SOUTHERN FIRST BANCSHARES INC
For the period ended Jun 30, 2025. Filed Aug 1, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 1, 2025
SFST$59.27+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-05.
0001206774-25-000343
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-01.
0001206774-25-000538
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 105 previous paragraphs and 115 current paragraphs.
50 unchanged; 49 reworded; 9 added; 2 removed; 4 previous and 7 current paragraphs rearranged.
Tables are not compared: 55 previous and 63 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Our interest-bearing deposits were the primary driver of the decrease in interest expense with a weighted average rate of 3.43% for the second quarter of 2025, a 60 basis point decrease from the second quarter of 2024.
Current report
During the first six months of 2025, our net interest margin (TE) increased by 51 basis points to 2.47%, compared to 1.96% for the first six months of 2024, primarily due to a decrease in the cost of our interest-bearing liabilities. Our average interest-bearing liabilities grew by only $21.6 million from prior year, while the rate of these liabilities decreased by 50 basis points to 3.51%. In addition, our average interest-earning assets grew by $55.4 million, while the average yield increased by 10 basis points to 5.18%.
Current report
The increase in average interest-bearing liabilities for the first half of 2025 was driven by an increase in interest-bearing deposits of $33.7 million, partially offset by a $11.4 million decrease in subordinated debentures. The primary driver of our decrease in interest expense was a 56 basis point decrease in the cost of our interest-bearing deposits.
Current report
Net interest income for the first half of 2025 was $48.7 million compared to $38.2 million for 2024, a $10.5 million, or 27.5%, increase. The increase in net interest income during 2025 was driven by a $7.5 million decrease in interest expense, related primarily to lower rates on our interest-bearing deposits as well as an increase in average balance and yield on our loan portfolio.
Current report
We recorded a provision for credit losses of $700,000 during the second quarter of 2025, compared to a $500,000 provision for credit losses in the second quarter of 2024. The $700,000 provision in 2025, which included a $650,000 provision for credit losses and a $50,000 reserve for unfunded commitments was driven primarily by growth in our loan portfolio. The $500,000 provision in 2024, which included a $750,000 provision for credit losses and a $250,000 reversal for unfunded commitments, was driven by an increase in the level of charge-offs we experienced during the second quarter, combined with an increase in the specific reserve on individually assessed loans. During the second quarter of 2024, we charged-off $1.0 million related to one relationship associated with the assisted living industry. The reversal of the reserve for unfunded commitments was due to a decrease in the balance of unfunded commitments at June 30, 2024.
Current report
We recorded a provision expense of $1.5 million and $325,000 for the six months ended June 30, 2025 and June 30, 2024, respectively. The $1.5 million provision expense for the first half of 2025 included $1.4 provision for credit losses and a $50,000 reserve for unfunded commitments. The increase in provision expense was primarily due to loan growth during the first half of the year. The $325,000 provision expense for the first half of 2024 included $750,000 provision for credit losses and a $425,000 reversal for unfunded commitments.
Current report
Noninterest income was $6.4 million for the first half of 2025, a $260,000, or 4.2%, increase from noninterest income of $6.2 million for the second half of 2024. Service fees on deposit account increased by $296,000, or 36.5% over the prior year, while mortgage banking income decreased by $94,000, or 3.0%, from the first half of 2024.
Current report
Noninterest expense was $38.2 million for the first half of 2025, a $1.4 million, or 3.9%, increase from noninterest expense of $36.7 million for the first half of 2024. The increase in noninterest expense was driven primarily by the following:
Current report
Partially offsetting these increases, professional fees decreased $82,000, or 6.8%, relating primarily to decreases in legal fees, consulting fees, and other professional fees.
Removed paragraphs (2)
Previous report
The increase in our average interest-bearing liabilities during the first quarter of 2025 resulted primarily from a $39.6 million increase in our interest-bearing deposits from the prior year, while the 46 basis point decrease in rate on our interest-bearing liabilities was driven by a 50 basis point decrease in deposit rates.
Previous report
We recorded a provision for credit losses of $750,000 during the first quarter of 2025, compared to a reversal of $175,000 to the provision for credit losses in the first quarter of 2024. The provision during the first quarter of 2025 was driven primarily by growth in our loan portfolio. In addition, we did not record a provision for unfunded commitments during the first quarter of 2025.
Reworded paragraphs (49)
Previous wording
Item 2. MANAGEMENT’S DISCUSSION AND Analysis of Financial Condition and Results of Operations.
Current wording
MANAGEMENT’S DISCUSSION AND Analysis of Financial Condition and Results of Operations.
Previous wording
The following discussion reviews our results of operations for the three month period ended March 31, 2025 as compared to the three month period ended March 31, 2024 and assesses our financial condition as of March 31, 2025 as compared to December 31, 2024. You should read the following discussion and analysis in conjunction with the accompanying consolidated financial statements and the related notes and the consolidated financial statements and the related notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K for that period. Results for the three month period ended March 31, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future period.
Current wording
The following discussion reviews our results of operations for the three and six month periods ended June 30, 2025 as compared to the three and six month periods ended June 30, 2024 and assesses our financial condition as of June 30, 2025 as compared to December 31, 2024. You should read the following discussion and analysis in conjunction with the accompanying consolidated financial statements and the related notes and the consolidated financial statements and the related notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K for that period. Results for the three and six month periods ended June 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025 or any future period.
Previous wording
looking statements may relate to our financial condition, results of operations, plans, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “seek to,” “strive,” “focus,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to:
Current wording
This report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements may relate to our financial condition, results of operations, plans, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “seek to,” “strive,” “focus,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to:
Previous wording
At March 31, 2025, we had total assets of $4.28 billion, a 4.8% increase from total assets of $4.09 billion at December 31, 2024. The largest component of our total assets is loans which were $3.68 billion and $3.63 billion at March 31, 2025 and December 31, 2024, respectively. Our liabilities and shareholders’ equity at March 31, 2025 totaled $3.95 billion and $337.6 million, respectively, compared to liabilities of $3.76 billion and shareholders’ equity of $330.4 million at December 31, 2024. The principal component of our liabilities is deposits which were $3.62 billion and $3.44 billion at March 31, 2025 and December 31, 2024, respectively.
Current wording
At June 30, 2025, we had total assets of $4.31 billion, a 5.4% increase from total assets of $4.09 billion at December 31, 2024. The largest component of our total assets is loans which were $3.75 billion and $3.63 billion at June 30, 2025 and December 31, 2024, respectively. Our liabilities and shareholders’ equity at June 30, 2025 totaled $3.96 billion and $345.5 million, respectively, compared to liabilities of $3.76 billion and shareholders’ equity of $330.4 million at December 31, 2024. The principal component of our liabilities is deposits which were $3.64 billion and $3.44 billion at June 30, 2025 and December 31, 2024, respectively.
Previous wording
Our net income to common shareholders was $5.3 million and $2.5 million for the three months ended March 31, 2025 and 2024, respectively. Diluted earnings per share (“EPS”) was $0.65 for the first quarter of 2025 as compared to $0.31 for the same period in 2024. The increase in net income was primarily driven by an increase in net interest income.
Current wording
Our net income to common shareholders was $6.6 million and $3.0 million for the three months ended June 30, 2025 and 2024, respectively. Diluted earnings per share (“EPS”) was $0.81 for the second quarter of 2025 as compared to $0.37 for the same period in 2024. The increase in net income was primarily driven by an increase in net interest income.
Previous wording
Our level of net interest income is determined by the level of earning assets and the management of our net interest margin. Our net interest income was $23.4 million for the first quarter of 2025, a 25.4% increase over net interest income of $18.6 million for the first quarter of 2024, driven primarily by a $3.5 million decrease in interest expense and a $1.3 million increase in interest income on our interest-earning assets. In addition, our net interest margin, on a tax-equivalent (TE) basis, was 2.41% for the first quarter of 2025 compared to 1.94% for the same period in 2024.
Current wording
Our level of net interest income is determined by the level of earning assets and the management of our net interest margin. Our net interest income was $25.3 million for the second quarter of 2025, a 29.5% increase over net interest income of $19.5 million for the second quarter of 2024, driven primarily by a $3.9 million decrease in interest expense on our interest-bearing deposits combined with a $1.8 million increase in interest income on our interest-earning assets. In addition, our net interest margin, on a tax-equivalent (TE) basis, was 2.50% for the second quarter of 2025 compared to 1.98% for the same period in 2024.
Previous wording
We have included a number of tables to assist in our description of various measures of our financial performance. For example, the “Average Balances, Income and Expenses, Yields and Rates” table reflects the average balance of each category of our assets and liabilities as well as the yield we earned or the rate we paid with respect to each category during the three month period ended March 31, 2025 and 2024. A review of this table shows that our loans typically provide higher interest yields than do other types of interest-earning assets, which is why we direct a substantial percentage of our earning assets into our loan portfolio. Similarly, the “Rate/Volume Analysis” tables demonstrate the effect of changing interest rates and changing volume of assets and liabilities on our financial condition during the periods shown. We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables to illustrate our interest rate sensitivity with respect to interest-earning accounts and interest-bearing accounts.
Current wording
We have included a number of tables to assist in our description of various measures of our financial performance. For example, the “Average Balances, Income and Expenses, Yields and Rates” table reflects the average balance of each category of our assets and liabilities as well as the yield we earned or the rate we paid with respect to each category during the three and six month periods ended June 30, 2025 and 2024. A review of this table shows that our loans typically provide higher interest yields than do other types of interest-earning assets, which is why we direct a substantial percentage of our earning assets into our loan portfolio. Similarly, the “Rate/Volume Analysis” tables demonstrate the effect of changing interest rates and changing volume of assets and liabilities on our financial condition during the periods shown. We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included tables to illustrate our interest rate sensitivity with respect to interest-earning accounts and interest-bearing accounts.
Previous wording
Our net interest margin (TE) increased 47 basis points to 2.41% during the first quarter of 2025, compared to the first quarter of 2024, primarily due to a decrease in the cost on our interest-bearing liabilities. Our average interest-bearing liabilities grew by $26.8 million during the first quarter of 2025 from the prior year, while the rate on these liabilities decreased 46 basis points to 3.52%. Our average interest-earning assets grew by $70.5 million during the first quarter of 2025 from the prior year, while the average yield on these assets increased by 10 basis points to 5.12%.
Current wording
Our net interest margin (TE) increased by 52 basis points to 2.50% during the second quarter of 2025, compared to the second quarter of 2024, primarily due to a decrease in the cost of our interest-bearing liabilities resulting from the 100 basis point decrease in the Fed Funds rate during the latter part of 2024. Our average interest-bearing liabilities grew by only $15.8 million during the second quarter of 2025 from the prior year, while the rate on these liabilities decreased 55 basis points to 3.49%. Our average interest-earning assets grew by $79.1 million during the second quarter of 2025 from the prior year, while the average yield on these assets increased by six basis points to 5.18%.
Previous wording
The increase in average interest-earning assets for the first quarter of 2025 related primarily to an increase of $50.9 million in our average loan balances from the prior year and a $13.4 million increase in average federal funds sold and interest-bearing deposits with banks. The 10 basis point increase in yield on our interest-earning assets was driven by a 15 basis point increase in loan yield, partially offset by a 108 basis point decrease in yield on federal funds sold and interest-bearing deposits with banks, resulting from the 100 basis point decrease in the Fed Funds rate during the latter part of 2024.
Current wording
The increase in average interest-earning assets for the second quarter of 2025 related primarily to an increase of $78.5 million in our average loan balances from the prior year. The six basis point increase in yield on our interest-earning assets was driven by a 14 basis point increase in loan yield, offset by a 116 basis point decrease in yield on federal funds sold and interest-bearing deposits with banks, as a result of the decrease in the Fed Funds rate.
Previous wording
in our net interest spread for the 2025 period. We anticipate continued pressure on our net interest spread and net interest margin in future periods based on the competitive rate environment around our deposits.
Current wording
Our net interest spread was 1.69% for the second quarter of 2025 compared to 1.08% for the same period in 2024. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The six basis point increase in yield on our interest-earning assets, combined with the 55 basis point decrease in the rate on our interest-bearing liabilities, resulted in a 61 basis point increase in our net interest spread for the 2025 period. We anticipate continued pressure on our net interest spread and net interest margin in future periods based on the competitive rate environment around our deposits.
Previous wording
Our net interest spread was 1.60% for the first quarter of 2025 compared to 1.04% for the same period in 2024. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The 10 basis point increase in yield on our interest-earning assets, combined with the 46 basis point decrease in the rate on our interest-bearing liabilities, resulted in a 56 basis point increase
Current wording
Our net interest spread was 1.67% for the first half of 2025 compared to 1.06% for the same period in 2024. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The 10 basis point increase in yield on our interest-earning assets, combined with the 50 basis point decrease in the rate on our interest-bearing liabilities, resulted in a 61 basis point increase in our net interest spread for 2025.
Previous wording
Net interest income, the largest component of our income, was $23.4 million for the first quarter of 2025 and $18.6 million for the first quarter of 2024, a $4.7 million, or 25.4%, increase year over year. The increase during 2025 was driven by a $3.5 million decrease in interest expense primarily due to lower rates on our interest-bearing deposits as well as an increase in the average balance and yield on our loan portfolio.
Current wording
Net interest income, the largest component of our income, was $25.3 million for the second quarter of 2025 and $19.5 million for the second quarter of 2024, a $5.8 million, or 29.5%, increase year over year. The increase during 2025 was driven by a $4.0 million decrease in interest expense primarily due to lower rates on our interest-bearing deposits as well as higher yields on our loan portfolio.
Previous wording
The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses and reserve for unfunded commitments at levels consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. We review the adequacy of the allowance for credit losses on a quarterly basis. Please see the discussion included in Note 4 – Loans and Allowance for Credit Losses for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance. Based on the transition to the DCF methodology for calculating the ACL, management analyzed the risk level associated with factors such as the global, national and local economy, which includes the potential impact of tariffs, changes in the experience and depth of management, as well as changes in the risk ratings and volume and severity of past due loans in the consideration of the qualitative portion of the ACL.
Current wording
The provision for credit losses, which includes a provision for losses on unfunded commitments, is a charge to earnings to maintain the allowance for credit losses and reserve for unfunded commitments at levels consistent with management’s assessment of expected losses in the loan portfolio at the balance sheet date. We review the adequacy of the allowance for credit losses on a quarterly basis. Please see the discussion included in Note 4 – Loans and Allowance for Credit Losses for a description of the factors we consider in determining the amount of
Previous wording
Noninterest income was $3.1 million for the first quarter of 2025, a $450,000, or 16.9%, increase from noninterest income of $2.7 million for the first quarter of 2024. Mortgage banking income continues to be the largest component of our noninterest income at $1.4 million for the first quarter of 2025, an increase of $260,000, or 22.3%, over the prior year. The increase was driven by higher mortgage volume during the first quarter of 2025. Service fees on deposit accounts increased $152,000, or 39.3%, over the prior year. The increase was driven by fee income on our commercial credit cards and additional wire fee income.
Current wording
Noninterest income was $3.3 million for the second quarter of 2025, a $189,000, or 5.4%, decrease from noninterest income of $3.5 million for the second quarter of 2024. Mortgage banking income continues to be the largest component of our noninterest income at $1.6 million for the second quarter of 2025, a decrease of $354,000, or 18.4%, over the prior year which was driven by lower mortgage volume during the second quarter of 2025. Service fees on deposit accounts increased $151,000, or 36.3%, over the prior year, driven by fee income on our commercial credit cards and additional wire fee income.
Previous wording
Noninterest expense was $18.8 million for the first quarter of 2025, a $736,000, or 4.1%, increase from noninterest expense of $18.1 million for the first quarter of 2024. The increase in noninterest expense was driven primarily by the following:
Current wording
Noninterest expense was $19.3 million for the second quarter of 2025, a $693,000, or 3.7%, increase from noninterest expense of $18.6 million for the second quarter of 2024. The increase in noninterest expense was driven primarily by the following:
Previous wording
Partially offsetting the above increases was a decrease in professional fees of $109,000, or 17.6% due to less consulting expenses.
Current wording
Partially offsetting the above increases was a decrease in insurance expense of $55,000, or 5.7% due to lower FDIC insurance premiums.
Previous wording
Our efficiency ratio was 71.1% for the first quarter of 2025, compared to 84.9% for the first quarter of 2024. The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income. The improvement during the 2025 period was driven primarily by the increase in net interest income.
Current wording
Our efficiency ratio was 67.5% for the second quarter of 2025, compared to 80.9% for the second quarter of 2024. The efficiency ratio represents the percentage of one dollar of expense required to be incurred to earn a full dollar of revenue and is computed by dividing noninterest expense by the sum of net interest income and noninterest income. The improvement during the 2025 period was driven primarily by the increase in net interest income.
Previous wording
We incurred income tax expense of $1.6 million and $862,000 for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate was 23.8% and 25.5% for the three months ended March 31, 2025 and 2024, respectively. The decrease in the effective tax rate was driven by the effect of equity compensation transactions in comparison to our income before income tax expense.
Current wording
We incurred income tax expense of $2.0 million and $909,000 for the three months ended June 30, 2025 and 2024, respectively, and $3.7 million and $1.8 million for the six months ended June 30, 2025 and 2024. Our effective tax rate was 23.6% and 24.3% for the six months ended June 30, 2025 and 2024, respectively. The decrease in the
Previous wording
At March 31, 2025, the $151.2 million in our investment securities portfolio represented approximately 3.5% of our total assets. Our available for sale investment portfolio included corporate bonds, US treasuries, US government agency securities, state and political subdivisions, asset-backed securities and mortgage-backed securities with a fair value of $131.3 million and an amortized cost of $144.0 million, resulting in an unrealized loss of $12.7 million. At December 31, 2024, the $151.6 million in our investment securities portfolio represented approximately 3.7% of our total assets, including investment securities with a fair value of $132.1 million and an amortized cost of $146.6 million for an unrealized loss of $14.5 million. In addition, other investments, which include FHLB Stock and other nonmarketable investments, increased $437,000 from December 31, 2024 to $19.9 million at March 31, 2025.
Current wording
At June 30, 2025, the $148.8 million in our investment securities portfolio represented approximately 3.5% of our total assets. Our available for sale investment portfolio included corporate bonds, US treasuries, US government agency securities, state and political subdivisions, asset-backed securities and mortgage-backed securities with a fair value of $128.9 million and an amortized cost of $141.0 million, resulting in an unrealized loss of $12.2 million. At December 31, 2024, the $151.6 million in our investment securities portfolio represented approximately 3.7% of our total assets, including investment securities with a fair value of $132.1 million and an amortized cost of $146.6 million for an unrealized loss of $14.5 million. In addition, other investments, which include FHLB Stock and other nonmarketable investments, increased $416,000 from December 31, 2024 to $19.9 million at June 30, 2025.
Previous wording
Since loans typically provide higher interest yields than other types of interest earning assets, a substantial percentage of our earning assets are invested in our loan portfolio. Average loans, excluding mortgage loans held for sale, for the three months ended March 31, 2025 and 2024 were $3.67 billion and $3.62 billion, respectively. Before the allowance for credit losses, total loans outstanding at March 31, 2025 and December 31, 2024 were $3.68 billion and $3.63 billion, respectively.
Current wording
Since loans typically provide higher interest yields than other types of interest earning assets, a substantial percentage of our earning assets are invested in our loan portfolio. Average loans, excluding mortgage loans held for sale, for the six months ended June 30, 2025 and 2024 were $3.69 billion and $3.63 billion, respectively. Before the allowance for credit losses, total loans outstanding at June 30, 2025 and December 31, 2024 were $3.75 billion and $3.63 billion, respectively.
Previous wording
The principal component of our loan portfolio is loans secured by real estate mortgages. As of March 31, 2025, our loan portfolio included $3.08 billion, or 83.7%, of real estate loans, compared to $3.03 billion, or 83.5%, at December 31, 2024. Most of our real estate loans are secured by residential or commercial property. We obtain a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. Generally, we limit the loan-to-value ratio on loans to coincide with the appropriate regulatory guidelines. We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business types. Home equity lines of credit totaled $223.1 million as of March 31, 2025, of which approximately 49% were in a first lien position, while the remaining balance was second liens. At December 31, 2024, our home equity lines of credit totaled $204.9 million, of which approximately 46% were in first lien positions, while the remaining balance was in second liens. The average home equity loan had a balance of approximately $100,000 and a loan to value of 73% as of March 31, 2025, compared to an average loan balance of $92,000 and a loan to value of approximately 74% as of December 31, 2024. Further, 0.42% and 0.12% of our total home equity lines of credit were over 30 days past due as of March 31, 2025 and December 31, 2024, respectively.
Current wording
The principal component of our loan portfolio is loans secured by real estate mortgages. As of June 30, 2025, our loan portfolio included $3.12 billion, or 83.2%, of real estate loans, compared to $3.03 billion, or 83.5%, at December 31, 2024. Most of our real estate loans are secured by residential or commercial property. We obtain a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. Generally, we limit the loan-to-value ratio on loans to coincide with the appropriate regulatory guidelines. We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business types. Home equity lines of credit totaled $234.6 million as of June 30, 2025, of which approximately 49% were in a first lien position, while the remaining balance was second liens. At December 31, 2024, our home equity lines of credit totaled $204.9 million, of which approximately 46% were in first lien positions, while the remaining balance was in second liens. The average home equity loan had a balance of approximately $104,000 and a loan to value of 72% as of June 30, 2025, compared to an average loan balance of $92,000 and a loan to value of approximately 74% as of December 31, 2024. Further, 0.49% and 0.12% of our total home equity lines of credit were over 30 days past due as of June 30, 2025 and December 31, 2024, respectively.
Previous wording
Following is a summary of our loan composition at March 31, 2025 and December 31, 2024. During the first three months of 2025, our loan portfolio increased by $52.2 million, or 1.44%, primarily driven by a $39.6 million increase in consumer loans secured by real estate. Our consumer real estate portfolio grew by $18.7 million and includes high quality 1-4 family consumer real estate loans. Our average consumer real estate loan currently has a principal balance of $472,000, a term of 23 years, and an average rate of 4.44% as of March 31, 2025, compared to a principal balance of $468,000, a term of 23 years, and an average rate of 4.36% as of December 31, 2024.
Current wording
Following is a summary of our loan composition at June 30, 2025 and December 31, 2024. During the first six months of 2025, our loan portfolio increased by $115.1 million, or 6.39% annualized, primarily driven by a $69.6 million increase in consumer loans secured by real estate and a $33.5 million increase in commercial business loans. Our consumer real estate portfolio grew by $35.6 million and includes high quality 1-4 family consumer real estate loans. Our average consumer real estate loan currently has a principal balance of $476,000, a term of 23 years, and an average rate of 4.51% as of June 30, 2025, compared to a principal balance of $468,000, a term of 23 years, and an average rate of 4.36% as of December 31, 2024.
Previous wording
We have included the table below to provide additional clarity on our commercial real estate exposure. We have not identified any geographic concentrations within these collateral types. Our level of non-owner occupied commercial real estate loans represents 245.9% of the Bank’s total risk-based capital at March 31, 2025. The table below presents the majority of our commercial real estate exposure in the commercial business, construction, and non-owner occupied segments.
Current wording
We have included the table below to provide additional clarity on our commercial real estate exposure. We have not identified any geographic concentrations within these collateral types. Our level of non-owner occupied commercial real estate loans represents 241.1% of the Bank’s total risk-based capital at June 30, 2025. The table below presents the majority of our commercial real estate exposure by collateral type which are included in the commercial business, construction, and non-owner occupied segments.
Previous wording
Nonperforming assets include real estate acquired through foreclosure or deed taken in lieu of foreclosure and loans on nonaccrual status. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the loan terms and to show capacity to continue performing into
Current wording
Nonperforming assets include real estate acquired through foreclosure or deed taken in lieu of foreclosure and loans on nonaccrual status. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received. Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the loan terms and to show capacity to continue performing into the future before that loan can be placed back on accrual status. As of June 30, 2025 we had one loan that was
Previous wording
the future before that loan can be placed back on accrual status. As of March 31, 2025 and December 31, 2024, we had no loans 90 days past due and still accruing.
Current wording
90 days past due and still accruing. At December 31, 2024 we had no loans that were 90 days past due and still accruing.
Previous wording
At March 31, 2025, nonperforming assets were $11.0 million, or 0.26% of total assets and 0.30% of gross loans. Comparatively, nonperforming assets were $10.9 million, or 0.27% of total assets and 0.30% of gross loans at December 31, 2024. The amount of foregone interest income on nonaccrual loans in the first quarter of 2025 and 2024 was $74,000 and $10,000, respectively.
Current wording
At June 30, 2025, nonperforming assets were $11.7 million, or 0.27% of total assets and 0.31% of gross loans. Comparatively, nonperforming assets were $10.9 million, or 0.27% of total assets and 0.30% of gross loans at December 31, 2024. The amount of foregone interest income on nonaccrual loans in the second quarter of 2025 and 2024 was $126,000 and $13,000, respectively.
Previous wording
At March 31, 2025 and December 31, 2024, the allowance for credit losses represented 378.09% and 366.94% of the total amount of nonperforming loans, respectively. A significant portion of the nonperforming loans at March 31, 2025 were secured by real estate. We have evaluated the underlying collateral on these loans and believe that the collateral on these loans is sufficient to minimize future losses.
Current wording
At June 30, 2025 and December 31, 2024, the allowance for credit losses represented 362.35% and 366.94% of the total amount of nonperforming loans, respectively. A significant portion of the nonperforming loans at June 30, 2025 were secured by real estate. We have evaluated the underlying collateral on these loans and believe that the collateral on these loans is sufficient to minimize future losses.
Previous wording
In addition, at March 31, 2025, 83.7% of our loans were collateralized by real estate and 95.1% of our individually evaluated loans were secured by real estate. We utilize third party appraisers to determine the fair value of collateral dependent loans. Our current loan and appraisal policies require us to obtain updated appraisals on an annual basis, either through a new external appraisal or an appraisal evaluation. Individually evaluated loans are reviewed on a quarterly basis to determine the level of credit loss. As of March 31, 2025, we did not have any individually evaluated real estate loans carried at a value in excess of the appraised value. We typically charge-off a portion or create a specific reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement.
Current wording
In addition, at June 30, 2025, 83.2% of our loans were collateralized by real estate and 95.8% of our individually evaluated loans were secured by real estate. We utilize third party appraisers to determine the fair value of collateral dependent loans. Our current loan and appraisal policies require us to obtain updated appraisals on an annual basis, either through a new external appraisal or an appraisal evaluation. Individually evaluated loans are reviewed on a quarterly basis to determine the level of credit loss. As of June 30, 2025, we did not have any individually evaluated real estate loans carried at a value in excess of the appraised value. We typically charge-off a portion or create a specific reserve for individually evaluated loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement.
Previous wording
At March 31, 2025, individually evaluated loans totaled $12.1 million, for which $5.0 million of these loans had a reserve of approximately $1.8 million allocated in the allowance for credit losses. Comparatively, individually evaluated loans totaled $12.2 million at December 31, 2024 for which $4.5 million of these loans had a reserve of approximately $1.9 million allocated in the allowance for credit losses.
Current wording
At June 30, 2025, individually evaluated loans totaled $12.7 million, for which $4.8 million of these loans had a reserve of approximately $1.7 million allocated in the allowance for credit losses. Comparatively, individually evaluated loans totaled $12.2 million at December 31, 2024 for which $4.5 million of these loans had a reserve of approximately $1.9 million allocated in the allowance for credit losses.
Previous wording
The allowance for credit losses was $40.7 million, representing 1.10% of outstanding loans and providing coverage of 378.09% of nonperforming loans at March 31, 2025 compared to $39.9 million, or 1.10% of outstanding loans and 366.94% of nonperforming loans at December 31, 2024. At March 31, 2024, the ACL was $40.4 million, or 1.11% of outstanding loans and 1,109.13% of nonperforming loans.
Current wording
The allowance for credit losses was $41.3 million, representing 1.10% of outstanding loans and providing coverage of 362.35% of nonperforming loans at June 30, 2025 compared to $39.9 million, or 1.10% of outstanding loans and 366.94% of nonperforming loans at December 31, 2024. At June 30, 2024, the ACL was $40.2 million, or 1.11% of outstanding loans and 357.95% of nonperforming loans.
Previous wording
During the first quarter of 2025, the Company refined its methodology for estimating the allowance for credit losses on loans by transitioning from a lifetime probability of default and loss given default model to a discounted cash flow (“DCF”) approach. The Company transitioned to the DCF method as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF model uses regression techniques that relate one or more economic factors to the default rate of various portfolios to build reasonable and supportable forecasts to estimate future losses. The Company determined that the national gross domestic product and unemployment rate were the two economic factors which had the greatest correlation to historical performance to use in the forecasted portion of the model. In addition, the transition to the DCF model allowed the Company to reduce its reliance on qualitative factors and to analyze them on a more granular level, such as by segment. The refinement represents a change in accounting estimate under ASC Topic 250, Accounting Changes and Error Corrections, with prospective application beginning in the period of change. This change in accounting estimate did not have a material effect on the Company’s financial statements.
Current wording
During the first quarter of 2025, the Company refined its methodology for estimating the allowance for credit losses on loans by transitioning from a lifetime probability of default and loss given default model (“lifetime PD/LGD”) to a discounted cash flow (“DCF”) approach. The Company transitioned to the DCF method as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF model uses regression techniques that relate one or more economic factors to the default rate of various portfolios to build reasonable and supportable forecasts to estimate future losses. The Company determined that the national gross domestic product and unemployment rate were the two economic factors which had the greatest correlation to historical performance to use in the forecasted portion of the model. In addition, the transition to the DCF model allowed the Company to reduce its reliance on qualitative factors and to analyze them on a more granular level, such as by segment. The refinement represents a change in accounting estimate under ASC Topic 250,Accounting Changes and Error Corrections, with prospective application beginning in the period of change. This change in accounting estimate did not have a material effect on the Company’s financial statements.
Previous wording
Under the DCF methodology, the expected loss rates are evaluated at an individual loan level, incorporating a forecast for certain economic conditions, prepayment assumptions, weighted average life of loan and peer loss experience into the credit loss calculation. In addition, the model no longer considers risk rating as a key factor in the calculation. The incorporation of the weighted average life of loan into the calculation was a key driver of the change in allocation between our commercial portfolio and our consumer portfolio as the weighted average life of our consumer loans is generally longer than that of our commercial loans, thus driving the changes in the expected loss rate to correlate to the expected life of the loan. As a result, the allocation of the ACL shifted among loan categories, reducing the ACL allotted to the commercial portfolio and increasing the ACL allotted to the consumer portfolio.
Current wording
Under the DCF methodology, the expected loss rates are evaluated at an individual loan level, incorporating a forecast for certain economic conditions, prepayment assumptions, weighted average life of loan and peer loss experience into the credit loss calculation. In addition, the model no longer considers risk rating as a key factor in the calculation of expected credit losses. This factor drove the decrease in expected loss under the DCF model for the commercial non-owner occupied category as loans with a risk rating less than “pass” were assigned a higher expected loss rate under the lifetime PD/LGD model. In addition, loan categories such as commercial business and consumer real estate loans were highly impacted by the incorporation of prepayment rates and a regression analysis under the DCF method. Higher prepayment rates shortened the recovery period for expected losses, resulting in an increased expected loss rate while the regression analysis, which includes a forecasted gross national product (“GDP”) and unemployment rate, increased the probability of default for both of these loan categories and consequently resulted in a higher expected loss rate. Finally, the incorporation of the weighted average life of loan into the calculation was a key driver of the change in the overall allocation between our commercial portfolio and our consumer portfolio as the weighted average life of our consumer loans is generally longer than that of our commercial loans, thus driving the changes in the expected loss rate to correlate to the expected life of the loan. As a result, the allocation of the ACL shifted among loan categories, reducing the ACL allotted to the commercial portfolio and increasing the ACL allotted to the consumer portfolio.
Previous wording
Our retail deposits represented $3.02 billion, or 83.4% of total deposits, while our wholesale deposits represented $600.5 million, or 16.6%, of total deposits at March 31, 2025. At December 31, 2024, retail deposits represented $2.89 billion, or 84.0%, of our total deposits and wholesale deposits were $550.3 million, representing 16.0% of our total deposits. Our loan-to-deposit ratio was 102% at March 31, 2025 and 106% at December 31, 2024.
Current wording
Our retail deposits represented $3.08 billion, or 84.6% of total deposits, while our wholesale deposits represented $560.7 million, or 15.4%, of total deposits at June 30, 2025. At December 31, 2024, retail deposits represented $2.89 billion, or 84.0%, of our total deposits and wholesale deposits were $550.3 million, representing 16.0% of our total deposits. Our loan-to-deposit ratio was 103% at June 30, 2025 and 106% at December 31, 2024.
Previous wording
Our primary focus is on increasing core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, in order to provide a relatively stable funding source for our loan portfolio and other earning assets. In addition, at March 31, 2025 and December 31, 2024, we estimate that we have approximately $1.4 billion and $1.3 billion, or 38.5% and 37.1% of total deposits, respectively, in uninsured deposits, including related interest accrued and unpaid. Since it is not reasonably practicable to provide a precise measure of uninsured deposits, the amounts above are estimates and are based on the same methodologies and assumptions used by the FDIC for the Bank’s regulatory reporting requirements.
Current wording
Our primary focus is on increasing core deposits, which exclude out-of-market deposits and time deposits of $250,000 or more, in order to provide a relatively stable funding source for our loan portfolio and other earning assets. In addition, at June 30, 2025 and December 31, 2024, we estimate that we have approximately $1.4 billion and $1.3 billion, or 38.1% and 37.1% of total deposits, respectively, in uninsured deposits, including related interest accrued and unpaid. Since it is not reasonably practicable to provide a precise measure of uninsured deposits, the amounts above are estimates and are based on the same methodologies and assumptions used by the FDIC for the Bank’s regulatory reporting requirements.
Previous wording
During the first three months of 2025, our average transaction account balances decreased by $64.4 million, or 2.5%, from the prior year, while our average time deposit balances increased by $128.5 million, or 16.0%.
Current wording
During the first six months of 2025, our average transaction account balances decreased by $26.1 million, or 1.0%, from the prior year, while our average time deposit balances increased by $86.3 million, or 10.2%.
Previous wording
Time deposits that meet or exceed the FDIC insurance limit of $250,000 at March 31, 2025 and December 31, 2024 were $800.7 million and $774.0 million, respectively. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. This gives us the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep deposits on balance sheet or sell them to other members of the network.
Current wording
Time deposits that meet or exceed the FDIC insurance limit of $250,000 at June 30, 2025 and December 31, 2024 were $769.1 million and $774.0 million, respectively. We have a relationship with IntraFi Promontory Network, allowing us to provide deposit customers with access to aggregate FDIC insurance in amounts exceeding $250,000. This gives us the ability, as and when needed, to attract and retain large deposits from insurance conscious customers. With IntraFi, we have the option to keep deposits on balance sheet or sell them to other members of the network.
Previous wording
At March 31, 2025 and December 31, 2024, we had $240.0 million of convertible fixed rate FHLB advances with a weighted average rate of 3.74%. At March 31, 2025, the $240.0 million was secured with approximately $1.28 billion of mortgage loans and $14.5 million of stock in the FHLB. At December 31, 2024, the $240.0 million was secured with approximately $1.29 billion of mortgage loans and $14.5 million of stock in the FHLB.
Current wording
At June 30, 2025 and December 31, 2024, we had $240.0 million of convertible fixed rate FHLB advances with a weighted average rate of 3.74%. At June 30, 2025, the $240.0 million was secured with approximately $1.32 billion of mortgage loans and $14.5 million of stock in the FHLB. At December 31, 2024, the $240.0 million was secured with approximately $1.29 billion of mortgage loans and $14.5 million of stock in the FHLB.
Previous wording
At March 31, 2025 and December 31, 2024, our cash and cash equivalents totaled $305.1 million and $162.9 million, respectively, or 7.1% and 4.0% of total assets, respectively. Our investment securities at March 31, 2025 and December 31, 2024 amounted to $151.2 million and $151.6 million, respectively, or 3.5% and 3.7% of total assets, respectively. Investment securities traditionally provide a secondary source of liquidity since they can be converted into cash in a timely manner.
Current wording
At June 30, 2025 and December 31, 2024, our cash and cash equivalents totaled $271.0 million and $162.9 million, respectively, or 6.3% and 4.0% of total assets, respectively. Our investment securities at June 30, 2025 and December 31, 2024 amounted to $148.8 million and $151.6 million, respectively, or 3.5% and 3.7% of total assets, respectively. Investment securities traditionally provide a secondary source of liquidity since they can be converted into cash in a timely manner.
Previous wording
Our ability to maintain and expand our deposit base and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the liquidation of temporary investments, the generation of deposits, loan payoffs, and from additional borrowings. In addition, we will receive cash upon the maturity and sale of loans and the maturity of investment securities. We maintain six federal funds purchased lines of credit with correspondent banks totaling $128.5 million for which there were no borrowings against the lines of credit at March 31, 2025. We also had $228.5 million pledged and available with the Federal Reserve Discount Window at March 31, 2025. Comparatively, at December 31, 2024, we had $210.8 million pledged and available with the Federal Reserve Discount Window.
Current wording
Our ability to maintain and expand our deposit base and borrowing capabilities serves as our primary source of liquidity. We plan to meet our future cash needs through the liquidation of temporary investments, the generation of deposits, loan payoffs, and from additional borrowings. In addition, we will receive cash upon the maturity and sale of loans and the maturity of investment securities. We maintain six federal funds purchased lines of credit with correspondent banks totaling $128.5 million for which there were no borrowings against the lines of credit at June 30, 2025. We also had $199.7 million pledged and available with the Federal Reserve Discount Window at June 30, 2025. Comparatively, at December 31, 2024, we had $210.8 million pledged and available with the Federal Reserve Discount Window.
Previous wording
We are also a member of the FHLB, from which applications for borrowings can be made. The FHLB requires that securities, qualifying mortgage loans, and stock of the FHLB owned by the Bank be pledged to secure any advances from the FHLB. The unused borrowing capacity currently available from the FHLB at March 31, 2025 was $774.7 million, based primarily on the Bank’s qualifying mortgages available to secure any future borrowings. However, we are able to pledge additional securities to the FHLB in order to increase our available borrowing capacity. In addition, at March 31, 2025 and December 31, 2024 we had $212.3 million and $205.4 million, respectively, of letters of credit outstanding with the FHLB to secure client deposits.
Current wording
We are also a member of the FHLB, from which applications for borrowings can be made. The FHLB requires that securities, qualifying mortgage loans, and stock of the FHLB owned by the Bank be pledged to secure any advances from the FHLB. The unused borrowing capacity currently available from the FHLB at June 30, 2025 was $824.4 million, based primarily on the Bank’s qualifying mortgages available to secure any future borrowings. However, we
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Current report — wording carried from elsewhere
Our net income to common shareholders was $11.8 million and $5.5 million for the six months ended June 30, 2025 and 2024, respectively. Diluted earnings per share (“EPS”) was $1.46 for the second quarter of 2025 as compared to $0.68 for the same period in 2024. The increase in net income was primarily driven by an increase in net interest income.
Current report — wording carried from elsewhere
Average Balances, Income and Expenses, Yields and Rates
Current report — wording carried from elsewhere
The increase in average interest-earning assets for the first half of 2025 related primarily to a $64.8 million increase in our average loan balances. The increase in yield on our interest-earning assets was driven by a 14 basis point increase on our loan yield, partially offset by a 114 basis point decrease in the yield on Federal Funds sold and interest-bearing deposits with banks.
Current report — wording carried from elsewhere
the provision we expense each period to maintain this allowance. Based on the transition to the DCF methodology for calculating the ACL, management analyzed the risk level associated with factors such as the global, national and local economy, which includes the potential impact of tariffs, changes in the experience and depth of management, as well as changes in the risk ratings and volume and severity of past due loans in the consideration of the qualitative portion of the ACL.
Current report — wording carried from elsewhere
effective tax rate was driven by the effect of equity compensation transactions in comparison to our income before income tax expense.
Current report — wording carried from elsewhere
are able to pledge additional securities to the FHLB in order to increase our available borrowing capacity. In addition, at June 30, 2025 and December 31, 2024 we had $223.1 million and $205.4 million, respectively, of letters of credit outstanding with the FHLB to secure client deposits.
Current report — wording carried from elsewhere
limitations. We are also required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
This report contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-
Previous report — wording carried elsewhere
traditional brokered CDs or the FHLB. In this manner, IntraFi can provide us with another funding option. Thus, it serves as a deposit-gathering tool and an additional liquidity management tool. Under the Economic Growth, Regulatory Relief, and Consumer Protection Act, a well capitalized bank with a CAMELS rating of 1 or 2 may hold reciprocal deposits up to the lesser of 20% of its total liabilities or $5 billion without those deposits being treated as brokered deposits.
Previous report — wording carried elsewhere
1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.
Previous report — wording carried elsewhere
Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024, for a description our significant accounting policies that use critical accounting estimates.