same shareholders who control the bank), any subsidiary of the bank that is itself a bank, any company in which the majority of the directors or trustees also constitute a majority of the directors or trustees of the bank or holding company of the bank, any company sponsored and advised on a contractual basis by the bank or an affiliate, and any mutual fund advised by a bank or any of the bank’s affiliates.
The affiliates of a bank include any holding company of the bank, any other company under common control with the bank (including any company controlled by the same shareholders who control the bank), any subsidiary of the bank that is itself a bank, any company in which the majority of the directors or trustees also constitute a majority of the directors or trustees of the bank or holding company of the bank, any company sponsored and advised on a contractual basis by the bank or an affiliate, and any mutual fund advised by a bank or any of the bank’s affiliates.
(2) All deposit data is based on June 30, 2024 data sourced from S&P Global Market Intelligence. (3) Our full-service banking office in the Piedmont Region opened on October 20, 2022. We believe that we serve attractive banking markets with long-term growth potential and a well-educated employment base that helps to support our diverse and relatively stable local economy.
(2) All deposit data is based on June 30, 2025 data sourced from S&P Global Market Intelligence. We believe that we serve attractive banking markets with long-term growth potential and a well-educated employment base that helps to support our diverse and relatively stable local economy.
If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm.
Institutions in the top two tiers would be subject to rules much more detailed and proscriptive than are currently in effect. If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm.
The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company.
The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company.
Institutions classified as higher risk pay assessments at higher rates than institutions that pose a lower risk. In addition to the ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.
Institutions classified as higher risk pay assessments at higher rates than institutions that pose a lower risk. The initial base assessment rates currently range from approximately five basis points to approximately 32 basis points. In addition to the ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances.
If a depository institution fails to submit an acceptable plan, it is categorized as significantly undercapitalized. Significantly undercapitalized categorized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become categorized as adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks.
If a depository institution fails to submit an acceptable plan, it is categorized as significantly undercapitalized. 14 Significantly undercapitalized categorized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become categorized as adequately capitalized, requirements to reduce total assets, restrictions on deposit interest rates, orders for election of new directors or forced dismissal of executive officers, divestment of certain subsidiaries, and cessation of receipt of deposits from correspondent banks.
The relief, which applies to banks and asset managers that become principal stockholders of banks, will now expire on the earlier of January 1, 2026, or the effective date of a final Federal Reserve rule revising Regulation O.
The federal banking agencies have extended the temporary relief from enforcement actions related to Regulation O multiple times. The relief, which applies to banks and asset managers that become principal stockholders of banks, will now expire on the earlier of January 1, 2027, or the effective date of a final Federal Reserve rule revising Regulation O.
As of June 30, 2024, there were 27 financial institutions operating approximately 158 offices in the Midlands market, 21 financial institutions operating 90 branches in the CSRA market, 41 financial institutions operating 230 branches in the Upstate market, and 18 financial institutions operating 47 branches in the Piedmont market.
As of June 30, 2025, there were 27 financial institutions operating approximately 156 offices in the Midlands market, 23 financial institutions operating 95 branches in the CSRA market, 41 financial institutions operating 229 branches in the Upstate market, and 18 financial institutions operating 47 branches in the Piedmont market.
We expect this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our customers are located. 21 Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.
Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers. 21 Effect of Governmental Monetary Policies.
For a change in control at the holding company level, both the Federal Reserve and the subsidiary bank’s primary federal regulator must approve the change in control; at the bank level, only the bank’s primary federal regulator is involved.
For a change in control at the holding company level, the Federal Reserve is the primary reviewing agency, and the subsidiary bank’s primary federal regulator is provided notice and an opportunity to comment; at the bank level, only the bank’s primary federal regulator is involved.
As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund.
It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund.
As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve under the Bank Holding Company Act and its regulations promulgated thereunder. Moreover, as a bank holding company of a bank located in South Carolina, we also are subject to the South Carolina Banking and Branching Efficiency Act. Permitted Activities.
Moreover, as a bank holding company of a bank located in South Carolina, we also are subject to the South Carolina Banking and Branching Efficiency Act. 11 Permitted Activities.
In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations, and have generally committed to strengthen their coordination efforts. 17 In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals.
In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. Financial Subsidiaries.
Under Basel III, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the buffer amount.
Under Basel III, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.
In August 2023, the FFIEC updated its BSA/AML Examination Manual to clarify risk-based compliance expectations. The FDIC emphasizes oversight of third-party AML/CFT service providers, with enforcement actions against institutions that fail to monitor vendors effectively. 20 The Anti-Money Laundering Act of 2020 led to FinCEN’s Corporate Transparency Act (“CTA”), requiring many corporate entities to disclose beneficial ownership information.
In August 2023, the FFIEC updated its BSA/AML Examination Manual to clarify risk-based compliance expectations. The FFIEC and the FDIC emphasize oversight of third-party AML/CFT service providers, with examination enforcement actions against institutions that fail to monitor vendors effectively.
The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor, or shareholder.
The FDIC’s claim for damages is superior to claims of shareholders of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors, and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions. 12 The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor, or shareholder.
First Community Corporation We own 100% of the outstanding capital stock of the Bank, and, therefore, we are considered to be a bank holding company under the federal Bank Holding Company Act.
First Community Corporation We own 100% of the outstanding capital stock of the Bank, and, therefore, we are considered a bank holding company under the federal Bank Holding Company Act. As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve under the Bank Holding Company Act and its regulations promulgated thereunder.
Certain arrangements are permissible: a bank may offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain foreign transactions are exempt from the general rule.
Certain arrangements are permissible: a bank may offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain foreign transactions are exempt from the general rule. A bank holding company or any bank affiliate also is subject to anti-tying requirements in connection with electronic benefit transfer services.
States continue to take the lead in passing privacy focused legislation. Nine additional states passed some form of consumer privacy protection laws, only some of which include an exemption for entities regulated under GLBA. Congress has proposed significant privacy focused legislation largely targeting technology companies, however, to date, none of these laws have been passed.
A majority of states have now enacted some form of consumer privacy protection laws, many of which include exemptions or partial exemptions for entities regulated under GLBA. Congress has proposed significant privacy focused legislation largely targeting technology companies, however, to date, none of these laws have been enacted.
However, the Federal Reserve did not join the proposed rulemaking. In January 2025, the OCC, FDIC, and Federal Reserve issued additional guidance clarifying that digital and fintech-driven activities may be eligible for CRA credit provided they meet established criteria. This guidance reflects efforts to modernize CRA evaluations in light of evolving banking practices.
However, the Federal Reserve did not join the proposed rulemaking. That proposed rulemaking was later superseded and is no longer in effect. In January 2025, the OCC, the FDIC, and the Federal Reserve issued additional guidance clarifying that digital and fintech-driven activities may be eligible for CRA consideration provided they meet applicable CRA criteria.
We cannot predict what final rules may be adopted, nor how they may be implemented and, therefore, it cannot be determined at this time whether compliance with such policies will adversely affect our ability to hire, retain and motivate our key employees.
We cannot predict what final rules may be adopted, nor how they may be implemented and, therefore, it cannot be determined at this time whether compliance with such policies will adversely affect our ability to hire, retain and motivate our key employees. 22 In addition, the Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law in December 2017, contains certain provisions affecting performance-based compensation.
Based on the Bank’s loan portfolio as of December 31, 2024, its non-owner occupied commercial loans and its construction and land development loans were approximately 305% and 82% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 46% from December 31, 2021 to December 31, 2024.
Based on the Bank’s loan portfolio as of December 31, 2025, non-owner-occupied commercial real estate loans and construction and land development loans were approximately 307% and 71% of total risk-based capital, respectively, and non-owner-occupied commercial real estate loans increased by approximately 37% from December 31, 2022 to December 31, 2025.
If adopted, these amendments could result in more transactions being subject to the Change in Bank Control Act notice requirements and FDIC review. Transactions subject to the Bank Holding Company Act are exempt from Change in Control Act requirements. For state banks, state laws, including those of South Carolina, typically require approval by the state bank regulator as well.
Transactions subject to the Bank Holding Company Act are exempt from Change in Bank Control Act requirements. For state banks, state laws, including those of South Carolina, typically require approval by the state bank regulator as well. Transactions with Affiliates and Insiders. The Company is a legal entity separate and distinct from the Bank and its other subsidiaries.
SUPERVISION AND REGULATION Both the Company and the Bank are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of our operations.
There are no family relationships among any of the executive officers, and there are no arrangements or understandings between any executive officer and any other person pursuant to which such officer was selected, other than arrangements with the Company’s Board of Directors. 8 SUPERVISION AND REGULATION Both the Company and the Bank are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of our operations.
Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, in which they argued that the federal banking agencies exceeded their statutory authority in adopting the CRA final rule. In March 2024, a federal judge granted an injunction to extend the CRA final rule’s effective date, originally set for April 1, 2024.
Several banking industry groups filed a lawsuit seeking to invalidate the CRA final rule, arguing that the federal banking agencies exceeded their statutory authority in adopting the rule. In March 2024, a federal judge granted an injunction preventing the CRA final rule from taking effect. The OCC, the FDIC, and the Federal Reserve appealed the injunction.
The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.
Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.
If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties. In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.
In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.
In 2016, federal agencies proposed regulations which could significantly change the regulation of incentive compensation programs at financial institutions. The proposal would create four tiers of institutions based on asset size. Institutions in the top two tiers would be subject to rules much more detailed and proscriptive than are currently in effect.
The scope and content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. In 2016, federal agencies proposed regulations which could significantly change the regulation of incentive compensation programs at financial institutions. The proposal would create four tiers of institutions based on asset size.
The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions (the “S.C. Board”).
The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions (the “S.C. Board”). Unless otherwise mentioned or unless the context requires otherwise, references herein to “First Community,” “we,” “us,” “our” or similar references mean First Community Corporation and its consolidated subsidiaries.
These moves have been met with legal challenges and public debate regarding the future of the agency. 19 Bank regulators take into account compliance with consumer protection laws when considering approval of a proposed expansionary proposals. Enforcement Powers.
Bank regulators take into account compliance with consumer protection laws when considering approval of proposed expansionary proposals. Enforcement Powers.
In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the CRA.
In acting on acquisition applications, the federal banking agencies consider, among other factors, competitive effects, the public benefits expected to be received, post-transaction capital levels, and the applicant’s record of meeting community credit needs, including the needs of low- and moderate-income neighborhoods, consistent with safe and sound operation, under the CRA.
Regulators are also empowered to place in receivership or require the sale of a bank to another depository institution when a bank’s leverage ratio reaches two percent. Better capitalized institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital. The FDIC’s regulations set forth five capital categories, each with specific regulatory consequences.
Better capitalized institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital. The FDIC’s regulations set forth five capital categories, each with specific regulatory consequences. The categories are: · Well Capitalized—The institution exceeds the required minimum level for each relevant capital measure.
The FDICIA established a “prompt corrective action” program in which every bank is placed in one of five regulatory categories, depending primarily on its regulatory capital levels. The FDIC and the other federal banking regulators are permitted to take increasingly severe action as a bank’s capital position or financial condition declines below the “Adequately Capitalized” level described below.
Prompt Corrective Action. The FDICIA established a “prompt corrective action” program in which every bank is placed in one of five regulatory categories, depending primarily on its regulatory capital levels.
In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the Company’s ability to pay dividends or otherwise engage in capital distributions.
In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. Likewise, under the proposed Basel III Endgame rules, banks subject to the new framework could face increased capital requirements that may impact dividend policies and capital distribution strategies.
Under the standards, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence. In 2024, the Federal Reserve indicated it may revisit certain aspects of this framework to address evolving market structures and investor behavior, though no formal rulemaking has been issued.
Under the standards, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.
According to S&P Global Market Intelligence, 2025 median household incomes for each of the counties in the regions noted above were as follows: Richland County, SC $ 64,520 Lexington County, SC $ 74,805 Newberry County, SC $ 62,392 Kershaw County, SC $ 62,464 Greenville County, SC $ 73,698 Anderson County, SC $ 63,945 Pickens County, SC $ 58,326 Aiken County, SC $ 67,850 Richmond County, GA $ 51,339 Columbia County, GA $ 95,838 York County, SC $ 89,527 The county estimates noted above compare to 2025 statewide median household income estimates of $67,758 and $75,118 for South Carolina and Georgia, respectively.
According to S&P Global Market Intelligence, 2026 median household incomes for each of the counties in the regions noted above were as follows: Richland County, SC $ 68,296 Lexington County, SC $ 82,807 Newberry County, SC $ 68,516 Kershaw County, SC $ 74,302 Greenville County, SC $ 85,125 Anderson County, SC $ 72,272 Pickens County, SC $ 63,817 Aiken County, SC $ 72,345 Richmond County, GA $ 83,218 Columbia County, GA $ 101,226 York County, SC $ 91,323 The county estimates noted above illustrate differences between South Carolina and Georgia in 2026 statewide median household income estimates of $74,877 and $83,364, respectively.
If a pattern or practice of lending discrimination is alleged by a regulator, then the matter may be referred by the agency to the DOJ for investigation.
If a pattern or practice of lending discrimination is alleged by a regulator, then the matter may be referred by the agency to the DOJ for investigation. In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations, and have generally committed to strengthen their coordination efforts.
The final rule took effect on April 1, 2022 and banks and their service providers must have complied with the requirements of the rule by May 1, 2022. Effective December 9, 2022, the FTC’s amendments to GLBA’s Safeguards Rule went into effect and financial institutions are continuing to implement this rule including its ongoing monitoring and risk assessment protocols.
The final rule took effect on April 1, 2022 and banks and their service providers must have complied with the requirements of the rule by May 1, 2022.

… 94 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

107 edited+30 added−21 removed148 unchanged
Biggest changeFurther, if, as a result of competitive pressures, market interest rates, alternative investment opportunities that present more attractive returns to customers, general economic conditions or other events, the balance of our deposits decreases relative to our overall banking operations, we may need to rely more heavily on wholesale or other sources of external funding, or may have to increase deposit rates to maintain deposit levels in the future.
Biggest changeWe maintain policies and procedures governing the use of brokered deposits, including limits on brokered deposits as a percentage of total deposits and oversight by management, our Asset/Liability Committee and our board of directors. 30 If, as a result of competitive pressures, changes in market interest rates, alternative investment opportunities, general economic conditions or other factors, our deposit balances decrease or shift toward higher-cost products, we may need to rely more heavily on brokered deposits and other wholesale funding sources or raise deposit rates to maintain deposit levels.
Our governing documents: · authorize a class of preferred stock that may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval; · authorize 20,000,000 shares of common stock and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval; · classify our board with staggered three-year terms, preventing a change in a majority of the board at any annual meeting; · require advance notice of proposed nominations for election to the board of directors and business to be conducted at a shareholder meeting; · grant the board of directors the discretion, when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders, to take into account the effect of the transaction on our employees, clients and suppliers and upon the communities in which we are located, to the extent permitted by South Carolina law; · provide that the number of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer than nine nor more than 25 members; and · provide that no individual who is or becomes a “business competitor” or who is or becomes affiliated with, employed by, or a representative of any individual, corporation, or other entity which the board of directors, after having such matter formally brought to its attention, determines to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a “business competitor”) shall be eligible to serve as a director if the board of directors determines that it would not be in our best interests for such individual to serve as a director (any financial institution having branches or affiliates within the counties in which we operate is presumed to be a business competitor unless the board of directors determines otherwise).
Our governing documents: · authorize a class of preferred stock that may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval; · authorize 20,000,000 shares of common stock and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval; · classify our board with staggered three-year terms, preventing a change in a majority of the board at any annual meeting; 37 · require advance notice of proposed nominations for election to the board of directors and business to be conducted at a shareholder meeting; · grant the board of directors the discretion, when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders, to take into account the effect of the transaction on our employees, clients and suppliers and upon the communities in which we are located, to the extent permitted by South Carolina law; · provide that the number of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer than nine nor more than 25 members; and · provide that no individual who is or becomes a “business competitor” or who is or becomes affiliated with, employed by, or a representative of any individual, corporation, or other entity which the board of directors, after having such matter formally brought to its attention, determines to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a “business competitor”) shall be eligible to serve as a director if the board of directors determines that it would not be in our best interests for such individual to serve as a director (any financial institution having branches or affiliates within the counties in which we operate is presumed to be a business competitor unless the board of directors determines otherwise).
Moreover, unexpected shifts in domestic or international economic policies, or abrupt changes in market conditions, could lead to rapid alterations in the yield curve and further impact the broader financial system. Adverse developments affecting the financial services industry, such as the 2023 and 2024 bank failures or concerns involving liquidity, may have a material adverse effect on our operations.
Moreover, unexpected shifts in domestic or international economic policies, or abrupt changes in market conditions, could lead to rapid alterations in the yield curve and further impact the broader financial system. 28 Adverse developments affecting the financial services industry, such as the 2023 and 2024 bank failures or concerns involving liquidity, may have a material adverse effect on our operations.
In addition, any new or acquired banking offices will be subject to regulatory approval, and there can be no assurance that we will succeed in securing such approval. Risks Related to Our Human Capital We are dependent on key individuals, and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects.
In addition, any new or acquired banking offices will be subject to regulatory approval, and there can be no assurance that we will succeed in securing such approval. 31 Risks Related to Our Human Capital We are dependent on key individuals, and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects.
Although we take steps to minimize reputation risk, this risk will always be present given the nature of our business. 33 Legal, Accounting, Regulatory and Compliance Risks We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business.
Although we take steps to minimize reputation risk, this risk will always be present given the nature of our business. Legal, Accounting, Regulatory and Compliance Risks We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business.
Although we have historically paid cash dividends on our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend in the future. Our stock price may be volatile, which could result in losses to our investors and litigation against us.
Although we have historically paid cash dividends on our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend in the future. 36 Our stock price may be volatile, which could result in losses to our investors and litigation against us.
Loss of part or all of our DTAs would have a material adverse effect on our financial condition and results of operations. 35 Our ability to realize deferred tax assets may be reduced, which may adversely impact our results of operations.
Loss of part or all of our DTAs would have a material adverse effect on our financial condition and results of operations. Our ability to realize deferred tax assets may be reduced, which may adversely impact our results of operations.
These types of threats may derive from human error, fraud or malice on the part of external or internal parties or may result from accidental technological failure. Our technologies, systems, networks and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual attempts to sophisticated and targeted measures directed at us.
These types of threats may derive from human error, fraud or malice on the part of external or internal parties or may result from accidental technological failure. Our technologies, systems, networks and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual attempts to sophisticated and targeted measures aimed at us.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. We are subject to fair lending laws, and failure to comply with these laws could lead to material penalties.
Based on projections of future taxable income in periods in which deferred tax assets are expected to become deductible, management determined that the realization of our net deferred tax asset was more likely than not. As a result, we did not recognize a valuation allowance on our net deferred tax asset as of December 31, 2024.
Based on projections of future taxable income in periods in which deferred tax assets are expected to become deductible, management determined that the realization of our net deferred tax asset was more likely than not. As a result, we did not recognize a valuation allowance on our net deferred tax asset as of December 31, 2025.
The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgements, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm. We could be adversely affected by changes in tax laws and regulations or the interpretations of such laws and regulations.
The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm. We could be adversely affected by changes in tax laws and regulations or the interpretations of such laws and regulations.
Michael C. Crapps, our president and chief executive officer, and Mr. Nissen, the Bank’s president and chief executive officer, each have extensive and long-standing ties within our primary market area and substantial experience with our operations, and each has contributed significantly to our business. If we lose the services of Mr. Crapps or Mr.
Michael C. Crapps, our president and chief executive officer, and J. Ted Nissen, the Bank’s president and chief executive officer, each have extensive and long-standing ties within our primary market area and substantial experience with our operations, and each has contributed significantly to our business. If we lose the services of Mr. Crapps or Mr.
Although we cannot predict what the insurance assessment rates will be in the future, either deterioration in our risk-based capital ratios or adjustments to the base assessment rates could have a material adverse impact on our business, financial condition, results of operations, and cash flows. We could experience a loss due to competition with other financial institutions or nonbank companies.
Although we cannot predict what the insurance assessment rates will be in the future, either deterioration in our risk-based capital ratios or adjustments to the base assessment rates could have a material adverse impact on our business, financial condition, results of operations, and cash flows. We could experience a loss due to competition with other financial institutions or non-bank companies.
Our information systems may experience failure, interruption or breach in security. In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. Any failure, interruption or breach in security of these systems could result in significant disruption to our operations.
In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. Any failure, interruption or breach in security of these systems could result in significant disruption to our operations.
We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within our loan portfolio monthly.
We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within the Bank’s loan portfolio monthly.
The Bank is subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain and an additional capital conservation buffer. From time to time, the regulators change these regulatory capital adequacy guidelines.
In addition, the Bank is subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain and an additional capital conservation buffer. From time to time, the regulators change these regulatory capital adequacy guidelines.
In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to offer products and services in more areas in which they do not have a physical location and for nonbanks, such as FinTech companies, to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.
In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to offer products and services in more areas in which they do not have a physical location and for non-bank such as FinTech companies, to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.
While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts. Federal, state, and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts. Consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.
Also, as a member of the Federal Home Loan Bank (the “FHLB”), the Bank must comply with applicable regulations of the Federal Housing Finance Board and the FHLB. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders.
Also, as a member of the Federal Home Loan Bank (the “FHLB”), the Bank must comply with applicable regulations of the Federal Housing Finance Agency (“FHFA”) and the FHLB. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders.
New or acquired banking office facilities and other facilities may not be profitable. We may not be able to identify profitable locations for new banking offices. The costs to start up new banking offices or to acquire existing branches, and the additional costs to operate these facilities, may increase our non-interest expense and decrease our earnings in the short term..
We may not be able to identify profitable locations for new banking offices. The costs to start up new banking offices or to acquire existing branches, and the additional costs to operate these facilities, may increase our non-interest expense and decrease our earnings in the short term.
Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board.
Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. In addition, the FDIC and the S.C.
Accordingly, we may be unable to anticipate these techniques or to implement zero risk security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk.
Accordingly, we may be unable to anticipate these techniques or to implement fully effective security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk.
The high-profile bank failures in 2023 and 2024 involving Silicon Valley Bank, Signature Bank, First Republic Bank, and Republic First Bank caused general uncertainty and concern regarding the liquidity adequacy of the banking sector.
The high-profile bank failures in 2023 and 2024 involving Silicon Valley Bank, Signature Bank, New York, NY, First Republic Bank, and Republic First Bank caused general uncertainty and concern regarding the liquidity adequacy of the banking sector.
Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At December 31, 2024, commercial business loans comprised 7.1% of our total loan portfolio.
Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. At December 31, 2025, commercial business loans comprised 7.0% of our total loan portfolio.
Third parties with whom we do business or that facilitate our business activities, including financial intermediaries, or vendors that provide service or security solutions for our operations, and other unaffiliated third parties, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints.
Third parties with whom we do business or that facilitate our business activities, including financial intermediaries, service providers and other vendors, and other unaffiliated third parties, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints.
The potential impact of the unified Republican government on additional changes in agency structure, personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
The potential impact of changes in government leadership and agency personnel, policies and priorities on the financial services sector, including the Company and the Bank, cannot be fully predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us.
A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the CRA and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition, and results of operations.
A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the CRA and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition, and results of operations. 34 Changes in accounting standards could materially affect our financial statements.
At December 31, 2024, the portfolio was 26.6% of earning assets compared to 29.6% of earning assets at December 31, 2023. Turmoil in the financial markets could impair the market value of our investment portfolio, which could adversely affect our net income and possibly our capital.
At December 31, 2025, the portfolio was 25.2% of earning assets compared to 26.6% of earning assets at December 31, 2024. Turmoil in the financial markets could impair the market value of our investment portfolio, which could adversely affect our net income and possibly our capital.
Information security risks for financial institutions such as ours have increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, and terrorists, activists, and other external parties.
Information security risks for financial institutions such as ours have increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, and state-sponsored actors, hacktivists, and other external parties.
Disruptions or failures in the physical infrastructure or operating systems that support our businesses and clients, or cyber attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputation damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could have a material effect on our results of operations or financial condition.
Disruptions or failures in the physical infrastructure or operating systems that support our businesses and clients, or cyber attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, remediation and notification costs, reputation damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could have a material effect on our results of operations or financial condition. 32 Our information systems may experience failure, interruption or breach in security.
In addition, supervisory limits on commercial loan-to-value exceptions are set at 30% of the Bank’s tier 1 capital plus allowance for credit losses. At December 31, 2024, $5.5 million of our commercial loans, or 3.1% of the Bank’s regulatory capital, exceeded the supervisory loan-to-value ratio.
In addition, supervisory limits on commercial loan-to-value exceptions are set at 30% of the Bank’s tier 1 capital plus allowance for credit losses. At December 31, 2025, $11.2 million of our commercial loans, or 5.8% of the Bank’s regulatory capital, exceeded the supervisory loan-to-value ratio.
These factors include but are not limited to: actual or anticipated variations in earnings, changes in analysts’ recommendations or projections, our announcement of developments related to our businesses, operations and stock performance of other companies deemed to be peers, new technology used or services offered by traditional and non-traditional competitors, news reports of trends, irrational exuberance on the part of investors, new federal banking regulations, and other issues related to the financial services industry.
These factors include but are not limited to: actual or anticipated variations in earnings, changes in analysts’ recommendations or projections, our announcement of developments related to our businesses, operations and stock performance of other companies deemed to be peers, new technology used or services offered by traditional and non-traditional competitors, news reports of trends, changes in investor sentiment, market speculation, new federal banking regulations, and other issues related to the financial services industry.
Negative public opinion surrounding the Bank and the financial institutions industry generally could damage our reputation and adversely impact our earnings. Reputation risk, or the risk to our business, earnings and capital from negative public opinion surrounding the Bank and the financial institutions industry generally, is inherent in our business.
Reputation risk, or the risk to our business, earnings and capital from negative public opinion surrounding the Bank and the financial institutions industry generally, is inherent in our business.
As of December 31, 2024, we had net deferred tax assets of $12.0 million. Realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in which existing deferred tax assets are expected to become deductible for federal income tax purposes.
As of December 31, 2025, we had net deferred tax assets of $10.7 million. Realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in which existing deferred tax assets are expected to become deductible for federal income tax purposes.
We use brokered deposits as a source of funding to support our asset growth, to augment deposits generated from our branch network and to assist in the management of our interest rate risk.
We may from time to time use brokered deposits, including brokered certificates of deposit, as a source of funding to support asset growth, augment deposits generated from our branch network and assist in the management of our interest rate risk.
Risks Related to Our Industry Inflationary pressures and rising prices may affect our results of operations and financial condition. In 2021 through 2022, inflation rose to levels not seen for over 40 years, reaching 7.0% and 6.5%, respectively.
Risks Related to Our Industry Inflationary pressures and rising prices may affect our results of operations and financial condition. In 2021 through 2022, inflation rose to levels not seen for over 40 years, reaching 7.0% and 6.5% (based on CPI-U annual percent change), respectively.
Further, with the risk of any additional bank failures, we may face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations. 28 Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.
Further, with the risk of any additional bank failures, we may face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.
Finally, the Change in Bank Control Act and the Bank Holding Company Act generally require filings and approvals prior to certain transactions that would result in a party acquiring control of the Company or the Bank. 37 An investment in our common stock is not an insured deposit.
Finally, the Change in Bank Control Act and the Bank Holding Company Act generally require filings and approvals prior to certain transactions that would result in a party acquiring control of the Company or the Bank. These requirements can delay, restrict, or prevent a change of control. An investment in our common stock is not an insured deposit.
The prospects for the enactment of major banking reform legislation remain unclear at this time. Furthermore, leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment. Since the change in presidential administration in 2020, key positions across agencies—including the Comptroller of the Currency, CFPB, CFTC, SEC, and the U.S. Treasury—experienced significant turnover.
Because of this kind of oscillation in regulation, the prospects for the enactment of major banking reform legislation remain unclear at this time. Furthermore, leadership changes within federal banking agencies and financial regulators continue to shape the regulatory environment. Since changes in presidential administration, key positions across agencies—including the Comptroller of the Currency, CFPB, CFTC, SEC, and the U.S.
Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans and other extensions of credit may not be repaid.
Making loans and other extensions of credit is an essential element of our business. Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans and other extensions of credit may not be repaid.
Our deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and are subject to deposit insurance assessments to maintain deposit insurance. As an FDIC-insured institution, we are required to pay quarterly deposit insurance premium assessments to the FDIC.
Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition. Our deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and are subject to deposit insurance assessments to maintain deposit insurance. As an FDIC-insured institution, we are required to pay quarterly deposit insurance premium assessments to the FDIC.
We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. In addition, we depend on internal and outsourced technology to support all aspects of our business operations.
Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. In addition, we depend on internal and outsourced technology to support all aspects of our business operations.
Our investment securities portfolio is a significant component of our total earning assets. Total investment securities averaged $491.0 million in 2024, as compared to $541.1 million in 2023. This represents 27.5% and 33.2% of the average earning assets for the years ended December 31, 2024 and 2023, respectively.
Our investment securities portfolio is a significant component of our total earning assets. Total investment securities averaged $499.7 million in 2025, as compared to $491.0 million in 2024. This represents 25.9% and 27.5% of the average earning assets for the years ended December 31, 2025 and 2024, respectively.
From time to time, we may seek to acquire other financial institutions or parts of those institutions. We may also expand into new markets, like we did in York County, South Carolina, which we refer to as the Piedmont Region, in 2022, or lines of business or offer new products or services.
We may also expand into new markets, like we did in York County, South Carolina, which we refer to as the Piedmont Region, in 2022, or into lines of business or offer new products or services.
Our total non-owner-occupied commercial real estate loans represented 305% of the Bank’s total risk-based capital at December 31, 2024, and our construction and land development loans represented 82% of the Bank’s total risk-based capital at December 31, 2024. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 46% from December 31, 2021 to December 31, 2024.
Our total non-owner-occupied commercial real estate loans represented 307% of the Bank’s total risk-based capital at December 31, 2025, and our construction and land development loans represented 71% of the Bank’s total risk-based capital at December 31, 2025. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 37% from December 31, 2022 to December 31, 2025.
From time to time, we are, or may become, the subject of information-gathering requests, reviews, investigations and proceedings, and other forms of regulatory inquiry, including by bank regulatory agencies, self-regulatory agencies, the SEC and law enforcement authorities.
Many aspects of the banking business involve a substantial risk of legal liability. From time to time, we are, or may become, the subject of information-gathering requests, reviews, investigations and proceedings, and other forms of regulatory inquiry, including by bank regulatory agencies, self-regulatory agencies, the SEC and law enforcement authorities.
In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible.
Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible.
Our commercial real estate loans have grown 3.5%, or $31.2 million, since December 31, 2023.
Our commercial real estate loans have grown 6.2%, or $57.5 million, since December 31, 2024.
Securities which have unrealized losses were not considered to be credit loss impaired at December 31, 2024 or at December 31, 2023 and we believe it is more likely than not we will be able to hold these until they mature or recover our current book value.
The effective duration on our total investment securities portfolio was approximately 3.1 at December 31, 2025. 27 Securities which have unrealized losses were not considered to be credit loss impaired at December 31, 2025 or at December 31, 2024 and we believe it is more likely than not we will be able to hold these until they mature or recover our current book value.
As of December 31, 2024, approximately $16.6 million of our loans, or 9.3% of the Bank’s regulatory capital (Tier 1 Capital plus allowance for credit losses), had loan-to-value ratios that exceeded regulatory supervisory guidelines, of which three loans totaling approximately $606 thousand had loan-to-value ratios of 100% or more.
As of December 31, 2025, approximately $23.1 million of our loans, or 11.9% of the Bank’s regulatory capital (Tier 1 Capital plus allowance for credit losses), had loan-to-value ratios that exceeded regulatory supervisory guidelines, of which one loan totaling approximately $350 thousand had a loan-to-value ratio of 100% or more.
However, if we were to cease to have the ability and intent to hold these investments until maturity or the market prices do not recover, and we were to sell these securities at a loss, it could adversely affect our net income and our capital. 27 The Bank is subject to strict capital requirements, which could be amended to be more stringent, in the future.
However, if we were to cease to have the ability and intent to hold these investments until maturity or the market prices do not recover, and we were to sell these securities at a loss, it could adversely affect our net income and our capital.
Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our financial condition and results of operations.
In particular, the capital requirements applicable under Basel III require the Bank to satisfy minimum capital adequacy standards and related buffer requirements. Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our financial condition and results of operations.
Given the relatively low trading volume of our common stock, significant sales of our common stock in the public market, or the perception that those sales may occur, could cause the trading price of our common stock to decline or to be lower than it otherwise might be in the absence of those sales or perceptions. 36 Economic and other circumstances may require us to raise capital at times or in amounts that are unfavorable to us.
Given the relatively low trading volume of our common stock, significant sales of our common stock in the public market, or the perception that those sales may occur, could cause the trading price of our common stock to decline or to be lower than it otherwise might be in the absence of those sales or perceptions.
Such physical risks may have adverse impacts on us, both directly on our business operations and as a result of impacts on our borrowers and counterparties, such as declines in the value of loans, investments, real estate and other assets, disruptions in business operations and economic activity, including supply chains, and market volatility.
Such physical risks may have adverse impacts on us, both directly on our business operations and as a result of impacts on our borrowers and counterparties, such as declines in the value of loans, investments, real estate and other assets, disruptions in business operations and economic activity, including supply chains, and market volatility. 38 The risks associated with climate change are rapidly changing and evolving, making them difficult to assess due to limited data and other uncertainties.
In addition, our credit risk may be exacerbated when the collateral held by the bank cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the bank. Any such losses could have a material adverse effect on our financial condition and results of operations.
In addition, our credit risk may be exacerbated when the collateral held by the bank cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the bank.
Additionally, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities.
Any issuance would also be subject to applicable banking regulatory considerations (including, as applicable, regulatory notice/approval requirements). Additionally, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities.
Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including, changes in market conditions affecting the value of loan collateral and problems affecting the credit of our borrowers.
Industry experience shows that a portion of loans will become delinquent, and a portion of loans will require partial or entire charge-off. Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including changes in market conditions affecting the value of loan collateral and problems affecting the credit of our borrowers.
As of December 31, 2024, we had approximately $921.0 million in loans outstanding to borrowers whereby the collateral securing the loan was commercial real estate, representing approximately 75.5% of our total loans outstanding as of that date. Approximately $283.7 million, or 23.2% of our total loans, and 30.8% of our commercial real estate loans are secured by owner-occupied properties.
As of December 31, 2025, we had approximately $978.5 million in loans outstanding to borrowers whereby the collateral securing the loan was commercial real estate, representing approximately 74.63% of our total loans outstanding as of that date. Approximately $290.0 million, or 22.1% of our total loans, and 29.6% of our commercial real estate loans are secured by owner-occupied properties.
Our failure to compete for these personnel, or the loss of the services of several of such key personnel, could adversely affect our business strategy and materially and adversely affect our business, results of operations, and financial condition. 31 Operational Risks A failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers or other third parties, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
Operational Risks A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers or other third parties, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.
From time to time, FASB, the SEC and our regulators change the financial accounting and reporting standards, or the interpretation thereof, and guidance that govern the preparation and disclosure of external financial statements. Such changes are beyond our control, can be hard to predict and could materially impact how we report and disclose our financial condition and results of operations.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, FASB, the SEC and our regulators change the financial accounting and reporting standards, or the interpretation thereof, and guidance that govern the preparation and disclosure of external financial statements.
In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution.
In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to our Bank if the Bank experiences financial distress.
New lines of business or new products and services may subject us to additional risk. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources.
We currently maintain adequate liquidity which supports our ability to hold these investments until they mature, or until there is a market price recovery.
We currently maintain liquidity resources and contingency funding sources that we believe support our ability to hold these investments until they mature, or until there is a market price recovery.
Additions to the allowance for credit losses would result in a decrease of our net income, and possibly our capital. Federal and state regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs, based on judgments different than those of our management.
Federal and state regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in the amount of our provision or loans charged-off could have a negative effect on our operating results.
The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations.
The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations. Regulatory developments have led to enhanced expectations in areas such as cybersecurity, data privacy, digital asset management, and anti-money laundering.
We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third party relationships and in the performance of the parties with which we have these relationships.
Regulatory guidance and supervisory expectations require us to enhance our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third-party relationships and in the performance of the parties with which we have these relationships.
Our future success depends, 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, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, 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, as well as to create additional efficiencies in our operations.
For example, there could be electrical or telecommunication outages, natural disasters such as earthquakes, tornadoes, and hurricanes, disease pandemics, events arising from local or larger scale political or social matters, including terrorist acts, and as described below, cyber attacks. As noted above, our business relies on our digital technologies, computer and email systems, software, and networks to conduct its operations.
For example, there could be electrical or telecommunication outages, natural disasters such as earthquakes, tornadoes, and hurricanes, public health events, events arising from local or larger scale political or social matters, including terrorist acts, and as described below, cyber attacks.
Under these requirements, in the future, we could be required to provide financial assistance to our Bank if the Bank experiences financial distress. 34 A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds.
A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds.
Fraud-related costs—including regulatory scrutiny, legal liability, and business disruption—could materially impact our operations. Our use of third party vendors and our other ongoing third party business relationships are subject to increasing regulatory requirements and attention. We regularly use third party vendors as part of our business and have substantial ongoing business relationships with other third parties.
We have increased investments in fraud prevention, but losses may still occur, potentially harming our customers, reputation, and financial condition. Fraud-related costs—including regulatory scrutiny, legal liability, and business disruption—could materially impact our operations. Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention.
The development and use of AI by us or our third-party vendors poses significant risks. The evolving legal and regulatory landscape—covering intellectual property, privacy, consumer protection, employment, and more—could force costly changes and heighten non-compliance risks. AI models, especially generative ones, might produce biased, inaccurate, or harmful outputs, disclose confidential information, or infringe on intellectual property rights.
The development and use of AI presents risks and challenges that may adversely impact our business. The development and use of AI by us or our third-party vendors poses significant risks. The evolving legal and regulatory landscape—covering intellectual property, privacy, consumer protection, employment, and more—could force costly changes and heighten non-compliance risks.
In August 2023, Fitch Ratings downgraded the U.S. long-term credit rating from “AAA” to “AA+”, citing expected fiscal deterioration, a high and growing government debt burden, and erosion of governance standards. Subsequently, in November 2023, Moody’s Investors Service revised its outlook on U.S. ratings to negative, reflecting large fiscal deficits and a decline in debt affordability.
Recent developments have heightened concerns about the U.S. credit rating and its potential impact on our business. In August 2023, Fitch Ratings downgraded the U.S. long-term credit rating from “AAA” to “AA+”, citing expected fiscal deterioration, a high and growing government debt burden, and erosion of governance standards.
In 2024 and early 2025, continued regional economic uncertainty—exacerbated by persistent inflation, supply chain disruptions, and subdued consumer spending—has further increased the risks in our primary markets.
In 2025 and early 2026, continued regional economic uncertainty—exacerbated by persistent inflation, elevated interest rates, geopolitical developments, and subdued consumer spending—may further increase the risks in our primary markets.
In 2024 and early 2025, the pace of technological change has accelerated, and the rapid evolution of cybersecurity threats, as well as the need to integrate new digital platforms, has increased the risks associated with failure to adapt. 29 The development and use of AI presents risks and challenges that may adversely impact our business.
Failure to successfully keep pace with technological changes could have a material adverse impact on our business, financial condition, and results of operations. In 2024 and 2025, the pace of technological change has accelerated, and the rapid evolution of cybersecurity threats, as well as the need to integrate new digital platforms, has increased the risks associated with failure to adapt.
Any future regulatory changes or capital constraints could increase our funding costs and impact liquidity. 30 Risks Related to Our Strategy We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.
Risks Related to Our Strategy We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value. From time to time, we may seek to acquire other financial institutions or parts of those institutions.
Though we endeavor to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber-attacks against us, our merchants, our third-party service providers and our customers remain a serious issue. 32 Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risks of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risks of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage.
While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case.
Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.
Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations, increasing our credit risk. Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.
If our Bank is not permitted to pay cash dividends to us, it is unlikely that we would be able to pay cash dividends on our common stock. Moreover, holders of our common stock are entitled to receive dividends only when, and if declared by our board of directors.
Moreover, holders of our common stock are entitled to receive dividends only when, and if declared by our board of directors.
These types of third party relationships are subject to increasingly demanding regulatory requirements and attention by our bank regulators. Recent regulation requires us to enhance our due diligence, ongoing monitoring and control over our third party vendors and other ongoing third party business relationships.
We regularly use third party vendors as part of our business and have substantial ongoing business relationships with other third parties. These types of third-party relationships are subject to increasingly demanding regulatory requirements and attention by our bank regulators.

… 78 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

13 edited+5 added−1 removed7 unchanged
Biggest changeWe maintain an Incident Response Program that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate executive officers, Board-approved committees, regulators, law enforcement and the Audit & Compliance Committee of our board of directors.
Biggest changeWe leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program. 39 We maintain an Incident Response Program that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate executive officers, board-approved committees, and, as appropriate, regulators and law enforcement, in each case consistent with applicable legal requirements and our internal escalation protocols, and the Audit and Compliance Committee of our board of directors.
Governance Our Information Security Officer is accountable for oversight, risk assessment and reporting on our information security program, leveraging the Director of Information Technology Infrastructure and other resources as needed. Responsibilities include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, board training, employee training, and business resilience.
Governance Our Information Security and Third-Party Risk Officer is accountable for oversight, risk assessment and reporting on our information security program, leveraging the Director of Information Technology Infrastructure and other resources as needed. Responsibilities include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, board training, employee training, and business resilience.
The information security program is periodically reviewed and reported upon to the Audit & Compliance Committee of the Board with the goal of addressing changing threats, risks, and conditions. We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology.
The information security program is periodically reviewed and reported upon to the Audit and Compliance Committee of the board with the goal of addressing changing threats, risks, and conditions. We employ an in-depth, layered, defensive strategy that embraces a “security-by-design” philosophy when designing new products, services, and technology.
Our Information Security Officer and Director of Information Technology Infrastructure and Chief Operations/Chief Risk Officer along with other key members of management regularly collaborate with expert resources, industry groups, and regulators to discuss cybersecurity trends and issues and identify best practices.
Our Information Security and Third-Party Risk Officer and Director of Information Technology Infrastructure and Chief Operations/Chief Risk Officer along with other key members of management regularly collaborate with expert resources, industry groups, and regulators to discuss cybersecurity trends and issues and identify best practices.
The Incident Response Plan is coordinated through the Information Security Officer and key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber attacks is severe.
The Incident Response Plan is coordinated through the Information Security and Third-Party Risk Officer and key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber attacks is severe.
The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the Information Security Officer, provides guidance, oversight, monitoring and challenge of the first line’s activities.
The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the Information Security and Third-Party Risk Officer, provides guidance, oversight, monitoring and challenge of the first line’s activities.
Additionally, the Audit & Compliance Committee of our board of directors reviews our cyber security risk profile on a quarterly basis and provides a report to the full board of directors at no later than the next board meeting after their meetings.
Additionally, the Audit and Compliance Committee of our board of directors reviews our cybersecurity risk profile on a quarterly basis and provides a report to the full board of directors no later than the next board meeting after their meetings.
In particular, our Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact and business impact. This committee provides oversight and governance of the technology program and the information security program.
In particular, our Information Security and Third-Party Risk Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact and business impact.
Our Information Security Officer also provides quarterly reports to the Audit & Compliance Committee of our board of directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The executive leadership team and the board of directors review and approve our information security and technology budgets and strategies annually.
Our Information Security and Third-Party Risk Officer also provides quarterly reports to the Audit and Compliance Committee of our board of directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes.
This committee is chaired jointly by the Information Security Officer and Director of Information Technology Infrastructure and made up of key departmental managers from throughout the entire company.
This committee provides oversight and governance of the technology program and the information security program. This committee is chaired jointly by the Information Security and Third-Party Risk Officer and Director of Information Technology Infrastructure and made up of key departmental managers from throughout the entire company. Two executive leadership team members oversee this committee.
Our Information Security Officer has primary oversight of the cybersecurity component of the Bank’s risk management program, together with our Director of Information Technology Infrastructure. Both of these individuals are key members of senior management, reporting directly to the Chief Operations/Chief Risk Officer and as discussed below, periodically to the Audit & Compliance Committee of our board of directors.
Both of these individuals are key members of senior management, reporting directly to the Chief Operating Officer and Chief Risk Officer and, as discussed below, periodically to the Audit and Compliance Committee of our board of directors.
Two executive leadership team members oversee this committee. 39 The Information Security Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, to the Audit & Compliance Committee of our board of directors on a quarterly basis (or more frequently as may be required by the Incident Response Plan).The Audit & Compliance Committee of our board of directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
The Information Security and Third-Party Risk Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, to the Audit and Compliance Committee of our board of directors on a quarterly basis (or more frequently as may be required by the Incident Response Plan).
Our internal systems, processes, and controls are designed to mitigate loss from cyber attacks. To date, cybersecurity threats have not materially affected our company, but we remain diligent, nonetheless. For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption or Breach in Security” in Item 1A. Risk Factors.
For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption or Breach in Security” in Item 1A. Risk Factors.
Removed
We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.
Added
Our Information Security and Third-Party Risk Officer has primary oversight of the cybersecurity component of the Company’s risk management program, together with our Director of Information Technology Infrastructure.
Added
As of the date of this report, cybersecurity threats have not materially affected, and are not reasonably likely to materially affect, the Company, including our business strategy or results of operations or financial condition.
Added
Our internal systems, processes, and controls are designed to mitigate loss from cyber attacks. As noted above, cybersecurity threats have not materially affected and are not reasonably likely to materially affect our company, but we remain diligent, nonetheless.
Added
The Audit and Compliance Committee of our board of directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks.
Added
The executive leadership team and the board of directors review and approve our information security and technology budgets and strategies annually.

Item 2. Properties

Properties — owned and leased real estate

0 edited+0 added−1 removed3 unchanged
Removed
We closed one office in downtown Augusta, Georgia on June 27, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−2 removed8 unchanged
Biggest changeIn addition, the Bank must maintain a capital conservation buffer, above its regulatory minimum capital requirements, consisting entirely of Common Equity Tier 1 capital, in order to avoid restrictions with respect to its payment of dividends to the Company. 41 Unregistered Sales of Equity Securities Pursuant to our Amended and Restated Non-Employee Director Deferred Compensation Plan, non-employee directors may elect to defer all or any part of annual retainer fees payable in respect of the following calendar year to the director for his or her service on the board of directors or any committee of the board of directors.
Biggest changeUnregistered Sales of Equity Securities Pursuant to our Amended and Restated Non-Employee Director Deferred Compensation Plan, non-employee directors may elect to defer all or any part of annual retainer fees payable in respect of the following calendar year for his or her service on the board of directors or any committee of the board of directors.
During the year, a number of deferred stock units are credited quarterly to the director’s account equal to (i) the otherwise payable amount divided by (ii) the fair market value of a share of our common stock on the last trading day of such calendar quarter.
During the year, a number of deferred stock units are credited quarterly to the director’s account equal to (i) the otherwise payable amount of deferred fees divided by (ii) the fair market value of a share of our common stock on the last trading day of such calendar quarter.
In general, a director’s vested account balance will be distributed in a lump sum of our common stock on the 30th day following the participants separation from service. During the year ended December 31, 2024, we credited an aggregate of 8,533 deferred stock units to accounts for directors who elected to defer monthly fees or annual retainer fees for 2024.
In general, a director’s vested account balance will be distributed in a lump sum of our common stock on the 30th day following the participant’s separation from service. During the year ended December 31, 2025, we credited an aggregate of 8,908 deferred stock units to accounts for directors who elected to defer monthly fees or annual retainer fees for 2025.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities. As of February 28, 2025, there were approximately 1,716 shareholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities. As of February 28, 2026, there were approximately 1,856 shareholders of record of our common stock.
High Low Dividends 2024 Quarter ended March 31, 2024 $ 21.90 $ 16.00 $ 0.14 Quarter ended June 30, 2024 $ 18.33 $ 15.40 $ 0.14 Quarter ended September 30, 2024 $ 23.30 $ 16.06 $ 0.15 Quarter ended December 31, 2024 $ 26.48 $ 20.49 $ 0.15 2023 Quarter ended March 31, 2023 $ 22.25 $ 18.30 $ 0.14 Quarter ended June 30, 2023 $ 21.50 $ 16.30 $ 0.14 Quarter ended September 30, 2023 $ 20.00 $ 16.77 $ 0.14 Quarter ended December 31, 2023 $ 22.00 $ 17.00 $ 0.14 Dividend Policy We currently intend to continue to pay quarterly cash dividends on our common stock, subject to approval by our board of directors, although we may elect not to pay dividends or to change the amount of such dividends.
High Low Dividends 2025 Quarter ended March 31, 2025 $ 27.96 $ 21.55 $ 0.15 Quarter ended June 30, 2025 $ 24.94 $ 19.46 $ 0.15 Quarter ended September 30, 2025 $ 29.55 $ 24.00 $ 0.16 Quarter ended December 31, 2025 $ 31.50 $ 25.92 $ 0.16 2024 Quarter ended March 31, 2024 $ 21.90 $ 16.00 $ 0.14 Quarter ended June 30, 2024 $ 18.33 $ 15.40 $ 0.14 Quarter ended September 30, 2024 $ 23.30 $ 16.06 $ 0.15 Quarter ended December 31, 2024 $ 26.48 $ 20.49 $ 0.15 Dividend Policy We currently intend to continue to pay quarterly cash dividends on our common stock, subject to approval by our board of directors, although we may elect not to pay dividends or to change the amount of such dividends.
The 2024 Repurchase Plan expires at the market close on May 13, 2025. Item 6. [Reserved].
No repurchases have been made under the 2025 Repurchase Plan. The 2025 Repurchase Plan expires at the market close on May 8, 2026. No repurchases were made in any month during the fourth quarter of 2025. Item 6. [Reserved].
These deferred stock units include dividend equivalents in the form of additional stock units. The deferred stock units were issued pursuant to an exemption from registration under the Securities Act of 1933 in reliance upon Section 4(a)(2) of the Securities Act of 1933.
These deferred stock units include dividend equivalents in the form of additional stock units.
Removed
Repurchases of Equity Securities On April 20, 2022, we announced that our board of directors approved the repurchase of up to 375,000 shares of our common stock. No repurchases were made under such repurchase plan before it expired at the market close on December 31, 2023.
Added
In addition, the Bank must maintain a capital conservation buffer, above its regulatory minimum capital requirements, consisting entirely of Common Equity Tier 1 capital, in order to avoid restrictions with respect to its payment of dividends to the Company.
Removed
On May 14, 2024, we announced that our board of directors approved a plan to utilize up to $7.1 million of capital to repurchase shares of our common stock (the “2024 Repurchase Plan”), which represented approximately 5.3% of our shareholders’ equity at the time of the announcement. No repurchases have been made under the 2024 Repurchase Plan.
Added
The deferred stock units were credited (and any shares of common stock issued upon settlement of such units will be issued) in reliance upon Section 4(a)(2) of the Securities Act because the issuance is not a public offering and the participants had access to information regarding the Company. 41 Repurchases of Equity Securities On May 9, 2025, we announced that our board of directors approved a plan to utilize up to $7.5 million of capital to repurchase shares of our common stock (the “2025 Repurchase Plan”).

Item 7. Management's Discussion & Analysis

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

170 edited+16 added−91 removed127 unchanged
Biggest changeWe had 268 full-time employees, 14 part-time employees, and five seasonal/on-call employees at December 31, 2023 compared to 254 full-time employees, seven part-time employees, and eight seasonal/on-call employees at December 31, 2022. · Occupancy expense increased $155 thousand to $3.2 million during the twelve months ended December 31, 2023 compared to $3.0 million during the same period in 2022 primarily related to the opening of our York County, South Carolina office in 2022, the expansion of our Southlake operations and support location in Lexington, South Carolina, and higher maintenance expense partially offset by lower janitorial expense. · Equipment expense increased $223 thousand to $1.6 million during the twelve months ended December 31, 2023 compared to $1.3 million during the same period in 2022 primarily due to higher equipment maintenance and repair, equipment depreciation, and auto expense. · Marketing and public relations increased $237 thousand to $1.5 million during the twelve months ended December 31, 2023 from $1.3 million during the same period in 2022 primarily due to media production and campaigns. · FDIC assessments increased $436 thousand to $904 thousand during the twelve months ended December 31, 2023 compared to $468 thousand during the same period in 2022 due to an increase in our FDIC assessment rate. · Other real estate expenses declined $420 thousand to $112 thousand in contra expenses or credits during the twelve months ended December 31, 2023 compared to $308 thousand in expenses during the same period in 2022 primarily due to a reversal in accruals for real estate taxes on a non-accrual loan, which were either paid by the borrower or recovered as a result of the sale of the real estate. · Other expense increased $753 thousand to $10.1 million during the twelve months ended December 31, 2023 compared to $9.4 million during the same period in 2022, which included o Computer service expense, which includes core banking and electronic processing and services, ATM/debit card processing, software subscriptions and services and wire processing fees, increased $344 thousand primarily due to higher customer activity and enhanced technology solutions. o Debit card and fraud losses increased $137 thousand due to an extraordinary spike in mail check fraud losses during the third quarter of 2023. o Telephone expense increased $131 thousand primarily due to a change in our telecommunications vendor, which resulted in paying two vendors for a period of time. o Director fees increased $113 thousand primarily due to an increase in director compensation, which includes an increase in director stock awards. o Loan processing and closing costs increased $65 thousand due to an increase in loans. o Correspondent services increased $51 thousand. o Legal and professional fees declined $135 thousand primarily due to lower legal expense. o Investment advisory services declined $80 thousand. 65 The following table sets forth for the periods indicated the primary components of noninterest expense: Year ended December 31, (In thousands) 2024 2023 2022 Salaries and employee benefits $ 29,263 $ 25,864 $ 25,357 Occupancy 3,094 3,157 3,002 Equipment 1,451 1,566 1,343 Marketing and public relations 1,511 1,496 1,259 FDIC Insurance assessments 1,177 904 468 Other real estate expense (income) 103 (112 ) 308 Amortization of intangibles 158 158 158 Core banking and electronic processing and services 2,736 2,512 2,469 ATM/debit card processing 1,280 1,074 885 Software subscriptions and services 1,260 1,008 896 Supplies 151 134 134 Telephone 517 485 354 Courier 296 284 279 Correspondent services 303 354 303 Insurance 406 381 358 Debit card and Fraud losses 199 422 285 Investment advisory services 344 329 409 Loan processing and closing costs 236 331 266 Director fees 603 601 488 Legal and Professional fees 1,205 1,042 1,177 Shareholder expense 277 197 221 Other 895 957 834 $ 47,465 $ 43,144 $ 41,253 * Core banking and electronic processing and services includes core processing, bill payment, online banking, remote deposit capture, wire processing services and postage costs for mailing customer notices and statements.
Biggest changeWe responded to this spike with countermeasures including deploying additional resources, and conducting a formal customer education marketing campaign called “THINK TWICE,” which requests customers who have been a victim of fraud to enhance their check authorization processes and upgrade to our current fraud detection system. o Telephone expense increased $32 thousand or 6.6% due to a change in our telecommunications vendor, which resulted in paying two vendors for a period of time and due to a $29 thousand write-off the remainder of a contract related to the closing of our downtown Augusta, Georgia banking office. o Loan processing and closing costs declined $95 thousand or 28.7% primarily due to lower average new loan sizes in 2024 and fees paid for a home equity campaign in 2023. o Legal and professional fees increased $163 thousand, or 15.6%, primarily due to an increase in auditing costs and higher legal expense. 61 The following table sets forth the primary components of noninterest expense for the periods indicated: Year ended December 31, (In thousands) 2025 2024 2023 Salaries and employee benefits $ 31,949 $ 29,263 $ 25,864 Occupancy 3,142 3,094 3,157 Equipment 1,552 1,451 1,566 Marketing and public relations 1,821 1,511 1,496 FDIC Insurance assessments 1,117 1,177 904 Other real estate expense (income) 138 103 (112 ) Amortization of intangibles 158 158 158 Merger 1,264 — — Core banking and electronic processing and services 2,955 2,736 2,512 ATM/debit card processing 1,569 1,280 1,074 Software subscriptions and services 1,576 1,260 1,008 Supplies 159 151 134 Telephone 439 517 485 Courier 313 296 284 Correspondent services 295 303 354 Insurance 435 406 381 Debit card and Fraud losses 209 199 422 Investment advisory services 365 344 329 Loan processing and closing costs 328 236 331 Director fees 649 603 601 Legal and Professional fees 1,533 1,205 1,042 Shareholder expense 289 277 197 Other 1,083 895 957 $ 53,338 $ 47,465 $ 43,144 * Core banking and electronic processing and services include core processing, bill payment, online banking, remote deposit capture, wire processing services and postage costs for mailing customer notices and statements.
However, our net interest margin expanded from the low of 2.77% in the month of February 2024 to 3.04% in month of December 2024. Our cost of funds and cost of deposits peaked in 2024 during the month of August 2024 at 2.23% and 2.05%, respectively.
However, our net interest margin expanded from the low of 2.77% in the month of February 2024 to 3.04% in the month of December 2024. Our cost of funds and cost of deposits peaked in 2024 during the month of August 2024 at 2.23% and 2.05%, respectively.
The yield on our other short-term investments declined to 4.95% for the twelve months ended December 31, 2024 from 5.11% for the same period in 2023 due to the Federal Open Market Committee (FOMC) decreasing the target range of federal funds during the twelve months of 2024 a total of 1.00% to a target federal funds rate range of 4.25% – 4.50% at December 31, 2023 from a target federal funds rate range of 5.25% – 5.50% at December 31, 2024.
The yield on our other short-term investments declined to 4.95% for the twelve months ended December 31, 2024 from 5.11% for the same period in 2023 due to the Federal Open Market Committee (FOMC) decreasing the target range of federal funds during the twelve months of 2024 a total of 1.00% to a target federal funds rate range of 4.25% – 4.50% at December 31, 2024 from a target federal funds rate range of 5.25% – 5.50% at December 31, 2023.
We continue to focus on growing our pure deposits plus customer cash management repurchase agreements (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, IRAs, and customer cash management repurchase agreements) as these accounts tend to be low-cost deposits and assist us in controlling our overall cost of funds.
We continue to focus on growing our pure deposits plus customer cash management repurchase agreements (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, IRAs, and customer cash management repurchase agreements) as these accounts tend to be low-cost deposits and assist us in controlling our overall cost of funds.
There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period.
There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period.
The allowance is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance based on information available to them at the time of their examination.
The allowance is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance based on information available to them at the time of their examination.
When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment.
When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment.
We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits.
We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits.
As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income.
As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income.
Average earning assets increased $154.9 million, or 9.5%, to $1.8 billion for the twelve months ended December 31, 2024 compared to $1.6 billion in the same period of 2023. · The increase in net interest income was primarily due to a higher level of average earning assets partially offset by lower net interest margin. · The increase in average earning assets was due to increases in total loans and interest-bearing deposits in other banks, partially offset by declines in securities and other fed funds sold. · Earning asset yield growth, which included the benefit of a pay-fixed/receive-floating interest rate swap (the “Pay-Fixed Swap Agreement”) described below, was more than offset by the rising cost of funding, leading to the net interest margin compression.
Average earning assets increased $154.9 million, or 9.5%, to $1.8 billion for the twelve months ended December 31, 2024 compared to $1.6 billion in the same period of 2023. 49 · The increase in net interest income was primarily due to a higher level of average earning assets partially offset by lower net interest margin. · The increase in average earning assets was due to increases in total loans and interest-bearing deposits in other banks, partially offset by declines in securities and other fed funds sold. · Earning asset yield growth, which included the benefit of a pay-fixed/receive-floating interest rate swap (the “Pay-Fixed Swap Agreement”) described below, was more than offset by the rising cost of funding, leading to the net interest margin compression.
The one basis point reduction in our reasonable and supportable forecast alternative scenarios factor was driven by an improvement in externally calculated economic forecasts that flow into our model. 46 · The $3.6 million increase in non-interest income is primarily related to an increase in mortgage banking income of $962 thousand, an increase in investment advisory fees of $1.7 million, a decrease in loss on sale of securities of $1.2 million, and an increase of $88 thousand in other non-interest income partially offset by a loss on early extinguishment of debt of $229 thousand and by a decrease in gain on sale of assets of $146 thousand. o The increase in mortgage banking income was primarily driven by higher secondary market production and higher gain on sale margin during the twelve months ended 2024 compared to the prior year period. o The increase in investment advisory fees was primarily driven by higher assets under management during the twelve months ended December 31, 2024 compared to the prior year period. o The increase in other non-interest income was primarily related to an increase in gains on insurance proceeds of $73 thousand and an increase in rental income of $25 thousand partially offset by a loss on disposition of assets on the closing of our downtown Augusta, Georgia banking office of $6 thousand. o Loss on sale of securities improved by $1.2 million to zero during the twelve months ended December 31, 2024 compared to a loss of $1.2 million during the same period in 2023.
The one basis point reduction in our reasonable and supportable forecast alternative scenarios factor was driven by an improvement in externally calculated economic forecasts that flow into our model. 47 · The $3.6 million increase in non-interest income is primarily related to an increase in mortgage banking income of $962 thousand, an increase in investment advisory fees of $1.7 million, a decrease in loss on sale of securities of $1.2 million, and an increase of $88 thousand in other non-interest income partially offset by a loss on early extinguishment of debt of $229 thousand and by a decrease in gain on sale of assets of $146 thousand. o The increase in mortgage banking income was primarily driven by higher secondary market production and higher gain on sale margin during the twelve months ended December 31, 2024 compared to the prior year period. o The increase in investment advisory fees was primarily driven by higher assets under management during the twelve months ended December 31, 2024 compared to the prior year period. o The increase in other non-interest income was primarily related to an increase in gains on insurance proceeds of $73 thousand and an increase in rental income of $25 thousand partially offset by a loss on disposition of assets on the closing of our downtown Augusta, Georgia banking office of $6 thousand. o Loss on sale of securities improved by $1.2 million to zero during the twelve months ended December 31, 2024 compared to a loss of $1.2 million during the same period in 2023.
This was primarily due to a return to normal activity during the twelve months ended December 31, 2024 compared to a significant reversal in accruals for real estate taxes on a non-accrual loan, which were either paid by the borrower or recovered as a result of the sale of the real estate. · Other expense increased $597 thousand to $10.7 million during the twelve months ended December 31, 2024 compared to $10.1 million during the same period in 2023, which included o Core banking and electronic processing and services increased $224 thousand or 8.9% primarily due to an increase in the cost of our core service provider, FIS as a result of higher customer activity and enhanced technology. o ATM/debit card processing increased $206 thousand or 19.2% as EFT processing expense increased during the period. o Software subscriptions and services increased $252 thousand or 25.0% due to new subscriptions and higher renewal rates. 64 o Debit card and fraud losses declined $223 thousand, or 52.8%, due to a decline in fraud losses.
This was primarily due to a return to normal activity during the twelve months ended December 31, 2024 compared to a significant reversal in accruals for real estate taxes on a non-accrual loan, which were either paid by the borrower or recovered as a result of the sale of the real estate. · Other expenses increased $597 thousand to $10.7 million during the twelve months ended December 31, 2024 compared to $10.1 million during the same period in 2023, which included o Core banking and electronic processing and services increased $224 thousand or 8.9% primarily due to an increase in the cost of our core service provider, FIS as a result of higher customer activity and enhanced technology. o ATM/debit card processing increased $206 thousand or 19.2% as EFT processing expense increased during the period. o Software subscriptions and services increased $252 thousand or 25.0% due to new subscriptions and higher renewal rates. o Debit card and fraud losses declined $223 thousand, or 52.8%, due to a decline in fraud losses.
Total mortgage production during the twelve months ended December 31, 2024 was $165.6 million, $79.3 million of the production was originated to be sold in the secondary market, $40.9 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $45.4 million of the loan production was commitments for new construction residential real estate loans.
Total mortgage production during the twelve months ended December 31, 2024 was $165.6 million, $79.3 million of the production was originated to be sold in the secondary market, while $40.9 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $45.4 million of the loan production was commitments for new construction residential real estate loans.
Such agencies may require us to recognize additions to the allowance for credit losses based on their judgments about information available to them at the time of their examination. 43 Income Taxes, Deferred Tax Assets, and Deferred Tax Liabilities We are subject to the income tax laws of the U.S., its states, and the municipalities in which we operate.
Such agencies may require us to recognize additions to the allowance for credit losses based on their judgments about information available to them at the time of their examination. Income Taxes, Deferred Tax Assets, and Deferred Tax Liabilities We are subject to the income tax laws of the U.S., its states, and the municipalities in which we operate.
In the following section, we have included a detailed discussion of this process, as well as several tables describing our allowance for credit losses and the allocation of this allowance among our various categories of loans. 42 In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers.
In the following section, we have included a detailed discussion of this process, as well as several tables describing our allowance for credit losses and the allocation of this allowance among our various categories of loans. In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers.
A favorable tax settlement would result in a reduction in our effective income tax rate in the period of resolution. Goodwill and Other Intangible Assets Goodwill represents the cost in excess of fair value of the net assets we acquired (including identifiable intangibles) in purchase transactions.
A favorable tax settlement would result in a reduction in our effective income tax rate in the period of resolution. 43 Goodwill and Other Intangible Assets Goodwill represents the cost in excess of fair value of the net assets we acquired (including identifiable intangibles) in purchase transactions.
The allowance for credit losses on loans as a percentage of total loans held-for-investment was 1.08% at December 31, 2024, 1.08% at December 31, 2023 and 1.15% at January 1, 2023. 55 The total ACL is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments.
The allowance for credit losses on loans as a percentage of total loans held-for-investment was 1.08% at December 31, 2024, 1.08% at December 31, 2023 and 1.15% at January 1, 2023. The total ACL is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments.
Simulation modeling is performed to assess the impact varying interest rates and balance sheet mix assumptions will have on net interest income. We model the impact on net interest income for several different changes in the yield curve.
Simulation modeling is performed to assess the impact of varying interest rates and balance sheet mix assumptions will have on net interest income. We model the impact on net interest income for several different changes in the yield curve.
Until the cessation of LIBOR on June 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act, which is three-month CME Term SOFR plus 257 basis points plus a tenor spread adjustment of 0.26161%.
Until the cessation of LIBOR on June 30, 2024, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act, which is three-month CME Term SOFR plus 257 basis points plus a tenor spread adjustment of 0.26161%.
This reduction was driven by an improvement in externally calculated economic forecasts that flow into our model. · The $1.1 million provision for credit losses during the twelve months ended December 31, 2023 is primarily related to a $153.2 million increase in loans held-for-investment and a $50.9 million increase in unfunded commitments net of unconditionally cancellable commitments partially offset by a reduction of five basis points in our qualitative factors (four basis points in our changes in total of past due, rated, and non-accrual / changes in total of 30-89 days past due and other loans especially mentioned qualitative factor and one basis point in our reasonable and supportable forecast alternative scenarios qualitative factor).
This reduction was driven by an improvement in externally calculated economic forecasts that flow into our model. · The $1.1 million provision for credit losses during the twelve months ended December 31, 2023 is primarily related to a $153.2 million increase in loans held-for-investment and a $50.9 million increase in unfunded commitments net of unconditionally cancellable commitments partially offset by a reduction of five basis points in our qualitative factors (four basis points in our changes in total of past due, rated, and nonaccrual / changes in total of 30-89 days past due and other loans especially mentioned qualitative factor and one basis point in our reasonable and supportable forecast alternative scenarios qualitative factor).
The increase in short-term investments in 2024 is primarily due to deposit growth exceeding loan growth, which resulted in additional cash on hand for short-term investments. We maintain the majority of our short-term overnight investments in our account at the Federal Reserve rather than in federal funds at various correspondent banks due to the lower regulatory capital risk weighting.
The increase in short-term investments in 2025 is primarily due to deposit growth exceeding loan growth, which resulted in additional cash on hand for short-term investments. We maintain the majority of our short-term overnight investments in our account at the Federal Reserve rather than in federal funds at various correspondent banks due to the lower regulatory capital risk weighting.
The risk of loss can be measured in either diminished current market values or reduced current and potential net income. Our primary market risk is interest rate risk. We have established an Asset/Liability Committee of the board of directors (the “ALCO”), which has members from our board of directors and management to monitor and manage interest rate risk.
The risk of loss can be measured by either diminished current market values or reduced current and potential net income. Our primary market risk is interest rate risk. We have established an Asset/Liability Committee of the board of directors (the “ALCO”), which has members from our board of directors and management to monitor and manage interest rate risk.
The following discussion describes our results of operations for 2024, as compared to 2023 and 2022, and also analyzes our financial condition as of December 31, 2024, as compared to December 31, 2023. Like most community banks, we derive most of our income from interest we receive on our loans and investments.
The following discussion describes our results of operations for 2025, as compared to 2024 and 2023, and also analyzes our financial condition as of December 31, 2025, as compared to December 31, 2024. Like most community banks, we derive most of our income from interest we receive on our loans and investments.
For example, the “Average Balances” table shows the average balance during 2024, 2023 and 2022 of each category of our assets and liabilities, as well as the yield we earned or the rate we paid with respect to each category.
For example, the “Average Balances” table shows the average balance during 2025, 2024 and 2023 of each category of our assets and liabilities, as well as the yield we earned or the rate we paid with respect to each category.
These non-GAAP financial measures include “efficiency ratio,” “tangible book value at period end,” “return on average tangible common equity” and “tangible common shareholders’ equity to tangible assets.” The “efficiency ratio” is defined as non-interest expense by net interest income on a tax equivalent basis and non-interest income, excluding loss on sale of securities, gain on sale of other assets, loss on early extinguishment of debt, and other non-recurring noninterest income.
These non-GAAP financial measures include “efficiency ratio,” “tangible book value at period end,” “return on average tangible common equity” and “tangible common shareholders’ equity to tangible assets.” The “efficiency ratio” is defined as non-interest expense less merger expenses divided by net interest income on a tax equivalent basis and non-interest income, excluding loss on sale of securities, gain on sale of other assets, loss on early extinguishment of debt, and other non-recurring noninterest income.
We had two loans totaling $215 thousand that were accruing loans past due 90 days or more at December 31, 2023. At December 31, 2024 and December 31, 2023, we considered loan relationships exceeding $500 thousand and on non-accrual status as individually assessed loans for the allowance for credit losses.
We had two loans totaling $215 thousand that were accruing loans past due 90 days or more at December 31, 2023. At December 31, 2024 and December 31, 2023, we considered loan relationships exceeding $500 thousand and on nonaccrual status as individually assessed loans for the allowance for credit losses.
During 2024 and 2023, loans accounted for 66.3% and 64.2% of average earning assets, respectively. The loan portfolio (including held-for-sale) averaged $1.2 billion in 2024 as compared to $1.0 billion in 2023. Quality loan portfolio growth continued to be a strategic focus of ours in 2024.
During 2025 and 2024, loans accounted for 66.0% and 66.3% of average earning assets, respectively. The loan portfolio (including held-for-sale) averaged $1.3 billion in 2025 as compared to $1.2 billion in 2024. Quality loan portfolio growth continued to be a strategic focus of ours in 2025.
(2) Securities based on amortized cost. Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at December 31, 2024 and at December 31, 2023 over the subsequent 12 months.
(2) Securities based on amortized cost. Net Interest Income Sensitivity Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at December 31, 2025 and at December 31, 2024 over the subsequent 12 months.
The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0 million during 2024, 2023, and 2022. The average rates paid during these periods were 8.13%, 7.93%, and 4.51%, respectively. The balances of trust preferred securities were $15.0 million as of December 31, 2024 and December 31, 2023.
The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0 million during 2025, 2024, and 2023. The average rates paid during these periods were 7.16%, 8.13%, and 7.93%, respectively. The balances of trust preferred securities were $15.0 million as of December 31, 2025 and December 31, 2024.
The repurchase agreements all mature within one to four days and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $12 thousand, $1.1 million, and $1.5 million during 2024, 2023, and 2022, respectively.
The repurchase agreements all mature within one to four days, and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $11 thousand, $12 thousand, and $1.1 million during 2025, 2024, and 2023, respectively.
No repurchases were made under the 2022 Repurchase Plan prior to its expiration at the market close on December 31, 2023.
We made no repurchases under the 2022 Repurchase Plan prior to its expiration at the market close on December 31, 2023.
Borrowed funds consist of fed funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $77.2 million, $74.6 million, and $74.8 million during 2024, 2023, and 2022, respectively.
Borrowed funds consist of fed funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $111.9 million, $77.2 million, and $74.6 million during 2025, 2024, and 2023, respectively.
Two of these loans were on non-accrual status. The largest loan of the two is $217 thousand and is secured by a first lien mortgage. The balance of the remaining loan on non-accrual status is $2 thousand and it is secured by a second lien mortgage.
Two of these loans were on nonaccrual status. The largest loan of the two is $217 thousand and is secured by a first lien mortgage. The balance of the remaining loan on nonaccrual status is $2 thousand, and it is secured by a second lien mortgage.
Average loan balances include non-accrual loans and loans held for sale. (2) Based on a 21.0% marginal tax rate. The following table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the amount attributable to changes in rate.
Average loan balances include nonaccrual loans and loans held for sale. (2) Based on a 21.0% marginal tax rate. 51 The following table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the amount attributable to changes in rate.
The allowance for credit losses represents management’s best estimate for our expected losses at December 31, 2024 and 2023 and probable losses at December 31, 2022, but significant downturns in circumstances relating to asset quality and economic conditions could result in a requirement for additional allowance for credit losses.
The allowance for credit losses represents management’s best estimate for our expected losses at December 31, 2025 and 2024, but significant downturns in circumstances relating to asset quality and economic conditions could result in a requirement for additional allowance for credit losses.
The non-performing asset ratio was 0.04% of total assets with the nominal level of $810 thousand in non-performing assets at December 31, 2024 compared to 0.05% and $864 thousand at December 31, 2023. Non-accrual loans increase to $219 thousand at December 31, 2024 from $27 thousand at December 31, 2023.
The non-performing asset ratio was 0.04% of total assets with the nominal level of $810 thousand in non-performing assets at December 31, 2024 compared to 0.05% and $864 thousand at December 31, 2023. Nonaccrual loans increased to $219 thousand at December 31, 2024 from $27 thousand at December 31, 2023.
Income Tax Expense Our income tax expense for the years ended December 31, 2024, 2023, and 2022 were $3.8 million, $3.2 million, and $3.8 million, respectively. See Note 14 “Income Taxes” to the Consolidated Financial Statements for additional information.
Income Tax Expense Our income tax expense for the years ended December 31, 2025, 2024, and 2023 were $5.7 million, $3.8 million, and $3.2 million, respectively. See Note 14 “Income Taxes” to the Consolidated Financial Statements for additional information.
During the twelve months ended December 31, 2024, these pure deposits plus customer cash management repurchase agreements averaged 83.1% of total deposits plus customer cash management repurchase agreements as compared to 89.9% during the same period of 2023.
During the twelve months ended December 31, 2025, these pure deposits plus customer cash management repurchase agreements averaged 84.9% of total deposits plus customer cash management repurchase agreements as compared to 83.1% during the same period of 2024.
Brokered certificates of deposit totaled $10.4 million and $48.1 million in brokered deposits as of December 31, 2024 and December 31, 2023, respectively. The $10.4 million in brokered deposits had a maturity date of July 31, 2025 with an interest rate of 4.70%.
Brokered certificates of deposit totaled zero and $10.4 million in brokered deposits as of December 31, 2025 and December 31, 2024, respectively. The $10.4 million in brokered deposits had a maturity date of July 31, 2025 with an interest rate of 4.70%.
Combined, we have total remaining credit availability, subject to collateral requirements, in excess of $573.1 million as compared to uninsured deposits excluding deposits of states or political subdivisions in the U.S., which are secured or collateralized, of $437.1 million as previously noted.
Combined, we have total remaining credit availability, subject to collateral requirements, in excess of $732.1 million as compared to uninsured deposits excluding deposits of states or political subdivisions in the U.S., which are secured or collateralized, of $488.9 million as previously noted.
A valuation allowance is established to reduce the deferred tax asset to the level that it is more likely than not that the tax benefit will be realized. Our effective tax rates were 21.5%, 21.3%, and 20.6%, for the twelve month periods ended December 31, 2024, 2023, and 2022, respectively.
A valuation allowance is established to reduce the deferred tax asset to the level that it is more likely than not that the tax benefit will be realized. Our effective tax rates were 22.7 %, 21.5%, and 21.3%, for the twelve-month periods ended December 31, 2025, 2024, and 2023, respectively.
On May 14, 2024, we announced that our board of directors approved a plan to utilize up to $7.1 million of capital to repurchase shares of our common stock (the “2024 Repurchase Plan”), which represented approximately 5.3% of our shareholders’ equity at the time of the announcement. No repurchases have been made under the 2024 Repurchase Plan.
On May 14, 2024, we announced that our board of directors approved a plan to utilize up to $7.1 million of capital to repurchase shares of our common stock (the “2024 Repurchase Plan”), which represented approximately 5.3% of our shareholders’ equity at the time of the announcement.
We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of December 31, 2023 and December 31, 2022, approximately 91.7% and 91.2%, respectively, of the loan portfolio had real estate collateral.
We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of December 31, 2024 and December 31, 2023, approximately 91.4% and 91.7%, respectively, of the loan portfolio had real estate collateral.
Generally, we limit the loan-to-value ratio to 80%. The principal components of our loan portfolio at December 31, 2024 and 2023 were commercial mortgage loans in the amount of $796.4 million and $791.9 million, respectively, representing 65.3% and 69.8% of the portfolio, respectively, excluding loans held for sale.
Generally, we limit the loan-to-value ratio to 80%. The principal components of our loan portfolio at December 31, 2025 and 2024 were commercial mortgage loans in the amount of $863.4 million and $796.4 million, respectively, representing 65.9% and 65.3% of the portfolio, respectively, excluding loans held for sale.
The average rates paid during these periods were 4.99%, 4.73%, and 3.54%, respectively. The balances of federal funds purchased were zero at December 31, 2024 and December 31, 2023. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts.
The average rates paid during these periods were 9.09%, 4.99%, and 4.73%, respectively. The balances of federal funds purchased were zero at December 31, 2025 and December 31, 2024. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts.
Neither the “gap” analysis or asset/liability modeling are precise indicators of our interest sensitivity position due to the many factors that affect net interest income including, the timing, magnitude, and frequency of interest rate changes as well as changes in the volume and mix of earning assets and interest-bearing liabilities. 53 The following table illustrates our interest rate sensitivity at December 31, 2024.
Neither the “gap” analysis nor asset/liability modeling is precise indicators of our interest sensitivity position due to the many factors that affect net interest income including the timing, magnitude, and frequency of interest rate changes as well as changes in the volume and mix of earning assets and interest-bearing liabilities. 52 The following table illustrates our interest rate sensitivity at December 31, 2025.
We held FHLB stock in the amount of $5.4 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $354.2 thousand at December 31, 2023. These are equity securities without readily determinable fair values. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB Atlanta.
We held FHLB stock in the amount of $1.3 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $399.2 thousand at December 31, 2024. These are equity securities without readily determinable fair values. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB of Atlanta.
The following table depicts, for the periods indicated, certain information related to our average balance sheet and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities.
The following table depicts, for the periods indicated, certain information related to our average balance sheet and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from daily averages.
At December 31, 2024, we have remaining credit availability under this facility in excess of $485.6 million, subject to collateral requirements.
At December 31, 2025, we have remaining credit availability under this facility in excess of $619.6 million, subject to collateral requirements.
During the twelve months ended December 31, 2023, these pure deposits plus customer cash management repurchase agreements averaged 89.9% of total deposits plus customer cash management repurchase agreements as compared to 92.2% during the same period of 2022. Average Balances, Income Expenses and Rates.
During the twelve months ended December 31, 2024, these pure deposits plus customer cash management repurchase agreements averaged 83.1% of total deposits plus customer cash management repurchase agreements as compared to 89.9% during the same period of 2023. 50 Average Balances, Income Expenses and Rates.
Loans (excluding loans held-for-sale) increased $86.5 million, or 7.6%, to $1.2 billion at December 31, 2024 from $1.1 billion at December 31, 2023. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $179.3 million during the twelve months ended December 31, 2024 compared to $198.8 million during the same period in 2023.
Loans (excluding loans held-for-sale) increased $90.5 million, or 7.4%, to $1.3 billion at December 31, 2025 from $1.2 billion at December 31, 2024. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $202.6 million during the twelve months ended December 31, 2025 compared to $138.4 million during the same period in 2024.
For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at December 31, 2023 and December 31, 2022.
For collateral dependent loans, the fair value of collateral method is used, and the fair value is determined by an independent appraisal less estimated selling costs. There were no specific allowances for credit losses on our individually assessed loans at December 31, 2025 and December 31, 2024.
We believe this reduction in these borrowings positioned us for improvements in net interest income and margin in the future. Non-interest income during the twelve months ended December 31, 2023 declined to $10.4 million from $11.6 million during the same period in 2022.
We believe this reduction in these borrowings positioned us for improvements in net interest income and margin in the future. Non-interest income during the twelve months ended December 31, 2024 increased to $14.0 million from $10.4 million during the same period in 2023.
At December 31, 2023, we had issued commitments to extend unused credit of $214.2 million, including $53.1 million in unused home equity lines of credit, through various types of lending arrangements. We evaluate each customer’s credit worthiness on a case-by-case basis.
At December 31, 2024, we had issued commitments to extend unused credit of $180.2 million, including $63.6 million in unused home equity lines of credit, through various types of lending arrangements. We evaluate each customer’s credit worthiness on a case-by-case basis.
This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million net of tax) at December 31, 2024.
This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $10.6 million ($8.4 million net of tax) at December 31, 2025.
The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), and equity to assets ratio for the three years ended December 31. 2024 2023 2022 Return on average assets 0.74 % 0.68 % 0.88 % Return on average common equity 10.17 % 9.59 % 11.99 % Equity to assets ratio 7.38 % 7.17 % 7.08 % Dividend Payout Ratio 31.69 % 35.76 % 26.78 % While the Company is currently a small bank holding company and so generally is not subject to Basel III capital requirements, our Bank remains subject to such capital requirements.
The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), and equity to assets ratio for the three years ended December 31. 2025 2024 2023 Return on average assets 0.94 % 0.74 % 0.68 % Return on average common equity 12.36 % 10.17 % 9.59 % Equity to assets ratio 8.14 % 7.38 % 7.17 % Dividend Payout Ratio 24.70 % 31.69 % 35.76 % While the Company is currently a small bank holding company and so generally is not subject to Basel III capital requirements, our Bank remains subject to such capital requirements.
The ratio is calculated by dividing non-interest expense by net interest income on a tax equivalent basis and non-interest income, excluding loss on sale of securities, gain on sale of other assets, loss on early extinguishment of debt, and other non-recurring noninterest income. The efficiency ratio is a measure of the relationship between operating expenses and net revenue.
The ratio is calculated by dividing non-interest expense less merger expenses by net interest income on a tax equivalent basis and non-interest income, excluding loss on sale of securities, gain on sale of other assets, loss on early extinguishment of debt, and other non-recurring noninterest income.
No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. 61 The following table shows the allocation of the allowance for credit losses on loans: Allocation of the Allowance for Credit Losses on Loans 2024 2023 2022 (Dollars in thousands) Amount % of loans in category Amount % of loans in category Amount % of loans in category Commercial $ 994 7.6 % $ 935 7.6 % $ 849 7.9 % Real Estate Construction 1,675 12.8 % 1,337 10.9 % 75 0.7 % Real Estate Mortgage: Commercial 7,974 60.6 % 8,146 66.4 % 8,569 80.1 % Residential 1,639 12.5 % 1,122 9.2 % 723 6.8 % Consumer - Home Equity 568 4.3 % 472 3.8 % 314 2.9 % Consumer - Other 285 2.2 % 255 2.1 % 170 1.6 % Unallocated — N/A — N/A 636 N/A Total $ 13,135 100.0 % $ 12,267 100.0 % $ 11,336 100.0 % Non-interest Income and Expense Non-interest Income.
No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. 57 The following table shows the allocation of the allowance for credit losses on loans: Allocation of the Allowance for Credit Losses on Loans 2025 2024 2023 (Dollars in thousands) Amount % of loans in category Amount % of loans in category Amount % of loans in category Commercial $ 1,050 7.6 % $ 994 7.6 % $ 935 7.6 % Real Estate Construction 1,654 12.0 % 1,675 12.8 % 1,337 10.9 % Real Estate Mortgage: Commercial 8,349 60.4 % 7,974 60.6 % 8,146 66.4 % Residential 1,720 12.5 % 1,639 12.5 % 1,122 9.2 % Consumer - Home Equity 706 5.1 % 568 4.3 % 472 3.8 % Consumer - Other 327 2.4 % 285 2.2 % 255 2.1 % Unallocated — N/A — N/A — N/A Total $ 13,806 100.0 % $ 13,135 100.0 % $ 12,267 100.0 % Non-interest Income and Expense Non-interest Income.
Other investments, at cost, include Federal Home Loan Bank (“FHLB”) stock in the amount of $1.3 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $399.2 thousand at December 31, 2024.
Other investments, at cost, include Federal Home Loan Bank (“FHLB”) stock in the amount of $1.4 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $571.1 thousand at December 31, 2025.
FHLB advances averaged $54.8 million, $86.6 million, and $9.5 million during 2024, 2023, and 2022, respectively. The average rates paid during these periods were 5.12%, 5.02%, and 3.91%, respectively.
FHLB advances averaged zero, $54.8 million, and $86.6 million during 2025, 2024, and 2023, respectively. The average rates paid during these periods were zero, 5.12%, and 5.02%, respectively.
If our hedging strategy was to become ineffective, hedge accounting would no longer apply and the reported results of operations or financial condition could be materially affected. 44 Financial Highlights As of or For the Years Ended December 31, (Dollars in thousands except per share amounts) 2024 2023 2022 Balance Sheet Data: Total assets $ 1,958,021 $ 1,827,688 $ 1,672,946 Loans held for sale 9,662 4,433 1,779 Loans 1,220,542 1,134,019 980,857 Deposits 1,675,901 1,511,001 1,385,382 Total common shareholders’ equity 144,494 131,059 118,361 Total shareholders’ equity 144,494 131,059 118,361 Average shares outstanding, basic 7,617 7,568 7,528 Average shares outstanding, diluted 7,702 7,647 7,608 Results of Operations: Interest income $ 89,422 $ 72,697 $ 51,117 Interest expense 37,382 23,805 3,174 Net interest income 52,040 48,892 47,943 Provision for (release of) credit losses 809 1,129 (152 ) Net interest income after provision for (release of) credit losses 51,231 47,763 48,095 Non-interest income 14,004 10,421 11,569 Non-interest expenses 47,465 43,144 41,253 Income before taxes 17,770 15,040 18,411 Income tax expense 3,815 3,197 3,798 Net income 13,955 11,843 14,613 Net income available to common shareholders 13,955 11,843 14,613 Per Share Data: Basic earnings per common share $ 1.83 $ 1.56 $ 1.94 Diluted earnings per common share 1.81 1.55 1.92 Book value at period end 18.90 17.23 15.62 Tangible book value at period end (non-GAAP) 16.93 15.23 13.59 Dividends per common share 0.58 0.56 0.52 Asset Quality Ratios: Non-performing assets to total assets (3) 0.04 % 0.05 % 0.35 % Non-performing loans to period end loans 0.02 % 0.02 % 0.50 % Net charge-offs (recoveries) to average loans 0.01 % 0.00 % (0.03 )% Allowance for credit losses to period-end total loans 1.08 % 1.08 % 1.16 % Allowance for credit losses to non-performing assets 1,683.70 % 1,492.36 % 194.41 % Selected Ratios: Return on average assets 0.74 % 0.68 % 0.88 % Return on average common equity: 10.17 % 9.59 % 11.99 % Return on average tangible common equity (non-GAAP): 11.44 % 10.95 % 13.73 % Efficiency Ratio (non-GAAP) (1) 71.56 % 71.23 % 68.60 % Noninterest income to operating revenue (2) 21.20 % 17.57 % 19.44 % Net interest margin (tax equivalent) 2.92 % 3.01 % 3.14 % Equity to assets 7.38 % 7.17 % 7.08 % Tangible common shareholders’ equity to tangible assets (non-GAAP) 6.66 % 6.39 % 6.21 % Tier 1 risk-based capital (Bank) (4) 12.87 % 12.53 % 13.49 % Total risk-based capital (Bank) (4) 13.94 % 13.58 % 14.54 % Leverage (Bank) (4) 8.40 % 8.45 % 8.63 % Average loans to average deposits (5) 74.35 % 73.25 % 64.92 % (1) The efficiency ratio is a key performance indicator in our industry.
If our hedging strategy was to become ineffective, hedge accounting would no longer apply, and the reported results of operations or financial condition could be materially affected. 44 Financial Highlights As of or For the Years Ended December 31, (Dollars in thousands except per share amounts) 2025 2024 2023 Balance Sheet Data: Total assets $ 2,057,732 $ 1,958,021 $ 1,827,688 Loans held for sale 10,737 9,662 4,433 Loans 1,311,019 1,220,542 1,134,019 Deposits 1,749,544 1,675,901 1,511,001 Total common shareholders’ equity 167,557 144,494 131,059 Total shareholders’ equity 167,557 144,494 131,059 Average shares outstanding, basic 7,663 7,617 7,568 Average shares outstanding, diluted 7,761 7,702 7,647 Results of Operations: Interest income $ 97,054 $ 89,422 $ 72,697 Interest expense 35,032 37,382 23,805 Net interest income 62,022 52,040 48,892 Provision for credit losses 770 809 1,129 Net interest income after provision for credit losses 61,252 51,231 47,763 Non-interest income 16,945 14,004 10,421 Non-interest expenses 53,338 47,465 43,144 Income before taxes 24,859 17,770 15,040 Income tax expense 5,654 3,815 3,197 Net income 19,205 13,955 11,843 Net income available to common shareholders 19,205 13,955 11,843 Per Share Data: Basic earnings per common share $ 2.51 $ 1.83 $ 1.56 Diluted earnings per common share 2.47 1.81 1.55 Book value at period end 21.78 18.90 17.23 Tangible book value at period end (non-GAAP) 19.84 16.93 15.23 Dividends per common share 0.62 0.58 0.56 Asset Quality Ratios: Non-performing assets to total assets (3) 0.02 % 0.04 % 0.05 % Non-performing loans to period end loans 0.02 % 0.02 % 0.02 % Net charge-offs (recoveries) to average loans 0.00 % 0.01 % 0.00 % Allowance for credit losses to period-end total loans 1.05 % 1.08 % 1.08 % Allowance for credit losses to non-performing assets 3,859.14 % 1,683.70 % 1,492.36 % Selected Ratios: Return on average assets 0.94 % 0.74 % 0.68 % Return on average common equity: 12.36 % 10.17 % 9.59 % Return on average tangible common equity (non-GAAP): 13.68 % 11.44 % 10.95 % Efficiency Ratio (non-GAAP) (1) 65.97 % 71.56 % 71.23 % Noninterest income to operating revenue (2) 21.46 % 21.20 % 17.57 % Net interest margin (tax equivalent) 3.23 % 2.92 % 3.01 % Equity to assets 8.14 % 7.38 % 7.17 % Tangible common shareholders’ equity to tangible assets (non-GAAP) 7.47 % 6.66 % 6.39 % Tier 1 risk-based capital (Bank) (4) 13.11 % 12.87 % 12.53 % Total risk-based capital (Bank) (4) 14.16 % 13.94 % 13.58 % Leverage (Bank) (4) 8.66 % 8.40 % 8.45 % Average loans to average deposits (5) 73.35 % 74.35 % 73.25 % (1) The efficiency ratio is a key performance indicator in our industry.
Based on the Bank’s loan portfolio as of December 31, 2024, its non-owner occupied commercial real estate loans and its construction and land development loans were approximately 305% and 82% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 46% from December 31, 2021 to December 31, 2024.
Based on the Bank’s loan portfolio as of December 31, 2025, its non-owner occupied commercial real estate loans and its construction and land development loans were approximately 307% and 71% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 37% from December 31, 2022 to December 31, 2025.
We have identified the determination of the allowance for credit losses, income taxes and deferred tax assets and liabilities, goodwill and other intangible assets, and derivative instruments to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates Therefore, management has reviewed and approved these critical accounting policies and estimates and has discussed these policies with our Audit and Compliance Committee.
We have identified the determination of the allowance for credit losses, income taxes and deferred tax assets and liabilities, goodwill and other intangible assets, and derivative instruments to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates.
Compared to the day one CECL results, the allowance for credit losses on loans increased $945 thousand to $12.3 million at December 31, 2023 from $11.3 million at January 1, 2023; the allowance for credit losses on unfunded commitments increased $199 thousand to $597 thousand as of December 31, 2023 from $398 thousand as of January 1, 2023; and the allowance for credit losses on held-to-maturity investments declined $14 thousand to $30 thousand at December 31, 2023 from $43.5 thousand at January 1, 2023.
During the twelve months ended December 31, 2024, the allowance for credit losses on loans increased $868 thousand to $13.1 million, the allowance for credit losses on unfunded commitments declined $117 thousand to $480 thousand, and the allowance for credit loss on held-to-maturity investments declined $7 thousand to $23 thousand compared to the day one CECL results, the allowance for credit losses on loans increased $945 thousand to $12.3 million at December 31, 2023 from $11.3 million at January 1, 2023; the allowance for credit losses on unfunded commitments increased $199 thousand to $597 thousand as of December 31, 2023 from $398 thousand as of January 1, 2023; and the allowance for credit losses on held-to-maturity investments declined $14 thousand to $30 thousand at December 31, 2023 from $43.5 thousand at January 1, 2023.
The average rates paid during these periods were 2.83%, 2.22%, and 0.30%, respectively. The balances of securities sold under agreements to repurchase were $103.1 million and $62.9 million at December 31, 2024 and December 31, 2023, respectively.
The average rates paid during these periods were 2.42%, 2.83%, and 2.22%, respectively. The balances of securities sold under agreements to repurchase were $107.2 million and $103.1 million at December 31, 2025 and December 31, 2024, respectively.
There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million net of tax) at December 31, 2024. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) at December 31, 2023.
There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $10.6 million ($8.4 million net of tax) at December 31, 2025. The remaining pretax unrealized net holding loss on these investments was $12.3 million ($9.7 million net of tax) at December 31, 2024.
The table below provides a reconciliation of non-GAAP measures to GAAP for the three years ended December 31: 2024 2023 2022 Tangible book value, dollars in thousands Tangible common equity (non-GAAP) $ 129,411 $ 115,818 $ 102,963 Effect to adjust for intangible assets 15,083 15,241 15,398 Book value (GAAP) $ 144,494 $ 131,059 $ 118,361 Tangible book value per common share, dollars Tangible common equity per common share (non-GAAP) $ 16.93 $ 15.23 $ 13.59 Effect to adjust for intangible assets 1.97 2.00 2.03 Book value per common share (GAAP) $ 18.90 $ 17.23 $ 15.62 Return on average tangible common equity Return on average tangible common equity (non-GAAP) 11.44 % 10.95 % 13.73 % Effect to adjust for intangible assets (1.27 )% (1.36 )% (1.74 )% Return on average common equity (GAAP) 10.17 % 9.59 % 11.99 % Tangible common shareholders’ equity to tangible assets Tangible common equity to tangible assets (non-GAAP) 6.66 % 6.39 % 6.21 % Effect to adjust for intangible assets 0.72 % 0.78 % 0.87 % Common equity to assets (GAAP) 7.38 % 7.17 % 7.08 % Results of Operations Year Ended December 31, 2024 and 2023 Our net income for the twelve months ended December 31, 2024 was $14.0 million, or $1.81 diluted earnings per common share, as compared to $11.8 million, or $1.55 diluted earnings per common share, for the twelve months ended December 31, 2023.
The table below provides a reconciliation of non-GAAP measures to GAAP for the three years ended December 31: 2025 2024 2023 Tangible book value, dollars in thousands Tangible common equity (non-GAAP) $ 152,631 $ 129,411 $ 115,818 Effect to adjust for intangible assets 14,926 15,083 15,241 Book value (GAAP) $ 167,557 $ 144,494 $ 131,059 Tangible book value per common share, dollars Tangible common equity per common share (non-GAAP) $ 19.84 $ 16.93 $ 15.23 Effect to adjust for intangible assets 1.94 1.97 2.00 Book value per common share (GAAP) $ 21.78 $ 18.90 $ 17.23 Return on average tangible common equity Return on average tangible common equity (non-GAAP) 13.68 % 11.44 % 10.95 % Effect to adjust for intangible assets (1.32 )% (1.27 )% (1.36 )% Return on average common equity (GAAP) 12.36 % 10.17 % 9.59 % Tangible common shareholders’ equity to tangible assets Tangible common equity to tangible assets (non-GAAP) 7.47 % 6.66 % 6.39 % Effect to adjust for intangible assets 0.67 % 0.72 % 0.78 % Common equity to assets (GAAP) 8.14 % 7.38 % 7.17 % Results of Operations Year Ended December 31, 2025 and 2024 Our net income for the twelve months ended December 31, 2025 was $19.2 million, or $2.47 diluted earnings per common share, as compared to $14.0 million, or $1.81 diluted earnings per common share, for the twelve months ended December 31, 2024.
The $3.6 million increase in non-interest income is primarily related to a reduction in loss on sale of securities of $1.2 million, increases in mortgage banking income of $962 thousand, investment advisory fees and non-deposit commissions of $1.7 million, and an increase in gains on insurance proceeds of $73 thousand partially offset by a decease in gain on sale of other assets of $146 thousand and a loss on early extinguishment of debt of $229 thousand.
The $3.6 million increase in non-interest income is primarily related to a reduction in loss on sale of securities of $1.2 million, increases in mortgage banking income of $962 thousand, investment advisory fees and non-deposit commissions of $1.7 million, and an increase in gains on insurance proceeds of $73 thousand partially offset by a decrease in gain on sale of other assets of $146 thousand and a loss on early extinguishment of debt of $229 thousand. 58 During the third quarter of 2023, we sold $39.9 million of book value U.S.
Total assets under management were $926.0 million at December 31, 2024 compared to $755.4 million at December 31, 2023. Our net new assets were $37.5 million during the twelve months ended December 31, 2024. Furthermore, our investment performance for the twelve months ended December 31, 2024 was 17.6% compared to 23.3% for the S&P 500.
Our net new assets were $37.5 million during the twelve months ended December 31, 2024. Furthermore, our investment performance for the twelve months ended December 31, 2024 was 17.6% compared to 23.3% for the S&P 500.
At December 31, 2024, the estimated weighted average life of our total investment portfolio was 5.67 years, the modified duration was 4.4, the effective duration was 3.5, and the weighted average tax equivalent book yield was 3.68%.
At December 31, 2025, the estimated weighted average life of our total investment portfolio was 5.2 years, the modified duration was 4.0, the effective duration was 3.1, and the weighted average tax equivalent book yield was 3.61%.
The $130.3 million increase in assets was primarily due to loans (excluding loans held-for-sale), which increased $86.5 million, or 7.6%, to $1.2 billion at December 31, 2024 from $1.1 billion at December 31, 2023. 66 Earning Assets Loans and loans held-for-sale Loans held-for-sale increased to $9.7 million at December 31, 2024 from $4.4 million at December 31, 2023.
The $99.7 million increase in assets was primarily due to loans (excluding loans held-for-sale), which increased $90.5 million, or 7.4%, to $1.3 billion at December 31, 2025 from $1.2 billion at December 31, 2024. 62 Earning Assets Loans and loans held-for-sale Loans held-for-sale increased to $10.7 million at December 31, 2025 from $9.7 million at December 31, 2024.
Total mortgage production during the twelve months ended December 31, 2023 was $135.7 million, $49.7 million of the production was originated to be sold in the secondary market, $32.5 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $53.5 million of the loan production was commitments for new construction residential real estate loans.
Total mortgage production during the twelve months ended December 31, 2025 was $202.7 million, $115.4 million of the production was originated to be sold in the secondary market, $16.8 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $70.5 million of the loan production was commitments for new construction residential real estate loans.
Total mortgage production during the twelve months ended December 31, 2023 was $135.7 million, $49.7 million of the production was originated to be sold in the secondary market, $32.5 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $53.5 million of the loan production was commitments for new construction residential real estate loans.
Total mortgage production during the twelve months ended December 31, 2025 was $202.7 million, $115.4 million of the production was originated to be sold in the secondary market, $16.8 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $70.5 million of the loan production was commitments for new construction residential real estate loans.
We had two loans totaling $215 thousand that were accruing loans past due 90 days or more at December 31, 2023. At December 31, 2023, we considered loan relationships exceeding $500 thousand and on non-accrual status as individually assessed loans for the allowance for credit losses. At December 31, 2023, we had no individually assessed loans.
We had five loans totaling $267 thousand that were accruing loans past due 90 days or more at December 31, 2024. At December 31, 2025 and December 31, 2024, we considered loan relationships exceeding $500 thousand and on nonaccrual status as individually assessed loans for the allowance for credit losses.
Non-interest expense during the twelve months ended December 31, 2024 increased $4.3 million to $47.5 million from $43.1 million during the same period in 2023.
Non-interest expense during the twelve months ended December 31, 2025 increased $5.9 million to $53.3 million from $47.5 million during the same period in 2024.
The effective tax rates were affected by a $149 thousand non-recurring reduction to income tax during the twelve months ended December 31, 2024, by a $122 thousand non-recurring reduction to income tax expense during the twelve months ended December 31, 2023, and by a $153 thousand non-recurring reduction to income taxes during the twelve months ended December 31, 2022.
The effective tax rates were affected by a $120 thousand reduction to income tax during the twelve months ended December 31, 2025, by a $217 thousand reduction to income tax expense during the twelve months ended December 31, 2024, and by a $122 thousand reduction to income taxes during the twelve months ended December 31, 2023.
Advances from unfunded commercial construction loans available for draws were $94.5 million during the twelve months ended December 31, 2024.
Advances from unfunded commercial construction loans available for draws were $48.8 million during the twelve months ended December 31, 2025.
December 31, (Dollars in thousands) 2024 2023 2022 Securities held-to-maturity at fair value: Mortgage-backed securities $ 96,918 $ 104,250 $ 113,116 State and local government 99,122 101,268 100,497 Total $ 196,040 $ 205,518 $ 213,613 We hold other investments carried at cost totaling $2.7 million and $6.8 million at December 31, 2024 and 2023, respectively.
December 31, (Dollars in thousands) 2025 2024 2023 Securities held-to-maturity at fair value: Mortgage-backed securities $ 93,066 $ 96,918 $ 104,250 State and local government 102,050 99,122 101,268 Total $ 195,116 $ 196,040 $ 205,518 We hold other investments carried at cost totaling $2.9 million and $2.7 million at December 31, 2025 and 2024, respectively.
At December 31, 2024, we had issued commitments to extend unused credit of $180.2 million, including $63.6 million in unused home equity lines of credit, through various types of lending arrangements.
At December 31, 2025, we had issued commitments to extend unused credit of $211.2 million, including $69.0 million in unused home equity lines of credit, through various types of lending arrangements.
We continue to maintain a conservative philosophy regarding our underwriting guidelines, and believe we will reduce the risk elements of the loan portfolio through strategies that diversify the lending mix. 67 The repayment of loans in the loan portfolio as they mature is a source of liquidity.
Significant portions of these commercial mortgage loans are made to finance owner-occupied real estate. We continue to maintain a conservative philosophy regarding our underwriting guidelines, and believe we will reduce the risk elements of the loan portfolio through strategies that diversify the lending mix. The repayment of loans in the loan portfolio as they mature is a source of liquidity.

… 197 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−1 removed15 unchanged
Biggest changeL egal, Accounting, Regulatory and Compliance Risks · We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business. · Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business. · Failure to comply with federal and state fair lending laws could result in significant penalties for us. · Changes in accounting standards could materially affect our financial statements. · The Federal Reserve may require us to commit capital resources to support the Bank. · We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. · We are involved in various claims and lawsuits related to our business.
Biggest changeOperational Risks · System or infrastructure failures, including cyber-attacks, could disrupt our operations, lead to the disclosure of confidential information, harm our reputation, or increase costs and losses. · Our information systems may experience failure, interruption or breach in security. · Increased fraud risk could adversely impact our business. · Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention. · If we fail to maintain our reputation, our performance may be harmed. 3 L egal, Accounting, Regulatory and Compliance Risks · We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business. · Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business. · Failure to comply with federal and state fair lending laws could result in significant penalties for us. · Changes in accounting standards could materially affect our financial statements. · The Federal Reserve may require us to commit capital resources to support the Bank. · We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities. · We are involved in various claims and lawsuits related to our business.
Risks Related to Our Industry · Inflationary pressures and rising prices may affect our results of operations and financial condition. · The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve. · Adverse developments affecting the financial services industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on our operations · Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition. · We could experience a loss due to competition with other financial institutions or nonbank companies. · We may be adversely affected by the soundness of other financial institutions. · Failure to keep pace with technological changes could adversely affect our business. · New lines of business or new products and services may subject us to additional risk. · Consumers may decide not to use banks to complete their financial transactions. · We use brokered deposits, which may be an unstable and costly source of funding for asset growth. · Our ability to obtain brokered deposits as an additional funding source may become limited. · Consumers may decide not to use banks to complete their financial transactions.
Risks Related to Our Industry · Inflationary pressures and rising prices may affect our results of operations and financial condition. · The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve. · Adverse developments affecting the financial services industry, such as bank failures or concerns involving liquidity, may have a material adverse effect on our operations · Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition. · We could experience a loss due to competition with other financial institutions or non-bank companies. · We may be adversely affected by the soundness of other financial institutions. · Failure to keep pace with technological changes could adversely affect our business. · New lines of business or new products and services may subject us to additional risk. · Consumers may decide not to use banks to complete their financial transactions. · We use brokered deposits, which may be an unstable and costly source of funding for asset growth. · Our ability to obtain brokered deposits as an additional funding source may become limited.
Securities and Exchange Commission (the “SEC”) and the following: · credit losses as a result of, among other potential factors, changes in real estate values, interest rates, unemployment, or in customer payment behavior or other factors; · the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market; · restrictions or conditions imposed by our regulators on our operations; · the adequacy of the level of our allowance for credit losses and the amount of credit loss provisions required in future periods; · examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, write-down assets, or take other actions; · risks associated with actual or potential information gatherings, investigations or legal proceedings by customers, regulatory agencies or others; · reduced earnings due to higher credit impairment charges resulting from decline in the value of our securities portfolio, specifically as a result of increasing default rates, and loss severities on the underlying real estate collateral; · increases in competitive pressure in the banking and financial services industries; · changes in the interest rate environment, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets, and that could reduce anticipated or actual margins; temporarily reduce the market value of our available-for-sale investment securities and temporarily reduce accumulated other comprehensive income or increase accumulated other comprehensive loss, which temporarily could reduce shareholders’ equity; · enterprise risk management may not be effective in mitigating risk and reducing the potential for losses; · changes in political conditions or the legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including as a result of the presidential administration and congressional elections; · general economic conditions resulting in, among other things, a deterioration in credit quality; · changes occurring in business conditions and inflation, including the impact of inflation on us, including a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expense, which may have an adverse impact on our financial performance; · changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity; · FDIC assessment which has increased, and may continue to increase, our cost of doing business; · cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third party security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; · changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, and returns available to customers on alternative investments; · changes in technology, including the increasing use of artificial intelligence; · our current and future products, services, applications and functionality and plans to promote them; · changes in monetary and tax policies, including potential changes in tax laws and regulations; · changes in accounting standards, policies, estimates and practices as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and the Public Company Accounting Oversight Board; · our assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results; · the rate of delinquencies and amounts of loans charged-off; · the rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio; · our ability to maintain appropriate levels of capital, including levels of capital required under the capital rules implementing Basel III; 1 · our ability to successfully execute our business strategy; · our ability to attract and retain key personnel; · our ability to retain our existing customers, including our deposit relationships; · our use of brokered deposits may be an unstable and/or expensive deposit source to fund earning asset growth; · our ability to obtain brokered deposits as an additional funding source could be limited; · · adverse changes in asset quality and resulting credit risk-related losses and expenses; risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence, information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations; · the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs, and disruptions caused by widespread cybersecurity incidents; · disruptions due to flooding, fires, severe weather or other natural disasters; and · other risks and uncertainties described under “Risk Factors” below.
Securities and Exchange Commission (the “SEC”) and the following: · credit losses as a result of, among other potential factors, changes in real estate values, interest rates, unemployment, or in customer payment behavior or other factors; · the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market; · restrictions or conditions imposed by our regulators on our operations; · the adequacy of the level of our allowance for credit losses and the amount of credit loss provisions required in future periods; · examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, write-down assets, or take other actions; · risks associated with actual or potential information gatherings, investigations or legal proceedings by customers, regulatory agencies or others; · reduced earnings due to higher credit impairment charges resulting from decline in the value of our securities portfolio, specifically as a result of increasing default rates, and loss severities on the underlying real estate collateral; · increases in competitive pressure in the banking and financial services industries; · changes in the interest rate environment, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets, and that could reduce anticipated or actual margins; temporarily reduce the market value of our available-for-sale investment securities and temporarily reduce accumulated other comprehensive income or increase accumulated other comprehensive loss, which temporarily could reduce shareholders’ equity; · enterprise risk management may not be effective in mitigating risk and reducing the potential for losses; · changes in political and economic conditions, including potential disruptions resulting from U.S. federal government funding lapses, shutdowns, or related fiscal policy uncertainty, or changes in the legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including changes as a result of the presidential administration and congressional elections; · general economic conditions resulting in, among other things, a deterioration in credit quality; · changes occurring in business conditions and inflation, including the impact of inflation on us, including a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expense, which may have an adverse impact on our financial performance; · changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity; · FDIC assessment which has increased, and may continue to increase, our cost of doing business; · cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third-party security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events; · changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, and returns available to customers on alternative investments; · changes in technology, including the increasing use of artificial intelligence; · our current and future products, services, applications and functionality and plans to promote them; · changes in monetary and tax policies, including potential changes in tax laws and regulations; · changes in accounting standards, policies, estimates and practices as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and the Public Company Accounting Oversight Board; · our assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results; · the rate of delinquencies and amounts of loans charged-off; · the rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio; · our ability to maintain appropriate levels of capital, including levels of capital required under the capital rules implementing Basel III; · our ability to successfully execute our business strategy; 1 · our ability to attract and retain key personnel; · our ability to retain our existing customers, including our deposit relationships; · our use of brokered deposits may be an unstable and/or expensive deposit source to fund earning asset growth; · our ability to obtain brokered deposits as an additional funding source could be limited; · · adverse changes in asset quality and resulting credit risk-related losses and expenses; risks associated with complex and changing regulatory environments, including, among others, with respect to data privacy, artificial intelligence (“AI”), information security, climate change or other environmental, social and governance matters, and labor matters, relating to our operations; · the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics, war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs, and disruptions caused by widespread cybersecurity incidents; · disruptions due to flooding, fires, severe weather or other natural disasters; and · other risks and uncertainties described under “Risk Factors” below.
Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitation, those described under the heading “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the U.S.
Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitation, those described under the heading “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the U.S.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 121 Item 9A. Controls and Procedures 121 Item 9B. Other Information 122 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 122 PART III 123 Item 10. Directors, Executive Officers and Corporate Governance 123 Item 11. Executive Compensation 123 Item 12.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 120 Item 9A. Controls and Procedures 120 Item 9B. Other Information 120 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 120 PART III 121 Item 10. Directors, Executive Officers and Corporate Governance 121 Item 11. Executive Compensation 121 Item 12.
Exhibits, Financial Statement Schedules 124 SIGNATURES 127 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report, including information included or incorporated by reference in this report, contains statements which constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Exhibits, Financial Statement Schedules 122 SIGNATURES 125 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report, including information included or incorporated by reference in this report, contains statements which constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 123 Item 13. Certain Relationships and Related Transactions, and Director Independence 123 Item 14. Principal Accountant Fees and Services 123 PART IV 124 Item 15.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 121 Item 13. Certain Relationships and Related Transactions, and Director Independence 121 Item 14. Principal Accountant Fees and Services 121 PART IV 122 Item 15.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 74 Item 8. Financial Statements and Supplementary Data 74 Consolidated Balance Sheets 78 Consolidated Statements of Income 79 Consolidated Statements of Comprehensive Income (Loss) 80 Consolidated Statements of Changes in Shareholders’ Equity 81 Consolidated Statements of Cash Flows 82 Notes to Consolidated Financial Statements 83 Item 9.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 70 Item 8. Financial Statements and Supplementary Data 70 Consolidated Balance Sheets 74 Consolidated Statements of Income 75 Consolidated Statements of Comprehensive Income 76 Consolidated Statements of Changes in Shareholders’ Equity 77 Consolidated Statements of Cash Flows 78 Notes to Consolidated Financial Statements 79 Item 9.
Removed
Risks Related to Our Human Capital · We are dependent on key individuals, and the loss of one or more of these individuals could limit our growth and adversely affect our prospects. 3 Operational Risks · System or infrastructure failures, including cyber-attacks, could disrupt our operations, lead to the disclosure of confidential information, harm our reputation, or increase costs and losses. · Our information systems may experience failure, interruption or breach in security. · Increased fraud risk could adversely impact our business. · Our use of third party vendors and our other ongoing third party business relationships are subject to increasing regulatory requirements and attention. · If we fail to maintain our reputation, our performance may be harmed.
Added
Risks Related to Our Human Capital · We are dependent on key individuals, and the loss of one or more of these individuals could limit our growth and adversely affect our prospects.

Other FCCO 10-K year-over-year comparisons