What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-03-03 compared with 2024-03-01 · 153 added, 162 removed, 551 unchanged (36% of the section changed)

1 unchanged sentence

Our common stock is listed on the New York Stock Exchange under the symbol “SFBS.” As of February 26, 2025, there were 453 holders of record of our common stock.

As of the close of business on February 27, 2024, the price of our common stock was $62.44 per share.

On December 16, 2024, our Board of Directors increased our quarterly cash dividend from $0.30 per share to $0.335 per share.

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Statutory and regulatory limitations apply to the Bank’s payment of dividends to us, as well as our payment of dividends to our stockholders.

For a more complete discussion on the restrictions on dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1.

For a more complete discussion on the restrictions on dividends, see “Bank Supervision and Regulation - Payment of Dividends” in Item 1.

Recent Sales of Unregistered Securities

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The following performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates the performance graph by reference therein.

ServisFirst Bancshares, Inc.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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Through our wholly-owned subsidiary bank, we operate full service banking offices located in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia.

We also operate loan production offices in Florida.

We also operate a loan production office in Florida.

Our principal business is to accept deposits from the public and to make loans and other investments.

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Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses, and other overhead expenses.

Our business is conducted through a single reportable segment.

For additional information regarding our segment reporting, refer to (Note 23) - “ Segment Reporting ” in the Notes to the Consolidated Financial Statements.

2024 Highlights

Diluted earnings per common share of $3.79 in 2023 decreased $0.82, or 18%, from 2022.

Average loans of $11.60 billion for 2023 increased $1.04 billion, or 10%, from a year ago.

Average deposits of $12.26 billion for 2023 increased $434.6 million, or 4%, from a year ago.

Net interest income of $410.9 million in 2023 decreased $60.0 million, or 13%, from 2022.

Net interest margin of 2.81% in 2023 decreased 51 basis points from 3.32% in 2022.

Noninterest income of $30.4 million in 2023 decreased $2.9 million, or 9%, from 2022, primarily due to an interest rate cap that matured in May of 2023.

Noninterest expense of $178.1 million in 2023 increased $20.2 million, or 13%, from 2022, primarily driven by increases in salaries and FDIC assessments.

Diluted earnings per common share increased $0.37, or 9.8%, to $4.16 in 2024 from 2023.

Average loans increased $548.0 million, or 4.7%, to $12.15 billion in 2024 from 2023.

Average deposits increased $940.0 million, or 7.7%, to $13.20 billion in 2024 from 2023.

Net interest income increased $35.7 million, or 8.7%, to $446.7 million in 2024 from 2023.

Net interest margin increased one basis point to 2.82% in 2024 from 2023.

Noninterest income increased $4.6 million, or 15.3%, to $35.1 million in 2024 from 2023, primarily due to increases in mortgage banking income and bank-owned life insurance income.

Noninterest expense increased $3.1 million, or 1.7%, to $181.1 million in 2024 from 2023, primarily driven by increases in salaries and third-party processing expenses.

Results of Operations

The following discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2024 and 2023 and results of operations for each of the years then ended.

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on February 25, 2023 ( 2022 FORM 10-K ) for a discussion and analysis of the more significant factors that affected periods prior to 2022.

Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 1, 2024 for a discussion and analysis of the more significant factors that affected periods prior to 2023.

Net Income Available to Common Stockholders

Net income available to common stockholders was $227.2 million for the year ended December 31, 2024, compared to $206.8 million for the year ended December 31, 2023.

As discussed herein, this decrease in net income was primarily attributable to a decrease in net interest income, and an increase in noninterest expense, partially offset by a decrease in provision for credit losses.

Basic and diluted net income per common share were $3.80 and $3.79, respectively, for the year ended December 31, 2023, compared to $4.63 and $4.61, respectively, for the year ended December 31, 2022.

The increase in net income was primarily attributable to an increase in net interest income.

Basic and diluted net income per common share was $4.17 and $4.16, respectively, for the year ended December 31, 2024, compared to $3.80 and $3.79, respectively, for the year ended December 31, 2023.

Return on average assets was 1.39% in 2024, compared to 1.37% in 2023, and return on average common stockholders’ equity was 14.98% in 2024, compared to 15.13% in 2023.

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Year Ended December 31,

Change from the

Change from the Prior Year

(Dollars in Thousands)

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Provision for credit losses

Net interest income after

provision for credit losses

Net interest income after provision for credit losses

Noninterest income

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Dividends on preferred stock

Net income available to

common stockholders

Net income available to common stockholders

Year Ended December 31,

Change from the

Change from the Prior Year

(Dollars in Thousands)

3 unchanged sentences

Provision for credit losses

Net interest income after

provision for credit losses

Net interest income after provision for credit losses

Noninterest income

2 unchanged sentences

Dividends on preferred stock

Net income available to

common stockholders

Net income available to common stockholders

Performance Ratios

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Average stockholders' equity to average total assets

(1) Net interest margin in the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets..

Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.

Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.

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Our management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

Net interest income decreased 12.7% for the year ended December 31, 2023 from the year ended December 31, 2022.

The decrease in net interest income was mostly attributable to the increase in both the average balance and rates paid on interest-bearing liabilities.

Total average interest-bearing liabilities increased 19.7% year-over-year, while total interest expense increased by 355.0% year-over-year.

As demonstrated in the discussion of net interest margin below, average interest rate yields on average earning assets had a lesser impact on our interest income.

Average earning assets increased 3.1% in 2023 from 2022, which was primarily driven by an increase of $1.04 billion in average loans.

Net interest income increased 8.7% for the year ended December 31, 2024 from the year ended December 31, 2023.

The increase in net interest income was mostly attributable to increases in both the average balance and rate on our interest earning assets.

While interest-bearing liabilities average balance and rate both increased, the growth in our interest-earning assets outpaced those of our interest-bearing liabilities, which resulted in increased net interest income.

Average earning assets increased 8.4% in 2024 from 2023, which was primarily driven by an increase of 4.7% in average loans.

A majority of our regional markets grew loans during 2024.

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The net interest spread eliminates the effect of noninterest-earning assets as well as noninterest-bearing deposits and other noninterest-bearing funding sources and gives a direct perspective on the effect of market interest rate movements.

The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest revenue as a percentage of total average interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity.

The net interest margin is an indication of the profitability of a company’s balance sheet and is defined as net interest income as a percentage of total average interest-earning assets, which includes the positive effect of funding a portion of interest-earning assets with noninterest-bearing deposits and stockholders’ equity.

The net interest margin is impacted by the average volumes of interest-sensitive assets and interest-sensitive liabilities and by the difference between the yield on interest-sensitive assets and the cost of interest-sensitive liabilities (spread).

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The net yield on earning assets is an indicator of effectiveness of our ability to manage the net interest margin by managing the overall yield on assets and cost of funding those assets.

The following table shows, for the years ended December 31, 2023, 2022 and 2021, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue, and the change in interest income and interest expense segregated into amounts attributable to changes in volume and changes in rates.

The following table shows, for the years ended December 31, 2024, 2023 and 2022, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest income, and the change in interest income and interest expense segregated into amounts attributable to changes in volume and changes in rates.

This table is presented on a taxable equivalent basis, if applicable.

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Loan fees of $15,381, $13,752 and $19,605 are included in interest income in 2024, 2023, and 2022, respectively.

Loan fees include accretion of PPP loan fees of $40, $7,730 and $27,330 in 2023, 2022 and 2021, respectively.

Amortization of acquired loan premiums of $186, $197 and $161 is included in interest income in 2024, 2023 and 2022, respectively.

Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.

Unrealized (losses) gains of $(70,960), $(30,770) and $25,276 are excluded from the yield calculation in 2023, 2022 and 2021, respectively.

Accretion on acquired CD premiums of $75 are included in interest expense in 2021.

Net interest margin is net interest revenue divided by average interest-earning assets.

Unrealized losses of $(60,030), $(74,519) and $(30,770) are excluded from the yield calculation in 2024, 2023, and 2022, respectively.

Net interest margin is net interest income divided by average interest-earning assets.

The following table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-bearing assets and liabilities:

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In the table above, changes in net interest income are attributable to (a) changes in average balances (volume variance), (b) changes in rates (rate variance), or (c) changes in rate and average balances (rate/volume variance).

The volume variance is calculated as the change in average balances times the previous period average balance.

The rate variance is calculated as the change in rates times the previous period average balance.

The rate/volume variance is calculated as the change in rates times the change in average balances.

The volume variance is calculated as the change in average balances multiplied by the previous period average balance.

The rate variance is calculated as the change in rates multiplied by the previous period average balance.

The rate/volume variance is calculated as the change in rates multiplied by the change in average balances.

From 2023 to 2024, our volume component was favorable as asset volumes increased primarily as a result of the growth in loan balances as well as an increase in taxable debt securities, while the volume change from our liabilities was primarily driven by growth in money market balances.

The rate component was unfavorable as average rates paid on interest-bearing liabilities increased 275 basis points while yields on average earning assets increased 162 basis points.

The rate component was favorable as average rates paid on interest-bearing liabilities increased 39 basis points while yields on average earning assets increased 41 basis points.

The two primary factors that make up the spread are the interest rates received on loans and the interest rates paid on deposits.

Our net interest spread and net interest margin were 1.84% and 2.82%, respectively, for the year ended December 31, 2024, compared to 1.83% and 2.81%, respectively, for the year ended December 31, 2023.

The decrease in net interest spread and net interest margin was primarily attributable to increases in average interest-bearing liabilities, which increased $1.77 billion in 2023.

Our average interest-earning assets for the year ended December 31, 2023 increased $434.6 million, or 3.1%, to $14.62 billion from $14.19 billion for the year ended December 31, 2022.

Average loans grew $1.04 billion, or 9.8%, average debt securities grew $164.4 million, or 9.6%, and average federal funds sold and interest-bearing balances with banks decreased $771.0 million, or 40.8%.

The increase in net interest spread and net interest margin was primarily attributable to increases in the average balance and the interest earned from loans, which increased $548.0 million and $88.8 million, respectively, in 2024.

Our average interest-earning assets for the year ended December 31, 2024 increased $1.23 billion, or 8.4%, to $15.85 billion from $14.62 billion for the year ended December 31, 2023.

Average loans grew $548.0 million, or 4.7%, average debt securities increased $76.7 million, or 4.1%, and average federal funds sold and interest-bearing balances with banks increased $599.2 million, or 53.5%.

Our average interest-bearing liabilities increased $1.32 billion, or 12.3%, to $12.10 billion for the year ended December 31, 2024 from $10.78 billion for the year ended December 31, 2023.

The ratio of our average interest-earning assets to average interest-bearing liabilities decreased from 157.5% for the year ended December 31, 2022 to 135.6% for the year ended December 31, 2023, as average noninterest-bearing deposits and stockholders’ equity decreased by a combined $1.4 billion, or 24.9%, from 2022 to 2023.

The ratio of our average interest-earning assets to average interest-bearing liabilities decreased from 135.6% for the year ended December 31, 2023 to 130.9% for the year ended December 31, 2024, as average noninterest-bearing deposits and stockholders’ equity decreased by a combined $107.8 million, or 2.52%, from 2023 to 2024.

Our average interest-earning assets produced a taxable equivalent yield of 5.97% for the year ended December 31, 2024, compared to 5.56% for the year ended December 31, 2023.

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See the section captioned “Allowance for Credit Losses” located elsewhere in this item for additional discussion related to provision for credit losses.

The provision expense for credit losses decreased 50.2% for the year ended December 31, 2023 when compared to the year-ended December 31, 2022.

The decrease in provision expense was primarily the result of lower loan growth during 2023 compared to 2022.

The provision expense for credit losses for the year ended December 31, 2024 increased compared to the year-ended December 31, 2023.

The increase in provision expense is primarily the result of loan growth during 2024 compared to 2023.

Nonperforming loans increased to $42.5 million, or 0.34% of total loans, at December 31, 2024 from $21.5 million, or 0.18% of total loans, at December 31, 2023.

During 2024, we had net charged-off loans totaling $10.4 million, compared to net charged-off loans of $11.7 million for 2023.

52% of the $7.6 million net charge-off in 2022 was represented by three loans.

In 2023, 62% of the $11.7 million net charge-off was represented by four loans.

The ratio of net charged-off loans to average loans was 0.09% for 2024 compared to 0.10% for 2023.

The ACL at December 31, 2023 totaled $153.3 million, or 1.32% of loans, net of unearned income.

The ACL for December 31, 2024 totaled $164.5 million, or 1.30% of loans, net of unearned income.

The ACL totaled $153.3 million, or 1.32% of loans, net of unearned income, at December 31, 2023.

Noninterest Income

Noninterest income for the years ended December 31, 2023 and 2022 were as follows.

Noninterest income for the years ended December 31, 2024 and 2023 was as follows:

Percentage Change

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Credit card income

Securities (losses) gains

Increase in cash surrender value life insurance

Bank-owned life insurance income

Other operating income

Total noninterest income

Noninterest income decreased $2.9 million, or 8.8%, to $30.4 million in 2023 from $33.4 million in 2022.

The decrease in noninterest income is primarily the result of a decrease in other operating income, due to the maturity of an interest rate cap which was partially offset by the losses on sale of securities in 2022.

Service charges on deposit accounts increased $387,000, or 4.8%, to $8.4 million in 2023 compared to $8.0 million 2022.

Credit card income decreased $1.3 million, or 13.0%, to $8.6 million in 2023 compared to $9.9 million in 2022.

Mortgage banking income increased $317,000, or 13.0%, to $2.8 million in 2023 compared to $2.4 million in 2022.

The increase in cash surrender value of bank-owned life insurance contracts increased $1.1 million, or 16.9%, to $7.6 million in 2023 compared to $6.5 million 2022.

Other operating income decreased 76.0% in 2023 compared to 2022, driven by a decrease in our interest rate cap.

The income recognized from our interest rate cap derivative decreased from $7.0 million for the year ended December 31, 2022, to $32,000 for the year ended December 31, 2023, as a result of the interest rate cap maturing during the second quarter of 2023.

Merchant service revenue increased $449,000, or 25.45%, to $2.2 million in 2023 compared to 2022.

Noninterest income increased $4.6 million, or 15.3%, to $35.1 million for the year ended December 31, 2024 compared to $30.4 million for the same period in 2023.

Service charges on deposit accounts increased $1.0 million, or 12.0%, to $9.4 million for the year ended December 31, 2024 compared to $8.4 million for the same period in 2023.

Credit card income decreased $351,000, or 4.1%, to $8.3 million for the year ended December 31, 2024 compared to $8.6 million for the same period in 2023.

Mortgage banking income increased $2.2 million, or 78.7%, to $4.9 million for the year ended December 31, 2024 compared to $2.8 million for the same period in 2023.

Closed loans increased 49.9% during 2024 compared to 2023.

Bank-owned life insurance income increased $2.0 million, or 25.9%, to $9.5 million for the year ended December 31, 2024 compared to $7.6 million for the same period in 2023.

The cash surrender value increased $1.6 million during 2024 compared to 2023.

Other operating income decreased $150,000, or 4.9%, to $2.9 million for the year ended December 31, 2024 compared to $3.0 million for the same period in 2023.

Merchant service revenue increased $63,000, or 2.9%, to $2.3 million for the year ended December 31, 2024 compared to $2.2 million for the same period in 2023.

Noninterest Expense

Noninterest expense for the years ended December 31, 2023 and 2022 were as follows.

Noninterest expense for the years ended December 31, 2024 and 2023 was as follows:

Percentage Change

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Total noninterest expenses

Noninterest expenses increased $20.2 million, or 12.8%, to $178.1 million in 2023 compared to $157.8 million in 2022.

Increased salaries and employee benefits expenses as well as increases in FDIC assessments were the primary drivers of the increase in noninterest expense.

Salary and employee benefits expenses increased $3.0 million, or 3.9%, to $81.0 million in 2023 compared to $78.0 million in 2022.

We had 591 full-time equivalent employees in 2023 compared to 571 in 2022.

Equipment and occupancy expense increased $2.0 million, or 16.0%, to $14.30 million in 2023 compared to $12.30 million in 2022.

Third party processing and other services increased $539,000, or 2.0%, to $27.9 million in 2023 compared to $27.3 million in 2022.

Professional services expense increased $1.6 million, or 38.3%, to $5.9 million in 2023 compared to $4.3 million in 2022.

FDIC assessments increased $11.0 million, or 242.0%, to $15.6 million in 2023 compared to $4.6 million in 2022.

The FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an expense of $7.2 million during 2023.

Expenses on other real estate owned decreased $248,000, or 84.1%, to $47,000 in 2023 compared to $295,000 in 2022.

Other operating expenses increased $2.3 million, or 7.3%, to $33.3 million in 2023 compared to $31.1 million in 2022.

Noninterest expenses increased $3.1 million, or 1.7%, to $181.1 million for the year ended December 31, 2024 compared to $178.1 million for the same period in 2023.

Increased salaries and employee benefits expenses were the primary drivers of the increase in noninterest expense.

Salary and employee benefits expenses increased $15.4 million, or 19.0%, to $96.3 million for the year ended December 31, 2024 compared to $81.0 million for the same period in 2023.

We had 630 full-time equivalent employees as of December 31, 2024 compared to 591 as of December 31, 2023 Equipment and occupancy expense increased $224,000, or 1.6%, to $14.5 million for the year ended December 31, 2024 compared to $14.3 million for the same period in 2023.

Third party processing and other services increased $3.3 million, or 11.9%, to $31.2 million for the year ended December 31, 2024 compared to $27.9 million for the same period in 2023.

Professional services expense increased $985,000, or 16.6%, to $6.9 million for the year ended December 31, 2024 compared to $5.9 million for the same period in 2023.

FDIC assessments decreased $4.9 million, or 31.6%, to $10.7 million for the year ended December 31, 2024 compared to $15.6 million for the same period in 2023.

The FDIC implemented a special assessment to recapitalize the Deposit Insurance Fund resulting in an expense of $1.8 million during 2024, and $7.2 million during 2023.

Other operating expenses decreased $12.0 million, or 36.0%, to $21.3 million for the year ended December 31, 2024 compared to $33.3 million for the same period in 2023.

We adopted the proportional amortization method of accounting for investments in certain tax credit partnerships during 2024.

The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the consolidated income statement as a component of income tax expense.

Previously the amortization of the investment was included in other non-interest expenses.

Changes in other operating expenses from 2023 to 2024 are detailed in Note 15 - “ Other Operating Income and Expenses, ” to the Consolidated Financial Statements.

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Our effective tax rates for 2024 and 2023 were 18.5% and 15.4%, respectively.

We recognized $17.7 million in credits related to new investments in Federal New Market Tax Credits during 2023 and $12.6 million during 2022.

The increase in our effective tax rates reflect our adoption of the proportional amortization of accounting for investment tax credits during the first quarter of 2024.

We recognized $15.4 million in credits during 2024 and $17.7 million during 2023, related to new investments in Federal New Market Tax Credits.

We also recognized excess tax benefits as an income tax credit to our income tax expense from the exercise and vesting of stock options and restricted stock during 2024 of $1.3 million, compared to $1.5 million during 2023.

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Total assets as of December 31, 2024, were $17.35 billion, an increase of $1.22 billion, or 7.6%, from total assets of $16.13 billion as of December 31, 2023.

Average assets for the year ended December 31, 2023 were $15.07 billion, an increase of $363.7 million, or 2.5%, over average assets of $14.70 billion for the year ended December 31, 2022.

Growth in loans and debt securities, offset by decreases in interest-bearing balances with banks, and federal funds sold were the primary reasons for the increase in ending and average total assets.

Year-end 2023 loans, were $11.66 billion, a decrease of $29.1 million, or 0.2% compared to $1.53 billion, over year-end 2022 total loans of $11.69 billion.

Average assets for the year ended December 31, 2024 were $16.33 billion, an increase of $1.27 billion, or 8.40%, over average assets of $15.07 billion for the year ended December 31, 2023.

Growth in loans and interest-bearing balances with banks were the primary reasons for the increase in ending and average total assets.

Year-end 2024 total loans were $12.61 billion, an increase of $947.0 million, or 8.1%, over year-end 2023 total loans of $11.66 billion.

Earning assets include loans, securities, short-term investments and bank-owned life insurance contracts.

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The amortized cost of securities in our portfolio totaled $1.92 billion at December 31, 2024, compared to $1.95 billion at December 31, 2023.

The following table presents the book value and weighted average yield of our securities as of December 31, 2023 by their stated maturities (this maturity schedule excludes security prepayment and call features).

The following table presents the amortized cost and weighted average yield of our securities as of December 31, 2024 by their stated maturities (this maturity schedule excludes security prepayment and call features):

Maturity of Debt Securities - Weighted Average Yield

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Treasury Securities

Government Agency Securities

Mortgage-backed securities

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Treasury Securities

Government Agency Securities

Mortgage-backed securities

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government and its agencies, in an amount greater than 10% of stockholders’ equity.

During the first two quarters of 2022, the bank added $100 million per month, net of paydowns and maturities, of U.S.

Treasury Securities.

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure.

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Financial Statements and Supplementary Data elsewhere in this report for a more detailed analysis of our loan portfolio by type of loan.

Section 1102 of the CARES Act created the Paycheck Protection Program, a program administered by the SBA to provide loans to small businesses for payroll and other basic expenses during the COVID-19 pandemic.

Our bank participated in the PPP as a lender.

These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA.

Additionally, loan payments will also be deferred for the first six months of the loan term.

The PPP commenced on April 3, 2020 and was available to qualified borrowers through August 8, 2020.

No collateral or personal guarantees were required from borrowers and neither the government nor lenders were permitted to charge the recipients any fees.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act (“CAA”).

The CAA, among other things, extended the life of the PPP, effectively creating a second round of PPP loans for eligible businesses.

Effective May 28, 2021, the PPP was closed to new applications.

Additionally, section 541 of the CAA extended the relief provided by the CARES Act for financial institutions to suspend the GAAP accounting treatment for troubled debt restructuring to January 1, 2022.

We funded approximately 7,400 loans for a total amount of $1.5 billion for clients under the PPP since April 2020.

To the extent the PPP loans are forgiven, this represents outside funds to our borrowers;

and, especially with respect to vulnerable industries, we believe these capital injections have been instrumental in assisting our borrowers in navigating through the pandemic.

This capital injection, along with the level of capital each borrower had immediately prior to the beginning of the COVID-19 pandemic, are critical factors in determining the continued business viability of our borrowers.

As of December 31, 2023, we have received payment from the SBA on almost all of our loans totaling $1.5 billion.

We had total loans of approximately $12.61 billion at December 31, 2024.

A large majority of our loan customers are located within our market MSAs, as is the collateral for their loans.

A large majority of our loan customers are located within our market areas, as is the collateral for their loans.

With our loan portfolio concentrated in a limited number of markets, there is a risk that our borrowers’ ability to repay their loans from us could be affected by changes in local and regional economic conditions.

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1-4 family mortgage

Other mortgage

Non-owner occupied commercial

Total real estate - mortgage

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1-4 family mortgage

Other mortgage

Total real estate - mortgage

Non-owner occupied commercial

Real estate mortgage

The table below summarizes the Company’s commercial real estate portfolio at December 31, 2024 as segregated by industry concentrations based on North American Industry Classification System:

Percent of Total

(Dollars in Thousands)

Owner Occupied Real Estate

Other Services (except Public Administration)

Health Care and Social Assistance

Accommodation and Food Services

Manufacturing

Professional, Scientific, and Technical Services

Real Estate and Rental and Leasing

Wholesale Trade

All Other Owner Occupied Real Estate

Total Owner Occupied Real Estate

Non-Owner Occupied Real Estate

Multifamily Permanent

Shopping or Retail Center

Hotel or Motel

Office Building

Nursing Home or Assisted Living Facility

Office Warehouse

Self-Storage Facility

Gas Station or Convenience Store

All Other Income Property

Total Non-Owner Occupied Real Estate

Total Commercial Real Estate

The table below summarizes the Company’s commercial real estate portfolio at December 31, 2024 as segregated by geographic region in which the property is located:

Percent of Total

(Dollars in Thousands)

North Carolina

South Carolina

Total commercial real estate loans

The following table details maturities and sensitivity to interest rate changes for our loan portfolio at December 31, 2024:

After 5 years

After One Year

After Five Years

to Five Years

(in Thousands)

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Total real estate - mortgage

Amount due after one year at

variable interest rates:

Amount due after one year at variable interest rates:

Commercial, financial and agricultural

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Average amount outstanding

Other mortgage:

Non-owner occupied commercial

Net charge-offs during the period

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Average amount outstanding

As described below under Recently Adopted Accounting Pronouncements, the Company adopted ASU 2016 - 13 , Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“CECL”) Accounting Standard Codification (“ASC”) 326 effective January 1, 2020.

The ACL for December 31, 2023 and 2022 was calculated under the CECL methodology and totaled $153.3 million and $146.3 million, or 1.32% and 1.25% of loans, net of unearned income, respectively.

The increase in the ACL as a percent of total loans at December 31, 2023 from December 31, 2022 was largely the result of adjustments to qualitative factors in our construction land development and commercial real estate pools.

The allowance for credit losses (“ACL”) for December 31, 2024 and 2023 was calculated under the CECL methodology and totaled $164.5 million and $153.3 million, or 1.30% and 1.32% of loans, net of unearned income, respectively.

The decrease in the ACL as a percentage of total loans from December 31, 2023, to December 31, 2024, was primarily driven by a more favorable economic outlook, including lower unemployment rates and projected gross domestic product (“GDP”) growth compared to 2023.

Additionally, adjustments to qualitative factors within our CECL model were made to reflect these improved economic conditions.

Net credit charge-offs to average loans were 0.09% for the year ended December 31, 2024, compared to 0.10% and 0.08% for the years ended December 31, 2023 and 2022, respectively.

Nonaccrual loans increased to $39.5 million, or 0.31% of total loans, at December 31, 2024 from $19.3 million, or 0.17% of total loans, at December 31, 2023, and were $12.5 million, or 0.11% of total loans, at December 31, 2022.

At December 31, 2023, the nonaccrual balance increase was attributable to three owner-occupied loans representing a balance of $3.8 million, and a net increase of $2.9 million in 1-4 family mortgage nonaccruals.

At December 31, 2022, the nonaccrual increase was driven by one commercial and industrial (C&I) relationship and oneowner-occupied commercial relationship.

At December 31, 2024, the nonaccrual increase was driven by a commercial, financial and agricultural relationship and a owner-occupied commercial relationship.

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements.

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The ACL on unfunded loan commitments is classified as a liability account on the balance sheet within other liabilities, while the corresponding provision for these credit losses is recorded as a component of other expense.

The allowance for credit losses on unfunded commitments was $575,000 as of December 31, 2023 and December 31, 2022.

The following table presents the allocation of the allowance for loan losses for each respective loan category with the corresponding percent of loans in each category to total loans.

The allowance for credit losses on unfunded commitments was $608,000 as of December 31, 2024 and $575,000 as of December 31, 2023.

The following table presents the allocation of the allowance for credit losses for each respective loan category with the corresponding percent of loans in each category to total loans:

For the Years Ended December 31,

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Real estate - construction

Real estate - mortgage

Owner-occupied commercial

1-4 family mortgage

Non-owner occupied commercial

The Company assesses the adequacy of its ACL at the end of each calendar quarter.

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At December 31, 2024, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2023.

At December 31, 2022, we forecasted a moderately higher national unemployment rate and significantly lower national GDP compared to December 31, 2021.

At December 31, 2023, we forecasted a slightly lower national unemployment rate and moderately higher national GDP compared to December 31, 2022.

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method.

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The Company considers factors that are relevant within the qualitative framework, which include the following:

lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system;

and other economic conditions and new markets.

Expected credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis.

Individual evaluations are performed for nonaccrual loans, loans rated substandard, and modified loans classified as TDRs.

Specific allocations of the ACL for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

PPP loans outstanding totaled $56,000 and $2.0 million as of December 31, 2023 and 2022, respectively, and are included within the commercial, financial and agricultural loan category.

Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans.

Specific allocations of the ACL are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

The Bank has procedures and processes in place intended to ensure that losses do not exceed the potential amounts documented in the Bank’s analysis of loans individually evaluated and reduce potential losses in the remaining performing loans within our real estate construction portfolio.

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1-4 family mortgage

Other mortgage

Non-owner occupied commercial

Total real estate - mortgage

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1-4 family mortgage

Other mortgage

Non-owner occupied commercial

Total real estate - mortgage

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1-4 family mortgage

Other mortgage

Non-owner occupied commercial

Total real estate - mortgage

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Nonperforming loans to total loans

Nonperforming assets to total loans plus other Nonperforming assets to total loans plus other real estate owned and repossessions

Nonperforming assets to total loans plus other real estate owned and repossessions

Nonperforming assets and restructured accruing loans to total loans plus other real estate owned and repossessions

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There are not any loans, outside of those included in the table above, that cause management to have serious doubts as to the ability of borrowers to comply with present repayment terms.

On December 27, 2020, the CAA was signed into law and extended the period established by Section 4013 of the CARES Act to the earlier of January 1, 2022 or the date that is 60 days after the date on which the national COVID-19 emergency terminates.

In keeping with this guidance from regulators, the bank offered short-term modifications made in response to COVID-19 to borrowers who were current and otherwise not past due.

Should eventual credit losses on these deferred payments emerge, the related loans would be placed on nonaccrual status and interest income accrued would be reversed.

In such a scenario, interest income in future periods could be negatively impacted.

As of December 31, 2023, we carry $2.1 million of accrued interest income on deferrals made to COVID-19 affected borrowers compared to $2.4 million at December 31, 2022.

At this time, we are unable to project the materiality of such an impact on future deferrals to COVID-19 affected borrowers, but we recognize the breadth of the economic impact may affect our borrowers’ ability to repay in future periods.

We rely on increasing our deposit base to fund loan and other asset growth.

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Total deposits

At December 31, 2023 and December 31, 2022, we estimate that we had approximately $8.76 billion and $7.66 billion, respectively, in total uninsured deposits.

Included in the total uninsured deposits we estimate that we had approximately $607.3 million and $400.9 million, respectively, in uninsured time deposits.

These uninsured deposits represent the portion of deposit accounts that exceed FDIC insurance limits.

Included in our uninsured deposits as of December 31, 2023 and December 31, 2022, we estimate that we had approximately $2.2 billion and $758 million, respectively, in public funds.

While public fund balances that exceed FDIC limits are uninsured deposits, these deposits are collateralized by securities.

The uninsured deposit data for 2023 and 2022 reflect the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but do not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

At December 31, 2024, 2023, and 2022 we estimate that we had approximately $9.03 billion, $8.76 billion and $7.66 billion, respectively, in total uninsured deposits.

The uninsured deposit data for 2024 and 2023 reflects the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but does not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

The following table presents the portion of our time deposits in excess of insurance limit as of December 31, 2024.

Portion of Time Deposits in Excess of Insurance Limit

December 31, 2024

Time Deposits Otherwise Uninsured With a Maturity of:

(In Thousands)

3 months or less

Over 3 months through 6 months

Over 6 months through 12 months

Over 12 months

Borrowed Funds

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The fair value of the interest rate cap was carried on the Consolidated Balance Sheets in other assets and the change in fair value was recognized in noninterest income each quarter.

The interest rate cap had a fair value of $4.2 million and remaining term of 0.3 years at December 31, 2022, and expired on May 4, 2023.

The interest rate cap contract expired May 4, 2023.

The Bank has entered into agreements with secondary market investors to deliver loans on a “best efforts delivery” basis.

When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for our customer for a 30-day period.

When a rate is committed to a borrower, it is based on the best price that day and locked with our investor for that loan for a 30-day period.

In the event the loan is not delivered to the investor, the Bank has no risk or exposure with the investor.

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During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to adversely affect net interest income.

Our asset liability and investment committee is charged with monitoring our liquidity and funds position.

Our asset liability committee is charged with monitoring our liquidity and funds position.

The committee regularly reviews the rate sensitivity position on a three-month, six-month and one-year time horizon;

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The asset liability committee uses a model to analyze the maturities of rate-sensitive assets and liabilities.

The model measures the “gap” which is defined as the difference between the dollar amount of rate-sensitive assets repricing during a period and the volume of rate-sensitive liabilities repricing during the same period.

Gap is also expressed as the ratio of rate-sensitive assets divided by rate-sensitive liabilities.

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The following table illustrates, during the years presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated.

Average assets totaled $15.07 billion in 2023, compared to $14.70 billion in 2022, and $13.56 billion in 2021.

Average assets totaled $16.33 billion in 2024, compared to $15.07 billion in 2023, and to $14.70 billion in 2022:

For the Year Ended

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The management of liquidity at both levels is critical because the Company and the Bank have different funding needs and sources, and each are subject to regulatory guidelines and requirements.

We are subject to general FDIC guidelines that require a minimum level of liquidity.

We are subject to general FDIC guidelines which require a minimum level of liquidity.

Management believes our liquidity ratios meet or exceed these guidelines.

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Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits.

Liquidity is also available from funding sources consisting primarily of federal funds purchased, FHLB loan advances and available-for-sale securities.

Liquidity is also available from funding sources consisting primarily of federal funds purchased, Federal Home Loan Bank (“FHLB”) loan advances and available-for-sale securities.

The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position.

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The Bank’s policy limits on brokered deposits would allow for up to $4.34 billion in available funding for brokered deposits.

Additionally, the Bank had available to us approximately $888.0 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs.

Additionally, we had available to us approximately $537 million in unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs.

As a separate entity from the bank, we also have separate liquidity obligations.

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However, our ultimate source of liquidity consists of dividends from the Bank, which are limited by applicable law and regulations.

In 2023 and 2022, the Bank paid dividends of $62.5 million and $57.5 million, respectively.

In 2024 and 2023, the Bank paid dividends of $71.9 million and $62.5 million, respectively, to us.

For a detailed discussion on the regulatory limitation on Bank dividends, see “Supervision and Regulation - Payment of Dividends” in Item 1.

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Our management believes that we are well-capitalized under the prompt corrective action provisions as of December 31, 2024.

In addition, the Alabama Banking Department has required that the Bank maintain a leverage ratio of 8.00%.

In addition, the Alabama Banking Department has required that the Bank maintain a leverage ratio of at least 8.00%.

The following table sets forth (i) the capital ratios of the Bank required by the FDIC to maintain “well-capitalized” status and (ii) our actual ratios of capital to total regulatory or risk-weighted assets, as of December 31, 2024:

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Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect our reported results and financial position for the current period or in future periods.

The use of estimates, assumptions, and judgments are necessary when financial assets and liabilities are required to be recorded at, or adjusted to reflect, fair value.

Assets carried at fair value inherently result in more financial statement volatility.

Fair values and information used to record valuation adjustments for certain assets and liabilities are based on either quoted market prices or are provided by other independent third-party sources, when available.

When such information is not available, management estimates valuation adjustments.

Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on our future financial condition and results of operations.

We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements.

The accounting estimate related the Company’s ACL is considered to be a critical accounting estimate because considerable judgment and estimation is applied by management.

Allowance for Credit Losses

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Our regulators may disagree with our assumptions and could require us to materially increase our allowance for credit losses.

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a DCF, PD/LGD, or remaining life method.

The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product.

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Specific allocations of the allowance for credit losses are estimated on one of several methods, including the estimated fair value of the underlying collateral, observable market value of similar debt or the present value of expected cash flows.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates.

A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

In accordance with GAAP, the Company established a single model to address accounting for uncertain tax positions.

GAAP clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

GAAP also provides guidance on derecognition measurement classification interest and penalties, accounting in interim periods, disclosure, and transition.

GAAP provides a two-step process in the evaluation of a tax position.

The first step is recognition.

A company determines whether it is more likely than not that a tax position will be sustained upon examination, including a resolution of any related appeals or litigation processes, based upon the technical merits of the position.

The second step is measurement.

A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

Because of the uncertainty of estimates involved, the ultimate resolution may result in a payment that is different from the current estimate of the tax liabilities and can be significant to the Company’s consolidated financial position, results of operations or cash flows.

Adoption of Recent Accounting Pronouncements

New accounting standards are discussed in Note 1, “ Summary of Significant Accounting Policies ” to the Notes to Consolidated Financial Statements.

New accounting standards are discussed in Note 1, “ Summary of Significant Accounting Policies ” to the Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity