SSBK Southern States Bancshares Inc

Southern States Bancshares, Inc. (NASDAQ: SSBK) (“Southern States” or the “Company”), the holding company for Southern States Bank, an Alabama state-chartered commercial bank (the “Bank”), today reported net income of $8.8 million, or $0.98 diluted earnings per share, for the second quarter of 2023. This compares to net income of $7.7 million, or $0.85 diluted earnings per share, for the first quarter of 2023, and net income of $5.2 million, or $0.59 diluted earnings per share, for the second quarter of 2022. The Company reported core net income of $7.1 million, or $0.79 diluted core earnings per share, for the second quarter of 2023. This compares to core net income of $7.3 million, or $0.80 diluted core earnings per share, for the first quarter of 2023, and core net income of $5.3 million, or $0.59 diluted core earnings per share, for the second quarter of 2022 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary
Mark Chambers, Chief Executive Officer and President of Southern States, said, “Our team continued to identify attractive lending opportunities and build deposits across our footprint, prudently growing and delivering strong earnings while maintaining our unwavering focus on risk management and excellent credit quality.’’
“Our total loans grew 4.3% from the prior quarter and 20.0% from the second quarter of 2022. We more than funded our loan growth with an increase in our core deposits as we continued to expand our customer base. Meanwhile, our non-performing loans as a percentage of the overall portfolio totaled just 0.06%, down from both the first quarter and a year earlier. We continue to build upon the momentum we generated over the past several years across some of the most economically resilient markets in the South.’’
“While our funding costs rose during the quarter alongside higher interest rates, impacting our net interest margin, we have robust liquidity and capital levels that give Southern States the financial strength to drive ongoing growth. We are well-positioned to cultivate new business through superior customer service, giving gives us confidence in our ability to deliver long-term value for our shareholders.”

Net Interest Income and Net Interest Margin
	Three Months Ended												% Change June 30, 2023 vs.
	June 30,2023				March 31,2023				June 30,2022				March 31,2023			June 30,2022
	(Dollars in thousands)
Average interest-earning assets	$	2,091,998			$	1,947,957			$	1,710,022			7.4	%		22.3	%
Net interest income	$	19,432			$	19,546			$	16,365			(0.6)	%		18.7	%
Net interest margin		3.73	%			4.07	%			3.84	%		(34)	bps		(11)	bps

Net interest income for the second quarter of 2023 was $19.4 million, a decrease of 0.6% from $19.5 million for the first quarter of 2023. The decrease was primarily driven by the impact of higher interest rates paid on deposits, which more than offset an increase in the yield on interest-earning assets.

Relative to the second quarter of 2022, net interest income increased $3.1 million, or 18.7%. The increase was partially the result of improvement in the yield on interest-earning assets, which outpaced the rise in costs of deposits and other borrowings. In addition, we benefited from the significant organic growth in interest-earning assets year over year.

Net interest margin for the second quarter of 2023 was 3.73%, compared to 4.07% for the first quarter of 2023. The decrease was primarily due to higher interest rates paid on interest-bearing liabilities, which outpaced the increase in yield on interest-earning assets.

Relative to the second quarter of 2022, net interest margin decreased from 3.84%. The decrease was primarily due to a rapid increase in interest rates, which accelerated cost on interest-bearing liabilities at a faster pace than the yield received on interest-earning assets. A shift from noninterest-bearing deposits to interest-bearing deposits also had a negative impact on net interest margin.

Noninterest Income
	Three Months Ended												% Change June 30, 2023 vs.
	June 30,2023				March 31,2023				June 30,2022				March 31,2023			June 30,2022
	(Dollars in thousands)
Service charges on deposit accounts	$	456			$	450			$	480			1.3	%		(5.0)	%
Swap fees		173				(4	)			21			(4425.0	%		723.8	%
SBA/USDA fees		66				134				93			(50.7)	%		(29.0)	%
Mortgage origination fees		188				100				213			88.0	%		(11.7)	%
Net gain (loss) on securities		(45	)			514				(42	)		(108.8)	%		7.1	%
Other operating income		6,024				592				639			917.6	%		842.7	%
Total noninterest income	$	6,862			$	1,786			$	1,404			284.2	%		388.7	%

Noninterest income for the second quarter of 2023 was $6.9 million, an increase of 284.2% from $1.8 million for the first quarter of 2023. The second quarter included $5.1 million in employee retention credits (“ERC”) and interest from the Federal government as well as $264,000 in fees related to ERC from a third party.

Relative to the second quarter of 2022, noninterest income increased 388.7% from $1.4 million. The second quarter of 2023 included $5.1 million in ERC and interest from the Federal government as well as $264,000 in fees related to ERC from a third party.

Noninterest Expense
	Three Months Ended									% Change June 30, 2023 vs.
	June 30,2023			March 31,2023			June 30,2022			March 31,2023			June 30,2022
	(Dollars in thousands)
Salaries and employee benefits	$	7,863		$	6,311		$	5,982		24.6	%		31.4	%
Equipment and occupancy expenses		694			683			719		1.6	%		(3.5)	%
Data processing fees		646			593			570		8.9	%		13.3	%
Regulatory assessments		180			342			262		(47.4)	%		(31.3)	%
Other operating expenses		4,049			2,229			2,119		81.7	%		91.1	%
Total noninterest expenses	$	13,432		$	10,158		$	9,652		32.2	%		39.2	%

Noninterest expense for the second quarter of 2023 was $13.4 million, an increase of 32.2% from $10.2 million for the first quarter of 2023. The increase was primarily attributable to an increase in salaries and benefits, substantially as a result of one-time retirement related expenses of our former CEO in May 2023 and professional fees paid to a third party during the second quarter related to ERC.

Relative to the second quarter of 2022, noninterest expense increased 39.2% from $9.7 million. The increase was primarily attributable to an increase in salaries and benefits, substantially as a result of one-time retirement related expenses of our former CEO in May 2023 and professional fees paid to a third party during the second quarter related to ERC.

 

Loans and Credit Quality
	Three Months Ended												% Change June 30, 2023 vs.
	June 30,2023				March 31,2023				June 30,2022				March 31,2023			June 30,2022
	(Dollars in thousands)
Gross loans		1,722,278				1,650,929				1,435,089			4.3	%		20.0	%
Unearned income		(5,766	)			(5,614	)			(4,884	)		2.7	%		18.1	%
Loans, net of unearned income (“Loans”)	$	1,716,512			$	1,645,315			$	1,430,205			4.3	%		20.0	%
Average loans, net of unearned (“Average loans”)	$	1,676,816			$	1,609,564			$	1,359,320			4.2	%		23.4	%
Nonperforming loans (“NPL”)	$	1,010			$	1,646			$	3,550			(38.6)	%		(71.5)	%
Provision for credit losses	$	1,557			$	1,181			$	1,304			31.8	%		19.4	%
Allowance for credit losses (“ACL”)	$	21,385			$	19,855			$	16,807			7.7	%		27.2	%
Net charge-offs (recoveries)	$	27			$	197			$	(11	)		(86.3)	%		(345.5)	%
NPL to gross loans		0.06	%			0.10	%			0.25	%
Net charge-offs (recoveries) to average loans(1)		0.01	%			0.05	%			0.00	%
ACL to loans		1.25	%			1.21	%			1.18	%
(1) Ratio is annualized.

Loans, net of unearned income, were $1.7 billion at June 30, 2023, up $71.2 million from March 31, 2023 and up $286.3 million from June 30, 2022. The linked-quarter and year-over-year increases in loans were primarily attributable to new business growth across our footprint.

Nonperforming loans totaled $1.0 million, or 0.06% of gross loans, at June 30, 2023, compared with $1.6 million, or 0.10% of gross loans, at March 31, 2023, and $3.6 million, or 0.25% of gross loans, at June 30, 2022. The $636,000 net decrease in nonperforming loans in the second quarter of 2023 was primarily attributable to a commercial real estate loan that was paid-off. The $2.5 million net decrease in nonperforming loans from June 30, 2022, was primarily attributable to a significant commercial real estate loan being moved back to accruing status, two loans that were charged-off and one loan that was paid-off.

The Company recorded a provision for credit losses of $1.6 million for the second quarter of 2023, compared to $1.2 million for the first quarter of 2023. The increase in provision was primarily due to changes in our qualitative economic factors and modest loan growth for the quarter.

Net charge-offs for the second quarter of 2023 were $27,000, or 0.01% of average loans on an annualized basis, compared to net charge-offs of $197,000, or 0.05% of average loans on an annualized basis, for the first quarter of 2023, and net recoveries of $11,000, or 0.00% of average loans on an annualized basis, for the second quarter of 2022.

The Company’s allowance for credit losses was 1.25% of total loans and 2117.33% of nonperforming loans at June 30, 2023, compared with 1.21% of total loans and 1206.26% of nonperforming loans at March 31, 2023. Allowance for credit losses on unfunded commitments was $1.5 million at June 30, 2023.

Deposits
	Three Months Ended												% Change June 30, 2023 vs.
	June 30,2023				March 31,2023				June 30,2022				March 31,2023			June 30,2022
	(Dollars in thousands)
Noninterest-bearing deposits	$	449,433			$	433,832			$	512,598			3.6	%		(12.3)	%
Interest-bearing deposits		1,474,478				1,355,659				1,132,348			8.8	%		30.2	%
Total deposits	$	1,923,911			$	1,789,491			$	1,644,946			7.5	%		17.0	%
Uninsured deposits	$	553,084			$	567,709			$	660,115			(2.6)	%		(16.2)	%
Uninsured deposits to total deposits		28.75	%			31.72	%			40.13	%
Noninterest deposits to total deposits		23.36	%			24.24	%			31.16	%

Total deposits were $1.9 billion at June 30, 2023, up from $1.8 billion at March 31, 2023 and $1.6 billion at June 30, 2022. The $134.4 million increase in total deposits in the second quarter was due to an increase of $118.8 million in interest-bearing deposits and by a $15.6 million increase in noninterest-bearing deposits. Included in the increase was $49.1 million in brokered deposits.

Capital
	June 30,2023						March 31,2023						June 30,2022
	Company			Bank			Company			Bank			Company			Bank
Tier 1 capital ratio to average assets	8.70	%		11.82	%		8.89	%		12.19	%		8.78	%		10.97	%
Risk-based capital ratios:
Common equity tier 1 (“CET1”) capital ratio	9.11	%		12.37	%		9.00	%		12.34	%		8.92	%		11.14	%
Tier 1 capital ratio	9.11	%		12.37	%		9.00	%		12.34	%		8.92	%		11.14	%
Total capital ratio	14.42	%		13.47	%		14.41	%		13.38	%		12.58	%		12.09	%

As of June 30, 2023, total stockholders’ equity was $197.2 million, up from $189.7 million at March 31, 2023. The increase of $7.6 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 recent events and trends in the banking industry and the inflationary environment. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the dates made, we cannot give any assurance that such expectations will prove correct and actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 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
ljoyce@ssbank.bank				ssbankir@finprofiles.com

SELECT FINANCIAL DATA
(Dollars in thousands, except share and per share amounts)
	Three Months Ended												Six Months Ended
	June 30,2023				March 31,2023				June 30,2022				June 30,2023				June 30,2022
Results of Operations
Interest income	$	32,185			$	28,699			$	17,752			$	60,884			$	33,624
Interest expense		12,753				9,153				1,387				21,906				2,605
Net interest income		19,432				19,546				16,365				38,978				31,019
Provision for credit losses		1,557				1,181				1,304				2,738				2,004
Net interest income after provision		17,875				18,365				15,061				36,240				29,015
Noninterest income		6,862				1,786				1,404				8,648				2,737
Noninterest expense		13,432				10,158				9,652				23,590				18,942
Income tax expense		2,549				2,322				1,590				4,871				3,030
Net income	$	8,756			$	7,671			$	5,223			$	16,427			$	9,780
Core net income(1)	$	7,058			$	7,280			$	5,255			$	14,339			$	10,086
Share and Per Share Data
Shares issued and outstanding		8,738,814				8,723,763				8,691,620				8,738,814				8,691,620
Weighted average shares outstanding:
Basic		8,763,635				8,762,450				8,740,295				8,763,046				8,818,327
Diluted		8,950,847				9,044,490				8,894,577				9,001,600				8,960,565
Earnings per share:
Basic	$	1.00			$	0.87			$	0.60			$	1.87			$	1.11
Diluted	$	0.98			$	0.85			$	0.59			$	1.82			$	1.09
Core - diluted(1)	$	0.79			$	0.80			$	0.59			$	1.59			$	1.13
Book value per share	$	22.57			$	21.74			$	19.32			$	22.57			$	19.32
Tangible book value per share(1)	$	20.52			$	19.68			$	17.23			$	20.52			$	17.23
Cash dividends per common share	$	0.09			$	0.09			$	0.09			$	0.18			$	0.18
Performance and Financial Ratios
ROAA		1.60	%			1.51	%			1.15	%			1.56	%			1.09	%
ROAE		18.15	%			16.67	%			12.32	%			17.43	%			11.36	%
Core ROAA(1)		1.29	%			1.44	%			1.16	%			1.36	%			1.13	%
ROATCE(2)		20.01	%			18.45	%			13.80	%			19.25	%			12.70	%
Core ROATCE(1)		16.13	%			17.51	%			13.89	%			16.80	%			13.10	%
NIM		3.73	%			4.07	%			3.84	%			3.89	%			3.69	%
NIM - FTE(2)		3.74	%			4.09	%			3.86	%			3.90	%			3.70	%
Net interest spread		2.86	%			3.33	%			3.67	%			3.08	%			3.53	%
Yield on loans		6.61	%			6.38	%			4.80	%			6.50	%			4.74	%
Yield on interest-earning assets		6.17	%			5.97	%			4.16	%			6.08	%			4.00	%
Cost of interest-bearing liabilities		3.31	%			2.64	%			0.49	%			3.00	%			0.47	%
Cost of funds(2)		2.58	%			2.01	%			0.34	%			2.31	%			0.33	%
Cost of interest-bearing deposits		3.12	%			2.42	%			0.34	%			2.79	%			0.34	%
Cost of total deposits		2.38	%			1.81	%			0.23	%			2.11	%			0.23	%
Noninterest deposits to total deposits		23.36	%			24.24	%			31.16	%			23.36	%			31.16	%
Core deposits to total deposits		86.43	%			88.57	%			94.86	%			86.43	%			94.86	%
Uninsured deposits to total deposits		28.75	%			31.72	%			40.13	%			28.75	%			40.13	%
Total loans to total deposits		89.22	%			91.94	%			86.95	%			89.22	%			86.95	%
Efficiency ratio		51.00	%			48.79	%			54.19	%			50.02	%			55.45	%
Core efficiency ratio(1)		49.96	%			48.79	%			54.19	%			49.38	%			55.45	%

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

SELECT FINANCIAL DATA
(Dollars in thousands)
	Three Months Ended												Six Months Ended
	June 30,2023				March 31,2023				June 30,2022				June 30,2023				June 30,2022
Financial Condition (ending)
Total loans	$	1,716,512			$	1,645,315			$	1,430,205			$	1,716,512			$	1,430,205
Total securities		182,717				183,197				171,411				182,717				171,411
Total assets		2,277,803				2,135,622				1,902,495				2,277,803				1,902,495
Total noninterest bearing deposits		449,433				433,832				512,598				449,433				512,598
Total core deposits(1)		1,662,855				1,584,915				1,560,390				1,662,855				1,560,390
Total deposits		1,923,911				1,789,491				1,644,946				1,923,911				1,644,946
Total borrowings		131,472				131,372				72,013				131,472				72,013
Total liabilities		2,080,554				1,945,959				1,734,548				2,080,554				1,734,548
Total shareholders’ equity		197,249				189,663				167,947				197,249				167,947
Financial Condition (average)
Total loans	$	1,676,816			$	1,609,564			$	1,359,320			$	1,643,376			$	1,319,090
Total securities		196,731				192,348				178,527				194,552				170,151
Total other interest-earning assets		218,451				146,045				172,175				182,447				207,990
Total interest-bearing assets		2,091,998				1,947,957				1,710,022				2,020,375				1,697,231
Total assets		2,200,843				2,057,005				1,821,437				2,129,328				1,804,321
Total noninterest-bearing deposits		438,987				438,735				502,728				438,862				508,560
Total interest-bearing deposits		1,412,047				1,300,632				1,059,362				1,356,648				1,041,728
Total deposits		1,851,034				1,739,367				1,562,090				1,795,510				1,550,288
Total borrowings		131,411				104,901				72,066				118,229				65,506
Total interest-bearing liabilities		1,543,458				1,405,533				1,131,428				1,474,877				1,107,234
Total shareholders’ equity		193,516				186,639				170,038				190,096				173,621
Asset Quality
Nonperforming loans	$	1,010			$	1,646			$	3,550			$	1,010			$	3,550
Other real estate owned (“OREO”)	$	2,870			$	2,930			$	2,930			$	2,870			$	2,930
Nonperforming assets (“NPA”)	$	3,880			$	4,576			$	6,480			$	3,880			$	6,480
Net charge-offs (recovery) to average loans(2)		0.01	%			0.05	%			—	%			0.03	%			0.01	%
Provision for credit losses to average loans(2)		0.37	%			0.30	%			0.38	%			0.34	%			0.31	%
ACL to loans		1.25	%			1.21	%			1.18	%			1.25	%			1.18	%
ACL to gross loans		1.24	%			1.20	%			1.17	%			1.24	%			1.17	%
ACL to NPL		2117.33	%			1206.26	%			473.44	%			2117.33	%			473.44	%
NPL to loans		0.06	%			0.10	%			0.25	%			0.06	%			0.25	%
NPL to gross loans		0.06	%			0.10	%			0.25	%			0.06	%			0.25	%
NPA to gross loans and OREO		0.22	%			0.28	%			0.45	%			0.22	%			0.45	%
NPA to total assets		0.17	%			0.21	%			0.34	%			0.17	%			0.34	%
Regulatory and Other Capital Ratios
Total shareholders’ equity to total assets		8.66	%			8.88	%			8.83	%			8.66	%			8.83	%
Tangible common equity to tangible assets(3)		7.94	%			8.11	%			7.95	%			7.94	%			7.95	%
Tier 1 capital ratio to average assets		8.70	%			8.89	%			8.78	%			8.70	%			8.78	%
Risk-based capital ratios:
CET1 capital ratio		9.11	%			9.00	%			8.92	%			9.11	%			8.92	%
Tier 1 capital ratio		9.11	%			9.00	%			8.92	%			9.11	%			8.92	%
Total capital ratio		14.42	%			14.41	%			12.58	%			14.42	%			12.58	%

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

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
	June 30,2023				March 31,2023				December 31,2022				June 30,2022
	(Unaudited)				(Unaudited)				(Audited)				(Unaudited)
Assets
Cash and due from banks	$	21,299			$	17,245			$	15,260			$	22,167
Interest-bearing deposits in banks		159,818				99,541				90,198				95,156
Federal funds sold		84,812				76,010				63,041				73,024
Total cash and cash equivalents		265,929				192,796				168,499				190,347
Securities available for sale, at fair value		163,075				163,550				155,544				151,749
Securities held to maturity, at amortized cost		19,642				19,647				19,652				19,662
Other equity securities, at fair value		3,762				3,806				4,444				6,958
Restricted equity securities, at cost		3,862				3,862				3,134				2,825
Loans held for sale		1,589				2,376				1,047				2,709
Loans, net of unearned income		1,716,512				1,645,315				1,587,164				1,430,205
Less allowance for credit losses		21,385				19,855				20,156				16,807
Loans, net		1,695,127				1,625,460				1,567,008				1,413,398
Premises and equipment, net		26,957				27,098				27,345				28,467
Accrued interest receivable		7,372				7,077				6,963				4,839
Bank owned life insurance		29,521				29,350				29,186				29,509
Annuities		15,359				15,489				15,478				15,540
Foreclosed assets		2,870				2,930				2,930				2,930
Goodwill		16,862				16,862				16,862				16,862
Core deposit intangible		1,062				1,144				1,226				1,368
Other assets		24,814				24,175				25,886				15,332
Total assets	$	2,277,803			$	2,135,622			$	2,045,204			$	1,902,495
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing	$	449,433			$	433,832			$	460,977			$	512,598
Interest-bearing		1,474,478				1,355,659				1,259,766				1,132,348
Total deposits		1,923,911				1,789,491				1,720,743				1,644,946
Other borrowings		(13	)			(16	)			(19	)			—
FHLB advances		45,000				45,000				31,000				25,000
Subordinated notes		86,485				86,388				86,314				47,013
Accrued interest payable		1,063				844				584				88
Other liabilities		24,108				24,252				24,863				17,501
Total liabilities		2,080,554				1,945,959				1,863,485				1,734,548
Stockholders' equity:
Common stock		43,830				43,798				43,714				43,458
Capital surplus		77,101				77,053				76,785				75,597
Retained earnings		88,603				80,642				73,764				58,039
Accumulated other comprehensive loss		(10,799	)			(9,846	)			(11,048	)			(8,439	)
Unvested restricted stock		(709	)			(965	)			(477	)			(708	)
Vested restricted stock units		(777	)			(1,019	)			(1,019	)			—
Total stockholders' equity		197,249				189,663				181,719				167,947
Total liabilities and stockholders' equity	$	2,277,803			$	2,135,622			$	2,045,204			$	1,902,495

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
	Three Months Ended												Six Months Ended
	June 30,2023				March 31,2023				June 30,2022				June 30,2023			June 30,2022
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)			(Unaudited)
Interest income:
Loans, including fees	$	27,630			$	25,335			$	16,265			$	52,965		$	31,031
Taxable securities		1,641				1,383				788				3,024			1,407
Nontaxable securities		228				291				309				519			608
Other interest and dividends		2,686				1,690				390				4,376			578
Total interest income		32,185				28,699				17,752				60,884			33,624
Interest expense:
Deposits		10,998				7,768				889				18,766			1,762
Other borrowings		1,755				1,385				498				3,140			843
Total interest expense		12,753				9,153				1,387				21,906			2,605
Net interest income		19,432				19,546				16,365				38,978			31,019
Provision for credit losses		1,557				1,181				1,304				2,738			2,004
Net interest income after provision for credit losses		17,875				18,365				15,061				36,240			29,015
Noninterest income:
Service charges on deposit accounts		456				450				480				906			925
Swap fees		173				(4	)			21				169			36
SBA/USDA fees		66				134				93				200			481
Mortgage origination fees		188				100				213				288			499
Net gain (loss) on securities		(45	)			514				(42	)			469			(403	)
Other operating income		6,024				592				639				6,616			1,199
Total noninterest income		6,862				1,786				1,404				8,648			2,737
Noninterest expenses:
Salaries and employee benefits		7,863				6,311				5,982				14,174			11,707
Equipment and occupancy expenses		694				683				719				1,377			1,424
Data processing fees		646				593				570				1,239			1,134
Regulatory assessments		180				342				262				522			525
Other operating expenses		4,049				2,229				2,119				6,278			4,152
Total noninterest expenses		13,432				10,158				9,652				23,590			18,942
Income before income taxes		11,305				9,993				6,813				21,298			12,810
Income tax expense		2,549				2,322				1,590				4,871			3,030
Net income	$	8,756			$	7,671			$	5,223			$	16,427		$	9,780
Basic earnings per share	$	1.00			$	0.87			$	0.60			$	1.87		$	1.11
Diluted earnings per share	$	0.98			$	0.85			$	0.59			$	1.82		$	1.09

AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
	Three Months Ended
	June 30,2023										March 31,2023										June 30,2022
	AverageBalance				Interest			Yield/Rate			AverageBalance				Interest			Yield/Rate			AverageBalance				Interest			Yield/Rate
Assets:
Interest-earning assets:
Loans, net of unearned income(1)	$	1,676,816			$	27,630		6.61	%		$	1,609,564			$	25,335		6.38	%		$	1,359,320			$	16,265		4.80	%
Taxable securities		151,107				1,641		4.36	%			139,516				1,383		4.02	%			121,677				788		2.60	%
Nontaxable securities		45,624				228		2.00	%			52,832				291		2.24	%			56,850				309		2.18	%
Other interest-earnings assets		218,451				2,686		4.93	%			146,045				1,690		4.69	%			172,175				390		0.91	%
Total interest-earning assets	$	2,091,998			$	32,185		6.17	%		$	1,947,957			$	28,699		5.97	%		$	1,710,022			$	17,752		4.16	%
Allowance for credit losses		(20,154	)									(20,493	)									(15,815	)
Noninterest-earning assets		128,999										129,541										127,230
Total Assets	$	2,200,843									$	2,057,005									$	1,821,437
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts		92,245				20		0.09	%			93,951				20		0.08	%			114,743				27		0.09	%
Savings and money market accounts		845,742				6,872		3.26	%			806,001				5,040		2.54	%			735,845				625		0.34	%
Time deposits		474,060				4,106		3.47	%			400,680				2,708		2.74	%			208,774				237		0.46	%
FHLB advances		45,000				529		4.72	%			18,578				159		3.47	%			25,000				21		0.33	%
Other borrowings		86,411				1,226		5.69	%			86,323				1,226		5.76	%			47,066				477		4.07	%
Total interest-bearing liabilities	$	1,543,458			$	12,753		3.31	%		$	1,405,533			$	9,153		2.64	%		$	1,131,428			$	1,387		0.49	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits	$	438,987									$	438,735									$	502,728
Other liabilities		24,882										26,098										17,243
Total noninterest-bearing liabilities		463,869										464,833										519,971
Stockholders’ Equity		193,516										186,639										170,038
Total Liabilities and Stockholders’ Equity	$	2,200,843									$	2,057,005									$	1,821,437
Net interest income					$	19,432									$	19,546									$	16,365
Net interest spread(2)								2.86	%									3.33	%									3.67	%
Net interest margin(3)								3.73	%									4.07	%									3.84	%
Net interest margin - FTE(4)(5)								3.74	%									4.09	%									3.86	%
Cost of funds(6)								2.58	%									2.01	%									0.34	%
Cost of interest-bearing deposits								3.12	%									2.42	%									0.34	%
Cost of total deposits								2.38	%									1.81	%									0.23	%

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

AVERAGE BALANCE SHEET AND NET INTEREST MARGIN
(Dollars in thousands)
	Six Months Ended
	June 30,2023										June 30,2022
	AverageBalance				Interest			Yield/Rate			AverageBalance				Interest			Yield/Rate
Assets:
Interest-earning assets:
Loans, net of unearned income(1)	$	1,643,376			$	52,965		6.50	%		$	1,319,090			$	31,031		4.74	%
Taxable securities		145,344				3,024		4.20	%			114,289				1,407		2.48	%
Nontaxable securities		49,208				519		2.13	%			55,862				608		2.19	%
Other interest-earnings assets		182,447				4,376		4.84	%			207,990				578		0.56	%
Total interest-earning assets	$	2,020,375			$	60,884		6.08	%		$	1,697,231			$	33,624		4.00	%
Allowance for credit losses		(20,315	)									(15,430	)
Noninterest-earning assets		129,268										122,520
Total Assets	$	2,129,328									$	1,804,321
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing transaction accounts		93,093				40		0.09	%			112,874				53		0.09	%
Savings and money market accounts		825,982				11,911		2.91	%			705,841				1,217		0.35	%
Time deposits		437,573				6,815		3.14	%			223,013				492		0.45	%
FHLB advances		31,862				688		4.35	%			25,472				43		0.34	%
Other borrowings		86,367				2,452		5.73	%			40,034				800		4.03	%
Total interest-bearing liabilities	$	1,474,877			$	21,906		3.00	%		$	1,107,234			$	2,605		0.47	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits	$	438,862									$	508,560
Other liabilities		25,493										14,906
Total noninterest-bearing liabilities	$	464,355									$	523,466
Stockholders’ Equity		190,096										173,621
Total Liabilities and Stockholders’ Equity	$	2,129,328									$	1,804,321
Net interest income					$	38,978									$	31,019
Net interest spread(2)								3.08	%									3.53	%
Net interest margin(3)								3.89	%									3.69	%
Net interest margin - FTE(4)(5)								3.90	%									3.70	%
Cost of funds(6)								2.31	%									0.33	%
Cost of interest-bearing deposits								2.79	%									0.34	%
Cost of total deposits								2.11	%									0.23	%

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

LOAN COMPOSITION
(Dollars in thousands)
	June 30,2023							March 31,2023							December 31,2022							June 30,2022
	Amount				% of			Amount				% of			Amount				% of			Amount				% of
Real estate mortgages:
Construction and	$	228,236			13.3	%		$	227,560			13.8	%		$	255,736			16.1	%		$	185,164			12.9	%
Residential		214,897			12.5	%			196,923			11.9	%			167,891			10.5	%			153,275			10.7	%
Commercial		1,011,815			58.7	%			948,251			57.5	%			904,872			56.8	%			867,815			60.4	%
Commercial and industrial		259,195			15.0	%			270,825			16.4	%			256,553			16.1	%			219,284			15.3	%
Consumer and other		8,135			0.5	%			7,370			0.4	%			7,655			0.5	%			9,551			0.7	%
Gross loans		1,722,278			100.0	%			1,650,929			100.0	%			1,592,707			100.0	%			1,435,089			100.0	%
Unearned income		(5,766	)						(5,614	)						(5,543	)						(4,884	)
Loans, net of unearned income		1,716,512							1,645,315							1,587,164							1,430,205
Allowance for credit losses		(21,385	)						(19,855	)						(20,156	)						(16,807	)
Loans, net	$	1,695,127						$	1,625,460						$	1,567,008						$	1,413,398

DEPOSIT COMPOSITION
(Dollars in thousands)
	June 30,2023						March 31,2023						December 31,2022						June 30,2022
	Amount			% of total			Amount			% of total			Amount			% of total			Amount			% of total
Noninterest-bearing transaction	$	449,433		23.3	%		$	433,833		24.2	%		$	460,977		26.8	%		$	512,598		31.2	%
Interest-bearing transaction		922,835		48.0	%			877,166		49.0	%			837,127		48.6	%			836,230		50.8	%
Savings		41,574		2.2	%			47,742		2.7	%			49,235		2.9	%			67,583		4.1	%
Time deposits, $250,000 and under		438,228		22.8	%			366,271		20.5	%			307,145		17.8	%			188,682		11.5	%
Time deposits, over $250,000		71,841		3.7	%			64,479		3.6	%			66,259		3.9	%			39,853		2.4	%
Total deposits	$	1,923,911		100.0	%		$	1,789,491		100.0	%		$	1,720,743		100.0	%		$	1,644,946		100.0	%

Nonperfoming Assets
(Dollars in thousands)
	June 30,2023				March 31,2023				December 31,2022				June 30,2022
Nonaccrual loans	$	1,010			$	1,646			$	2,245			$	3,550
Past due loans 90 days or more and still accruing interest		—				—				—				—
Total nonperforming loans		1,010				1,646				2,245				3,550
OREO		2,870				2,930				2,930				2,930
Total nonperforming assets	$	3,880			$	4,576			$	5,175			$	6,480
Troubled debt restructured loans – nonaccrual(1)		724				805				832				676
Troubled debt restructured loans – accruing		1,328				1,272				1,292				1,323
Total troubled debt restructured loans	$	2,052			$	2,077			$	2,124			$	1,999
Allowance for credit losses	$	21,385			$	19,855			$	20,156			$	16,807
Loans, net of unearned income at the end of the period	$	1,716,512			$	1,645,315			$	1,587,164			$	1,430,205
Gross loans outstanding at the end of period	$	1,722,278			$	1,650,929			$	1,592,707			$	1,435,089
Total assets	$	2,277,803			$	2,135,622			$	2,045,204			$	1,902,495
Allowance for credit losses to nonperforming loans		2117.33	%			1206.26	%			897.82	%			473.44	%
Nonperforming loans to loans, net of unearned income		0.06	%			0.10	%			0.14	%			0.25	%
Nonperforming loans to gross loans		0.06	%			0.10	%			0.14	%			0.25	%
Nonperforming assets to gross loans and OREO		0.22	%			0.28	%			0.32	%			0.45	%
Nonperforming assets to total assets		0.17	%			0.21	%			0.25	%			0.34	%
Nonaccrual loans by category:
Real estate mortgages:
Construction & Development	$	33			$	64			$	67			$	73
Residential Mortgages		297				267				565				563
Commercial Real Estate Mortgages		671				1,263				1,278				2,135
Commercial & Industrial		9				51				312				768
Consumer and other		—				1				23				11
Total	$	1,010			$	1,646			$	2,245			$	3,550

(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 Credit Losses
(Dollars in thousands)
	Three Months Ended												Six Months Ended
	June 30,2023				March 31,2023				June 30,2022				June 30,2023				June 30, 2022
Average loans, net of unearned income	$	1,676,816			$	1,609,564			$	1,359,320			$	1,643,376			$	1,319,090
Loans, net of unearned income	$	1,716,512			$	1,645,315			$	1,430,205			$	1,716,512			$	1,430,205
Gross loans	$	1,722,278			$	1,650,929			$	1,435,089			$	1,722,278			$	1,435,089
Allowance for credit losses at beginning of the period	$	19,855			$	20,156			$	15,492			$	20,156			$	14,844
Impact of adoption of ASC 326	$	—			$	(1,285	)		$	—			$	(1,285	)		$	—
Charge-offs:
Construction and development		—				—				7				—				66
Residential		—				—				—				—				7
Commercial		—				—				—				—				—
Commercial and industrial		44				218				—				262				—
Consumer and other		—				6				1				6				7
Total charge-offs		44				224				8				268				80
Recoveries:
Construction and development		—				—				—				—				—
Residential		17				11				18				28				35
Commercial		—				—				—				—				—
Commercial and industrial		—				14				—				14				—
Consumer and other		—				2				1				2				4
Total recoveries		17				27				19				44				39
Net charge-offs (recoveries)	$	27			$	197			$	(11	)		$	224			$	41
Provision for credit losses	$	1,557			$	1,181			$	1,304			$	2,738			$	2,004
Balance at end of the period	$	21,385			$	19,855			$	16,807			$	21,385			$	16,807
Allowance for credit losses on unfunded commitments at beginning of the period	$	1,285			$	—			$	—			$	—			$	—
Impact of adoption of ASC 326		—				1,285				—				1,285				—
Provision for credit losses on unfunded commitments		210				—				—				210				—
Balance at the end of the period	$	1,495			$	1,285			$	—			$	1,495			$	—
Allowance to loans, net of unearned income		1.25	%			1.21	%			1.18	%			1.25	%			1.18	%
Allowance to gross loans		1.24	%			1.20	%			1.17	%			1.24	%			1.17	%
Net charge-offs (recoveries) to average loans, net of unearned income(1)		0.01	%			0.05	%			—	%			0.03	%			0.01	%
Provision for credit losses to average loans, net of unearned income(1)		0.37	%			0.30	%			0.38	%			0.34	%			0.31	%

(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												Six Months Ended
	June 30,2023				March 31,2023				June 30,2022				June 30,2023				June 30,2022
Net income	$	8,756			$	7,671			$	5,223			$	16,427			$	9,780
Add: One-time retirement related expenses		1,571				—				—				1,571				—
Add: Professional fees related to ERC		1,243				—				—				1,243				—
Add: Net OREO gains		7				—				—				7				—
Less: Employee retention related revenue		5,100				—				—				5,100				—
Less: Gain (loss) on securities		(45	)			514				(42	)			469				(403	)
Less: Tax effect		(536	)			(123	)			10				(660	)			97
Core net income	$	7,058			$	7,280			$	5,255			$	14,339			$	10,086
Average assets	$	2,200,843			$	2,057,005			$	1,821,437			$	2,129,328			$	1,804,321
Core return on average assets		1.29	%			1.44	%			1.16	%			1.36	%			1.13	%
Net income	$	8,756			$	7,671			$	5,223			$	16,427			$	9,780
Add: One-time retirement related expenses		1,571				—				—				1,571				—
Add: Professional fees related to ERC		1,243				—				—				1,243				—
Add: Net OREO gains		7				—				—				7				—
Add: Provision		1,557				1,181				1,304				2,738				2,004
Less: Employee retention related revenue		5,100				—				—				5,100				—
Less: Gain (loss) on securities		(45	)			514				(42	)			469				(403	)
Add: Income taxes		2,549				2,322				1,590				4,871				3,030
Pretax pre-provision core net income	$	10,628			$	10,660			$	8,159			$	21,288			$	15,217
Average assets	$	2,200,843			$	2,057,005			$	1,821,437			$	2,129,328			$	1,804,321
Pretax pre-provision core return on average assets		1.94	%			2.10	%			1.80	%			2.02	%			1.70	%
Net interest income	$	19,432			$	19,546			$	16,365			$	38,978			$	31,019
Add: Fully-taxable equivalent adjustments(1)		65				85				83				143				161
Net interest income - FTE	$	19,497			$	19,631			$	16,448			$	39,121			$	31,180
Net interest margin		3.73	%			4.07	%			3.84	%			3.89	%			3.69	%
Effect of fully-taxable equivalent adjustments(1)		0.01	%			0.02	%			0.02	%			0.01	%			0.01	%
Net interest margin - FTE		3.74	%			4.09	%			3.86	%			3.90	%			3.70	%
Total stockholders' equity	$	197,249			$	189,663			$	167,947			$	197,249			$	167,947
Less: Intangible assets		17,924				18,006				18,230				17,924				18,230
Tangible common equity	$	179,325			$	171,657			$	149,717			$	179,325			$	149,717
(1) Assumes a 24.0% tax rate.
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands, except share and per share amounts)
	Three Months Ended												Six Months Ended
	June 30,2023				March 31,2023				June 30,2022				June 30,2023				June 30,2022
Core net income	$	7,058			$	7,280			$	5,255			$	14,339			$	10,086
Diluted weighted average shares outstanding		8,950,847				9,044,490				8,894,577				9,001,600				8,960,565
Diluted core earnings per share	$	0.79			$	0.80			$	0.59			$	1.59			$	1.13
Common shares outstanding at year or period end		8,738,814				8,723,763				8,691,620				8,738,814				8,691,620
Tangible book value per share	$	20.52			$	19.68			$	17.23			$	20.52			$	17.23
Total assets at end of period	$	2,277,803			$	2,135,622			$	1,902,495			$	2,277,803			$	1,902,495
Less: Intangible assets		17,924				18,006				18,230				17,924				18,230
Adjusted assets at end of period	$	2,259,879			$	2,117,616			$	1,884,265			$	2,259,879			$	1,884,265
Tangible common equity to tangible assets		7.94	%			8.11	%			7.95	%			7.94	%			7.95	%
Total average shareholders equity	$	193,516			$	186,639			$	170,038			$	190,096			$	173,621
Less: Average intangible assets		17,974				18,055				18,270				18,014				18,304
Average tangible common equity	$	175,542			$	168,584			$	151,768			$	172,082			$	155,317
Net income to common shareholders	$	8,756			$	7,671			$	5,223			$	16,427			$	9,780
Return on average tangible common equity		20.01	%			18.45	%			13.80	%			19.25	%			12.70	%
Average tangible common equity	$	175,542			$	168,584			$	151,768			$	172,082			$	155,317
Core net income	$	7,058			$	7,280			$	5,255			$	14,339			$	10,086
Core return on average tangible common equity		16.13	%			17.51	%			13.89	%			16.80	%			13.10	%
Net interest income	$	19,432			$	19,546			$	16,365			$	38,978			$	31,019
Add: Noninterest income		6,862				1,786				1,404				8,648				2,737
Less: Employee retention related revenue		5,100				—				—				5,100				—
Less: Gain (loss) on securities		(45	)			514				(42	)			469				(403	)
Operating revenue	$	21,239			$	20,818			$	17,811			$	42,057			$	34,159
Expenses:
Total noninterest expense	$	13,432			$	10,158			$	9,652			$	23,590			$	18,942
Less: One-time retirement related expenses		1,571				—				—				1,571				—
Less: Professional fees related to ERC		1,243				—				—				1,243				—
Less: Net OREO gains		7				—				—				7				—
Adjusted noninterest expenses	$	10,611			$	10,158			$	9,652			$	20,769			$	18,942
Core efficiency ratio		49.96	%			48.79	%			54.19	%			49.38	%			55.45	%