NEW PEOPLES BANKSHARES INC
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
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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 31, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-01.
0001903596-24-000204
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001903596-25-000149
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 144 previous paragraphs and 144 current paragraphs.
75 unchanged; 52 reworded; 16 added; 17 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 14 previous and 16 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 (16)
Current report
technology utilized by us, including the successful core operating system conversion in 2025;
Current report
our ability to assist in managing third party fraud against customer accounts including but not limited to check, credit and debit card, and electronic funds transfer fraud;
Current report
Results for the year ended December 31, 2024 were impacted by several non-recurring events. On December 31, 2024 the Bank provided notice of termination of the contract with our core systems provider. We plan to complete the conversion to a new core systems provider in the fourth quarter of 2025. As a result of the termination notice, we recorded termination charges and certain conversion costs estimated to be $850,000. During the fourth quarter of 2024, we had two transactions in our bank owned life insurance portfolio (“BOLI”) that disposed of the entire portfolio. One policy was cancelled and redeemed, resulting in a loss of $49,000; and a benefit claim was filed on the second policy resulting in a gain of $1.6 million. After consideration of the tax impact, these non-recurring items increased earnings by $756,000 or $0.03 per basic and diluted share. In 2023, other noninterest income included $257,000 in insurance proceeds recovery related to costs incurred during the cybersecurity incident in 2022. The following non-GAAP table summarizes the impact of these nonrecurring events:
Current report
Adjusted net income and net income per share are non-GAAP financial measures that management uses to supplement the evaluation of the Company’s operating results and believes is beneficial to the users of its financial statements in evaluating the Company’s current operating results in relation to past periods.
Current report
For the year ended December 31, 2024, noninterest income was $11.3 million, an increase of $1.3 million from the $9.9 million in 2023. Excluding non-recurring items, noninterest income was unchanged at $9.7 million for 2024 and 2023, due to nonrecurring income of $1.6 million and $257,000 recorded in 2024 and 2023, respectively
Current report
For the year ended December 31, 2024, noninterest expense was $28.8 million, an increase of $800,000 from $28.0 million in 2023. Excluding non-recurring items, noninterest expense decreased $90,000 to $27.9 million compared to $28.0 million for the year ended December 31, 2023.
Current report
Net Interest Margin Analysis
Current report
Average Balances, Income and Expense, and Yields and Yields and Rates
Current report
The increases in interest income and interest expense during 2024 were driven by a combination of increased interest rates and increased volumes of interest earning assets and liabilities. Overall, our net interest margin decreased 20 bps to 3.47% in 2024 compared to 3.67% in 2023.
Current report
The increase in interest income is attributed to an increase in the average balance and yield on earning assets. Average earning assets increased $59.6 million. Specifically average loans increased $32.3 million or 5.31%, and average interest-bearing deposits in other banks increased $29.7 million, or 66.1%. In addition, the yield on average earning assets improved 55 bps to 5.42% for the year ended December 31, 2024 compared to 4.87% for the year ended December 31, 2023. Overall, loan interest income, including fees, increased $5.7 million during the year ended December 31, 2024 compared to December 31, 2023.
Current report
Interest expense increased $7.0 million, due primarily to an increase in the average balance and yield on interest bearing liabilities. Average time deposits and, money market and savings deposits increased $50.6 million and $6.9 million, respectively. These increases were largely due to aggressive pricing on these deposit products as the cost of interest-bearing deposits increased 109 bps to 2.74%. The increase in yield on interest bearing deposits was partially offset by a decrease in cost of borrowed funds which fell 64 bps to 5.79% due to principal payments made on trust preferred securities and the relatively lower cost for the Bank Term Funding Program borrowing that was outstanding throughout most of 2024.
Current report
** Maturities of Loans**
Current report
Excluding the loss on surrender and the income accrued on the death benefit, the Company recognized income of approximately $73,000 and $40,000 during the years ended December 31, 2024 and 2023.
Current report
For the year ended December 31, 2024, noninterest income totaled $11.3 million. After excluding non-recurring items, as shown in the table below, which is a non-GAAP measure, noninterest income was $9.7 million for 2024 compared to $9.9 million for 2023. A $244,000, or 22.51%, increase in financial services revenue to $1.3 million from the $1.1 million recorded during 2023 offset modest decreases in service charges and card processing revenue of $48,000 and $28,000, respectively. In addition, noninterest income was impacted by the sales of bank properties in 2024 and 2023. During 2024, a former branch office and a lot were sold, along with the sale of furniture, resulting in a net gain of $23,000. During the same period of 2023, two former office facilities and a vehicle were sold resulting in a net gain of $130,000. In 2023, other noninterest income included $257,000 in insurance proceeds recovery related to costs incurred during the cybersecurity incident in 2022, that was not repeated in 2024. Excluding this item noninterest income for 2023 and the nonrecurring items in 2024, noninterest income would have been unchanged at $9.7 million.
Current report
For the year ended December 31, 2024, noninterest expense totaled $28.8 million. After excluding non-recurring items, as shown in the table below, noninterest expense decreased $90,000 to $27.9 million compared to $28.0 million for the year ended December 31, 2023. The decrease was impacted by reductions in legal and professional fees, consulting, printing and supplies and loan expenses totaling $450,000. The expense reductions were partially offset by increases in advertising, ATM network and deposit insurance expenses, which combined for an increase of $111,000.
Current report
While we experienced no significant losses resulting from fraud in 2024, we experienced an increase in the volume and sophistication of fraudulent transaction attempts. These fraudulent transaction attempts ranged from unauthorized electronic transactions to check theft and forgery. We work continuously with customers to educate them on identifying potential fraud and the efforts they can take to reduce the risk of fraud. We expect increased fraudulent transaction attempts to continue for the foreseeable future.
Removed paragraphs (17)
Previous report
technology utilized by us;
Previous report
Cybersecurity
Previous report
The Company, primarily through the Bank, depends on its ability to continuously process, record and monitor a large number of customer transactions, and customer, public and regulatory expectations regarding operational and information security have increased over time. Accordingly, the Company’s and its subsidiaries’ operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. Although the Company has business continuity plans and other safeguards in place, disruptions or failures in the physical infrastructure or operating systems that support its businesses and customers, or cyber-attacks or security breaches of the networks, systems or devices on which customers’ personal information is stored and that customers use to access the Company’s and its subsidiaries’ products and services could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect the Company’s results of operations or financial condition.
Previous report
Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it or its subsidiaries will not suffer such losses in the future. On June 15, 2022, we experienced a cybersecurity incident that temporarily interrupted the operability of our computer systems. Limited operations were restored June 17, 2022, and full operations were restored June 21, 2022. Since that date, restoration efforts have been completed and normal operations have resumed. The Company’s risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, our plans to continue to implement our e-banking and mobile banking channel strategies and develop additional remote connectivity solutions to serve our customers when and how they want to be served. As a result, cybersecurity and the continued development and enhancement of the Company’s controls, processes and practices, designed to protect its and its subsidiaries’ systems, computers, software, data and networks from attack, damage or unauthorized access, remain a priority for the Company. As cyber threats continue to evolve, the Company has expended resources and may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities.
Previous report
As discussed under the heading “Cybersecurity” in Item 1.C of this Form 10-K, the federal banking agencies have issued a joint rule that requires banking organizations to notify their primary regulator as soon as possible and no later than 36 hours after any cybersecurity incident has occurred, and the SEC has outlined rules for public disclosure.
Previous report
Noninterest income increased $709,000 to $9.9 million for the year ended December 31, 2023 from $9.2 million for the comparable period in 2022. The primary drivers of the increase were the sales of a former operations facility and branch location resulting in a combined gain of $130,000; an increase in financial services revenue of $168,000; and income resulting from an insurance claim payment in the amount of $257,000. This was offset by decreases in service charge income and card processing fees totaling a combined $122,000 during the period. Service charge income decreased due to changes made in 2022 in assessing certain charges that reduced the number of transactions subject to such fees. Additional changes to our service charge structure took effect during the fourth quarter of 2023, which eliminated charges for certain representment items, and certain funds transfer fees. Fees from debit card activity declined as customer deposit balances have reverted to pre-pandemic levels and customer spending habits have also begun to normalize.
Previous report
Noninterest expense was $28.0 million for the year ended December 31, 2023 compared to $26.5 million for the year ended December 31, 2022. The $1.5 million increase was impacted by increases in salaries and employee benefits of $891,000 data processing and telecommunications costs of $112,000, legal and professional fees of $273,000, cards rewards program expense of $115,000 and deposit insurance of $143,000. These increases were partially offset by decreases in occupancy expenses of $192,000, and data processing and telecommunication costs of $171,000, in comparison to the year ended December 31, 2022. During the first quarter of 2024 changes will be made to our branch network, with the consolidation of our two offices in Bristol, VA along with the opening of a full-service branch office in Boone, NC. It is expected that personnel and occupancy costs will incur modest increases resulting from these changes.
Previous report
The increases in interest income and interest expense during 2023 were driven mainly by increased interest rates, as short-term assets and liabilities tied to short-term rates adjusted to market rate increases throughout the year, new production at higher rates, and asset yields outpacing increases in funding costs in the rising interest rate environment. Overall, our net interest margin increased five basis points to 3.67% in 2023 compared to 3.62% in 2022.
Previous report
The increase in interest income is primarily attributed to an increase in yields on loans, which was mainly driven by higher market rates, combined with higher rates on interest bearing deposits in other banks. Overall, loan interest income, including fees, increased $4.8 million during the year ended December 31, 2023 compared to December 31, 2022.
Previous report
Interest expense increased $6.0 million, due primarily to an increase in the average balance and yield on time deposits, as noted above, combined with increased market rates on interest-bearing demand deposits, savings and money market deposits, and trust preferred securities. This was offset by a decrease in interest expense on other borrowings due to a reduction in volume.
Previous report
Our interest rate structure was impacted by the end of the use of LIBOR, which phased-out in 2023. We used LIBOR in pricing a limited number of our interest earning assets and liabilities, including our trust preferred securities. Most of these contracts were replaced with the secured overnight funding rate (“SOFR”).
Previous report
The Company adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment for the adoption of CECL included a decrease in the allowance for credit losses on loans of $80,000, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $348,000, which is recorded within other liabilities. The Company recorded a net decrease to retained earnings of $212,000 as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).
Previous report
Prior to the adoption of ASU 2016-13, loans were considered impaired when, based on current information and events, it was probable the Company would be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans included loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company would be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considered the borrower’s capacity to pay, which included such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assessed for impairment all nonaccrual loans greater than $250,000 and all troubled debt restructurings, whether or not currently classified as such. The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan was deemed impaired, a specific valuation allowance was allocated, if necessary, so that the loan was reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment was expected solely from the collateral. Interest payments on impaired loans were typically applied to principal unless collectability of the principal amount was reasonably assured, in which case interest was recognized on a cash basis.
Previous report
The Company recognized income of approximately $40,000 during the year ended December 31, 2023. The Company recorded a loss of $136,000 due to a write-down of approximately $158,000, partially offset by earnings of $22,000, during the year ended December 31, 2022. The write-down was due to the impact of rising interest rates on the value of the underlying assets supporting the policies.
Previous report
Noninterest income increased $709,000 to $9.9 million for the year ended December 31, 2023 from $9.2 million for the comparable period in 2022. The primary drivers of the increase were the sales of a former operations facility and branch location resulting in a combined gain of $130,0000; an increase in financial services revenue of $168,000; and income resulting from an insurance claim payment from the cybersecurity incident in the amount of $257,000. This was offset by decreases in service charge income and card processing fees totaling a combined $122,000 during the period. Service charge income decreased due to changes made in 2022 in assessing certain charges that reduced the number of transactions subject to such fees. Additional changes to our service charge structure took effect during the fourth quarter of 2023, which eliminated charges for certain representment items, and certain funds transfer fees. Fees from debit card activity declined as customer deposit balances have reverted to pre-pandemic levels and customer spending habits have also begun to normalize.
Previous report
Noninterest expense was $28.0 million for the year ended December 31, 2023 compared to $26.5 million for the year ended December 31, 2022. The $1.5 million increase was impacted by increases in salaries and employee benefits of $891,000, data processing and telecommunications costs of $112,000, legal and professional fees of $273,000, cards rewards program expense of $115,000 and deposit insurance of $143,000. These increases were partially offset by decreases in occupancy expenses of $192,0000, and data processing and telecommunication costs of $171,000, in comparison to the year ended December 31, 2022.
Previous report
Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. Those lines of credit may not actually be drawn upon to the total extent to which the Bank is committed. In response to two bank failures in March 2023, and resulting liquidity concerns for other super-regional banks, we drew a short-term advance from FHLB as precaution against any significant unusual activity by borrowers drawing against their lines of credit. We did not experience any significant draws by borrowers during that period nor do we anticipate experiencing such demand that might cause us to limit customer access to these lines of credit.
Reworded paragraphs (52)
Previous wording
Important factors that may cause actual results to differ from projections include:
Current wording
The following important factors, among others, that may cause actual results to differ from that expressed in such forward-looking statements include:
Previous wording
geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;
Current wording
geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad;
Previous wording
our ability to successfully manage cybersecurity;
Current wording
our ability to successfully manage cybersecurity, including generative artificial intelligence risks;
Previous wording
For the year ended December 31, 2023, net income was $7.2 million, or basic and diluted net income per share of $0.30, compared to a net income of $8.1 million, or basic and diluted net income per share of $0.34, for the year ended December 31, 2022, a decrease of $0.9 million, or 11.1%. Retained earnings increased to $14.5 million as of December 31, 2023 from $8.9 million as of December 31, 2022, an increase of $5.6 million or 62.14%.
Current wording
For the year ended December 31, 2024, net income was $8.2 million, or basic and diluted net income per share of $0.35, compared to a net income of $7.2 million, or basic and diluted net income per share of $0.30, for the year ended December 31, 2023, an increase of $1.0 million, or 14.20%. Retained earnings increased $6.5 million, or 45.26%, to $21.0 million as of December 31, 2024 from $14.5 million as of December 31, 2023.
Previous wording
As discussed in “Net Interest Income and Net Interest Margin” net interest income for the year ended December 31, 2023 was $28.0 million compared to $28.3 million for the year ended December 31, 2022. The decrease was primarily due to an increase in the cost of interest-bearing liabilities of 125 basis points (“bps”; 1 basis point is equal to 1/100 th of 1 percent) to 1.88% during the year ended December 31, 2023 compared to 0.63% during the year ended December 31, 2022.
Current wording
As discussed in “Net Interest Income and Net Interest Margin”, net interest income for the year ended December 31, 2024 was $28.5 million compared to $28.0 million for the year ended December 31, 2023. The increase was primarily due to a $59.6 million increase in average earning assets. Average interest-bearing liabilities increased $65.3 million to $549.5 million during the comparative twelve-month periods.
Previous wording
Total assets as of December 31, 2023 were $826.3 million, an increase of $51.0 million, or 6.6%, from $775.4 million as of December 31, 2022. Gross loans increased $53.5 million, or 9.2%, during 2023 due to continuing strong loan demand. Investment securities decreased $6.3 million during 2023 primarily due to principal repayments of amortizing investments and other security maturities of $9.4 million, combined with a decrease of $2.9 million in the unrealized loss position, partially offset by $500,000 in purchases. All of the Company's investments are designated as available-for-sale.
Current wording
Total assets as of December 31, 2024 were $854.9 million, an increase of $28.6 million, or 3.46%, from $826.3 million as of December 31, 2023. Gross loans increased $19.4 million, or 3.04%, during 2024 due to continuing loan demand. Investment securities increased $6.2 million during 2024 primarily due to securities purchases executed throughout the year. All of the Company's investments are designated as available-for-sale.
Previous wording
Deposits totaled $716.5 million as of December 31, 2023 compared to $692.7 million as of December 31, 2022. The increase of $23.8 million, or 3.4%, was due to efforts to attract and retain deposits, specifically time deposits, combined with cyclical funds inflows. As a result of these efforts, total time deposits increased $64.1 million during the year ended December 31, 2023. The increase in time deposits contributed to the increase in our cost of funds, as previously discussed, due to the rising interest rate environment experienced over the past two years.
Current wording
Deposits totaled $750.0 million as of December 31, 2024 compared to $716.5 million as of December 31, 2023. The increase of $33.5 million, or 4.68%, was due to efforts to attract and retain deposits, specifically time deposits through targeted promotional rates and terms and money market accounts through more aggressive pricing of rates, combined with cyclical funds inflows. As a result of these efforts, total time deposits increased $16.4 million during the year ended December 31, 2024.
Previous wording
New Peoples Bank remains well-capitalized. The leverage ratio improved to 11.11% as of December 31, 2023, compared to 10.40% as of December 31, 2022.
Current wording
New Peoples Bank remains well-capitalized. The leverage ratio is 10.70% as of December 31, 2024, compared to 11.11% as of December 31, 2023.
Previous wording
The Company’s primary source of income is net interest income, which decreased $0.3 million, or 0.9%, in 2023 compared to 2022 due primarily to an increase in the cost of interest-bearing liabilities of 125 bps to 1.88% during the year ended December 31, 2023 compared to 0.63% during the year ended December 31, 2022. Time deposits were the primary contributor to the decline in net interest income, due to an increase of 176 bps in the cost of time deposits to 2.57% and a $33.3 million increase in the average balance due to a shift in the deposit mix from lower cost products. Additionally, the cost of borrowed funds increased, as trust preferred securities costs rose 323 bps to 7.65% and other borrowings cost rose 114 bps to 3.60%. The impact of other borrowings cost increase was partially offset by a reduction of $13.2 million in the average outstanding balance. The increase in cost of funds was offset by an increase of 85 bps in the yield on earning assets. The yield on loans increased 66 bps to 5.35%, helping to offset the increased cost of funding during the year ended December 31, 2023. These rate and volume activities combined to result in a decrease in net interest income of $266,000, while the net interest margin rose slightly to 3.67% for the year ended December 31, 2023, from 3.62% for 2022.
Current wording
The Company’s primary source of income is net interest income, which increased $502,000, or 1.79%, in 2024 compared to 2023 due primarily to an increase in average earning assets which increased $59.6 million or 7.8% in 2024. Loans and interest bearing deposits in other banks were the principal drivers of this growth increasing $32.3 million and $29.7 million, respectively. Combined with the increase in the volume of earning assets, the yield on these assets increased 55 basis points (bps; 1 basis point is equal to 1/100th of 1 percent) to 5.42%. The yield on loans increased 61 bps to 5.96%. The increase in interest income was partially offset by the cost of interest-bearing liabilities which increased 105 bps to 2.93% during the year ended December 31, 2024 compared to 1.88% during the year ended December 31, 2023. Time deposits were the primary contributor to the increase in interest expense due to an increase of 137 bps in the cost of time deposits to 3.94% and a $50.6 million increase in the average balance due to a strategy to attract and retain time deposits. Additionally, the cost of borrowed funds decreased 64 bps to 5.79%, as the cost of other borrowings increased 44 bps to 4.04% while trust preferred securities costs rose 7 bps to 7.72%. Aside from the rate increases in borrowed funds, the total average balance increased $9.8 million due primarily to the Bank Term Funding Program borrowing taken in December 2023 and repaid during the fourth quarter of 2024. These rate and volume activities combined to result in an increase in net interest income of $502,000, while the net interest margin decreased to 3.47% for the year ended December 31, 2024, from 3.67% for 2023.
Previous wording
Our primary source of income is interest earned on loans. Total gross loans increased $53.5 million during 2023, or 9.15%, to $638.1 million as of December 31, 2023 as compared to $584.6 million as of December 31, 2022. The primary driver of this increase in total loans was an increase of $43.1 million in commercial real estate loans to $240.2 million as of December 31, 2023 compared to $197.1 million as of December 31, 2022. Additionally, residential 1-4 family, multifamily, commercial, and consumer installment loans increased $11.0 million, $4.9 million, $6.5 million, and $3.3 million, respectively. This was offset by decreases of $13.6 million in construction and land development loans; $1.3 million in farmland loans; $248,000 in agricultural loans; and $114,000 in all other loans. For more detail on loan balances, refer to Note 6 of the consolidated financial statements contained in Item 8 of this Form 10-K.
Current wording
Our primary source of income is interest earned on loans. Total gross loans increased $19.4 million during 2024, or 3.04%, to $657.5 million as of December 31, 2024 as compared to $638.1 million as of December 31, 2023. The primary drivers of this increase in total loans were increases in construction loans, commercial real estate loans and commercial loans which increased $7.3 million to $36.1 million, $3.5 million to $243.6 million and $7.4 million to $60.6 million, respectively. These increases resulted from small business development efforts throughout 2024 and a commercial loan promotion offered. In addition, consumer installment and all other loans increased $5.9 million due to private student loan originations of $1.8 million and the acquisition of $2.9 million in consumer loans. These increases offset reductions in residential and multi-family mortgage loans which decreased $3.4 million to $234.9 million and $2.2 million to $32.4 million during 2024. For more detail on loan balances, refer to Note 6 of the consolidated financial statements contained in Item 8 of this Form 10-K.
Previous wording
Nonaccrual loans increased approximately $0.1 million during 2023 from $3.4 million as of December 31, 2022 to $3.5 million as of December 31, 2023. Nonaccrual loans negatively affect interest income as these loans are nonearning assets. When doubt about the collectability of a loan exists, it is the Bank’s policy to stop accruing interest on that loan under the following circumstances: (a) whenever we are advised by the borrower that scheduled payment or interest payments cannot be met, (b) when conditions indicate that payment of principal and interest can no longer be expected, or (c) when any such loan becomes delinquent for 90 days and is not both well secured and in the process of collection. All interest accrued but not collected on loans that are placed on nonaccrual is charged off and reversed against interest income in the current period. In the case of a nonaccrual loan that is well secured and in the process of collection, the interest accrued but not collected is not reversed. Interest received on these loans is accounted for on the cash basis or cost-recovery method until qualifying for return to accrual. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, six consecutive timely payments are made, and prospects for future contractual payments are reasonably assured. For more detail on nonaccrual loans, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.
Current wording
Nonaccrual loans decreased approximately $261,000 during 2024 from $3.5 million as of December 31, 2023 to $3.3 million as of December 31, 2024. Nonaccrual loans negatively affect interest income as these loans are nonearning assets. When doubt about the collectability of a loan exists, it is the Bank’s policy to stop accruing interest on that loan under the following circumstances: (a) whenever we are advised by the borrower that scheduled payment or interest payments cannot be met, (b) when conditions indicate that payment of principal and interest can no longer be expected, or (c) when any such loan becomes delinquent for 90 days and is not both well secured and in the process of collection. All interest accrued but not collected on loans that are placed on nonaccrual is charged off and reversed against interest income in the current period. In the case of a nonaccrual loan that is well secured and in the process of collection, the interest accrued but not collected is not reversed. Interest received on these loans is accounted for on the cash basis or cost-recovery method until qualifying for return to accrual. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, six consecutive timely payments are made, and prospects for future contractual payments are reasonably assured. For more detail on nonaccrual loans, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.
Previous wording
Individually evaluated loans, previously known as impaired loans under the incurred loss methodology, decreased during 2023, to $1.1 million as of December 31, 2023, from $2.7 million as of December 31, 2022. Interest income and cash receipts on individually evaluated loans are handled differently depending on whether or not the loan is on nonaccrual status. If the individually evaluated loan is not on nonaccrual status, the interest income on the loan is computed using the effective interest method. For more detail onindividually evaluated loan balances, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.
Current wording
Individually evaluated loans increased during 2024 to $1.7 million as of December 31, 2024, from $1.1 million as of December 31, 2023. Interest income and cash receipts on individually evaluated loans are handled differently depending on whether or not the loan is on nonaccrual status. If the individually evaluated loan is not on nonaccrual status, the interest income on the loan is computed using the effective interest method. For more detail onindividually evaluated loan balances, refer to Note 6 of the consolidated financial statements in Item 8 of this Form 10-K.
Previous wording
On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.
Current wording
The Company maintains its allowance for credit losses based on the expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.
Previous wording
The Company primarily utilizes the cohort and the probability of default/loss given default methodologies for its reasonable and supportable forecasting of current expected credit losses. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider the following qualitative adjustment factors: changes to: lending policies and procedures, national and local economic conditions, the experience and ability of management and staff, the volume and severity of past due, rated and nonaccrual assets, loan review system, collateral value, concentrations of credit, and legal or regulatory requirements and competition.
Current wording
The Company primarily utilizes the cohort and the probability of default/loss given default methodologies for its reasonable and supportable forecasting of current expected credit losses. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider the following qualitative adjustment factors: changes to: lending policies and procedures, national and local economic conditions, the experience and ability of management and staff, the volume and severity of past due, rated and nonaccrual assets, loan review system, collateral values, concentrations of credit, and legal or regulatory requirements and competition.
Previous wording
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates loan relationships of $250,000 or more that have been determined to meet the regulatory definitions of “special mention” or “classified” (together known as “criticized”) as individually evaluated. The fair value of individually evaluated loans is measured using the fair value of collateral (“collateral method”) or the discounted cash flow (“DCF”) method.
Current wording
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis. The Company designates loan relationships of $250,000 or more that have been determined to meet the regulatory definitions of “classified” as individually evaluated. The fair value of individually evaluated loans is measured using the fair value of collateral (“collateral method”) or the discounted cash flow (“DCF”) method.
Previous wording
The allowance for credit losses increased to $7.3 million as of December 31, 2023 from $6.7 million as of December 31, 2022. The allowance for credit losses at the end of 2023 was approximately 1.14% of total loans as compared to 1.15% at the end of 2022. Provisions for credit losses for loans receivable of approximately $712,000 and $625,000 were recorded during the years ended December 31, 2023 and 2022, respectively. Loans charged off, net of recoveries, totaled approximately $103,000, or 0.02% of average loans, for the year ended December 31, 2023, compared to approximately $633,000, or 0.11% of average loans, in 2022. The allowance for credit losses represents an amount that, in the Company's judgment, will be adequate to absorb expected and estimable losses inherent in the loan portfolio. The judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs for relevant periods of time, changes in the nature and volume of the loan portfolio, current reasonable and supportable forecasts of economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available.
Current wording
The allowance for credit losses increased to $7.7 million as of December 31, 2024 from $7.3 million as of December 31, 2023. The allowance for credit losses at the end of 2024 was approximately 1.17% of total loans as compared to 1.14% at the end of 2023. Provisions for credit losses for loans receivable of approximately $506,000 and $712,000 were recorded during the years ended December 31, 2024 and 2023, respectively. Loans charged off, net of recoveries, totaled approximately $78,000, or 0.01% of average loans, for the year ended December 31, 2024, compared to approximately $103,000, or 0.02% of average loans, in 2023. The allowance for credit losses represents an amount that, in the Company's judgment, will be adequate to absorb expected and estimable losses inherent in the loan portfolio. The judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs for relevant periods of time, changes in the nature and volume of the loan portfolio, current reasonable and supportable forecasts of economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available.
Previous wording
Nonaccrual loans increased approximately $0.1 million during 2023 from $3.4 million as of December 31, 2022 to $3.5 million as of December 31, 2023. The amount of interest income that would have been recognized on these loans had they been accruing interest was approximately $61,000 and $10,000 in the years ended December 31, 2023 and 2022, respectively. There were no loans past due 90 days or greater and still accruing interest at either December 31, 2023 or 2022. There are no commitments to lend additional funds to non-performing borrowers.
Current wording
Nonaccrual loans decreased approximately $261,000 during 2024 from $3.5 million as of December 31, 2023 to $3.3 million as of December 31, 2024. The amount of interest income that would have been recognized on these loans had they been accruing interest was approximately $49,000 and $61,000 in the years ended December 31, 2024 and 2023, respectively. There were no loans past due 90 days or greater and still accruing interest at either December 31, 2024 or 2023. There are no commitments to lend additional funds to non-performing borrowers.
Previous wording
A majority of our loans are collateralized by real estate located in our market area. It is our policy to sufficiently collateralize loans to help minimize exposure to losses in cases of default. Increasing real estate values in our area have reduced this exposure somewhat. However, while we consider our market area to be somewhat diverse, certain areas are more reliant upon agriculture, coal mining and natural gas. As a result, increased risk of loan impairments is possible due to the volatile nature of the coal mining and natural gas industries. As a result of the lingering economic impact of the COVID-19 pandemic, a number of industries have been identified as posing increased risk. Specifically, residential and commercial rentals, hotels, restaurants and entertainment, and the coal and gas industries have been adversely impacted by the global and domestic economic slowdown coupled with rising inflation. We are monitoring these industries and consider these segments to be the primary higher risks in the loan portfolio.
Current wording
A majority of our loans are collateralized by real estate located in our market area. It is our policy to sufficiently collateralize loans to help minimize exposure to losses in cases of default. Increasing real estate values in our area have reduced this exposure somewhat. However, while we consider our market area to be somewhat diverse, certain areas are more reliant upon agriculture, coal mining and natural gas. As a result, increased risk of loan impairments is possible due to the volatile nature of the coal mining and natural gas industries.
Previous wording
For non-1-4 family residential loans that are 90 days or more past due or in bankruptcy, the collateral value less estimated liquidation costs are compared to the loan balance to calculate any potential deficiency. If the collateral is sufficient, then no charge-off is necessary. If a deficiency exists, then upon the loan becoming contractually 120 days past due, the deficiency is charged-off against the allowance for credit losses. In the case of 1-4 family residential or home equity loans, upon the loan becoming 120 days past due, a current value is obtained and after application of an estimated liquidation discount, a comparison is made to the loan balance to calculate any deficiency. Subsequently, any noted deficiency is then charged-off against the allowance for credit losses when the loan becomes contractually 180 days past due. If the customer has filed bankruptcy, then within 60 days of the bankruptcy notice, any calculated deficiency is charged-off against the allowance for credit losses. Collection efforts continue by means of repossessions or foreclosures, and upon bank ownership, liquidation ensues.
Current wording
For non-1-4 family residential loans that are 90 days or more past due or in bankruptcy, the collateral value less estimated liquidation costs are compared to the loan balance to calculate any potential deficiency. If the collateral is sufficient, then no charge-off is necessary. If a deficiency exists, then upon the loan becoming contractually 120 days past due, the deficiency is charged-off against the allowance for credit losses. In the case of 1-4 family residential or home equity loans, upon the loan becoming 120 days past due, or at the time of foreclosure, a current value is obtained and after application of an estimated liquidation discount, a comparison is made to the loan balance to calculate any deficiency. Subsequently, any noted deficiency is then charged-off against the allowance for credit losses when the loan becomes contractually 180 days past due, or at the time of foreclosure. If the customer has filed bankruptcy, then within 60 days of the bankruptcy notice, any calculated deficiency is charged-off against the allowance for credit losses. Collection efforts continue by means of repossessions or foreclosures, and upon bank ownership, liquidation ensues.
Previous wording
Annualized net charge-offs, as a percentage of average loans, was 0.02% during the year ended December 31, 2023, compared to 0.11% for the same period of 2022. The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known credit losses within the loan portfolio, whether or not the losses are actually ever realized. Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the year ended December 31, 2023, we made modest adjustments to our qualitative factors to consider risk factors associated with commercial real estate and residential mortgage loans. Those changes, along with the assessment of the historical and specific risks associated with the loan portfolio, resulted in a net provision for credit losses of $649,000, of which $712,000 was provided for the loan portfolio; offset by a reduction of the allowance for unfunded commitments of $63,000. The following table summarizes components of the allowance for credit losses and related loans as of December 31, 2023 and 2022:
Current wording
Annualized net charge-offs, as a percentage of average loans, was 0.01% during the year ended December 31, 2024, compared to 0.02% for the same period of 2023. The allowance for credit losses is maintained at a level that management deems appropriate to absorb any potential future losses and known credit losses within the loan portfolio, whether or not the losses are actually ever realized. Through our quarterly assessment, we continue to adjust the CECL model to best reflect the risks in the portfolio. However, future provisions may be deemed necessary. During the year ended December 31, 2024, we made modest adjustments to our qualitative factors to consider risk factors associated with commercial real estate and residential mortgage loans and the impacts of the hurricane Helene. Those changes, along with the assessment of the historical and specific risks associated with the loan portfolio, resulted in a net provision for credit losses of $625,000, of which $506,000 was provided for the loan portfolio and $119,000 was provided to the allowance for unfunded commitments. The following table summarizes components of the allowance for credit losses and related loans as of December 31, 2024 and 2023:
Previous wording
Allocation of the Allowance for Credit Losses 1
Current wording
Allocation of the Allowance for Credit Losses
Previous wording
The allocation of the allowance for credit losses is based on our judgment of the relative risk associated with each type of loan. We have allocated 34.7% of the allowance to commercial real estate loans, which constituted 37.6% of our loan portfolio at December 31, 2023. This allocation decreased slightly compared to 35.1% in 2022, due primarily to the impact of the CECL methodology. We have allocated 9.3% of the allowance to commercial loans, which constituted 8.3% of our loan portfolio at December 31, 2023. This allocation percentage increased compared to December 31, 2022, due to the impact of the CECL methodology.
Current wording
The allocation of the allowance for credit losses is based on our judgment of the relative risk associated with each type of loan. We have allocated 33.4% of the allowance to commercial real estate loans, which constituted 37.1% of our loan portfolio at December 31, 2024. This allocation decreased slightly compared to 34.7% in 2023, due primarily to the slight decrease in nonaccrual and past due loans for this segment of the loan portfolio. We have allocated 9.8% of the allowance to commercial loans, which constituted 9.2% of our loan portfolio at December 31, 2024. This allocation percentage increased compared to December 31, 2023, due to the increase in this component of the loan portfolio.
Previous wording
We allocated 4.1% of the allowance to real estate construction loans, which constituted 4.5% of our loan portfolio as of December 31, 2023. Construction loans are secured by real estate with values that are dependent upon market and economic conditions. Additionally, these credits are generally shorter-term projects of eighteen months or less. These loans are made consistent with appraisal policies and real estate lending policies which detail maximum loan-to-value ratios and maturities.
Current wording
We allocated 4.2% of the allowance to real estate construction loans, which constituted 5.5% of our loan portfolio as of December 31, 2024. Construction loans are secured by real estate with values that are dependent upon market and economic conditions. Additionally, these credits are generally shorter-term projects of eighteen months or less.
Previous wording
We allocated 36.7% of the allowance to residential real estate loans, which constituted 37.3% of our loan portfolio as of December 31, 2023.
Current wording
We allocated 38.0% of the allowance to residential real estate loans, which constituted 35.7% of our loan portfolio as of December 31, 2024.
Previous wording
We allocated 5.5% of the allowance to consumer and all other loans, which constituted 3.8% of our loan portfolio as of December 31, 2023. Our allocation generally remained consistent with the allocation as of December 31, 2022.
Current wording
We allocated 7.2% of the allowance to consumer and all other loans, which constituted 4.4% of our loan portfolio as of December 31, 2024. Our allocation increased compared to the allocation as of December 31, 2023, due to the impact of activity on overdrawn deposit accounts.
Previous wording
Other real estate owned decreased $104,000, or 39.9%, to approximately $157,000 as of December 31, 2023 from $261,000 as of December 31, 2022. All properties are available for sale, primarily, by commercial and residential realtors under the direction of our Special Assets division. During 2023, four properties were sold in the amount of $132,000 and three properties were acquired in the amount of $124,000.
Current wording
Other real estate owned decreased $70,000, or 44.59%, to approximately $87,000 as of December 31, 2024 from $157,000 as of December 31, 2023. During 2024, five properties were sold in the amount of $1.5 million and four properties were acquired in the amount of $1.3 million.
Previous wording
Total investment securities decreased $6.3 million, or 6.5%, to $89.8 million as of December 31, 2023 from $96.1 million as of December 31, 2022. All securities are classified as available-for-sale for liquidity purposes. There were no sales of securities during 2023 and 2022. During 2023 and 2022, there were maturities, calls and paydowns of $9.4 million and $14.0 million, respectively. The Company purchased $0.5 million and $19.8 million in investment securities during 2023 and 2022, respectively. Investment securities with a carrying value of $36.8 million and $27.3 million as of December 31, 2023 and 2022, respectively, were pledged to secure public deposits and for other purposes required, or permitted, by law.
Current wording
Total investment securities increased $6.2 million, or 6.88%, to $96.0 million as of December 31, 2024 from $89.8 million as of December 31, 2023. All securities are classified as available-for-sale for liquidity purposes. The increase in investment securities during 2024 was due to purchases of $23.3 million, which more than offset sales of $2.1 million, and maturities, payments and amortization of $14.6 million and a $419,000 increase in the unrealized loss on securities available-for-sale. During the third quarter of 2024, odd lot investment securities totaling $2.1 million were sold, and the proceeds were used to reinvest in other securities. These sales generated a net gain of $4,000.There were no sales of securities during 2023. During 2023, there were maturities, calls and paydowns of $9.4 million, and the Company purchased $0.5 million in investment securities. Investment securities with a carrying value of $35.2 million and $36.8 million as of December 31, 2024 and 2023, respectively, were pledged to secure public deposits and for other purposes required, or permitted, by law.
Previous wording
The fair value of our investment portfolio is substantially affected by changes in interest rates. Losses could be realized if liquidity and/or business strategy necessitate the sale of securities in a loss position, due to Federal Reserve actions, U.S. fiscal policies or other factors affecting market interest rates. As of December 31, 2023, we had a net unrealized loss in our investment portfolio totaling $14.8 million as compared to a $17.6 million loss as of December 31, 2022. As market interest rates increase, the level of unrealized losses could change substantially. However, these changes would have no impact on earnings or regulatory capital, unless the securities were sold at a loss. We believe that all unrealized losses resulted from temporary changes in interest rates and current market conditions and are not a result of credit deterioration. No allowance for credit losses on available-for-sale securities was recorded as of December 31, 2023. We monitor our portfolio regularly and use it to maintain liquidity, manage interest rate risk and enhance earnings.
Current wording
The fair value of our investment portfolio is substantially affected by changes in interest rates. Losses could be realized if liquidity and/or business strategy necessitate the sale of securities in a loss position, due to Federal Reserve actions, U.S. fiscal policies or other factors affecting market interest rates. As of December 31, 2024, we had a net unrealized loss in our investment portfolio totaling $15.2 million as compared to a $14.8 million loss as of December 31, 2023. As market interest rates increase, the level of unrealized losses could change substantially. However, these changes would have no impact on earnings or regulatory capital, unless the securities were sold at a loss. We believe that all unrealized losses resulted from temporary changes in interest rates and current market conditions and are not a result of credit deterioration. No allowance for credit losses on available-for-sale securities was recorded as of December 31, 2024 and 2023. We monitor our portfolio regularly and use it to maintain liquidity, manage interest rate risk and enhance earnings.
Previous wording
As of December 31, 2023 and 2022, the Bank had an aggregate total cash surrender value of $4.6 million and $4.5 million, respectively, on life insurance policies covering former key officers.
Current wording
As of December 31, 2024 and 2023, the Bank had an aggregate total cash surrender value of $0 and $4.6 million, respectively, on life insurance policies covering former key officers. During 2024, one policy was surrendered at market value resulting in a loss of $49,000. In December 2024, a death benefit receivable of $5.4 million was recorded, resulting in an income accrual of $1.6 million.
Previous wording
Total deposits were $716.5 million as of December 31, 2023, an increase of $23.8 million, or 3.4%, from $692.7 million as of December 31, 2022, due to efforts to attract and retain deposits, specifically time deposits, combined with cyclical fund inflows. Most of the increase was driven by time deposits, which increased $64.1 million, or 34.0%, to $252.3 million as of December 31, 2023.
Current wording
Total deposits were $750.0 million as of December 31, 2024, an increase of $33.5 million, or 4.68%, from $716.5 million as of December 31, 2023, due to efforts to attract and retain deposits, specifically time deposits, combined with more aggressive pricing on money market accounts and cyclical fund inflows. Most of the increase was driven by money market deposits which increased $30.2 million, or 55.9%, to $84.1 million, and time deposits, which increased $16.4 million, or 6.51%, to $268.7 million as of December 31, 2024 and 2023. These increases more than offset a reduction in noninterest bearing demand deposits of $8.9 million. The increases in time and money market deposits resulted from small business development efforts throughout 2024, revamping certain accounts to better suit customer needs and offering periodic rate promotions.
Previous wording
Core deposits are considered to include demand deposits and other types of transaction accounts, such as commercial relationships and savings products, all of which decreased in 2023. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities.
Current wording
Core deposits are considered to include demand deposits and other types of transaction accounts, such as commercial relationships and savings and money market products. Noninterest bearing demand deposits decreased $8.9 million in 2024, while interest bearing demand deposits, savings and money market deposits increased $26.0 million. Overall, we continue to maintain core deposits through attractive consumer and commercial deposit products and strong ties with our customer base and communities.
Previous wording
Time deposits of $250,000 or more equaled approximately 7.36% of deposits at the end of 2023 and 3.87% of deposits at the end of 2022.
Current wording
Time deposits of $250,000 or more equaled approximately 6.84% of deposits at the end of 2024 and 7.36% of deposits at the end of 2023.
Previous wording
As of December 31, 2023 and 2022, uninsured deposits are estimated to be $93.8 million and $87.5 million, respectively. Estimated uninsured deposits represented 13.1% and 12.6% of total deposits as of December 31, 2023 and 2022, respectively. Included in estimated uninsured deposits are $27.9 million and $14.4 million of public funds, for such respective periods, considered secured via pledged securities or letters of credit we have with the FHLB.
Current wording
As of December 31, 2024 and 2023, uninsured deposits are estimated to be $91.9 million and $93.8 million, respectively. Estimated uninsured deposits represented 12.3% and 13.1% of total deposits as of December 31, 2024 and 2023, respectively. Included in estimated uninsured deposits are $22.9 million and $27.9 million of public funds, for such respective periods, considered secured via pledged securities or letters of credit we have with the Federal Home Loan Bank of Atlanta (the FHLB).
Previous wording
As of December 31, 2023 and 2022, $36.8 million and $27.3 million of securities, respectively, were pledged to collateralize public deposits, including time deposits, held in our Tennessee offices, and as collateral for credit facilities available through FRB. Additionally, we held letters of credit from the FHLB for $12.0 million and $7.0 million at December 31, 2023 and 2022, respectively, to secure public deposits, including time deposits, held in our Virginia offices.
Current wording
As of December 31, 2024 and 2023, $35.2 million and $36.8 million of securities, respectively, were pledged to collateralize public deposits, including time deposits, held in our Tennessee offices, and as collateral for credit facilities available through FRB. Additionally, we held letters of credit from the FHLB for $14.0 million and $12.0 million at December 31, 2024 and 2023, respectively, to secure public deposits, including time deposits, held in our Virginia offices.
Previous wording
We held no brokered deposits at December 31, 2023 or 2022. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the average rate paid on deposits is shown in the net interest margin analysis table in the “Net Interest Income and Net Interest Margin” section. Total Certificate of Deposit Registry Service (“CDARS”) time deposits were $6.3 million and $1.4 million at December 31, 2023 and 2022, respectively.
Current wording
We held $3.0 million in brokered deposits at December 31, 2024, and no brokered deposits as of December 31, 2023. While not a primary source of funding, brokered deposits provide a means to efficiently manage funding and liquidity. Internet accounts are limited to customers located in our primary market area and the surrounding geographical area. The average balance of and the average rate paid on deposits is shown in the net interest margin analysis table in the “Net Interest Income and Net Interest Margin” section. Total Certificate of Deposit Registry Service (“CDARS”) time deposits were $7.0 million and $6.3 million at December 31, 2024 and 2023, respectively.
Previous wording
Our efficiency ratio, a non-GAAP measure, which is defined as noninterest expense divided by the sum of net interest income plus noninterest income, was 73.7% in 2023 compared to 70.6% in 2022. The modest performance decline in this ratio is a result of the decline in net interest income and increased noninterest expenses, as discussed above and in the “Net Interest Income and Net Interest Margin” section earlier in this Item 7. We continue to seek opportunities to operate more efficiently through the use of technology, improving processes, reducing nonperforming assets and increasing productivity.
Current wording
Our efficiency ratio, a non-GAAP measure, is defined as noninterest expense divided by the sum of net interest income plus noninterest income and was 72.40% in 2024 compared to 73.71% in 2023. The performance improvement in this ratio is a result of the increase in net interest income, as discussed in the “Net Interest Income and Net Interest Margin” section earlier in this Item 7. After adjusting for non-recurring items, the efficiency ratio increases slightly to 73.01%, as shown in the table below. We continue to seek opportunities to operate more efficiently through the use of technology, improving processes, reducing nonperforming assets and increasing productivity.
Previous wording
Income taxes were $2.1 million for the year ended December 31, 2023, compared to $2.3 million for the same period in 2022. The effective tax rates were 23.0%, and 22.2% for 2023 and 2022, respectively. The effective tax rate for the periods differed from the federal statutory rate of 21.0% principally due to the lessened impact of tax preference items, along with the effect of certain state income taxes. The higher effective tax rate in 2023 is the result of an increase in pre-tax earnings in relation to the various tax preference items, and increased income in states that maintain a tax structure based on allocated income.
Current wording
Income taxes were $2.1 million for the year ended December 31, 2024, compared to $2.1 million for the same period in 2023. The effective tax rates were 20.76%, and 23.01% for 2024 and 2023, respectively. The effective tax rate for the periods differed from the federal statutory rate of 21.0% principally due to the lessened impact of tax preference items, along with the effect of certain state income taxes. The lower effective tax rate in 2024 is the result of non-taxable income resulting from the BOLI insurance benefit accrual included in pre-tax earnings.
Previous wording
During the year ended December 31, 2023, total shareholders’ equity increased $7.6 million to $64.8 million due to the earnings of $7.2 million and the $2.3 million decrease in the net unrealized loss on available-for-sale investment securities, which was partially offset by a cash dividend payment of $1.4 million and the repurchase of common stock totaling $237,000. Additionally, the implementation of the current expected credit loss (“CECL”) methodology resulted in a one-time net of tax, direct charge to retained earnings of $212,000. Consequently, book value per share increased to $2.73 as of December 31, 2023 compared to $2.40 as of December 31, 2022. The Bank remains well capitalized per regulatory guidance.
Current wording
During the year ended December 31, 2024, total shareholders’ equity increased $5.9 million to $70.7 million due to the earnings of $8.2 million which was partially offset by a cash dividend payment of $1.7 million, the repurchase of common stock totaling $282,000 and the $331,000 increase in the net unrealized loss on available-for-sale investment securities, net of taxes.
Previous wording
As previously reported, the Board extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2024. During 2023, the Company repurchased 100,875 shares at an average price of $2.31 per share. Since commencement of the repurchase plan, 174,470 shares have been repurchased at an average rate of $2.32.
Current wording
As previously reported, the Board extended the repurchase of up to 500,000 shares of the Company’s common stock through March 31, 2025. During 2024, the Company repurchased 109,176 shares at an average price of $2.58 per share. Since commencement of the stock repurchase program, 285,362 shares have been repurchased at an average rate of $2.42.
Previous wording
The Company meets the eligibility criteria to be considered a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement issued in February 2015 and does not report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.
Current wording
The Company meets the eligibility criteria to be considered a small bank holding company in accordance with the Federal Reserve’s Small Bank Holding Company Policy Statement and does not report consolidated regulatory capital. The Bank continues to be subject to various capital requirements administered by banking agencies.
Showing the first 40 of 52 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
These loans are made consistent with appraisal policies and real estate lending policies which detail maximum loan-to-value ratios and maturities.