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What changed in FIRST US BANCSHARES, INC.'s 10-K — 2023 vs 2024

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

+357 added−288 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-14)

Top changes in FIRST US BANCSHARES, INC.'s 2024 10-K

357 paragraphs added · 288 removed · 217 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

47 edited+58 added−7 removed103 unchanged
Biggest changeEven so, the CFPB has adopted a number of rules that impact our lending practices, including, among other things, (1) requiring financial institutions to make a “reasonable and good faith determination” that a consumer has a “reasonable ability” to repay a residential mortgage loan before making such a loan, (2) requiring sponsors of asset-backed securities to retain at least 5% of the credit risk of the assets underlying the securities (and generally prohibiting sponsors from transferring or hedging that credit risk), and (3) imposing a number of new and enhanced requirements on the mortgage servicing industry, including rules regarding communications with borrowers, maintenance of customer account records, procedures for responding to written borrower requests and complaints of errors, servicing delinquent loans, and conducting foreclosure proceedings, among other measures. 13 Regulation of Deposit Operations Our deposit operations are subject to federal laws applicable to depository accounts, including, among others, the following: • Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Truth-In-Savings Act, requiring certain disclosures for consumer deposit accounts; • Electronic Fund Transfer Act and Regulation E, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and • Rules and regulations of the various agencies charged with the responsibility of implementing these laws.
Biggest changeThe CFPB has adopted a number of rules that impact our lending practices, including, among other things, (1) requiring financial institutions to make a “reasonable and good faith determination” that a consumer has a “reasonable ability” to repay a residential mortgage loan before making such a loan, (2) requiring sponsors of asset-backed securities to retain at least 5% of the credit risk of the assets underlying the securities (and generally prohibiting sponsors from transferring or hedging that credit risk), and (3) imposing a number of new and enhanced requirements on the mortgage servicing industry, including rules regarding communications with borrowers, maintenance of customer account records, procedures for responding to written borrower requests and complaints of errors, servicing delinquent loans, and conducting foreclosure proceedings, among other measures.
The 2015 guidance also indicated that the agencies would pay special attention in the future to potential risks associated with CRE lending. In June 2023, in response to the increased risk relating to commercial real estate loans, the federal banking agencies issued a final Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts.
The 2015 guidance also indicated that the agencies would pay special attention in the future to potential risks associated with CRE lending. In June 2023, in response to the increased risk relating to CRE loans, the federal banking agencies issued a final Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts.
This Code of Business Conduct can be found on our website at http://www.fusb.com under the tabs “About – Investor Relations – FUSB Policies.” Privacy of Customer Information The Financial Services Modernization Act of 1999 (also known as the “Gramm-Leach-Bliley Act” or the “GLBA”) and the implementing regulations issued by federal banking regulatory agencies require financial institutions to adopt policies and procedures regarding the disclosure of nonpublic personal information about their customers to non-affiliated third parties.
This Code of Business Conduct can be found on our website at http://www.fusb.com under the tabs “About – Investor Relations – FUSB Policies.” 13 Privacy of Customer Information The Financial Services Modernization Act of 1999 (also known as the “Gramm-Leach-Bliley Act” or the “GLBA”) and the implementing regulations issued by federal banking regulatory agencies require financial institutions to adopt policies and procedures regarding the disclosure of nonpublic personal information about their customers to non-affiliated third parties.
The Growth Act, among other things, requires the federal banking agencies to issue regulations allowing community bank organizations with total assets of less than $10 billion and limited amounts of certain assets and off-balance sheet exposures to access a simpler capital regime focused on a bank’s Tier 1 leverage capital levels rather than risk-based capital levels that are the focus of the capital rules issued under the Dodd-Frank Act implementing Basel III.
The Growth Act, among other things, requires the federal banking agencies to issue regulations allowing community bank organizations with total assets of less than $10 billion and limited 9 amounts of certain assets and off-balance sheet exposures to access a simpler capital regime focused on a bank’s Tier 1 leverage capital levels rather than risk-based capital levels that are the focus of the capital rules issued under the Dodd-Frank Act implementing Basel III.
Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank,” and banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate large banks under four performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test.
Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar 10 years will be an “intermediate bank,” and banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate large banks under four performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test.
In addition to healthy base wages, additional programs include bonus opportunities, Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, vacation and paid time off, family and military leave, flexible work schedules and employee assistance programs. 5 The success of our business is fundamentally connected to the well-being of our people.
In addition to healthy base wages, additional programs include bonus opportunities, Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, vacation and paid time off, family and military leave, flexible work schedules and employee assistance programs. The success of our business is fundamentally connected to the well-being of our people.
Loans secured by certain readily marketable collateral are exempt from these limitations, as are loans secured by deposits and certain government securities. Commercial Real Estate Concentration Limits In December 2006, the U.S. bank regulatory agencies issued guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” to address increased concentrations in commercial real estate (“CRE”) loans.
Loans secured by certain readily marketable collateral are exempt from these limitations, as are loans secured by deposits and certain government securities. 7 Commercial Real Estate Concentration Limits In December 2006, the U.S. bank regulatory agencies issued guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” to address increased concentrations in commercial real estate (“CRE”) loans.
We strive to maintain an inclusive workplace and seek to foster an environment where all of our employees can thrive through active engagement in the ongoing success of our organization. It is essential to our business that we continually attract and retain a talented workforce, and our practices are designed to promote diversity and fairness in the hiring process.
We strive to maintain an inclusive workplace and seek to foster an environment where all of our employees can thrive through active engagement in the ongoing success of our organization. It is essential to our business that we continually attract and retain a talented workforce, and our practices are designed to promote fairness in the hiring process.
A change in applicable laws and regulations, or in the manner in which such laws or regulations are interpreted by regulatory agencies or courts, may have a material effect on our business, operations and earnings. 6 Regulation of Bancshares Bancshares is registered as a bank holding company and is subject to regulation and supervision by the Federal Reserve.
A change in applicable laws and regulations, or in the manner in which such laws or regulations are interpreted by regulatory agencies or courts, may have a material effect on our business, operations and earnings. Regulation of Bancshares Bancshares is registered as a bank holding company and is subject to regulation and supervision by the Federal Reserve.
Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards for testing technology and internal processes for Bank Secrecy Act compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain Bank Secrecy Act violations; and expands Bank Secrecy Act whistleblower incentives and protections.
Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards for testing technology and internal processes for Bank Secrecy Act compliance; expands 11 enforcement- and investigation-related authority, including increasing available sanctions for certain Bank Secrecy Act violations; and expands Bank Secrecy Act whistleblower incentives and protections.
Moreover, the federal banking agencies have adopted a joint agency policy statement, noting that the adequacy and effectiveness of a bank’s interest rate risk management process and the level of its interest rate exposures are critical factors in the evaluation of the bank’s capital adequacy. 9 In 2018, the U.S.
Moreover, the federal banking agencies have adopted a joint agency policy statement, noting that the adequacy and effectiveness of a bank’s interest rate risk management process and the level of its interest rate exposures are critical factors in the evaluation of the bank’s capital adequacy. In 2018, the U.S.
Furthermore, on December 18, 2023, the FDIC issued an advisory on Managing Commercial Real Estate Concentrations in a Challenging Economic Environment, which conveys certain key risk management practices for FDIC-supervised institutions to consider in managing commercial real estate loan concentrations in the current economic environment.
Furthermore, on December 18, 2023, the FDIC issued an advisory on Managing Commercial Real Estate Concentrations in a Challenging Economic Environment, which conveys certain key risk management practices for FDIC-supervised institutions to consider in managing CRE loan concentrations in the current economic environment.
Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S.
Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network ("FinCEN"), a bureau of the U.S.
In the event that there is no such amount, dividends may be paid out of the net profits of the corporation for the fiscal year in which the dividend is declared and/or the immediately preceding fiscal year.
In the event that there is no such amount, dividends may be paid out of the net profits of the corporation for the fiscal year in which the dividend is 8 declared and/or the immediately preceding fiscal year.
In addition, the Dodd-Frank Act created the CFPB, an independent bureau with broad authority to regulate the consumer finance industry, including regulated financial institutions, non-banks and others involved in extending credit to consumers. The CFPB has authority through rulemaking, orders, policy statements, guidance and enforcement actions to administer and enforce federal consumer financial laws.
In addition, the Dodd-Frank Act created the Consumer Financial Protection Bureau (the “CFPB”), an independent bureau with broad authority to regulate the consumer finance industry, including regulated financial institutions, non-banks and others involved in extending credit to consumers. The CFPB has authority through rulemaking, orders, policy statements, guidance and enforcement actions to administer and enforce federal consumer financial laws.
On October 19, 2023, the Consumer Financial Protection Bureau ("CFPB") announced a proposed rule to adopt a regulation regarding personal financial data rights that is designed to promote “open banking.” If enacted as proposed, the regulation would require, among other things, that data providers, including any financial institution, make available to consumers and certain authorized third parties upon request certain covered transaction, account and payment information.
On October 19, 2023, the CFPB announced a proposed rule to adopt a regulation regarding personal financial data rights that is designed to promote “open banking.” If enacted as proposed, the regulation would require, among other things, that data providers, including any financial institution, make available to consumers and certain authorized third parties upon request certain covered transaction, account and payment information.
Item 1. B usiness. First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiaries, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancshares operates one banking subsidiary, First US Bank, an Alabama banking corporation (the “Bank”).
Item 1. B usiness. First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiary, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”). Bancshares operates one wholly-owned banking subsidiary, First US Bank, an Alabama banking corporation (the “Bank”).
Human Capital Resources Bancshares has no employees, other than the executive officers discussed in the information incorporated by reference in Part III, Item 10 of this report. As of December 31, 2023, the Bank had 153 full-time equivalent employees. None of our employees are party to a collective bargaining agreement. Management believes that the Company’s employee relations are satisfactory.
Human Capital Resources Bancshares has no employees, other than the executive officers discussed in the information incorporated by reference in Part III, Item 10 of this report. As of December 31, 2024, the Bank had 151 full-time equivalent employees. None of our employees are party to a collective bargaining agreement. Management believes that the Company’s employee relations are satisfactory.
Specifically, the amendments require current reporting about material cybersecurity incidents, periodic disclosures 12 about a registrant’s policies and procedures to identify and manage cybersecurity risk, management’s role in implementing cybersecurity policies and procedures, management's cybersecurity expertise, if any, and the board of directors' oversight of cybersecurity risk.
Specifically, the amendments require current reporting about material cybersecurity incidents, periodic disclosures about a registrant’s policies and procedures to identify and manage cybersecurity risk, management’s role in implementing cybersecurity policies and procedures, management's cybersecurity expertise, if any, and the board of directors oversight of cybersecurity risk.
Most notably, it (i) adds a new discussion of short-term loan accommodations, (ii) expands guidance regarding the evaluation and assessment of guarantors to also encompass loan sponsors, (iii) incorporates information about changes to accounting principles since 2009, and (iv) updates and expands the illustrative examples of commercial real estate loan workouts.
Most notably, it (i) adds a new discussion of short-term loan accommodations, (ii) expands guidance regarding the evaluation and assessment of guarantors to also encompass loan sponsors, (iii) incorporates information about changes to accounting principles since 2009, and (iv) updates and expands the illustrative examples of CRE loan workouts.
On October 30, 2023, the current Presidential Administration issued an Executive Order on Safe, Secure and Trustworthy Development and Use of AI, emphasizing the need for transparency, accountability and fairness in the development and use of AI.
On October 30, 2023, the Biden administration issued an Executive Order on Safe, Secure and Trustworthy Development and Use of AI, emphasizing the need for transparency, accountability and fairness in the development and use of AI.
A significant increase in insurance assessments would likely have an adverse effect on our operating expense, results of operations, and cash flows. Management cannot predict what insurance assessment rates will be in the future.
The FDIC has authority to increase insurance assessments. A significant increase in insurance assessments would likely have an adverse effect on our operating expense, results of operations, and cash flows. Management cannot predict what insurance assessment rates will be in the future.
Under the FDIC’s assessment system for banks with less than $10 billion in assets, the assessment rate is determined based on a number of factors, including the Bank’s CAMELS (supervisory) rating, leverage ratio, net income, non-performing loan ratios, Other Real Estate Owned (OREO) ratios, core deposit ratios, one-year organic asset growth and a loan mix index. 8 The FDIC has authority to increase insurance assessments.
Under the FDIC’s assessment system for banks with less than $10 billion in assets, the assessment rate is determined based on a number of factors, including the Bank’s CAMELS (supervisory) rating, leverage ratio, net income, non-performing loan ratios, other real estate owned (OREO) ratios, core deposit ratios, one-year organic asset growth and a loan mix index.
In 2016, the Federal Reserve and the Office of Comptroller of the Currency also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping.
In 2016, the Federal Reserve and the Office of Comptroller of the Currency also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2024, these rules have not been implemented.
The Bank is subject to federal laws that limit the amount of transactions between the Bank and its nonbank affiliates, including Bancshares, but excluding operating subsidiaries, such as ALC.
The Bank is subject to federal laws that limit the amount of transactions between the Bank and its nonbank affiliates, including Bancshares.
Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing.
Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing. The Corporate Transparency Act (the “CTA”) was adopted as Title LXIV of the William M.
Cybersecurity The Cybersecurity Information Sharing Act of 2015 (“CISA”) was intended to improve cybersecurity in the United States by enhanced sharing of information about security threats among the U.S. government and private sector entities, including financial institutions.
The Company could face enforcement actions by the Virginia Attorney General and penalties for noncompliance with the VCDPA. Cybersecurity The Cybersecurity Information Sharing Act of 2015 (“CISA”) was intended to improve cybersecurity in the United States by enhanced sharing of information about security threats among the U.S. government and private sector entities, including financial institutions.
The Federal Reserve also has the authority to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.
The Federal Reserve also has the authority to require a bank holding company to terminate any activity or to relinquish control of a non-bank subsidiary upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company. 6 Any capital loan by Bancshares to the Bank is subordinate in right of payment to deposits and certain other indebtedness of the Bank.
As climate-related supervisory guidance is formalized, and relevant risk areas and corresponding control expectations are further refined, we may be required to expend significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such requirements. 14 Website Information The Bank’s website address is https://www.fusb.com. Bancshares does not maintain a separate website.
As climate-related supervisory guidance is formalized, and relevant risk areas and corresponding control expectations are further refined, we may be required to expend significant capital and incur compliance, operating, maintenance and remediation costs in order to conform to such requirements.
As of December 31, 2023, these rules have not been implemented. 7 Lending Limits Under Alabama law, the amount of loans that may be made by a bank in the aggregate to one person is limited.
Lending Limits Under Alabama law, the amount of loans that may be made by a bank in the aggregate to one person is limited.
This classification is primarily for the purpose of applying the federal prompt corrective action provisions and is not intended to be, and should not be, interpreted as a representation of our overall financial condition or prospects. 10 Community Reinvestment Act The Community Reinvestment Act (the “CRA”) requires the federal banking regulatory agencies to assess all financial institutions that they regulate to determine whether these institutions are meeting the credit needs of the communities that they serve, including their assessment area(s) (as established for these purposes in accordance with applicable regulations based principally on the location of the institution’s branch offices).
Community Reinvestment Act The Community Reinvestment Act (the “CRA”) requires the federal banking regulatory agencies to assess all financial institutions that they regulate to determine whether these institutions are meeting the credit needs of the communities that they serve, including their assessment area(s) (as established for these purposes in accordance with applicable regulations based principally on the location of the institution’s branch offices).
The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.
The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance.
In October 2016, the federal bank regulatory agencies issued an Advance Notice of Proposed Rulemaking regarding enhanced cyber risk management standards which would apply to a wide range of large financial institutions and their third-party service providers, including Bancshares and the Bank.
The law includes liability protections for companies that share cyber threat information with third parties so long as such sharing activity is conducted in accordance with CISA. 14 In October 2016, the federal bank regulatory agencies issued an Advance Notice of Proposed Rulemaking regarding enhanced cyber risk management standards which would apply to a wide range of large financial institutions and their third-party service providers, including Bancshares and the Bank.
The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.
The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. However, in March 2024, a federal district court issued a preliminary injunction of the regulations, and litigation addressing the constitutionality of the regulations is still pending.
Previously, the Bank had two wholly owned subsidiaries: Acceptance Loan Company, Inc., an Alabama corporation (“ALC”), and FUSB Reinsurance, Inc., an Arizona corporation (“FUSB Reinsurance”). Both ALC and FUSB Reinsurance were dissolved in 2023, after all remaining assets and liabilities of these entities were transferred to the Bank.
Bancshares and the Bank are headquartered in Birmingham, Alabama. Previously, the Bank operated two additional wholly-owned subsidiaries, Acceptance Loan Company and FUSB Reinsurance, Inc., both of which were legally dissolved in 2023, and all remaining assets and liabilities of these entities were transferred to the Bank prior to December 31, 2023.
These regulatory agencies generally have broad discretion to impose restrictions and limitations on our operations. This supervisory framework could materially impact the conduct and profitability of our activities. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the text of such provisions.
These regulatory agencies generally have broad discretion to impose restrictions and limitations on our operations. This supervisory framework could materially impact the conduct and profitability of our activities. It is anticipated that the Trump administration and the current U.S.
Regulation of Lending Practices Our lending practices are subject to a number of federal and state laws, as supplemented by the rules and regulations of the various agencies charged with the responsibility of implementing these laws.
For example, the California Privacy Protection Agency ("CCPA") is currently in the process of finalizing regulations under the CCPA regarding the use of automated decision making. 15 Regulation of Lending Practices Our lending practices are subject to a number of federal and state laws, as supplemented by the rules and regulations of the various agencies charged with the responsibility of implementing these laws.
Prior to its name change on October 11, 2016, Bancshares was known as United Security Bancshares, Inc. Bancshares and the Bank are headquartered in Birmingham, Alabama. The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture.
The Bank conducts a general commercial banking business and offers banking services such as demand, savings, individual retirement account and time deposits, personal and commercial loans, safe deposit box services and remote deposit capture.
Climate-Related Regulation and Risk Management In recent years, the federal banking agencies have increased their focus on climate-related risks impacting the operations of banks, the communities they serve and the broader financial system.
Additionally, in the event that a member financial institution fails, the right of the FHLBA to seek repayment of funds loaned to that institution will take priority over the rights of all other creditors. 16 Climate-Related Regulation and Risk Management In recent years, the federal banking agencies have increased their focus on climate-related risks impacting the operations of banks, the communities they serve and the broader financial system.
We and our Board of Directors have, as appropriate, adopted or modified our policies and practices in order to comply with these regulatory requirements and to enhance our corporate governance practices. 11 As required by Sarbanes-Oxley, we have adopted a Code of Business Conduct and Ethics applicable to our Board, executives and employees.
As required by Sarbanes-Oxley, we have adopted a Code of Business Conduct and Ethics applicable to our Board, executives and employees.
In July 2023, the federal banking regulators proposed revisions to the Basel III Capital Rules to implement the Basel Committee’s 2017 standards and make other changes to the Basel III Capital Rules. The proposal introduces revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes.
In July 2023, the federal banking regulators proposed revisions to the Basel III Capital Rules to implement the Basel Committee’s 2017 standards and make other changes to the Basel III Capital Rules. In September 2024, the federal banking regulators announced a reproposal of the revisions with some modifications.
CISA also authorizes companies to monitor their own systems notwithstanding any other provision of law and allows companies to carry out cybersecurity defensive measures on their own systems. The law includes liability protections for companies that share cyber threat information with third parties so long as such sharing activity is conducted in accordance with CISA.
CISA also authorizes companies to monitor their own systems notwithstanding any other provision of law and allows companies to carry out cybersecurity defensive measures on their own systems.
In November 2021, the U.S. federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer security incidents.
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. In November 2021, federal bank regulatory agencies adopted a rule regarding notification requirements for banking organizations related to significant computer security incidents.
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. In March 2021, Virginia adopted the Consumer Data Protection Act (the “VCDPA”), which imposes certain restrictions and requirements on businesses that collect consumer data for at least 100,000 consumers in Virginia.
In March 2021, Virginia adopted the Consumer Data Protection Act (the “VCDPA”), which imposes certain restrictions and requirements on businesses that collect consumer data for at least 100,000 consumers in Virginia. The Bank currently has fewer than 100,000 customers in Virginia but may become subject to the VCDPA if its customer base grows above that level.
The requirements are intended to allow stockholders to more easily and efficiently monitor the performance of companies and directors.
The requirements are intended to allow stockholders to more easily and efficiently monitor the performance of companies and directors. We and our Board of Directors have, as appropriate, adopted or modified our policies and practices in order to comply with these regulatory requirements and to enhance our corporate governance practices.
We encourage a customer-focused orientation that meets the diverse needs of consumers and businesses in the communities in which we serve. As of December 31, 2023, 79% of our workforce was comprised of females, and 19% of our workforce was comprised of individuals who are racially or ethnically diverse.
We encourage a customer-focused orientation that meets the diverse needs of consumers and businesses in the communities in which we serve. 5 Competition We face strong competition in making loans, acquiring deposits and attracting customers for investment services.
As of December 31, 2023, the Bank was “well-capitalized” under the prompt corrective action rules.
As of December 31, 2024, the Bank was “well-capitalized” under the prompt corrective action rules. This classification is primarily for the purpose of applying the federal prompt corrective action provisions and is not intended to be, and should not be, interpreted as a representation of our overall financial condition or prospects.
Removed
As used herein, unless the context suggests otherwise, references to the “Company,” “we,” “us” and “our” refer to Bancshares and the Bank, as well as ALC and FUSB Reinsurance (for periods prior to their dissolution), collectively. ALC was a finance company headquartered in Mobile, Alabama.
Added
Congress likely will not increase the regulatory burden on community banking organizations and may seek to reduce and streamline certain prudential and regulatory requirements applicable to community banking organizations at a federal level based on statements made by relevant congressional leaders and the acting leaders of certain banking agencies.
Removed
The Bank will continue to manage the remaining loans from ALC’s portfolio, which totaled $10.5 million as of December 31, 2023, through final resolution. FUSB Reinsurance was designed to reinsure certain insurance policies sold to the Bank's and ALC's consumer loan customers.
Added
At this time, however, it is not possible to predict with any certainty the actual impact the Trump administration may have on the banking industry or our operations. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the text of such provisions.
Removed
Our Board of Directors includes three females and one racially or ethnically diverse member (representing 36% of Directors). Women and individuals who are racially or ethnically diverse represent 21% of our senior management team, which includes our executive officers. Competition We face strong competition in making loans, acquiring deposits and attracting customers for investment services.
Added
Over the last several years, the CFPB has taken an aggressive approach to the regulation (and supervision, where applicable) of providers of consumer financial products and services.
Removed
Any capital loan by Bancshares to the Bank is subordinate in right of payment to deposits and certain other indebtedness of the Bank.
Added
For example, the CFPB has taken, or attempted to take, a proactive, multi-front approach to protect consumers from excessive overdraft and non-sufficient funds fees, including through proposed or final rules, interpretive opinions and enforcement actions.
Removed
The Bank currently has fewer than 100,000 customers in Virginia but may become subject to the VCDPA if its customer base grows above that level. The Company could face enforcement actions by the Virginia Attorney General and penalties for noncompliance with the VCDPA.
Added
Given the increased number and expansive nature of its regulatory initiatives, the CFPB has been subject to lawsuits brought by the banking industry and other providers of consumer financial products and services. The CFPB’s approach may change under the Trump administration, but it remains unclear exactly what changes will occur or how quickly.
Removed
For example, the California Privacy Protection Agency ("CCPA") is currently in the process of finalizing regulations under the CCPA regarding the use of automated decision making.
Added
In addition, certain rules that the Biden administration CFPB finalized may be subject to reversal by either the U.S. Congress or the new CFPB administration.
Removed
Additionally, in the event that a member financial institution fails, the right of the FHLBA to seek repayment of funds loaned to that institution will take priority over the rights of all other creditors.
Added
The Federal Reserve, which has authority to prohibit a bank holding company from paying dividends or making other distributions, has issued a Supervisory Letter stating that a bank holding company should not pay cash dividends unless its net income available to common stockholders has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the holding company’s capital needs, asset quality, and overall financial condition.
Added
The Dodd-Frank Act, Basel III (described below), and their respective implementing regulations impose additional restrictions on the ability of banking institutions to pay dividends.
Added
The proposed rules introduce revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes.
Added
Fair Access On January 23, 2025, President Trump signed an Executive Order titled “Strengthening American Leadership in the Digital Financial Technology” (the “Order”). The primary focus of the Order is promoting U.S. developments in blockchain, digital assets and other emerging financial technologies, including cryptocurrency.
Added
The Order also states that one of the administration’s objectives is “protecting and promoting fair and open access to banking services for all law-abiding individual citizens and private-sector entities alike.” This objective appears to be related to a regulatory initiative in the first Trump administration that ultimately led to the OCC adopting a final rule on “Fair Access to Financial Services” (the “Fair Access Rule”) in the final days of that administration.
Added
The Fair Access Rule would require “covered banks” (generally, national banks with over $100 billion in assets) to: • Make each financial service it offers available to all persons in the geographic market served by the covered bank on proportionally equal terms; • Not deny any person a financial service the covered bank offers unless the denial is justified by such person’s quantified and documented failure to meet quantitative, impartial risk-based standards established in advance by the covered bank; and • Not deny, in coordination with others, any person a financial service the covered bank offers.
Added
The Trump administration expressed concern, in particular, for banks denying access due to political or social concerns. The Biden administration paused implementation of the Fair Access Rule, and it never became effective. The new Trump administration may revive the Fair Access Rule or enact similar regulations. Any such rule could impose a regulatory burden on covered banks to document compliance.
Added
The Company is not a covered bank under the existing version of the Fair Access Rule, but additional rulemaking could broaden its scope to apply to the Company. Third-Party Risk Management On June 9, 2023, the OCC, Federal Reserve, and FDIC issued final interagency guidance on risk management of third-party relationships, including third-party lending relationships.
Added
The interagency guidance is based, in part, on the OCC’s previously existing third-party risk management guidance from 2013 and seeks to, among other things, promote consistency in third-party risk management and provide sound risk management guidance for third-party relationships commensurate with a bank’s risk profile and complexity as well as the criticality of the activity.
Added
The final interagency guidance replaces each agency’s existing guidance on this topic (including the OCC's 2020 Frequently Asked Questions on Third-Party Relationships) and is directed to all banking organizations supervised by the OCC, Federal Reserve, and FDIC.
Added
Additionally, third party relationship risk management and banking as a service arrangements (including with respect to deposit products and services) have been topics of focus for federal bank regulators in 2024 and further rulemaking activity or guidance may be forthcoming.
Added
(Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. FinCEN adopted a final regulation as 31 C.F.R. 101.380 on September 30, 2022 to implement the CTA. This became effective on January 1, 2024. These regulations require entities to report information about their beneficial owners and the individuals who created the entity (together, “beneficial ownership information” or “BOI”).
Added
FinCEN explained that the proposed rule would help protect the U.S. financial system from illicit use by making it more difficult for bad actors to conceal their financial activities through entities with opaque ownership structures.
Added
FinCEN also explained that the proposed reporting obligations would provide essential information to law enforcement and others to help prevent corrupt actors, terrorists, and proliferators from hiding money or other property in the United States.
Added
The new rules expand financial institutions’ obligations under the Customer Due Diligence Rule (the “CDD Rule”) to collect information and verify the beneficial ownership of legal entities. The constitutionality of the CTA has been challenged in federal court, and enforcement of the CTA is subject to an injunction pending the outcome of the related litigation.
Added
Although the Company and the Bank are exempt from the CTA’s requirements to report their respective beneficial owners, the new CTA reporting requirements, if they become effective, may increase the Bank’s anti-money laundering diligence activities and costs.
Added
The United States has imposed various sanctions upon various foreign countries, such as China, Iran, North Korea, Russia and Venezuela, and certain of their government officials and persons. Banks are required to comply with these sanctions which require additional customer screening and transaction monitoring.
Added
Russia’s February 2022 invasion of Ukraine has generated a significant number of new sanctions on Russia, Russian persons and suppliers of military or dual-purpose products to Russia. Federal bank regulators have issued alerts that Russia and others may step up cyber-attacks and data intrusions following the invasion.
Added
FinCEN has issued four alerts on potential Russian illicit financial activity since February 2022. On January 25, 2023 FinCEN issued an alert to financial institutions on potential investments in the U.S. commercial real estate sector by sanctioned Russian elites, oligarchs, their family members, and the entities through which they act.
Added
The alert listed potential red flags and typologies involving attempted sanctions evasion in the commercial real estate sector, and reminds financial institutions of their Bank Secrecy Act (BSA) reporting obligations. Overdrafts Federal bank regulators have updated their guidance several times on overdrafts, including overdrafts incurred at automated teller machines and point of sale terminals.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+42 added−3 removed111 unchanged
Biggest changeAny failure to adequately oversee the actions of our third-party service providers could result in regulatory actions against us, which could adversely affect our business, consolidated financial condition, results of operations and cash flows. 19 Risks Related to Legal, Reputational and Compliance Matters We are subject to extensive governmental regulation, and the costs of complying with such regulation could have an adverse impact on our operations.
Biggest changeIn addition, federal regulators have issued guidance outlining their expectations for third-party service provider oversight and monitoring by financial institutions. Any failure to adequately oversee the actions of our third-party service providers could result in regulatory actions against us, which could adversely affect our business, consolidated financial condition, results of operations and cash flows.
Our acquisition activities could involve a number of additional risks, including the risks of: • incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating the terms of potential transactions, resulting in our attention being diverted from the operation of our existing business; • using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; • being potentially exposed to unknown or contingent liabilities of banks and businesses we acquire; • changes in asset quality and credit risk as a result of the transaction; • being required to expend time and expense to integrate the operations and personnel of the combined businesses; • experiencing higher operating expenses relative to operating income from the new operations; • creating an adverse short-term effect on our results of operations; • losing key team members and customers as a result of an acquisition that is poorly received; and • incurring significant problems relating to the conversion of the financial and customer data of the entity being acquired into our financial and customer product systems.
Our acquisition activities could involve a number of additional risks, including the risks of: • incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating the terms of potential transactions, resulting in our attention being diverted from the operation of our existing business; • using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; • being potentially exposed to unknown or contingent liabilities of banks and businesses we acquire; 25 • changes in asset quality and credit risk as a result of the transaction; • being required to expend time and expense to integrate the operations and personnel of the combined businesses; • experiencing higher operating expenses relative to operating income from the new operations; • creating an adverse short-term effect on our results of operations; • losing key team members and customers as a result of an acquisition that is poorly received; and • incurring significant problems relating to the conversion of the financial and customer data of the entity being acquired into our financial and customer product systems.
The market price of our common stock may be subject to significant fluctuations in response to a variety of factors, including, but not limited to: • general economic, business and political conditions; • changing market conditions in the broader stock market in general, or in the financial services industry in particular; • monetary and fiscal policies, laws and regulations and other activities of the government, agencies and similar organizations; • actual or anticipated variations in our operating results, financial condition or asset quality; • our failure to meet analyst predictions and projections; 23 • collectability of loans; • cost and other effects of legal and administrative cases and proceedings, claims, settlements and judgments; • additions or departures of key personnel; • trades of large blocks of our stock; • announcements of innovations or new services by us or our competitors; • future sales of our common stock or other securities; and • other events or factors, many of which are beyond our control.
The market price of our common stock may be subject to significant fluctuations in response to a variety of factors, including, but not limited to: • general economic, business and political conditions; • changing market conditions in the broader stock market in general, or in the financial services industry in particular; • monetary and fiscal policies, laws and regulations and other activities of the government, agencies and similar organizations; • actual or anticipated variations in our operating results, financial condition or asset quality; • our failure to meet analyst predictions and projections; • collectability of loans; • cost and other effects of legal and administrative cases and proceedings, claims, settlements and judgments; • additions or departures of key personnel; • trades of large blocks of our stock; • announcements of innovations or new services by us or our competitors; • future sales of our common stock or other securities; and • other events or factors, many of which are beyond our control.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, consolidated financial condition, results of operations and cash flows.
Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in 23 significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, consolidated financial condition, results of operations and cash flows.
In addition, banking regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further charge-offs if the regulators’ judgments are different than those of our management. Material additions to the allowance could materially decrease our net income. 15 CRE lending may expose us to increased lending risks.
In addition, banking regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further charge-offs if the regulators’ judgments are different than those of our management. Material additions to the allowance could materially decrease our net income. CRE lending may expose us to increased lending risks.
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, and, as a result, may be able to offer certain products and services at a lower cost than we are able to offer, which could adversely affect our business.
In addition, many of our non-bank competitors are not subject to the 19 same extensive federal regulations that govern bank holding companies and federally insured banks, and, as a result, may be able to offer certain products and services at a lower cost than we are able to offer, which could adversely affect our business.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the repayment or sale of loans and other sources could have a substantial negative effect on our liquidity. Our funding sources include federal funds, purchased securities sold under repurchase agreements, core and non-core deposits, and short- and long-term debt.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the repayment or sale of loans and other sources could have a substantial negative effect on our liquidity. Our funding sources include federal funds, purchased 18 securities sold under repurchase agreements, core and non-core deposits, and short- and long-term debt.
The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations. 21 Risks Related to Strategic Planning We intend to engage in acquisitions of other banking institutions from time to time.
The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations. Risks Related to Strategic Planning We intend to engage in acquisitions of other banking institutions from time to time.
Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of delinquencies, defaults and charge-offs, additional provisions for loan losses, a decline in the value of our collateral, and an overall material adverse effect on 16 the quality of our loan portfolio.
Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of delinquencies, defaults and charge-offs, additional provisions for loan losses, a decline in the value of our collateral, and an overall material adverse effect on the quality of our loan portfolio.
Our inability to overcome these risks could have an adverse effect on levels of reported net income, return on equity and return on assets and the ability to achieve our business strategy and maintain market value. 22 We may not be able to maintain consistent growth, earnings or profitability.
Our inability to overcome these risks could have an adverse effect on levels of reported net income, return on equity and return on assets and the ability to achieve our business strategy and maintain market value. We may not be able to maintain consistent growth, earnings or profitability.
The FDIC has authority to increase insurance assessments, and any significant increase in insurance assessments would likely have an adverse effect on us. 20 We face a risk of noncompliance and enforcement action under the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The FDIC has authority to increase insurance assessments, and any significant increase in insurance assessments would likely have an adverse effect on us. We face a risk of noncompliance and enforcement action under the Bank Secrecy Act and other anti-money laundering statutes and regulations.
Information security risks for financial institutions have generally 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, terrorists, activists and other external parties.
Information security risks for financial institutions have generally 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 21 sophistication and activities of organized crime, hackers, terrorists, activists and other external parties.
Further, the income tax treatment of corporations may at any time be clarified and/or modified through legislation, administration or judicial changes or interpretations. These changes or interpretations could adversely affect us, either directly or as a result of the effects on our customers.
Further, the income tax treatment of corporations may at any time be clarified and/or 24 modified through legislation, administration or judicial changes or interpretations. These changes or interpretations could adversely affect us, either directly or as a result of the effects on our customers.
The community involvement of our executive officers and directors and our directors’ diverse and extensive business relationships are important to our success. A material change in the composition of our management team or board of directors could cause our business to suffer.
The community involvement of our executive officers and directors and our directors’ diverse and extensive business relationships are 27 important to our success. A material change in the composition of our management team or board of directors could cause our business to suffer.
We make various assumptions and judgments about the collectability of our loan portfolio and provide an allowance for potential credit losses based on a number of factors. We believe that our allowance for credit losses is adequate.
We make various assumptions and judgments about the collectability of our loan portfolio and 17 provide an allowance for potential credit losses based on a number of factors. We believe that our allowance for credit losses is adequate.
We are under continuous threat 18 of loss due to hacking and cyber-attacks, especially as we continue to expand customer capabilities to utilize the internet and other remote channels to transact business.
We are under continuous threat of loss due to hacking and cyber-attacks, especially as we continue to expand customer capabilities to utilize the internet and other remote channels to transact business.
Extreme weather could cause a disruption in our operations, which could have an adverse impact on our profitability . Some of our operations are located in areas near the Gulf of Mexico, a region that is susceptible to hurricanes and other forms of extreme weather.
Extreme weather could cause a disruption in our operations, which could have an adverse impact on our profitability . Some of our operations are located in areas near the Gulf of America, a region that is susceptible to hurricanes and other forms of extreme weather.
Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government’s debt limit may increase the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States. On January 21, 2025, the U.S.
Our business is subject to liquidity risk, which could disrupt our ability to meet financial obligations. Liquidity risk refers to the ability of the Company to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes.
Liquidity risk refers to the ability of the Company to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant reputational consequences for us. Any of these circumstances could have a material adverse effect on our business, consolidated financial condition, results of operations and cash flows. Bancshares’ liquidity is subject to various regulatory restrictions applicable to its subsidiaries.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have significant reputational consequences for us. Any of these circumstances could have a material adverse effect on our business, consolidated financial condition, results of operations and cash flows.
Our policy generally has been to originate CRE loans primarily in the states in which the Bank operates. At December 31, 2023, CRE loans, including owner occupied, investor, and real estate construction loans, totaled $301.7 million or 36.7%, of our total loan portfolio.
Our policy generally has been to originate CRE loans primarily in the states in which the Bank operates. At December 31, 2024, CRE loans, including owner occupied, investor, and real estate construction loans, totaled $293.3 million or 35.6%, of our total loan portfolio.
Our consolidated results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve. The instruments of monetary policy employed by the Federal Reserve include open market operations in United States government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits.
The instruments of monetary policy employed by the Federal Reserve include open market operations in United States government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits.
We encounter strong competition in making loans, acquiring deposits and attracting customers for investment services. We compete with commercial banks, online banks, credit unions, finance companies, mutual funds, insurance companies, investment banking companies, brokerage firms and other financial intermediaries operating in our markets and elsewhere in various segments of the financial services market.
We compete with commercial banks, online banks, credit unions, finance companies, mutual funds, insurance companies, investment banking companies, brokerage firms and other financial intermediaries operating in our markets and elsewhere in various segments of the financial services market.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our net interest margin depends on many factors that are partly or completely out of our control, including competition, federal economic monetary and fiscal policies and general economic conditions.
For a more detailed discussion of these risks and our management strategies for these risks, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our net interest margin depends on many factors that are partly or completely out of our control, including competition, federal economic monetary and fiscal policies and general economic conditions.
Adverse changes in the economic conditions of the southeastern United States in general or any one or more of these local markets could negatively impact the financial results of our banking operations and have a negative effect on our profitability. The banking industry is highly competitive, which could result in loss of market share and adversely affect our business.
Adverse changes in the economic conditions of the southeastern United States in general or any one or more of these local markets could negatively impact the financial results of our banking operations and have a negative effect on our profitability.
In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.
In addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations. The potential effect of these factors is heightened due to the current conditions in the financial markets and economic conditions generally.
Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio. At December 31, 2023, nonaccrual CRE loans totaled $1.3 million, or less than 1% of our total portfolio of CRE loans.
Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio. At December 31, 2024, the Company had no CRE loans on nonaccrual status.
Our success depends to a certain extent on the general economic conditions of the geographic markets that we serve in Alabama, Tennessee and Virginia. Local economic conditions in these areas have a significant impact on our commercial, real estate and construction loans, the ability of borrowers to repay these loans and the value of the collateral securing these loans.
Local economic conditions in these areas have a significant impact on our commercial, real estate and construction loans, the ability of borrowers to repay these loans and the value of the collateral securing these loans.
The potential effect of these factors is heightened due to the current conditions in the financial markets and economic conditions generally. 17 Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
Fiscal challenges facing the U.S. government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide. Changes in the policies of monetary authorities and other government action could adversely affect our profitability.
A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide and, therefore, materially adversely affect our business, financial condition and results of operations. 20 Any government shutdown could adversely affect the U.S. and global economy and our liquidity, financial condition and earnings.
Regulations and laws may be modified at any time, and new legislation may be enacted that could affect us. We cannot assure you that any changes in regulations or new laws will not adversely affect our performance or consolidated results of operations. Our regulatory framework is discussed in greater detail under “Item 1.
The potential impact of any changes in agency personnel, policies and priorities on the financial services sector, including the Bank, cannot be predicted at this time. We cannot assure you that any changes in regulations or new laws will not adversely affect our performance or consolidated results of operations. Our regulatory framework is discussed in greater detail under “Item 1.
Such weather events could disrupt our operations and have a material adverse effect on our overall results of operations. Further, a hurricane, tornado or other extreme weather event in any of our market areas could adversely impact the ability of borrowers to timely repay their loans and may adversely impact the value of collateral that we hold.
Further, a hurricane, tornado or other extreme weather event in any of our market areas could adversely impact the ability of borrowers to timely repay their loans and may adversely impact the value of collateral that we hold. 26 Securities issued by us, including our common stock, are not insured.
The financial services industry is extensively regulated and supervised under both federal and state law. We are subject to the supervision and regulation of the Federal Reserve, the FDIC and the ASBD. These regulations are intended primarily to protect depositors, the public and the FDIC’s Deposit Insurance Fund, rather than shareholders.
We are subject to the supervision and regulation of the Federal Reserve, the FDIC and the ASBD. These regulations are intended primarily to protect depositors, the public and the FDIC’s Deposit Insurance Fund, rather than shareholders. Additionally, we are subject to supervision, regulation and examination by other regulatory authorities, such as the SEC and state securities and insurance regulators.
We maintain a portfolio of securities that can be used as a source of liquidity. Other sources of liquidity are available should they be needed, such as through our acquisition of additional non-core deposits. Bancshares may be able, depending on market conditions, to issue and sell debt securities and preferred or common equity securities in public or private transactions.
We maintain a portfolio of securities that can be used as a source of liquidity. In addition, certain loans in the Company's loan portfolio may be pledged to the FHLB or Federal Reserve Bank ("FRB") as a source of liquidity. Other sources of liquidity are available should they be needed, such as through our acquisition of additional non-core deposits.
These differences could result in an increase in interest expense relative to interest income or a decrease in our interest rate spread. For a more detailed discussion of these risks and our management strategies for these risks, see “Item 7.
These differences could result in an increase in interest expense relative to interest income or a decrease in our interest rate spread. Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely affect both our ability to originate new loans and our ability to grow.
Removed
In addition, federal regulators have issued guidance outlining their expectations for third-party service provider oversight and monitoring by financial institutions.
Added
Weakness in the residential real estate markets could adversely affect our performance. As of December 31, 2024, 1-4 family residential real estate loans represented approximately 9% of our total loan portfolio.
Removed
Additionally, we are subject to supervision, regulation and examination by other regulatory authorities, such as the SEC and state securities and insurance regulators.
Added
A general decline in home values would adversely affect the value of collateral securing the residential real estate that we hold, as well as the volume of loan originations and the amount we realize on the sale of real estate loans.
Removed
Securities issued by us, including our common stock, are not insured.
Added
Additionally, if insurance obtained by our borrowers is insufficient to cover any losses sustained to the collateral, the decreases in the value of collateral securing our loans as a result of natural disasters or other related events could adversely impact our financial condition and results of operations.
Added
If insurance coverage is unavailable to our borrowers due to the reluctance of insurance companies to renew policies covering the collateral or due to other factors, the resulting increase in cost of home ownership could affect the ability of borrowers to repay loans.
Added
These factors could result in higher delinquencies and greater charge-offs in future periods, which could materially adversely affect our business, financial condition or results of operations. Our business is subject to liquidity risk, which could disrupt our ability to meet financial obligations.
Added
Bancshares may be able, depending on market conditions, to issue and sell debt securities and preferred or common equity securities in public or private transactions.
Added
Our success depends to a certain extent on the general economic conditions of the geographic markets that we serve in Alabama, Tennessee and Virginia, as well as other states in which our indirect lending team operates.
Added
Significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.
Added
The Trump administration has commenced efforts to implement significant changes to the size and scope of the federal government and reform its operations to achieve stated goals that include reducing the federal budget deficit and national debt, improving the efficiency of government operations, and promoting innovation and economic growth.
Added
To date, these efforts have been carried out through a mix of executive actions aimed at eliminating or modifying federal agency and federal program funding, reducing the size of the federal workforce, reducing or altering the scope of activities conducted by, and possibly eliminating, various federal agencies and bureaus, and encouraging the use of AI and other advanced technologies within the public and private sectors.
Added
These changes, if implemented and taken as a whole, may have varied effects on the economy that are difficult to predict. For instance, the delivery of government services and the distribution of federal program funds and benefits may be disrupted or, in some cases, eliminated as a result of funding cuts or recasting of federal agency mandates.
Added
Further, a substantial reduction of the federal workforce could adversely affect regional and local economies, both directly and indirectly, in geographies with significant concentrations of federal employees and contractors.
Added
It is possible that such comprehensive changes to the federal government may be materially adverse to the regional and local economies where we conduct business and to our customers, which, in turn, could be materially adverse to our business, financial condition and results of operations.
Added
The banking industry is highly competitive, which could result in loss of market share and adversely affect our business. We encounter strong competition in making loans, acquiring deposits and attracting customers for investment services.
Added
Beginning in early 2022, in response to growing signs of inflation, the FRB increased interest rates rapidly, causing the federal funds rate to reach a 22-year high. Although the FRB reduced its benchmark rates in the latter part of 2024, the inflationary outlook in the United States is currently uncertain.
Added
Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.
Added
Persistent inflation could lead to higher interest rates, which could, in turn, increase the borrowing costs of our customers, making it more difficult for them to repay their loans or other obligations. High interest rates could also push down asset prices and weaken economic activity.
Added
Treasury began taking extraordinary measures to prevent a default on U.S. government debt, which measures are expected to continue until such time as the U.S. Congress increases the debt ceiling. However, it is unclear how long such extraordinary measures will forestall a default in the event of extended Congressional negotiations or inaction.
Added
Disagreement over the federal budget has previously caused the U.S. federal government to shut down for periods of time. On December 21, 2024, President Biden signed a bipartisan continuing resolution to extend federal spending and avert a government shutdown through March 14, 2025.
Added
Accordingly, without a final agreement regarding the federal budget in place prior to the expiration of the continuing resolution, or another continuing resolution, it is still possible that a partial shutdown of the U.S. government may occur.
Added
An extended period of shutdown of portions of the U.S. federal government could negatively impact the financial performance of certain customers and could negatively impact customers’ future access to certain loan and guaranty programs. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.
Added
During any protracted federal government shutdown, we may not be able to close certain loans and we may not be able to recognize non-interest income on the sale of loans. In addition, we believe that some borrowers may decide not to proceed to close on their loans, which would result in a permanent loss of the related non-interest income.
Added
A federal government shutdown could also result in reduced income for government employees or employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-performing, criticized, and classified assets, and a decline in demand for our products and services.
Added
Changes in the policies of monetary authorities and other government action could adversely affect our profitability. Our consolidated results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve.
Added
The development and use of Artificial Intelligence (“AI”) presents risks and challenges that may adversely impact our business. We or our third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to our business.
Added
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.
Added
These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance.
Added
AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful.
Added
In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs.
Added
This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made.
Added
Further, we may rely on AI 22 models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.
Added
Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.
Added
Risks Related to Legal, Reputational and Compliance Matters We are subject to extensive governmental regulation, and the costs of complying with such regulation could have an adverse impact on our operations. The financial services industry is extensively regulated and supervised under both federal and state law.
Added
Regulations and laws may be modified at any time, and new legislation may be enacted that could affect us. The recent turnover of the Presidential administration will result in certain changes in the leadership and senior staffs of the FDIC, the CFPB, the SEC, the Treasury Department, and other agencies.
Added
These changes are expected to impact the rulemaking, supervision, examination and enforcement priorities and policies of the agencies, including the possible reversal of a number of final and proposed rules and policy statements promulgated under the Biden administration.
Added
We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and a failure to comply with these laws could lead to a wide variety of sanctions.
Added
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act, and other fair lending laws and regulations (collectively, “fair lending laws”) impose community investment and nondiscriminatory lending requirements on financial institutions. The CFPB, the Department of Justice and other federal and state agencies are responsible for enforcing these federal laws and regulations and comparable state provisions.
Added
Various federal banking agencies have recently completed significant changes to their respective CRA regulations. Federal, state or local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans.
Added
A successful regulatory challenge to an institution's performance under the fair lending laws could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions, restrictions on expansion and restrictions on entering new business lines.
Added
Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations. Bancshares’ liquidity is subject to various regulatory restrictions applicable to its subsidiaries.
Added
In March 2024, the SEC adopted final rules for "The Enhancement and Standardization of Climate-Related Disclosures for Investors,” which would have required issuers to provide climate-related disclosures. In April 2024, the SEC stayed the effectiveness of the final rules pending the outcome of certain legal challenges.
Added
Such weather events could disrupt our operations and have a material adverse effect on our overall results of operations.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur processes also address cybersecurity threat risks associated with our use of third-party service providers, including those in our supply chain or who have access to our customer and employee data or our systems. Third-party risks are included within our enterprise risk management program, as well as our cybersecurity-specific risk identification program, both of which are discussed above.
Biggest changeThird-party risks are included within our enterprise risk management program, as well as our cybersecurity-specific risk identification program, both of which are discussed above. In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers.
These controls include the following activities: 24 • conduct annual customer data handling and use requirements training for our employees; • conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; • conduct regular phishing email simulations for employees with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • through policy, practice and contract (as applicable) require employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • utilize an incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; • maintain multiple layers of controls, including embedding security into our technology investments; • carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident; and • external reviews of our cybersecurity position to help ensure adherence to best practices and validate risk assessments and response plans.
These controls include the following activities: • conduct annual customer data handling and use requirements training for our employees; • conduct annual cybersecurity management and incident training for employees involved in our systems and processes that handle sensitive data; • conduct regular phishing email simulations for employees with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • through policy, practice and contract (as applicable) require employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • utilize an incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; • maintain multiple layers of controls, including embedding security into our technology investments; • carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident; and • external reviews of our cybersecurity position to help ensure adherence to best practices and validate risk assessments and response plans.
For additional information regarding the risk the Company faces from cybersecurity threats, please see the risk factors titled “We use information technology in our operations and offer online banking services to our customers, and unauthorized access to our customers’ confidential or proprietary information as a result of a cyber-attack or otherwise could expose us to reputational harm and litigation and adversely affect our ability to attract and retain customers” and “We depend on outside third parties for the processing and handling of our records and data, which exposes us to additional risk for cybersecurity breaches and regulatory action.” included in Part I.
For additional information regarding the risk the Company faces from cybersecurity threats, please see the risk factors titled “We use information technology in our operations and offer online banking services to our customers, and unauthorized access to our customers’ confidential or proprietary information as a result of a cyber-attack or otherwise could expose us to reputational harm and litigation and adversely affect our ability to attract and retain customers” and “ We depend on outside third parties for the processing and handling of our records and data, which exposes us to additional risk for cybersecurity breaches and regulatory action.” included in Part I.
Item 1A. – Risk Factors of this report. 25 Cybersecurity Governance Cybersecurity is an important part of our enterprise risk management program and an area of increasing focus for our Board and management.
Item 1A. – Risk Factors of this report. Cybersecurity Governance Cybersecurity is an important part of our enterprise risk management program and an area of increasing focus for our Board and management.
In addition, our incident response plan coordinates the activities we take to prepare for, detect, respond to, and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.
In addition, our incident response plan coordinates the activities we take to prepare for, detect, respond to, and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage. 28 Our processes also address cybersecurity threat risks associated with our use of third-party service providers, including those in our supply chain or who have access to our customer and employee data or our systems.
As a regulated financial institution, the Company is also subject to financial privacy laws and its cybersecurity practices are subject to oversight by the federal banking agencies. For additional information, see “Supervision and Regulation – Privacy of Customer Information and “– Cybersecurity” included in Part I. Item 1 – Business of this report.
For additional information, see “Supervision and Regulation – Privacy of Customer Information and “– Cybersecurity” included in Part I. Item 1 – Business of this report.
In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers. We perform diligence on third parties that have access to our systems, data or facilities that house such systems or data, and monitor cybersecurity threat risks identified through such diligence.
We perform diligence on third parties that have access to our systems, data or facilities that house such systems or data, and monitor cybersecurity threat risks identified through such diligence. As a regulated financial institution, the Company is also subject to financial privacy laws and its cybersecurity practices are subject to oversight by the federal banking agencies.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn the opinion of management, based on a review and consultation with our legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on our consolidated financial statements or results of operation.
Biggest changeIn the opinion of management, based on a review and consultation with our legal counsel, the outcome of such ordinary course litigation should not have a material adverse effect on our consolidated financial statements or results of operation. 29

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn December 2019 and April 2021, the Board approved the repurchase of additional shares of common stock under the share repurchase program, and the Board has periodically extended the expiration date of the program, most recently to December 31, 2024.
Biggest changeIn November 2024, the Board of Directors authorized the Company to repurchase an additional 600,000 shares under the program and to extend the expiration date of the program to December 31, 2025. As of December 31, 2024, Bancshares was authorized to repurchase up to 912,813 shares of common stock under the share repurchase program.
(2) 137,500 shares were repurchased during the fourth quarter pursuant to Bancshares’ publicly announced share repurchase program, which was initially approved by the Board of Directors on January 19, 2006 and authorized the repurchase of up to 642,785 shares of common stock.
(2) 40,000 shares were repurchased during the fourth quarter pursuant to Bancshares’ publicly announced share repurchase program, which was initially approved by the Board of Directors on January 19, 2006 and authorized the repurchase of up to 642,785 shares of common stock.
Bancshares’ common stock is listed on the Nasdaq Capital Market under the symbol “FUSB.” Prior to our name change on October 11, 2016, our common stock was listed on the Nasdaq Capital Market under the symbol “USBI.” As of March 6, 2024, there were approximately 634 record holders of Bancshares’ common stock (excluding any participants in any clearing agency and “street name” holders).
Bancshares’ common stock is listed on the Nasdaq Capital Market under the symbol “FUSB.” Prior to our name change on October 11, 2016, our common stock was listed on the Nasdaq Capital Market under the symbol “USBI.” As of March 3, 2025, there were approximately 616 record holders of Bancshares’ common stock (excluding any participants in any clearing agency and “street name” holders).
Bancshares declared total dividends of $0.20 per common share and $0.14 per common share during the years ended December 31, 2023 and 2022, respectively.
Bancshares declared total dividends of $0.22 per common share and $0.20 per common share during the years ended December 31, 2024 and 2023, respectively.
See Note 14, "Shareholders' Equity," in the consolidated financial statements for additional information on dividend restrictions. 26 Share Repurchases The following table sets forth purchases made by or on behalf of Bancshares or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of Bancshares’ common stock during the fourth quarter of 2023.
Share Repurchases The following table sets forth purchases made by or on behalf of Bancshares or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, of shares of Bancshares’ common stock during the fourth quarter of 2024.
Bancshares expects to continue to pay comparable cash dividends in the future, subject to the results of operations of Bancshares and the Bank, legal and regulatory requirements and potential limitations imposed by financial covenants with third parties.
Bancshares expects to continue to pay comparable cash dividends in the future, subject to the results of operations of Bancshares and the Bank, legal and regulatory requirements and potential limitations imposed by financial covenants with third parties. See Note 14, "Shareholders' Equity," in the consolidated financial statements for additional information on dividend restrictions.
As of December 31, 2023, Bancshares was authorized to repurchase up to 459,313 shares of common stock under the share repurchase program. Securities Authorized for Issuance under Equity Compensation Plans Information regarding securities authorized for issuance under our equity compensation plans is incorporated by reference to Item 12 of this Annual Report on Form 10-K.
Securities Authorized for Issuance under Equity Compensation Plans Information regarding securities authorized for issuance under our equity compensation plans is incorporated by reference to Item 12 of this Annual Report on Form 10-K.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Programs (2) October 1-31, 2023 1,043 $ 8.70 — 596,813 November 1-30, 2023 111 $ 9.03 — 596,813 December 1-31, 2023 137,575 $ 10.34 137,500 459,313 Total 138,729 $ 10.33 137,500 459,313 (1) 1,229 shares were purchased in open-market transactions by an independent trustee for Bancshares' 401(k) Plan during the fourth quarter of 2023.
Issuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Maximum Number of Shares that May Yet Be Purchased Under the Programs (2) October 1-31, 2024 595 $ 11.61 — 352,813 November 1-30, 2024 30,036 $ 12.32 30,000 922,813 December 1-31, 2024 10,060 $ 13.75 10,000 912,813 Total 40,691 $ 12.66 40,000 912,813 (1) 691 shares were purchased in open-market transactions by an independent trustee for Bancshares' 401(k) Plan during the fourth quarter of 2024.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe table below summarizes loan balances by portfolio category at the end of each of the most recent five years as of December 31, 2023: Year Ended December 31, 2023 2022 2021 2020 2019 (Dollars in Thousands) Real estate loans: Construction, land development and other land loans $ 88,140 $ 53,914 $ 67,393 $ 37,377 $ 30,755 Secured by 1-4 family residential properties 76,200 87,995 72,670 88,936 104,440 Secured by multi-family residential properties 62,397 67,852 46,021 54,421 50,845 Secured by non-farm, non-residential properties 213,586 200,156 198,000 184,622 162,916 Commercial and industrial loans 60,515 73,546 73,865 81,562 90,954 Consumer loans: Direct consumer 5,938 9,851 20,090 27,229 34,518 Branch retail 8,670 13,992 24,380 30,176 29,946 Indirect 306,345 266,567 205,931 141,521 46,631 Total loans $ 821,791 $ 773,873 $ 708,350 $ 645,844 $ 551,005 Allowance for credit losses 10,507 9,422 8,320 7,470 5,762 Net loans $ 811,284 $ 764,451 $ 700,030 $ 638,374 $ 545,243 41 Allowance for Credit Losses on Loans and Leases The table below summarizes changes in the allowance for credit losses on loans and leases for each of the most recent five years as of December 31, 2023.
Biggest changeThe table below summarizes loan balances by portfolio category at the end of each of the most recent five years as of December 31, 2024: Year Ended December 31, 2024 2023 2022 2021 2020 (Dollars in Thousands) Real estate loans: Construction, land development and other land loans $ 65,537 $ 88,140 $ 53,914 $ 67,393 $ 37,377 Secured by 1-4 family residential properties 69,999 76,200 87,995 72,670 88,936 Secured by multi-family residential properties 101,057 62,397 67,852 46,021 54,421 Secured by non-farm, non-residential properties 227,751 213,586 200,156 198,000 184,622 Commercial and industrial loans 44,238 60,515 73,546 73,865 81,562 Consumer loans: Direct consumer 4,774 5,938 9,851 20,090 27,229 Branch retail 5,558 8,670 13,992 24,380 30,176 Indirect 304,125 306,345 266,567 205,931 141,521 Total loans $ 823,039 $ 821,791 $ 773,873 $ 708,350 $ 645,844 Allowance for credit losses 10,184 10,507 9,422 8,320 7,470 Net loans $ 812,855 $ 811,284 $ 764,451 $ 700,030 $ 638,374 As of December 31, 2024 and December 31, 2023, the composition of the non-farm, non-residential loan portfolio was as follows: December 31, 2024 December 31, 2023 Owner Occupied Non-Owner Occupied Total Owner Occupied Non-Owner Occupied Total (Dollars in Thousands) Office $ 10,093 $ 36,811 $ 46,904 $ 14,686 $ 30,693 $ 45,379 Hospitality — — — 501 5,346 5,847 Industrial 5,696 45,477 51,173 12,480 35,265 47,745 Nursing homes 17,961 — 17,961 — — — Retail services 15,031 — 15,031 16,016 — 16,016 Retail single credit tenant — 41,357 41,357 — 43,113 43,113 Retail with anchor 3,075 13,628 16,703 376 11,953 12,329 Retail without anchor — — — 3,166 8,010 11,176 Storage 780 14,835 15,615 831 15,254 16,085 Other 11,989 11,018 23,007 10,552 5,344 15,896 Total loans $ 64,625 $ 163,126 $ 227,751 $ 58,608 $ 154,978 $ 213,586 43 As of December 31, 2024 and December 31, 2023, the composition of the construction, land development, and other land loans loan portfolio was as follows: December 31, 2024 December 31, 2023 Owner Occupied Non-Owner Occupied Total Owner Occupied Non-Owner Occupied Total (Dollars in Thousands) Apartments $ — $ 61,118 $ 61,118 $ — $ 66,789 $ 66,789 Senior housing — — — 8,362 — 8,362 Medical office — — — — 6,584 6,584 Farmland 3,057 — 3,057 3,174 — 3,174 Residential — — — 1,152 — 1,152 Retail without anchor — — — 763 — 763 Other 440 922 1,362 725 591 1,316 Total loans $ 3,497 $ 62,040 $ 65,537 $ 14,176 $ 73,964 $ 88,140 44 The following table classifies the Company's fixed and variable rate loans as of December 31, 2024 according to contractual maturities of: (1) one year or less, (2) after one year through five years, (3) after five years through fifteen years, and (4) after fifteen years: December 31, 2024 One Year or Less After One Year Through Five Years After Five Years Through Fifteen Years After Fifteen Years Total (Dollars in Thousands) Total loans: Real estate loans: Construction, land development and other land loans $ 12,561 $ 52,832 $ 144 $ — $ 65,537 Secured by 1-4 family residential properties 1,201 14,107 23,659 31,032 69,999 Secured by multi-family residential properties 36,406 54,526 8,188 1,937 101,057 Secured by non-farm, non-residential properties 37,095 112,124 78,532 — 227,751 Commercial and industrial loans 15,540 22,768 5,930 — 44,238 Consumer loans: Direct consumer 1,547 3,179 48 — 4,774 Branch retail 221 2,701 2,636 — 5,558 Indirect 206 13,848 290,071 — 304,125 Total loans $ 104,777 $ 276,085 $ 409,208 $ 32,969 $ 823,039 Loans with fixed interest rates: Real estate loans: Construction, land development and other land loans $ 563 $ 2,721 $ 144 $ — $ 3,428 Secured by 1-4 family residential properties 1,093 6,348 5,438 14,283 27,162 Secured by multi-family residential properties 32 35,545 363 167 36,107 Secured by non-farm, non-residential properties 19,772 53,722 61,996 — 135,490 Commercial and industrial loans 6,273 16,473 5,930 — 28,676 Consumer loans: Direct consumer 1,535 3,179 48 — 4,762 Branch retail 221 2,701 2,636 — 5,558 Indirect 206 13,848 290,071 — 304,125 Total loans with fixed interest rates $ 29,695 $ 134,537 $ 366,626 $ 14,450 $ 545,308 Loans with variable interest rates: Real estate loans: Construction, land development and other land loans $ 11,998 $ 50,111 $ — $ — $ 62,109 Secured by 1-4 family residential properties 108 7,759 18,221 16,749 42,837 Secured by multi-family residential properties 36,374 18,981 7,825 1,770 64,950 Secured by non-farm, non-residential properties 17,323 58,402 16,536 — 92,261 Commercial and industrial loans 9,267 6,295 — — 15,562 Consumer loans: Direct consumer 12 — — — 12 Branch retail — — — — — Indirect — — — — — Total loans with variable interest rates $ 75,082 $ 141,548 $ 42,582 $ 18,519 $ 277,731 45 Allowance for Credit Losses on Loans and Leases The table below summarizes changes in the allowance for credit losses on loans and leases for each of the most recent five years as of December 31, 2024.
Additionally, refer to the section captioned “Dividend Restrictions” included in Note 14 for a discussion regarding restrictions that could materially influence the Bank’s, and therefore Bancshares’, ability to pay dividends. 48 Asset/Liability Management Market risk reflects the potential risk of loss arising from adverse changes in interest rates and market prices.
Additionally, refer to the section captioned “Dividend Restrictions” included in Note 14 for a discussion regarding restrictions that could materially influence the Bank’s, and therefore Bancshares’, ability to pay dividends. Asset/Liability Management Market risk reflects the potential risk of loss arising from adverse changes in interest rates and market prices.
Allowance for Credit Losses on Loans and Leases The allowance for credit losses is a contra-asset valuation account that is deducted from the amortized cost basis of the loans to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed.
Allowance for Credit Losses on Loans and Leases The allowance for credit losses is a contra-asset valuation account that is deducted from the amortized cost basis of the loans to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes 32 the uncollectibility of a loan balance is confirmed.
Impairment exists when a reporting unit’s carrying amount of goodwill exceeds its implied fair value. In testing goodwill for impairment, U.S. GAAP permits the Company to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Impairment exists when a reporting unit’s carrying amount of goodwill exceeds its implied fair value. In testing goodwill for 33 impairment, U.S. GAAP permits the Company to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount 30 that the fair value is less than the amortized cost basis.
If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis.
Fair value is measured based on a variety of inputs that the Company utilizes. Fair value may be based on quoted market prices for identical assets or liabilities traded in active markets (Level 1 valuations).
Fair value is measured based on a variety of inputs that the Company utilizes. Fair value may be based on 34 quoted market prices for identical assets or liabilities traded in active markets (Level 1 valuations).
The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The allowance for credit losses on investment securities held-to-maturity is adjusted through the provision for (recovery of) credit losses.
The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The allowance for credit losses on investment securities held-to-maturity is adjusted through the provision for credit losses.
The valuation of financial instruments when quoted market prices are not available (Levels 2 and 3) may require significant management judgment to assess assumptions and observable inputs. Detailed information regarding fair value measurements can be found in Note 21, "Fair Value of Financial Instruments," in the consolidated financial statements contained herein.
The valuation of financial instruments when quoted market prices are not available (Levels 2 and 3) may require significant management judgment to assess assumptions and observable inputs. Detailed information regarding fair value measurements can be found in Note 19, "Fair Value of Financial Instruments," in the consolidated financial statements contained herein.
As of both December 31, 2023 and 2022, the Bank exceeded all applicable minimum capital standards, and met applicable regulatory guidelines to be considered well-capitalized. No significant conditions or events have occurred since December 31, 2023 that management believes would affect the Bank’s classification as well-capitalized for regulatory purposes.
As of both December 31, 2024 and 2023, the Bank exceeded all applicable minimum capital standards, and met applicable regulatory guidelines to be considered well-capitalized. No significant conditions or events have occurred since December 31, 2024 that management believes would affect the Bank’s classification as well-capitalized for regulatory purposes.
The following discussion and financial information are presented to aid in an understanding of the Company’s consolidated financial position, changes in financial position, results of operations and cash flows and should be read in conjunction with the consolidated financial statements and notes thereto included herein. The emphasis of the discussion is on the years 2023 and 2022.
The following discussion and financial information are presented to aid in an understanding of the Company’s consolidated financial position, changes in financial position, results of operations and cash flows and should be read in conjunction with the consolidated financial statements and notes thereto included herein. The emphasis of the discussion is on the years 2024 and 2023.
Refer to the section captioned “Regulatory Capital” included in Note 14, “Shareholders’ Equity,” in the Notes to the consolidated financial statements for an illustration of the Bank’s actual regulatory capital amounts and ratios under regulatory capital standards in effect as of December 31, 2023 and December 31, 2022.
Refer to the section captioned “Regulatory Capital” included in Note 14, “Shareholders’ Equity,” in the Notes to the consolidated financial statements for an illustration of the Bank’s actual regulatory capital amounts and ratios under regulatory capital standards in effect as of December 31, 2024 and December 31, 2023.
Interest-bearing liabilities consist of interest-bearing demand deposits and savings and time deposits, as well as borrowings. The following table shows the average balances of each principal category of assets, liabilities and shareholders’ equity for the years ended December 31, 2023 and 2022.
Interest-bearing liabilities consist of interest-bearing demand deposits and savings and time deposits, as well as borrowings. The following table shows the average balances of each principal category of assets, liabilities and shareholders’ equity for the years ended December 31, 2024 and 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements You should read the following discussion of our financial condition and results of operations in conjunction with the “Selected Financial Data” and our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2023.
MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements You should read the following discussion of our financial condition and results of operations in conjunction with the “Selected Financial Data” and our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K for the year 30 ended December 31, 2024.
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded in the provision for (recovery of) credit losses.
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded in the provision for credit losses.
The allowance for credit losses on unfunded lending commitments is included in other liabilities on the Company’s consolidated balance sheet and is adjusted through the provision for (recovery of) credit losses.
The allowance for credit losses on unfunded lending commitments is included in other liabilities on the Company’s consolidated balance sheet and is adjusted through the provision for credit losses.
These may include unfunded loan commitments, standby letters of credit, and financial guarantees. The CECL accounting guidance requires that an estimate of expected credit loss be measured on commitments in which an entity is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable by the issuer.
These may include unfunded loan commitments, standby letters of credit, and financial guarantees. ASC 326 guidance requires that an estimate of expected credit loss be measured on commitments in which an entity is exposed to credit risk via a present contractual obligation to extend credit unless the obligation is unconditionally cancellable by the issuer.
The investment securities portfolio had an estimated average life of 3.9 years and 3.5 years as of December 31, 2023 and 2022, respectively. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements.
The investment securities portfolio had an estimated average life of 3.6 years and 3.9 years as of December 31, 2024 and 2023, respectively. However, management does not rely solely upon the investment portfolio to generate cash flows to fund loans, capital expenditures, dividends, debt repayment and other cash requirements.
In both 2023 and 2022, the Company terminated certain interest rate swap contracts that had previously been in place, recording deferred gains of $2.1 million and $0.3 million in 2023 and 2022, respectively. The deferred gains are being accreted to net interest income over the remaining life of the original term of each swap.
In 2022 and 2023, the Company terminated certain interest rate swap contracts that had previously been in place, recording deferred gains totaling $0.3 million and $2.1 million in 2022 and 2023, respectively. The deferred gains are being accreted to net interest income over the remaining life of the original terms of each swap.
In addition, on October 1, 2021, the Company completed a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031. Net of unamortized debt issuance costs, the subordinated notes were recorded as long-term borrowings totaling $10.8 million and $10.7 million as of December 31, 2023 and 2022, respectively.
On October 1, 2021, the Company completed a private placement of $11.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes that will mature on October 1, 2031. Net of unamortized debt issuance costs, the subordinated notes were recorded as long-term borrowings totaling $10.9 million and $10.8 million as of December 31, 2024 and 2023, respectively.
As of December 31, 2023, the Company held three forward interest rate swap contracts designated as fair value hedges that were intended to mitigate risk associated with rising interest rates by converting a portfolio of fixed rate loans to a variable rate.
As of December 31, 2023, the Company held the following derivative financial instruments: • Three forward interest rate swap contracts designated as fair value hedges that were intended to mitigate risk associated with rising interest rates by converting a portfolio of fixed rate loans to a variable rate.
Non-accruing loans averaged $1.7 million and $1.8 million for the years ended December 31, 2023 and 2022, respectively. (2) Loan fees are included in the interest amounts presented.
Non-accruing loans averaged $3.1 million and $1.7 million for the years ended December 31, 2024 and 2023, respectively. (2) Loan fees are included in the interest amounts presented.
The Bank manages the pricing of its deposits to maintain a desired deposit balance. The Company had $10.0 million and $20.0 million in outstanding short-term borrowings under FHLB advances as of December 31, 2023 and 2022, respectively.
The Bank manages the pricing of its deposits to maintain a desired deposit balance. The Company had $10.0 million in outstanding short-term borrowings under FHLB advances as of both December 31, 2024 and 2023.
Year Ended December 31, 2023 2022 2021 2020 2019 (Dollars in Thousands, except Per Share Amounts) Results of Operations: Interest income $ 52,806 $ 41,197 $ 39,921 $ 40,377 $ 43,588 Interest expense 15,456 4,256 2,950 4,611 6,646 Net interest income 37,350 36,941 36,971 35,766 36,942 Provision for credit losses 319 3,308 2,010 2,945 2,714 Non-interest income 3,381 3,451 3,521 5,010 5,366 Non-interest expense 29,141 28,072 32,756 34,299 33,782 Income before income taxes 11,271 9,012 5,726 3,532 5,812 Provision for income taxes 2,786 2,148 1,275 825 1,246 Net income $ 8,485 $ 6,864 $ 4,451 $ 2,707 $ 4,566 Per Share Data: Basic net income per share $ 1.42 $ 1.13 $ 0.70 $ 0.43 $ 0.71 Diluted net income per share $ 1.33 $ 1.06 $ 0.66 $ 0.40 $ 0.67 Dividends per share $ 0.20 $ 0.14 $ 0.12 $ 0.12 $ 0.09 Common stock price - High $ 10.44 $ 12.00 $ 12.50 $ 12.00 $ 11.93 Common stock price - Low $ 6.54 $ 6.46 $ 7.54 $ 5.18 $ 7.60 Period end price per share $ 10.31 $ 8.68 $ 10.57 $ 9.02 $ 11.61 Period end shares outstanding (in thousands) 5,735 5,812 6,172 6,177 6,158 Period-End Balance Sheet: Total assets $ 1,072,940 $ 994,667 $ 958,302 $ 890,511 $ 788,738 Total loans 821,791 773,873 708,350 645,844 551,005 Allowance for credit losses on loans 10,507 9,422 8,320 7,470 5,762 Investment securities, net 136,669 132,657 134,319 91,422 108,356 Total deposits 950,191 870,025 838,126 782,212 683,662 Short-term borrowings 10,000 20,038 10,046 10,017 10,025 Long-term borrowings 10,799 10,726 10,653 — — Total shareholders’ equity 90,593 85,135 90,064 86,678 84,748 Book value 15.80 14.65 14.59 14.03 13.76 Performance Ratios: Total loans to deposits 86.5 % 88.9 % 84.5 % 82.6 % 80.6 % Net interest margin 3.87 % 4.07 % 4.23 % 4.69 % 5.18 % Return on average assets 0.82 % 0.70 % 0.47 % 0.32 % 0.58 % Return on average equity 9.88 % 7.99 % 5.01 % 3.17 % 5.51 % Asset Quality: Allowance for credit losses as % of loans 1.28 % 1.22 % 1.17 % 1.16 % 1.05 % Nonperforming assets as % of loans and other real estate 0.37 % 0.30 % 0.59 % 0.62 % 0.87 % Nonperforming assets as % of total assets 0.28 % 0.24 % 0.43 % 0.45 % 0.61 % Net charge-offs as a % of average loans 0.14 % 0.30 % 0.16 % 0.21 % 0.38 % Capital Adequacy: Common equity tier 1 risk-based capital ratio 10.88 % 11.07 % 11.36 % 11.78 % 12.78 % Tier 1 risk-based capital ratio 10.88 % 11.07 % 11.36 % 11.78 % 12.78 % Total risk-based capital ratio 12.11 % 12.19 % 12.44 % 12.92 % 13.77 % Tier 1 leverage ratio 9.36 % 9.39 % 9.17 % 8.98 % 9.61 % 28 DESCRIPTION OF THE BUSINESS First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiary, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
Year Ended December 31, 2024 2023 2022 2021 2020 (Dollars in Thousands, except Per Share Amounts) Results of Operations: Interest income $ 58,260 $ 52,806 $ 41,197 $ 39,921 $ 40,377 Interest expense 22,111 15,456 4,256 2,950 4,611 Net interest income 36,149 37,350 36,941 36,971 35,766 Provision for credit losses 622 319 3,308 2,010 2,945 Non-interest income 3,583 3,381 3,451 3,521 5,010 Non-interest expense 28,356 29,141 28,072 32,756 34,299 Income before income taxes 10,754 11,271 9,012 5,726 3,532 Provision for income taxes 2,584 2,786 2,148 1,275 825 Net income $ 8,170 $ 8,485 $ 6,864 $ 4,451 $ 2,707 Per Share Data: Basic net income per share $ 1.40 $ 1.42 $ 1.13 $ 0.70 $ 0.43 Diluted net income per share $ 1.33 $ 1.33 $ 1.06 $ 0.66 $ 0.40 Dividends per share $ 0.22 $ 0.20 $ 0.14 $ 0.12 $ 0.12 Common stock price - High $ 14.30 $ 10.44 $ 12.00 $ 12.50 $ 12.00 Common stock price - Low $ 8.66 $ 6.54 $ 6.46 $ 7.54 $ 5.18 Period end price per share $ 12.59 $ 10.31 $ 8.68 $ 10.57 $ 9.02 Period end shares outstanding (in thousands) 5,696 5,735 5,812 6,172 6,177 Period-End Balance Sheet: Total assets $ 1,101,086 $ 1,072,940 $ 994,667 $ 958,302 $ 890,511 Total loans 823,039 821,791 773,873 708,350 645,844 Allowance for credit losses on loans 10,184 10,507 9,422 8,320 7,470 Investment securities, net 168,570 136,669 132,657 134,319 91,422 Total deposits 972,557 950,191 870,025 838,126 782,212 Short-term borrowings 10,000 10,000 20,038 10,046 10,017 Long-term borrowings 10,872 10,799 10,726 10,653 — Total shareholders’ equity 98,624 90,593 85,135 90,064 86,678 Book value per share 17.31 15.80 14.65 14.59 14.03 Performance Ratios: Total loans to deposits 84.6 % 86.5 % 88.9 % 84.5 % 82.6 % Net interest margin 3.59 % 3.87 % 4.07 % 4.23 % 4.69 % Return on average assets 0.76 % 0.82 % 0.70 % 0.47 % 0.32 % Return on average equity 8.62 % 9.88 % 7.99 % 5.01 % 3.17 % Asset Quality: Allowance for credit losses as % of loans 1.24 % 1.28 % 1.22 % 1.17 % 1.16 % Nonperforming assets as % of loans and other real estate 0.66 % 0.37 % 0.30 % 0.59 % 0.62 % Nonperforming assets as % of total assets 0.50 % 0.28 % 0.24 % 0.43 % 0.45 % Net charge-offs as a % of average loans 0.14 % 0.14 % 0.30 % 0.16 % 0.21 % Capital Adequacy: Common equity tier 1 risk-based capital ratio 11.31 % 10.88 % 11.07 % 11.36 % 11.78 % Tier 1 risk-based capital ratio 11.31 % 10.88 % 11.07 % 11.36 % 11.78 % Total risk-based capital ratio 12.47 % 12.11 % 12.19 % 12.44 % 12.92 % Tier 1 leverage ratio 9.50 % 9.36 % 9.39 % 9.17 % 8.98 % 31 DESCRIPTION OF THE BUSINESS First US Bancshares, Inc., a Delaware corporation (“Bancshares” and, together with its subsidiary, the “Company”), is a bank holding company formed in 1983 registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”).
Interest income increased by $11.6 million, comparing the 2023 to 2022. Of the increase, $8.1 million was attributable to higher average yields on interest-earning assets, while $3.5 million was attributable to growth in average loan volume comparing the two periods.
Interest income increased by $5.5 million, comparing 2024 to 2023. Of the increase, $3.5 million was attributable to higher average yields on interest-earning assets, while $1.9 million was attributable to growth in average loan volume comparing the two periods.
Excluding wholesale brokered deposits, as of December 31, 2023, the Company had over 29 thousand deposit accounts with an average balance of approximately $29.8 thousand per account.
Excluding wholesale brokered deposits, as of December 31, 2024, the Company had approximately 29 thousand deposit accounts with an average balance of approximately $31.0 thousand per account.
As of December 31, 2023, these liabilities represented 2.5% of interest-bearing liabilities, compared to 4.2% as of December 31, 2022. The table below summarizes short- and long-term liabilities and related interest rate data as of and for the years ended December 31, 2023 and 2022.
As of both December 31, 2024 and 2023, these liabilities represented 2.5% of interest-bearing liabilities. The table below summarizes short- and long-term liabilities and related interest rate data as of and for the years ended December 31, 2024 and 2023.
As of December 31, 2023, core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, totaled $819.5 million, or 86.2% of total deposits, compared to $778.1 million, or 89.4% of total deposits, as of December 31, 2022.
As of December 31, 2024, core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, totaled $837.7 million, or 86.1% of total deposits, compared to $819.5 million, or 86.2% of total deposits, as of December 31, 2023.
As of December 31, 2023, core deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, totaled $819.5 million, or 86.2% of total deposits, compared to $778.1 million, or 89.4% of total deposits, as of December 31, 2022.
As of December 31, 2024, core 47 deposits, which exclude time deposits of $250 thousand or more and all brokered deposits, totaled $837.7 million, or 86.1% of total deposits, compared to $819.5 million, or 86.2% of total deposits, as of December 31, 2023.
The Company’s net charge-offs as a percentage of average loans totaled 0.14% during the year ended December 31, 2023, compared to 0.30% during the year ended December 31, 2022. As of December 31, 2023, the Company’s allowance for credit losses on loans as a percentage of total loans was 1.28%, compared to 1.22% as of December 31, 2022.
The Company’s net charge-offs as a percentage of average loans totaled 0.14% during both the years ended December 31, 2024 and 2023. As of December 31, 2024, the Company’s allowance for credit losses on loans as a percentage of total loans was 1.24%, compared to 1.28% as of December 31, 2023.
As of December 31, 2023, the Company had $0.2 million in other intangible assets, and there was no indication of impairment. Other Real Estate Owned Other real estate owned (“OREO”) consists of properties obtained through foreclosure or in satisfaction of loans, as well as closed Bank and ALC branches.
As of December 31, 2024, there was no indication of impairment associated with the Company's other intangible assets. Other Real Estate Owned Other real estate owned (“OREO”) consists of properties obtained through foreclosure or in satisfaction of loans, as well as closed Bank and ALC branches.
Cash Dividends The Company declared cash dividends totaling $0.20 per share on its common stock during 2023, compared to cash dividends totaling $0.14 per share on its common stock during 2022. Share Repurchases During 2023, the Company completed share repurchases totaling 137,500 shares of its common stock at a weighted average price of $10.34 per share.
Cash Dividends The Company declared cash dividends totaling $0.22 per share on its common stock during 2024, compared to cash dividends totaling $0.20 per share on its common stock during 2023. Share Repurchases During 2024, the Company completed share repurchases totaling 146,500 shares of its common stock at a weighted average price of $11.22 per share.
The Company’s effective tax rate was 24.7% and 23.8%, respectively, for the same periods. The effective tax rate is impacted by recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance.
The effective tax rate is impacted by recurring items, such as changes in tax-exempt interest income earned from bank-qualified municipal bonds and loans and the cash surrender value of bank-owned life insurance.
December 31, 2023 2022 (Dollars in Thousands) Total loans accounted for on a non-accrual basis $ 2,400 $ 1,651 Interest income that would have been recorded under original terms 107 60 Interest income reported and recorded during the year 50 29 Deposits Deposits totaled $950.2 million as of December 31, 2023, compared to $870.0 million as of December 31, 2022.
December 31, 2024 2023 (Dollars in Thousands) Total loans accounted for on a non-accrual basis $ 3,949 $ 2,400 Interest income that would have been recorded under original terms 120 107 Interest income reported and recorded during the year 471 50 Deposits Deposits totaled $972.6 million as of December 31, 2024, compared to $950.2 million as of December 31, 2023.
Since interest payments under a variable rate cannot be forecasted with certainty, contractual interest during the variable period is not included in the table above. 49 Off-Balance Sheet Obligations The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources other than as described in Note 15 “Leases,” Note 16 “Derivative Financial Instruments” and Note 18 “Guarantees, Commitments and Contingencies” in the consolidated financial statements.
Off-Balance Sheet Obligations The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources other than as described in Note 15 “Leases,” Note 16 “Derivative Financial Instruments” and Note 18 “Guarantees, Commitments and Contingencies” in the consolidated financial statements.
Short-Term Borrowings (Maturity Less Than One Year) Long-Term Borrowings (Maturity One Year or Greater) (Dollars in Thousands) Other interest-bearing liabilities outstanding at year-end: 2023 $ 10,000 $ 10,799 2022 $ 20,038 $ 10,726 Weighted average interest rate at year-end: 2023 5.46 % 4.20 % 2022 4.40 % 4.20 % Maximum amount outstanding at any month end: 2023 $ 35,048 $ 10,799 2022 $ 48,095 $ 10,726 Average amount outstanding during the year: 2023 $ 15,438 $ 10,766 2022 $ 19,293 $ 10,689 Weighted average interest rate during the year: 2023 5.12 % 4.20 % 2022 2.44 % 4.20 % Shareholders’ Equity As of December 31, 2023, shareholders’ equity totaled $90.6 million, or 8.4% of total assets, compared to $85.1 million, or 8.6% of total assets, as of December 31, 2022.
Short-Term Borrowings (Maturity Less Than One Year) Long-Term Borrowings (Maturity One Year or Greater) (Dollars in Thousands) Other interest-bearing liabilities outstanding at year-end: 2024 $ 10,000 $ 10,872 2023 $ 10,000 $ 10,799 Weighted average interest rate at year-end: 2024 4.57 % 4.20 % 2023 5.46 % 4.20 % Maximum amount outstanding at any month end: 2024 $ 15,000 $ 10,872 2023 $ 35,048 $ 10,799 Average amount outstanding during the year: 2024 $ 2,568 $ 10,836 2023 $ 15,438 $ 10,766 Weighted average interest rate during the year: 2024 4.05 % 4.20 % 2023 5.12 % 4.20 % Shareholders’ Equity As of December 31, 2024, shareholders’ equity totaled $98.6 million, or 9.0% of total assets, compared to $90.6 million, or 8.4% of total assets, as of December 31, 2023.
During the year ended December 31, 2023 the Company completed repurchases of 137,500 shares of its common stock at a weighted average price of $10.34 per share, or $1.4 million in aggregate.
During the year ended December 31, 2024 the Company completed repurchases of 146,500 shares of its common stock at a weighted average price of $11.22 per share, or $1.6 million in aggregate.
Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company’s overall strategy. The Company’s effective tax rate is expected to fluctuate commensurate with the level of these investments as compared to total pre-tax income.
Management makes decisions about whether to invest in tax-exempt instruments on a case-by-case basis after considering a number of factors, including investment return, credit quality and the consistency of such investments with the Company’s overall strategy.
Asset Quality Nonperforming assets, including loans in non-accrual status and OREO, totaled $3.0 million as of December 31, 2023 compared to $2.3 million as of December 31, 2022. The increase in nonperforming assets resulted primarily from one commercial real estate loan that moved into nonaccrual status during the third quarter of 2023.
Asset Quality Nonperforming assets, including loans in non-accrual status and OREO, totaled $5.5 million as of December 31, 2024, compared to $3.0 million as of December 31, 2023. The increase in nonperforming assets during 2024 resulted primarily from one loan that was foreclosed and moved into OREO and another loan that moved into non-accrual status during 2024.
These assets and liabilities include securities available-for-sale, impaired loans and derivative instruments. Additionally, other real estate and certain other assets acquired in foreclosure are reported at the lower of the recorded investment or fair value of the property, less estimated cost to sell.
Additionally, other real estate and certain other assets acquired in foreclosure are reported at the lower of the recorded investment or fair value of the property, less estimated cost to sell.
The Bank’s Asset/Liability Committee routinely reassesses the Company’s strategies to manage interest rate risk in accordance with policies established by the Company’s Board of Directors. A key objective of the asset/liability management program is to quantify, monitor and manage interest rate risk and to assist management in maintaining stability in net interest margin under varying interest rate environments.
A key objective of the asset/liability management program is to quantify, monitor and manage interest rate risk and to assist management in maintaining stability in net interest margin under varying interest rate environments. 51 As part of interest rate risk management, the Company may use derivative financial instruments in accordance with policies established by the Board of Directors.
The increase in interest income was mostly offset by an increase in interest expense of $11.2 million, comparing 2023 to 2022. Of the increase, $10.6 million was attributable to the rise in market interest rates, while $0.6 million was attributable to growth in interest-bearing liabilities, primarily time deposits.
The increase in interest income was offset by an increase in interest expense of $6.7 million, comparing 2024 to 2023. Of the increase, $5.6 million was attributable to the rise in market interest rates, while $1.1 million was attributable to growth in interest-bearing liabilities, primarily interest-bearing demand deposits and time deposits.
The Company had up to $279.4 million and $246.8 million in remaining unused credit from the FHLB (subject to available collateral) as of December 31, 2023 and 2022, respectively. In addition, the Company had $48.0 million and $45.0 million in unused established federal funds lines as of December 31, 2023 and 2022, respectively.
The Company had up to $319.9 million and $279.4 million in remaining unused credit from the FHLB (subject to available collateral) as of December 31, 2024 and 2023, respectively. In addition, the Company had $48.0 million in unused established federal funds lines as of both December 31, 2024 and 2023. The Company also has access to the FRB’s discount window.
Year Ended December 31, 2023 2022 (Dollars in Thousands) Interest income $ 52,806 $ 41,197 Interest expense 15,456 4,256 Net interest income 37,350 36,941 Provision for credit losses 319 3,308 Net interest income after provision for credit losses 37,031 33,633 Non-interest income 3,381 3,451 Non-interest expense 29,141 28,072 Income before income taxes 11,271 9,012 Provision for income taxes 2,786 2,148 Net income $ 8,485 $ 6,864 Basic net income per share $ 1.42 $ 1.13 Diluted net income per share $ 1.33 $ 1.06 Dividends per share $ 0.20 $ 0.14 The discussion that follows summarizes the most significant activity that impacted changes in the Company’s operations during 2023 as compared to 2022, as well as significant changes in the Company’s balance sheet comparing December 31, 2023 to December 31, 2022.
Year Ended December 31, 2024 2023 (Dollars in Thousands) Interest income $ 58,260 $ 52,806 Interest expense 22,111 15,456 Net interest income 36,149 37,350 Provision for credit losses 622 319 Net interest income after provision for credit losses 35,527 37,031 Non-interest income 3,583 3,381 Non-interest expense 28,356 29,141 Income before income taxes 10,754 11,271 Provision for income taxes 2,584 2,786 Net income $ 8,170 $ 8,485 Basic net income per share $ 1.40 $ 1.42 Diluted net income per share $ 1.33 $ 1.33 Dividends per share $ 0.22 $ 0.20 The discussion that follows summarizes the most significant activity that impacted changes in the Company’s operations during 2024 as compared to 2023, as well as significant changes in the Company’s balance sheet comparing December 31, 2024 to December 31, 2023.
The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.
The Bank also performs indirect lending through third-party retailers and currently conducts this lending in 17 states, including Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance.
At this time, management considers it to be more likely than not that the Company will have sufficient taxable income in the future to allow all deferred tax assets to be realized.
At this time, management considers it to be more likely than not that the Company will have sufficient taxable income in the future to allow all deferred tax assets to be realized. Accordingly, a valuation allowance was not established for deferred tax assets as of either December 31, 2024 or 2023.
Loan fees totaled $0.6 million and $0.9 million for the years ended December 31, 2023 and December 31, 2022, respectively. 36 The following table summarizes the impact of variances in volume and rate of interest-earning assets and interest-bearing liabilities on components of net interest income. 2023 Compared to 2022 Increase (Decrease) Due to Change In: 2022 Compared to 2021 Increase (Decrease) Due to Change In: Volume Average Rate Net Volume Average Rate Net (Dollars in Thousands) Interest earned on: Total loans $ 3,715 $ 6,019 $ 9,734 $ 2,212 $ (2,426 ) $ (214 ) Taxable investment securities (254 ) 480 226 479 650 1,129 Tax-exempt investment securities (20 ) (3 ) (23 ) (18 ) (6 ) (24 ) Federal Home Loan Bank stock 1 39 40 12 7 19 Federal funds sold 47 26 73 0 22 22 Interest-bearing deposits in banks (3 ) 1,562 1,559 (48 ) 392 344 Total interest-earning assets 3,486 8,123 11,609 2,637 (1,361 ) 1,276 Interest expense on: Demand deposits (88 ) 227 139 24 61 85 Savings deposits 119 3,684 3,803 46 559 605 Time deposits 676 6,350 7,026 (93 ) 116 23 Borrowings (110 ) 342 232 344 249 593 Total interest-bearing liabilities 597 10,603 11,200 321 985 1,306 Increase (decrease) in net interest income $ 2,889 $ (2,480 ) $ 409 $ 2,316 $ (2,346 ) $ (30 ) Note: Changes attributable to the combined effect of volume and interest rates have been allocated proportionately to the changes due to volume and the changes due to interest rates.
Loan fees totaled $0.7 million and $0.6 million for the years ended December 31, 2024 and December 31, 2023, respectively. 38 The following table summarizes the impact of variances in volume and rate of interest-earning assets and interest-bearing liabilities on components of net interest income. 2024 Compared to 2023 Increase (Decrease) Due to Change In: 2023 Compared to 2022 Increase (Decrease) Due to Change In: Volume Average Rate Net Volume Average Rate Net (Dollars in Thousands) Interest earned on: Total loans $ 1,385 $ 2,335 $ 3,720 $ 3,715 $ 6,019 $ 9,734 Taxable investment securities 377 1,152 1,529 (254 ) 480 226 Tax-exempt investment securities — 0 — (20 ) (3 ) (23 ) Federal Home Loan Bank stock (27 ) 3 (24 ) 1 39 40 Federal funds sold 263 8 271 47 26 73 Interest-bearing deposits in banks (90 ) 48 (42 ) (3 ) 1,562 1,559 Total interest-earning assets 1,908 3,546 5,454 3,486 8,123 11,609 Interest expense on: Demand deposits (24 ) 1,026 1,002 (88 ) 227 139 Savings deposits 492 1,357 1,849 119 3,684 3,803 Time deposits 1,140 3,208 4,348 676 6,350 7,026 Borrowings (541 ) (3 ) (544 ) (110 ) 342 232 Total interest-bearing liabilities 1,067 5,588 6,655 597 10,603 11,200 Increase (decrease) in net interest income $ 841 $ (2,042 ) $ (1,201 ) $ 2,889 $ (2,480 ) $ 409 Note: Changes attributable to the combined effect of volume and interest rates have been allocated proportionately to the changes due to volume and the changes due to interest rates.
Liquidity As of December 31, 2023, the Company continued to maintain excess funding capacity sufficient to provide adequate liquidity for loan growth, capital expenditures and ongoing operations.
Its total capital ratio was 12.47%, and its Tier 1 leverage ratio was 9.50%. Liquidity As of December 31, 2024, the Company continued to maintain excess funding capacity sufficient to provide adequate liquidity for loan growth, capital expenditures and ongoing operations.
Previously, the Bank had two wholly owned subsidiaries: Acceptance Loan Company, Inc., an Alabama corporation (“ALC”), and FUSB Reinsurance, Inc., an Arizona corporation (“FUSB Reinsurance”). Both ALC and FUSB Reinsurance were dissolved in 2023, after all remaining assets and liabilities of these entities were transferred to the Bank.
Previously, the Bank operated two additional wholly-owned subsidiaries, Acceptance Loan Company ("ALC") and FUSB Reinsurance, Inc., both of which were legally dissolved in 2023, and all remaining assets and liabilities of these entities were transferred to the Bank prior to December 31, 2023.
The calculations of the weighted average yields for each maturity category are based upon yield weighted by the respective costs of the securities.
Available-for-sale securities are stated at fair value. Held-to-maturity securities are stated at amortized cost. The calculations of the weighted average yields for each maturity category are based upon yield weighted by the respective costs of the securities.
As of December 31, 2023, available-for-sale securities totaled $135.6 million, or 99.2% of the total investment portfolio, compared to $130.8 million, or 98.6% of the total investment portfolio, as of December 31, 2022. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S.
As of December 31, 2024, available-for-sale securities totaled $167.9 million, or 99.6% of the total investment portfolio, compared to $135.6 million, or 99.2% of the total investment portfolio, as of December 31, 2023. Available-for-sale securities consisted of residential and commercial mortgage-backed securities, U.S. Treasury securities, corporate notes, obligations of U.S. government-sponsored agencies, and obligations of state and political subdivisions.
Both available-for-sale and held-for-maturity securities may be pledged at fair value with the FHLB and through the FRB discount window. The amounts shown as liquidity from pledgeable investment securities represent total investment securities as recorded on the balance sheet, less reductions for securities already pledged and discounts expected to be taken by the lender to determine collateral value.
The amounts shown as liquidity from pledgable investment securities represent total investment securities as recorded on the consolidated balance sheet, less reductions for securities already pledged and discounts expected to be taken by the lender to determine collateral value.
For years ended December 31, 2022 and prior, information presented is as determined in accordance with ASC 310, Receivables , prior to the adoption of ASC 326: Year Ended December 31, 2023 2022 2021 2020 2019 (Dollars in Thousands) Balance at beginning of period $ 9,422 $ 8,320 $ 7,470 $ 5,762 $ 5,055 Impact of adopting CECL accounting guidance 2,123 — — — — Charge-offs: Real estate loans: Construction, land development and other loan loans — — (23 ) — — Secured by 1-4 family residential properties (97 ) (40 ) (12 ) (61 ) (101 ) Secured by multi-family residential properties — — — — — Secured by non-farm, non-residential properties — — — — — Commercial and industrial loans — — (6 ) — — Consumer loans: Direct consumer (571 ) (1,958 ) (1,230 ) (1,621 ) (2,000 ) Branch retail (445 ) (633 ) (377 ) (374 ) (425 ) Indirect (932 ) (382 ) (483 ) (152 ) (301 ) Total charge-offs (2,045 ) (3,013 ) (2,131 ) (2,208 ) (2,827 ) Recoveries 965 807 971 971 820 Net charge-offs (1,080 ) (2,206 ) (1,160 ) (1,237 ) (2,007 ) Provision for credit losses 42 3,308 2,010 2,945 2,714 Ending balance $ 10,507 $ 9,422 $ 8,320 $ 7,470 $ 5,762 Ending balance as a percentage of loans 1.28 % 1.22 % 1.17 % 1.16 % 1.05 % Net charge-offs as a percentage of average loans 0.14 % 0.30 % 0.16 % 0.21 % 0.38 % The adoption of CECL was most impactful on the Company’s consumer indirect loan portfolio due primarily to the extension of the loss estimate period to the estimated life of loans in this category.
For years ended December 31, 2022 and prior, information presented is as determined in accordance with ASC 310, Receivables , prior to the adoption of ASC 326, Financial Instruments - Credit losses : Year Ended December 31, 2024 2023 2022 2021 2020 (Dollars in Thousands) Balance at beginning of period $ 10,507 $ 9,422 $ 8,320 $ 7,470 $ 5,762 Impact of adopting ASC 326 accounting guidance — 2,123 — — — Charge-offs: Real estate loans: Construction, land development and other loan loans — — — (23 ) — Secured by 1-4 family residential properties (2 ) (97 ) (40 ) (12 ) (61 ) Secured by multi-family residential properties — — — — — Secured by non-farm, non-residential properties (248 ) — — — — Commercial and industrial loans (121 ) — — (6 ) — Consumer loans: Direct consumer (62 ) (571 ) (1,958 ) (1,230 ) (1,621 ) Branch retail (63 ) (445 ) (633 ) (377 ) (374 ) Indirect (1,318 ) (932 ) (382 ) (483 ) (152 ) Total charge-offs (1,814 ) (2,045 ) (3,013 ) (2,131 ) (2,208 ) Recoveries Construction, land development and other loan loans 20 — 2 22 — Secured by 1-4 family residential properties 56 54 39 14 22 Secured by multi-family residential properties — — — — — Secured by non-farm, non-residential properties — — 5 5 14 Commercial and industrial loans 2 — — 21 10 Consumer loans: Direct consumer 300 619 565 626 725 Branch retail 148 243 151 215 186 Indirect 150 49 45 68 14 Total recoveries 676 965 807 971 971 Net charge-offs (1,138 ) (1,080 ) (2,206 ) (1,160 ) (1,237 ) Provision for credit losses 815 42 3,308 2,010 2,945 Ending balance $ 10,184 $ 10,507 $ 9,422 $ 8,320 $ 7,470 Ending balance as a percentage of loans 1.24 % 1.28 % 1.22 % 1.17 % 1.16 % Net charge-offs as a percentage of average loans 0.14 % 0.14 % 0.30 % 0.16 % 0.21 % Allowance for Credit Losses on Unfunded Lending Commitments Unfunded lending commitments are off-balance sheet arrangements that represent unconditional commitments of the Company to lend to a borrower that are unfunded as of the balance sheet date.
The expected average life of securities in the investment portfolio was 3.9 years and 3.5 years as of December 31, 2023 and 2022, respectively. Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity.
Available-for-sale securities are recorded at estimated fair value, with unrealized gains or losses recognized, net of taxes, in accumulated other comprehensive loss, a separate component of shareholders’ equity.
The growth in 2023 included an increase of $96.4 million in interest-bearing deposits, partially offset by a decrease of $16.2 million in noninterest-bearing deposits. The shift to interest-bearing deposits is consistent with deposit holders seeking to maximize interest earnings on their accounts amid the rising interest rate environment.
The shift to interest-bearing deposits is consistent with deposit holders seeking to maximize interest earnings on their accounts amid the elevated interest rate environment. The deposit growth in 2024 was also partially offset by a decrease of $10.3 million in wholesale brokered deposits.
Although some securities in the investment portfolio have legal final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice.
Investment securities forecasted to mature or reprice in one year or less were estimated to be $29.6 million and $12.9 million of the investment portfolio as of December 31, 2024 and 2023, respectively. 49 Although some securities in the investment portfolio have legal final maturities exceeding 10 years, a substantial percentage of the portfolio provides monthly principal and interest payments and consists of securities that are readily marketable and easily convertible into cash on short notice.
As of December 31, 2023, 459,313 shares remained available for repurchase under the program. During the year ended December 31, 2023, the Company declared dividends totaling $0.20 per common share, or approximately $1.2 million in aggregate amount, compared to $0.14 per common share, or approximately $0.8 million in aggregate amount, during the year ended December 31, 2022.
During the year ended December 31, 2024, the Company declared dividends totaling $0.22 per common share, or approximately $1.3 million in aggregate amount, compared to $0.20 per common share, or approximately $1.2 million in aggregate amount, during the year ended December 31, 2023.
For the Company, unconditional lending commitments generally include unfunded term loan agreements, home equity lines of credit, lines of credit, and demand deposit account overdraft protection. As of December 31, 2023, the Company’s allowance for credit losses on unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.6 million.
As of December 31, 2024 and 2023, the Company’s allowance for credit losses on unfunded commitments, which is recorded in other liabilities in the Company’s consolidated balance sheets, totaled $0.4 million and $0.6 million, respectively.
Bancshares’ Board of Directors evaluates dividend payments based on the Company’s level of earnings and the desire to maintain a strong capital base, as well as regulatory requirements relating to the payment of dividends. 46 Liquidity and Capital Resources The asset portion of the balance sheet provides liquidity primarily from the following sources: (1) excess cash and interest-bearing deposits in banks, (2) federal funds sold, (3) principal payments and maturities of loans and (4) principal payments and maturities from the investment portfolio.
Liquidity and Capital Resources The asset portion of the balance sheet provides liquidity primarily from the following sources: (1) excess cash and interest-bearing deposits in banks, (2) federal funds sold, (3) principal payments and maturities of loans and (4) principal payments and maturities from the investment portfolio.
Goodwill impairment was neither indicated nor recorded during the years ended December 31, 2023 or 2022. As of October 1, 2023, the date of our most recent impairment test, the Bank reporting unit had a fair value that was in excess of its carrying value.
As of October 1, 2024, the date of the Company's most recent impairment test, the Bank reporting unit had a fair value that was in excess of its carrying value.
The following table presents the major components of non-interest expense for the periods indicated: Year Ended December 31, 2023 2022 $ Change % Change (Dollars in Thousands) Salaries and employee benefits $ 16,076 $ 16,418 $ (342 ) (2.1 )% Net occupancy and equipment 3,479 3,281 198 6.0 % Computer services 1,756 1,639 117 7.1 % Insurance expense and assessments 1,583 1,250 333 26.6 % Fees for professional services 1,105 1,060 45 4.2 % Postage, stationery and supplies 620 614 6 1.0 % Telephone/data communication 722 682 40 5.9 % Collection and recoveries 292 261 31 11.9 % Directors fees 471 479 (8 ) (1.7 )% Software amortization 412 460 (48 ) (10.4 )% Other real estate/foreclosure expense, net 68 (331 ) 399 (120.5 )% Other expense 2,557 2,259 298 13.2 % Total non-interest expense $ 29,141 $ 28,072 $ 1,069 3.8 % The Company’s non-interest expense increased by 3.8% comparing 2023 to 2022.
The following table presents the major components of non-interest expense for the periods indicated: Year Ended December 31, 2024 2023 $ Change % Change (Dollars in Thousands) Salaries and employee benefits $ 15,460 $ 16,076 $ (616 ) (3.8 )% Net occupancy and equipment 3,761 3,479 282 8.1 % Computer services 1,687 1,756 (69 ) (3.9 )% Insurance expense and assessments 1,510 1,583 (73 ) (4.6 )% Fees for professional services 1,184 1,105 79 7.1 % Postage, stationery and supplies 560 620 (60 ) (9.7 )% Telephone/data communication 779 722 57 7.9 % Collection and recoveries 169 292 (123 ) (42.1 )% Directors fees 380 471 (91 ) (19.3 )% Software amortization 356 412 (56 ) (13.6 )% Other real estate/foreclosure expense, net 230 68 162 238.2 % Other expense 2,280 2,557 (277 ) (10.8 )% Total non-interest expense $ 28,356 $ 29,141 $ (785 ) (2.7 )% The Company’s non-interest expense decreased by $0.8 million comparing 2024 to 2023.
Investment Securities Maturity Schedule The following tables summarize the carrying values and weighted average yield of the available-for-sale and held-to-maturity securities portfolios as of December 31, 2023, according to contractual maturity. Available-for-sale securities are stated at fair value. Held-to-maturity securities are stated at amortized cost.
For the year ended December 31, 2024, the yield on taxable investment securities totaled 3.04%, compared to 2.24% for the year ended December 31, 2023. 41 Investment Securities Maturity Schedule The following tables summarize the carrying values and weighted average yield of the available-for-sale and held-to-maturity securities portfolios as of December 31, 2024, according to contractual maturity.
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions, and our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed under Item 1A “Risk Factors” and elsewhere in this Annual Report. 27 Selected Financial Data The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the consolidated financial statements and related notes, appearing elsewhere herein.
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions, and our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed under Item 1A “Risk Factors” and elsewhere in this Annual Report.
Both the discount window and the BTFP allowed borrowing on pledged collateral that includes eligible investment securities and, in certain circumstances, eligible loans. In response to heightened liquidity concerns in the banking industry, during 2023 management undertook measures designed to enhance the Company’s liquidity position.
The discount window allows borrowing on pledged collateral that includes eligible investment securities and loans. In response to heightened liquidity concerns in the banking industry, during 2023 management undertook measures designed to enhance the Company’s liquidity position. These procedures included holding higher levels of on-balance sheet cash, as well as enhancing the availability of off-balance sheet borrowing capacity.
As part of interest rate risk management, the Company may use derivative instruments in accordance with policies established by the Board of Directors. Derivative instruments may include the use of interest rate swaps or option products such as caps and floors.
Derivative financial instruments may include the use of interest rate swaps or option products such as caps and floors.
The net value of all interest rate swap contracts totaled a liability position of $0.1 million as of December 31, 2023, while the net value of all interest rate swap contracts totaled an asset position of $2.3 million as of December 31, 2022.
The value of all derivative financial instruments totaled a net asset position of $0.6 million as of December 31, 2024, while the value of all derivative financial instruments totaled a net liability position of $0.1 million as of December 31, 2023.
Year Ended December 31, 2023 2022 Average Balance Interest Annualized Yield/ Rate % Average Balance Interest Annualized Yield/ Rate % (Dollars in Thousands) ASSETS Interest-earning assets: Total loans (1) $ 795,446 $ 47,749 6.00 % $ 724,639 $ 38,015 5.25 % Taxable investment securities 127,653 2,858 2.24 % 141,283 2,632 1.86 % Tax-exempt investment securities 1,042 13 1.25 % 2,342 36 1.54 % Federal Home Loan Bank stock 1,264 93 7.36 % 1,247 53 4.25 % Federal funds sold 1,841 95 5.16 % 584 22 3.77 % Interest-bearing deposits in banks 38,111 1,998 5.24 % 38,379 439 1.14 % Total interest-earning assets 965,357 52,806 5.47 % 908,474 41,197 4.53 % Noninterest-earning assets 63,765 65,855 Total $ 1,029,122 $ 974,329 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing liabilities: Demand deposits $ 212,010 $ 777 0.37 % $ 246,124 $ 638 0.26 % Savings deposits 229,238 5,007 2.18 % 208,672 1,204 0.58 % Time deposits 305,848 8,566 2.80 % 212,591 1,540 0.72 % Total interest-bearing deposits 747,096 14,350 1.92 % 667,387 3,382 0.51 % Noninterest-bearing demand deposits 160,598 — — 182,032 — — Total deposits 907,694 14,350 1.58 % 849,419 3,382 0.40 % Borrowings 26,252 1,106 4.21 % 30,048 874 2.91 % Total funding costs 933,946 15,456 1.65 % 879,467 4,256 0.48 % Other noninterest-bearing liabilities 9,302 8,977 Shareholders’ equity 85,874 85,885 Total $ 1,029,122 $ 974,329 Net interest income (2) $ 37,350 $ 36,941 Net interest margin 3.87 % 4.07 % (1) For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding.
Year Ended December 31, 2024 2023 Average Balance Interest Annualized Yield/ Rate % Average Balance Interest Annualized Yield/ Rate % (Dollars in Thousands) ASSETS Interest-earning assets: Total loans (1) $ 818,524 $ 51,469 6.29 % $ 795,446 $ 47,749 6.00 % Taxable investment securities 144,503 4,387 3.04 % 127,653 2,858 2.24 % Tax-exempt investment securities 1,020 13 1.27 % 1,042 13 1.25 % Federal Home Loan Bank stock 891 69 7.74 % 1,264 93 7.36 % Federal funds sold 6,930 366 5.28 % 1,841 95 5.16 % Interest-bearing deposits in banks 36,399 1,956 5.37 % 38,111 1,998 5.24 % Total interest-earning assets 1,008,267 58,260 5.78 % 965,357 52,806 5.47 % Noninterest-earning assets 65,931 63,765 Total $ 1,074,198 $ 1,029,122 LIABILITIES AND SHAREHOLDERS’ EQUITY Interest-bearing liabilities: Demand deposits $ 205,581 $ 1,779 0.87 % $ 212,010 $ 777 0.37 % Savings deposits 251,772 6,856 2.72 % 229,238 5,007 2.18 % Time deposits 346,541 12,914 3.73 % 305,848 8,566 2.80 % Total interest-bearing deposits 803,894 21,549 2.68 % 747,096 14,350 1.92 % Noninterest-bearing demand deposits 152,252 — — 160,598 — — Total deposits 956,146 21,549 2.25 % 907,694 14,350 1.58 % Borrowings 13,404 562 4.19 % 26,252 1,106 4.21 % Total funding costs 969,550 22,111 2.28 % 933,946 15,456 1.65 % Other noninterest-bearing liabilities 9,898 9,302 Shareholders’ equity 94,750 85,874 Total $ 1,074,198 $ 1,029,122 Net interest income (2) $ 36,149 $ 37,350 Net interest margin 3.59 % 3.87 % (1) For the purpose of these computations, non-accruing loans are included in the average loan amounts outstanding.
However, various economic and competitive factors could affect this funding source in the future, including increased competition from other financial institutions in deposit gathering, national and local economic conditions, and interest rate policies adopted by the FRB and other central banks. 44 Average Daily Amount of Deposits and Rates The average daily amount of deposits and rates paid on such deposits are summarized for the periods indicated in the following table: 2023 2022 Average Amount Rate Average Amount Rate (Dollars in Thousands) Non-interest-bearing demand deposit accounts $ 160,598 — $ 182,032 — Interest-bearing demand deposit accounts 212,010 0.37 % 246,124 0.26 % Savings deposits 229,238 2.18 % 208,672 0.58 % Time deposits 305,848 2.80 % 212,591 0.72 % Total deposits $ 907,694 1.58 % $ 849,419 0.40 % Total interest-bearing deposits $ 747,096 1.92 % $ 667,387 0.51 % Maturities of time deposits of greater than $250 thousand, as well as brokered deposits, outstanding as of December 31, 2023 and 2022 are summarized in the following table: Maturities December 31, 2023 2022 (Dollars in Thousands) Three months or less $ 12,167 $ 22,024 Over three through six months 26,032 1,976 Over six through twelve months 24,258 16,553 Over twelve months 68,213 52,244 Total $ 130,670 $ 92,797 Maturities of time certificates of deposit of greater than $100 thousand and less than $250 thousand outstanding as of December 31, 2023 and 2022 are summarized as follows: Maturities December 31, 2023 2022 (Dollars in Thousands) Three months or less $ 7,521 $ 7,971 Over three through six months 9,257 5,968 Over six through twelve months 32,323 8,834 Over twelve months 46,788 45,156 Total $ 95,889 $ 67,929 45 Other Interest-Bearing Liabilities Other interest-bearing liabilities consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and subordinated debt that are used by the Company as alternative sources of funds.
Average Daily Amount of Deposits and Rates The average daily amount of deposits and rates paid on such deposits are summarized for the periods indicated in the following table: 2024 2023 Average Amount Rate Average Amount Rate (Dollars in Thousands) Non-interest-bearing demand deposit accounts $ 152,252 — $ 160,598 — Interest-bearing demand deposit accounts 205,581 0.87 % 212,010 0.37 % Savings deposits 251,772 2.72 % 229,238 2.18 % Time deposits 346,541 3.73 % 305,848 2.80 % Total deposits $ 956,146 2.25 % $ 907,694 1.58 % Total interest-bearing deposits $ 803,894 2.68 % $ 747,096 1.92 % Maturities of time deposits of greater than $250 thousand, as well as brokered deposits, outstanding as of December 31, 2024 and 2023 are summarized in the following table: Maturities December 31, 2024 2023 (Dollars in Thousands) Three months or less $ 43,397 $ 12,167 Over three through six months 23,865 26,032 Over six through twelve months 43,362 24,258 Over twelve months 24,267 68,213 Total $ 134,891 $ 130,670 Maturities of time certificates of deposit of greater than $100 thousand and less than $250 thousand outstanding as of December 31, 2024 and 2023 are summarized as follows: Maturities December 31, 2024 2023 (Dollars in Thousands) Three months or less $ 37,606 $ 7,521 Over three through six months 22,148 9,257 Over six through twelve months 25,912 32,323 Over twelve months 9,708 46,788 Total $ 95,374 $ 95,889 48 Other Interest-Bearing Liabilities Other interest-bearing liabilities consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and subordinated debt that are used by the Company as alternative sources of funds.
Estimated uninsured/uncollateralized deposits (calculated as deposit amounts per deposit holder in excess of $250 thousand, the maximum amount of federal deposit insurance, and excluding deposits secured by pledged assets) totaled $200.3 million, or 21.1% of total deposits, as of December 31, 2023, compared to $148.3 million, or 17.1% of total deposits, as of December 31, 2022. 47 The table below provides information on the Company’s on-balance sheet liquidity, as well as readily available off-balance sheet sources of liquidity as of both December 31, 2023 and 2022.
Estimated uninsured deposits (calculated as deposit amounts per deposit holder in excess of $250 thousand, the maximum amount of federal deposit insurance, and excluding deposits secured by pledged assets) totaled $216.8 million, or 22.2% of total deposits, as of December 31, 2024. As of December 31, 2023, estimated uninsured deposits totaled $200.3 million, or 21.1% of total deposits.
These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments.
Under these requirements, the Bank is subject to minimum risk-based capital and leverage capital requirements, which are administered by the federal banking regulatory agencies. These capital requirements, as defined by federal regulations, involve quantitative and qualitative measures of assets, liabilities and certain off-balance sheet instruments.
Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off. The allowance for credit losses on loans and leases is adjusted through the provision for (recovery of) credit losses.
Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off. The allowance for credit losses on loans and leases is adjusted through the provision for credit losses. Management estimates the allowance by using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
As of December 31, 2023, a total of 459,313 shares remained available for repurchase under the program. Regulatory Capital During 2023, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations.
Regulatory Capital During 2024, the Bank continued to maintain capital ratios at higher levels than required to be considered a “well-capitalized” institution under applicable banking regulations. As of December 31, 2024, the Bank’s common equity Tier 1 capital and Tier 1 risk-based capital ratios were each 11.31%.
The following table presents the major components of non-interest income for the periods indicated: Year Ended December 31, 2023 2022 $ Change % Change (Dollars in Thousands) Service charges and other fees on deposit accounts $ 1,197 $ 1,154 $ 43 3.7 % Bank-owned life insurance 471 451 20 4.4 % Net loss on sale and prepayment of investment securities — (83 ) 83 NM Gain on sales of premises and equipment and other assets 17 301 (284 ) (94.4 )% Lease income 949 864 85 9.8 % ATM fee income 415 532 (117 ) (22.0 )% Other income 332 232 100 43.1 % Total non-interest income $ 3,381 $ 3,451 $ (70 ) (2.0 )% NM: Not Meaningful The Company’s non-interest income decreased by $0.1 million comparing 2023 to 2022, due primarily to gains on the sale of premises and equipment that occurred in 2022, but were not repeated in 2023, as well as reductions in ATM fee income.
The following table presents the major components of non-interest income for the periods indicated: Year Ended December 31, 2024 2023 $ Change % Change (Dollars in Thousands) Service charges and other fees on deposit accounts $ 1,232 $ 1,197 $ 35 2.9 % Bank-owned life insurance 538 471 67 14.2 % Gain on sales of premises and equipment and other assets — 17 (17 ) (100.0 )% Lease income 1,033 949 84 8.9 % ATM fee income 381 415 (34 ) (8.2 )% Other income 399 332 67 20.2 % Total non-interest income $ 3,583 $ 3,381 $ 202 6.0 % The Company’s non-interest income increased by $0.2 million comparing 2024 to 2023, due primarily to increases in lease income, bank-owned life insurance, and other miscellaneous revenue sources.
The shift to interest-bearing deposits is consistent with deposit holders seeking to maximize interest earnings on their accounts amid the rising interest rate environment.
The shift to interest-bearing deposits is consistent with deposit holders seeking to maximize interest earnings on their accounts amid the elevated interest rate environment. The elevated market interest rate environment has had, and continues to have, a significant impact on the Company and the banking industry in general.
Share repurchases under the program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate, subject to applicable regulatory requirements. The repurchase program does not obligate the Company to acquire any particular number of shares and may be suspended at any time at the Company’s discretion.
The repurchased shares were allocated to treasury stock under the Company’s previously announced share repurchase program, which was expanded in 2024 to authorize the purchase of 600,000 additional shares. Share repurchases under the program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate, subject to applicable regulatory requirements.
These estimates are necessary to comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general banking practices. The estimates include accounting for the allowance for credit losses, goodwill and other intangible assets, other real estate owned, valuation of deferred tax assets and fair value measurements.
The estimates include accounting for the allowance for credit losses, goodwill and other intangible assets, other real estate owned, valuation of deferred tax assets and fair value measurements.
Certain of the measures have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”); however, management believes that the non-GAAP measures are beneficial to the reader as they enhance the overall understanding of the Company’s liquidity position and can be used as a supplement to GAAP-based measures of liquidity.
Management believes that these non-GAAP measures are beneficial to the reader as they enhance the overall understanding of the Company’s liquidity position and can be used as a supplement to GAAP-based measures of liquidity, but they should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP.
December 31, 2023 December 31, 2022 (Dollars in Thousands) (Unaudited) (Unaudited) Liquidity from cash and federal funds sold: Cash and cash equivalents $ 50,279 $ 30,152 Federal funds sold 9,475 1,768 Liquidity from cash and federal funds sold 59,754 31,920 Liquidity from pledgable investment securities: Investment securities available-for sale, at fair value 135,565 130,795 Investment securities held-to-maturity, at amortized cost 1,104 1,862 Less: securities pledged (41,375 ) (54,717 ) Less: estimated collateral value discounts (11,129 ) (7,833 ) Liquidity from pledgable investment securities 84,165 70,107 Liquidity from unused lendable collateral (loans) at FHLB 21,696 18,215 Liquidity from unused lendable collateral (loans and securities) at FRB 161,729 1,198 Unsecured lines of credit with banks 48,000 45,000 Total readily available liquidity $ 375,344 $ 166,440 The table calculates readily available sources of liquidity, including cash and cash equivalents, federal funds sold, and other liquidity sources.
December 31, 2024 December 31, 2023 (Dollars in Thousands) (Unaudited) (Unaudited) Liquidity from cash and federal funds sold: Cash and cash equivalents $ 47,216 $ 50,279 Federal funds sold 5,727 9,475 Liquidity from cash and federal funds sold 52,943 59,754 Liquidity from pledgable investment securities: Investment securities available-for sale, at fair value 167,888 135,565 Investment securities held-to-maturity, at amortized cost 682 1,104 Less: securities pledged (72,110 ) (41,375 ) Less: estimated collateral value discounts (10,164 ) (11,129 ) Liquidity from pledgable investment securities 86,296 84,165 Liquidity from unused lendable collateral (loans) at FHLB 45,388 21,696 Liquidity from unused lendable collateral (loans and securities) at FRB 165,061 161,729 Unsecured lines of credit with banks 48,000 48,000 Total readily available liquidity $ 397,688 $ 375,344 The table above calculates readily available liquidity by combining cash and cash equivalents, federal funds sold, securities purchased under reverse repurchase agreements and unencumbered investment security values on the Company’s consolidated balance sheet with off-balance sheet liquidity that is readily available through unused collateral pledged to the FHLB and FRB, as well as unsecured lines of credit with other banks.
Unrealized losses net of unrealized gains in the available-for-sale portfolio totaled $9.3 million as of December 31, 2023, compared to $11.1 million as of December 31, 2022. Unrealized losses net of unrealized gains within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.
Held-to-maturity securities consisted of commercial mortgage-backed securities, obligations of U.S. government-sponsored agencies and obligations of states and political subdivisions. Net unrealized losses in the available-for-sale portfolio totaled $6.7 million as of December 31, 2024, compared to $9.3 million as of December 31, 2023. Net unrealized losses within the available-for-sale portfolio were recognized, net of tax, in accumulated other comprehensive loss.
Based on these evaluations, management concluded that no credit losses were included in either portfolio and that the unrealized losses in both portfolios resulted from the prevailing interest rate environment.
As of December 31, 2024, the Company evaluated both the available-for-sale and held-to-maturity portfolios for credit losses and concluded that no credit losses were included in either portfolio and that the unrealized losses in both portfolios resulted from the prevailing interest rate environment.
Policies related to the right of use asset and lease liability, revenue recognition, and long-lived assets require difficult judgments on complex matters that are often subject to multiple and recent changes in the authoritative guidance. Certain of these matters are among topics currently under re-examination by accounting standard setters and regulators.
Policies related to the right of use asset and lease liability, revenue recognition, and long-lived assets require difficult judgments on complex matters that are often subject to multiple and recent changes in the authoritative guidance. See Note 2, “Summary of Significant Accounting Policies,” in the consolidated financial statements, which discusses accounting policies that we have selected from acceptable alternatives.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed6 unchanged
Biggest changeAverage Change in Net Interest Margin from Level Interest Rate Forecast (basis points, pre-tax): 1 Year 2 Years +1% 12 10 +2% 23 17 +3% 30 20 -1% (15 ) (11 ) -2% (32 ) (26 ) -3% (52 ) (45 ) Cumulative Change in Net Interest Income from Level Interest Rate Forecast (dollars in thousands, pre-tax): 1 Year 2 Years +1% $ 1,349 $ 2,069 +2% 2,475 3,645 +3% 3,214 4,382 -1% (1,574 ) (2,336 ) -2% (3,466 ) (5,660 ) -3% (5,617 ) (9,680 ) 50
Biggest changeAverage Change in Net Interest Margin from Level Interest Rate Forecast (basis points, pre-tax): 1 Year 2 Years +1% 10 11 +2% 19 20 +3% 27 28 -1% (15 ) (16 ) -2% (31 ) (36 ) -3% (49 ) (59 ) Cumulative Change in Net Interest Income from Level Interest Rate Forecast (dollars in thousands, pre-tax): 1 Year 2 Years +1% $ 1,109 $ 2,339 +2% 2,150 4,484 +3% 3,003 6,241 -1% (1,647 ) (3,529 ) -2% (3,481 ) (8,069 ) -3% (5,386 ) (12,969 ) 53
Assessing Short-Term Interest Rate Risk – Net Interest Margin Simulation On a periodic basis, management simulates how changes in short- and long-term interest rates will impact future profitability, as reflected by changes in the Bank’s net interest margin and net interest income.
Assessing Short-Term Interest Rate Risk – Net Interest Margin Simulation On a quarterly basis, management simulates how changes in short- and long-term interest rates will impact future profitability, as reflected by changes in the Bank’s net interest margin and net interest income.
The tables below depict how, as of December 31, 2023, pre-tax net interest margin and net interest income are forecasted to change over timeframes of one year and two years under the 6 listed interest rate scenarios. The interest rate scenarios contemplate immediate and parallel shifts in short- and long-term interest rates.
The tables below depict how, as of December 31, 2024, pre-tax net interest margin and net interest income are forecasted to change over timeframes of one year and two years under the six listed interest rate scenarios. The interest rate scenarios contemplate immediate and parallel shifts in short- and long-term interest rates.

Other FUSB 10-K year-over-year comparisons