MetroCity Bankshares Inc
For the period ended Dec 31, 2024. Filed Mar 10, 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 10, 2025
MCBS$36.05-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-11.
0001747068-24-000010
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-10.
0001747068-25-000007
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 163 previous paragraphs and 164 current paragraphs.
93 unchanged; 60 reworded; 5 added; 7 removed; 3 previous and 6 current paragraphs rearranged.
Tables are not compared: 23 previous and 23 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
We recorded net income of $64.5 million for the year ended December 31, 2025 compared to $51.6 million for the year ended December 31, 2023, an increase of $12.9 million, or 25.0%. The increase was due to an increase in net interest income of $16.7 million and an increase in noninterest income of $4.9 million, offset by an increase in noninterest expense of $5.7 million, an increase in income tax expense of $2.5 million and an increase in provision for credit losses of $531,000.
Current report
Service charges on deposit accounts were $2.1 million for the year ended December 31, 2024 compared to $1.9 million for the year ended December 31, 2023, an increase of $155,000, or 8.1%. The increase was primarily attributable to increased overdraft fees and wire transfer fees.
Current report
Occupancy expense for the year ended December 31, 2024 was $5.5 million compared to $4.9 million for the year ended December 31, 2023, an increase of $631,000, or 12.9%. This increase was primarily due to higher expenses related to depreciation, rent, and maintenance and repairs.
Current report
Data processing expense for the year ended December 31, 2024 was $1.3 million compared to $1.2 million for the year ended December 31, 2023, an increase of $64,000, or 5.2%. The increase was consistent with the continued growth of our loans and deposits.
Current report
Advertising expense for the year ended December 31, 2024 was $634,000 compared to $614,000 for the year ended December 31, 2023, a slight increase of $20,000, or 3.3%. The increase was consistent with the continued growth of our loans and deposits.
Removed paragraphs (7)
Previous report
Recent Industry Developments
Previous report
During the first half of 2023, the banking industry experienced significant volatility with multiple high-profile bank failures and industry wide concerns related to liquidity, deposit outflows, uninsured deposit concentrations, unrealized securities losses and eroding consumer confidence in the banking system. Despite these negative industry developments, the Company’s liquidity position and balance sheet remains robust. The Company’s total deposits increased by 2.4% from December 31, 2022 to $2.73 billion at December 31, 2023. The Company’s uninsured deposits represented 26.5% of total deposits at December 31, 2023 compared to 32.5% of total deposits at December 31, 2022. The Company also took a number of preemptive actions, which included proactive outreach to clients and actions to maximize its funding sources in response to these recent developments. Furthermore, the Company’s capital remains strong with common equity Tier 1 and total capital ratios of 16.73% and 17.60 %, respectively, as of December 31, 2023.
Previous report
We recorded net income of $62.6 million for the year ended December 31, 2022 compared to $61.7 million for the year ended December 31, 2021, an increase of $901,000, or 1.5%. The increase was due to a $15.4 million increase in net
Previous report
Service charges on deposit accounts were $2.0 million for the year ended December 31, 2022 compared to $1.7 million for the year ended December 31, 2021, an increase of $295,000, or 17.4%. The increase was primarily attributable to increased analysis fees and overdraft fees.
Previous report
Occupancy expense for the year ended December 31, 2022 was $4.9 million compared to $5.0 million for year ended December 31, 2021, a decrease of $171,000, or 3.4%. This decrease was partially due to lower maintenance and repairs expense and rent expense.
Previous report
Data processing expense for the years ended December 31, 2022 and 2021 remained flat at $1.1 million.
Previous report
Advertising expense for the year ended December 31, 2022 was $606,000 compared to $541,000 for 2021, an increase of $65,000, or 12.0%. The increase was consistent with the continued growth of our loans and deposit.
Reworded paragraphs (60)
Previous wording
Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.
Current wording
Management’s evaluation of the appropriateness of the reserve for credit losses is often the most critical of accounting estimates for a financial institution. Our determination of the amount of the reserve for credit losses is a critical accounting estimate as it requires the use of estimates and significant judgment as to the amount and timing of expected future cash flows, reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors, and the reliance on our reasonable and supportable forecasts. The reserve for credit losses attributable to each portfolio segment also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk (geographic, large borrower, and industry),
Previous wording
Basic and diluted earnings per common share for the year ended December 31, 2022 was $2.46 and $2.44, respectively, compared to $2.41 and $2.39 for the basic and diluted earnings per common share for the year ended December 31, 2021.
Current wording
Basic and diluted earnings per common share for the year ended December 31, 2024 was $2.55 and $2.52, respectively, compared to $2.05 and $2.02 for the basic and diluted earnings per common share for the year ended December 31, 2023.
Previous wording
Net interest income for the year ended December 31, 2022 was $119.6 million compared to $104.2 million for the year ended December 31, 2021, an increase of $15.4 million, or 14.8%. Interest income totaled $147.2 million for the year ended December 31, 2022, an increase of $38.5 million, or 35.4%, from the year ended December 31, 2021, primarily due to a $661.4 million increase in average loans while the yield on average loans increased by four basis points. We recognized Paycheck Protection Program (“PPP”) loan fee income of $1.0 million during 2022 compared to PPP loan fee income of $5.4 million during 2021. Average earning assets increased by $692.4 million, primarily due to an increase of $661.4 million in average loans and $31.0 million in average investment securities, fed funds sold and interest-bearing cash accounts. The increase in average loans included increases of $653.0 million in average residential real estate loans and $85.0 million in average commercial real estate loans, offset by decreases of $12.5 million in average construction and development loans and $64.1 million in average commercial and industrial loans.
Current wording
Net interest income for the year ended December 31, 2024 was $118.1 million compared to $101.5 million for the year ended December 31, 2023, an increase of $16.7 million, or 16.4%. Interest income totaled $212.9 million for the year ended December 31, 2024, an increase of $20.1 million, or 10.4%, from the year ended December 31, 2023, primarily due to a 41 basis points increase in the yield on average loans coupled with a $99.8 million increase in average loans. Average earning assets increased by $117.5 million, due to increases of $99.8 million in average loans and $18.7 million in average fed funds sold and interest-bearing cash accounts, offset by a decrease of $957,000 in average investment securities. The increase in average loans included increases of $78.8 million in average commercial real estate loans, $21.8 million in average residential real estate loans and $13.9 million in average commercial and industrial loans, offset by a decrease of $14.8 million in average construction and development loans.
Previous wording
Interest expense for the year ended December 31, 2022 increased $23.0 million to $27.6 million compared to interest expense of $4.6 million for the year ended December 31, 2021. This increase is primarily attributable to a $491.3 million increase in average interest-bearing deposits and a 100 basis points increase in deposit costs, which includes a 119 basis points increase in the average yield on money market deposits and an 84 basis points decrease in the average yield on time deposits. Average borrowings outstanding for the year ended December 31, 2022 increased by $150.2 million with an increase in rate of 81 basis points compared to the year ended December 31, 2021.
Current wording
Interest expense for the year ended December 31, 2024 increased $3.4 million, or 3.7%, to $94.8 million compared to interest expense of $91.3 million for the year ended December 31, 2023. This increase is primarily attributable to a $91.0 million increase in average time deposit balances coupled with an 84 basis points increase in time deposit costs, as well as a 101 basis points increase to interest-bearing demand deposit costs. These increases to deposit interest expense were offset by a 141 basis points decrease to the yield on average money market accounts from the benefit received on the Company’s interest rate derivatives (see further discussion in next paragraph). Average borrowings outstanding for the year ended December 31, 2024 increased by $12.8 million with an increase in rate of 98 basis points compared to the year ended December 31, 2023.
Previous wording
The Company currently has interest rate derivative agreements totaling $850.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.29%. During the year ended December 31, 2023, we recorded a credit to interest expense of $5.4 million from the benefit received on these interest rate derivatives compared to $287,000 of interest expense recorded during the year ended December 31, 2022. Of the $850.0 million interest rate derivatives, only $500.0 million were making payments as of December 31, 2023 and the remaining $350.0 million will begin making payments in the second quarter of 2024. Based on the Federal Funds Effective rate as of December 31, 2023 (5.33%), the Company would estimate to record a credit to interest expense of $22.9 million during 2024 from the benefit received on these interest rate derivatives. See Note 10 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K, for additional information on these interest rate derivatives.
Current wording
The Company currently has interest rate derivative agreements totaling $850.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.29%. During the year ended December 31, 2024, we recorded a credit to interest expense of $22.1 million from the benefit received on these interest rate derivatives compared to a credit to interest expense of $5.4 million recorded during the year ended December 31, 2023. Based on the Federal Funds Effective rate as of December 31, 2024 (4.33%), the Company would estimate to record a credit to interest expense of $16.2 million during 2025 from the benefit received on these interest rate derivatives. See Note 10 of our consolidated financial statements as of December 31, 2024, included elsewhere in this Annual Report on Form 10-K, for additional information on these interest rate derivatives.
Previous wording
The net interest margin for the year ended December 31, 2022 was 3.95% compared to 4.45% for the year ended December 31, 2021, a decrease of 50 basis points. The cost of interest-bearing liabilities increased by 96 basis points to 1.25% from 0.29%, while the yield on interest-earning assets increased by 21 basis points to 4.86% from 4.65% for the previous year. Average earning assets increased by $692.4 million, primarily due to an increase of $661.4 million in average loans and an increase of $31.0 million in average total investments. Average interest-bearing liabilities increased by $641.5 million as average interest-bearing deposits increased by $491.3 million and average borrowings increased by $150.2 million.
Current wording
The net interest margin for the year ended December 31, 2024 was 3.51% compared to 3.13% for the year ended December 31, 2023, an increase of 38 basis points. The yield on interest-earning assets increased by 39 basis points to 6.33% from 5.94%, while the cost of interest-bearing liabilities decreased by one basis point to 3.72% from 3.73% for the previous year. Average earning assets increased by $117.5 million, primarily due to an increase of $99.8 million in average loans and an increase of $17.7 million in average total investments. Average interest-bearing liabilities increased by $102.1 million as average interest-bearing deposits increased by $89.3 million and average borrowings increased by $12.8 million.
Previous wording
Interest expense for the year ended December 31, 2023 increased $63.7 million, or 230.9%, to $91.3 million compared to interest expense of $27.6 million for the year ended December 31, 2022. This increase is primarily attributable to a $263.4 million increase in average deposit balances and a 256 basis points increase in deposit costs, which includes a 279 basis points increase in the average yield on money market deposits and an 258 basis points increase in the average yield on time deposits. Average borrowings outstanding for the year ended December 31, 2023 decreased by $20.1 million with an increase in rate of 195 basis points compared to the year ended December 31, 2022.
Current wording
Interest expense for the year ended December 31, 2023 increased $63.7 million, or 230.9%, to $91.3 million compared to interest expense of $27.6 million for the year ended December 31, 2022. This increase is primarily attributable to a $263.4 million increase in average deposit balances and a 256 basis points increase in deposit costs, which includes a 279 basis points increase in the average yield on money market deposits and a 258 basis points increase in the average yield on time deposits. Average borrowings outstanding for the year ended December 31, 2023 decreased by $20.1 million with an increase in rate of 195 basis points compared to the year ended December 31, 2022.
Previous wording
The net interest margin for the year ended December 31, 2023 was 3.13% compared to 3.95% for the year ended December 31, 2022, a decrease of 82 basis points. The cost of interest-bearing liabilities increased by 248 basis points to 3.73% from 1.25%, while the yield on interest-earning assets increased by 108 basis points to 5.94% from 4.86% for the previous year. Average earning assets increased by $213.3 million, primarily due to an increase of $274.3 million in average loans, offset by a decrease of $61.0 million in average total investments. Average interest-bearing liabilities increased by $243.4 million as average interest-bearing deposits increased by $263.4 million while average borrowings decreased by $20.1 million.
Current wording
3.73% from 1.25%, while the yield on interest-earning assets increased by 108 basis points to 5.94% from 4.86% for the previous year. Average earning assets increased by $213.3 million, primarily due to an increase of $274.3 million in average loans, offset by a decrease of $61.0 million in average total investments. Average interest-bearing liabilities increased by $243.4 million as average interest-bearing deposits increased by $263.4 million while average borrowings decreased by $20.1 million.
Previous wording
We recorded a credit provision for loan losses of $2.8 million during the year ended December 31, 2022 compared to $6.9 million provision expense recorded during the year ended December 31, 2021. The credit provision for loan losses recorded during the year ended December 31, 2022 was due to the release of additional reserves allocated for the uncertainties in our loan portfolio caused by the COVID-19 pandemic as certain loans that were modified during the COVID-19 pandemic returned to their contractual payment terms. We did not experience the level of credit deterioration for these loans that we had initially anticipated. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2022 and 2021 was 0.45% and 0.67%, respectively. None of the ACL balance was allocated to our PPP loan portfolio at December 31, 2022 and 2021. Our ACL as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans.
Current wording
We recorded a provision for credit losses of $516,000 during the year ended December 31, 2024 compared to a credit provision of $15,000 recorded during the year ended December 31, 2023. The provision expense recorded during the year ended December 31, 2024 was primarily due to the increase in reserves allocated to individually analyzed loans, as well as an increase in the general reserves allocated to our commercial real estate and commercial and industrial loan portfolios due to higher loan balances. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2024 and 2023 was 0.59% and 0.57%, respectively. Our allowance for credit losses as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.
Previous wording
We recorded a credit provision for credit losses of $15,000 during the year ended December 31, 2023 compared to a credit provision of $2.8 million recorded during the year ended December 31, 2022. The credit provision recorded during the year ended December 31, 2023 was due to the decrease in reserves allocated to individually analyzed loans, as well as a decrease in the general reserves allocated to our residential mortgage loan portfolio as the outlook for the national housing price index improved during 2023, offset by general reserves allocated for the increase in loan balances during the year. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2023 and 2022 was 0.58% and 0.45%, respectively. Our allowance for credit losses as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.
Current wording
We recorded a credit provision for credit losses of $15,000 during the year ended December 31, 2023 compared to a credit provision of $2.8 million recorded during the year ended December 31, 2022. The credit provision recorded during the year ended December 31, 2023 was due to the decrease in reserves allocated to individually analyzed loans, as well as a decrease in the general reserves allocated to our residential mortgage loan portfolio as the outlook for the national housing price index improved during 2023, offset by general reserves allocated for the increase in loan balances during the year. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2023 and 2022 was 0.57% and 0.45%, respectively. Our allowance for credit losses as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans due to their low LTVs.
Previous wording
Other service charges, commissions and fees decreased $4.7 million, or 32.6%, to $9.7 million for year ended December 31, 2022 compared to $14.4 million for the year ended December 31, 2021. The decrease is mainly attributable to lower underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume declined during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Current wording
Other service charges, commissions and fees increased $1.2 million, or 21.1%, to $6.9 million for the year ended December 31, 2024 compared to $5.7 million for the year ended December 31, 2023. The increase is mainly attributable to higher underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume increased during the year ended December 31, 2024 compared to the year ended December 31, 2023.
Previous wording
Mortgage loan originations totaled $833.6 million during the year ended December 31, 2022 compared to $1.20 billion during the year ended December 31, 2021.
Current wording
Mortgage loan originations totaled $413.7 million during the year ended December 31, 2024 compared to $337.0 million during the year ended December 31, 2023.
Previous wording
Total gain on sale of loans was $4.1 million for the year ended December 31, 2022 compared to $11.0 million for the year ended December 31, 2021, a decrease of $6.9 million, or 62.7%.
Current wording
Total gain on sale of loans was $4.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023, an increase of $1.6 million, or 47.3%.
Previous wording
Gain on sale of residential loans totaled $2.0 million for the year ended December 31, 2022 compared to no gain on sale of residential mortgage loans recorded for the year ended December 31, 2021 as no mortgage loans were sold during 2021. We sold $94.9 million in residential mortgage loans with an average premium of 2.13% during the year ended December 31, 2022.
Current wording
Gain on sale of residential loans totaled $1.9 million for the year ended December 31, 2024 as we sold $187.5 million in residential mortgage loans during the period with an average premium of 1.05%. We recorded no gain on sale of residential mortgage loans during the year ended December 31, 2023 as no residential mortgage loans were sold during the period.
Previous wording
Gain on sale of SBA loans totaled $2.1 million for the year ended December 31, 2022 compared to $11.0 million for the year ended December 31, 2021. We sold $31.5 million in SBA loans during the year ended December 31, 2022 with average premiums of 8.45% compared to the sale of $124.7 million in SBA loans with an average premium of 10.67% in the year ended December 31, 2021.
Current wording
Gain on sale of SBA loans totaled $2.9 million for the year ended December 31, 2024 compared to $3.3 million for the year ended December 31, 2023. We sold $72.2 million in SBA loans during the year ended December 31, 2024 with average premiums of 6.57% compared to the sale of $72.9 million in SBA loans with an average premium of 6.09% in the year ended December 31, 2023.
Previous wording
Mortgage loan servicing income had an expense balance of $561,000 for the year ended December 31, 2022 compared to an expense balance of $564,000 for the year ended December 31, 2021, a slight increase of $3,000, or 0.5%. Included in mortgage loan servicing income for the year ended December 31, 2022 was $3.2 million in mortgage servicing fees compared to $4.7 million for 2021, and capitalized mortgage servicing assets of $761,000 for the year ended December 31, 2022 compared to $0 for 2021. These amounts were offset by mortgage loan servicing asset amortization of $4.7 million for the year ended December 31, 2022 compared to $5.7 million for the year ended December 31, 2021. During the year ended December 31, 2022, we recorded fair value impairment recovery of $163,000 on our mortgage servicing assets compared to a fair value impairment recovery of $478,000 recorded during the year ended December 31, 2021. Our total residential mortgage loan servicing portfolio was $526.7 million at December 31, 2022 compared to $608.2 million at December 31, 2021.
Current wording
Mortgage loan servicing income was $2.4 million for the year ended December 31, 2024 compared to an expense balance of $193,000 for the year ended December 31, 2023, an increase of $2.6 million, or 1368.4%. The change in mortgage loan servicing income was primarily due to the decrease in mortgage servicing amortization and an increase in capitalized mortgage servicing assets, partially offset by the decrease in mortgage servicing fees. Included in mortgage loan servicing income for the year ended December 31, 2024 was $2.3 million in mortgage servicing fees compared to $2.5 million for 2023, and capitalized mortgage servicing assets of $1.2 million for the year ended December 31, 2024 compared to $0 for 2023. These amounts were offset by mortgage loan servicing asset amortization of $1.1 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023. During the year ended December 31, 2024, we recorded a fair value impairment of $20,000 on our mortgage servicing assets compared to no fair value impairment recorded during 2023. Our total residential mortgage loan servicing portfolio was $527.0 million at December 31, 2024 compared to $443.1 million at December 31, 2023.
Previous wording
SBA servicing income was $1.8 million for the year ended December 31, 2022 compared to $5.9 million for the year ended December 31, 2021, a decrease of $4.1 million, or 69.0%. Our total SBA loan servicing portfolio was $465.1 million as of December 31, 2022 compared to $543.0 million as of December 31, 2021. SBA servicing fees totaled $5.0 million for the year ended December 31, 2022 compared to $5.3 million for the year ended December 31, 2021. Our SBA servicing rights are carried at fair value and inputs used to calculate fair value change from period to period. During the year ended December 31, 2022, we recorded a $3.1 million fair value adjustment charge on our SBA servicing rights compared to a $619,000 fair value gain on our SBA servicing rights during the year ended December 31, 2021.
Current wording
SBA servicing income was $4.2 million for the year ended December 31, 2024 compared to $4.8 million for the year ended December 31, 2023, a decrease of $553,000, or 11.5%. Our total SBA and USDA loan servicing portfolio was $479.7 million as of December 31, 2024 compared to $508.0 million as of December 31, 2023. SBA servicing fees totaled $4.2 million for the year ended December 31, 2024 compared to $4.6 million for the year ended December 31, 2023. Our SBA servicing rights are carried at fair value and inputs used to calculate fair value change from period to period. During the year ended December 31, 2024, we recorded a $29,000 fair value gain on our SBA servicing rights compared to a $201,000 fair value gain on our SBA servicing rights during the year ended December 31, 2023.
Previous wording
Other noninterest income was $1.1 million for the year ended December 31, 2022 compared to $1.3 million for the year ended December 31, 2021, a decrease of $231,000, or 18.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $1.7 million and $1.1 million, respectively, for the years ended December 31, 2022 and 2021. Also included in other noninterest income are fair value losses on our equity securities, which totaled $1.1 million and $114,000, respectively, for the years ended December 31, 2022 and 2021.
Current wording
Other noninterest income was $2.6 million for the year ended December 31, 2024 compared to $2.7 million for the year ended December 31, 2023, a decrease of $135,000, or 5.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $2.3 million and $1.8 million, respectively, for the years ended December 31, 2024 and 2023. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $35,000 (loss) and $35,000 (gain), respectively, for the years ended December 31, 2024 and 2023.
Previous wording
to lower underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume declined during the year ended December 31, 2023 compared to the year ended December 31, 2022. Mortgage loan originations totaled $337.0 million during the year ended December 31, 2023 compared to $833.6 million during the year ended December 31, 2022.
Current wording
Other service charges, commissions and fees decreased $4.1 million, or 41.8%, to $5.7 million for the year ended December 31, 2023 compared to $9.7 million for the year ended December 31, 2022. The decrease is mainly attributable to lower underwriting, processing and origination fees earned from our origination of residential mortgage loans as mortgage volume declined during the year ended December 31, 2023 compared to the year ended December 31, 2022. Mortgage loan originations totaled $337.0 million during the year ended December 31, 2023 compared to $833.6 million during the year ended December 31, 2022.
Previous wording
Gain on sale of SBA loans totaled $3.3 million for the year ended December 31, 2023 compared to $2.1 million for the year ended December 31, 2022. We sold $72.9 million in SBA loans during the year ended December 31, 2023 with average premiums of 6.09% compared to the sale of $31.5 million in SBA loans with an average premium of 8.45% in the year ended Decemer 31, 2022.
Current wording
Gain on sale of SBA loans totaled $3.3 million for the year ended December 31, 2023 compared to $2.1 million for the year ended December 31, 2022. We sold $72.9 million in SBA loans during the year ended December 31, 2023 with average premiums of 6.09% compared to the sale of $31.5 million in SBA loans with an average premium of 8.45% in the year ended December 31, 2022.
Previous wording
Salaries and employee benefits expense for the year ended December 31, 2022 was $30.5 million compared to $30.1 million for the year ended December 31, 2021, an increase of $390,000, or 1.3%. This increase was mainly attributable to the increase in the overall number of employees necessary to support our continued growth and annual salary adjustments, as well as increased restricted stock expense, offset by lower commissions paid to our loan officers as loan volume declined during the year ended December 31, 2022. The average number of full-time equivalent employees was 216 for the year ended December 31, 2022 compared to 213 for the year ended December 31, 2021.
Current wording
Salaries and employee benefits expense for the year ended December 31, 2024 was $33.2 million compared to $29.3 million for the year ended December 31, 2023, an increase of $3.9 million, or 13.3%. This increase was primarily attributable to higher employee salaries and benefits due to the increase in the overall number of employees necessary to support our continued growth and annual salary adjustments, higher commissions from higher loan volume, and increased employee insurance costs and stock based compensation. The average number of full-time equivalent employees was 240 for the year ended December 31, 2024 compared to 220 for the year ended December 31, 2023.
Previous wording
Other expenses for the year ended December 31, 2022 were $12.2 million compared to $11.5 million for the year ended December 31, 2021, an increase of $690,000, or 6.0%. The increase was primarily due to higher FDIC deposit insurance premiums, professional fees, and communication expenses, offset by lower loan and other real estate owned expenses. Included in other expenses were directors’ fees of $565,000 and $455,000 for the years ended December 31, 2022 and 2021, respectively.
Current wording
Other expenses for the year ended December 31, 2024 were $12.7 million compared to $11.7 million for the year ended December 31, 2023, an increase of $1.0 million, or 8.9%. The increase was primarily due to higher expenses related to security, audit and accounting services, business taxes, other real estate owned and FDIC insurance premiums. Included in other expenses were directors’ fees of $645,000 and $617,000 for the years ended December 31, 2024 and 2023, respectively.
Previous wording
Income tax expense for the years ended December 31, 2023, 2022 and 2021 was $20.4 million, $28.6 million and $20.9 million, respectively. The Company’s effective tax rates for the years ended December 31, 2023, 2022 and 2021 were 28.3%, 31.4% and 25.3%, respectively. The elevated effective tax rate for the year ended December 31, 2022 was due to the re-allocation of state income tax apportionment schedules from prior year tax returns, as well as corrections for the treatment of prior year’s state tax credits. The effective tax rate of 28.3% for the year ended December 31, 2023 should be the more normalized tax rate for the Company going forward.
Current wording
Income tax expense for the years ended December 31, 2024, 2023 and 2022 was $22.8 million, $20.4 million and $28.6 million, respectively. The Company’s effective tax rates for the years ended December 31, 2024, 2023 and 2022 were 26.1%, 28.3% and 31.4%, respectively. The decrease in the effective tax rate during 2024 was partially due to a tax provision to tax return adjustment recorded for our 2023 state tax returns filed during the third and fourth quarter of 2024. The elevated effective tax rate for the year ended December 31, 2022 was due to the re-allocation of state income tax apportionment schedules from prior year tax returns, as well as corrections for the treatment of prior year’s state tax credits.
Previous wording
We had a net deferred tax liability of $2.3 million at December 31, 2023, a net deferred tax liability of $1.6 million at December 31, 2022 and net deferred tax asset of $2.2 million at December 31, 2021.
Current wording
We had a net deferred tax asset of $158,000 at December 31, 2024, a net deferred tax liability of $2.3 million at December 31, 2023 and net deferred tax liability of $1.6 million at December 31, 2022.
Previous wording
For the year ended December 31, 2023 and 2022, our average equity includes $22.1 million and $7.6 million, respectively, of average accumulated other comprehensive income. This amount includes unrealized losses on our available for sale securities portfolio and significant unrealized gains on our interest rate derivatives. Excluding the average accumulated other comprehensive income balance, the return on average equity was 15.00% and 20.02% for the years ended December 31, 2023 and 2022, respectively. The average accumulated other comprehensive income balance had little to no impact on the return on average equity for the years ended December 31, 2021.
Current wording
For the year ended December 31, 2024, 2023 and 2022, our average equity includes $13.2 million, $22.1 million and $7.6 million, respectively, of average accumulated other comprehensive income. These amounts includes unrealized losses on our available for sale securities portfolio and significant unrealized gains on our interest rate derivatives. Excluding the average accumulated other comprehensive income balance, the return on average equity was 16.71%, 15.00% and 20.02% for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
Total assets increased $75.6 million, or 2.2%, to $3.50 billion at December 31, 2023 as compared to $3.43 billion at December 31, 2022. The increase in total assets was primarily attributable to increases in loans held for investment of $86.4 million, loans held for sale of $22.3 million, premises and equipment of $3.9 million and interest rate derivatives of $3.0 milion, partially offset by a decrease in cash and cash equivalents of $34.7 million and an increase of $4.2 million in the allowance for credit losses.
Current wording
Total assets increased $91.2 million, or 2.6%, to $3.59 billion at December 31, 2024 as compared to $3.50 billion at December 31, 2023. The increase in total assets was primarily attributed to increases in cash and due from banks of $94.2 million, loans held for investment of $15.8 million, federal funds sold of $10.9 million, Federal Home Loan Bank stock of $2.4 million and bank owned life insurance of $2.3 million, partially offset by decreases in loans held for sale of $22.3 million and interest rate derivatives of $10.0 million.
Previous wording
Our investment securities portfolio made up only 0.82% of our total assets at December 31, 2023 compared to 0.86% at December 31, 2022.
Current wording
Our investment securities portfolio made up only 0.77% of our total assets at December 31, 2024 compared to 0.82% at December 31, 2023.
Previous wording
Our gross loans held for investment increased $85.6 million, or 2.8%, to $3.15 billion as of December 31, 2023 compared to $3.07 billion as of December 31, 2022. Our loan growth during the year ended December 31, 2023 was comprised of a decrease of $24.5 million, or 51.3%, in construction and development loans, an increase of $53.9 million, or 8.2%, in commercial real estate loans, an increase of $12.7 million, or 23.9%, in commercial and industrial loans, an increase of $43.4 million, or 1.9%, in residential real estate loans and an increase of $103,000, or 47.7%, in consumer and other loans. Loans classified as held for sale totaled $23.6 million as of December 31, 2023. There were no loans classified as held for sale as of December 31, 2022.
Current wording
Our gross loans held for investment increased $14.4 million, or 0.5%, to $3.17 billion as of December 31, 2024 compared to $3.15 billion as of December 31, 2023. Our loan growth during the year ended December 31, 2024 was comprised of a decrease of $1.7 million, or 7.3%, in construction and development loans, an increase of $50.9 million, or 7.2%, in commercial real estate loans, an increase of $12.3 million, or 18.7%, in commercial and industrial loans, a decrease of $47.1 million, or 2.0%, in residential real estate loans and a decrease of $59,000, or 18.5%, in consumer and other loans. There were no loans classified as held for sale as of December 31, 2024 or 2022. Loans classified as held for sale totaled $22.3 million as of December 31, 2023.
Previous wording
Our loan portfolio is concentrated in commercial real estate and residential mortgage loans with the remaining balance in construction and development, commercial and industrial, and consumer loans. 97.9% of our gross loans held for investment were secured by real property as of December 31, 2023, compared to 98.3% as of December 31, 2022 and 97.1% as of December 31, 2021.
Current wording
Our loan portfolio is concentrated in commercial real estate and residential mortgage loans with the remaining balance in construction and development, commercial and industrial, and consumer loans. 97.5% of our gross loans held for investment were secured by real property as of December 31, 2024, compared to 97.9% as of December 31, 2023 and 98.3% as of December 31, 2022.
Previous wording
As of December 31, 2023, our construction and development loans comprised $23.3 million, or 0.7%, of total loans held for investment, compared to $47.8 million, or 1.6%, of total loans held for investment as of December 31, 2022. This compares to $38.9 million, or 1.6%, of total loans held for investment as of December 31, 2021.
Current wording
As of December 31, 2024, our construction and development loans comprised $21.6 million, or 0.7%, of total loans held for investment, compared to $23.3 million, or 0.7%, of total loans held for investment as of December 31, 2023. This compares to $47.8 million, or 1.6%, of total loans held for investment as of December 31, 2022.
Previous wording
Commercial real estate loans. Commercial real estate loans include owner-occupied and non-owner occupied commercial real estate. We require our commercial real estate loans to be secured by what we believe to be well-managed property with adequate margins and we generally obtain a personal guarantee from responsible parties. We originate both fixed-rate and adjustable-rate loans with terms up to 25 years. At December 31, 2023, approximately 92.4% of our commercial real estate loans were owner-occupied.
Current wording
Commercial real estate loans. Commercial real estate loans include owner-occupied and non-owner occupied commercial real estate. We require our commercial real estate loans to be secured by what we believe to be well-managed property with adequate margins and we generally obtain a personal guarantee from responsible parties. We originate both fixed-rate and adjustable-rate loans with terms up to 25 years. At December 31, 2024, approximately 92.0% of our commercial real estate loans were owner-occupied compared to 92.4% at December 31, 2023.
Previous wording
As of December 31, 2023, our loans secured by commercial real estate were $711.2 million, or 22.6%, of total loans held for investment compared to $657.2 million, or 21.4%, as of December 31, 2022. This increase was due to consistent loan production and market demand for these types of loans. Commercial real estate loans were $520.5 million, or 20.7%, of our portfolio as of December 31, 2021. Our non-owner occupied commercial real estate loans make up a small percentage of our overall commercial real estate loan portfolio. Non-owner occupied commercial real estate loans were 7.6%, 10.4%, and 12.4%, as a percentage of commercial real estate loans for the years ending December 31, 2023, 2022, and 2021, respectively.
Current wording
As of December 31, 2024, our loans secured by commercial real estate were $762.0 million, or 24.1%, of total loans held for investment compared to $711.2 million, or 22.6%, as of December 31, 2023. This increase was due to consistent loan production and market demand for these types of loans. Commercial real estate loans were $657.2 million, or 21.4%, of our portfolio as of December 31, 2022. Our non-owner occupied commercial real estate loans make up a small percentage of our overall commercial real estate loan portfolio. Non-owner occupied commercial real estate loans were 8.0%, 7.6%, and 10.4%, as a percentage of commercial real estate loans for the years ending December 31, 2024, 2023, and 2022, respectively.
Previous wording
We originate both fixed and adjustable rate loans. Adjustable rate loans are based on SOFR, prime rate or constant maturity treasury (“CMT”). At December 31, 2023 and 2022, approximately 28.9% and 25.2% of the commercial real estate portfolio consisted of fixed-rate loans, respectively. Our policy maximum LTV is 85% for commercial real estate loans. However, our weighted average LTV is well below this policy maximum. Newly originated and renewed non-SBA commercial real estate loans for the years ending December 31, 2023 and 2022 carried a weighted average LTV of 46.4% and 57.7%, respectively.
Current wording
We originate both fixed and adjustable rate loans. Adjustable rate loans are based on the prime rate, SOFR or constant maturity treasury (“CMT”). At December 31, 2024 and 2023, approximately 12.0% and 28.9% of the commercial real estate portfolio consisted of fixed-rate loans, respectively. Our policy maximum LTV is 85% for commercial real estate loans. However, our weighted average LTV is well below this policy maximum. Newly originated and renewed non-SBA commercial real estate loans for the years ending December 31, 2024 and 2023 carried a weighted average LTV of 53.5% and 46.4%, respectively.
Previous wording
receivable and inventory financing, machinery and equipment purchases, and other business purposes. Generally, short-term loans have maturities ranging from six months to one year, and “term loans” have maturities ranging from five to ten years. Loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans generally provide for floating interest rates, with monthly payments of both principal and interest.
Current wording
Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans. The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts receivable and inventory financing, machinery and equipment purchases, and other business purposes. Generally, short-term loans have maturities ranging from six months to one year, and “term loans” have maturities ranging from five to ten years. Loans are generally intended to finance current transactions and typically provide for periodic principal payments, with interest payable monthly. Term loans generally provide for floating interest rates, with monthly payments of both principal and interest.
Previous wording
As of December 31, 2023, our commercial and industrial loans comprised $65.9 million, or 2.1%, of total loans held for investement, compared to $53.2 million, or 1.7% of total loans held for investment as of December 31, 2022. This increase was due to consistent loan production and market demand for these types of loans. This compares to $73.1 million, or 2.9%, of total loans held for investment as of December 31, 2021.
Current wording
As of December 31, 2024, our commercial and industrial loans comprised $78.2 million, or 2.5%, of total loans held for investment, compared to $65.9 million, or 2.1% of total loans held for investment as of December 31, 2023. This increase was due to consistent loan production and market demand for these types of loans. This compares to $53.2 million, or 1.7%, of total loans held for investment as of December 31, 2022.
Previous wording
A large portion of both our commercial real estate and commercial and industrial loans are SBA loans. We are designated an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We have historically sold the guaranteed portion (75%-90%) of the SBA loans that we originate. Our SBA loans are typically made to small-sized retail, hotel/motel, service and distribution businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2023, our SBA portfolio totaled $286.9 million compared to $304.3 million as of December 31, 2022. This decrease was primarily the result of the increase in SBA loans sold during 2023 coupled with the decrease in SBA loan originations during the year. We originated and sold $88.1 million and $72.9 million during the year ended December 31, 2023 compared to originations and sales of $136.7 million and $31.5 million for the year ended December 31, 2022. We originated and sold $285.8 million and $124.7 million of SBA loans during the year ended December 31, 2021.
Current wording
A large portion of both our commercial real estate and commercial and industrial loans are SBA loans. We are designated an SBA Preferred Lender under the SBA Preferred Lender Program. We offer mostly SBA 7(a) variable-rate loans. We have historically sold the guaranteed portion (75%-90%) of the SBA loans that we originate. Our SBA loans are typically made to small-sized retail, hotel/motel, service and distribution businesses for working capital needs or business expansions. SBA loans have maturities up to 25 years. Typically, non-real estate secured loans mature in less than 10 years. Collateral may also include inventory, accounts receivable and equipment, and may include personal guarantees. Our unguaranteed SBA loans collateralized by real estate are monitored by collateral type and included in our CRE Concentration Guidance. As of December 31, 2024, our SBA and USDA portfolio totaled $277.0 million compared to $286.9 million as of December 31, 2023. This decrease was primarily the result of prepayments on existing SBA loans during 2024. We originated and sold $90.8 million and $72.2 million of SBA loans during the year ended December 31, 2024 compared to originations and sales of $88.1 million and $72.9 million for the year ended December 31, 2023. We originated and sold $136.7 million and $31.5 million of SBA loans during the year ended December 31, 2022.
Previous wording
From our total SBA loan portfolio of $286.9 million at December 31, 2023, $254.2 million is secured by real estate and $32.7 million is unsecured or secured by business assets, which we classify as commercial and industrial loans.
Current wording
From our total SBA and USDA loan portfolio of $277.0 million at December 31, 2024, $248.6 million is secured by real estate and $28.5 million is unsecured or secured by business assets, which we classify as commercial and industrial loans.
Previous wording
Residential real estate loans. We originate mainly non-conforming single-family residential mortgage loans through our branch network, without the use of any third party originator. During 2023, our primary loan products were 15-year and 30-year fixed rate products and a three-year, five-year or ten-year hybrid adjustable rate mortgage which reprice after three, five or ten years to the one-year CMT plus certain spreads. We originate the residential mortgage loans to hold for investment and also sell on the secondary market when premiums are elevated or for liquidity purposes.
Current wording
Residential real estate loans. We originate mainly non-conforming single-family residential mortgage loans through our branch network, without the use of any third party originator. During 2024, our primary loan products were a three-year, five-year or ten-year hybrid adjustable rate mortgage which reprice after three, five or ten years to the one-year CMT plus certain spreads, as well as 15-year and 30-year fixed rate products. We originate the residential mortgage loans to hold for investment and also sell on the secondary market when premiums are elevated or for liquidity purposes.
Previous wording
As of December 31, 2023, our residential real estate loans comprised $2.35 billion, or 74.6%, of total loans held for investment, compared to $2.31 billion, or 75.3%, of total loans held for investment as of December 31, 2022. This compares to $1.88 billion, or 74.8%, of total loans held for investment as of December 31, 2021. The increase in 2023 was due to management’s decision to hold all of our production for investment rather than sell our residential loans on the secondary market. During the years ended December 31, 2023 and 2022, we originated $337.0 million and $833.6 million and sold $0 and $94.9 million, respectively, in residential mortgage loans. During the year ended December 31, 2021, we originated $1.20 billion and sold $0 in residential mortgage loans.
Current wording
As of December 31, 2024, our residential real estate loans comprised $2.30 billion, or 72.7%, of total loans held for investment, compared to $2.35 billion, or 74.6%, of total loans held for investment as of December 31, 2023. This compares to $2.31 billion, or 75.3%, of total loans held for investment as of December 31, 2022. The decrease in 2024 was due to management’s decision to start selling our residential mortgage loans again on the secondary market after noy selling any residential mortgage loans during 2023. During the years ended December 31, 2024 and 2023, we originated $413.7 million and $337.0 million and sold $187.5 million and $0, respectively, in residential mortgage loans. During the year ended December 31, 2022, we originated $833.6 million and sold $94.9 in residential mortgage loans.
Previous wording
As of December 31, 2023, our consumer and other loans totaled $319,000 compared to $216,000 as of December 31, 2022. This compares to $79,000 as of December 31, 2021.
Current wording
As of December 31, 2024, our consumer and other loans totaled $260,000 compared to $319,000 as of December 31, 2023. This compares to $216,000 as of December 31, 2022.
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Current report — wording carried from elsewhere
changes in underwriting standards, changes in collateral values, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans.
Current report — wording carried from elsewhere
The Company has interest rate derivative agreements totaling $850.0 million that are designated as cash flow hedges of our deposit accounts indexed to the Federal Funds Effective rate. The weighted average pay rate for these interest rate derivatives is 2.29%. During the year ended December 31, 2023, we recorded a credit to interest expense of $5.4 million from the benefit received on these interest rate derivatives compared to $287,000 of interest expense recorded during the year ended December 31, 2022. Of the $850.0 million interest rate derivatives, only $500.0 million were making payments as of December 31, 2023 and the remaining $350.0 million will begin making payments in the second quarter of 2024.
Current report — wording carried from elsewhere
The net interest margin for the year ended December 31, 2023 was 3.13% compared to 3.95% for the year ended December 31, 2022, a decrease of 82 basis points. The cost of interest-bearing liabilities increased by 248 basis points to
Current report — wording carried from elsewhere
We maintain a reserve for credit losses that consist of two components, the allowance for credit losses (ACL) on funded loans and the ACL for unfunded commitments, The allowance for credit losses provides for the risk of credit losses expected in our loan portfolio and is based on loss estimates derived from a comprehensive quarterly evaluation. The evaluation reflects analyses of individual borrowers coupled with analysis of historical loss experience in various loan
Current report — wording carried from elsewhere
noninterest-bearing demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets.
Current report — wording carried from elsewhere
deposits. Other alternative sources of funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
interest income and a $9.7 decrease in provision for credit losses, offset by a $14.6 million decrease in noninterest income, a $1.9 million increase in noninterest expense and a $7.7 million increase in provision for income taxes.
Previous report — wording carried elsewhere
Other service charges, commissions and fees decreased $4.1 million, or 41.8%, to $5.7 million for the year ended December 31, 2023 compared to $9.7 million for the year ended December 31, 2022. The decrease is mainly attributable
Previous report — wording carried elsewhere
Commercial and industrial loans. We provide a mix of variable and fixed rate commercial and industrial loans. The loans are typically made to small and medium-sized businesses for working capital needs, business expansions and for trade financing. We extend commercial business loans on an unsecured and secured basis for working capital, accounts