Southern States Bancshares, Inc. Announces First Quarter 2024 Financial Results

First Quarter 2024 Performance and Operational Highlights

  • Net income of $8.1 million, or $0.90 per diluted share
  • Core net income(1)of $8.1 million, or $0.90 per diluted share(1)
  • Net interest income of $20.8 million, an increase of $435,000 from the prior quarter
  • Net interest margin (“NIM”) of 3.59%, down 10 basis points from the prior quarter
  • NIM of 3.60% on a fully-taxable equivalent basis (“NIM – FTE”)(1)
  • Return on average assets (“ROAA”) of 1.33%; return on average stockholders’ equity (“ROAE”) of 14.87%; and return on average tangible common equity (“ROATCE”)(1)of 16.17%
  • Core ROAA(1)of 1.34%; and core ROATCE(1)of 16.19%
  • Efficiency ratio of 46.90%
  • Linked-quarter loan growth of 17.2% annualized
  • Linked-quarter total deposits grew 18.3% annualized
  • Linked-quarter total deposits, excluding brokered deposits, grew 7.1% annualized

(1) See “Reconciliation of Non-GAAP Financial Measures” below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

ANNISTON, Ala., April 22, 2024 (GLOBE NEWSWIRE) — Southern States Bancshares, Inc. (NASDAQ: SSBK) (“Southern States” or the “Company”), the holding company for Southern States Bank, an Alabama state-chartered commercial bank (the “Bank”), today reported net income of $8.1 million, or $0.90 diluted earnings per share, for the first quarter of 2024. This compares to net income of $8.9 million, or $0.99 diluted earnings per share, for the fourth quarter of 2023, and net income of $7.7 million, or $0.85 diluted earnings per share, for the first quarter of 2023. The Company reported core net income of $8.1 million, or $0.90 diluted core earnings per share, for the first quarter of 2024. This compares to core net income of $7.3 million, or $0.81 diluted core earnings per share, for the fourth quarter of 2023, and core net income of $7.3 million, or $0.80 diluted core earnings per share, for the first quarter of 2023 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary
Mark Chambers, Chief Executive Officer and President of Southern States, said, “We built on our momentum in 2023 and continued strong lending activity in the first quarter, selectively identifying compelling opportunities while carefully managing risk and maintaining solid credit quality.”
 
“We grew our total loans by 17.2% annualized from the prior quarter, while our non-performing loans as a percentage of the total portfolio was just 0.18%. Our portfolio is in excellent shape. In addition to loan growth, we grew total non-brokered deposits by 7.1% annualized, and net interest income expanded by 2.1% as we benefited from higher yields on earning assets. While funding expenses remained elevated amid the higher-for-longer interest rate environment, resulting in continued pressure on our net interest margin, the rate of cost increases leveled off during the first quarter, and our NIM remained healthy at 3.59%.”
 
“With liquidity and capital levels, Southern States is well well-positioned to drive further growth across our footprint, which includes economically dynamic markets throughout Alabama and Georgia. Importantly, our previously announced acquisition of CBB Bancorp, the holding company for Century Bank of Georgia, will further fortify our deposit base and provide an excellent platform for loan growth in new markets. It gives us added confidence in our ability to deliver long-term value for our shareholders.”
Net Interest Income and Net Interest Margin
  Three Months Ended   % Change March 31, 2024 vs.
March 31, 2024   December 31, 2023   March 31, 2023   December 31, 2023   March 31, 2023
  (Dollars in thousands)        
                   
Average interest-earning assets $ 2,336,369     $ 2,195,381     $ 1,947,957     6.4 %   19.9 %
Net interest income $ 20,839     $ 20,404     $ 19,546     2.1 %   6.6 %
Net interest margin   3.59 %     3.69 %     4.07 %   (10)bps   (48)bps
                   

Net interest income for the first quarter of 2024 was $20.8 million, an increase of 2.1% from $20.4 million for the fourth quarter of 2023. The increase was primarily driven by a higher yield on interest-earning assets resulting from growth at higher interest rates, which more than offset a higher cost of interest-bearing deposits due to both higher interest rates and competition.

Relative to the first quarter of 2023, net interest income increased $1.3 million, or 6.6%. The increase was substantially due to growth, which offset the decline in net interest margin.

Net interest margin for the first quarter of 2024 was 3.59%, compared to 3.69% for the fourth quarter of 2023. The decrease was primarily due to an increase in the cost of interest-bearing deposits, which was greater than the increase in the yield on interest-earning assets.

Relative to the first quarter of 2023, net interest margin decreased from 4.07%. The decrease was primarily the result of the rapid increase in interest rates, which accelerated the cost of interest-bearing liabilities at a greater pace than the yield received on interest-earning assets. A shift from noninterest-bearing deposits into interest-bearing deposits also had a negative impact on net interest margin.

Noninterest Income
  Three Months Ended   % Change March 31, 2024 vs.
March 31, 2024   December 31, 2023   March 31, 2023   December 31, 2023   March 31, 2023
  (Dollars in thousands)        
                   
Service charges on deposit accounts $ 463     $ 441   $ 450     5.0 %   2.9 %
Swap fees   15       70     (4 )   (78.6)%   (475.0)%
SBA/USDA fees   64       70     134     (8.6)%   (52.2)%
Mortgage origination fees   96       87     100     10.3 %   (4.0)%
Net (loss) gain on securities   (12 )     98     514     (112.2)%   (102.3)%
Other operating income   642       2,352     592     (72.7)%   8.4 %
Total noninterest income $ 1,268     $ 3,118   $ 1,786     (59.3)%   (29.0)%
                   

Noninterest income for the first quarter of 2024 was $1.3 million, a decrease of 59.3% from $3.1 million for the fourth quarter of 2023. The fourth quarter of 2023 included a $1.9 million fee related to the early payoff of a $12.0 million purchased loan. As this was unusually large and atypical for the Bank, it was recorded as noninterest income instead of interest income, which would have impacted the net interest margin.

Relative to the first quarter of 2023, noninterest income decreased 29.0% from $1.8 million. The decrease was primarily due to a realized net loss on securities during the first quarter of 2024 compared to a net gain on securities during the first quarter of 2023.

Noninterest Expense
  Three Months Ended   % Change March 31, 2024 vs.
March 31, 2024   December 31, 2023   March 31, 2023   December 31, 2023   March 31, 2023
  (Dollars in thousands)        
                   
Salaries and employee benefits $ 6,231   $ 5,739   $ 6,311   8.6 %   (1.3)%
Equipment and occupancy expenses   689     681     683   1.2 %   0.9 %
Data processing fees   643     639     593   0.6 %   8.4 %
Regulatory assessments   360     355     342   1.4 %   5.3 %
Other operating expenses   2,452     2,303     2,229   6.5 %   10.0 %
Total noninterest expenses $ 10,375   $ 9,717   $ 10,158   6.8 %   2.1 %
                   

Noninterest expense for the first quarter of 2024 was $10.4 million, an increase of 6.8% from $9.7 million for the fourth quarter of 2023. The increase was primarily due to an increase in salaries and benefits, substantially as a result of higher payroll taxes brought about by incentive expense paid during the first quarter of 2024. In addition, other operating expense increased primarily as a result of the recognition of a $49,000 provision for credit losses on unfunded loan commitments during the first quarter of 2024, compared to a $334,000 credit for credit losses on unfunded loan commitments during the fourth quarter of 2023. These increases were partially offset by net forgery/fraud recoveries and a decrease in legal fees incurred during the first quarter of 2024.

Relative to the first quarter of 2023, noninterest expense increased 2.1% from $10.2 million. The increase was primarily attributable to increases in other operating expense, including marginal increases in insured deposit program expense, provision for credit losses on unfunded commitments and expense associated with a new market tax credit.

Loans and Credit Quality
  Three Months Ended   % Change March 31, 2024 vs.
March 31, 2024   December 31, 2023   March 31, 2023   December 31, 2023   March 31, 2023
(Dollars in thousands)        
                   
Gross loans $ 1,971,396     $ 1,890,677     $ 1,650,929     4.3 %   19.4 %
Unearned income   (6,247 )     (6,169 )     (5,614 )   1.3 %   11.3 %
Loans, net of unearned income (“Loans”)   1,965,149       1,884,508       1,645,315     4.3 %   19.4 %
Average loans, net of unearned (“Average loans”) $ 1,916,288     $ 1,814,484     $ 1,609,564     5.6 %   19.1 %
                   
Nonperforming loans (“NPL”) $ 3,446     $ 1,177     $ 1,646     192.8 %   109.4 %
Provision for credit losses $ 1,236     $ 2,579     $ 1,181     (52.1)%   4.7 %
Allowance for credit losses (“ACL”) $ 25,144     $ 24,378     $ 19,855     3.1 %   26.6 %
Net charge-offs $ 470     $ 382     $ 197     23.0 %   138.6 %
NPL to gross loans   0.17 %     0.06 %     0.10 %        
Net charge-offs to average loans(1)   0.10 %     0.08 %     0.05 %        
ACL to loans   1.28 %     1.29 %     1.21 %        
                   
(1) Ratio is annualized.                  
                   

Loans, net of unearned income, were $2.0 billion at March 31, 2024, up $80.6 million from December 31, 2023 and up $319.8 million from March 31, 2023. The linked-quarter and year-over-year increases in loans were primarily attributable to new business growth across our footprint.

Nonperforming loans totaled $3.4 million, or 0.17% of gross loans, at March 31, 2024, compared with $1.2 million, or 0.06% of gross loans, at December 31, 2023, and $1.6 million, or 0.10% of gross loans, at March 31, 2023. The $2.3 million net increase in nonperforming loans in the first quarter was primarily attributable to one significant commercial real estate loan and one significant commercial and industrial loan each being placed on nonaccrual status. The $1.8 million net increase in nonperforming loans from March 31, 2023 was primarily attributable to the two significant aforementioned loans. These increases were partially offset by one significant commercial real estate loan being paid off.

The Company recorded a provision for credit losses of $1.2 million for the first quarter of 2024, compared to $2.6 million for the fourth quarter of 2023. Provision in the first quarter of 2024 was based on loan growth, qualitative economic factors and individually analyzed loans.

Net charge-offs for the first quarter of 2024 were $470,000, or 0.10% of average loans on an annualized basis, compared to net charge-offs of $382,000, or 0.08% of average loans on an annualized basis, for the fourth quarter of 2023, and net charge-offs of $197,000, or 0.05% of average loans on an annualized basis, for the first quarter of 2023.

The Company’s allowance for credit losses was 1.28% of total loans and 729.66% of nonperforming loans at March 31, 2024, compared with 1.29% of total loans and 2071.20% of nonperforming loans at December 31, 2023. Allowance for credit losses on unfunded commitments was $1.3 million at March 31, 2024.

  Three Months Ended   % Change March 31, 2024 vs.
March 31, 2024   December 31, 2023   March 31, 2023   December 31, 2023   March 31, 2023
  (Dollars in thousands)        
                   
Noninterest-bearing deposits $ 416,704     $ 437,959     $ 433,833     (4.9)%   (3.9)%
Interest-bearing deposits   1,693,094       1,580,230       1,355,658     7.1 %   24.9 %
Total deposits $ 2,109,798     $ 2,018,189     $ 1,789,491     4.5 %   17.9 %
                   
Uninsured deposits $ 610,122     $ 615,651     $ 567,709     (0.9)%   7.5 %
Uninsured deposits to total deposits   28.92 %     30.51 %     31.72 %        
Noninterest deposits to total deposits   19.75 %     21.70 %     24.24 %        
                   

Total deposits were $2.1 billion at March 31, 2024, up from $2.0 billion at December 31, 2023 and $1.8 billion at March 31, 2023. The $91.6 million increase in total deposits in the first quarter was primarily due to an increase of $112.9 million in interest-bearing deposits, which includes a $60.2 million increase in brokered deposits, partially offset by a $21.3 million decrease in noninterest-bearing deposits. Total brokered deposits were $291.0 million at March 31, 2024.

  March 31,
2024
  December 31,
2023
  March 31,
2023
Company   Bank   Company   Bank   Company   Bank
                     
Tier 1 capital ratio to average assets 8.79 %   11.67 %   8.99 %   12.01 %   8.89 %   12.19 %
Risk-based capital ratios:                      
Common equity tier 1 (“CET1”) capital ratio 9.39 %   12.47 %   9.20 %   12.30 %   9.00 %   12.34 %
Tier 1 capital ratio 9.39 %   12.47 %   9.20 %   12.30 %   9.00 %   12.34 %
Total capital ratio 14.42 %   13.63 %   14.29 %   13.45 %   14.41 %   13.38 %
                       

As of March 31, 2024, total stockholders’ equity was $222.9 million, up from $215.0 million at December 31, 2023. The increase of $7.9 million was substantially due to earnings growth.

About Southern States Bancshares, Inc.

Headquartered in Anniston, Alabama, Southern States Bancshares, Inc. is a bank holding company that operates primarily through its wholly-owned subsidiary, Southern States Bank. The Bank is a full service community banking institution, which offers an array of deposit, loan and other banking-related products and services to businesses and individuals in its communities. The Bank operates 13 branches in Alabama and Georgia and two loan production offices in Atlanta.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, which reflect our current expectations and beliefs with respect to, among other things, future events and our financial performance. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. This may be especially true given recent events and trends in the banking industry and the inflationary environment. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the dates made, we cannot give any assurance that such expectations will prove correct and actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 under the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.

These statements are often, but not always, made through the use of words or phrases such as “may,” “can,” “should,” “could,” “to be,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “likely,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “target,” “project,” “would” and “outlook,” or the negative version of those words or other similar words or phrases of a future or forward-looking nature. Forward-looking statements appear in a number of places in this press release and may include statements about our acquisition of Century Bank of Georgia, business strategy and prospects for growth, operations, ability to pay dividends, competition, regulation and general economic conditions.

Contact Information
SELECT FINANCIAL DATA
(Dollars in thousands, except share and per share amounts)
           
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
         
Results of Operations          
Interest income $ 38,736     $ 36,172     $ 28,699  
Interest expense   17,897       15,768       9,153  
Net interest income   20,839       20,404       19,546  
Provision for credit losses   1,236       2,579       1,181  
Net interest income after provision   19,603       17,825       18,365  
Noninterest income   1,268       3,118       1,786  
Noninterest expense   10,375       9,717       10,158  
Income tax expense   2,377       2,330       2,322  
Net income $ 8,119     $ 8,896     $ 7,671  
Core net income(1) $ 8,128     $ 7,289     $ 7,280  
           
Share and Per Share Data          
Shares issued and outstanding   8,894,794       8,841,349       8,723,763  
Weighted average shares outstanding:          
Basic   8,913,477       8,864,734       8,762,450  
Diluted   9,043,122       9,021,358       9,044,490  
Earnings per share:          
Basic $ 0.91     $ 1.00     $ 0.87  
Diluted   0.90       0.99       0.85  
Core – diluted(1)   0.90       0.81       0.80  
Book value per share   25.06       24.31       21.74  
Tangible book value per share(1)   23.07       22.30       19.68  
Cash dividends per common share   0.09       0.09       0.09  
           
Performance and Financial Ratios          
ROAA   1.33 %     1.53 %     1.51 %
ROAE   14.87 %     17.02 %     16.67 %
Core ROAA(1)   1.34 %     1.26 %     1.44 %
ROATCE(1)   16.17 %     18.62 %     18.45 %
Core ROATCE(1)   16.19 %     15.26 %     17.51 %
NIM   3.59 %     3.69 %     4.07 %
NIM – FTE(1)   3.60 %     3.71 %     4.09 %
Net interest spread   2.63 %     2.73 %     3.33 %
Yield on loans   7.06 %     6.91 %     6.38 %
Yield on interest-earning assets   6.67 %     6.54 %     5.97 %
Cost of interest-bearing liabilities   4.04 %     3.81 %     2.64 %
Cost of funds(2)   3.27 %     3.03 %     2.01 %
Cost of interest-bearing deposits   3.92 %     3.66 %     2.42 %
Cost of total deposits   3.12 %     2.86 %     1.81 %
Noninterest deposits to total deposits   19.75 %     21.70 %     24.24 %
Core deposits to total deposits   81.45 %     83.70 %     88.57 %
Uninsured deposits to total deposits   28.92 %     30.51 %     31.72 %
Total loans to total deposits   93.14 %     93.38 %     91.94 %
Efficiency ratio   46.90 %     41.48 %     48.79 %
Core efficiency ratio(1)   46.90 %     45.78 %     48.79 %
           

(1) See “Reconciliation of Non-GAAP Financial Measures” below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(2) Includes total interest-bearing liabilities and noninterest deposits.

SELECT FINANCIAL DATA
(Dollars in thousands)
           
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
         
Financial Condition (ending)          
Total loans $ 1,965,149     $ 1,884,508     $ 1,645,315  
Total securities   197,006       198,632       183,197  
Total assets   2,510,975       2,446,663       2,135,622  
Total noninterest bearing deposits   416,704       437,959       433,833  
Total core deposits(1)   1,718,333       1,689,266       1,584,915  
Total deposits   2,109,798       2,018,189       1,789,491  
Total borrowings   146,773       183,673       131,372  
Total liabilities   2,288,094       2,231,699       1,945,959  
Total shareholders’ equity   222,881       214,964       189,663  
           
Financial Condition (average)          
Total loans $ 1,916,288     $ 1,814,484     $ 1,609,564  
Total securities   208,954       209,074       192,348  
Total other interest-earning assets   211,127       171,823       146,045  
Total interest-bearing assets   2,336,369       2,195,381       1,947,957  
Total assets   2,447,278       2,303,398       2,057,005  
Total noninterest-bearing deposits   416,141       420,019       438,735  
Total interest-bearing deposits   1,633,307       1,502,348       1,300,632  
Total deposits   2,049,448       1,922,367       1,739,367  
Total borrowings   148,771       140,790       104,901  
Total interest-bearing liabilities   1,782,078       1,643,138       1,405,533  
Total shareholders’ equity   219,622       207,324       186,639  
           
Asset Quality          
Nonperforming loans $ 3,446     $ 1,177     $ 1,646  
Other real estate owned (“OREO”) $ 33     $ 33     $ 2,930  
Nonperforming assets (“NPA”) $ 3,479     $ 1,210     $ 4,576  
Net charge-offs to average loans(2)   0.10 %     0.08 %     0.05 %
Provision for credit losses to average loans(2)   0.26 %     0.56 %     0.30 %
ACL to loans   1.28 %     1.29 %     1.21 %
ACL to gross loans   1.28 %     1.29 %     1.20 %
ACL to NPL   729.66 %     2071.20 %     1206.26 %
NPL to loans   0.18 %     0.06 %     0.10 %
NPL to gross loans   0.17 %     0.06 %     0.10 %
NPA to gross loans and OREO   0.18 %     0.06 %     0.28 %
NPA to total assets   0.14 %     0.05 %     0.21 %
           
Regulatory and Other Capital Ratios          
Total shareholders’ equity to total assets   8.88 %     8.79 %     8.88 %
Tangible common equity to tangible assets(3)   8.23 %     8.12 %     8.11 %
Tier 1 capital ratio to average assets   8.79 %     8.99 %     8.89 %
Risk-based capital ratios:          
CET1 capital ratio   9.39 %     9.20 %     9.00 %
Tier 1 capital ratio   9.39 %     9.20 %     9.00 %
Total capital ratio   14.42 %     14.29 %     14.41 %
           

(1) We define core deposits as total deposits excluding brokered deposits and time deposits greater than $250,000.
(2) Ratio is annualized.
(3) See “Reconciliation of Non-GAAP Financial Measures” below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.

    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
           
  March 31, 2024   December 31, 2023   March 31, 2023
(Unaudited)   (Audited)   (Unaudited)
         
Assets          
Cash and due from banks $ 20,470     $ 19,710     $ 17,245  
Interest-bearing deposits in banks   129,917       134,846       99,541  
Federal funds sold   86,736       96,095       76,010  
Total cash and cash equivalents   237,123       250,651       192,796  
           
Securities available for sale, at fair value   177,379       179,000       163,550  
Securities held to maturity, at amortized cost   19,627       19,632       19,647  
Other equity securities, at fair value   3,638       3,649       3,806  
Restricted equity securities, at cost   5,108       5,684       3,862  
Loans held for sale   425       450       2,376  
           
Loans, net of unearned income   1,965,149       1,884,508       1,645,315  
Less allowance for credit losses   25,144       24,378       19,855  
Loans, net   1,940,005       1,860,130       1,625,460  
           
Premises and equipment, net   26,262       26,426       27,098  
Accrued interest receivable   9,561       8,711       7,077  
Bank owned life insurance   30,075       29,884       29,350  
Annuities   15,939       15,036       15,489  
Foreclosed assets   33       33       2,930  
Goodwill   16,862       16,862       16,862  
Core deposit intangible   817       899       1,144  
Other assets   28,121       29,616       24,175  
           
Total assets $ 2,510,975     $ 2,446,663     $ 2,135,622  
           
Liabilities and Stockholders’ Equity          
Liabilities:          
Deposits:          
Noninterest-bearing $ 416,704     $ 437,959     $ 433,833  
Interest-bearing   1,693,094       1,580,230       1,355,658  
Total deposits   2,109,798       2,018,189       1,789,491  
           
Other borrowings   7,997       26,994       (16 )
FHLB advances   52,000       70,000       45,000  
Subordinated notes   86,776       86,679       86,388  
Accrued interest payable   1,805       1,519       844  
Other liabilities   29,718       28,318       24,252  
           
Total liabilities   2,288,094       2,231,699       1,945,959  
           
Stockholders’ equity:          
Common stock   44,746       44,479       43,798  
Capital surplus   79,282       78,361       77,053  
Retained earnings   109,838       102,523       80,642  
Accumulated other comprehensive loss   (8,401 )     (8,379 )     (9,846 )
Unvested restricted stock   (1,030 )     (466 )     (965 )
Vested restricted stock units   (1,554 )     (1,554 )     (1,019 )
           
Total stockholders’ equity   222,881       214,964       189,663  
           
Total liabilities and stockholders’ equity $ 2,510,975     $ 2,446,663     $ 2,135,622  
                       
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
           
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
(Unaudited)   (Unaudited)   (Unaudited)
Interest income:          
Loans, including fees $ 33,628     $ 31,613   $ 25,335  
Taxable securities   1,981       1,986     1,383  
Nontaxable securities   229       230     291  
Other interest and dividends   2,898       2,343     1,690  
Total interest income   38,736       36,172     28,699  
           
Interest expense:          
Deposits   15,906       13,869     7,768  
Other borrowings   1,991       1,899     1,385  
Total interest expense   17,897       15,768     9,153  
           
Net interest income   20,839       20,404     19,546  
Provision for credit losses   1,236       2,579     1,181  
Net interest income after provision for credit losses   19,603       17,825     18,365  
           
Noninterest income:          
Service charges on deposit accounts   463       441     450  
Swap fees   15       70     (4 )
SBA/USDA fees   64       70     134  
Mortgage origination fees   96       87     100  
Net (loss) gain on securities   (12 )     98     514  
Other operating income   642       2,352     592  
Total noninterest income   1,268       3,118     1,786  
           
Noninterest expenses:          
Salaries and employee benefits   6,231       5,739     6,311  
Equipment and occupancy expenses   689       681     683  
Data processing fees   643       639     593  
Regulatory assessments   360       355     342  
Other operating expenses   2,452       2,303     2,229  
Total noninterest expenses   10,375       9,717     10,158  
           
Income before income taxes   10,496       11,226     9,993  
           
Income tax expense   2,377       2,330     2,322  
           
Net income $ 8,119     $ 8,896   $ 7,671  
           
Basic earnings per share $ 0.91     $ 1.00   $ 0.87  
           
Diluted earnings per share $ 0.90     $ 0.99   $ 0.85  
                     
AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
                                   
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
Average
Balance
  Interest   Yield/Rate   Average
Balance
  Interest   Yield/Rate   Average
Balance
  Interest   Yield/Rate
Assets:                                  
Interest-earning assets:                                  
Loans, net of unearned income(1) $ 1,916,288     $ 33,628   7.06 %   $ 1,814,484     $ 31,613   6.91 %   $ 1,609,564     $ 25,335   6.38 %
Taxable securities   163,586       1,981   4.87 %     163,537       1,986   4.82 %     139,516       1,383   4.02 %
Nontaxable securities   45,368       229   2.03 %     45,537       230   2.00 %     52,832       291   2.24 %
Other interest-earnings assets   211,127       2,898   5.52 %     171,823       2,343   5.41 %     146,045       1,690   4.69 %
Total interest-earning assets $ 2,336,369     $ 38,736   6.67 %   $ 2,195,381     $ 36,172   6.54 %   $ 1,947,957     $ 28,699   5.97 %
Allowance for credit losses   (24,313 )             (22,666 )             (20,493 )        
Noninterest-earning assets   135,222               130,683               129,541          
Total Assets $ 2,447,278             $ 2,303,398             $ 2,057,005          
                                   
Liabilities and Stockholders’ Equity:                                  
Interest-bearing liabilities:                                  
Interest-bearing transaction accounts   85,858       26   0.12 %     86,163       23   0.11 %     93,951       20   0.08 %
Savings and money market accounts   902,361       8,804   3.92 %     885,548       8,445   3.78 %     806,001       5,040   2.54 %
Time deposits   645,088       7,076   4.41 %     530,637       5,401   4.04 %     400,680       2,708   2.74 %
FHLB advances   53,121       655   4.96 %     52,076       645   4.92 %     18,578       159   3.47 %
Other borrowings   95,650       1,336   5.62 %     88,714       1,254   5.61 %     86,323       1,226   5.76 %
Total interest-bearing liabilities $ 1,782,078     $ 17,897   4.04 %   $ 1,643,138     $ 15,768   3.81 %   $ 1,405,533     $ 9,153   2.64 %
                                   
Noninterest-bearing liabilities:                                  
Noninterest-bearing deposits $ 416,141             $ 420,019             $ 438,735          
Other liabilities   29,437               32,917               26,098          
Total noninterest-bearing liabilities $ 445,578             $ 452,936             $ 464,833          
Stockholders’ Equity   219,622               207,324               186,639          
Total Liabilities and Stockholders’ Equity $ 2,447,278             $ 2,303,398             $ 2,057,005          
                                   
Net interest income     $ 20,839           $ 20,404           $ 19,546    
Net interest spread(2)         2.63 %           2.73 %           3.33 %
Net interest margin(3)         3.59 %           3.69 %           4.07 %
Net interest margin – FTE(4)(5)         3.60 %           3.71 %           4.09 %
Cost of funds(6)         3.27 %           3.03 %           2.01 %
Cost of interest-bearing deposits         3.92 %           3.66 %           2.42 %
Cost of total deposits         3.12 %           2.86 %           1.81 %
                                         

(1) Includes nonaccrual loans.
(2) Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest-bearing liabilities.
(3) Net interest margin is a ratio of net interest income to average interest earning assets for the same period.
(4) Net interest margin – FTE is a ratio of fully-taxable equivalent net interest income to average interest earning assets for the same period. It assumes a 24.0% tax rate.
(5) Refer to “Reconciliation of Non-GAAP Financial Measures”.
(6) Includes total interest-bearing liabilities and noninterest deposits.

LOAN COMPOSITION
 
(Dollars in thousands)
                       
  March 31, 2024   December 31, 2023   March 31, 2023
Amount   % of gross   Amount   % of gross   Amount   % of gross
                     
Real estate mortgages:                      
Construction and development $ 252,934     12.8 %   $ 242,960     12.9 %   $ 227,560     13.8 %
Residential   238,702     12.1 %     224,603     11.9 %     196,923     11.9 %
Commercial   1,182,634     60.0 %     1,144,867     60.5 %     948,251     57.5 %
Commercial and industrial   288,701     14.7 %     269,961     14.3 %     270,825     16.4 %
Consumer and other   8,425     0.4 %     8,286     0.4 %     7,370     0.4 %
Gross loans   1,971,396     100.0 %     1,890,677     100.0 %     1,650,929     100.0 %
Unearned income   (6,247 )         (6,169 )         (5,614 )    
Loans, net of unearned income   1,965,149           1,884,508           1,645,315      
Allowance for credit losses   (25,144 )         (24,378 )         (19,855 )    
Loans, net $ 1,940,005         $ 1,860,130         $ 1,625,460      
                                   
DEPOSIT COMPOSITION
(Dollars in thousands)
                       
  March 31, 2024   December 31, 2023   March 31, 2023
Amount   % of total   Amount   % of total   Amount   % of total
                     
                       
Noninterest-bearing transaction $ 416,704   19.7 %   $ 437,959   21.7 %   $ 433,833   24.2 %
Interest-bearing transaction   974,079   46.2 %     946,347   46.9 %     877,166   49.0 %
Savings   33,909   1.6 %     35,412   1.7 %     47,742   2.7 %
Time deposits, $250,000 and under   584,658   27.7 %     500,406   24.8 %     366,271   20.5 %
Time deposits, over $250,000   100,448   4.8 %     98,065   4.9 %     64,479   3.6 %
Total deposits $ 2,109,798   100.0 %   $ 2,018,189   100.0 %   $ 1,789,491   100.0 %
                                   
Nonperfoming Assets
(Dollars in thousands)
           
  March 31, 2024   December 31, 2023   March 31, 2023
         
         
Nonaccrual loans $ 3,446     $ 1,017     $ 1,646  
Past due loans 90 days or more and still accruing interest         160        
Total nonperforming loans   3,446       1,177       1,646  
OREO   33       33       2,930  
Total nonperforming assets $ 3,479     $ 1,210     $ 4,576  
           
Financial difficulty modification loans– nonaccrual(1)   675       907       805  
Financial difficulty modification loans – accruing   1,283       1,095       1,272  
Financial difficulty modification loans $ 1,958     $ 2,002     $ 2,077  
           
Allowance for credit losses $ 25,144     $ 24,378     $ 19,855  
Loans, net of unearned income at the end of the period $ 1,965,149     $ 1,884,508     $ 1,645,315  
Gross loans outstanding at the end of period $ 1,971,396     $ 1,890,677     $ 1,650,929  
Total assets $ 2,510,975     $ 2,446,663     $ 2,135,622  
Allowance for credit losses to nonperforming loans   729.66 %     2071.20 %     1206.26 %
Nonperforming loans to loans, net of unearned income   0.18 %     0.06 %     0.10 %
Nonperforming loans to gross loans   0.17 %     0.06 %     0.10 %
Nonperforming assets to gross loans and OREO   0.18 %     0.06 %     0.28 %
Nonperforming assets to total assets   0.14 %     0.05 %     0.21 %
           
Nonaccrual loans by category:          
Real estate mortgages:          
Construction & Development $     $     $ 64  
Residential Mortgages   246       252       267  
Commercial Real Estate Mortgages   2,422       765       1,263  
Commercial & Industrial   778             51  
Consumer and other               1  
Total $ 3,446     $ 1,017     $ 1,646  
                       

(1) Financial difficulty modification loans are excluded from nonperforming loans unless they otherwise meet the definition of nonaccrual loans or are more than 90 days past due.

Allowance for Credit Losses
(Dollars in thousands)
           
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
         
Average loans, net of unearned income $ 1,916,288     $ 1,814,484     $ 1,609,564  
Loans, net of unearned income   1,965,149       1,884,508       1,645,315  
Gross loans   1,971,396       1,890,677       1,650,929  
Allowance for credit losses at beginning of the period   24,378       22,181       20,156  
Impact of adoption of ASC 326               (1,285 )
Charge-offs:          
Construction and development                
Residential   11              
Commercial   27              
Commercial and industrial   442       424       218  
Consumer and other   15       2       6  
Total charge-offs   495       426       224  
Recoveries:          
Construction and development                
Residential   8       4       11  
Commercial                
Commercial and industrial   16       39       14  
Consumer and other   1       1       2  
Total recoveries   25       44       27  
Net charge-offs $ 470     $ 382     $ 197  
           
Provision for credit losses $ 1,236     $ 2,579     $ 1,181  
Balance at end of the period $ 25,144     $ 24,378     $ 19,855  
           
Allowance for credit losses on unfunded commitments at beginning of the period $ 1,239     $ 1,524     $  
Impact of adoption of ASC 326               1,285  
Provision (credit) for credit losses on unfunded commitments   49       (285 )      
Balance at the end of the period $ 1,288     $ 1,239     $ 1,285  
           
Allowance to loans, net of unearned income   1.28 %     1.29 %     1.21 %
Allowance to gross loans   1.28 %     1.29 %     1.20 %
Net charge-offs to average loans, net of unearned income(1)   0.10 %     0.08 %     0.05 %
Provision for credit losses to average loans, net of unearned income(1)   0.26 %     0.56 %     0.30 %

(1) Ratio is annualized.

Reconciliation of Non-GAAP Financial Measures

In addition to reporting GAAP results, the Company reports non-GAAP financial measures in this earnings release and other disclosures. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors to view our performance using the same tools that our management uses to evaluate our performance. While we believe that these non-GAAP financial measures are useful in evaluating our performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.

The following table provides a reconciliation of the non-GAAP financial measures to their most directly comparable financial measure presented in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts
           
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
         
Net income $ 8,119     $ 8,896     $ 7,671  
Add: Net OREO gains         (154 )      
Less: Provision fee received on early loan payoff         1,863        
Less: Net (loss) gain on securities   (12 )     98       514  
Less: Tax effect   3       (508 )     (123 )
Core net income $ 8,128     $ 7,289     $ 7,280  
Average assets $ 2,447,278     $ 2,303,398     $ 2,057,005  
Core return on average assets   1.34 %     1.26 %     1.44 %
           
Net income $ 8,119     $ 8,896     $ 7,671  
Add: Net OREO gains         (154 )      
Add: Provision for credit losses   1,236       2,579       1,181  
Less: Provision fee received on early loan payoff         1,863        
Less: Net (loss) gain on securities   (12 )     98       514  
Add: Income taxes   2,377       2,330       2,322  
Pretax pre-provision core net income $ 11,744     $ 11,690     $ 10,660  
Average assets $ 2,447,278     $ 2,303,398     $ 2,057,005  
Pretax pre-provision core return on average assets   1.93 %     2.01 %     2.10 %
           
Net interest income $ 20,839     $ 20,404     $ 19,546  
Add: Fully-taxable equivalent adjustments(1)   73       99       85  
Net interest income – FTE $ 20,912     $ 20,503     $ 19,631  
           
Net interest margin   3.59 %     3.69 %     4.07 %
Effect of fully-taxable equivalent adjustments(1)   0.01 %     0.02 %     0.02 %
Net interest margin – FTE   3.60 %     3.71 %     4.09 %
           
Total stockholders’ equity $ 222,881     $ 214,964     $ 189,663  
Less: Intangible assets   17,679       17,761       18,006  
Tangible common equity $ 205,202     $ 197,203     $ 171,657  
           
(1) Assumes a 24.0% tax rate.
           
           
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts
           
  Three Months Ended
March 31, 2024   December 31, 2023   March 31, 2023
         
Core net income $ 8,128     $ 7,289     $ 7,280  
Diluted weighted average shares outstanding   9,043,122       9,021,358       9,044,490  
Diluted core earnings per share $ 0.90     $ 0.81     $ 0.80  
           
Common shares outstanding at year or period end   8,894,794       8,841,349       8,723,763  
Tangible book value per share $ 23.07     $ 22.30     $ 19.68  
           
Total assets at end of period $ 2,510,975     $ 2,446,663     $ 2,135,622  
Less: Intangible assets   17,679       17,761       18,006  
Adjusted assets at end of period $ 2,493,296     $ 2,428,902     $ 2,117,616  
Tangible common equity to tangible assets   8.23 %     8.12 %     8.11 %
           
Total average shareholders equity $ 219,622     $ 207,324     $ 186,639  
Less: Average intangible assets   17,730       17,809       18,055  
Average tangible common equity $ 201,892     $ 189,515     $ 168,584  
Net income to common shareholders $ 8,119     $ 8,896     $ 7,671  
Return on average tangible common equity   16.17 %     18.62 %     18.45 %
Average tangible common equity $ 201,892     $ 189,515     $ 168,584  
Core net income $ 8,128     $ 7,289     $ 7,280  
Core return on average tangible common equity   16.19 %     15.26 %     17.51 %
           
Net interest income $ 20,839     $ 20,404     $ 19,546  
Add: Noninterest income   1,268       3,118       1,786  
Less: Provision fee received on early loan payoff         1,863        
Less: Net (loss) gain on securities   (12 )     98       514  
Operating revenue $ 22,119     $ 21,561     $ 20,818  
           
Expenses:          
Total noninterest expense $ 10,375     $ 9,717     $ 10,158  
Less: Net OREO gains         (154 )      
Adjusted noninterest expenses $ 10,375     $ 9,871     $ 10,158  
Core efficiency ratio   46.90 %     45.78 %     48.79 %


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