Farmers Merchants Bancshares Inc
For the period ended Dec 31, 2024. Filed Mar 13, 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 13, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-11.
0001437749-24-007276
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-13.
0001437749-25-007333
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 114 previous paragraphs and 110 current paragraphs.
70 unchanged; 35 reworded; 5 added; 9 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 28 previous and 26 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 (5)
Current report
Total assets were $844.6 million at December 31, 2024, an increase of $44.7 million, or 5.6%, over the $799.9 million recorded at December 31, 2023. The increase was due primarily to a $59.7 million increase in loans and a $20.0 million increase cash and cash equivalents, offset by a decrease of $38.0 million in investments.
Current report
Total liabilities were $788.4 million at December 31, 2024, an increase of $40.6 million, or 5.4%, over the $747.8 million recorded at December 31, 2023. The increase was due primarily to an increase of $77.8 million in deposits, offset by a decrease of $33.0 million in Federal Reserve Bank (“FRB”) advances, a decrease of $1.2 million in repurchase agreements, a $1.9 million decrease in long term debt, and a decrease of $1.1 million in accrued interest payable and other liabilities.
Current report
Uninsured deposits totaled $145.9 million at December 31, 2024.
Current report
Noninterest income was $1.7 million in 2024 compared to $1.6 million in 2023, an increase of $0.1 million. The increase was due primarily to an increase of $138.4 thousand on insurance proceeds from storm damage to the Bank’s Upperco, Maryland location, an increase in service charges on deposit accounts of $17.3 thousand, an increase in mortgage banking revenue of $10.8 thousand and an increase of $48.3 thousand in bank owned life insurance income, offset by a decrease in the fair value adjustment on an equity security of $9.8 thousand, a write down of the value of other real estate owned of $50.0 thousand, a loss on the sale of investment securities of $13.2 thousand, a loss on the sale of property and equipment of $5.2 thousand, a decrease in the gain on sale of SBA loans of $19.4 thousand, and a $6.3 thousand decrease in other fees and commissions.
Current report
Total noninterest expense increased by $1.8 million to $16.9 million in 2024 from $15.1 million in 2023. The increase was due primarily to an increase in salaries and benefits of $495.7 thousand due to additional lending staff being added during the year, and increase in occupancy costs of $195.7 thousand as a result of the opening of the Towson office in 2024, an increase on furniture and equipment costs of $309.6 due to the addition of the Towson office and purchases of computer equipment. Additionally, professional fees increased by $222.4 thousand due to consultant fees related to the Company’s core system conversion in 2024 and legal fees. ATM and debit card expenses increased by $138.5 thousand related to the core conversion in 2024, FDIC insurance premiums increased $52.2 thousand due to higher assessment rates, postage, delivery, and armored car services increased by $27.1 thousand. Gains on other real estate owned increased by $311.5 thousand. All of which were offset by decreased advertising and other expenses of $14.8 thousand.
Removed paragraphs (9)
Previous report
Total assets were $799,940,826 at December 31, 2023, an increase of $81,730,154, or 11.4%, over the $718,210,672 recorded at December 31, 2022. The increase was due primarily to an increase of $37,426,800 in cash and cash equivalents, an increase of $37,424,849 in securities available for sale and held to maturity and an increase of $6,387,504 in loans.
Previous report
Total liabilities were $747,762,535 at December 31, 2023, an increase of $77,326,826, or 11.5%, over the $670,435,709 recorded at December 31, 2022. The increase was due primarily to an increase of $57,351,727 in deposits, an increase of $33,000,000 in Federal Reserve Bank (“FRB”) advances, an increase of $1,585,190 in securities sold under repurchase agreements and an increase of $1,132,863 in accrued interest payable, offset by a decrease of $15,000,000 in Federal Home Loan Bank of Atlanta (“FHLB”) advances and a decrease of $1,883,264 in long term debt.
Previous report
Impaired loans at December 31, 2022 are set forth in the following table:
Previous report
Investment securities increased by $37,424,849, or 25.5%, to $184,248,295 at December 31, 2023 from $146,823,446 at December 31, 2022. The increase was due primarily to security purchases of $49,742,119, offset by principal paydowns and calls of $13,341,714. At December 31, 2023 and 2022, the Company had classified 89% and 86%, respectively, of the investment portfolio as available for sale. The remaining balance of the portfolio was classified as held to maturity.
Previous report
(1) – the yields indicated are based upon the amortized cost and have not been tax effected for tax exempt securities.
Previous report
SBA pools and mortgage-backed securities are due in monthly installments.
Previous report
Uninsured deposits totaled $150,955,541 at December 31, 2023.
Previous report
Noninterest income was $1,591,500 in 2023 compared to $2,293,938 in 2022, a decrease of $702,438. The decrease was due primarily to a decrease of $669,077 on insurance proceeds from the storm damage to the Bank’s Upperco, Maryland location, a $138,731 decrease in the gain on sale of SBA loans, and a $117,046 decrease in mortgage banking revenue as a result of the significant increase in interest rates in 2023 that reduced residential loan activity, offset by an increase of $116,233 in bank owned life insurance income.
Previous report
Total noninterest expense decreased by $225,354 to $15,141,926 in 2023 from $15,367,280 in 2022. The decrease was due primarily to a decrease in salaries of $320,421 as a result of lower bonuses paid in 2023 of $495,875, offset by higher salary costs of $175,454 due to normal salary increases, a decrease of $257,243 in other real estate owned costs as a result of the gain on the sale of other real estate owned of $249,217, a decrease in professional fees of $114,263 as a result of lower headhunting costs of $129,902, offset by an increase of $202,782 in employee benefit costs as a result of higher insurance expenses, an increase of $158,820 in FDIC premiums and an increase of $91,875 in furniture and equipment expense as a result of higher software maintenance and maintenance contract costs.
Reworded paragraphs (35)
Previous wording
On October 1, 2020, Farmers and Merchants Bancshares, Inc. acquired Carroll Bancorp, Inc. (“Carroll”) and Farmers and Merchants Bank acquired Carroll’s wholly-owned subsidiary, Carroll Community Bank, in a series of merger transactions (collectively, the “Merger”). As a result of the Merger, Carroll was merged with an into Farmers and Merchants Bancshares, Inc., with Farmers and Merchants Bancshares, Inc. as the surviving corporation, and Carroll Community Bank merged with an into Farmers and Merchants Bank, with Farmers and Merchants Bank as the surviving bank. The Merger was intended to constitute a tax-free reorganization for federal income tax purposes.
Current wording
The Merger was effected on October 1, 2020 and involved the acquisition of Carroll by Farmers and Merchants Bancshares, Inc., with Farmers and Merchants Bancshares, Inc. as the surviving corporation, and the acquisition of Carroll Community Bank by the Bank, with the Bank as the surviving bank subsidiary. The Merger was intended to constitute a tax-free reorganization for federal income tax purposes.
Previous wording
Stockholders’ equity was $52,178,291 at December 31, 2023 compared to $47,774,963 at December 31, 2022, an increase of $4,403,328, or 9.2%. The increase was due primarily to net income for 2023 of $6,418,337, offset by dividends paid, net of reinvestments, of $1,235,988 and a decrease in after-tax unrealized loss on available for sale securities of $578,315.
Current wording
Stockholders’ equity was $56.3 million at December 31, 2024 compared to $52.2 at December 31, 2023, an increase of $4.1 million or 7.8%. The increase was due primarily to net income for 2024 of $4.3 million and a decrease in after-tax unrealized loss on available for sale securities of $1.2 million, offset by dividends paid, net of reinvestments, of $1.4 million.
Previous wording
Loans increased by $6,387,504, or 1.2%, to $523,308,044 at December 31, 2023 from $516,920,540 at December 31, 2022. The increase was due primarily to an increase of $10,147,808 in commercial real estate loans and an increase of $1,756,575 in commercial loans, offset by a decrease in construction/land development loans of $3,532,223 and a decrease in residential real estate loans of $1,893,517. Due primarily to rising interest rates, total loan production decreased by $65 million in 2023 when compared to 2022 and loan payoffs decreased by $24 million as rising rates made it more difficult for borrowers to refinance. In addition, line of credit usage was flat year over year. For construction/land development loans the decrease was due primarily to several loans moving to permanent status after the construction completion. The allowance for credit losses increased by $135,049 to $4,285,247 at December 31, 2023 compared to $4,150,198 at December 31, 2022.
Current wording
Loans increased by $59.7 million, or 11.4%, to $583.0 million at December 31, 2024 from $523.3 million at December 31, 2023. The increase was due primarily to an increase of $36.2 million in commercial real estate loans and an increase of $17.6 million in commercial loans. Additionally, construction/land development loans increased by $1.7 million and residential loans increased by $4.4 million. The growth was due to addition of new lending staff during the year and stabilizing interest rates. Total loan production increased by $68.5 million in 2024 when compared to 2023 and loan payoffs increased by $19.7 million as stabilizing rising rates allowed for more borrowers to refinance. The allowance for credit losses remained flat at $4.3 million at both December 31, 2024 and December 31, 2023.
Previous wording
At December 31, 2022, the Company had one non-accrual commercial real estate loan totaling $502,961 and one non-accrual commercial loan totaling $152,449. The commercial loan was secured by business assets and a personal guaranty. Gross interest income of $45,856 would have been recorded in 2022 if these non-accrual loans had been current and performing in accordance with the original terms. The Company allocated $281,910 of its allowance for credit losses to these non-accrual loans.
Current wording
At December 31, 2024, the Company had three non-accrual commercial real estate loans totaling $2,440.5 thousand. Gross interest income of $25.0 thousand would have been recorded in 2024 if these non-accrual loan had been current and performing in accordance with the original terms. The Company allocated $360.0 thousand of its allowance for credit losses to these three non-accrual loans.
Previous wording
At December 31, 2023, the Company had one non-accrual commercial real estate loan totaling $502,961 and one non-accrual commercial loan totaling $152,449. The commercial loan was secured by business assets and a personal guaranty. Gross interest income of $45,856 would have been recorded in 2023 if these non- accrual loans had been current and performing in accordance with the original terms. The Company allocated $450,000 of its allowance for credit losses to these non-accrual loans.
Current wording
At December 31, 2023, the Company had one non-accrual commercial real estate loan totaling $502.9 thousand and one non-accrual commercial loan totaling $152.4 thousand. The commercial loan was secured by business assets and a personal guaranty. Gross interest income of $45.9 thousand would have been recorded in 2023 if these non-accrual loans had been current and performing in accordance with the original terms. The Company allocated $450.0 thousand of its allowance for credit losses to these non-accrual loans.
Previous wording
The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2023:
Current wording
The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2024 and December 31, 2023:
Previous wording
The allowance for credit losses is a reserve established through a provision for credit losses and is charged to expense. The allowance for credit losses represents an amount which, in management’s judgment, will be adequate to absorb expected losses on existing loans and other extensions of credit that may become uncollectible. The Company’s allowance for credit loss methodology is calculated in accordance with Financial Accounting Standards Board Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and allowance allocations calculated in accordance with ASC Topic 450, “Contingencies.” The amount of the allowance represents management’s best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms, adjusted for expected prepayments when appropriate.
Current wording
The allowance for credit losses is a reserve established through a provision for credit losses and is charged to expense. The allowance for credit losses represents an amount which, in management’s judgment, will be adequate to absorb expected losses on existing loans and other of credit that may become uncollectible. The Company’s allowance for credit loss methodology is calculated in accordance with Financial Accounting Standards Board Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amount of the allowance represents management’s best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms, adjusted for expected prepayments when appropriate.
Previous wording
Although management believes, based on currently available information, that the Company’s allowance for credit losses is sufficient to cover losses expected in its loan portfolio at this time, no assurances can be given that the Company’s level of allowance for credit losses will be sufficient to cover future credit losses incurred by the Company or that future adjustments to the allowance for credit losses will not be necessary if economic or other conditions differ substantially from the economic and other conditions at the time management determined the current level of the allowance for credit losses.
Current wording
Although management believes, based on currently available information, that the Company’s allowance for credit losses is sufficient to cover expected losses in its loan portfolio, no assurances can be given that the Company’s level of allowance for credit losses will be sufficient to cover future credit losses incurred by the Company or that future adjustments to the allowance for credit losses will not be necessary if economic or other conditions differ substantially from the economic and other conditions at the time management determined the current level of the allowance for credit losses.
Previous wording
Net recovery during the period to average loans outstanding:
Current wording
Net charge offs/(recoveries) during the period to average loans outstanding:
Previous wording
The Company received net recoveries of loans previously charged-off of $398,973 and $24,930 during 2023 and 2022, respectively. The impact on the income statement was a $570,000 recovery of credit losses in 2023 compared to a $475,000 provision for loan losses in 2022.
Current wording
The Company recorded net loan charge offs of $138.0 thousand during 2024. In 2023, the Company recorded a net recovery of previously charged off loans of $398.9 thousand. The impact on the income statement was a $114.0 thousand provision for credit losses in 2024 compared to a $700.0 thousand recovery of credit losses in 2023.
Previous wording
Management believes that the $4.3 million reserve at December 31, 2023, when coupled with the $570,000 recovery of credit losses for the year ended December 31, 2023, is appropriate to adequately cover the expected losses inherent in the loan portfolio. The reserve increased by $135,049, or 3.3%, from December 31, 2022. The Company’s loan portfolio grew by $6 million during the 2023.
Current wording
Management believes that the $4.3 million reserve at December 31, 2024 is appropriate to adequately cover the expected losses inherent in the loan portfolio. The reserve remained unchanged at $4.3 million as of December 31, 2024. The Company’s loan portfolio grew by $59.7 million during the 2024. The allowance for credit losses as a percentage of gross loans was 0.72% and 0.81% as of December 31, 2024 and 2023, respectively.
Previous wording
Other real estate owned (“OREO”) at December 31, 2023 included one property with a carrying value of $1,242,365. The property is an apartment building in Baltimore, Maryland that was acquired in the Merger. The property is being marketed for sale.
Current wording
Other real estate owned (“OREO”) at December 31, 2024 included one property with a carrying value of $1.2 million. The property is an apartment building in Baltimore, Maryland that was acquired in the Merger. The property is being marketed for sale.
Previous wording
Securities classified as available for sale are held for an indefinite period of time and may be sold in response to changing market and interest rate conditions as part of the Company’s asset/liability management strategy. Available for sale securities are carried at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity, net of income taxes. Securities classified as held to maturity, which management has both the positive intent and ability to hold to maturity, are reported at amortized cost. The Company does not currently follow a strategy of making security purchases with a view to near-term sales, and, therefore, does not own trading securities. The Company manages the investment portfolio within policies that seek to achieve desired levels of liquidity, manage interest rate sensitivity, meet earnings objectives, and provide required collateral for deposit and borrowing activities.
Current wording
Investment securities decreased by $38.0 million, or 20.6%, to $146.2 million at December 31, 2024 from $184.2 million at December 31, 2023. The decrease was due primarily to the unwinding of an interest rate swap which included the sale of $28 million of mortgage backed securities and maturities of $1.5 million. At December 31, 2024 and 2023, the Company had classified 86% and 89%, respectively, of the investment portfolio as available for sale. The remaining balance of the portfolio was classified as held to maturity. Securities classified as available for sale are held for an indefinite period of time and may be sold in response to changing market and interest rate conditions as part of the Company’s asset/liability management strategy. Available for sale securities are carried at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity, net of income taxes. Securities classified as held to maturity, which management has both the positive intent and ability to hold to maturity, are reported at amortized cost. The Company does not currently follow a strategy of making security purchases with a view to near-term sales, and, therefore, does not own trading securities. The Company manages the investment portfolio within policies that seek to achieve desired levels of liquidity, manage interest rate sensitivity, meet earnings objectives, and provide required collateral for deposit and borrowing activities.
Previous wording
Total deposits were $680,962,851 at December 31, 2023 compared to $623,611,124 at December 31, 2022, an increase of $57,351,727, or 9.2%. The increase was due to an $111,695,140 increase in certificates of deposit and a $2,016,597 increase in interest bearing checking accounts, offset by a $17,293,071 decrease in savings accounts, a $27,656,296 decrease in money market accounts and an $11,410,643 decrease in noninterest-bearing accounts.
Current wording
Total deposits were $758.8 million at December 31, 2024 compared to $681.0 million at December 31, 2023, an increase of $77.8 million, or 11.4%. The increase was due to a $108.6 million increase in certificates of deposit a $3.9 million increase in reciprocal deposits, and a $0.5 million increase in individual retirement accounts, offset by a $13.0 million decrease in checking accounts, a $6.9 million decrease in savings accounts, a $4.1 million decrease in money market accounts and an $8.1 million decrease in noninterest-bearing accounts.
Previous wording
On September 30, 2020, Farmers and Merchants Bancshares, Inc. borrowed $17,000,000 from First Horizon Bank (“FHN”) to be used, on October 1, 2020, to fund a portion of the merger consideration paid in the Merger. Net of issuance costs of $28,126, the proceeds of the net long-term debt was $16,971,874. The loan matures on September 30, 2025. The interest rate on the loan is fixed at 4.10%. The Company made quarterly interest-only payments through October 1, 2021. During the remaining term of the loan, the Company is required to make quarterly interest and principal payments of approximately $646,472, which is based on a nine-year straight-line amortization schedule. The remaining balance of approximately $9,916,667 will be due at maturity. To secure its obligations under this loan, the Company pledged all of its shares of common stock of the Bank to the lender.
Current wording
On September 30, 2020, Farmers and Merchants Bancshares, Inc. borrowed $17.0 million from First Horizon Bank to be used, on October 1, 2020, to fund a portion of the merger consideration paid in the Merger. Net of issuance costs of $28.1 thousand, the Company received $16.9 million in loan proceeds. The loan matures on September 30, 2025 and the Company is exploring refinancing options. The interest rate on the loan is fixed at 4.10%. The Company made quarterly interest-only payments through October 1, 2021. During the remaining term of the loan, the Company is required to make quarterly interest and principal payments of approximately $646.5 thousand, which is based on a nine-year straight-line amortization schedule. The remaining balance of approximately $9.9 million will be due at maturity. To secure its obligations under this loan, the Company pledged all of its shares of common stock of the Bank to the lender.
Previous wording
The Company reported net income of $6,418,337 for the year ended December 31, 2023 compared to $8,090,127 for the year ended December 31, 2022. The decrease of $1,671,790 from 2022 was due to a decrease in net interest income of $2,707,482 and a decrease in noninterest income of $702,438, offset by a decrease in the provision for credit losses of $1,045,000, a decrease in noninterest expense of $225,354 and a decrease in income taxes of $467,776.
Current wording
The Company reported net income of $4.3 million for the year ended December 31, 2024 compared to $6.4 million for the year ended December 31, 2023. The decrease of $2.1 million from 2023 was due to a decrease in net interest income of $0.6 million, an increase in the provision for credit losses of $0.7 million, and an increase in noninterest expense of $1.8 million offset by an increase in noninterest income of $0.2 million and a decrease in income taxes of $0.8 million.
Previous wording
For the year ended December 31, 2023, the Company recorded net interest income of $21,416,013 compared to $24,123,495 for 2022, a decrease of $2,707,482. The decrease was attributable to a decrease in the net yield on interest-earning assets of 57 basis points to 2.97% in 2023 from 3.54% in 2022. Higher interest expense on deposits and borrowings due to the Federal Reserve rate increases was the driving factor in the lower net interest income.
Current wording
For the year ended December 31, 2024, the Company recorded net interest income of $20.8 million compared to $21.4 million for 2023, a decrease of $0.6 million. The decrease was attributable to a 102 basis point increase in the cost of interest bearing liabilities to 2.76% in 2024 from 1.74% in 2023. Higher interest expense on deposits and borrowings due to the Federal Reserve rate increases was the driving factor in the lower net interest income.
Previous wording
Total interest income for the year ended December 31, 2023 increased by $5,053,485 to $31,323,138 from $26,269,653 for 2022. The increase was due primarily to an increase in average interest earning assets of $41,199,331 to $727,959,751 in 2023 from $686,760,420 in 2022 and by an increase of 48 basis points in the tax equivalent yield on interest earning assets to 4.33% in 2023 from 3.85% in 2022.
Current wording
Total interest income for the year ended December 31, 2024 increased by $7.0 million to $38.4 million from $31.3 million for 2023. The increase was due primarily to an increase in average interest earning assets of $56.6 million to $784.6 million in 2024 from $728.0 million in 2023 and by an increase of 59 basis points in the yield on interest earning assets to 4.92% in 2024 from 4.33% in 2023.
Previous wording
Interest income from loans was $25,730,722 in 2023 compared to $22,565,034 in 2022, an increase of $3,165,688. This increase was attributable to a $30,482,783 increase in the average balance of loans to $528,910,091 in 2023 from $498,427,308 in 2022 and a 33 basis point increase in the average yield on loans to 4.86% in 2023 from 4.53% in 2022.
Current wording
Interest income from loans was $30.3 million in 2024 compared to $25.7 in 2023, an increase of $4.6 million. This increase was attributable to a $29 million increase in the average balance of loans to $557.9 million in 2024 from $528.9 million 2023 and a 58 basis point increase in the average yield on loans to 5.44% in 2024 from 4.86% in 2023.
Previous wording
For the year ended December 31, 2023, the Company recorded interest income on securities of $4,853,602 compared to $3,551,955 for the same period in 2022. The $1,301,647 increase in 2023 was attributable to a $7,382,822 increase in the average balance of securities to $182,159,701 in 2023 from $174,776,879 in 2022 and a 62 basis point increase in the average tax equivalent yield on securities to 2.75% in 2023 from 2.13% in 2022.
Current wording
For the year ended December 31, 2024, the Company recorded interest income on securities of $6.8 million compared to $4.9 million for the same period in 2023. The $1.9 million increase in 2024 was attributable to a $19.1 million increase in the average balance of securities to $201.3 million in 2024 from $182.2 million in 2023 and a 71 basis point increase in the average yield on securities to 3.46% in 2024 from 2.75% in 2023.
Previous wording
Interest income on federal funds sold and other interest-earning assets (FHLB stock and certificates of deposit) increased by $586,150 to $738,814 in 2023 compared to $152,664 in 2022. The increase was due to a 346 basis point increase in the average tax equivalent yield to 4.66% in 2023 from 1.20% in 2022 and a $3,333,726 increase in the average balance of federal funds sold and other interest-earning assets to $16,889,959 in 2023 from $13,556,233 in 2022.
Current wording
Interest income on federal funds sold and other interest-earning assets (FHLB stock and certificates of deposit) increased by $0.5 million to $1.2 million in 2024 compared to $0.7 million in 2023. The increase was due to a 39 basis point increase in the average yield to 5.05% in 2024 from 4.66% in 2023 and an $8.6 million increase in the average balance of federal funds sold and other interest-earning assets to $25.5 million in 2024 from $16.9 million in 2023.
Previous wording
Total interest expense increased by $7,760,967 to $9,907,125 in 2023 compared to $2,146,158 in 2022. The increase was due to a 133 basis point increase in the cost of interest-bearing liabilities to 1.74% in 2023 from 0.41% in 2022 and an increase of $42,216,277 in the average balance of interest-bearing liabilities to $570,426,442 in 2023 from $528,210,165 in 2022. The Federal Reserve rate increases were the primary cause of the significant increase in the cost of funds.
Current wording
Total interest expense increased by $7.6 million to $17.5 million in 2024 compared to $9.9 million in 2023. The increase was due to a 102 basis point increase in the cost of interest-bearing liabilities to 2.76% in 2024 from 1.74% in 2023 and an increase of $64.2 in the average balance of interest-bearing liabilities to $634.6 million in 2024 from $570.4 million in 2023. The Federal Reserve rate increases were the primary cause of the significant increase in the cost of funds.
Previous wording
Interest paid on NOW, savings, and money market deposit accounts increased by $922,032 to $1,398,245 in 2023 compared to $476,213 in 2022. The increase was due to a 32 basis point increase in the cost of funds to 0.46% in 2023 from 0.14% in 2022 offset by a $29,887,505 decrease in the average balance of these deposits to $303,660,843 in 2023 from $333,548,348 in 2022.
Current wording
Interest paid on NOW, savings, and money market deposit accounts increased by $616.0 thousand to $2.0 million in 2024 compared to $1.4 million in 2023. The increase was due to a 28 basis point increase in the cost of funds to 0.74% in 2024 from 0.46% in 2023 offset by a $31.0 million decrease in the average balance of these deposits to $272.6 million in 2024 from $303.6 million in 2023.
Previous wording
Interest paid on time deposits increased by $5,673,371 to $6,572,849 in 2023 compared to $899,478 in 2022. The increase was due to an increase of 248 basis points in the average rate paid to 3.01% in 2023 from 0.53% in 2022 and an increase of $50,105,803 in the average balance to $218,724,746 in 2023 from $168,618,943 in 2022.
Current wording
Interest paid on time deposits increased by $5.9 million to $12.5 million in 2024 compared to $6.6 million in 2023. The increase was due to an increase of 131 basis points in the average rate paid to 4.32% in 2024 from 3.01% in 2023 and an increase of $71.0 million in the average balance to $289.7 million in 2024 from $218.7 million in 2023.
Previous wording
Interest paid on securities sold under repurchase agreements increased by $29,105 to $41,873 in 2023 compared to $12,768 in 2022. The increase was attributable to an increase of 60 basis points in the average rate paid to 0.90% in 2023 from 0.30% in 2022 and a $399,570 increase in the average balance of securities sold under repurchase agreements to $4,655,006 in 2023 from $4,255,436 in 2022.
Current wording
Interest paid on securities sold under repurchase agreements increased by $23.5 thousand to $65.3 thousand in 2024 compared to $41.8 thousand in 2023. The increase was attributable to an increase of 36 basis points in the average rate paid to 1.26% in 2024 from 0.90% in 2023 and a $540.0 thousand increase in the average balance of securities sold under repurchase agreements to $5.2 million in 2024 from $4.7 million in 2023.
Previous wording
Interest paid on long-term debt was $584,953 in 2023 compared to $664,620 in 2022. This debt relates to the $17 million term loan obtained on September 30, 2020 to finance a portion of the cash paid to the former stockholders of Carroll in the Merger. The average balance, net of issuance costs, decreased $1,656,386 to $14,259,819 in 2023 from $15,916,205 in 2022 due to scheduled principal payments.
Current wording
Interest paid on long-term debt was $507.0 thousand in 2024 compared to $585.0 thousand in 2023. This debt relates to the $17 million term loan obtained on September 30, 2020 to finance a portion of the cash paid to the former stockholders of Carroll in the Merger. The average balance, net of issuance costs, decreased $2.1 million to $12.1 million in 2024 from $14.3 million in 2023 due to scheduled principal payments.
Previous wording
The FRB’s Bank Term Funding Program (“BTFP”) was initiated in March 2023. The Company utilized the BTFP with an average balance of $15,515,069 during 2023 at a cost of 5.31%. We recorded an associated interest expense of $823,319 in 2023.
Current wording
The FRB’s Bank Term Funding Program (“BTFP”) was initiated in March 2023. The Company utilized the BTFP with an average balance of $48.7 million and $15.5 million during 2024 and 2023, respectively and cost of 4.75% and 5.31% in 2024 and 2023, respectively. We recorded an associated interest expense of $2.3 million and $823.0 thousand in 2024 and 2023, respectively.
Previous wording
Interest paid on FHLB advances increased $392,807 to $485,886 in 2023 from $93,079 in 2022. The increase was attributable to an increase of 198 basis points in the average rate paid to 3.57% in 2023 from 1.59% in 2022 and a $7,739,726 increase in the average balance of FHLB advances and other borrowings to $13,610,959 in 2023 from $5,871,233 in 2022.
Current wording
Interest paid on FHLB advances decreased $363.2 thousand to $122.7 thousand in 2024 from $485.9 thousand in 2023. The change was attributable to a decrease of 161 basis points in the average rate paid to 1.96% in 2024 from 3.57% in 2023 and a $7.3 million decrease in the average balance of FHLB advances and other borrowings to $6.3 million in 2024 from $13.6 million in 2023.
Previous wording
(1) - Interest on tax-exempt securities and other tax-exempt investments are reported on a fully taxable equivalent basis. The federal, stateand combined tax rates used were 21.00%, 8.25% and 27.5175% respectively.
Current wording
(1) - Interest on tax-exempt securities and other tax-exempt investments are reported on a fully taxable equivalent basis. The federal, state and combined tax rates used were 21.00%, 8.25% and 27.5175% respectively.
Previous wording
Income taxes decreased by $467,776 to $2,017,250 in 2023 from $2,485,026 in 2022.
Current wording
Income taxes decreased by $786.2 thousand to $1.2 million in 2024 from $2.1 million in 2023.
Previous wording
The Company’s effective tax rate increased to 23.9% in 2023, from 23.5% in 2022. The increase was due to a lower percentage of tax-exempt revenue. Note 14 to the consolidated financial statements provides additional information about the Company’s taxes, including a reconciliation of the Company’s effective tax rate to the Federal statutory rate of 21%.
Current wording
The Company’s effective tax rate decreased to 22.4% in 2024, from 23.9% in 2023. The decrease was due to a higher percentage of tax exempt revenue. Note 11 to the consolidated financial statements provides additional information about the Company’s taxes, including a reconciliation of the Company’s effective tax rate to the Federal statutory rate of 21%.
Previous wording
Based upon the simulation analysis performed at December 31, 2023 and 2022, management estimated the following changes in NII, assuming the indicated rate changes:
Current wording
Based upon the most recent data available to the Company (as of September 30, 2024), the simulation analysis produced the following estimated changes in NII, assuming the indicated rate changes:
Previous wording
The Bank is approved to borrow 75% of eligible pledged single-family residential loans and 50% of eligible pledged commercial loans as well as investment securities, or approximately $67.0 million under a secured line of credit with the FHLB. The Bank also has two facilities with the Reserve Bank. Under the first facility, which has been in place for over 10 years and is collateralized by loans, the Bank can borrow approximately $23.4 million. The second facility is the Bank Term Funding Program (“BTFP”) that the Reserve Bank created in 2023. The BTFP facility allows securities to be pledged at par, provides fixed rates for up to one-year terms, and allows prepayments in whole or in part at any time. Finally, the Bank has $23,500,000 ($14,500,000 unsecured and $9,000,000 secured) of overnight federal funds lines of credit available from commercial banks.
Current wording
The Bank is approved to borrow 75% of eligible pledged single-family residential loans and 50% of eligible pledged commercial loans as well as investment securities, or approximately $70.4 million under a secured line of credit with the FHLB. The Bank also has two facilities with the FRB. Under the first facility, which has been in place for over 10 years and is collateralized by loans, the Bank can borrow approximately $32.5 million. The second facility is the BTFP that the Federal Reserve previously created in 2023, but expired in 2024. The BTFP facility allowed securities to be pledged at par, provided fixed rates for up to one-year terms, and allowed prepayments in whole or in part at any time. Finally, the Bank has $23.5 million ($14.5 million unsecured and $9.0 million secured) of overnight federal funds lines of credit available from commercial banks.
Previous wording
FHLB advances of $5,000,000 and $20,000,000 were outstanding as of December 31, 2023 and 2022, respectively. BTFP advances of $33,000,000 and $0 were outstanding as of December 31, 2023 and 2022, respectively. The Company borrowed $17,000,000 to facilitate the Merger in 2020. There were no borrowings from the Reserve Bank other than the BTFP advances noted above or our commercial bank lenders at December 31, 2023 and 2022. Management believes that we have adequate liquidity sources to meet all anticipated liquidity needs over the next 12 months. Management knows of no trend or event which is likely to have a material impact on our ability to maintain liquidity at satisfactory levels. Uninsured deposits were approximately $150,956,000,000 or 22% of total deposits at December 31, 2023.
Current wording
FHLB advances of $5.0 million were outstanding as of both December 31, 2024 and 2023. BTFP advances of $0.0 and $33.0 million were outstanding as of December 31, 2024 and 2023, respectively. The Company borrowed $17.0 million to facilitate the Merger in 2020. There were no borrowings from the FRB, other than the BTFP advances noted above, or from our commercial bank lenders at December 31, 2024 and 2023. Management believes that we have adequate liquidity sources to meet all anticipated liquidity needs over the next 12 months. Management knows of no trend or event which is likely to have a material impact on our ability to maintain liquidity at satisfactory levels. The Company’s uninsured deposits were approximately $477.1 thousand as of December 31, 2024.
Previous wording
Cash provided by operating activities decreased by $992,216 to $6,163,746 in 2023 from $7,155,962 in 2022. Cash used in investing activities decreased by $7,260,261 to $42,618,829 in 2023 from $35,358,568 in 2022 due primarily to a $38,658,421 decrease in the net cash outflow from the debt securities portfolio, offset by a $30,127,002 increase in the net cash outflow from the loan portfolio. Cash provided by financing activities increased by $64,877,846 to $73,881,883 in 2023 from $9,004,037 in 2022 due primarily to a $60,064,193 increase in the net cash inflow from deposits and a $33,000,000 increase in the net cash inflow from Federal Reserve Bank advances and a $1,823,912 increase in the net cash outflow from securities sold under repurchase agreements, offset by a $30,000,000 decrease in the net cash outflow from Federal Home Loan Bank of Atlanta advances.
Current wording
Cash provided by operating activities decreased by $3.6 million to $2.3 million in 2024 from $6.2 million in 2023. Cash used in investing activities decreased by $19.7 million to $22.7 million in 2024 from $42.4 in 2023 due primarily to a $5.1 million increase in the net cash inflow from the debt securities portfolio, $23.9 million provided by the sale of a security, and a decrease in the purchases of securities of $45.9 million offset by a $54.1 million increase in the net cash outflow from the loan portfolio. Cash provided by financing activities decreased by $33.5 million to $40.4 million in 2024 from $73.9 million in 2023 due primarily to a $2.8 million decrease in repurchase agreement activity and a $66.0 million decrease in the net cash inflow from FRB advances. These were offset by a $20.4 million increase in the net cash inflow from deposits $15.0 million a increase in the net cash outflow from Federal Home Loan Bank of Atlanta advances.