FIRST COMMUNITY CORP /SC/

Previous wording

The following discussion describes our results of operations for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023 and analyzes our financial condition as of September 30, 2024 as compared to December 31, 2023. Like most community banks, we derive most of our income from interest we receive on our loans and investments. Our primary sources of funds for making these loans and investments are our deposits and borrowings, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. There are risks inherent in all loans, so we maintain an allowance for credit losses to absorb our estimate of expected credit losses on existing loans that may become uncollectible. We establish and maintain this allowance by recording a provision for or release of credit losses against our earnings. In the following section, we have included a detailed discussion of this process.

Current wording

The following discussion describes our results of operations for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 and analyzes our financial condition as of March 31, 2025 as compared to December 31, 2024. Like most community banks, we derive most of our income from interest we receive on our loans and investments. Our primary sources of funds for making these loans and investments are our deposits and borrowings, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. There are risks inherent in all loans, so we maintain an allowance for credit losses to absorb our estimate of expected credit losses on existing loans that may become uncollectible. We establish and maintain this allowance by recording a provision for or release of credit losses against our earnings. In the following section, we have included a detailed discussion of this process.

Previous wording

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments, deposits and borrowings through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member banks’ deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. During 2023, market interest rates increased 1.00% due to an increase in inflation. The target range of federal funds was 5.25% - 5.50% from July 26, 2023 to September 17, 2024. On September 18, 2024, the FOMC reduced the target range of federal funds by 0.50% to 4.75% - 5.00%. The target range of federal funds was 4.75% - 5.00% at September 30, 2024 compared to 5.25% - 5.50% at September 30, 2023. Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations and related mortgage banking income.

Current wording

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments, deposits and borrowings through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member banks’ deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. The target rate range of federal funds was 5.25% - 5.50% from July 26, 2023 to September 17, 2024. On September 18, 2024, the FOMC reduced the target range of federal funds by 0.50% to 4.75% - 5.00%. There were two additional 25 basis point cuts to the target rate range of federal funds during the fourth quarter of 2024, lowering the target rate range to 4.25% - 4.50% at March 31, 2025, compared to 5.25% - 5.50% at March 31, 2024. Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations and related mortgage banking income.

Previous wording

Our net income for the three months ended September 30, 2024 increased $2.1 million to $3.9 million, or $0.50 diluted earnings per common share, as compared to $1.8 million, or $0.23 diluted earnings per common share, for the three months ended September 30, 2023. The $2.1 million increase in net income between the two periods is primarily due to a $1.3 million increase in net interest income, a $490,000 decrease in provision for credit losses, and a $1.7 million increase in total non-interest income, partially offset by a $718,000 increase in total non-interest expense and a $682,000 increase in income tax expense.

Current wording

Our net income for the three months ended March 31, 2025 increased $1.4 million to $4.0 million, or $0.51 diluted earnings per common share, as compared to $2.6 million, or $0.34 diluted earnings per common share, for the three months ended March 31, 2024. The $1.4 million increase in net income between the two periods is primarily due to a $2.3 million increase in net interest income and a $798,000 increase in total non-interest income, partially offset by a $308,000 increase in provision for credit losses, a $949,000 increase in total non-interest expense and a $454,000 increase in income tax expense.

Previous wording

Net interest income increased $1.3 million, or 10.8%, to $13.4 million for the three months ended September 30, 2024 from $12.1 million for the three months ended September 30, 2023. Our net interest margin remained flat at 2.95% during the three months ended September 30, 2024 compared to 2.95% during the three months ended September 30, 2023. Our net interest margin, on a taxable equivalent basis, was 2.96% for the three months ended September 30, 2024 compared to 2.96% for the three months ended September 30, 2023. Average earning assets were $1.8 billion for the three months ended September 30, 2024 and $1.6 billion in the same period of 2023.

Current wording

Net interest income increased $2.3 million, or 19.2%, to $14.4 million for the three months ended March 31, 2025 from $12.1 million for the three months ended March 31, 2024. Our net interest margin improved 34 basis points to 3.12% during the three months ended March 31, 2025 compared to 2.78% during the three months ended March 31, 2024. Our net interest margin, on a taxable equivalent basis, was 3.13% for the three months ended March 31, 2025 compared to 2.79% for the three months ended March 31, 2024. Average earning assets were $1.9 billion for the three months ended March 31, 2025 and $1.7 billion in the same period of 2024.

Previous wording

Average loans increased $134.5 million, or 12.6%, to $1.2 billion for the three months ended September 30, 2024 from $1.1 billion for the same period in 2023. Our loan (including loans held-for-sale) to deposit ratio on average during the three months ended September 30, 2024 was 74.0%, as compared to 74.4% during same period in 2023. The yield on loans increased 59 basis points to 5.73% during the three months ended September 30, 2024 from 5.14% during the same period in 2023 due to an increase in market interest rates.

Current wording

Average loans increased $90.0 million, or 7.8%, to $1.2 billion for the three months ended March 31, 2025 from $1.1 billion for the same period in 2024. Our loan (including loans held-for-sale) to deposit ratio on average during the three months ended March 31, 2025 was 74.2%, as compared to 75.5% during same period in 2024. The yield on loans increased 27 basis points to 5.71% during the three months ended March 31, 2025 from 5.44% during the same period in 2024 due to an increase in market interest rates.

Previous wording

Average securities for the three months ended September 30, 2024 decreased $45.5 million, or 8.5%, to $487.6 million from $533.1 million during the same period in 2023. Short-term investments and CDs increased $88.5 million to $118.0 million during the three months ended September 30, 2024 from $29.5 million during the same period in 2023. The increase in short-term investments was due to our decision to hold excess liquidity in interest bearing deposits at the Federal Reserve Bank. The yield on our securities portfolio increased to 3.53% for the three months ended September 30, 2024 from 3.42% for the same period in 2023. The yield on our short-term investments improved to 5.23% for the three months ended September 30, 2024 from 4.51%.

Current wording

Average securities for the three months ended March 31, 2025 decreased $7.2 million, or 1.4%, to $492.2 million from $499.4 million during the same period in 2024. Short-term investments and CDs increased $43.3 million to $140.6 million during the three months ended March 31, 2025 from $97.4 million during the same period in 2024. The increase in short-term investments was due to our decision to hold excess liquidity in interest bearing deposits at the Federal Reserve Bank. The yield on our securities portfolio declined to 3.42% for the three months ended March 31, 2025 from 3.66% for the same period in 2024. The yield on our short-term investments declined to 4.29% for the three months ended March 31, 2025 from 4.79%.

Previous wording

The yields on earning assets for the three months ended September 30, 2024 and 2023 were 5.10% and 4.56%, respectively.

Current wording

The yields on earning assets for the three months ended March 31, 2025 and 2024 were 5.00% and 4.90%, respectively.

Previous wording

The cost of interest-bearing liabilities was 2.96% during the three months ended September 30, 2024 compared to 2.27% during the same period in 2023. The cost of deposits, including demand deposits, was 2.03% during the three months ended September 30, 2024 compared to 1.32% during the same period in 2023. The cost of funds, including demand deposits, was 2.21% during the three months ended September 30, 2024 compared to 1.64% during the same period in 2023. We continue to focus on growing our pure deposits (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, and IRAs) plus customer cash management repurchase agreements as these accounts tend to be low-cost funding and assist us in controlling our overall cost of funds. Average pure deposits plus customer cash management repurchase agreements increased $47.0 million or 3.5% to $1.4 billion during the three months ended September 30, 2024 from $1.3 billion during the same period in 2023. During the three months ended September 30, 2024, pure deposits plus customer cash management repurchase agreements averaged 82.6% of total deposits plus customer cash management repurchase agreements as compared to 89.7% during the same period of 2023. This reduction is related to a higher rate of growth in our certificates of deposit compared to pure deposits due to the higher interest rate environment. The growth in certificates of deposit is related to both customer certificates of deposit and brokered certificates of deposit. We began issuing brokered certificates of deposit during the third quarter of 2023 to supplement our funding mix. As of September 30, 2024, we had $22.4 million in brokered certificates of deposit ranging in initial terms from 18 months to three years, with the three year term callable after six months. We had $48.1 million and $48.1 million in brokered certificates of deposit at December 31, 2023 and at September 30, 2023, respectively.

Current wording

The cost of interest-bearing liabilities was 2.58% during the three months ended March 31, 2025 compared to 2.88% during the same period in 2024. The cost of deposits, including demand deposits, was 1.85% during the three months ended March 31, 2025 compared to 1.90% during the same period in 2024. The cost of funds, including demand deposits, was 1.94% during the three months ended March 31, 2025 compared to 2.16% during the same period in 2024. We continue to focus on growing our pure deposits (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, and IRAs) plus customer cash management repurchase agreements as these accounts tend to be low-cost funding and assist us in controlling our overall cost of funds. Average pure deposits plus customer cash management repurchase agreements increased $143.4 million or 10.6% to $1.5 billion during the three months ended March 31, 2025 from $1.4 billion during the same period in 2024. During the three months ended March 31, 2025, pure deposits plus customer cash management repurchase agreements averaged 83.0% of total deposits plus customer cash management repurchase agreements as compared to 84.0% during the same period of 2024. This reduction is related to a higher rate of growth in our certificates of deposit compared to pure deposits due to the higher interest rate environment. The growth in certificates of deposit is related to customer certificates of deposit partially offset by a reduction in brokered certificates of deposit. As of March 31, 2025, we had $10.4 million in brokered certificates of deposit with an initial terms of 18 months. We had $10.4 million and $60.6 million in brokered certificates of deposit at December 31, 2024 and at March 31, 2024, respectively.

Previous wording

Non-interest income during the nine months ended September 30, 2024 increased $2.9 million to $10.4 million from $7.5 million during the same period in 2023. The increase in non-interest income was primarily related to increases in deposit service charges, mortgage banking income, investment advisory fees and non-deposit commissions, and other non-interest income and a decline in loss on sale of other securities, partially offset by a decrease in gain on sale of other assets.

Current wording

Non-interest income during the three months ended March 31, 2025 increased $798,000 to $4.0 million from $3.2 million during the same period in 2024. The $798,000 increase in non-interest income was primarily related to increases of $334,000 in mortgage banking income, $448,000 in investment advisory fees and non-deposit commissions, and $54,000 in other non-interest income, partially offset by a decrease of $38,000 in deposit service charges.

Previous wording

Mortgage banking income increased $64,000 to $575,000 during the three months ended September 30, 2024 from $511,000 during the same period in 2023. Total production in the mortgage line of business in the three months ended September 30, 2024 was $38.1 million, which was comprised of $19.5 million in secondary market loans, $8.7 million in adjustable rate mortgages (ARMs), and $9.9 million in commitments for new construction residential real estate loans. Fee revenue from the mortgage line of business was $575,000 for the three months ended September 30, 2024, which includes $571,000 associated with the secondary market loans with a gain-on-sale margin of 2.92%. This compares to production year-over-year of $41.7 million which was comprised of $17.3 million in secondary market loans, $11.4 million in ARMs, and $13.0 million in commitments for new construction residential real estate loans during the three months ended September 30, 2023. Fee revenue from the mortgage line of business was $511,000, which includes $508,000 associated with the secondary market loans with a gain-on-sale margin of 2.93% during the three months ended September 30, 2023.

Current wording

Mortgage banking income increased $334,000 to $759,000 during the three months ended March 31, 2025 from $425,000 during the same period in 2024. Total production in the mortgage line of business in the three months ended March 31, 2025 was $43.9 million, which was comprised of $25.8 million in secondary market loans, $4.0 million in adjustable rate mortgages (ARMs), and $14.1 million in commitments for new construction residential real estate loans. Fee revenue from the mortgage line of business was $759,000 for the three months ended March 31, 2025, which includes $755,000 associated with the secondary market loans with a gain-on-sale margin of 2.93%. This compares to production year-over-year of $36.6 million which was comprised of $13.1 million in secondary market loans, $9.7 million in ARMs, and $13.9 million in commitments for new construction residential real estate loans during the three months ended March 31, 2024. Fee revenue from the mortgage line of business was $425,000, which includes $418,000 associated with the secondary market loans with a gain-on-sale margin of 3.20% during the three months ended March 31, 2024.

Previous wording

Investment advisory fees rose $408,000 to $1.6 million during the three months ended September 30, 2024 from $1.2 million during the same period in 2023. Total assets under management increased to $901.6 million at September 30, 2024 compared to $755.4 million at December 31, 2023 and $674.5 million at September 30, 2023. Our net new assets were $6.0 million during the three months ended September 30, 2024. Furthermore, our investment performance for the three months ended September 30, 2024 was 3.5% compared to 5.5% for the S&P 500; and our investment performance for the 12-month period ended September 30, 2024 was 29.2% compared to 34.4% for the S&P 500. Our customers’ assets under management are not fully invested in only equities. Our assets under management include bonds and cash.

Current wording

Investment advisory fees rose $448,000 to $1.8 million during the three months ended March 31, 2025 from $1.4 million during the same period in 2024. Total assets under management decreased to $892.8 million at March 31, 2025 compared to $926.0 million at December 31, 2024 and increased compared to $832.9 million at March 31, 2024. The decline between December 31, 2024 and March 31, 2025 was driven by broad declines in the US stock market during the first quarter of 2025. Our net new assets under management were $21.5 million during the three months ended March 31, 2025. Furthermore, our investment performance for the three months ended March 31, 2025 was -5.9% compared to -4.6% for the S&P 500; and our investment performance for the 12-month period ended March 31, 2025 was 2.1% compared to 6.8% for the S&P 500. Our customers’ assets under management are allocated across a range of asset classes, including equities, bonds, and cash.

Previous wording

Other non-interest income increased $35,000 to $1.2 million during the three months ended September 30, 2024 from $1.1 million during the same period in 2023. The $35,000 increase was primarily due to increased in ATM debit card income of $15,000 and bank owned life insurance of $14,000.

Current wording

Other non-interest income increased $54,000 to $1.2 million during the three months ended March 31, 2025 from $1.1 million during the same period in 2024. The $54,000 increase was primarily due to increases in ATM debit card income of $36,000 and rental income of $22,000.

Previous wording

Non-interest expense increased $718,000 during the three months ended September 30, 2024 to $12.0 million compared to $11.3 million during the same period in 2023. The $718,000 increase in non-interest expense is primarily due to increases in salaries and employee benefits, occupancy, FDIC insurance assessments, partially offset by decreases in equipment, marketing and public relations, other real estate expense, net, and other non-interest expense.

Current wording

Non-interest expense increased $949,000 during the three months ended March 31, 2025 to $12.8 million compared to $11.8 million during the same period in 2024. The $949,000 increase in non-interest expense is primarily due to increases of $556,000 in salaries and employee benefits, $60,000 in equipment, $22,000 in FDIC insurance assessments, and $376,000 in other non-interest expense, partially offset by decreases of $13,000 in occupancy expense and $52,000 in marketing and public relations expense.

Previous wording

We incurred income tax expense of $1.1 million and $464,000 for the three months ended September 30, 2024 and 2023, respectively. Our effective tax rate was 22.89% and 20.90% for the three months ended September 30, 2024 and 2023, respectively.

Current wording

We incurred income tax expense of $1.2 million and $730,000 for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate was 22.85% and 21.94% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The total ACL is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, which at September 30, 2024 and December 31, 2023 included the following factors:

Current wording

The total allowance for credit losses (ACL) is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, which at March 31, 2025 and December 31, 2024 included the following factors:

Previous wording

We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of September 30, 2024 and December 31, 2023, approximately 91.5% and 91.7%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period. The allowance is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance based on information available to them at the time of their examination.

Current wording

We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of March 31, 2025 and December 31, 2024, approximately 91.2% and 91.4%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period. The allowance for credit losses is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy for credit losses and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance for credit losses based on information available to them at the time of their examination.

Previous wording

The non-performing asset ratio was 0.04% of total assets with the nominal level of $874,000 in non-performing assets at September 30, 2024 compared to 0.05% and $864,000 at December 31, 2023. Non-accrual loans increased to $119,000 at September 30, 2024 from $27,000 at December 31, 2023. We had one accruing loan past due 90 days or more at $211,000 at September 30, 2024 compared to $215,000 at December 31, 2023. Loans past due 30 days or more represented 0.11% of the loan portfolio at September 30, 2024 compared to 0.06% at December 31, 2023. The ratio of classified loans plus OREO and repossessed assets declined to 1.15% of total bank regulatory risk-based capital at September 30, 2024 from 1.25% at December 31, 2023. During the nine months ended September 30, 2024, we experienced net loan charge offs of $43,000 (charge-offs of $85,000 less recoveries of $42,000) and net overdraft charge-offs of $52,000 (charge-offs of $64,000 and recoveries of $12,000). In comparison, we experienced net loan recoveries of $40,000 and net overdraft charge-offs of $35,000 during the nine months ended September 30, 2023.

Current wording

The non-performing asset ratio was 0.03% of total assets with the nominal level of $658,000 in non-performing assets at March 31, 2025 compared to 0.04% and $810,000 at December 31, 2024. Non-accrual loans decreased to $215,000 at March 31, 2025 from $219,000 at December 31, 2024. We had three accruing loans past due 90 days or more totaling $6,000 at March 31, 2025 compared to $48,000 at December 31, 2024. Loans past due 30 days or more represented 0.14% of the loan portfolio at March 31, 2025 compared to 0.05% at December 31, 2024. The ratio of classified loans plus OREO and repossessed assets declined to 0.98% of total bank regulatory risk-based capital at March 31, 2025 from 1.06% at December 31, 2024. During the three months ended March 31, 2025, we experienced net loan recoveries of $14,000 (charge-offs of $0 less recoveries of $14,000) and net overdraft charge-offs of $3,000 (charge-offs of $9,000 and recoveries of $6,000). In comparison, we experienced net loan recoveries of $1,000 and net overdraft charge-offs of $23,000 during the three months ended March 31, 2024.

Previous wording

There were three loans totaling $331,000 (0.03% of total loans) included on non-performing status (non-accrual loans and loans past due 90 days and still accruing) at September 30, 2024. Two of these loans were on non-accrual status. The largest loan of the two is $117,000 and is secured by real estate. The balance of the remaining loan on non-accrual status is $2,000. This loan is secured by a second mortgage lien. We had one loan that was accruing loans past due 90 days or more at September 30, 2024. At both September 30, 2024 and December 31, 2023, we considered loan relationships exceeding $500,000 and on non-accrual status as individually assessed loans for the allowance for credit losses. At both September 30, 2024 and December 31, 2023, we had no individually assessed loans. The specific allowance for individually assessed loans is based on the fair value of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at September 30, 2024 and December 31, 2023. At September 30, 2024, we had $1.1 million in loans that were delinquent 30 days to 89 days representing 0.09% of total loans compared to $498,000 or 0.04% of total loans at December 31, 2023.

Current wording

There were five loans totaling $221,000 (0.02% of total loans) included on non-performing status (non-accrual loans and loans past due 90 days and still accruing) at March 31, 2025. Two of these loans were on non-accrual status. The largest loan of the two is $213,000 and is secured by real estate. The balance of the remaining loan on non-accrual status is $2,000. This loan is secured by a second mortgage lien. We had three loans that were accruing loans past due 90 days or more at March 31, 2025. At both March 31, 2025 and December 31, 2024, we considered loan relationships exceeding $500,000 and on non-accrual status as individually assessed loans for the allowance for credit losses. At both March 31, 2025 and December 31, 2024, we had no individually assessed loans. The specific allowance for individually assessed loans is based on the fair value of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at March 31, 2025 and December 31, 2024. At March 31, 2025, we had $1.7 million in loans that were delinquent 30 days to 89 days representing 0.14% of total loans compared to $554,000 or 0.05% of total loans at December 31, 2024.

Previous wording

Assets increased $115.9 million, or 6.3% (8.5% annualized), to $1.9 billion at September 30, 2024 from $1.8 billion at December 31, 2023. The increase in assets was primarily due to increases in interest-bearing bank balances of $77.6 million and loans held-for-investment of $62.6 million, partially offset by decreases in investment securities available-for-sale of $12.7 million, investment securities held-to-maturity of $5.0 million, and other assets of $2.3 million.

Current wording

Assets increased $81.4 million, or 4.2% (16.8% annualized), to $2.0 billion at March 31, 2025 from $2.0 billion at December 31, 2024. The increase in assets was primarily due to increases in interest-bearing bank balances of $49.8 million, investment securities available-for-sale of $7.4 million and loans held-for-investment of $31.4 million, partially offset by decreases in investment securities held-to-maturity of $3.6 million and loans held-for-sale of $2.6 million.

Previous wording

Loans held-for-sale decreased to $3.9 million at September 30, 2024 from $4.4 million at December 31, 2023. Loans (excluding loans held-for-sale) increased $62.6 million, or 5.5% (7.4% annualized), to $1.2 billion at September 30, 2024 from $1.1 billion at December 31, 2023. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $138.3 million during the nine months ended September 30, 2024 compared to $147.1 million during the same period in 2023. Advances from unfunded commercial construction loans available for draws were $71.3 million during the nine months ended September 30, 2024. Payoffs and paydowns totaled $84.8 million during the nine months ended September 30, 2024 compared to $58.4 million during the same period in 2023.

Current wording

Loans held-for-sale decreased to $7.1 million at March 31, 2025 from $9.7 million at December 31, 2024. Loans (excluding loans held-for-sale) increased $31.4 million, or 2.6% (10.4% annualized), to $1.3 billion at March 31, 2025 from $1.2 billion at December 31, 2024. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $57.6 million during the three months ended March 31, 2025 compared to $37.5 million during the same period in 2024. Advances from unfunded commercial construction loans available for draws were $9.0 million during the three months ended March 31, 2025. Payoffs and paydowns totaled $18.6 million during the three months ended March 31, 2025 compared to $26.5 million during the same period in 2024.

Previous wording

Total mortgage production during the nine months ended September 30, 2024 was $123.7 million, $55.3 million of the production was originated to be sold in the secondary market, $32.9 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $35.5 million of the loan production was commitments for new construction residential real estate loans. Total mortgage production during the nine months ended September 30, 2023 was $97.1 million, $35.5 million of the production was originated to be sold in the secondary market, $22.5 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $39.1 million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income. The increase in mortgage production was due to higher secondary market, ARM, and construction residential real estate loan production.

Current wording

Total mortgage production during the three months ended March 31, 2025 was $43.9 million, $25.8 million of the production was originated to be sold in the secondary market, $4.0 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $14.1 million of the loan production was commitments for new construction residential real estate loans. Total mortgage production during the three months ended March 31, 2024 was $36.6 million, $13.1 million of the production was originated to be sold in the secondary market, $9.7 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $13.9 million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income. The increase in mortgage production was primarily due to higher secondary market loan production.

Previous wording

The loan-to-deposit ratio (including loans held-for-sale) at September 30, 2024 and December 31, 2023 was 73.0% and 75.3%, respectively. The loan-to-deposit ratio (excluding loans held-for-sale) at September 30, 2024 and December 31, 2023 was 72.8% and 75.1%, respectively.

Current wording

The loan-to-deposit ratio (including loans held-for-sale) at March 31, 2025 and December 31, 2024 was 73.0% and 73.4%, respectively. The loan-to-deposit ratio (excluding loans held-for-sale) at March 31, 2025 and December 31, 2024 was 72.6% and 72.8%, respectively.

Previous wording

One of our goals as a community bank has been, and continues to be, to grow our assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets. Based on our loan portfolio as of September 30, 2024, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 304% and 83% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 40% from September 30, 2021 to September 30, 2024. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within our loan portfolio monthly.

Current wording

One of our goals as a community bank has been, and continues to be, to grow our assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets. Based on our loan portfolio as of March 31, 2025, the non-owner occupied commercial real estate loans and the construction and land development loans were approximately 308% and 80% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 51% from March 31, 2022 to March 31, 2025. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within our loan portfolio monthly.

Previous wording

In the office exposure noted above, there are only four loans where the collateral is an office building in excess of 50,000 square feet of rentable space. These four loans represent $10.7 million in outstanding loans and have a weighted average loan-to-value of 33%.

Current wording

In the office exposure noted above, there are only four loans where the collateral is an office building in excess of 50,000 square feet of rentable space. These four loans represent $10.8 million in outstanding loans and have a weighted average loan-to-value of 35%.

Previous wording

In the office exposure noted above, there are only four loans where the collateral is an office building in excess of 50,000 square feet of rentable space. These four loans represent $10.4 million in loan outstandings and have a weighted average loan-to-value of 33%.

Current wording

In the office exposure noted above, there are only four loans where the collateral is an office building in excess of 50,000 square feet of rentable space. These four loans represent $13.4 million in loan outstandings and have a weighted average loan-to-value of 48%.

Previous wording

Investment securities declined $19.4 million to $486.8 million, net of allowance for credit losses on investments of $24,000, at September 30, 2024 from $506.2 million, net of allowance for credit losses on investments of $30,000, at December 31, 2023. The decline was primarily related to normal principal cash flows.

Current wording

Investment securities increased $4.0 million to $495.6 million, net of allowance for credit losses on investments of $24,000, at March 31, 2025 from $491.7 million, net of allowance for credit losses on investments of $23,000, at December 31, 2024. The increase was driven by purchases of treasury securities in the available-for-sale portfolio, partially offset by normal principal cash flows.

Previous wording

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $12.7 million ($10.0 million net of tax) at September 30, 2024. Our HTM investments totaled $212.2 million and represented approximately 44% of our total investments at September 30, 2024. Our AFS investments totaled $269.5 million or approximately 55% of our total investments at September 30, 2024. Our investments at cost totaled $5.1 million or approximately 1% of our total investments at September 30, 2024. The unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative impact on the fair value of our investment securities portfolio and on accumulated other comprehensive income (loss), which is included in shareholders’ equity.

Current wording

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $11.9 million ($9.4 million net of tax) at March 31, 2025.

Previous wording

At September 30, 2024, the estimated weighted average life of our total investment portfolio was 5.7 years, the modified duration was 4.4, the effective duration was 3.4, and the weighted average tax equivalent book yield was 3.70%.

Current wording

At March 31, 2025, the estimated weighted average life of our total investment portfolio was 5.5 years, the modified duration was 4.2, the effective duration was 3.2, and the weighted average tax equivalent book yield was 3.64%.

Previous wording

Other short-term investments increased $77.6 million to $144.4 million at September 30, 2024 from $66.8 million at December 31, 2023 due to our decision to temporarily hold excess liquidity in interest-bearing bank deposits at the Federal Reserve Bank. This additional liquidity will be used to fund loan growth and or reduce borrowings and brokered certificates of deposit.

Current wording

Other short-term investments increased $49.8 million to $173.2 million at March 31, 2025 from $123.5 million at December 31, 2024 due to our decision to temporarily hold excess liquidity in interest-bearing bank deposits at the Federal Reserve Bank. This additional liquidity will be used to fund loan growth and/or reduce borrowings and brokered certificates of deposit.

Previous wording

Deposits increased $133.1 million, or 8.8% (11.8% annualized), to $1.6 billion at September 30, 2024 compared to $1.5 billion at December 31, 2023. Our pure deposits, which are defined as total deposits less certificates of deposits, increased $64.5 million, or 5.0% (6.7% annualized), to $1.3 billion at September 30, 2024 from $1.3 billion at December 31, 2023. We continue to focus on growing our pure deposits in order to better manage our overall cost of funds. Certificates of deposits increased $68.6 million to $294.4 million at September 30, 2024 from $225.8 million at December 31, 2023.

Current wording

Deposits increased $49.8 million, or 3.0% (12.1% annualized), to $1.7 billion at March 31, 2025 compared to $1.7 billion at December 31, 2024. Our pure deposits, which are defined as total deposits less certificates of deposits, increased $38.6 million, or 2.8% (11.4% annualized), to $1.41 billion at March 31, 2025 from $1.38 billion at December 31, 2024. We continue to focus on growing our pure deposits in order to better manage our overall cost of funds. Certificates of deposits increased $11.2 million to $311.5 million at March 31, 2025 from $300.2 million at December 31, 2024.

Previous wording

Total uninsured deposits were $492.5 million and $436.6 million at September 30, 2024 and December 31, 2023, respectively. Included in uninsured deposits at September 30, 2024 and December 31, 2023 were $97.9 million and $82.8 million of deposits of states or political subdivisions in the U.S., which are secured or collateralized, respectively. Total uninsured deposits, excluding these deposits that are secured or collateralized, totaled $404.3 million, or 24.6%, of total deposits at September 30, 2024 and $353.8 million, or 23.4%, of total deposits at December 31, 2023. The average balance of all customer deposit accounts at September 30, 2024 was $24,281. The average balance for consumer accounts was $13,152 and the average balance for non-consumer accounts was $52,782.

Current wording

Total uninsured deposits were $575.2 million and $542.9 million at March 31, 2025 and December 31, 2024, respectively. Included in uninsured deposits at March 31, 2025 and December 31, 2024 were $95.5 million and $105.8 million of deposits of states or political subdivisions in the U.S., which are secured or collateralized, respectively. Total uninsured deposits, excluding these deposits that are secured or collateralized, totaled $479.7 million, or 27.8%, of total deposits at March 31, 2025 and $437.1 million, or 26.1%, of total deposits at December 31, 2024. The average balance of all customer deposit accounts at March 31, 2025 was $31,262. The average balance for consumer accounts was $16,416 and the average balance for non-consumer accounts was $67,993.

Previous wording

The uninsured amount of time deposits in the table above at September 30, 2024 and December 31, 2023 was $35.2 million and $17.1 million, respectively.

Current wording

The uninsured amount of time deposits in the table above at March 31, 2025 and December 31, 2024 was $42.7 million and $40.8 million, respectively.

Previous wording

*Borrowed funds.*Borrowed funds consist of fed funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $69.1 million, $70.0 million, and $71.5 million during the three months ended September 30, 2024, December 31, 2023, and September 30, 2023, respectively. The average rates paid during these periods were 2.91%, 2.79%, and 2.48%, respectively. The balances of securities sold under agreements to repurchase were $66.9 million, $62.9 million, and $67.2 million at September 30, 2024, December 31, 2023, and September 30, 2023, respectively. The repurchase agreements all mature within one to four days and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $40,000, zero, and $1.6 million during the three months ended September 30, 2024, December 31, 2023, and September 30, 2023, respectively. The average rates paid during these periods were 0.00%, 0.00%, and 5.00%, respectively. Federal funds purchased were $3.7 million, zero, and zero at September 30, 2024, December 2023, and September 30, 2023, respectively. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts. FHLB advances averaged $50.0 million, $84.0 million, and $83.3 million during the three months ended September 30, 2024, December 31, 2023, and September 30, 2023, respectively. The average rates paid during these periods were 5.14%, 5.07%, and 5.14%, respectively. The balances of FHLB advances were $50.0 million, $90.0 million, and $80.0 million at September 30, 2024, December 31, 2023, and September 30, 2023, respectively.

Current wording

*Borrowed funds.*Borrowed funds consist of federal funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $130.8 million, $83.9 million, and $87.1 million during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The average rates paid during these periods were 2.52%, 2.71%, and 2.81%, respectively. The balances of securities sold under agreements to repurchase were $129.8 million, $103.1 million, and $81.8 million at March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The repurchase agreements all mature within one to four days and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $2,000, zero, and $2,000 during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The average rates paid during these periods were 0.00%, 0.00%, and 0.00%, respectively. Federal funds purchased were zero at March 31, 2025, December 2024, and March 31, 2024. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts. FHLB advances averaged zero, $30.3 million, and $83.7 million during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024, respectively. The average rates paid during these periods were zero, 5.15%, and 5.09%, respectively. The balances of FHLB advances were zero, zero, and $60.0 million at March 31, 2025, December 31, 2024, and March 31, 2024, respectively.

Previous wording

We issued $15.5 million in trust preferred securities on September 16, 2004. During the fourth quarter of 2015, we redeemed $500,000 of these securities. Until the cessation of LIBOR on September 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act. The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0 million during the three months ended September 30, 2024, December 31, 2023, and September 30, 2023. The average rates during these periods were 8.24%, 8.33%, and 8.19%, respectively. The balances of trust preferred securities were $15.0 million as of September 30, 2024, December 31, 2023, and September 30, 2023.

Current wording

We issued $15.5 million in trust preferred securities on September 16, 2004. During the fourth quarter of 2015, we redeemed $500,000 of these securities. Until the cessation of LIBOR on September 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act. The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0 million during the three months ended March 31, 2025, December 31, 2024, and March 31, 2024. The average rates during these periods were 7.29%, 7.71%, and 8.28%, respectively. The balances of trust preferred securities were $15.0 million as of March 31, 2025, December 31, 2024, and March 31, 2024.

Previous wording

Total shareholders’ equity increased $12.3 million, or 9.3%, to $143.3 million at September 30, 2024 from $131.1 million at December 31, 2023. Shareholders’ equity was 7.4% of total assets at September 30, 2024 and 7.2% at December 31, 2023. The $12.3 million increase in shareholders’ equity was due to a $6.5 million increase in retention of earnings resulting from $9.7 million in net income less $3.3 million in dividends, a $521,000 increase due to employee and director stock awards, a $313,000 increase due to dividend reinvestment plan (DRIP) purchases, and a $5.0 million improvement in accumulated other comprehensive loss. The improvement in other accumulated other comprehensive loss for the period was due to improvements in the accumulated other comprehensive loss on available-for-sale securities, net of tax expense, of $3.9 million and the reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense, of $1.0 million.

Current wording

Total shareholders’ equity increased $5.5 million, or 3.8%, to $150.0 million at March 31, 2025 from $144.5 million at December 31, 2024. Shareholders’ equity was 7.4% of total assets at March 31, 2025 and 7.4% at December 31, 2024. The $5.5 million increase in shareholders’ equity was due to a $2.9 million increase in retention of earnings resulting from $4.0 million in net income less $1.1 million in dividends, a $34,000 increase due to employee and director stock awards, a $96,000 increase due to dividend reinvestment plan (DRIP) purchases, and a $2.5 million improvement in accumulated other comprehensive loss. The improvement in other accumulated other comprehensive loss for the period was due to improvements in the accumulated other comprehensive loss on available-for-sale securities, net of tax expense, of $2.2 million and the reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense, of $330,000.

Previous wording

Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at September 30, 2024 and at December 31, 2023 over the subsequent 12 months. We were liability sensitive at September 30, 2024 and primarily liability sensitive at December 31, 2023. In 2023, we increased our non-maturity deposit interest rate betas in increasing rate environments, which increased our liability sensitivity. This was partially offset by the previously mentioned $150.0 million Pay-Fixed Swap Agreement that we entered into effective May 5, 2023. Furthermore, we reduced the average life on our non-maturity deposits at June 30, 2024. As a result, our modeling, at September 30, 2024, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly more liability sensitive during the second 12-month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income during both the first 12-month period and the second 12-month period subsequent to interest rate changes. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve. As a result, our modeling, at December 31, 2023, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly less liability sensitive during the second 12-month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income in the down 100 basis point and down 200 basis point scenarios and declines in net interest income in the down 300 basis point and 400 basis point scenarios during the first 12-month period subsequent to interest rate changes. The positive impact in the down 100 and down 200 basis point scenarios of declining rates changes to a fairly neutral impact on net interest income during the second 12-month period subsequent to interest rate changes. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve.

Current wording

Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at March 31, 2025 and at December 31, 2024 over the subsequent 12 months. We were liability sensitive at March 31, 2025 and at December 31, 2024. Previously in 2023, we increased our non-maturity deposit interest rate betas in increasing rate environments, which increased our liability sensitivity. This was partially offset by the previously mentioned $150.0 million Pay-Fixed Swap Agreement that we entered into effective May 5, 2023. Furthermore, we reduced the average life on our non-maturity deposits at June 30, 2024. As a result, our modeling, at March 31, 2025, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly more liability sensitive during the second 12- month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income during both the first 12-month period and the second 12-month period subsequent to interest rate changes. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve.

Previous wording

During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel increases in interest rates along the entire yield curve, our net interest income is projected to decline 2.24%, 5.46%, 9.49%, and 13.65%, respectively, at September 30, 2024, and 1.94%, 4.67%, 7.63%, and 10.68%, respectively, at December 31, 2023. During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel reduction in interest rates along the entire yield curve, our net interest income is projected to increase 1.88%, 3.04%, 2.24%, and 0.39%, respectively, at September 30, 2024, and to increase 0.51% and decline 0.03%, 3.19%, and 4.41%, respectively, at December 31, 2023.

Current wording

During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel increases in interest rates along the entire yield curve, our net interest income is projected to decline 1.98%, 4.83%, 8.79%, and 12.96%, respectively, at March 31, 2025, and 2.04%, 4.96%, 8.75%, and 12.70%, respectively, at December 31, 2024. During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel reduction in interest rates along the entire yield curve, our net interest income is projected to increase 2.05%, 3.39%, 2.40%, and 0.11%, respectively, at March 31, 2025, and to increase 1.80%, 2.91%, and 1.46%, and decline 1.75%, respectively, at December 31, 2024.

Previous wording

We perform a valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity (“PVE”) over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled changes in PVE at no more than 15%, 20%, 25%, and 25%, respectively, in a 100, 200, 300, and 400 basis point change in market interest rates. Our PVE declines in all of the down interest rate scenarios and the up 400 basis point scenarios at September 30, 2024. However, our PVE increases slightly in the up 100, up 200, and up 300 basis point scenarios at September 30, 2024. Based on PVE, we were primarily asset sensitive at December 31, 2023.

Current wording

We perform a valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity (“PVE”) over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled changes in PVE at no more than 15%, 20%, 25%, and 25%, respectively, in a 100, 200, 300, and 400 basis point change in market interest rates. Based on PVE, we were primarily asset sensitive at March 31, 2025 and at December 31, 2024. However, our PVE increases slightly in the up 100, up 200, and up 300 basis point scenario and declines 1.49% in the up 400 basis point scenario at March 31, 2025. Our PVE increases slightly in the up 100, up 200 basis point scenarios and in the up 300 and up 400 basis point scenarios, the PVE declines 1.47% and 3.72%, respectively, at December 31, 2024.

Previous wording

We began issuing brokered certificates of deposit during the third quarter of 2023 to supplement our funding mix. As of September 30, 2024, we had $22.4 million in brokered certificates of deposit ranging in initial terms from 18 months to three years, with the three year term callable after six months. We had $48.1 million and $48.1 million in brokered certificates of deposit at December 31, 2023 and at September 30, 2023, respectively. We believe that we have ample liquidity to meet the needs of our customers through our low-cost deposits, ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, ability to borrow on a secured basis through the Federal Reserve Discount Window, and ability to obtain advances secured by certain securities and loans from the FHLB.

Current wording

From time to time, we issue brokered certificates of deposit to supplement our funding mix. As of March 31, 2025 and December 31, 2024, we had $10.4 million in brokered certificates of deposit. This brokered certificate of deposit had an initial term of 18 months and matures in July 2025. We believe that we have ample liquidity to meet the needs of our customers through our low-cost deposits, the ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, the ability to borrow on a secured basis through the Federal Reserve Discount Window, and the ability to obtain advances secured by certain securities and loans from the FHLB.

Previous wording

The Bank maintains federal funds purchased lines in the total amount of $77.5 million with three financial institutions and $10.0 million through the Federal Reserve Discount Window. We utilized $3.7 million of our federal funds purchased lines at September 30, 2024 and none at December 31, 2023. The FHLB of Atlanta has approved a line of credit of up to 25.00% of the Bank’s total assets, which, when utilized, is collateralized by a pledge against specific investment securities and/or eligible loans. We had $50.0 million in FHLB advances at September 30, 2024 compared to $90.0 million at December 31, 2023. The FHLB advances at September 30, 2024 had maturity dates between December 9, 2024, and November 3, 2026 with interest rates between 4.81% and 5.26%. At September 30, 2024, we have remaining credit availability under this facility in excess of $421.1 million, subject to collateral requirements. Combined, we have total remaining credit availability, subject to collateral requirements, in excess of $505.0 million as compared to uninsured deposits excluding deposits of states or political subdivisions in the U.S., which are secured or collateralized, of $404.3 million as previously noted.

Current wording

The Bank maintains federal funds purchased lines in the total amount of $77.5 million with three financial institutions and $10.0 million through the Federal Reserve Discount Window. We utilized none of our federal funds purchased lines at March 31, 2025 and December 31, 2024. The FHLB of Atlanta has approved a line of credit of up to 25.00% of the Bank’s total assets, which, when utilized, is collateralized by a pledge against specific investment securities and/or eligible loans. We had no FHLB advances at March 31, 2025 and at December 31, 2024. At March 31, 2025, we had remaining credit availability under this facility in excess of $489.3 million, subject to collateral requirements. Combined, we have total remaining credit availability, subject to collateral requirements, in excess of $576.8 million as compared to uninsured deposits excluding deposits of states or political subdivisions in the U.S., which are secured or collateralized, of $479.7 million as previously noted.