Southern States Bancshares, Inc. Announces Fourth Quarter 2022 Financial Results

Fourth Quarter 2022 Performance and Operational Highlights

Net income of $10.6 million, or $1.18 per diluted share
Core net income⁽¹⁾ of $8.1 million, or $0.90 per diluted share⁽¹⁾
Net interest income of $20.9 million, an increase of $1.4 million from the prior quarter
Net interest margin (“NIM”) of
4.38%
, up
23
basis points from the prior quarter
NIM of 4.39% on a fully-taxable equivalent basis (“NIM – FTE”)⁽¹⁾
Return on average assets (“ROAA”) of
2.11%
; return on average stockholders’ equity (“ROAE”) of
23.77%
; and return on average tangible common equity (“ROATCE”)
⁽¹⁾
of
26.49%
Core ROAA⁽¹⁾ of 1.61%; and core ROATCE⁽¹⁾ of 20.21%
Efficiency ratio of 40.81%, an improvement from 48.94% for the prior quarter
Linked-quarter loan growth was 18.1% annualized⁽²⁾
Linked-quarter deposit growth was 4.6% annualized⁽²⁾
Completed the sale of two branches resulting in a $2.4 million net gain

^{(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) The sale of two branches on October 1, 2022 resulted in a $7.3 million reduction in loans and a $66.0 million reduction in deposits. The growth percentages are net of the accounts sold.}

ANNISTON, Ala., Jan. 23, 2023 (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 $10.6 million, or $1.18 diluted earnings per share, for the fourth quarter of 2022. This compares to net income of $6.7 million, or $0.75 diluted earnings per share, for the third quarter of 2022, and net income of $4.1 million, or $0.44 diluted earnings per share, for the fourth quarter of 2021. The Company reported core net income of $8.1 million, or $0.90 diluted core earnings per share, for the fourth quarter of 2022. This compares to core net income of $6.8 million, or $0.77 diluted core earnings per share, for the third quarter of 2022, and core net income of $4.3 million, or $0.47 diluted core earnings per share, for the fourth quarter of 2021 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary

Stephen Whatley, Chairman and Chief Executive Officer of Southern States, said, “We are very pleased with our fourth-quarter and full-year results. Our talented bankers identified compelling opportunities throughout 2022, driving strong new business development. At the same time, we maintained underwriting discipline and excellent credit quality.”

“We grew loans by 18.1% annualized in the fourth quarter and 27.7% for the full year, culminating a year of robust production across our economically dynamic markets. This growth, combined with an increased net interest margin, fueled the expansion of our fourth-quarter net interest income, which increased by 7.5% from the prior quarter and by 48.2% from the fourth quarter of 2021.”

Mr. Whatley continued. “While our markets are healthy and our clients are cautiously optimistic, we are mindful of the slowing economic environment heading into 2023 and the lagging impact of rising interest rates on deposit costs. Our long-term commitment to prudent, selective lending and proactive expense management give us confidence in our ability to navigate the changing landscape and continue to drive strong risk-adjusted returns for our shareholders.”

“To that end, during the fourth quarter, we completed the sale of two branches as part of an ongoing effort to optimize our physical footprint. The branch sales resulted in a net gain of $2.4 million.”

Net Interest Income and Net Interest Margin

	Three Months Ended									% Change December 31, 2022 vs.
	December 31, 2022			September 30, 2022			December 31, 2021			September 30, 2022		December 31, 2021
	(Dollars in thousands)

Average interest-earning assets	$	1,893,069		$	1,859,104		$	1,519,490		1.8	%	24.6	%
Net interest income	$	20,884		$	19,435		$	14,096		7.5	%	48.2	%
Net interest margin		4.38	%		4.15	%		3.68	%	23	bps	70	bps

Net interest income for the fourth quarter of 2022 was $20.9 million, an increase of 7.5% from $19.4 million for the third quarter of 2022. The increase was primarily attributable to growth, accompanied by an increase in net interest margin.

Relative to the fourth quarter of 2021, net interest income increased $6.8 million, or 48.2%. The increase was substantially the result of growth, accompanied by an increase in net interest margin.

Net interest margin for the fourth quarter of 2022 was 4.38%, compared to 4.15% for the third quarter of 2022. The increase was primarily due to the Company’s asset sensitive balance sheet as rates increased.

Relative to the fourth quarter of 2021, net interest margin increased from 3.68%. The increase was primarily due to the Company’s asset sensitive balance sheet as rates increased, coupled with the deployment of excess liquidity.

Noninterest Income

	Three Months Ended									% Change December 31, 2022 vs.
	December 31, 2022			September 30, 2022			December 31, 2021			September 30, 2022		December 31, 2021
	(Dollars in thousands)

Service charges on deposit accounts	$	431		$	508		$	428		(15.2	)%	0.7	%
Swap fees		2			11			(6	)	(81.8	)%	(133.3	)%
SBA/USDA fees		70			95			533		(26.3	)%	(86.9	)%
Mortgage origination fees		98			218			269		(55.0	)%	(63.6	)%
Net gain (loss) on securities		(86	)		(143	)		(40	)	(39.9	)%	115.0	%
Other operating income		4,088			650			567		528.9	%	621.0	%
Total noninterest income	$	4,603		$	1,339		$	1,751		243.8	%	162.9	%

Noninterest income for the fourth quarter of 2022 was $4.6 million, an increase of 243.8% from $1.3 million for the third quarter of 2022. The fourth quarter 2022 results included a $2.6 million gain on the sale of two branches and a bank owned life insurance (“BOLI”) benefit claim of $774,000. This decrease was partially offset by a decrease in mortgage fees.

Relative to the fourth quarter of 2021, noninterest income increased 162.9% from $1.8 million. The fourth quarter 2022 results included a $2.6 million gain on the sale of two branches and a BOLI benefit claim of $774,000. This increase was partially offset by a decrease in SBA/USDA fees and mortgage fees during the fourth quarter of 2022.

Noninterest Expense

	Three Months Ended						% Change December 31, 2022 vs.
	December 31, 2022		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
	(Dollars in thousands)

Salaries and employee benefits	$	6,738	$	6,152	$	5,563	9.5	%	21.1	%
Equipment and occupancy expenses		730		764		943	(4.5	)%	(22.6	)%
Data processing fees		711		599		563	18.7	%	26.3	%
Regulatory assessments		165		235		263	(29.8	)%	(37.3	)%
Other operating expenses		2,092		2,487		2,280	(15.9	)%	(8.2	)%
Total noninterest expenses	$	10,436	$	10,237	$	9,612	1.9	%	8.6	%

Noninterest expense for the fourth quarter of 2022 was $10.4 million, an increase of 1.9% from $10.2 million for the third quarter of 2022. The increase was primarily attributable to an increase in salaries and benefits as a result of expense related to the issuance of restricted stock units in a deferred compensation plan. Also included in the fourth quarter of 2022 was $200,000 in expenses associated with the sale of the branches. The increase was partially offset by a decrease in fraud losses as a portion was recovered in the fourth quarter of 2022.

Relative to the fourth quarter of 2021, noninterest expense increased 8.6% from $9.6 million. The increase was primarily attributable to an increase in salaries and benefits as a result of additional incentive accruals based on operating results along with expense related to the issuance of restricted stock units in a deferred compensation plan.

Loans and Credit Quality

	Three Months Ended									% Change December 31, 2022 vs.
	December 31, 2022			September 30, 2022			December 31, 2021			September 30, 2022		December 31, 2021
	(Dollars in thousands)

Core loans	$	1,592,707		$	1,530,129		$	1,244,914		4.1	%	27.9	%
PPP loans		—			—			9,203		—	%	NM
Gross loans		1,592,707			1,530,129			1,254,117		4.1	%	27.0	%
Unearned income		(5,543	)		(5,139	)		(3,817	)	7.9	%	45.2	%
Loans, net of unearned income (“Loans”)	$	1,587,164		$	1,524,990		$	1,250,300		4.1	%	26.9	%
Average loans, net of unearned (“Average loans”)	$	1,563,255		$	1,480,735		$	1,191,688		5.6	%	31.2	%

Nonperforming loans (“NPL”)	$	2,245		$	3,950		$	1,972		(43.2	)%	13.8	%
Provision for loan losses	$	1,938		$	1,663		$	732		16.5	%	164.8	%
Allowance for loan losses (“ALLL”)	$	20,156		$	18,423		$	14,844		9.4	%	35.8	%
Net charge-offs (recoveries)	$	205		$	47		$	(15	)	336.2	%	(1466.7	)%
NPL to gross loans		0.14	%		0.26	%		0.16	%
Net charge-offs (recoveries) to average loans⁽¹⁾		0.05	%		—	%		—	%
ALLL to loans		1.27	%		1.21	%		1.19	%

^{(1) Ratio is annualized.}
^{NM = Not meaningful}

Loans, net of unearned income were $1.6 billion at December 31, 2022, up $62.2 million from September 30, 2022 and up $336.9 million from December 31, 2021. The linked-quarter increase in loans was primarily attributable to growth across our footprint.

Nonperforming loans totaled $2.2 million, or 0.14% of gross loans, at December 31, 2022, compared with $4.0 million, or 0.26% of gross loans, at September 30, 2022, and $2.0 million, or 0.16% of gross loans, at December 31, 2021. The $1.7 million net decrease in nonperforming loans in the fourth quarter was primarily attributable to one commercial real estate loan that was moved back to accruing status. The $273,000 net increase in nonperforming loans from December 31, 2021 was primarily attributable to loans being added and removed from nonaccrual status, none of which were significant.

The Company recorded a provision for loan losses of $1.9 million for the fourth quarter of 2022, compared to $1.7 million for the third quarter of 2022. The provision was primarily due to changes in our qualitative economic factors.

Net charge-offs for the fourth quarter of 2022 were $205,000, or 0.05% of average loans, compared to net charge-offs of $47,000, or 0.00% of average loans, for the third quarter of 2022, and net recoveries of $15,000, or 0.00% of average loans, for the fourth quarter of 2021.

The Company’s allowance for loan losses was 1.27% of total loans and 897.82% of nonperforming loans at December 31, 2022, compared with 1.21% of total loans and 466.41% of nonperforming loans at September 30, 2022.

Deposits

	Three Months Ended						% Change December 31, 2022 vs.
	December 31, 2022		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
	(Dollars in thousands)

Noninterest-bearing deposits	$	460,977	$	499,613	$	541,546	(7.7	)%	(14.9	)%
Interest-bearing deposits		1,259,766		1,267,479		1,014,905	(0.6	)%	24.1	%
Total deposits	$	1,720,743	$	1,767,092	$	1,556,451	(2.6	)%	10.6	%

Total deposits were $1.7 billion at December 31, 2022, compared with $1.8 billion at September 30, 2022 and $1.6 billion at December 31, 2021. The $46.3 million decrease in total deposits in the fourth quarter was substantially due to the sale of two branches in October, which resulted in a $66.0 million reduction in total deposits. Excluding the sale, total deposits had a net increase of $19.7 million due to a $43.7 million increase in interest-bearing account balances that more than offset a decrease of $24.0 million in noninterest-bearing deposits.

Capital

	December 31, 2022				September 30, 2022				December 31, 2021
	Company		Bank		Company		Bank		Company		Bank

Tier 1 capital ratio to average assets	8.82	%	12.17	%	8.44	%	11.49	%	9.74	%	10.44	%
Risk-based capital ratios:
Common equity tier 1 (“CET1”) capital ratio	8.82	%	12.17	%	8.73	%	11.89	%	10.35	%	11.09	%
Tier 1 capital ratio	8.82	%	12.17	%	8.73	%	11.89	%	10.35	%	11.09	%
Total capital ratio	14.29	%	13.18	%	12.26	%	12.87	%	11.33	%	12.07	%

As of December 31, 2022, total stockholders’ equity was $181.7 million, compared with $170.3 million at September 30, 2022. The increase of $11.4 million was substantially due to strong 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 the inflationary environment, the COVID-19 pandemic and governmental responses. 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and in other SEC filings 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 business strategy and prospects for growth, operations, ability to pay dividends, competition, regulation and general economic conditions.

Contact Information

Lynn Joyce	Kevin Dobbs
(205) 820-8065	(310) 622-8245
[email protected]	[email protected]

SELECT FINANCIAL DATA
(In thousands, except share and per share amounts)

	Three Months Ended									Year Ended December 31,
	December 31, 2022			September 30, 2022			December 31, 2021				2022			2021

Results of Operations
Interest income	$	26,706		$	22,520		$	15,171		$	82,850		$	57,777
Interest expense		5,822			3,085			1,075			11,512			4,864
Net interest income		20,884			19,435			14,096			71,338			52,913
Provision for loan losses		1,938			1,663			732			5,605			2,982
Net interest income after provision		18,946			17,772			13,364			65,733			49,931
Noninterest income		4,603			1,339			1,751			8,677			10,803
Noninterest expense		10,436			10,237			9,612			39,614			36,435
Income tax expense⁽¹⁾		2,521			2,174			1,445			7,725			5,732
Net income	$	10,592		$	6,700		$	4,058		$	27,071		$	18,567
Core net income⁽²⁾	$	8,081		$	6,806		$	4,256		$	24,975		$	15,956

Share and Per Share Data
Shares issued and outstanding		8,706,920			8,705,920			9,012,857			8,706,920			9,012,857
Weighted average shares outstanding:
Basic		8,707,026			8,693,745			9,012,857			8,774,860			8,198,188
Diluted		8,932,585			8,871,116			9,125,872			8,949,669			8,316,536
Earnings per share:
Basic	$	1.22		$	0.77		$	0.45		$	3.08		$	2.26
Diluted	$	1.18		$	0.75		$	0.44		$	3.02		$	2.23
Core – diluted⁽²⁾	$	0.90		$	0.77		$	0.47		$	2.79		$	1.92
Book value per share	$	20.87		$	19.56		$	19.66		$	20.87		$	19.66
Tangible book value per share⁽²⁾	$	18.79		$	17.48		$	17.62		$	18.79		$	17.62
Cash dividends declared	$	0.09		$	0.09		$	0.09		$	0.36		$	0.36

Performance and Financial Ratios
ROAA		2.11	%		1.35	%		0.99	%		1.43	%		1.23	%
ROAE		23.77	%		15.42	%		9.15	%		15.55	%		11.80	%
Core ROAA⁽²⁾		1.61	%		1.37	%		1.04	%		1.32	%		1.06	%
ROATCE⁽²⁾		26.49	%		17.24	%		10.22	%		17.37	%		13.38	%
Core ROATCE⁽²⁾		20.21	%		17.51	%		10.72	%		16.02	%		11.50	%
NIM		4.38	%		4.15	%		3.68	%		3.99	%		3.78	%
NIM – FTE⁽²⁾		4.39	%		4.17	%		3.70	%		4.01	%		3.80	%
Net interest spread		3.84	%		3.86	%		3.54	%		3.68	%		3.63	%
Yield on loans		6.05	%		5.37	%		4.75	%		5.27	%		4.89	%
Yield on interest-bearing assets		5.60	%		4.81	%		3.96	%		4.64	%		4.13	%
Cost of interest-bearing liabilities		1.76	%		0.95	%		0.42	%		0.96	%		0.50	%
Cost of funds⁽³⁾		1.29	%		0.69	%		0.30	%		0.68	%		0.36	%
Cost of interest-bearing deposits		1.52	%		0.82	%		0.39	%		0.79	%		0.47	%
Cost of total deposits		1.09	%		0.58	%		0.27	%		0.55	%		0.33	%
Noninterest deposits to total deposits		26.79	%		28.27	%		34.79	%		26.79	%		34.79	%
Total loans to total deposits		92.24	%		86.30	%		80.33	%		92.24	%		80.33	%
Efficiency ratio		40.81	%		48.94	%		60.50	%		49.12	%		57.13	%
Core efficiency ratio⁽²⁾		45.98	%		48.94	%		59.07	%		50.97	%		60.13	%

^{(1) Three months ended and year ended December 31, 2022 include a $540,000 investment tax credit.}

^{(2) See “Reconciliation of Non-GAAP Financial Measures” below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.}

^{(3) Includes total interest-bearing liabilities and noninterest deposits.}

SELECT FINANCIAL DATA
(In thousands)

	Three Months Ended									Year Ended December 31,
	December 31, 2022			September 30, 2022			December 31, 2021				2022			2021

Financial Condition (ending)
Total loans	$	1,587,164		$	1,524,990		$	1,250,300		$	1,587,164		$	1,250,300
Total securities		175,196			170,375			151,844			175,196			151,844
Total assets		2,044,866			2,052,725			1,782,592			2,044,866			1,782,592
Total noninterest bearing deposits		460,977			499,613			541,546			460,977			541,546
Total deposits		1,720,743			1,767,092			1,556,451			1,720,743			1,556,451
Total borrowings		117,295			93,020			38,448			117,295			38,448
Total liabilities		1,863,147			1,882,400			1,605,394			1,863,147			1,605,394
Total shareholders’ equity	$	181,719		$	170,325		$	177,198		$	181,719		$	177,198

Financial Condition (average)
Total loans	$	1,563,255		$	1,480,735		$	1,191,688		$	1,421,376		$	1,118,386
Total securities		188,765			185,670			140,201			178,755			122,425
Other interest-earning assets		141,049			192,699			187,601			187,263			158,243
Total interest-bearing assets		1,893,069			1,859,104			1,519,490			1,787,394			1,399,054
Total assets		1,994,087			1,966,556			1,628,804			1,893,044			1,510,114
Noninterest-bearing deposits		477,301			491,917			439,142			496,486			378,868
Interest-bearing deposits		1,216,492			1,207,797			965,457			1,127,637			922,870
Total deposits		1,693,793			1,699,714			1,404,599			1,624,123			1,301,738
Total borrowings		99,111			75,039			38,448			76,379			41,733
Total interest-bearing liabilities		1,315,603			1,282,836			1,003,905			1,204,016			964,603
Total shareholders’ equity	$	176,769		$	172,402		$	175,913		$	174,107		$	157,277

Asset Quality
Nonperforming loans	$	2,245		$	3,950		$	1,972		$	2,245		$	1,972
Other real estate owned (“OREO”)	$	2,930		$	2,930		$	2,930		$	2,930		$	2,930
Nonperforming assets (“NPA”)	$	5,175		$	6,880		$	4,902		$	5,175		$	4,902
Net charge-offs (recovery) to average loans⁽¹⁾		0.05	%		—	%		—	%		0.02	%		—	%
Provision for loan losses to average loans⁽¹⁾		0.49	%		0.45	%		0.24	%		0.39	%		0.27	%
ALLL to loans		1.27	%		1.21	%		1.19	%		1.27	%		1.19	%
ALLL to gross loans		1.27	%		1.20	%		1.18	%		1.27	%		1.18	%
ALLL to NPL		897.82	%		466.41	%		752.74	%		897.82	%		752.74	%
NPL to loans		0.14	%		0.26	%		0.16	%		0.14	%		0.16	%
NPL to gross loans		0.14	%		0.26	%		0.16	%		0.14	%		0.16	%
NPA to gross loans and OREO		0.32	%		0.45	%		0.39	%		0.32	%		0.39	%
NPA to total assets		0.25	%		0.34	%		0.27	%		0.25	%		0.27	%

Regulatory and Other Capital Ratios
Total shareholders’ equity to total assets		8.89	%		8.30	%		9.94	%		8.89	%		9.94	%
Tangible common equity to tangible assets⁽²⁾		8.07	%		7.48	%		9.00	%		8.07	%		9.00	%
Tier 1 capital ratio to average assets		8.82	%		8.44	%		9.74	%		8.82	%		9.74	%
Risk-based capital ratios:
CET1 capital ratio		8.82	%		8.73	%		10.35	%		8.82	%		10.35	%
Tier 1 capital ratio		8.82	%		8.73	%		10.35	%		8.82	%		10.35	%
Total capital ratio		14.29	%		12.26	%		11.33	%		14.29	%		11.33	%

^{(1) Ratio is annualized.}

^{(2) 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
(In thousands)

	December 31, 2022 (Unaudited)			September 30, 2022 (Unaudited)			December 31, 2021 (Audited)


Assets
Cash and due from banks	$	15,260		$	17,394		$	6,397
Interest-bearing deposits in banks		90,198			165,637			203,537
Federal funds sold		63,041			63,031			74,022
Total cash and cash equivalents		168,499			246,062			283,956

Securities available for sale, at fair value		155,544			150,718			132,172
Securities held to maturity, at amortized cost		19,652			19,657			19,672
Other equity securities, at fair value		5,243			5,694			9,232
Restricted equity securities, at cost		3,134			2,791			2,600
Loans held for sale		1,047			1,643			2,400

Loans, net of unearned income		1,587,164			1,524,990			1,250,300
Less allowance for loan losses		20,156			18,423			14,844
Loans, net		1,567,008			1,506,567			1,235,456

Premises and equipment, net		27,345			28,585			27,044
Accrued interest receivable		6,963			5,699			4,170
Bank owned life insurance		29,186			29,677			22,201
Annuities		15,478			15,564			12,888
Foreclosed assets		2,930			2,930			2,930
Goodwill		16,862			16,862			16,862
Core deposit intangible		1,226			1,302			1,500
Other assets		24,749			18,974			9,509

Total assets	$	2,044,866		$	2,052,725		$	1,782,592

Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	460,977		$	499,613		$	541,546
Interest-bearing		1,259,766			1,267,479			1,014,905
Total deposits		1,720,743			1,767,092			1,556,451

Other borrowings		(19	)		19,978			12,498
FHLB advances		31,000			26,000			25,950
Subordinated notes		86,314			47,042			—
Accrued interest payable		584			359			132
Other liabilities		24,525			21,929			10,363

Total liabilities		1,863,147			1,882,400			1,605,394

Stockholders’ equity:
Common stock		43,714			43,529			45,064
Capital surplus		76,785			75,835			80,640
Retained earnings		73,764			63,956			49,858
Accumulated other comprehensive income (loss)		(11,048	)		(12,403	)		2,113
Unvested restricted stock		(477	)		(592	)		(477	)
Vested restricted stock units		(1,019	)		—			—

Total stockholders’ equity		181,719			170,325			177,198

Total liabilities and stockholders’ equity	$	2,044,866		$	2,052,725		$	1,782,592

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)

	Three Months Ended									Year Ended December 31,
	December 31, 2022			September 30, 2022			December 31, 2021				2022			2021
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(Audited)
Interest income:
Loans, including fees	$	23,853		$	20,052		$	14,280		$	74,936		$	54,709
Taxable securities		1,206			1,010			459			3,622			1,593
Nontaxable securities		322			323			294			1,253			1,023
Other interest and dividends		1,325			1,135			138			3,039			452
Total interest income		26,706			22,520			15,171			82,850			57,777

Interest expense:
Deposits		4,655			2,489			955			8,906			4,310
Other borrowings		1,167			596			120			2,606			554
Total interest expense		5,822			3,085			1,075			11,512			4,864

Net interest income		20,884			19,435			14,096			71,338			52,913
Provision for loan losses		1,938			1,663			732			5,605			2,982
Net interest income after provision for loan losses		18,946			17,772			13,364			65,733			49,931

Noninterest income:
Service charges on deposit accounts		431			508			428			1,863			1,528
Swap fees		2			11			(6	)		49			931
SBA/USDA fees		70			95			533			646			3,968
Mortgage origination fees		98			218			269			815			1,465
Net gain (loss) on securities		(86	)		(143	)		(40	)		(632	)		(57	)
Other operating income		4,088			650			567			5,936			2,968
Total noninterest income		4,603			1,339			1,751			8,677			10,803

Noninterest expenses:
Salaries and employee benefits		6,738			6,152			5,563			24,597			21,667
Equipment and occupancy expenses		730			764			943			2,918			3,640
Data processing fees		711			599			563			2,444			2,128
Regulatory assessments		165			235			263			925			952
Other operating expenses		2,092			2,487			2,280			8,730			8,048
Total noninterest expenses		10,436			10,237			9,612			39,614			36,435

Income before income taxes		13,113			8,874			5,503			34,796			24,299

Income tax expense		2,521			2,174			1,445			7,725			5,732

Net income	$	10,592		$	6,700		$	4,058		$	27,071		$	18,567

Basic earnings per share	$	1.22		$	0.77		$	0.45		$	3.08		$	2.26

Diluted earnings per share	$	1.18		$	0.75		$	0.44		$	3.02		$	2.23

AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)

	Three Months Ended
	December 31, 2022							September 30, 2022							December 31, 2021
	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⁾	$	1,563,255		$	23,853	6.05	%	$	1,480,735		$	20,052	5.37	%	$	1,191,688		$	14,280	4.75	%
Taxable securities		132,222			1,206	3.62	%		128,932			1,010	3.11	%		86,292			459	2.11	%
Nontaxable securities		56,543			322	2.26	%		56,738			323	2.26	%		53,909			294	2.16	%
Other interest-earnings assets		141,049			1,325	3.73	%		192,699			1,135	2.34	%		187,601			138	0.29	%
Total interest-earning assets	$	1,893,069		$	26,706	5.60	%	$	1,859,104		$	22,520	4.81	%	$	1,519,490		$	15,171	3.96	%
Allowance for loan losses		(19,374	)						(17,250	)						(14,421	)
Noninterest-earning assets		120,392							124,702							123,735
Total Assets	$	1,994,087						$	1,966,556						$	1,628,804

Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts		98,978			22	0.09	%		114,517			26	0.09	%		101,863			25	0.10	%
Savings and money market accounts		794,692			3,126	1.56	%		811,349			1,644	0.80	%		599,948			625	0.41	%
Time deposits		322,822			1,507	1.85	%		281,931			819	1.15	%		263,646			305	0.46	%
FHLB advances		22,739			147	2.56	%		27,380			102	1.47	%		25,950			22	0.34	%
Other borrowings		76,372			1,020	5.30	%		47,659			494	4.12	%		12,498			98	3.11	%
Total interest-bearing liabilities	$	1,315,603		$	5,822	1.76	%	$	1,282,836		$	3,085	0.95	%	$	1,003,905		$	1,075	0.42	%

Noninterest-bearing liabilities:
Noninterest-bearing deposits	$	477,301						$	491,917						$	439,142
Other liabilities		24,414							19,401							9,844
Total noninterest-bearing liabilities	$	501,715						$	511,318						$	448,986
Stockholders’ Equity		176,769							172,402							175,913
Total Liabilities and Stockholders’ Equity	$	1,994,087						$	1,966,556						$	1,628,804

Net interest income				$	20,884						$	19,435						$	14,096
Net interest spread⁽²⁾						3.84	%						3.86	%						3.54	%
Net interest margin⁽³⁾						4.38	%						4.15	%						3.68	%
Net interest margin – FTE⁽⁴⁾⁽⁵⁾						4.39	%						4.17	%						3.70	%
Cost of funds⁽⁶⁾						1.29	%						0.69	%						0.30	%
Cost of interest-bearing deposits						1.52	%						0.82	%						0.39	%
Cost of total deposits						1.09	%						0.58	%						0.27	%

^{(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 for the three months ended December 31, 2022 and September 30, 2022 and a 23.5% tax rate for the three months ended December 31, 2021.}

^{(5)   Refer to “Reconciliation of Non-GAAP Financial Measures”.}

^{(6)   Includes total interest-bearing liabilities and noninterest deposits.}

AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)

	Year Ended December 31,
		2022							2021
	Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets:
Interest-earning assets:
Loans, net of unearned income⁽¹⁾	$	1,421,376		$	74,936	5.27	%	$	1,118,386		$	54,709	4.89	%
Taxable securities		122,500			3,622	2.96	%		77,281			1,593	2.06	%
Nontaxable securities		56,255			1,253	2.23	%		45,144			1,023	2.27	%
Other interest-earnings assets		187,263			3,039	1.62	%		158,243			452	0.29	%
Total interest-earning assets	$	1,787,394		$	82,850	4.64	%	$	1,399,054		$	57,777	4.13	%
Allowance for loan losses		(16,883	)						(13,276	)
Noninterest-earning assets		122,533							124,336
Total Assets	$	1,893,044						$	1,510,114

Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts		109,786			100	0.09	%		96,503			91	0.09	%
Savings and money market accounts		754,830			5,988	0.79	%		527,484			2,680	0.51	%
Time deposits		263,021			2,818	1.07	%		298,883			1,539	0.51	%
FHLB advances		25,264			291	1.15	%		30,636			143	0.47	%
Other borrowings		51,115			2,315	4.53	%		11,097			411	3.72	%
Total interest-bearing liabilities	$	1,204,016		$	11,512	0.96	%	$	964,603		$	4,864	0.50	%

Noninterest-bearing liabilities:
Noninterest-bearing deposits	$	496,486						$	378,868
Other liabilities		18,435							9,366
Total noninterest-bearing liabilities	$	514,921						$	388,234
Stockholders’ Equity		174,107							157,277
Total Liabilities and Stockholders’ Equity	$	1,893,044						$	1,510,114

Net interest income				$	71,338						$	52,913
Net interest spread⁽²⁾						3.68	%						3.63	%
Net interest margin⁽³⁾						3.99	%						3.78	%
Net interest margin – FTE⁽⁴⁾⁽⁵⁾						4.01	%						3.80	%
Cost of funds⁽⁶⁾						0.68	%						0.36	%
Cost of interest-bearing deposits						0.79	%						0.47	%
Cost of total deposits						0.55	%						0.33	%

^{(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 for the year ended ended December 31, 2022 and a 23.5% tax rate for the year ended December 31, 2021.}

^{(5)   Refer to “Reconciliation of Non-GAAP Financial Measures”.}

^{(6)   Includes total interest-bearing liabilities and noninterest deposits.}

LOAN COMPOSITION
(Dollars in thousands)

	December 31, 2022					September 30, 2022					December 31, 2021
	Amount			% of gross		Amount			% of gross		Amount			% of gross

Real estate mortgages:
Construction and development	$	255,736		16.1	%	$	222,159		14.5	%	$	174,480		13.9	%
Residential		167,891		10.5	%		164,296		10.7	%		147,490		11.8	%
Commercial		904,872		56.8	%		889,942		58.2	%		716,541		57.1	%
Commercial and industrial		256,553		16.1	%		243,577		15.9	%		197,694		15.8	%
PPP loans		—		—	%		—		—	%		9,203		0.7	%
Consumer and other		7,655		0.5	%		10,155		0.7	%		8,709		0.7	%
Gross loans		1,592,707		100.0	%		1,530,129		100.0	%		1,254,117		100.0	%
Unearned income		(5,543	)				(5,139	)				(3,817	)
Loans, net of unearned income		1,587,164					1,524,990					1,250,300
Allowance for loan losses		(20,156	)				(18,423	)				(14,844	)
Loans, net	$	1,567,008				$	1,506,567				$	1,235,456

DEPOSIT COMPOSITION
(Dollars in thousands)

	December 31, 2022				September 30, 2022				December 31, 2021
	Amount		% of total		Amount		% of total		Amount		% of total


Noninterest-bearing transaction	$	460,977	26.8	%	$	499,613	28.3	%	$	541,546	34.8	%
Interest-bearing transaction		837,127	48.6	%		855,350	48.4	%		704,326	45.3	%
Savings		49,235	2.9	%		78,687	4.5	%		56,715	3.6	%
Time deposits, $250,000 and under		307,145	17.8	%		266,491	15.0	%		224,556	14.4	%
Time deposits, over $250,000		66,259	3.9	%		66,951	3.8	%		29,308	1.9	%
Total deposits	$	1,720,743	100.0	%	$	1,767,092	100.0	%	$	1,556,451	100.0	%

Nonperfoming Assets
(Dollars in thousands)

	December 31, 2022			September 30, 2022			December 31, 2021


Nonaccrual loans	$	2,245		$	3,950		$	1,478
Past due loans 90 days or more and still accruing interest		—			—			494
Total nonperforming loans		2,245			3,950			1,972
OREO		2,930			2,930			2,930
Total nonperforming assets	$	5,175		$	6,880		$	4,902

Troubled debt restructured loans – nonaccrual⁽¹⁾		832			1,011			940
Troubled debt restructured loans – accruing		1,292			1,307			1,072
Total troubled debt restructured loans	$	2,124		$	2,318		$	2,012

Allowance for loan losses	$	20,156		$	18,423		$	14,844
Loans, net of unearned income at the end of the period	$	1,587,164		$	1,524,990		$	1,250,300
Gross loans outstanding at the end of period	$	1,592,707		$	1,530,129		$	1,254,117
Total assets	$	2,044,866		$	2,052,725		$	1,782,592
Allowance for loan losses to nonperforming loans		897.82	%		466.41	%		752.74	%
Nonperforming loans to loans, net of unearned income		0.14	%		0.26	%		0.16	%
Nonperforming loans to gross loans		0.14	%		0.26	%		0.16	%
Nonperforming assets to gross loans and OREO		0.32	%		0.45	%		0.39	%
Nonperforming assets to total assets		0.25	%		0.34	%		0.27	%

Nonaccrual loans by category:
Real estate mortgages:
Construction & Development	$	67		$	70		$	346
Residential Mortgages		565			550			167
Commercial Real Estate Mortgages		1,278			2,888			674
Commercial & Industrial		312			434			285
Consumer and other		23			8			6
Total	$	2,245		$	3,950		$	1,478

^{(1) Troubled debt restructured 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 Loan Losses
(Dollars in thousands)

	Three Months Ended									Year Ended December 31,
	December 31, 2022			September 30, 2022			December 31, 2021				2022			2021

Average loans, net of unearned income	$	1,563,255		$	1,480,735		$	1,191,688		$	1,421,376		$	1,118,386
Loans, net of unearned income	$	1,587,164		$	1,524,990		$	1,250,300		$	1,587,164		$	1,250,300
Gross loans	$	1,592,707		$	1,530,129		$	1,254,117		$	1,592,707		$	1,254,117
Allowance for loan losses at beginning of the period	$	18,423		$	16,807		$	14,097		$	14,844		$	11,859
Charge-offs:
Construction and development		—			—			—			66			—
Residential		—			—			—			7			44
Commercial		—			—			—			—			—
Commercial and industrial		210			269			—			479			—
Consumer and other		18			1			—			26			2
Total charge-offs		228			270			—			578			46
Recoveries:
Construction and development		—			—			—			—			—
Residential		4			11			13			50			25
Commercial		—			—			—			—			—
Commercial and industrial		1			204			1			205			15
Consumer and other		18			8			1			30			9
Total recoveries		23			223			15			285			49
Net charge-offs (recoveries)	$	205		$	47		$	(15	)	$	293		$	(3	)

Provision for loan losses	$	1,938		$	1,663		$	732		$	5,605		$	2,982
Balance at end of period	$	20,156		$	18,423		$	14,844		$	20,156		$	14,844
Allowance to loans, net of unearned income		1.27	%		1.21	%		1.19	%		1.27	%		1.19	%
Allowance to gross loans		1.27	%		1.20	%		1.18	%		1.27	%		1.18	%
Net charge-offs (recoveries) to average loans, net of unearned income⁽¹⁾		0.05	%		—	%		—	%		0.02	%		—	%
Provision for loan losses to average loans, net of unearned income⁽¹⁾		0.49	%		0.45	%		0.24	%		0.39	%		0.27	%

^{(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									Year Ended December 31,
	December 31, 2022			September 30, 2022			December 31, 2021				2022			2021

Net income	$	10,592		$	6,700		$	4,058		$	27,071		$	18,567
Add: Net OREO gains		—			—			227			—			219
Less: Gain on sale of USDA loan		—			—			—			—			2,806
Less: Net gain on sale of branches		2,372			—			—			2,372			—
Less: BOLI benefit claim		774			—			—			774			742
Less: Loss on securities		(86	)		(143	)		(40	)		(632	)		(57	)
Less: Tax effect		(549	)		37			69			(418	)		(661	)
*Core net income*	$	*8,081*		$	*6,806*		$	*4,256*		$	*24,975*		$	*15,956*
Average assets	$	1,994,087		$	1,966,556		$	1,628,804		$	1,893,044		$	1,510,114
*Core return on average assets*		*1.61*	%		*1.37*	%		*1.04*	%		*1.32*	%		*1.06*	%

Net income	$	10,592		$	6,700		$	4,058		$	27,071		$	18,567
Add: Net OREO gains		—			—			227			—			219
Add: Provision		1,938			1,663			732			5,605			2,982
Less: Gain on sale of USDA loan		—			—			—			—			2,806
Less: Net gain on sale of branches		2,372			—			—			2,372			—
Less: BOLI benefit claim		774			—			—			774			742
Less: Loss on securities		(86	)		(143	)		(40	)		(632	)		(57	)
Add: Income taxes		2,521			2,174			1,445			7,725			5,732
*Pretax pre-provision core net income*	$	*11,991*		$	*10,680*		$	*6,502*		$	*37,887*		$	*24,009*
Average assets	$	1,994,087		$	1,966,556		$	1,628,804		$	1,893,044		$	1,510,114
*Pretax pre-provision core return on average assets*		*2.39*	%		*2.15*	%		*1.58*	%		*2.00*	%		*1.59*	%

Net interest income	$	20,884		$	19,435		$	14,096		$	71,338		$	52,913
Add: Fully-taxable equivalent adjustments⁽¹⁾		84			86			77			335			276
*Net interest income – FTE*	$	*20,968*		$	*19,521*		$	*14,173*		$	*71,673*		$	*53,189*

Net interest margin		4.38	%		4.15	%		3.68	%		3.99	%		3.78	%
Effect of fully-taxable equivalent adjustments⁽¹⁾		0.01	%		0.02	%		0.02	%		0.02	%		0.02	%
*Net interest margin – FTE*		*4.39*	%		*4.17*	%		*3.70*	%		*4.01*	%		*3.80*	%

Total stockholders’ equity	$	181,719		$	170,325		$	177,198		$	181,719		$	177,198
Less: Intangible assets		18,088			18,164			18,362			18,088			18,362
*Tangible common equity*	$	*163,631*		$	*152,161*		$	*158,836*		$	*163,631*		$	*158,836*

^{1) Assumes a 24.0% tax rate for the three months ended December 31, 2022 and September 30, 2022 and a 23.5% tax rate for the three months ended December 31, 2021. Assumes a 24.0% tax rate for the year ended December 31, 2022 and a 23.5% tax rate for the year ended December 31, 2021.}

Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts

	Three Months Ended									Year Ended December 31,
	December 31, 2022			September 30, 2022			December 31, 2021				2022			2021

Core net income	$	8,081		$	6,806		$	4,256		$	24,975		$	15,956
Diluted weighted average shares outstanding		8,932,585			8,871,116			9,125,872			8,949,669			8,316,536
*Diluted core earnings per share*	$	*0.90*		$	*0.77*		$	*0.47*		$	*2.79*		$	*1.92*

Common shares outstanding at year or period end		8,706,920			8,705,920			9,012,857			8,706,920			9,012,857
*Tangible book value per share*	$	*18.79*		$	*17.48*		$	*17.62*		$	*18.79*		$	*17.62*

Total assets at end of period	$	2,044,866		$	2,052,725		$	1,782,592		$	2,044,866		$	1,782,592
Less: Intangible assets		18,088			18,164			18,362			18,088			18,362
Adjusted assets at end of period	$	2,026,778		$	2,034,561		$	1,764,230		$	2,026,778		$	1,764,230
*Tangible common equity to tangible assets*		*8.07*	%		*7.48*	%		*9.00*	%		*8.07*	%		*9.00*	%

Total average shareholders equity	$	176,769		$	172,402		$	175,913		$	174,107		$	157,277
Less: Average intangible assets		18,134			18,203			18,402			18,236			18,501
Average tangible common equity	$	158,635		$	154,199		$	157,511		$	155,871		$	138,776
Net income to common shareholders	$	10,592		$	6,700		$	4,058		$	27,071		$	18,567
*Return on average tangible common equity*		*26.49*	%		*17.24*	%		*10.22*	%		*17.37*	%		*13.38*	%
Average tangible common equity	$	158,635		$	154,199		$	157,511		$	155,871		$	138,776
Core net income	$	8,081		$	6,806		$	4,256		$	24,975		$	15,956
*Core return on average tangible common equity*		*20.21*	%		*17.51*	%		*10.72*	%		*16.02*	%		*11.50*	%

Net interest income	$	20,884		$	19,435		$	14,096		$	71,338		$	52,913
Add: Noninterest income		4,603			1,339			1,751			8,677			10,803
Less: Gain on sale of USDA loan		—			—			—			—			2,806
Less: Gain on sale of branches		2,600			—			—			2,600			—
Less: BOLI benefit claim		774			—			—			774			742
Less: Loss on securities		(86	)		(143	)		(40	)		(632	)		(57	)
Operating revenue	$	22,199		$	20,917		$	15,887		$	77,273		$	60,225

Expenses:
Total noninterest expense	$	10,436		$	10,237		$	9,612		$	39,614		$	36,435
Less: Net OREO gains		—			—			227			—			219
Less: Loss on sale of branches		228			—			—			228			—
Adjusted noninterest expenses	$	10,208		$	10,237		$	9,385		$	39,386		$	36,216
*Core efficiency ratio*		*45.98*	%		*48.94*	%		*59.07*	%		*50.97*	%		*60.13*	%