FIRST COMMUNITY BANKSHARES INC VA
For the period ended Dec 31, 2024. Filed Mar 7, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 7, 2025
FCBC$45.48+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-08.
0001437749-24-007150
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-07.
0001437749-25-006683
Item 7. 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 100 previous paragraphs and 101 current paragraphs.
73 unchanged; 19 reworded; 8 added; 8 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 32 previous and 32 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 (8)
Current report
During the last week of September 2024, Hurricane Helene made landfall in Florida’s panhandle, resulting in widespread flooding and washing out of towns and roadways. Hurricane Helene had a significant impact on western North Carolina. Millions have lost access to critical services like water and sewer, electricity, and telecommunications. Thousands of miles of roads and bridges were damaged. The hurricane resulted in property damage to our customers, the closing or disruption of many businesses and damage to infrastructure in communities that we serve. Our branch in Banner Elk, North Carolina was temporarily closed due to lack of power and water, but it is now open to the public. We continue to evaluate the impact of Hurricane Helen on our customers and the Bank’s loans. Based on our assessment to date, we do not expect the losses related to Hurricane Helene to have a material impact on the Bank’s financial condition or results of operations.
Current report
2024 Compared to 2023. Pre-tax income increased $3.72 million, or 6.00% compared to 2023. The increase was primarily attributable to a decrease in provision for credit losses of $4.39 million, or 54.95% offset by a decrease in net interest income of $1.22 million, or 0.95%. Provision for credit losses totaled $3.60 million for 2024 compared to $7.99 million in 2023. The provision for credit losses in 2023 included $1.61 million recorded for the day two provision for the acquisition of the Surrey loan portfolio. Net interest income totaled $126.47 million for 2024 compared to $127.68 million in 2023. The decrease in net interest income is primarily attributable to an increase in deposit interest expense due to increased rates on interest-bearing deposits. Non interest income increased $1.94 million, or 5.17% offset by an increase in non interest expense of $1.39 million, or 1.46%.
Current report
2024 Compared to 2023. Net interest income comprised 76.25% of total net interest and noninterest income in 2024 compared to 77.32% in 2023. Net interest income decreased $1.22 million, or 0.95%. On a FTE basis net interest income decreased $1.22 million, or 0.95%. There was no change in the FTE net interest margin; the FTE net interest spread decreased 22 basis points. The decrease was primarily driven by an increase in interest expense due to increases in rates paid on interest-bearing deposits.
Current report
Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, decreased $17.26 million, or 0.96%, primarily due to a decrease in interest-bearing deposits of $14.69 million, or 0.81%. Interest-bearing demand deposits decreased $23.95 million, or 3.49%, and time deposits decreased $21.92 million, or 8.18%. Savings deposits increased $31.19 million or 3.68%. The yield on interest-bearings liabilities increased 58 basis points and is primarily due to increased rates paid on interest-bearing deposit liabilities.
Current report
2024 Compared to 2023. Noninterest income comprised 23.75% of total net interest and noninterest income in 2024 compared to 22.68% in 2023. Noninterest income increased $1.94 million, or 5.17%. Other operating income increased $850 thousand, or 15.04%. Other operating income for 2024 included a gain of $825 thousand from the sale of two closed branch properties, while other operating income for the same period of 2023 included a gain of $204 thousand for the sale of one closed branch property. In addition, other operating income for 2024, included a holdback payment of $184 thousand related to a prior divestiture of an insurance agency. Other service charges and fees increased $745 thousand, or 5.46%. The increase is primarily attributable to an increase in net interchange income of $709 thousand.
Current report
2024 Compared to 2023. Non interest expense increased $1.39 million, or 1.46%. Salaries and employee benefits increased $1.82 million, other operating expense increased $1.06 million, and service fees increased $734 thousand. The increases in non-interest expense is primarily due to the addition of the Surrey branches as well as inflationary increases. Non interest expense for 2023 included non-recurring expense of $2.39 million in merger charges related to the Surrey acquisition. 2024 included a non-recurring charge of $1.80 million to settle a putative class action lawsuit while 2023 included a non-recurring charge of $3.00 million to accrue for the settlement of the same lawsuit.
Current report
Total assets as of December 31, 2024, decreased $7.33 million, or 0.22%, to $3.26 billion from $3.27 billion as of December 31, 2023. Loans decreased $156.21 million, or 6.07% while securities available for sale decreased $111.11 million, or 39.55%. Total liabilities decreased $30.43 million, or 1.10%, and is primarily attributable to a decrease in deposits of $31.08 million. Stockholders' equity increased $23.10 million, or 4.59%. The increase is primarily due to earnings offset by dividends paid.
Current report
Total deposits as of December 31, 2024, decreased $31.08 million, or 1.14%, compared to December 31, 2023. The largest decrease occurred in noninterest-bearing demand with a decrease of $48.42 million, or 5.20%. Other decreases occurred in interest-bearing demand of $18.46 million, or 2.66% and time deposits of $12.83 million, or 5.06%. These decreases were offset by an increase in savings deposits of $48.63 million, or 5.77% We had no deposit concentrations to any single customer or industry that represented 10% or more of outstanding deposits as of December 31, 2024 or 2023.
Removed paragraphs (8)
Previous report
2022 Compared to 2021. Pre-tax income decreased $6.37 million, or 9.58%, primarily due to an increase of $15.04 million in provision for credit losses offset by an increase in net interest income of $10.19 million. The increase in provision for credit losses of $15.04 million was attributable to a return to normalized provisions that include forecasts for higher unemployment rates and weaker macroeconomic trends as compared with prior year recoveries of pandemic-related provisioning. The increase in net interest income of $10.19 million was primarily due to increases in both interest on securities and interest and fees on loans. The increases were primarily driven by significant growth in both portfolios. Interest on deposits in banks increased as well and was primarily driven by rate increases in the FOMC's target federal funds rate throughout 2022.
Previous report
2022 Compared to 2021. Net interest income comprised 75.19% of total net interest and noninterest income in 2022 compared to 74.92% in 2021. Net interest income increased $10.19 million, or 9.94%, and increased $10.20 million, or 9.91%, on a FTE basis. The FTE net interest margin increased 25 basis points and the FTE net interest spread increased 27 basis points. The increase in net interest margin was primarily driven by an increase in yield on earning assets of 21 basis points, specifically, interest on deposits in banks. The increased yield on interest on deposits in banks was primarily driven by rate increases in the FOMC's target federal funds rate throughout 2022.
Previous report
Average interest-bearing liabilities, which consist of interest-bearing deposits and borrowings, increased $35.78 million, or 1.93%, primarily due to an increase in average interest-bearing deposits. The yield on interest-bearing liabilities decreased 6 basis points. Average interest-bearing deposits increased $34.74 million, or 1.88%, with increases of $63.33 million, or 7.75%, in average savings deposits, $36.50 million, or 5.64%, in average interest-bearing demand deposits, offset by a decrease of $65.09 million, or 16.81%, in average time deposits.
Previous report
2022 Compared to 2021. The provision charged to operations increased $15.04 million, or 177.58%. The increase was attributable to growth of the loan portfolio throughout 2022 and an economic forecast that projects higher unemployment rates and weaker macroeconomic trends. The prior year included recoveries of pandemic-related provisioning.
Previous report
2022 Compared to 2021. Noninterest income comprised 24.81% of total net interest and noninterest income in 2022 compared to 25.08% in 2021. Noninterest income increased $2.88 million, or 8.40%, primarily due to the $1.66 million gain recognized from the sale of the Company's Emporia, Virginia, branch to Benchmark Community Bank in the third quarter of 2022. Also contributing to the increase was $1.23 million in net FDIC indemnification asset amortization recognized in 2021, as the asset became fully amortized in 2021. Service charges on deposits increased $767 thousand, or 5.70%, and is attributable to increased customer activity compared to the activity levels experienced during the pandemic lock-downs. Other operating income decreased $658 thousand, or 11.33%, and is primarily attributable to the 2021 recovered amount of $1.00 million of an acquired loan from a failed bank acquisition that had been written down prior to acquisition.
Previous report
2022 Compared to 2021. Noninterest expense increased $4.40 million, or 5.59%. The increase was primarily due to an increase in salaries and employee benefits of $2.94 million, or 6.65%, and service fees of $1.28 million, or 20.27%. The increase in salaries and benefits is due to wage increases implemented in the first quarter of 2022 as part of the Company's strategic initiative to enhance Human Capital Management, which included an increased minimum wage. Service fees increased due to an increase in core processing expense. In addition, the Company recorded merger and divestiture expenses related to the announced Surrey Bancorp acquisition and the divestiture of the Company's Emporia Virginia branch of $596 thousand and $153 thousand, respectively. These increases to expense were offset primarily by a decrease in other operating expense of $1.26 million, or 10.75%. The decrease is primarily attributable to the 2021 write-down of bank property of $781 thousand.
Previous report
Total assets as of December 31, 2023, increased $132.97 million, or 4.24%, to $3.27 billion from $3.14 billion as of December 31, 2022. Total liabilities increased $51.66 million, or 1.90%, and stockholders' equity increased $81.31 million, or 19.27%. The primary driver for the change in the balance sheet components was the acquisition of Surrey Bancorp on April 21, 2023. Total assets of $466.25 million were acquired in the transaction. In addition, the Company issued 2.99 million common shares in the purchase resulting in an increase in capital of $71.35 million. The purchase transaction created $14.38 million in goodwill and $12.7 million in other intangible assets.
Previous report
Total deposits as of December 31, 2023, increased $43.51 million, or 1.62%, compared to December 31, 2022. The increase was primarily attributable to the acquisition of Surrey Bancorp. The Company acquired $403.64 million in deposits in the transaction: acquiring $158.39 million in demand accounts, $99.32 million in interest-bearing demand, $102.70 million in savings, and $43.23 million in time deposit accounts. Excluding the Surrey acquisition, deposits decreased $360.13 million with decreases occurring in savings of $103.35 million, demand deposits of $98.64 million, interest-bearing demand of $84.95 million, and time deposits of $73,18 million. Deposit attrition related to Surrey post-merger totaled $70.77 million, with attrition of $36.97 million in interest-bearing demand, $13.65 million in time deposits, $13.18 million in demand, and $6.96 million in savings. We had no deposit concentrations to any single customer or industry that represented 10% or more of outstanding deposits as of December 31, 2023 or 2022.
Reworded paragraphs (19)
Previous wording
The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of commissions on assets under management and investment advisory fees. As of December 31, 2023, the Trust Division and FCWM managed and administered $1.49 billion in combined assets under various fee-based arrangements as fiduciary or agent.
Current wording
The Bank offers trust management, estate administration, and investment advisory services through its Trust Division and wholly owned subsidiary First Community Wealth Management (“FCWM”). The Trust Division manages inter vivos trusts and trusts under will, develops and administers employee benefit and individual retirement plans, and manages and settles estates. Fiduciary fees for these services are charged on a schedule related to the size, nature, and complexity of the account. Revenues consist primarily of commissions on assets under management and investment advisory fees. As of December 31, 2024, the Trust Division and FCWM managed and administered $1.62 billion in combined assets under various fee-based arrangements as fiduciary or agent.
Previous wording
On April 21, 2023, the Company completed the acquisition of Surrey Bancorp. Total assets of $466.25 million were acquired in the transaction. In addition the Company issued 2.99 million common shares in the transaction. The purchase transaction created $14.38 million in goodwill and $12.7 million in other intangible assets. The Company completed the sale of its Emporia, Virginia branch to Benchmark Community Bank on September 16, 2022, which resulted in a gain of $1.66 million. The Company had no acquisition and divestiture activity during 2021. For additional information, see Note 2, “Acquisitions and Divestitures,” to the Consolidated Financial Statements in Item 8 of this report.
Current wording
On April 21, 2023, the Company completed the acquisition of Surrey Bancorp. Total assets of $466.25 million were acquired in the transaction. In addition the Company issued 2.99 million common shares in the transaction. The purchase transaction created $14.38 million in goodwill and $12.7 million in other intangible assets. The Company completed the sale of its Emporia, Virginia branch to Benchmark Community Bank on September 16, 2022, which resulted in a gain of $1.66 million. For additional information, see Note 2, “Acquisitions and Divestitures,” to the Consolidated Financial Statements in Item 8 of this report.
Previous wording
The Company uses a number of economic variables to estimate the allowance for credit losses, with the most significant driver being a forecast of the national unemployment rate. In the December 31, 2023, estimate, the Company assumed an unemployment forecast range of 4.0% to 4.3%, compared to the range of 3.9% to 4.8% utilized in the December 31, 2022, estimate. Based on a sensitivity analysis as of December 31, 2023, an increase of 1% in the unemployment forecast would result in an increase in the allowance for credit losses of approximately 9.00%.
Current wording
The Company uses a number of economic variables to estimate the allowance for credit losses, with the most significant driver being a forecast of the national unemployment rate. In the December 31, 2024, estimate, the Company assumed an unemployment forecast of 4.3%, compared to the range of 4.0% to 4.3% utilized in the December 31, 2023, estimate. Based on a sensitivity analysis as of December 31, 2024, an increase of 1% in the unemployment forecast would result in an increase in the allowance for credit losses of approximately 9.00%.
Previous wording
Average earning assets increased $81.32 million, or 2.90%, primarily due to an increase in average securities available for sale of $175.17 million, or 216.13%, and average loans of $145.40 million, or 6.75%. The increases were offset by a decrease in average interest-bearing deposits in banks of $239.26 million, or 41.97%. The yield on earning assets increased 21 basis points primarily due to an increase in yield on interest on deposits in banks of 101 basis points to 1.14% compared to 0.13% in 2021. The increase in yield was primarily driven by rate increases in the FOMC's target federal funds rate throughout 2022. The average loan to deposit ratio increased to 83.58% from 80.71% in 2022. Non-cash accretion income related to PCD loans decreased $2.04 million, or 43.77%, to $2.62 million due to reduced balances in the PCD portfolios. The impact of non-cash purchase accounting accretion income on the FTE net interest margin was 9 basis points compared to 17 basis points in 2021.
Current wording
Average earning assets decreased $24.43 million, or 0.85%, due to decreases in both the average balance of securities available for sale of $127.31 million, or 42.67%, and the average balance of loans of $57.15 million, or 2.25%. These decreases were offset by an increase in interest-bearing deposits with banks of $160.03 million, or 343.40%. The yield on earning assets increased 36 basis points, or 7.55% and is attributable to an increase in interest income of $8.97 million, or 6.52%. Interest income for interest-bearing deposits with banks increased $8.37 million, or 336.62%. This increase was primarily driven by an increase in the average balance as noted above offset by a decrease in the yield of 8 basis points. Interest income on loans also increased $3.18 million, or 2.50%. The increase was primarily due to an increase in yield of 25 basis points offset by a decrease in the average balance of $57.15 million. Interest income on securities available for sale decreased $2.57 million, or 31.65%. The yield increased 52 basis points, however, the average balance decreased $127.31 million, or 42.67%. The average loan to deposit ratio decreased to 92.93% from 93.04% in 2023. Non-cash accretion increased $155 thousand, or 5.65% to $2.90 million. The impact of non-cash purchase accounting accretion income on the FTE net interest margin was 10 basis points for 2024 compared to 9 basis points in 2023.
Previous wording
2022 Compared to 2021. Income tax expense decreased $1.87 million or 12.14%, and is primarily attributable to the decrease in pre-tax net income. The effective tax rate decreased to 22.43% in 2022 compared to 23.09% in 2021.
Current wording
2024 Compared to 2023. Income tax expense increased $136 thousand, or 0.97% and was primarily due to the increase in pre-tax income. The effective tax rate decreased to 21.45% in 2024 compared to 22.52% in 2023.
Previous wording
Our investment securities are used to generate interest income through the deployment of excess funds, to fund loan demand or deposit liquidation, to pledge as collateral where required, and to make selective investments for Community Reinvestment Act purposes. The composition of our investment portfolio changes from time to time as we consider our liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Available-for-sale debt securities as of December 31, 2023, decreased $19.39 million, or 6.46%, compared to December 31, 2022. The decrease was due to $83.59 million in maturities, prepayments, and calls, as well as sales of $38.98 million in securities available for sale. Included in the sale of securities was the entire portfolio of Surrey with an acquired fair value of $20.93 million comprised primarily of U.S. Treasury securities. A loss of $28 thousand was recognized in the sale of the portfolio. The decreases were offset by purchases of $74.10 million and $20.93 million in investments acquired in the Surrey acquisition. The market value of debt securities available for sale as a percentage of amortized cost was 95.23% as of December 31, 2023, compared to 93.82% as of December 31, 2022. There were no held-to-maturity debt securities as of December 31, 2023, or 2022.
Current wording
Our investment securities are used to generate interest income through the deployment of excess funds, to fund loan demand or deposit liquidation, to pledge as collateral where required, and to make selective investments for Community Reinvestment Act purposes. The composition of our investment portfolio changes from time to time as we consider our liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. Available-for-sale debt securities as of December 31, 2024, decreased $111.11 million, or 39.55%, compared to December 31, 2023. The decrease was primarily due to $221.34 million in maturities, prepayments, and calls in securities available for sale. The decrease was offset by purchases of $109.98 million. The market value of debt securities available for sale as a percentage of amortized cost was 91.97% as of December 31, 2024, compared to 95.23% as of December 31, 2023. There were no held-to-maturity debt securities as of December 31, 2024, or 2023.
Previous wording
Total loans held for investment, net of unearned income, as of December 31, 2023, increased $172.10 million, or 7.17%, compared to December 31, 2022. primarily due to the Surrey acquisition with loans acquired totaling $239.08 million. The largest components of Surrey's portfolio included approximately $98.89 million in non-farm, non-residential loans, $61.47 million commercial and industrial loans, and $23.03 million in non-owner occupied single family loans. We had no foreign loans or loan concentrations to any single borrower or industry, which are not otherwise disclosed as a category of loans that represented 10% or more of outstanding loans, as of December 31, 2023 or 2022. For additional information, see Note 4, “Loans,” to the Consolidated Financial Statements in Item 8 of this report.
Current wording
Total loans held for investment, net of unearned income, as of December 31, 2024, decreased $156.21 million, or 6.07%, compared to December 31, 2023. We had no foreign loans or loan concentrations to any single borrower or industry, which are not otherwise disclosed as a category of loans that represented 10% or more of outstanding loans, as of December 31, 2024 or 2023. For additional information, see Note 4, “Loans,” to the Consolidated Financial Statements in Item 8 of this report.
Previous wording
Nonperforming assets as of December 31, 2023, increased $2.25 million, or 12.95%, from December 31, 2022, with the largest increase due to an increase due to an increase in nonaccrual loans of $4.15 million. The increase was offset by a decrease of $1.35 million in nonaccrual TDRs that was reported in December 31, 2022. The adoption of ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, on January 1, 2023, eliminated the accounting guidance for troubled debt restructurings by creditors as provided in ASC 310-40, Receivables - Troubled Debt Restructuring by Creditors. Therefore, the guidance applied prior to January 1, 2023, is no longer applicable. OREO decreased $511 thousand, or 72.69% and accruing loans past due 90 days or more decreased $38 thousand from 2022. As of December 31, 2023, nonaccrual loans were largely attributed to single family owner occupied (48.38%), non-farm, non-residential real estate (12.63%), and consumer loans (9.85%). Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for credit losses based on management's estimate of loss at ultimate resolution.
Current wording
Nonperforming assets as of December 31, 2024, increased $1.02 million, or 5.20%, from December 31, 2023, with the largest increases attributable to an increase in nonaccrual loans of $513 thousand, or 2.65% and OREO of $329 thousand, or 171.35%. As of December 31, 2024, nonaccrual loans were largely attributed to single family owner occupied (46.25%), non-farm, non-residential real estate (14.17%), and commercial and industrial loans (12.54%). Certain loans included in the nonaccrual category have been written down to estimated realizable value or assigned specific reserves in the allowance for credit losses based on management's estimate of loss at ultimate resolution.
Previous wording
Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $33.93 million as of December 31, 2023, a increase of $4.25 million, or 14.32%, compared to $29.68 million as of December 31, 2022. Delinquent loans as a percent of total loans totaled 1.32% as of December 31, 2023, which includes past due loans 0.57% and nonaccrual loans 0.75%, compared to 1.24% as of December 31, 2022.
Current wording
Delinquent loans, comprised of loans 30 days or more past due and nonaccrual loans, totaled $37.55 million as of December 31, 2024, a increase of $3.62 million, or 10.67%, compared to $33.93 million as of December 31, 2023. Delinquent loans as a percent of total loans totaled 1.49% as of December 31, 2024, which includes past due loans 0.73% and nonaccrual loans 0.82%, compared to 1.32% as of December 31, 2023.
Previous wording
When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms. As noted above, ASU 2022-02, eliminated and replaced the accounting guidance for borrowers experiencing financial difficulties previously applied under ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors. ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, discloses loans for borrowers experiencing financial difficulty as modified loans. Total loans modified as of December 31, 2023, were $2.05 million.
Current wording
When restructuring loans for borrowers experiencing financial difficulty, we generally make concessions in interest rates, loan terms, or amortization terms. As noted above, ASU 2022-02, eliminated and replaced the accounting guidance for borrowers experiencing financial difficulties previously applied under ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors. ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, discloses loans for borrowers experiencing financial difficulty as modified loans. Total loans modified as of December 31, 2024, were $2.26 million as compared to $2.05 million reported as of December 31, 2023.
Previous wording
OREO, which is carried at the lesser of estimated net realizable value or cost, consisted of 6 properties with an average holding period of 10 months as of December 31, 2023. The net loss on the sale of OREO was $84 thousand in 2023, $453 thousand in 2022, and $231 thousand in 2021. The following table presents the changes in OREO during the periods indicated:
Current wording
OREO, which is carried at the lesser of estimated net realizable value or cost, consisted of 7 properties with an average holding period of 4 months as of December 31, 2024. The net loss on the sale of OREO was $28 thousand in 2024, $84 thousand in 2023, and $453 thousand in 2022. The following table presents the changes in OREO during the periods indicated:
Previous wording
With the adoption of ASU 2016-13 effective January 1, 2021, the Company changed its method for calculating it allowance for loan losses from an incurred loss method to a life of loan method. See Note 1 – "Basis of Presentation and Significant Accounting Policies" for further details. As of December 31, 2023, the balance of the ACL for loans was $36.19 million, or 1.41% of total loans. The ACL at December 31, 2023, increased $5.63 million from the balance of $30.56 million recorded December 31, 2022. This increase included a provision of $7.99 million and net charge-offs for the twelve months of $4.81 million. The increase in provision for the twelve months ended December 31, 2023, included a day two provision of $1.61 million for Surrey loans. In addition, $2.01 million was added to the reserve for Surrey's purchased credit deteriorated loans.
Current wording
With the adoption of ASU 2016-13 effective January 1, 2021, the Company changed its method for calculating it allowance for loan losses from an incurred loss method to a life of loan method. See Note 1 – "Basis of Presentation and Significant Accounting Policies" for further details. As of December 31, 2024, the balance of the ACL for loans was $34.83 million, or 1.44% of total loans. The ACL at December 31, 2024, decreased $1.36 million from the balance of $36.19 million recorded December 31, 2023. This decrease included a provision of $4.00 million and net charge-offs for the twelve months of $5.37 million.
Previous wording
At December 31, 2023, the Company also had an allowance for unfunded commitments of $746 thousand which was recorded in Other Liabilities on the Balance Sheet. During 2023, there was a recovery of provision for credit losses on unfunded commitments of $450 thousand which was recorded in provision expense on the Statement of Income. During 2022, the provision for credit losses on unfunded commitments was $518 thousand and was recorded in other expense on the Statement of Income.
Current wording
At December 31, 2024, the Company also had an allowance for unfunded commitments of $341 thousand compared to $746 thousand in 2023. The allowance for unfunded commitments is recorded in Other Liabilities on the balance sheet. During 2024, there was a recovery of provision for credit losses on unfunded commitments of $405 thousand. The provision for credit losses on unfunded commitments is recorded in provision expense on the Statement of Income.
Previous wording
Management considered the allowance adequate as of December 31, 2023; however, no assurance can be made that additions to the allowance will not be required in future periods. For additional information, see “Allowance for Credit Losses or ("ACL")” in the “Critical Accounting Policies” section above and Note 6, “Allowance for Loan Losses,” to the Consolidated Financial Statements in Item 8 of this report.
Current wording
Management considered the allowance adequate as of December 31, 2024; however, no assurance can be made that additions to the allowance will not be required in future periods. For additional information, see “Allowance for Credit Losses or ("ACL")” in the “Critical Accounting Policies” section above and Note 6, “Allowance for Credit Losses,” to the Consolidated Financial Statements in Item 8 of this report.
Previous wording
Total borrowings as of December 31, 2023, decreased $755 thousand, or 40.29%, compared to December 31, 2022. Total borrowings for 2023 were comprised entirely of short-term borrowings, which consist of retail repurchase agreements. The weighted average rate of 0.06% as of December 31, 2023, decreased one basis point from the weighted average rate of 0.07% as of December 31, 2022.
Current wording
Total borrowings as of December 31, 2024, decreased $213 thousand, or 19.03%, compared to December 31, 2023. Total borrowings for 2024 were comprised entirely of short-term borrowings, which consist of retail repurchase agreements. The weighted average rate of 0.05% as of December 31, 2024, decreased one basis point from the weighted average rate of 0.06% as of December 31, 2023.
Previous wording
As a financial holding company, the Company’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of December 31, 2023, the Company’s cash reserves and short-term investment securities totaled $14.68 million and $22.47 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations and projected dividends to shareholders for the next twelve months.
Current wording
As a financial holding company, the Company’s primary source of liquidity is dividends received from the Bank, which are subject to certain regulatory limitations. Other sources of liquidity include cash, investment securities, and borrowings. As of December 31, 2024, the Company’s cash reserves and short-term investment securities totaled $3.95 million and $55.77 million, respectively. The Company’s cash reserves and investments provide adequate working capital to meet obligations and projected dividends to shareholders for the next twelve months.
Previous wording
In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the FRB Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of December 31, 2023, our unencumbered cash totaled $116.42 million, unused borrowing capacity from the FHLB totaled $342.81 million, available credit from the FRB Discount Window totaled $123.81 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $135.88 million.
Current wording
In addition to cash on hand and deposits with other financial institutions, we rely on customer deposits, cash flows from loans and investment securities, and lines of credit from the FHLB and the FRB Discount Window to meet potential liquidity demands. These sources of liquidity are immediately available to satisfy deposit withdrawals, customer credit needs, and our operations. Secondary sources of liquidity include approved lines of credit with correspondent banks and unpledged available-for-sale securities. As of December 31, 2024, our unencumbered cash totaled $377.45 million, unused borrowing capacity from the FHLB totaled $352.32 million, available credit from the FRB Discount Window totaled $5.80 million, available lines from correspondent banks totaled $100.00 million, and unpledged available-for-sale securities totaled $145.21 million.
Previous wording
We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total stockholders’ equity as of December 31, 2023, increased $81.31 million, or 19.27%, to $503.29 million from $421.99 million as of December 31, 2022. The change in stockholders' equity was largely due to the acquisition of Surrey Bancorp. The Company issued 2.99 million shares of common stock in the transaction resulting in an increase to capital of $71.35 million. In addition, the Company earned $48.02 million, which was offset by repurchasing 768,079 shares of our common stock totaling $23.04 million and dividends on our common stock of $21.09 million. Our book value per common share increased $1.19 to $27.20 as of December 31, 2023, from $26.01 as of December 31, 2022.
Current wording
We are committed to effectively managing our capital to protect our depositors, creditors, and shareholders. Failure to meet certain capital requirements may result in actions by regulatory agencies that could have a material impact on our operations. Total stockholders’ equity as of December 31, 2024, increased $23.10 million, or 4.59%, to $526.39 million from $503.29 million as of December 31, 2023. The increase is primarily due to earnings of $51.60 million offset by dividends paid on our common stock totaling $22.02 million. In addition, the Company repurchased 257,294 shares of our common stock totaling $8.72 million. Our book value per common share increased $1.53 to $28.73 as of December 31, 2024, from $27.20 as of December 31, 2023.
Previous wording
At December 31, 2023, the Federal Open Market Committee set the benchmark federal funds rate at a range of 5.25% - 5.50% basis points. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated. In the downward rate shock presented, benchmark interest rates were assumed at levels with floors near 0%. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated.
Current wording
At December 31, 2024, the Federal Open Market Committee set the benchmark federal funds rate at a range of 4.25% - 4.50% basis points. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated. In the downward rate shock presented, benchmark interest rates were assumed at levels with floors near 0%. The following table presents the sensitivity of net interest income from immediate and sustained rate shocks in various interest rate scenarios over a twelve-month period for the periods indicated.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
2024 Compared to 2023. The provision charged to operations decreased $4.39 million compared to the prior year. The provision expense of $3.60 million was comprised of $4.00 million related to provision expense for loans and a recovery of provision of $405 thousand for unfunded loan commitments. Provision for credit losses for loans of $4.00 million was recorded compared to the provision of $8.44 million recorded in 2023. The decrease in provision is primarily due a much smaller required credit loss provision as the loan portfolio has experienced a decrease of $156.21 million. Additionally, $1.61 million of the provision in the prior year was attributable to day two provision for the Surrey portfolio. As noted above, a recovery of provision for loan commitments was recorded in 2024 of $405 thousand compared to a recovery of provision of $450 thousand in 2023.