What changed in Third Coast Bancshares, Inc.'s 2023 10-K compared to 2022?

Across the narrative sections we track, Third Coast Bancshares, Inc. (TCBX) added 169 paragraphs, removed 175, and edited 111 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+169/−175).

What changed in Third Coast Bancshares, Inc.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 169 new/edited paragraphs and 175 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Where does this TCBX 10-K diff come from?

The source filings are Third Coast Bancshares, Inc.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in Third Coast Bancshares, Inc.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of Third Coast Bancshares, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+169 added−175 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-15)

Top changes in Third Coast Bancshares, Inc.'s 2023 10-K

169 paragraphs added · 175 removed · 111 edited across 1 sections

Item 7. Management's Discussion & Analysis+169 / −175 · 111 edited

Item 7. Management's Discussion & Analysis

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

111 edited+58 added−64 removed73 unchanged

2022 filing

2023 filing

Biggest changeThe increase in our allowance for loan losses of $11.1 million, or 57.3%, was primarily due to loan loss provisions related to loan growth. 57 The following tables present as of and for the periods indicated, an analysis of the allowance for loan losses and other related data: For Year Ended December 31, (Dollars in thousands) 2022 2021 2020 2019 2018 Allowance for loan loss at beginning of period $ 19,295 $ 11,979 $ 8,123 $ 6,927 $ 5,460 Provision for loan loss 12,200 9,923 7,550 1,625 1,500 Charge-offs: Commercial real estate: Non-farm non-residential non-owner occupied — — (2,336 ) — — Commercial and industrial (1,214 ) (2,914 ) (1,389 ) (506 ) (108 ) Consumer (18 ) — (7 ) (2 ) (14 ) Municipal and other — (20 ) — — — Total charge-offs (1,232 ) (2,934 ) (3,732 ) (508 ) (122 ) Recoveries: Commercial real estate: Non-farm non-residential owner occupied — — — 50 — Commercial and industrial 73 323 33 29 89 Consumer 13 1 5 — — Municipal and other 2 3 — — — Total recoveries 88 327 38 79 89 Net (charge-offs) recoveries (1,144 ) (2,607 ) (3,694 ) (429 ) (33 ) Allowance for loan losses at end of period $ 30,351 $ 19,295 $ 11,979 $ 8,123 $ 6,927 Ratio of allowance for loan loss to total loans 0.98 % 0.93 % 0.77 % 1.00 % 1.01 % Ratio of net (charge-offs) recoveries to average loans (0.04 )% (0.16 )% (0.26 )% (0.06 )% (0.01 )% The allowance for loan losses by loan category as of the dates indicated was as follows: As of December 31, 2022 2021 2020 2019 2018 (Dollars in thousands) Allowance for Loan Loss Amount % Loans in Each Category Allowance for Loan Loss Amount % Loans in Each Category Allowance for Loan Loss Amount % Loans in Each Category Allowance for Loan Loss Amount % Loans in Each Category Allowance for Loan Loss Amount % Loans in Each Category Real estate: Commercial real estate: Non-farm non-residential owner occupied $ 3,773 15.9 % $ 3,456 18.6 % $ 2,608 22.7 % $ 2,158 27.2 % $ 1,559 27.7 % Non-farm non-residential non-owner occupied 5,741 16.3 % 5,935 21.5 % 3,107 17.9 % 1,627 23.6 % 1,669 22.7 % Residential 1,064 9.9 % 957 10.3 % 1,218 9.0 % 373 10.7 % 219 8.7 % Construction, development and other 3,053 18.3 % 2,064 15.5 % 932 6.3 % 330 7.5 % 306 8.3 % Farmland 82 0.7 % 45 0.5 % 32 0.3 % 29 0.9 % 28 1.3 % Commercial and industrial 16,269 34.1 % 6,500 29.5 % 3,858 41.5 % 3,504 26.6 % 3,063 27.8 % Consumer 6 0.1 % 6 0.2 % 35 0.3 % 16 0.5 % 14 0.6 % Municipal and other 363 4.7 % 332 3.9 % 189 2.0 % 86 3.0 % 69 2.9 % $ 30,351 100.0 % $ 19,295 100.0 % $ 11,979 100.0 % $ 8,123 100.0 % $ 6,927 100.0 % Securities Our investment portfolio consists of state and municipal securities, mortgage-backed securities, agency collateralized mortgage obligations, U.S. treasury bonds, and corporate bonds classified as available for sale.

Biggest changeThe increase in our allowance for credit losses on loans of $6.7 million, or 22.0%, was primarily due to $4.0 million from the impact of ASC 326 adoption and the $3.9 million provision for credit losses on loans recorded for the year ended December 31, 2023 offset by net charge-offs of $1.2 million for the year ended December 31, 2023. 56 The following tables present as of and for the periods indicated, an analysis of the allowance for credit losses and other related data: For Year Ended December 31, (Dollars in thousands) 2023 2022 Allowance for credit loss at beginning of period $ 30,351 $ 19,295 Impact of ASC 326 adoption 4,000 — Provision for credit loss on loans 3,908 12,200 Charge-offs: Commercial and industrial (1,824 ) (1,214 ) Consumer (19 ) (18 ) Municipal and other (20 ) — Total charge-offs (1,863 ) (1,232 ) Recoveries: Commercial and industrial 626 72 Consumer — 13 Municipal and other — 3 Total recoveries 626 88 Net charge-offs (1,237 ) (1,144 ) Allowance for credit losses at end of period $ 37,022 $ 30,351 Ratio of allowance for credit loss to total loans 1.02 % 0.98 % Ratio of net charge-offs to average loans 0.04 % 0.04 % The allowance for credit losses by loan category as of the dates indicated was as follows: As of December 31, 2023 2022 (Dollars in thousands) Amount % Loans in Each Category Amount % Loans in Each Category Real estate: Commercial real estate: Non-farm non-residential owner occupied $ 4,311 14.3 % $ 3,773 15.9 % Non-farm non-residential non-owner occupied 5,541 16.1 % 5,741 16.3 % Residential 2,341 9.4 % 1,064 9.9 % Construction, development and other 5,853 19.1 % 3,053 18.3 % Farmland 244 0.8 % 82 0.7 % Commercial and industrial 17,617 34.7 % 16,269 34.1 % Consumer 14 0.1 % 6 0.1 % Municipal and other 1,101 5.5 % 363 4.7 % $ 37,022 100.0 % $ 30,351 100.0 % Securities Our investment portfolio consists of state and municipal securities, mortgage-backed securities, agency collateralized mortgage obligations, U.S. treasury bonds, and corporate bonds classified as available for sale.

Our commercial and industrial loan portfolio consists of loans principally to retail trade, service, and manufacturing firms located in our market areas. 54 In addition, the commercial and industrial loan category includes factored receivables. TCCC provides working capital solutions for small- to medium-sized businesses throughout the United States. TCCC provides working capital financing through the purchase of accounts receivables.

Our commercial and industrial loan portfolio consists of loans principally to retail trade, service, and manufacturing firms located in our market areas. In addition, the commercial and industrial loan category includes factored receivables. TCCC provides working capital solutions for small- to medium-sized businesses throughout the United States. TCCC provides working capital financing through the purchase of accounts receivables.

The Company’s internal control system is a process designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with 64 GAAP. All internal control systems, no matter how well designed, have inherent limitations and can only provide reasonable assurance with respect to financial reporting.

The Company’s internal control system is a process designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations and can only provide reasonable assurance with respect to financial reporting.

The committee meets regularly to review, among 62 other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings.

The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings.

(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2022). 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's Form S-1 filed with the SEC on October 15, 2021). 4.2* Description of Registrant's Securities. 4.3 Indenture, dated as of March 31, 2022, by and between Third Coast Bancshares, Inc. and UMB Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022). 4.4 Form of 5.500% Fixed-to-Floating Rate Subordinated Note due 2032 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022). 4.5 Form of Warrant Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2022). 10.1 Third Coast Bancshares, Inc. 2013 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.2 Third Coast Bancshares, Inc. 2017 Director Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.3 Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.4 Form of Indemnification Agreement between Third Coast Bancshares, Inc. and its directors and certain officers (incorporated by reference to Exhibit 10.4 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.5 Loan Agreement, dated March 10, 2021, by and between American National Bank & Trust and Third Coast Bancshares, Inc.

(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on May 26, 2023). 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company's Form S-1 filed with the SEC on October 15, 2021). 4.2* Description of Registrant's Securities. 4.3 Indenture, dated as of March 31, 2022, by and between Third Coast Bancshares, Inc. and UMB Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022). 4.4 Form of 5.500% Fixed-to-Floating Rate Subordinated Note due 2032 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022). 4.5 Form of Warrant Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2022). 10.1 Third Coast Bancshares, Inc. 2013 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.2 Third Coast Bancshares, Inc. 2017 Director Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.3 Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.4 Form of Indemnification Agreement between Third Coast Bancshares, Inc. and its directors and certain officers (incorporated by reference to Exhibit 10.4 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.5 Loan Agreement, dated March 10, 2021, by and between American National Bank & Trust and Third Coast Bancshares, Inc.

We do not hold any preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, Alt-A or second lien elements in our investment portfolio. As of December 31, 2022 and 2021, our investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages.

We do not hold any preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, Alt-A or second lien elements in our investment portfolio. As of December 31, 2023 and 2022, our investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages.

As of December 31, 2022 and 2021, the Bank was in compliance with all applicable regulatory capital requirements, and the Bank was classified as “well capitalized” for purposes of the FDIC’s prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings.

As of December 31, 2023 and 2022, the Bank was in compliance with all applicable regulatory capital requirements, and the Bank was classified as “well capitalized” for purposes of the FDIC’s prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings.

Changes in Internal Control Over Financial Reporting There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified during the quarter ended December 31, 2022 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Changes in Internal Control Over Financial Reporting There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified during the quarter ended December 31, 2023 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures Management, with the participation of the Company’s Chairman, President and Chief Executive Officer and its Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule l3a-l5(e) and 15d-15(e) promulgated under the Exchange Act) as of December 31, 2022.

(incorporated by reference to Exhibit 10.5 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.6 Form of Subordinated Note Purchase Agreement, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022).# 10.7 Form of Registration Rights Agreement, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022). 10.8 Lease of 229 Dowlen Road, as amended (incorporated by reference to Exhibit 10.8 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.9 Consulting Agreement with Norma Galloway (incorporated by reference to Exhibit 10.9 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.10 Confidential Separation Agreement and General Release, dated June 30, 2022, by and between Third Coast Bancshares, Inc., Third Coast Bank, SSB, and Donald Legato (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on July 7, 2022). 10.11 Employment Agreement between Third Coast Bank, SSB and John McWhorter (incorporated by reference to Exhibit 10.11 to the Company's Form S-1 filed with the SEC on October 15, 2021). 67 10.12 Employment Agreement between Third Coast Bancshares, Inc., Third Coast Bank, SSB and Bart Caraway (incorporated by reference to Exhibit 10.12 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.13 Employment Agreement between Third Coast Bank, SSB and Audrey Duncan (incorporated by reference to Exhibit 10.13 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.14 Salary Continuation Agreement between Third Coast Bank, SSB and John McWhorter (incorporated by reference to Exhibit 10.15 to the Company's Form S-1 filed with the SEC on October 15, 2021 ). 10.15 Salary Continuation Agreement between Third Coast Bank, SSB and Bart Caraway (incorporated by reference to Exhibit 10.16 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.16 Salary Continuation Agreement between Third Coast Bank, SSB and Audrey Duncan (incorporated by reference to Exhibit 10.17 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.17 Separation Agreement between Heritage Bank and Dennis Bonnen (incorporated by reference to Exhibit 10.18 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.18 Form of Capital Warrant Agreement (incorporated by reference to Exhibit 10.19 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.19 Form of Stock Option Agreement under the Third Coast Bancshares, Inc. 2017 Director Stock Option Plan (incorporated by reference to Exhibit 10.20 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.20 Form of Stock Option Award Grant Notice and Stock Option Award Agreement under the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.21 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.21 Form of Notice of Grant of Restricted Stock and Restricted Stock Award Agreement for Non-Employee Directors under the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.22 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.22 Form of Notice of Grant of Restricted Stock Award Agreement for Officers under the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.23 Form of Investment Agreement, dated September 8, 2022, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022).# 10.24 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022). 10.25 Form of Voting Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022). 10.26 Form of Letter Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022). 10.27 Renewal, Extension and Modification of Loan, effective September 10, 2022, by and among Third Coast Bancshares, Inc. and American National Bank & Trust (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 14, 2022). 10.28 Form of Letter Agreement, dated September 30, 2022, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2022). 10.29* Consulting Agreement, dated as of January 1, 2023, by and between Third Coast Bancshares, Inc. and Dennis Bonnen. 21.1* Subsidiaries of Third Coast Bancshares, Inc. 23.1* Consent of Whitley Penn LLP . 24.1* Powers of attorney (included on signature page). 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C.

(incorporated by reference to Exhibit 10.5 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.6 Form of Subordinated Note Purchase Agreement, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022).# 10.7 Form of Registration Rights Agreement, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2022). 10.8 Lease of 229 Dowlen Road, as amended (incorporated by reference to Exhibit 10.8 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.9 Confidential Separation Agreement and General Release, dated June 30, 2022, by and between Third Coast Bancshares, Inc., Third Coast Bank, SSB, and Donald Legato (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on July 7, 2022). 10.10 Employment Agreement between Third Coast Bank, SSB and John McWhorter (incorporated by reference to Exhibit 10.11 to the Company's Form S-1 filed with the SEC on October 15, 2021). 67 10.11 Employment Agreement between Third Coast Bancshares, Inc., Third Coast Bank, SSB and Bart Caraway (incorporated by reference to Exhibit 10.12 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.12 Employment Agreement between Third Coast Bank, SSB and Audrey Duncan (incorporated by reference to Exhibit 10.13 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.13 Salary Continuation Agreement between Third Coast Bank, SSB and John McWhorter (incorporated by reference to Exhibit 10.15 to the Company's Form S-1 filed with the SEC on October 15, 2021 ). 10.14 Salary Continuation Agreement between Third Coast Bank, SSB and Bart Caraway (incorporated by reference to Exhibit 10.16 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.15 Salary Continuation Agreement between Third Coast Bank, SSB and Audrey Duncan (incorporated by reference to Exhibit 10.17 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.16 Separation Agreement between Heritage Bank and Dennis Bonnen (incorporated by reference to Exhibit 10.18 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.17 Form of Capital Warrant Agreement (incorporated by reference to Exhibit 10.19 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.18 Form of Stock Option Agreement under the Third Coast Bancshares, Inc. 2017 Director Stock Option Plan (incorporated by reference to Exhibit 10.20 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.19 Form of Stock Option Award Grant Notice and Stock Option Award Agreement under the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.21 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.20 Form of Notice of Grant of Restricted Stock and Restricted Stock Award Agreement for Non-Employee Directors under the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.22 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.21 Form of Notice of Grant of Restricted Stock and Restricted Stock Award Agreement for Officers under the Third Coast Bancshares, Inc. 2019 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.23 to the Company's Form S-1 filed with the SEC on October 15, 2021). 10.22 Form of Investment Agreement, dated September 8, 2022, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022).# 10.23 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022). 10.24 Form of Voting Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022). 10.25 Form of Letter Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 9, 2022). 10.26 Renewal, Extension and Modification of Loan, effective September 10, 2022, by and among Third Coast Bancshares, Inc. and American National Bank & Trust (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 14, 2022). 10.27 Form of Letter Agreement, dated September 30, 2022, by and among Third Coast Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2022). 10.28 Consulting Agreement, dated as of January 1, 2023, by and between Third Coast Bancshares, Inc. and Dennis Bonnen (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K filed with the SEC on March 15, 2023). 10.29 Employment Agreement, dated as of April 20, 2023, by and between Bill Bobbora and Third Coast Bank, SSB (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on August 8, 2023). 10.30 Salary Continuation Agreement, dated as of April 20, 2023, by and between Third Coast Bank, SSB and Bill Bobbora (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the SEC on August 8, 2023). 21.1* Subsidiaries of Third Coast Bancshares, Inc. 23.1* Consent of Whitley Penn LLP . 24.1* Powers of attorney (included on signature page). 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C.

As of December 31, 2022, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organizations, or COSO, of the Treadway Commission in 2013.

As of December 31, 2023, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control—Integrated Framework,” issued by the Committee of Sponsoring Organizations, or COSO, of the Treadway Commission in 2013.

Management’s assessment determined that the Company maintained effective internal controls over financial reporting as of December 31, 2022. This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the SEC for an emerging growth company. It em 9B. Other Information. None.

Management’s assessment determined that the Company maintained effective internal controls over financial reporting as of December 31, 2023. This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the SEC for an emerging growth company. It em 9B. Other Information.

Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources. Year ended December 31, 2022 vs.

Investment securities represented 4.7% and 1.1% of total assets as of December 31, 2022 and 2021, respectively. The mortgage-backed securities held include agency collateralized mortgage obligations, Fannie Mae, Freddie Mac, and Ginnie Mae securities.

Investment securities represented 4.1% and 4.7% of total assets as of December 31, 2023 and 2022, respectively. The mortgage-backed securities held include agency collateralized mortgage obligations, Fannie Mae, Freddie Mac, and Ginnie Mae securities.

The balance of the allowance for loan losses is based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature and volume of our loan portfolio, overall portfolio quality, industry or borrower concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates, among other factors.

The balance of the allowance for credit losses was based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature and volume of our loan portfolio, overall portfolio quality, industry or borrower concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates, among other factors.

Based on this evaluation, the Company’s Chairman, President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022.

(2) Net interest margin is equal to net interest income divided by average interest-earning assets. (3) Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $14.7 million, $32.8 million, and $18.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

(2) Net interest margin is equal to net interest income divided by average interest-earning assets. (3) Interest earned/paid includes accretion of deferred loan fees, premiums and discounts. Interest income on loans includes loan fees and discount accretion of $15.5 million, $14.7 million, and $32.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company maintains the allowance at an amount the Company believes is sufficient to provide for estimated losses inherent in the Company’s loan portfolio at each balance sheet date, and fluctuations in the provision for loan losses may result from management’s assessment of the adequacy of the allowance.

The Company maintains the allowance at an amount the Company believes is sufficient to provide for estimated current expected credit losses in the Company’s loan portfolio at each balance sheet date, and fluctuations in the provision for credit losses may result from management’s assessment of the adequacy of the allowance.

Total loans as a percentage of assets were 82.4% and 82.8% as of December 31, 2022 and 2021, respectively.

Total loans as a percentage of assets were 82.8% and 82.4% as of December 31, 2023 and 2022, respectively.

The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average assets were $3.20 billion for the year ended December 31, 2022 and $2.06 billion for the year ended December 31, 2021.

The following table illustrates, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods indicated. Average assets were $3.90 billion for the year ended December 31, 2023 and $3.20 billion for the year ended December 31, 2022.

For the years ended December 31, 2022 and 2021, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, borrowings, and proceeds from issuance of stock.

For the year ended December 31, 2023, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, and borrowings. For the year ended December 31, 2022, liquidity needs were primarily met by core deposits, loan maturities, amortizing loan portfolios, brokered deposits, borrowings, and proceeds from issuance of stock.

The increase was primarily due to growth in our national wholesale deposits through our core, fiduciary and institutional deposit programs, continued growth in our primary market areas, and the increase in commercial lending relationships for which we also seek deposit balances offset by a decrease in time deposits.

Net occupancy and equipment expenses were $8.5 million and $5.4 million for the years ended December 31, 2022 and 2021, respectively. This category includes building, leasehold, furniture, fixtures and equipment depreciation and software amortization totaling $3.7 million and $2.5 million for the years ended December 31, 2022 and 2021, respectively.

Net occupancy and equipment expenses were $11.3 million and $8.5 million for the years ended December 31, 2023 and 2022, respectively. This category includes building, leasehold, furniture, fixtures and equipment depreciation and software amortization totaling $4.9 million and $3.7 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2022 and 2021, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of December 31, 2022, we had cash and cash equivalents of $332.0 million, compared to $327.0 million as of December 31, 2021.

As of December 31, 2023 and 2022, we had no exposure to future cash requirements associated with known uncertainties or capital expenditure of a material nature. As of December 31, 2023, we had cash and cash equivalents of $411.8 million, compared to $332.0 million as of December 31, 2022.

Core deposit intangibles are acquired customer relationships arising from bank acquisitions and are amortized on a straight-line basis over their estimated useful life. Core deposit intangibles are tested for impairment whenever events or changes in circumstances indicate the carrying amount of assets may not be recoverable from future undiscounted cash flows. Recently Issued Accounting Pronouncements See “Part II—Item 8.

The note bears interest at The Wall Street Journal US Prime Rate, as such changes from time to time, plus 0.50%, with a floor rate of 5.00% per annum. Interest is payable quarterly on the 10 th day of March, June, September and December through maturity date of September 10, 2024. All principal and unpaid interest is due at maturity.

Upon 59 renewal, the note bears interest at The Wall Street Journal US Prime Rate, as such changes from time to time, plus 0.50%, with a floor rate of 5.00% per annum. Interest is payable quarterly on the 10th day of March, June, September and December through maturity date of September 10, 2024.

Noninterest Income Our primary sources of recurring noninterest income are service charges and fees on deposit accounts, gains from the sale of SBA loans, and earnings from bank-owned life insurance (“BOLI”) and derivative fees.

Noninterest Income Our primary sources of recurring noninterest income are service charges and fees on deposit accounts, gains from the sale of SBA loans and securities, earnings from bank-owned life insurance (“BOLI”) and our investment in the Small Business Investment Company, and derivative fees.

Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $56.5 million for the year ended December 31, 2022, an increase of $7.9 million, or 16.2%, compared to $48.6 million for the same period in 2021.

Salaries and employee benefits are the largest component of noninterest expense and include payroll expense, the cost of incentive compensation, benefit plans, health insurance and payroll taxes. Salaries and employee benefits were $62.2 million for the year ended December 31, 2023, an increase of $5.7 million, or 10.1%, compared to $56.5 million for the same period in 2022.

Completion of $69.4 Million Preferred Stock Private Placement On September 30, 2022, the Company completed a private placement of (i) 69,400 shares of a new series of preferred stock designated Series A Convertible Non-Cumulative Preferred Stock, par value $1.00 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”), and (ii) warrants to purchase an aggregate of 175,000 shares of the Company’s common stock (or, at the election of the warrant holder in accordance with the terms of the warrant agreement, Series B Convertible Perpetual Preferred Stock, par value $1.00 per share, or non-voting common stock, par value $1.00 per share, of the Company if an amendment to the Company's first amended and restated certificate of formation to create such non-voting common stock is approved by the Company's shareholders at its 2023 Annual Meeting of Shareholders) at an exercise price equal to $22.50 per share, for aggregate gross proceeds of $69.4 million before deducting placement fees and offering expenses.

Completion of $69.4 Million Preferred Stock Private Placement On September 30, 2022, the Company completed a private placement of (i) 69,400 shares of a new series of preferred stock designated Series A Convertible Non-Cumulative Preferred Stock, par value $1.00 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”), and (ii) warrants to purchase an aggregate of 175,000 shares of the Company’s common stock (or, at the election of the warrant holder in accordance with the terms of the warrant agreement, Series B Convertible Perpetual Preferred Stock, par value $1.00 per share, or non-voting common stock, par value $1.00 per share, of the Company) at an exercise price equal to $22.50 per share, for aggregate gross proceeds of $69.4 million before deducting placement fees and offering expenses.

For the Year Ended December 31, 2022 2021 2020 Sources of Funds: Deposits: Noninterest-bearing 9.8 % 18.6 % 18.6 % Interest-bearing 74.3 % 68.9 % 68.9 % FHLB advances 2.5 % 2.7 % 3.0 % Notes payable 2.4 % 1.1 % 2.4 % Other liabilities 0.9 % 0.4 % 0.4 % Shareholders’ equity, including ESOP-owned shares 10.1 % 8.3 % 6.7 % Total 100.0 % 100.0 % 100.0 % Uses of Funds: Loans, net 83.4 % 79.1 % 85.1 % Securities (available for sale and held to maturity) 3.9 % 1.4 % 1.0 % Federal funds sold and other interest-earning assets 7.0 % 13.0 % 9.1 % Other noninterest-earning assets 5.7 % 6.5 % 4.8 % Total 100.0 % 100.0 % 100.0 % Average noninterest-bearing deposits to average deposits 11.7 % 21.3 % 21.3 % Average total loans to average deposits 100.1 % 91.2 % 98.1 % Our primary source of funds is deposits, and our primary use of funds is loans.

For the Year Ended December 31, 2023 2022 Sources of Funds: Deposits: Noninterest-bearing 12.2 % 9.8 % Interest-bearing 71.5 % 74.3 % FHLB advances 2.0 % 2.5 % Notes payable 2.9 % 2.4 % Other liabilities 1.2 % 0.9 % Shareholders’ equity, including ESOP-owned shares 10.2 % 10.1 % Total 100.0 % 100.0 % Uses of Funds: Loans, net 85.5 % 83.4 % Securities (available for sale and held to maturity) 5.0 % 3.9 % Federal funds sold and other interest-earning assets 4.7 % 7.0 % Other noninterest-earning assets 4.8 % 5.7 % Total 100.0 % 100.0 % Average noninterest-bearing deposits to average deposits 14.5 % 11.7 % Average total loans to average deposits 103.3 % 100.1 % Our primary source of funds is deposits, and our primary use of funds is loans.

The information required by this Item is incorporated herein by reference to our Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders to be filed with the SEC within 120 days after our fiscal year end (the “Proxy Statement”).

Directors, Executive Officers and Corporate Governance. The information required by this Item is incorporated herein by reference to our Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC within 120 days after our fiscal year end (the “Proxy Statement”).

Interest expense related to interest bearing deposit accounts was $30.7 million and $8.5 million for the years ended December 31, 2022 and 2021, respectively. Interest expense related to notes payable and FHLB advances was $6.8 million for the year ended December 31, 2022 compared to $1.5 million for the year ended December 31, 2021.

Interest expense related to interest bearing deposit accounts was $115.0 million and $30.7 million for the years ended December 31, 2023 and 2022, respectively. Interest expense related to notes payable and FHLB advances was $12.0 million for the year ended December 31, 2023 compared to $6.8 million for the year ended December 31, 2022.

We have found that, historically, interest rates on these deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis.

Owner-occupied commercial real estate loans increased $109.9 million, or 28.6%, to $493.8 million as of December 31, 2022 from $383.9 million as of December 31, 2021. Non-owner-occupied commercial real estate loans are loans for income producing properties and are generally for retail strip centers, office buildings, self-storage facilities, and multi and single tenant office warehouses, all within our markets.

Owner-occupied commercial real estate loans increased $27.0 million, or 5.5%, to $520.8 million as of December 31, 2023 from $493.8 million as of December 31, 2022. Non-owner-occupied commercial real estate loans are loans for income producing properties and are generally for retail strip centers, office buildings, self-storage facilities, and multi and single tenant office warehouses, all within our markets.

The note bore interest at The Wall Street Journal US Prime Rate, as such 60 changes from time to time, with a floor rate of 4.00% per annum. Interest was payable quarterly on the 10 th day of March, June, September and December through maturity date of September 10, 2022. All principal and unpaid interest was due at maturity.

Prior to maturity, the note bore interest at The Wall Street Journal US Prime Rate, as such changes from time to time, with a floor rate of 4.00% per annum. Interest was payable quarterly on the 10th day of March, June, September and December through maturity date.

As of December 31, 2021, we had $606.2 million in outstanding commitments to extend credit and $14.1 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

As of December 31, 2022, we had $1.15 billion in outstanding commitments to extend credit and $21.7 million in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

Aggregate net proceeds were $66.2 million after deducting placement fees and offering expenses of $3.2 million. 46 The securities sold in the private placement were sold only to accredited investors and were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder as securities offered and sold only to accredited investors (as defined in Rule 501(a) of Regulation D under the Securities Act) in a transaction not involving any public offering.

The securities sold in the private placement were sold only to accredited investors and were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided under Section 4(a)(2) of the 47 Securities Act and Regulation D promulgated thereunder as securities offered and sold only to accredited investors (as defined in Rule 501(a) of Regulation D under the Securities Act) in a transaction not involving any public offering.

Average loans was $2.69 billion for the year ended December 31, 2022 compared to $1.65 billion for the year ended December 31, 2021 with the increase primarily due to loan growth in commercial and industrial loans, construction and development real estate loans, and commercial real estate loans.

Average loans were $3.37 billion for the year ended December 31, 2023 compared to $2.69 billion for the year ended December 31, 2022 with the increase primarily due to loan growth in commercial and industrial loans, construction and development real estate loans, and commercial real estate loans.

We do not expect a change in the primary source or use of our funds in the foreseeable future. 61 As of December 31, 2022, we had $1.15 billion in outstanding commitments to extend credit and $21.7 million in commitments associated with outstanding standby and commercial letters of credit.

We do not expect a change in the primary source or use of our funds in the foreseeable future. 60 As of December 31, 2023, we had $1.35 billion in outstanding commitments to extend credit and $26.9 million in commitments associated with outstanding standby and commercial letters of credit.

The FHLB allows us to borrow on a blanket floating lien status collateralized by FHLB stocks, real estate loans and investment securities. As of December 31, 2022 and 2021, total borrowing capacity available under this arrangement was $719.1 million and $450.4 million, respectively.

The FHLB allows us to borrow on a blanket floating lien status collateralized by FHLB stocks, real estate loans and investment securities. As of December 31, 2023 and 2022, total borrowing capacity available under this arrangement was $565.1 million and $719.1 million, respectively. The Company had no FHLB advances outstanding at December 31, 2023 and 2022.

However, we expect to monitor and control our growth in order to remain in compliance with all regulatory capital standards applicable to us. The following table presents the regulatory capital ratios for the Bank as of the dates indicated.

However, we expect to monitor and control our growth in order to remain in compliance with all regulatory capital standards applicable to us. The Company began reporting ratios beginning March 31, 2023 in accordance with the regulatory framework. The following table presents the regulatory capital ratios for the Company and Bank as of the dates indicated.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 68 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1* Third Coast Bancshares, Inc.

Non-owner-occupied commercial real estate loans increased $60.7 million, or 13.6%, to $506.0 million as of December 31, 2022 from $445.3 million as of December 31, 2021. The increases in commercial real estate loans were due to the addition of several lenders in 2022 and increased productivity of existing lenders in response to market demand. Residential Real Estate Loans.

Non-owner-occupied commercial real estate loans increased $80.6 million, or 15.9%, to $586.6 million as of December 31, 2023 from $506.0 million as of December 31, 2022. The increases in commercial real estate loans were due to the addition of several lenders and increased productivity of existing lenders in response to market demand. Residential Real Estate Loans.

For the year ended December 31, 2021, net interest margin and net interest spread were 4.65% and 4.50%, respectively, compared to 4.24% and 3.98%, respectively, for the year ended December 31, 2020. 49 The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average rate earned or paid on such assets or liabilities, respectively.

For the year ended December 31, 2023, net interest margin and net interest spread were 3.73% and 2.86%, respectively, compared to 3.82% and 3.57%, respectively, for the year ended December 31, 2022. 49 The following table presents an analysis of net interest income and net interest spread for the periods indicated, including average outstanding balances for each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid on such amounts, and the average rate earned or paid on such assets or liabilities, respectively.

Our loan portfolio represents the highest yielding component of our earning assets. As of December 31, 2022, total loans were $3.11 billion, an increase of $1.04 billion, or 50.2%, compared to $2.07 billion as of December 31, 2021.

Our loan portfolio represents the highest yielding component of our earning assets. As of December 31, 2023, total loans were $3.64 billion, an increase of $531.2 million, or 17.1%, compared to $3.11 billion as of December 31, 2022.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 68 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). * Filed herewith. ** These exhibits are furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act. Indicates a management contract or compensatory plan. # Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

Compensation Recovery Policy dated October 19, 2023. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). * Filed herewith. ** These exhibits are furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act. Indicates a management contract or compensatory plan. # Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

As of December 31, (Dollars in thousands) 2022 2021 FHLB borrowings $ - $ 50,000 Line of Credit - Senior Debt 30,875 1,000 Note Payable - Subordinated Debt 80,348 — Total borrowings $ 111,223 $ 51,000 Federal Home Loan Bank (FHLB) Advances.

As of December 31, (Dollars in thousands) 2023 2022 FHLB borrowings $ - $ - Line of Credit - Senior Debt 38,875 30,875 Note Payable - Subordinated Debt 80,553 80,348 Total borrowings $ 119,428 $ 111,223 Federal Home Loan Bank (FHLB) Advances.

Construction, development and other loans increased $247.5 million, or 77.3%, to $567.9 million as of December 31, 2022 from $320.3 million as of December 31, 2021 due primarily to the additional productivity from the builder finance group. Commercial and Industrial Loans. Commercial and industrial loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and effectively.

Construction, development and other loans increased $125.7 million, or 22.1%, to $693.6 million as of December 31, 2023 from $567.9 million as of December 31, 2022 due primarily to the additional productivity from the builder finance group. Commercial and Industrial Loans. Commercial and industrial loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and effectively.

Year ended December 31, 2021 The increase in noninterest expense of $17.3 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to increases in salaries and employee benefits expense, net occupancy and equipment expenses, legal and professional expenses, regulatory assessments, and other expenses.

Year ended December 31, 2022 The increase in noninterest expense of $11.5 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to increases in salaries and employee benefits expense, net occupancy and equipment expenses, software purchases and maintenance, legal and professional expenses, and other noninterest expenses.

The following tables summarize the simulated change in net interest income and fair value of equity over a 12-month horizon as of the dates indicated: As of December 31, 2022 2021 2020 Change in Interest Rates (Basis Points) Percent Change in Net Interest Income Percent Change in Fair Value of Equity Percent Change in Net Interest Income Percent Change in Fair Value of Equity Percent Change in Net Interest Income Percent Change in Fair Value of Equity + 300 9.99% 11.90% 8.22% 16.74% (1.68)% 20.30% + 200 6.64% 8.27% 4.80% 11.29% (1.91)% 13.36% + 100 3.31% 4.31% 1.83% 5.74% (1.48)% 6.82% Base — — — — — — –100 (3.32)% (2.46)% 2.34% (2.36)% 5.20% (2.77)% The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations.

The following tables summarize the simulated change in net interest income and fair value of equity over a 12-month horizon as of the dates indicated: As of December 31, 2023 2022 Change in Interest Rates (Basis Points) Percent Change in Net Interest Income Percent Change in Fair Value of Equity Percent Change in Net Interest Income Percent Change in Fair Value of Equity + 300 (0.35)% (5.91)% 9.99% 11.90% + 200 (0.23)% (3.39)% 6.64% 8.27% + 100 (0.09)% (1.35)% 3.31% 4.31% Base — — — — –100 0.05% 0.35% (3.32)% (2.46)% The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations.

Liquidity and Capital Resources Liquidity Liquidity involves our ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events.

The Company had no advances outstanding under these lines at December 31, 2023 and 2022. Liquidity and Capital Resources Liquidity Liquidity involves our ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events.

On March 31, 2022, the Company issued and sold $82.3 million in aggregate principal amount of the Notes. Please see “—Subordinated Notes Offering” above. As of December 31, 2022, the outstanding balance was $80.3 million, net of $2.0 million in unamortized debt issuance costs.

On March 31, 2022, the Company issued and sold $82.3 million in aggregate principal amount of the Notes. As of December 31, 2023, the outstanding balance was $80.6 million, net of $1.7 million in unamortized debt issuance costs.

The amount of the allowance for loan losses should not be interpreted as an indication that charge-offs in future periods will necessarily occur in those amounts. In determining the allowance for loan losses, we estimate losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined.

The amount of the allowance for credit losses was not an indicator that charge-offs in future periods would necessarily occur in those amounts. In determining the allowance for credit losses, we estimated losses on specific loans, or groups of loans, where the probable loss could be identified and reasonably determined.

Capital Resources Total shareholders’ equity increased to $381.8 million as of December 31, 2022, compared to $299.0 million as of December 31, 2021, an increase of $82.8 million, or 27.7%.

Capital Resources Total shareholders’ equity increased to $412.0 million as of December 31, 2023, compared to $381.8 million as of December 31, 2022, an increase of $30.2 million, or 7.9%.

Residential real estate loans consists of 1-4 family residential loans and multi-family residential loans. Our 1-4 family residential loan portfolio is predominately comprised of loans secured by 1-4 family homes, which are investor owned.

Residential real estate loans consists of 1-4 family residential loans and multi-family residential loans. Our 1-4 family residential loan portfolio is comprised of owner-occupied and investor owned loans secured by 1-4 family 53 homes. Our multi-family residential loan portfolio is comprised of loans secured by properties deemed multi-family, which includes apartment buildings.

Our cost of notes payable was 5.96% and 4.89% for the years ended December 31, 2022 and 2021, respectively. For additional information on our advances from the FHLB and other borrowings, see Note 7- FHLB Advances and Other Borrowings in the accompanying notes to the consolidated financial statements included elsewhere in this report.

For additional information on our Note Payable - Subordinated Debt, see Note 7 – FHLB Advances and Other Borrowings in the accompanying notes to the consolidated financial statements included elsewhere in this report. Our cost of notes payable was 6.74% and 5.96% for the years ended December 31, 2023 and 2022, respectively. Federal Reserve Borrower-in-Custody (BIC) Loan Pledge Arrangement.

Our current multifamily loans are to operators who we believe are seasoned and successful and possess quality alternative repayment sources. Residential real estate loans increased $95.5 million, or 44.8%, to $308.8 million as of December 31, 2022 from $213.3 million as of December 31, 2021 due primarily to continued organic growth. Construction, Development and Other Loans.

Our current multifamily loans are to operators who we believe are seasoned and successful and possess quality alternative repayment sources. Residential real estate loans increased $33.8 million, or 11.0%, to $342.6 million as of December 31, 2023 from $308.8 million as of December 31, 2022. Construction, Development and Other Loans.

The note is secured by 100% of the outstanding stock of the Bank and is senior in rights to the subordinated debt and subordinated notes described below. As of December 31, 2022, the outstanding balance of the note was $30.9 million. Note Payable - Subordinated Debt .

All principal and unpaid interest is due at maturity. The note is secured by 100% of the outstanding stock of the Bank and is senior in rights to the subordinated debt described below. At December 31, 2023, the outstanding balance of the note was $38.9 million. Note Payable - Subordinated Debt .

For the Year Ended December 31, For the Year Ended December 31, (Dollars in thousands) 2022 2021 Increase (Decrease) 2021 2020 Increase (Decrease) Interest income $ 153,946 $ 100,615 $ 53,331 53.0 % $ 100,615 $ 82,241 $ 18,374 22.3 % Interest expense 37,492 10,062 27,430 272.6 % 10,062 14,360 (4,298 ) (29.9 )% Net interest income 116,454 90,553 25,901 28.6 % 90,553 67,881 22,672 33.4 % Provision for loan losses 12,200 9,923 2,277 22.9 % 9,923 7,550 2,373 31.4 % Noninterest income 7,223 4,878 2,345 48.1 % 4,878 2,682 2,196 81.9 % Noninterest expense 88,309 71,025 17,284 24.3 % 71,025 47,403 23,622 49.8 % Income before income taxes 23,168 14,483 8,685 60.0 % 14,483 15,610 (1,127 ) (7.2 )% Income tax expense 4,509 3,059 1,450 47.4 % 3,059 3,495 (436 ) (12.5 )% Net income $ 18,659 $ 11,424 $ 7,235 63.3 % $ 11,424 $ 12,115 $ (691 ) (5.7 )% 48 Net Interest Income Our operating results depend primarily on our net interest income, calculated as the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings.

For the Year Ended December 31, For the Year Ended December 31, (Dollars in thousands) 2023 2022 Increase (Decrease) 2022 2021 Increase (Decrease) Interest income $ 266,544 $ 153,946 $ 112,598 73.1 % $ 153,946 $ 100,615 $ 53,331 53.0 % Interest expense 127,019 37,492 89,527 238.8 % 37,492 10,062 27,430 272.6 % Net interest income 139,525 116,454 23,071 19.8 % 116,454 90,553 25,901 28.6 % Provision for credit losses 6,320 12,200 (5,880 ) (48.2 )% 12,200 9,923 2,277 22.9 % Noninterest income 8,205 7,223 982 13.6 % 7,223 4,878 2,345 48.1 % Noninterest expense 99,798 88,309 11,489 13.0 % 88,309 71,025 17,284 24.3 % Income before income taxes 41,612 23,168 18,444 79.6 % 23,168 14,483 8,685 60.0 % Income tax expense 8,211 4,509 3,702 82.1 % 4,509 3,059 1,450 47.4 % Net income $ 33,401 $ 18,659 $ 14,742 79.0 % $ 18,659 $ 11,424 $ 7,235 63.3 % Net Interest Income Our operating results depend primarily on our net interest income, calculated as the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings.

Year ended December 31, 2021 Net interest income increased $25.9 million, or 28.6%, during the year ended December 31, 2022, compared to the year ended December 31, 2021 primarily due to interest income from loan growth offset by a decrease in income from PPP loans and an increase in interest expense from interest-bearing deposit growth and increased rates paid on deposits.

Year ended December 31, 2022 Net interest income increased $23.1 million, or 19.8%, during the year ended December 31, 2023, compared to the year ended December 31, 2022 primarily due to interest income from loan growth and increased loan rates offset by an increase in interest expense from increased rates paid on deposits.

For the Year Ended December 31, 2022 2021 2020 (Dollars in thousands) Average Outstanding Balance Interest Earned/ Paid (3) Average Yield/ Rate Average Outstanding Balance Interest Earned/ Paid (3) Average Yield/ Rate Average Outstanding Balance Interest Earned/ Paid (3) Average Yield/ Rate Assets Interest-earnings assets: Investment securities $ 129,507 $ 3,925 3.03 % $ 31,251 $ 1,043 3.34 % $ 14,709 $ 297 2.02 % Loans, gross 2,694,428 146,425 5.43 % 1,646,591 98,886 6.01 % 1,433,412 80,791 5.64 % Federal funds sold and other interest- earning assets 223,781 3,596 1.61 % 267,983 686 0.26 % 152,066 1,153 0.76 % Total interest-earning assets 3,047,716 153,946 5.05 % 1,945,825 100,615 5.17 % 1,600,187 82,241 5.14 % Less allowance for loan losses (25,600 ) (14,198 ) (10,506 ) Total interest-earning assets, net of allowance 3,022,116 1,931,627 1,589,681 Noninterest-earning assets 178,135 132,825 80,686 Total assets $ 3,200,251 $ 2,064,452 $ 1,670,367 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 2,377,079 $ 30,696 1.29 % $ 1,421,757 $ 8,526 0.60 % $ 1,150,723 $ 12,302 1.07 % Notes payable 77,317 4,605 5.96 % 22,329 1,091 4.89 % 39,793 1,615 4.06 % FHLB advances 81,083 2,191 2.70 % 56,442 445 0.79 % 50,000 443 0.89 % Total interest-bearing liabilities 2,535,479 37,492 1.48 % 1,500,528 10,062 0.67 % 1,240,516 14,360 1.16 % Noninterest-bearing deposits 313,972 383,747 310,357 Other liabilities 27,115 9,547 6,661 Total liabilities 2,876,566 1,893,822 1,557,534 Shareholders’ equity, including ESOP owned shares 323,685 170,630 112,833 Total liabilities and shareholders’ equity $ 3,200,251 $ 2,064,452 $ 1,670,367 Net interest income $ 116,454 $ 90,553 $ 67,881 Net interest spread (1) 3.57 % 4.50 % 3.98 % Net interest margin (2) 3.82 % 4.65 % 4.24 % (1) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

For the Year Ended December 31, 2023 2022 2021 (Dollars in thousands) Average Outstanding Balance Interest Earned/ Paid (3) Average Yield/ Rate Average Outstanding Balance Interest Earned/ Paid (3) Average Yield/ Rate Average Outstanding Balance Interest Earned/ Paid (3) Average Yield/ Rate Assets Interest-earnings assets: Investment securities $ 197,286 $ 8,313 4.21 % $ 129,507 $ 3,925 3.03 % $ 31,251 $ 1,043 3.34 % Loans, gross 3,366,180 248,911 7.39 % 2,694,428 146,425 5.43 % 1,646,591 98,886 6.01 % Federal funds sold and other interest- earning assets 181,782 9,320 5.13 % 223,781 3,596 1.61 % 267,983 686 0.26 % Total interest-earning assets 3,745,248 266,544 7.12 % 3,047,716 153,946 5.05 % 1,945,825 100,615 5.17 % Less allowance for credit losses (36,750 ) (25,600 ) (14,198 ) Total interest-earning assets, net of allowance 3,708,498 3,022,116 1,931,627 Noninterest-earning assets 188,514 178,135 132,825 Total assets $ 3,897,012 $ 3,200,251 $ 2,064,452 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 2,785,605 $ 115,044 4.13 % $ 2,377,079 $ 30,696 1.29 % $ 1,421,757 $ 8,526 0.60 % Notes payable 113,552 7,657 6.74 % 77,317 4,605 5.96 % 22,329 1,091 4.89 % FHLB advances 79,546 4,318 5.43 % 81,083 2,191 2.70 % 56,442 445 0.79 % Total interest-bearing liabilities 2,978,703 127,019 4.26 % 2,535,479 37,492 1.48 % 1,500,528 10,062 0.67 % Noninterest-bearing deposits 473,558 313,972 383,747 Other liabilities 47,527 27,115 9,547 Total liabilities 3,499,788 2,876,566 1,893,822 Shareholders’ equity, including ESOP owned shares 397,224 323,685 170,630 Total liabilities and shareholders’ equity $ 3,897,012 $ 3,200,251 $ 2,064,452 Net interest income $ 139,525 $ 116,454 $ 90,553 Net interest spread (1) 2.86 % 3.57 % 4.50 % Net interest margin (2) 3.73 % 3.82 % 4.65 % (1) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

The following table presents, for the periods indicated, the major categories of noninterest income: For the Year Ended December 31, For the Year Ended December 31, (Dollars in thousands) 2022 2021 Increase 2021 2020 Increase Noninterest Income: Service charges and fees $ 2,714 $ 2,367 $ 347 14.7 % $ 2,367 $ 1,709 $ 658 38.5 % Gain on sale of SBA loans 950 586 364 62.1 % 586 266 320 120.3 % Earnings on bank-owned life insurance 1,312 567 745 131.4 % 567 354 213 60.2 % Derivative fees 1,259 820 439 53.5 % 820 — 820 100.0 % Other 988 538 450 83.6 % 538 353 185 52.4 % Total noninterest income $ 7,223 $ 4,878 $ 2,345 48.1 % $ 4,878 $ 2,682 $ 2,196 81.9 % Year ended December 31, 2022 vs.

The following table presents, for the periods indicated, the major categories of noninterest income: For the Year Ended December 31, For the Year Ended December 31, (Dollars in thousands) 2023 2022 Increase (Decrease) 2022 2021 Increase Noninterest Income: Service charges and fees $ 3,233 $ 2,714 $ 519 19.1 % $ 2,714 $ 2,367 $ 347 14.7 % Gain on sale of investment securities available-for-sale 482 — 482 100.0 % — — — — Gain on sale of SBA loans 440 950 (510 ) (53.7 )% 950 586 364 62.1 % Earnings on bank-owned life insurance 2,101 1,312 789 60.1 % 1,312 567 745 131.4 % Derivative fees 763 1,259 (496 ) (39.4 )% 1,259 820 439 53.5 % Other 1,186 988 198 20.0 % 988 538 450 83.6 % Total noninterest income $ 8,205 $ 7,223 $ 982 13.6 % $ 7,223 $ 4,878 $ 2,345 48.1 % Year ended December 31, 2023 vs.

Deferred tax assets and liabilities are reflected at current income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics.

Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest-earning assets and interest-bearing liabilities and an interest rate shock simulation model. 62 We use interest rate risk simulation models and shock analyses to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics.

As of December 31, 2022 and 2021, we maintained federal funds lines of credit with commercial banks that provide for the availability to borrow up to an aggregate of $36.5 million and $50.5 million, respectively, in federal funds. The Company had no advances outstanding under these lines of credit at December 31, 2022 and 2021.

As of December 31, 2023, total borrowing capacity under this arrangement was $1.2 billion. There were no advances outstanding at December 31, 2023. Federal Funds Lines of Credit. At December 31, 2023 and 2022, the Company had federal funds lines of credit with commercial banks that provide for availability to borrow up to an aggregate of $36.5 million.

Based on this analysis, the Company records a provision for loan losses to maintain the allowance at appropriate levels. Determining the amount of the allowance is considered a critical accounting estimate, as it requires significant judgment and the use of subjective measurements, including management’s assessment of overall portfolio quality.

Determining the amount of the allowance is considered a critical accounting estimate, as it requires significant judgment and the use of subjective measurements, including management’s assessment of overall portfolio quality.

Upon maturity, the outstanding balance of the note was renewed for $30.9 million, and the total revolving line of credit facility was increased to $50.0 million with payment terms similar to the payment terms of the previous agreement.

On September 10, 2022, our $30.9 million revolving line of credit facility matured and was renewed and increased to $50.0 million with payment terms similar to the payment terms of the previous agreement.

The provision for loan losses for the year ended December 31, 2022 was $12.2 million compared to $9.9 million for the year ended December 31, 2021. The increase in the provision related primarily to provisioning for new loans booked.

The provision for credit losses for the year ended December 31, 2023 was $6.3 million compared to $12.2 million for the year ended December 31, 2022. The provision for credit losses for the year ended December 31, 2023 related primarily to provisioning for new loans and commitments.

Other categories of loans included in our loan portfolio include farmland loans, lease financing, Bond Anticipation Notes (BANs), consumer loans, and agricultural loans made to farmers and ranchers relating to their operations. None of these categories of loans represents a material portion of our total loan portfolio.

The increase was primarily a result of increased productivity of existing lenders in response to market demand. Other Loan Categories. Other categories of loans included in our loan portfolio include farmland loans, lease financing, Bond Anticipation Notes (BANs), consumer loans, and agricultural loans made to farmers and ranchers relating to their operations.

As of December 31, 2022, we had, on a consolidated basis, total assets of $3.77 billion, total loans of $3.11 billion, total deposits of $3.24 billion and total shareholders’ equity of $381.8 million.

As of December 31, 2023, we had, on a consolidated basis, total assets of $4.40 billion, total loans of $3.64 billion, total deposits of $3.80 billion and total shareholders’ equity of $412.0 million.

Noninterest expense also includes operational expenses, such as occupancy expenses, depreciation and amortization of our facilities and our furniture, fixtures and office equipment, legal and professional fees, data processing and network expenses, regulatory fees, including FDIC assessments, advertising and marketing expenses, and loan operations and repossessed asset related expenses. 51 The following table presents, for the periods indicated, the major categories of noninterest expense: For the Year Ended December 31, For the Year Ended December 31, (Dollars in thousands) 2022 2021 Increase (Decrease) 2021 2020 Increase (Decrease) Noninterest Expense: Salaries and employee benefits $ 56,510 $ 48,642 $ 7,868 16.2 % $ 48,642 $ 29,262 $ 19,380 66.2 % Net occupancy and equipment expenses 8,526 5,367 3,159 58.9 % 5,367 4,127 1,240 30.0 % Other: Legal and professional fees 6,987 5,293 1,694 32.0 % 5,293 3,962 1,331 33.6 % Data processing and network expenses 3,947 3,060 887 29.0 % 3,060 3,184 (124 ) (3.9 )% Regulatory assessments 3,464 1,101 2,363 214.6 % 1,101 1,303 (202 ) (15.5 )% Advertising and marketing expenses 1,912 1,889 23 1.2 % 1,889 1,326 563 42.5 % Loan operations and other real estate owned expenses 988 1,963 (975 ) (49.7 )% 1,963 1,369 594 43.4 % Loss on sale of other real estate owned 350 344 6 1.7 % 344 — 344 100.0 % Other expenses 5,625 3,366 2,259 67.1 % 3,366 2,870 496 17.3 % Total noninterest expense $ 88,309 $ 71,025 $ 17,284 24.3 % $ 71,025 $ 47,403 $ 23,622 49.8 % Year ended December 31, 2022 vs.

Noninterest expense also includes operational expenses, such as occupancy expenses, depreciation and amortization of our facilities and our furniture, fixtures and office equipment, legal and professional fees, data processing and network expenses, regulatory fees, including FDIC assessments, advertising and marketing expenses, and loan operations related expenses. 51 The following table presents, for the periods indicated, the major categories of noninterest expense: For the Year Ended December 31, For the Year Ended December 31, (Dollars in thousands) 2023 2022 Increase (Decrease) 2022 2021 Increase (Decrease) Noninterest Expense: Salaries and employee benefits $ 62,217 $ 56,510 $ 5,707 10.1 % $ 56,510 $ 48,642 $ 7,868 16.2 % Net occupancy and equipment expenses 11,285 8,526 2,759 32.4 % 8,526 5,367 3,159 58.9 % Other: Legal and professional fees 7,783 6,987 796 11.4 % 6,987 5,293 1,694 32.0 % Data processing and network expenses 4,735 3,947 788 20.0 % 3,947 3,060 887 29.0 % Advertising and marketing expenses 2,627 1,912 715 37.4 % 1,912 1,889 23 1.2 % Regulatory assessments 2,598 3,464 (866 ) (25.0 )% 3,464 1,101 2,363 214.6 % Software purchases and maintenance 2,375 1,012 1,363 134.7 % 1,012 852 160 18.8 % Loan operations 673 988 (315 ) (31.9 )% 988 1,963 (975 ) (49.7 )% Telephone and communications 510 496 14 2.8 % 496 595 (99 ) (16.6 )% Loss on sale of other real estate owned — 350 (350 ) (100.0 )% 350 344 6 1.7 % Other expenses 4,995 4,117 878 21.3 % 4,117 1,919 2,198 114.5 % Total noninterest expense $ 99,798 $ 88,309 $ 11,489 13.0 % $ 88,309 $ 71,025 $ 17,284 24.3 % Year ended December 31, 2023 vs.

The average cost of interest-bearing deposits was 0.60% for the year ended December 31, 2021 and 1.07% for the year ended December 31, 2020.

The average cost of interest-bearing deposits was 4.13% for the year ended December 31, 2023 and 1.29% for the year ended December 31, 2022.

Income tax expense and effective tax rates for the periods shown below were as follows: Year Ended December 31, (Dollars in thousands) 2022 2021 2020 Income tax expense $ 4,509 $ 3,059 $ 3,495 Effective tax rate 19.5 % 21.1 % 22.4 % Year ended December 31, 2022 vs.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. 52 Income tax expense and effective tax rates for the periods shown below were as follows: Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Income tax expense $ 8,211 $ 4,509 $ 3,059 Effective tax rate 19.7 % 19.5 % 21.1 % Year ended December 31, 2023 vs.

During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal, and, consequently, the average life of the security is typically lengthened. If interest rates begin to fall, prepayments may increase, thereby shortening the estimated life of the security.

Monthly pay downs on mortgage-backed securities tend to cause the average life of the securities to be much different than the stated contractual maturity. During a period of increasing interest rates, fixed rate mortgage-backed securities do not tend to experience heavy prepayments of principal, and, consequently, the average life of the security is typically lengthened.

Year ended December 31, 2021 For the years ended December 31, 2022 and 2021, income tax expense totaled $4.5 million and $3.1 million, respectively, and our effective tax rate was 19.5% and 21.1% for the years ended December 31, 2022 and 2021, respectively.

Year ended December 31, 2022 For the years ended December 31, 2023 and 2022, income tax expense totaled $8.2 million and $4.5 million, respectively. Our effective tax rates remained consistent at 19.7% and 19.5% for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2022, the allowance for loan losses totaled $30.4 million, or 0.98% of total loans, compared to $19.3 million, or 0.93% of total loans, as of December 31, 2021. The provision for loan losses for the year ended December 31, 2021 was $9.9 million compared to $7.6 million for the year ended December 31, 2020.

No provision for credit losses for securities was recorded for the year ended December 31, 2023. As of December 31, 2023, the allowance for credit losses for loans totaled $37.0 million, or 1.02% of total loans, compared to $30.4 million, or 0.98% of total loans, as of December 31, 2022.

Treasury bonds 100,567 98,518 - - - - Corporate bonds 57,607 54,251 23,556 24,527 22,571 22,673 $ 182,118 $ 176,067 $ 25,434 $ 26,432 $ 25,457 $ 25,595 As of December 31, 2022, the carrying amount of the security portfolio was $176.1 million compared to $26.4 million as of December 31, 2021, an increase of $149.6 million, or 85.0%.

Treasury bonds — — 100,567 98,518 Corporate bonds 100,371 95,563 57,607 54,251 $ 182,091 $ 178,087 $ 182,118 $ 176,067 As of December 31, 2023, the carrying amount of the security portfolio was $178.1 million compared to $176.1 million as of December 31, 2022, an increase of $2.0 million, or 1.1%.

Generally, loans are placed on nonaccrual status when they become more than 90 days past due and/or collection of principal or interest is in doubt. 55 The following table presents information regarding nonperforming assets at the dates indicated: As of December 31, (Dollars in thousands) 2022 2021 2020 2019 2018 Nonaccrual loans (1) $ 10,963 $ 10,030 $ 7,257 $ 4,078 $ 5,044 Loans > 90 days and still accruing 518 278 752 194 - Restructured loan—accruing 780 5,295 4,395 328 419 Total nonperforming loans $ 12,261 $ 15,603 $ 12,404 $ 4,600 $ 5,463 Other real estate owned and repossessed assets — 1,676 3,367 1,767 2,052 Total nonperforming assets $ 12,261 $ 17,279 $ 15,771 $ 6,367 $ 7,515 Ratio of nonaccrual loans to total loans 0.35 % 0.48 % 0.47 % 0.50 % 0.73 % Ratio of nonperforming loans to total loans 0.39 % 0.75 % 0.80 % 0.57 % 0.79 % Ratio of nonperforming loans to total assets 0.32 % 0.62 % 0.66 % 0.50 % 0.65 % Ratio of nonperforming assets to total assets 0.32 % 0.69 % 0.84 % 0.69 % 0.89 % Ratio of nonperforming loans to total loans plus OREO 0.39 % 0.75 % 0.80 % 0.57 % 0.79 % Ratio of allowance for loan losses to nonaccrual loans 276.85 % 192.37 % 165.07 % 199.19 % 137.33 % (1) Restructured loans-nonaccrual are included in nonaccrual loans.

Generally, loans are placed on nonaccrual status when they become more than 90 days past due and/or collection of principal or interest is in doubt. 54 The following table presents information regarding nonperforming assets at the dates indicated: As of December 31, (Dollars in thousands) 2023 2022 Nonaccrual loans (1) $ 16,649 $ 10,963 Loans > 90 days and still accruing 670 518 Restructured loan—accruing — 780 Total nonperforming loans $ 17,319 $ 12,261 Other real estate owned and repossessed assets — — Total nonperforming assets $ 17,319 $ 12,261 Ratio of nonaccrual loans to total loans 0.46 % 0.35 % Ratio of nonperforming loans to total loans 0.48 % 0.39 % Ratio of nonperforming loans to total assets 0.39 % 0.32 % Ratio of nonperforming assets to total assets 0.39 % 0.32 % Ratio of nonperforming loans to total loans plus OREO 0.48 % 0.39 % Ratio of allowance for credit losses to nonaccrual loans 222.37 % 276.85 % (1) Restructured loans-nonaccrual are included in nonaccrual loans.

The increase in loans was primarily related to construction and development real estate loans, commercial real estate loans, and commercial and industrial loans. Total loans as a percentage of deposits were 96.0% and 96.6% as of December 31, 53 2022 and 2021, respectively.

Commercial and industrial loans, construction and development real estate loans, and commercial real estate loans accounted for most of the loan growth for the year ended December 31, 2023. Total loans as a percentage of deposits were 95.7% and 96.0% as of December 31, 2023 and 2022, respectively.

Year ended December 31, 2021 The increase in noninterest income of $2.3 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, was primarily due to an increase in BOLI income of $745,000 related to additional BOLI purchased in the second quarter of 2022, an increase of $439,000 in derivative related fee income, and an increase of $364,000 from gains on the sales of guaranteed portion of SBA loans.

Year ended December 31, 2022 The increase in noninterest income of $982,000 for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to increases in service charges and BOLI and Small Business Investment Company income offset by decreases in gains recognized on the sales of the guaranteed portion of SBA loans and derivative related fee income.

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Item 7. Management's Discussion & Analysis

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