# MetroCity Bankshares, Inc. (MCBS) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from MetroCity Bankshares, Inc.'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/1747068/000174706824000010/mcbs-20231231x10k.htm Accession: 0001747068-24-000010 Filing date: 2024-03-11 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/MCBS/ All MD&A years: /company/MCBS/mda/ Previous year: /company/MCBS/mda/fy2022/ (FY 2022) Next year: /company/MCBS/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Certain risks, uncertainties and other factors, including but not limited to those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors,” and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected in the forward looking statements. We assume no obligation to update any of these forward-looking statements. Overview We are MetroCity Bankshares, Inc., a bank holding company headquartered in the Atlanta, Georgia metropolitan area. We operate through our wholly-owned banking subsidiary, Metro City Bank, a Georgia state-chartered commercial bank that was founded in 2006. We currently operate 20 full-service branch locations in multi-ethnic communities in Alabama, Florida, Georgia, New York, New Jersey, Texas and Virginia. We are focused on delivering full-service banking services in markets, predominantly Asian-American communities in growing metropolitan markets in the Eastern U.S. and Texas. Prior to December 2014, we operated without a holding company, and in December 2014, the Bank formed MetroCity Bankshares, Inc. as its holding company. On December 31, 2014, MetroCity Bankshares, Inc. acquired all of the outstanding common stock of Metro City Bank as a part of the holding company formation transaction. We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis relates to activities primarily conducted at the Bank level. Critical Accounting Policies and Estimates Our accounting  and reporting policies conform to accounting  principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the industry in which we operate. To prepare financial statements in conformity with GAAP, management makes estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements and, as this information changes, actual results could differ from the estimates, assumptions  and judgments reflected in the financial statement. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. The following is a discussion of the critical accounting policies and significant estimates that require us to make complex and subjective judgments. Additional information about these policies can be found in Note 1 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K. Reserve for Credit Losses A consequence of lending activities is that we may incur credit losses. The amount of such losses will vary depending upon the risk characteristics of the loan lease portfolio as affected by economic conditions such as rising interest rates and the financial performance of borrowers. The reserve for credit losses consists of the allowance for credit losses (“ACL”) and the allowance for unfunded commitments. As a result of our January 1, 2023 adoption of ASU No. 2016-13, and its related amendments, our methodology for estimating the reserve for credit losses changed significantly from December 31, 2022. The standard replaced the “incurred loss” approach with an “expected loss” approach known as the Current Expected Credit Losses (“CECL”). The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.” 42 Table of Contents The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. We then consider whether the historical loss experience should be adjusted for loan-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, we consider forecasts about future economic conditions that are reasonable and supportable. The allowance for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit. This allowance is estimated by loan segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur. 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. See Note 1 and Note 3 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K, for additional information on the reserve and allowance for credit losses. Recent Industry Developments 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. Results of Operations Net Income Year ended December 31, 2023 compared to year ended December 31, 2022 We recorded net income of $51.6 million for the year ended December 31, 2023 compared to $62.6 million for the year ended December 31, 2022, a decrease of $11.0 million, or 17.6%. The decrease was due to a $18.1 million decrease in net interest income and a $2.8 million increase in provision for credit losses, offset by a $8.3 million decrease in provision for income taxes, a $1.6 million decrease in noninterest expense and an $86,000 increase noninterest income. Basic and diluted earnings per common share for the year ended December 31, 2023 was $2.05 and $2.02, respectively, compared to $2.46 and $2.44 for the basic and diluted earnings per common share for the year ended December 31, 2022. Year ended December 31, 2022 compared to year ended December 31, 2021 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 43 Table of Contents 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. 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. Net Interest Income The management of interest income and expense is fundamental to our financial performance. Net interest income, the difference between interest income and interest expense, is the largest component of the Company’s total revenue. Management closely monitors both total net interest income and the net interest margin (net interest income divided by average earning assets). We seek to maximize net interest income without exposing the Company  to an excessive level of interest rate risk through  our asset and liability policies. Interest rate risk is managed by monitoring the pricing, maturity  and repricing options of all classes of interest-bearing assets and liabilities. Year ended December 31, 2023 compared to year ended December 31, 2022 Net interest income for the year ended December 31, 2023 was $101.5 million compared to $119.6 million for the year ended December 31, 2022, a decrease of $18.1 million, or 15.2%. Interest income totaled $192.8 million for the year ended December 31, 2023, an increase of $45.6 million, or 31.0%, from the year ended December 31, 2022, primarily due to an 82 basis points increase in the yield on average loans coupled with a $274.3 million increase in average loans. 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 investment securities, fed funds sold and interest-bearing cash accounts. The increase in average loans included increases of $208.9 million in average residential real estate loans and $70.4 million in average commercial real estate loans, offset by decreases of $3.6 million in average construction and development loans and $1.4 million in average commercial and industrial loans. 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. 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. 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. 44 Table of Contents Year ended December 31, 2022 compared to year ended December 31, 2021 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. 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. 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 $150.2 million. 45 Table of Contents Average Balances, Interest and Yields The following tables present, for the years ended December 31, 2023, 2021 and 2021, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","\u200b","2023","\u200b","2022","","2021"],["\u200b","\u200b","Average","\u200b","Interest and","\u200b","Yield /","\u200b","Average","\u200b","Interest and","\u200b","Yield /","","Average","\u200b","Interest and","\u200b","Yield /"],["(Dollars in thousands)","","Balance","","Fees","","Rate","","Balance","","Fees","","Rate","","Balance","","Fees","","Rate"],["Earning Assets:","","\u200b","","","\u200b","","","","","\u200b","","","\u200b","","","","\u200b","\u200b","","","\u200b","","","","\u200b"],["Federal funds sold and other investments(1)","\u200b","$","167,024","\u200b","$","9,995","","5.98","%","$","225,154","\u200b","$","3,524","","1.57","%","$","207,771","\u200b","$","500","","0.24","%"],["Investment securities","\u200b","","32,330","\u200b","","949","","2.94","\u200b","","35,188","\u200b","","881","","2.50","\u200b","","21,573","\u200b","","390","","1.81","\u200b"],["Total investments","\u200b","","199,354","\u200b","","10,944","","5.49","\u200b","","260,342","\u200b","","4,405","","1.69","\u200b","","229,344","\u200b","","890","","0.39","\u200b"],["Construction and development","\u200b","","31,955","\u200b","","1,864","","5.83","\u200b","","35,562","\u200b","","1,898","","5.34","\u200b","","48,076","\u200b","","2,513","","5.23","\u200b"],["Commercial real estate","\u200b","","659,432","\u200b","","57,710","","8.75","\u200b","","589,017","\u200b","","38,582","","6.55","\u200b","","503,968","\u200b","","29,750","","5.90","\u200b"],["Commercial and industrial","\u200b","","54,100","\u200b","","5,110","","9.45","\u200b","","55,516","\u200b","","3,920","","7.06","\u200b","","119,640","\u200b","","8,407","","7.03","\u200b"],["Residential real estate","\u200b","","2,299,246","\u200b","","117,071","","5.09","\u200b","","2,090,389","\u200b","","98,277","","4.70","\u200b","","1,437,377","\u200b","","67,058","","4.67","\u200b"],["Consumer and Other","\u200b","","195","\u200b","","128","","65.64","\u200b","","193","\u200b","","138","","71.50","\u200b","","188","\u200b","","123","","65.43","\u200b"],["Gross loans(2)","\u200b","","3,044,928","\u200b","","181,883","","5.97","\u200b","","2,770,677","\u200b","","142,815","","5.15","\u200b","","2,109,249","\u200b","","107,851","","5.11","\u200b"],["Total earning assets","\u200b","","3,244,282","\u200b","","192,827","","5.94","\u200b","","3,031,019","\u200b","","147,220","","4.86","\u200b","","2,338,593","\u200b","","108,741","","4.65","\u200b"],["Noninterest-earning assets","\u200b","","198,938","\u200b","","","","\u200b","\u200b","","156,185","\u200b","","","","\u200b","\u200b","","122,038","\u200b","","","","\u200b","\u200b"],["Total assets","\u200b","","3,443,220","\u200b","","","","\u200b","\u200b","","3,187,204","\u200b","","","","\u200b","\u200b","","2,460,631","\u200b","","","","\u200b","\u200b"],["Interest-bearing liabilities:","\u200b","","","\u200b","","","","\u200b","\u200b","","","\u200b","","","","\u200b","\u200b","","","\u200b","","","","\u200b","\u200b"],["NOW and savings deposits","\u200b","","146,543","\u200b","\u200b","2,264","","1.54","\u200b","","186,061","\u200b","\u200b","1,046","","0.56","\u200b","","112,943","\u200b","","222","","0.20","\u200b"],["Money market deposits","\u200b","","1,006,360","\u200b","\u200b","42,347","","4.21","\u200b","","1,130,439","\u200b","\u200b","16,067","","1.42","\u200b","","726,268","\u200b","","1,693","","0.23","\u200b"],["Time deposits","\u200b","","940,911","\u200b","\u200b","35,996","","3.83","\u200b","","513,867","\u200b","\u200b","6,445","","1.25","\u200b","","499,856","\u200b","","2,033","","0.41","\u200b"],["Total interest-bearing deposits","\u200b","","2,093,814","\u200b","","80,607","","3.85","\u200b","","1,830,367","\u200b","","23,558","","1.29","\u200b","","1,339,067","\u200b","","3,948","","0.29","\u200b"],["Borrowings","\u200b","","353,149","\u200b","\u200b","10,741","","3.04","\u200b","","373,238","\u200b","\u200b","4,051","","1.09","\u200b","","223,027","\u200b","","624","","0.28","\u200b"],["Total interest-bearing liabilities","\u200b","","2,446,963","\u200b","","91,348","","3.73","\u200b","","2,203,605","\u200b","","27,609","","1.25","\u200b","","1,562,094","\u200b","","4,572","","0.29","\u200b"],["Noninterest-bearing liabilities:","\u200b","","","\u200b","","","","\u200b","\u200b","","","\u200b","","","","\u200b","\u200b","","","\u200b","","","","\u200b","\u200b"],["Noninterest-bearing deposits","\u200b","","555,840","\u200b","","","","\u200b","\u200b","","599,340","\u200b","","","","\u200b","\u200b","","559,797","\u200b","","","","\u200b","\u200b"],["Other noninterest-bearing liabilities","\u200b","","74,254","\u200b","","","","\u200b","\u200b","","63,997","\u200b","","","","\u200b","\u200b","","76,727","\u200b","","","","\u200b","\u200b"],["Total noninterest-bearing liabilities","\u200b","","630,094","\u200b","","","","\u200b","\u200b","","663,337","\u200b","","","","\u200b","\u200b","","636,524","\u200b","","","","\u200b","\u200b"],["Shareholders' equity","\u200b","","366,163","\u200b","","","","\u200b","\u200b","","320,262","\u200b","","","","\u200b","\u200b","","262,013","\u200b","","","","\u200b","\u200b"],["Total liabilities and shareholders' equity","\u200b","$","3,443,220","\u200b","","","","\u200b","\u200b","$","3,187,204","\u200b","","","","\u200b","\u200b","$","2,460,631","\u200b","","","","\u200b","\u200b"],["Net interest income","\u200b","","","\u200b","$","101,479","","\u200b","\u200b","","","\u200b","$","119,611","","\u200b","\u200b","","","\u200b","$","104,169","","\u200b","\u200b"],["Net interest spread","\u200b","","","\u200b","","","","2.21","\u200b","","","\u200b","","","","3.61","\u200b","","","\u200b","","","","4.36","\u200b"],["Net interest margin","\u200b","","","\u200b","","","","3.13","\u200b","","","\u200b","","","","3.95","\u200b","","","\u200b","","","","4.45","\u200b"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(2)","Average loan balances include nonaccrual loans and loans held for sale."]] [[/GREPCENT_TABLE]] 46 Table of Contents Rate/Volume Analysis Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table sets forth the effects of changing rates and volumes on our net interest income during the period shown. Information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","\u200b","2023 Compared to 2022","\u200b","2022 Compared to 2021"],["\u200b","\u200b","Increase (Decrease) Due to Change in:","\u200b","Increase (Decrease) Due to Change in:"],["(Dollars in thousands)","","Volume","","Yield/Rate","","Total Change","","Volume","","Yield/Rate","","Total Change"],["Earning assets:","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Federal funds sold and other investments(1)","\u200b","$","(376)","\u200b","$","6,847","","$","6,471","\u200b","$","458","\u200b","$","2,586","","$","3,044"],["Investment securities","\u200b","","(581)","\u200b","","649","","","68","\u200b","","505","\u200b","","(34)","","","471"],["Total investments","\u200b","","(957)","\u200b","","7,496","","","6,539","\u200b","","963","\u200b","","2,552","","","3,515"],["Construction and development","\u200b","","(230)","\u200b","\u200b","196","","","(34)","\u200b","","(685)","\u200b","\u200b","70","","","(615)"],["Commercial real estate","\u200b","","4,979","\u200b","\u200b","14,149","","","19,128","\u200b","","5,030","\u200b","\u200b","3,802","","","8,832"],["Commercial and industrial","\u200b","","(115)","\u200b","\u200b","1,305","","","1,190","\u200b","","(4,667)","\u200b","\u200b","180","","","(4,487)"],["Residential real estate","\u200b","","10,161","\u200b","\u200b","8,633","","","18,794","\u200b","","30,875","\u200b","\u200b","344","","","31,219"],["Consumer and Other","\u200b","","(7)","\u200b","\u200b","(3)","","","(10)","\u200b","","7","\u200b","\u200b","8","","","15"],["Gross loans(2)","\u200b","","14,788","\u200b","","24,280","","","39,068","\u200b","","30,560","\u200b","","4,404","","","34,964"],["Total earning assets","\u200b","","13,831","\u200b","","31,776","","","45,607","\u200b","","31,523","\u200b","","6,956","","","38,479"],["Interest-bearing liabilities:","\u200b","","","\u200b","","","","","","\u200b","","","\u200b"],["NOW and savings deposits","\u200b","","(280)","\u200b","\u200b","1,498","","","1,218","\u200b","","197","\u200b","\u200b","627","","","824"],["Money market deposits","\u200b","","(1,893)","\u200b","\u200b","28,173","","","26,280","\u200b","","1,817","\u200b","\u200b","12,557","","","14,374"],["Time deposits","\u200b","","10,323","\u200b","\u200b","19,228","","","29,551","\u200b","","490","\u200b","\u200b","3,922","","","4,412"],["Total interest-bearing deposits","\u200b","","8,150","\u200b","","48,899","","","57,049","\u200b","","2,504","\u200b","","17,106","","","19,610"],["Borrowings","\u200b","","(219)","\u200b","\u200b","6,909","","","6,690","\u200b","","662","\u200b","\u200b","2,765","","","3,427"],["Total interest-bearing liabilities","\u200b","","7,931","\u200b","","55,808","","","63,739","\u200b","","3,166","\u200b","","19,871","","","23,037"],["Net interest income","\u200b","$","5,900","\u200b","$","(24,032)","","$","(18,132)","\u200b","$","28,357","\u200b","$","(12,915)","","$","15,442"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Includes income and average balances for term federal funds, interest-earning cash accounts, and other miscellaneous earning assets."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(2)","Loan balances include nonaccrual loans and loans held for sale."]] [[/GREPCENT_TABLE]] Provision for Credit Losses The provision for credit losses reflects our internal calculation and judgment of the appropriate amount of the allowance for credit losses. The adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments” or “CECL” has significantly changed the methodology of how we measure credit losses (see Note 1 to the Consolidated Financial Statements for more information). We maintain the allowance for credit losses at levels we believe are appropriate to cover our estimate of expected credit losses over the life of loans in the portfolio as of the end of the reporting period.  The allowance for credit losses is determined through detailed quarterly analyses of our loan portfolio. The allowance for credit losses is based on our loss experience, changes in the economic environment, reasonable and supportable forecasts, as well as an ongoing assessment of credit quality and environmental factors not reflective in historical loss rates. Additional qualitative factors that are considered in determining the amount of the allowance for credit losses are concentrations of credit risk (geographic, large borrower, and industry), changes in underwriting standards, changes in collateral value, experience and depth of lending staff, trends in delinquencies, and the volume and terms of loans. See the section captioned “Allowance for Credit Losses” elsewhere in this document for further analysis of our provision for credit losses. 47 Table of Contents Year ended December 31, 2023 compared to year ended December 31, 2022 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. Year ended December 31, 2022 compared to year ended December 31, 2021 We recorded a credit provision for loan losses of $2.8 million during the year ended December 31, 2022 compared to $6.9 million provision expense recorded during the year ended December 31, 2021. The credit provision for loan losses recorded during the year ended December 31, 2022 was due to the release of additional reserves allocated for the uncertainties in our loan portfolio caused by the COVID-19 pandemic as certain loans that were modified during the COVID-19 pandemic returned to their contractual payment terms. We did not experience the level of credit deterioration for these loans that we had initially anticipated. Our allowance for credit losses as a percentage of gross loans for the periods ended December 31, 2022 and 2021 was 0.45% and 0.67%, respectively. None of the ACL balance was allocated to our PPP loan portfolio at December 31, 2022 and 2021. Our ACL as a percent of gross loans is relatively lower than our peers due to our high percentage of residential mortgage loans, which tend to have lower allowance for credit loss ratios compared to other commercial or consumer loans. Noninterest Income Noninterest income is an important component of our total revenues. An important portion of our noninterest  income is associated with SBA and residential mortgage lending activity, consisting of gains on the sale of loans sold in the secondary market and servicing income from loans sold with servicing rights retained. Other sources of noninterest  income include service charges on deposit accounts and other service charges, commissions and fees. The following table sets forth the major components of our noninterest income for the years ended December 31, 2023, 2022 and 2021: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,","\u200b","2023 vs. 2022","\u200b","2022 vs. 2021","\u200b"],["(Dollars in thousands)","","2023","","2022","","2021","","$ Change","","% Change","","$ Change","","% Change","\u200b"],["Noninterest Income:","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","","\u200b","\u200b","","","\u200b","\u200b"],["Service charges on deposit accounts","\u200b","$","1,918","\u200b","$","1,991","\u200b","$","1,696","","$","(73)","","(3.7)","%","$","295","","17.4","%"],["Other service charges, commissions and fees","\u200b","","5,657","\u200b","","9,725","\u200b","","14,437","","","(4,068)","","(41.8)","\u200b","","(4,712)","","(32.6)","\u200b"],["Gain on sale of residential mortgage loans","\u200b","","\u2014","\u200b","","2,017","\u200b","","\u2014","","","(2,017)","","(100.0)","\u200b","","2,017","","100.0","\u200b"],["Mortgage servicing income, net","\u200b","","(193)","\u200b","","(561)","\u200b","","(564)","","","368","","65.6","\u200b","","3","","0.5","\u200b"],["Gain on sale of SBA loans","\u200b","\u200b","3,299","\u200b","\u200b","2,068","\u200b","\u200b","10,952","\u200b","\u200b","1,231","\u200b","59.5","\u200b","\u200b","(8,884)","\u200b","(81.1)","\u200b"],["SBA servicing income, net","\u200b","\u200b","4,796","\u200b","\u200b","1,825","\u200b","\u200b","5,884","\u200b","\u200b","2,971","\u200b","162.8","\u200b","\u200b","(4,059)","\u200b","(69.0)","\u200b"],["Other income","\u200b","\u200b","2,727","\u200b","\u200b","1,053","\u200b","\u200b","1,284","\u200b","\u200b","1,674","\u200b","159.0","\u200b","\u200b","(231)","\u200b","(18.0)","\u200b"],["Total noninterest income","\u200b","$","18,204","\u200b","$","18,118","\u200b","$","33,689","","$","86","","0.5","%","$","(15,571)","","(46.2)","%"]] [[/GREPCENT_TABLE]] ​ Year ended December 31, 2023 compared to year ended December 31, 2022 Service charges on deposit accounts were $1.9 million for the year ended December 31, 2023 compared to $2.0 million for the year ended December 31, 2022, a decrease of $73,000, or 3.7%. The decrease was primarily attributable to decreased overdraft fees, analysis fees and wire transfer fees. 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 48 Table of Contents 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. Total gain on sale of loans was $3.3 million for the year ended December 31, 2023 compared to $4.1 million for the year ended December 31, 2022, a decrease of $786,000, or 19.2%. 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. Gain on sale of residential loans totaled $2.0 million for the year ended December 31, 2022  as we sold $94.9 million in residential mortgage loans during the period with an average premium of 2.13%. 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. Mortgage loan servicing income had an expense balance of $193,000 for the year ended December 31, 2023 compared to an expense balance of $561,000 for the year ended December 31, 2022, an increase of $368,000, or 65.6%. The change in mortgage loan servicing income was primarily due to the decrease in mortgage servicing amortization, offset by decreases in mortgage servicing fees and capitalized mortgage servicing assets. Included in mortgage loan servicing income for the year ended December 31, 2023 was $2.5 million in mortgage servicing fees compared to $3.2 million for 2022, and capitalized mortgage servicing assets of $0 for the year ended December 31, 2023 compared to $761,000 for 2022. These amounts were offset by mortgage loan servicing asset amortization of $2.7 million for the year ended December 31, 2023 compared to $4.7 million for the year ended December 31, 2022. During the year ended December 31, 2023, we did not record a fair value impairment on our mortgage servicing assets. During the year ended December 31, 2022, we recorded a fair value impairment recovery of $163,000. Our total residential mortgage loan servicing portfolio was $443.1 million at December 31, 2023 compared to $526.7 million at December 31, 2022. SBA servicing income was $4.8 million for the year ended December 31, 2023 compared to $1.8 million for the year ended December 31, 2022, an increase of $3.0 million, or 162.8%. Our total SBA and USDA loan servicing portfolio was $508.0 million as of December 31, 2023 compared to $465.1 million as of December 31, 2023. SBA servicing fees totaled $4.6 million for the year ended December 31, 2023 compared to $5.0 million for the year ended December 31, 2022. 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, 2023, we recorded a $201,000 fair value gain on our SBA servicing rights compared to a $3.1 million fair value adjustment charge on our SBA servicing rights during the year ended December 31, 2022. Other noninterest income was $2.7 million for the year ended December 31, 2023 compared to $1.1 million for the year ended December 31, 2022, an increase of $1.7 million, or 159.0%. The largest component of other noninterest income is the income on bank owned life insurance, which totaled $1.8 million and $1.7 million, respectively, for the years ended December 31, 2023 and 2022. Also included in other noninterest income are fair value gains/losses on our equity securities, which totaled $35,000 (gain) and $1.1 million (loss), respectively, for the years ended December 31, 2023 and 2022. Year ended December 31, 2022 compared to year ended December 31, 2021 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. 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. 49 Table of Contents 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. 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%. 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. 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. 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. 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. 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 $114,000, respectively, for the years ended December 31, 2022 and 2021. 50 Table of Contents Noninterest Expense The following table sets forth the major components of our noninterest expense for the years ended December 31, 2023, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,","\u200b","2023 vs. 2022","\u200b","2022 vs. 2021","\u200b"],["(Dollars in thousands )","","2023","","2022","","2021","","$ Change","","% Change","","$ Change","","% Change","\u200b"],["Noninterest Expense:","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","","\u200b","\u200b","","","","\u200b"],["Salaries and employee benefits","\u200b","$","29,304","\u200b","$","30,502","\u200b","$","30,112","","$","(1,198)","","(3.9)","%","$","390","","1.3","%"],["Occupancy and equipment","\u200b","","4,893","\u200b","","4,857","\u200b","","5,028","","","36","","0.7","\u200b","","(171)","","(3.4)","\u200b"],["Data processing","\u200b","","1,229","\u200b","","1,095","\u200b","","1,100","","","134","","12.2","\u200b","","(5)","","(0.5)","\u200b"],["Advertising","\u200b","","614","\u200b","","606","\u200b","","541","","","8","","1.3","\u200b","","65","","12.0","\u200b"],["Other expenses","\u200b","","11,686","\u200b","","12,219","\u200b","","11,529","","","(533)","","(4.4)","\u200b","","690","","6.0","\u200b"],["Total noninterest expense","\u200b","$","47,726","\u200b","$","49,279","\u200b","$","48,310","","$","(1,553)","","(3.2)","%","$","969","","2.0","%"]] [[/GREPCENT_TABLE]] ​ Year ended December 31, 2023 compared to year ended December 31, 2022 Salaries and employee benefits expense for the year ended December 31, 2023 was $29.3 million compared to $30.5 million for the year ended December 31, 2022, a decrease of $1.2 million, or 3.9%. This decrease was primarily attributable to lower commissions paid to our loan officers as loan volume declined during the year ended December 31, 2023. These decreases were offset by 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, as well as increased restricted stock expense. The average number of full-time equivalent employees was 220 for the year ended December 31, 2023 compared to 216 for the year ended December 31, 2022. Occupancy expense for the year ended December 31, 2023 was $4.9 million compared to $4.9 million for the year ended December 31, 2022, a slight increase of $36,000, or 0.7%. This increase was partially due to higher maintenance and repairs expense, partially offset by lower depreciation expense. Data processing expense for the years ended December 31, 2023 was $1.2 million compared to $1.1 million for the year ended December 31, 2022, an increase of $134,000, or 12.2%. The increase was consistent with the continued growth of our loans and deposits. Advertising expense of $614,000 for the year ended December 31, 2023 remained relatively flat compared to $606,000 for the year ended December 31, 2022. Other expenses for the year ended December 31, 2023 were $11.7 million compared to $12.2 million for the year ended December 31, 2022, a decrease of $533,000, or 4.4%. The decrease was primarily due to lower loan related expenses, communications expense, security expense and business taxes, offset by higher FDIC deposit insurance premiums, professional fees, mobile and internet banking expenses, and other real estate owned expenses. Included in other expenses were directors’ fees of $617,000 and $565,000 for the years ended December 31, 2023 and 2022, respectively. Year ended December 31, 2022 compared to year ended December 31, 2021 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. 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. 51 Table of Contents Data processing expense for the years ended December 31, 2022 and 2021 remained flat at $1.1 million. 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. 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. Income Tax Expense 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. 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. Return on Equity and Assets The following table sets forth our return on average assets, return on average equity, dividend payout ratio and average shareholders’ equity to average assets ratio for the periods indicated: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,"],["\u200b","","2023","\u200b","2022","\u200b","2021"],["Return on average assets","\u200b","1.50","%","\u200b","1.96","%","\u200b","2.51","%"],["Return on average equity","\u200b","14.10","%","\u200b","19.55","%","\u200b","23.55","%"],["Dividend payout ratio","\u200b","35.43","%","\u200b","24.52","%","\u200b","19.17","%"],["Average shareholders' equity to average assets","\u200b","10.63","%","\u200b","10.05","%","\u200b","10.65","%"]] [[/GREPCENT_TABLE]] ​ 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. Financial Condition 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. 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. 52 Table of Contents Loans Our loans represent the largest portion  of our earning assets, substantially greater than the securities portfolio or any other asset category, and the quality and diversification of the loan portfolio is an important consideration when reviewing our financial condition. 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 $23.6 million as of December 31, 2023. There were no loans classified as held for sale as of December 31, 2022. The following table presents the ending balance of each major category in our loan portfolio held for investment as of the dates indicated. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021","\u200b","2020","\u200b","2019","\u200b"],["(Dollars in thousands)","","Amount","","% of Total","","Amount","","% of Total","","Amount","","% of Total","","Amount","","% of Total","","Amount","","% of Total","\u200b"],["Construction and Development","\u200b","$","23,262","\u200b","0.7","%","$","47,779","\u200b","1.6","%","$","38,857","\u200b","1.6","%","$","45,653","","2.8","%","$","31,739","","2.7","%"],["Commercial Real Estate","\u200b","","711,177","\u200b","22.6","\u200b","","657,246","\u200b","21.4","\u200b","","520,488","\u200b","20.7","\u200b","","477,419","","29.2","\u200b","","424,950","","36.5","\u200b"],["Commercial and Industrial","\u200b","","65,904","\u200b","2.1","\u200b","","53,173","\u200b","1.7","\u200b","","73,072","\u200b","2.9","\u200b","","137,239","","8.4","\u200b","","53,105","","4.6","\u200b"],["Residential Real Estate","\u200b","","2,350,299","\u200b","74.6","\u200b","","2,306,915","\u200b","75.3","\u200b","","1,879,012","\u200b","74.8","\u200b","","974,445","","59.6","\u200b","","651,645","","56.0","\u200b"],["Consumer and other","\u200b","","319","\u200b","0.0","\u200b","","216","\u200b","0.0","\u200b","","79","\u200b","0.0","\u200b","","183","","0.0","\u200b","","1,768","","0.2","\u200b"],["Total gross loans","\u200b","\u200b","3,150,961","","100.0","%","\u200b","3,065,329","","100.0","%","\u200b","2,511,508","","100.0","%","\u200b","1,634,939","","100.0","%","\u200b","1,163,207","","100.0","%"],["Unearned income","\u200b","","(8,856)","","","\u200b","","(9,640)","","","\u200b","","(6,438)","","","\u200b","","(4,595)","","","\u200b","","(2,045)","","","\u200b"],["Allowance for credit losses","\u200b","\u200b","(18,112)","\u200b","\u200b","\u200b","\u200b","(13,888)","\u200b","\u200b","\u200b","\u200b","(16,952)","\u200b","\u200b","\u200b","\u200b","(10,135)","\u200b","\u200b","\u200b","\u200b","(6,839)","\u200b","\u200b","\u200b"],["Total loans, net","\u200b","$","3,123,993","","","\u200b","$","3,041,801","","","\u200b","$","2,488,118","","","\u200b","$","1,620,209","","","\u200b","$","1,154,323","","","\u200b"]] [[/GREPCENT_TABLE]] ​ The following table presents the maturity distribution of our loans held for investment as of December 31, 2023. The table also shows the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31, 2023"],["(Dollars in thousands)","","One Year or Less","","One to Five Years","","Five to Fifteen Years","","Over Fifteen Years","","Total"],["Construction and Development","\u200b","$","10,502","","$","2,156","\u200b","$","10,604","\u200b","$","\u2014","\u200b","$","23,262"],["Commercial Real Estate","\u200b","","40,628","","","272,232","\u200b","","142,566","\u200b","","255,751","\u200b","","711,177"],["Commercial and Industrial","\u200b","","3,361","","","31,042","\u200b","","31,501","\u200b","","\u2014","\u200b","","65,904"],["Residential Real Estate","\u200b","","\u2014","","","352","\u200b","","935,337","\u200b","","1,414,610","\u200b","","2,350,299"],["Consumer and other","\u200b","","319","","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","319"],["Total gross loans","\u200b","$","54,810","","$","305,782","\u200b","$","1,120,008","\u200b","$","1,670,361","\u200b","$","3,150,961"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Amounts with fixed rates","\u200b","$","30,534","\u200b","$","151,271","\u200b","$","961,324","\u200b","$","200,414","\u200b","$","1,343,543"],["Amounts with floating or adjustable rates","\u200b","\u200b","24,276","\u200b","\u200b","154,511","\u200b","\u200b","158,684","\u200b","\u200b","1,469,947","\u200b","\u200b","1,807,418"],["Total gross loans","\u200b","$","54,810","\u200b","$","305,782","\u200b","$","1,120,008","\u200b","$","1,670,361","\u200b","$","3,150,961"]] [[/GREPCENT_TABLE]] 53 Table of Contents 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. We have established concentration limits in the loan portfolio for commercial real estate loans, commercial and industrial loans, and unsecured lending, among others. All loan types are within established limits. We use underwriting guidelines to assess the borrowers’ historical cash flow to determine debt service, and we further stress test the debt service under higher interest rate scenarios. Financial and performance covenants are used in commercial lending agreements to allow us to react to a borrower’s deteriorating financial condition, should that occur. For more information, see “Item 1 – Business – Lending Activities.” The principal categories of our loan portfolios  are discussed below: Construction and development loans. Our construction and development loans are comprised of commercial construction and land acquisition and development construction. Interest reserves are generally established on real estate construction loans. These loans typically carry a fixed interest rate and have maturities of less than 18 months. Our LTV policy limits are 65% for construction and development loans. Additionally, we impose limits on the total dollar amount of this category of our portfolio. The risks inherent in construction lending may affect adversely our results of operations. Such risks include, among other things, the possibility that contractors may fail to complete, or complete on a timely basis, construction of the relevant properties; substantial cost overruns in excess of original estimates and financing; market deterioration during construction; and lack of permanent take-out financing. Loans secured by such properties also involve additional risk because they have no operating history. Advances on construction loans are made relative to the overall percentage of completion on the project in an effort to remain adequately secured. Such properties may not be sold or leased so as to generate the cash flow anticipated by the borrower. 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. 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. 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. 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. 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 54 Table of Contents 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. 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. 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. 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. 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. 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. Consumer and other loans. These loans represent a small portion of our overall portfolio and primarily consists of overdrafts and consumer lines of credit. Consumer loans carry a greater amount of risk and collections are dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on such loans. 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. 55 Table of Contents Nonperforming Assets Loans are considered delinquent when principal or interest payments are past due 30 days or more. Delinquent loans may remain on accrual status between 30 days and 90 days past due. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Typically, the accrual of interest on loans is discontinued when principal and interest payments are past due 90 days or more or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. All payments received while a loan is on nonaccrual status are applied against the principal balance of the loan. The Company does not recognize interest income while loans are on nonaccrual status. Loans are restored to accrual status when loans become well-secured and management believes full collectability of principal and interest is probable. Real estate acquired as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until sold, and is carried at the balance of the loan at the time of foreclosure or at estimated fair value less estimated costs to sell, whichever is less. Nonperforming loans include loans 90 days or more past due and still accruing, loans accounted for on a nonaccrual basis and accruing restructured loans. Nonperforming assets consist of nonperforming loans plus OREO. Nonperforming loans were $36.9 million at December 31, 2023 compared to $20.2 million at December 31, 2022 and $11.8 million at December 31, 2021. The increase from December 31, 2022 to December 31, 2023 was primarily attributable to a $6.8 million increase in nonaccrual residential real estate loans and a $12.3 million increase in accruing restructured loans, offset by a $3.9 million decrease in commercial real estate loans and a $2.9 million decrease in other real estate owned. The increase from December 31, 2021 to December 31, 2022 was primarily attributable to a $1.2 million increase in nonaccrual commercial real estate loans and a $7.2 million increase in accruing restructured loans. The decrease from December 31, 2020 to December 31, 2021 was primarily attributable to a $2.4 million decrease in nonaccrual residential real estate loans, offset by a $857,000 increase in nonaccrual commercial real estate loans and $342,000 increase in loans past due ninety days or more and still accruing. We did not recognize any interest income on nonaccrual loans during the years ended December 31, 2023, 2022 and 2021. The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest, and loan modifications. At December 31, 2023, included in nonaccrual loans were $548,000 of construction and development loans, $991,000 of commercial real estate loans, $1.3 million in commercial and industrial loans and $11.9 million in residential real estate loans. Nonaccrual loans at December 31, 2022 comprised of $4.9 million of commercial real estate loans, $136,000 in commercial and industrial loans and $5.0 million in residential real estate loans. The weighted average LTV of nonaccrual residential real estate loans was approximately 52.8% at December 31, 2023. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b"],["(Dollars in thousands)","","2023","","2022","","2021","","2020","","2019"],["Nonaccrual loans","\u200b","$","14,682","\u200b","$","10,065","\u200b","$","8,759","\u200b","$","10,203","\u200b","$","12,236","\u200b"],["Past due loans 90 days or more and still accruing","\u200b","","\u2014","\u200b","","180","\u200b","","342","\u200b","","\u2014","\u200b","","\u2014","\u200b"],["Accruing restructured loans","\u200b","","22,233","\u200b","","9,919","\u200b","","2,697","\u200b","","2,891","\u200b","","2,459","\u200b"],["Total nonperforming loans","\u200b","","36,915","\u200b","","20,164","\u200b","","11,798","\u200b","","13,094","\u200b","","14,695","\u200b"],["Other real estate owned","\u200b","","1,466","\u200b","","4,328","\u200b","","3,618","\u200b","","3,844","\u200b","","423","\u200b"],["Total nonperforming assets","\u200b","$","38,381","\u200b","$","24,492","\u200b","$","15,416","\u200b","$","16,938","\u200b","$","15,118","\u200b"],["Nonperforming loans to gross loans","\u200b","","1.17","%","","0.66","%","","0.47","%","","0.80","%","","1.26","%"],["Nonperforming assets to total assets","\u200b","","1.10","%","","0.71","%","","0.50","%","","0.89","%","","0.93","%"],["Allowance for credit losses to nonperforming loans","\u200b","","49.06","%","","68.88","%","","143.69","%","","77.40","%","","46.54","%"]] [[/GREPCENT_TABLE]] ​ 56 Table of Contents Allowance for credit losses The allowance for credit losses was $18.1 million at December 31, 2023 compared to $13.9 million at December 31, 2022, an increase of $4.2 million, or 30.4%. The increase was due to the CECL adoption during the first quarter of 2023, offset by a decrease in reserves allocated to individually analyzed loans and $764,000 in charge-offs recorded during the year ended December 31, 2023. The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was probable a loss event was incurred. 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 pools that have been grouped based on similar risk characteristics, supplemented as necessary by credit judgment that considers observable trends, conditions, reasonable and supportable forecasts, and other relevant environmental and economic factors.  The level of the allowance for credit losses is adjusted by recording an expense or credit through the provision for credit losses.  The level of the allowance for unfunded commitments is adjusted by recording an expense or credit in other noninterest expense. The allowance for unfunded commitments was created upon adoption of CECL on January 1, 2023 and had a balance of $315,000 as of December 31, 2023. Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent loans where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the loan exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan. The impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the provision for credit losses, and therefore, greater volatility to our reported earnings. See Note 1 and Note 3 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K, for additional information on the on the allowance for credit losses and the allowance for unfunded commitments. It is the policy of management to maintain the allowance for credit losses at a level adequate for risks inherent in the loan portfolio. The FDIC and GA DBF also review the allowance for credit losses as an integral part of their examination process. Based on information currently available, management believes that our allowance for credit losses is adequate. However, the loan portfolio can be adversely affected if economic conditions and the real estate market in our market areas were to weaken. The effect of such events, although uncertain at this time, could result in an increase in the level of nonperforming loans and increased credit losses, which could adversely affect our future growth and profitability. No assurance of the ultimate level of credit losses can be given with any certainty. 57 Table of Contents Analysis of the Allowance for Credit Losses. The following table provides an analysis of the allowance for credit losses, provision for loan losses and net charge-offs for the periods presented below: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,"],["(Dollars in thousands)","","2023","","2022","","2021","","2020","","2019","\u200b"],["Balance, beginning of period","\u200b","$","13,888","\u200b","$","16,952","\u200b","$","10,135","\u200b","$","6,839","\u200b","$","6,645","\u200b"],["CECL adoption (Day 1) impact","\u200b","\u200b","5,055","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b"],["Charge-offs:","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Construction and development","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b"],["Commercial real estate","\u200b","","455","\u200b","","\u2014","\u200b","","67","\u200b","","109","\u200b","","237","\u200b"],["Commercial and industrial","\u200b","","309","\u200b","","390","\u200b","","64","\u200b","","51","\u200b","","14","\u200b"],["Residential real estate","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b"],["Consumer and other","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","97","\u200b","","525","\u200b"],["Total charge-offs","\u200b","","764","\u200b","","390","\u200b","","131","\u200b","","257","\u200b","","776","\u200b"],["Recoveries:","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Construction and development","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b"],["Commercial real estate","\u200b","","5","\u200b","","7","\u200b","","12","\u200b","","10","\u200b","","752","\u200b"],["Commercial and industrial","\u200b","","20","\u200b","","81","\u200b","","\u2014","\u200b","","25","\u200b","","\u2014","\u200b"],["Residential real estate","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b"],["Consumer and other","\u200b","","\u2014","\u200b","","5","\u200b","","7","\u200b","","51","\u200b","","218","\u200b"],["Total recoveries","\u200b","","25","\u200b","","93","\u200b","","19","\u200b","","86","\u200b","","970","\u200b"],["Net charge-offs/(recoveries)","\u200b","","739","\u200b","","297","\u200b","","112","\u200b","","171","\u200b","","(194)","\u200b"],["Provision for credit losses","\u200b","","(92)","\u200b","","(2,767)","\u200b","","6,929","\u200b","","3,467","\u200b","","\u2014","\u200b"],["Balance, end of period","\u200b","$","18,112","\u200b","$","13,888","\u200b","$","16,952","\u200b","$","10,135","\u200b","$","6,839","\u200b"],["Total loans at end of period","\u200b","$","3,150,961","\u200b","$","3,065,329","\u200b","$","2,511,508","\u200b","$","1,634,939","\u200b","$","1,163,207","\u200b"],["Average loans(1)","\u200b","","3,039,361","\u200b","","2,761,195","\u200b","","2,109,249","\u200b","","1,365,129","\u200b","","1,218,219","\u200b"],["Net charge-offs to average loans","\u200b","","0.02","%","","0.01","%","","0.01","%","","0.01","%","","(0.02)","%"],["Allowance for credit losses to total loans","\u200b","","0.57","%","","0.45","%","","0.67","%","","0.62","%","","0.59","%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Excludes loans held for sale."]] [[/GREPCENT_TABLE]] ​ Management believes the allowance for credit losses is adequate to provide for losses inherent in the loan portfolio as of December 31, 2023. 58 Table of Contents The following table presents a summary of the allocation of the allowance for credit losses by loan portfolio segment for the periods indicated: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021","\u200b","2020","\u200b","2019","\u200b"],["\u200b","\u200b","Allowance for","\u200b","% of Loans to","\u200b","Allowance for","\u200b","% of Loans to","\u200b","Allowance for","\u200b","% of Loans to","\u200b","Allowance for","\u200b","% of Loans to","\u200b","Allowance for","\u200b","% of Loans to","\u200b"],["(Dollars in thousands)","","Credit Losses","","Total Loans","","Credit Losses","","Total Loans","","Credit Losses","","Total Loans","","Credit Losses","","Total Loans","","Credit Losses","","Total Loans","\u200b"],["Construction and Development","\u200b","$","46","","0.7","%","$","124","","1.6","%","$","100","","1.6","%","$","178","","2.8","%","$","131","","2.7","%"],["Commercial Real Estate","\u200b","","6,876","","22.6","\u200b","","2,811","","21.4","\u200b","","4,146","","20.7","\u200b","","5,161","","29.2","\u200b","","2,320","","36.5","\u200b"],["Commercial and Industrial","\u200b","","588","","2.1","\u200b","","1,326","","1.7","\u200b","","4,989","","2.9","\u200b","","438","","8.4","\u200b","","448","","4.6","\u200b"],["Residential Real Estate","\u200b","","10,597","","74.6","\u200b","","9,626","","75.3","\u200b","","7,717","","74.8","\u200b","","4,350","","59.6","\u200b","","3,457","","56.0","\u200b"],["Consumer and other","\u200b","\u200b","5","\u200b","\u2014","\u200b","\u200b","1","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u2014","\u200b","\u200b","8","\u200b","\u2014","\u200b","\u200b","91","\u200b","0.2","\u200b"],["Unallocated","\u200b","","\u2014","","\u2014","\u200b","","\u2014","","\u2014","\u200b","","\u2014","","\u2014","\u200b","","\u2014","","\u2014","\u200b","","392","","\u2014","\u200b"],["Total allowance for credit losses","\u200b","$","18,112","","100.0","%","$","13,888","","100.0","%","$","16,952","","100.0","%","$","10,135","","100.0","%","$","6,839","","100.0","%"]] [[/GREPCENT_TABLE]] ​ Investment Securities Our securities portfolio is the third largest component of our interest earning assets. The portfolio serves the following purposes: (i) to optimize the Bank’s income consistent with the investment portfolio’s liquidity and risk objectives; (ii) to balance market and credit risks of other assets and the Bank’s liability structure; (iii) to profitably deploy funds which are not needed to fulfill loan demand, deposit redemptions or other liquidity purposes; (iv) to provide collateral which the Bank is required to pledge against public funds; and (v) to provide investments for Community Reinvestment Act (CRA) purposes. We classify our debt securities as either available-for-sale or held-to-maturity at the time of purchase. Accounting  guidance requires available-for-sale securities to be marked to fair value with an offset to accumulated other comprehensive income (loss), a component of shareholders’ equity. Monthly adjustments are made to reflect changes in the fair value of our available-for-sale securities. All of the debt securities in our investment portfolio were classified as available-for-sale as of December 31, 2023. All available-for-sale securities are carried at fair value. Securities available-for-sale consist primarily of U.S. government-sponsored agency securities, home mortgage-backed securities and state and municipal bonds. No issuer of the available-for-sale securities comprised more than ten percent of our shareholders’ equity as of December 31, 2023, 2022 or 2021. The following table presents the amortized cost and fair value of our available-for-sale securities portfolio as of the dates presented. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021"],["(Dollars in thousands)","","Amortized Cost","","Fair Value","","Amortized Cost","","Fair Value","","Amortized Cost","","Fair Value"],["Obligations of U.S. Government entities and agencies","\u200b","$","4,637","\u200b","$","4,637","\u200b","$","5,059","\u200b","$","5,059","\u200b","$","6,949","\u200b","$","6,949"],["States and political subdivisions","\u200b","\u200b","8,072","","\u200b","6,782","\u200b","\u200b","8,121","","\u200b","6,403","\u200b","\u200b","8,169","","\u200b","8,361"],["Mortgage-backed GSE residential","\u200b","","8,669","","","7,074","\u200b","","9,540","","","7,783","\u200b","","10,562","","","10,423"],["Total securities available for sale","\u200b","$","21,378","","$","18,493","\u200b","$","22,720","","$","19,245","\u200b","$","25,680","","$","25,733"]] [[/GREPCENT_TABLE]] ​ 59 Table of Contents Certain securities have fair values less than amortized cost and, therefore, contain unrealized losses. The Company does not believe that the securities available for sale that were in an unrealized loss position as of December 31, 2023 represent a credit loss impairment.  As of December 31, 2023, there have been no payment defaults nor do we currently expect any future payment defaults. Furthermore, the Company does not intend to sell these securities, and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. The following table sets forth certain information regarding contractual maturities and the weighted average yields of our investment securities available for sale as of the dates presented. Expected maturities may differ from contractual maturities if borrowers  have the right to call or prepay obligations with or without call or prepayment penalties. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of December 31, 2023","\u200b"],["\u200b","\u200b","One Year or Less","\u200b","More Than One Year Through Five Years","\u200b","More Than Five Years Through Ten Years","\u200b","More Than Ten Years","\u200b","Total","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b"],["(Dollars in thousands)","","Fair Value","","Average Yield","","Fair Value","","Average Yield","","Fair Value","","Average Yield","","Fair Value","","Average Yield","","Fair Value","","Average Yield","\u200b"],["Obligations of U.S. Government entities and agencies","\u200b","$","\u2014","\u200b","\u2014","%","$","4,637","\u200b","3.55","%","$","\u2014","\u200b","\u2014","%","$","\u2014","\u200b","\u2014","%","$","4,637","\u200b","3.55","%"],["States and political subdivisions","\u200b","","\u2014","\u200b","\u2014","\u200b","","845","\u200b","2.09","\u200b","","376","\u200b","2.33","\u200b","","5,561","\u200b","2.18","\u200b","","6,782","\u200b","2.18","\u200b"],["Mortgage-backed GSE residential","\u200b","","736","\u200b","1.19","\u200b","","1,261","\u200b","1.47","\u200b","","930","\u200b","1.85","\u200b","","4,147","\u200b","1.89","\u200b","","7,074","\u200b","1.74","\u200b"],["Total securities available for sale","\u200b","$","736","\u200b","1.19","%","$","6,743","\u200b","2.97","%","$","1,306","\u200b","1.99","%","$","9,708","\u200b","2.06","%","$","18,493","\u200b","2.55","%"]] [[/GREPCENT_TABLE]] ​ We have not used interest rate swaps or other derivative instruments to hedge fixed rate loans or securities to otherwise mitigate our interest rate risk. Equity Securities ​ As of both December 31, 2023 and December 31, 2022, the Company had equity securities with carrying values totaling $10.3 million. The equity securities consist of our investment in a bond mutual fund that invests in high quality fixed income bonds, mainly government agency securities whose proceeds are designed to positively impact community development throughout the United States. The mutual fund focuses exclusively on providing affordable housing to low- and moderate-income borrowers and renters, including those in Majority Minority Census Tracts. During the years ended December 31, 2023, 2022 and 2021, we recognized an unrealized gain of $35,000, an unrealized loss of $1.1 million and an unrealized loss of $114,000, respectively, in net income on our equity securities. Deposits Deposits represent the Bank’s primary source of funds, and we gather deposits primarily through our branch locations, as well as the use of wholesale and brokered deposits. We offer a variety of deposit products including demand deposit accounts, interest-bearing products, savings accounts and certificate of deposits. We put continued effort into gathering noninterest-bearing demand deposits accounts through marketing to our existing and new loan customers, customer referrals, and expansion into new markets. 60 Table of Contents Total deposits increased $64.1 million, or 2.4%, to $2.73 billion at December 31, 2023 compared to $2.67 billion at December 31, 2022. As of December 31, 2023, 18.7% of total deposits were comprised of noninterest-bearing demand accounts and 81.3% of interest-bearing deposit accounts compared to 22.9% and 77.1% as of December 31, 2022, respectively. Total deposits increased $403.8 million, or 17.8%, to $2.67 billion at December 31, 2022 compared to $2.26 billion at December 31, 2021.  Our noninterest-bearing demand accounts were 26.2% of total deposits and our interest-bearing deposits accounted for the remaining 73.8% of our deposits as of December 31, 2021. As of December 31, 2023 and 2022, the Company had estimated uninsured deposits of $730.5 million and $874.7 million, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting. Uninsured deposits were 26.5% of total deposits at December 31, 2023 compared to 32.5% at December 31, 2022. As of December 31, 2023, we had $1.21 billion of available borrowing capacity at the Federal Home Loan Bank ($721.1 million), Federal Reserve Discount Window ($446.3 million) and various other financial institutions (fed fund lines totaling $47.5 million). We had brokered deposits of $766.3 million, or 28.1% of total deposits, at December 31, 2023 compared to $523.7 million, or 19.6% of total deposits, at December 31, 2022 and $425.1 million, or 18.8% of total deposits, at December 31, 2021. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to support our asset growth and augment the deposits generated from our branch network, which are our principal source of funding. Our level of brokered deposits varies from time to time depending on competitive interest rate conditions and other factors and tends to increase as a percentage of total deposits when the brokered deposits are less costly than issuing internet certificates of deposit or borrowing from the Federal Home Loan Bank. We use interest rate swap and cap agreements to hedge our deposit accounts that are indexed to the Federal Funds Effective rate. These swap agreements are designated as cash flow hedges. As of December 31, 2023, the total amount of deposits tied to the Federal Funds Effective rate was $929.2 million. See Note 10 of our consolidated financial statements as of December 31, 2023, included elsewhere in this Annual Report on Form 10-K, for additional information. The following table summarizes our average deposit balances and weighted average rates for the years ended December 31, 2023, 2022 and 2021: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,","\u200b"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b","\u200b","\u200b","\u200b","Weighted","\u200b"],["\u200b","\u200b","Average","\u200b","Average","\u200b","Average","\u200b","Average","\u200b","Average","\u200b","Average","\u200b"],["(Dollars in thousands)","","Balance","","Rate","","Balance","","Rate","","Balance","","Rate","\u200b"],["Noninterest-bearing demand deposits","\u200b","$","555,840","\u200b","\u2014","%","$","599,340","\u200b","\u2014","%","$","559,797","\u200b","\u2014","%"],["Interest-bearing demand deposits","\u200b","\u200b","132,033","","1.70","\u200b","\u200b","159,277","","0.62","\u200b","\u200b","84,502","","0.19","\u200b"],["Savings and money market deposits","\u200b","","509,443","\u200b","2.82","\u200b","","695,758","\u200b","1.21","\u200b","","394,553","\u200b","0.34","\u200b"],["Brokered money market deposits","\u200b","\u200b","511,427","\u200b","5.47","\u200b","\u200b","461,465","\u200b","1.66","\u200b","\u200b","360,156","\u200b","0.11","\u200b"],["Time deposits","\u200b","","940,911","\u200b","3.83","\u200b","","513,867","\u200b","1.25","\u200b","","499,856","\u200b","0.41","\u200b"],["Total interest-bearing deposits","\u200b","\u200b","2,093,814","\u200b","3.85","\u200b","\u200b","1,830,367","\u200b","1.29","\u200b","\u200b","1,339,067","\u200b","0.29","\u200b"],["Total deposits","\u200b","$","2,649,654","","3.04","%","$","2,429,707","","0.97","%","$","1,898,864","","0.21","%"]] [[/GREPCENT_TABLE]] ​ The following table sets forth the scheduled maturities of time deposits of $250,000 or greater as of December 31, 2023: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b"],["(Dollars in thousands)","","December 31, 2023"],["Remaining maturity:","","\u200b","\u200b"],["Three months or less","\u200b","$","148,923"],["Over three through six months","\u200b","","95,782"],["Over six through twelve months","\u200b","","227,496"],["Over twelve months","\u200b","","14,697"],["Total time deposits $250,000 or greater","\u200b","$","486,898"]] [[/GREPCENT_TABLE]] ​ 61 Table of Contents Borrowed Funds Other than deposits, the Company utilizes FHLB advances as a supplementary funding source to finance our operations. The advances from the FHLB are collateralized by our residential real estate loans. At December 31, 2023 and December 31, 2022, we had available borrowing capacity from the FHLB of $721.1 million and $633.6 million, respectively. At December 31, 2023 and 2022, we had $325.0 million and $375.0 million, respectively, of outstanding advances from the FHLB. The following table provides information related to our FHLB Advances for the periods indicated: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","As of or for the Year Ended December 31,","\u200b"],["(Dollars in thousands)","","2023","","2022","","2021","\u200b"],["Maximum amount outstanding at any month-end during the period","\u200b","$","425,000","\u200b","$","500,000","\u200b","$","500,000","\u200b"],["Balance outstanding at end of period","\u200b","\u200b","325,000","\u200b","\u200b","375,000","\u200b","\u200b","500,000","\u200b"],["Average outstanding balance during the period","\u200b","\u200b","350,000","\u200b","\u200b","368,333","\u200b","\u200b","237,500","\u200b"],["Weighted average interest rate during the period","\u200b","\u200b","3.06","%","\u200b","1.16","%","\u200b","0.26","%"],["Weighted average interest rate at end of period","\u200b","","3.66","\u200b","","1.94","\u200b","","0.12","\u200b"]] [[/GREPCENT_TABLE]] ​ In addition  to our advances with the FHLB, we maintain federal funds agreements with our correspondent banks. Our available borrowings under these agreements were $47.5 million at December 31, 2023 and 2022. We did not have any advances outstanding under these agreements for any of the periods presented. We also have access to the Federal Reserve’s discount window in the amount of $446.3 million and $28.0 million at December 31, 2023 and 2022, respectively. No discount window borrowings were outstanding as of December 31, 2023 and  2022. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts. Liquidity Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs, all at a reasonable cost. We continuously  monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements. We manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. Our liquidity position is supported by management of liquid assets and access to alternative sources of funds. Our liquid assets include cash, interest-bearing deposits in correspondent banks, federal funds sold, and fair value of unpledged investment securities. Other available sources of liquidity include wholesale/brokered deposits and additional borrowings from correspondent banks, FHLB  advances, and the Federal Reserve discount window. Our short-term and long-term liquidity requirements are primarily met through cash flow from operations, redeployment of prepaying and maturing balances in our loan and investment portfolios, and increases in customer 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. As part of our liquidity management strategy, we open federal funds lines with our correspondent banks. As of December 31, 2023 and 2022, we had $47.5 million of unsecured federal funds lines with no amounts advanced. In addition, the Company had Federal Reserve Discount Window funds available of approximately $446.3 million and $28.0 million at December 31, 2023 and 2022, respectively. The FRB discount window line is collateralized by a pool of construction and development, commercial real estate and commercial and industrial loans with carrying balances totaling $604.0 million as of December 31, 2023, as well as all of the Company’s municipal and mortgage backed securities. There were no outstanding borrowings on this line as of December 31, 2023 and 2022. 62 Table of Contents At December 31, 2023 and 2022, we had $325.0 million and $375.0 million, respectively, of outstanding advances from the FHLB. Based on the values of residential mortgage loans pledged as collateral, we had $721.1 million and $633.6 million of additional borrowing availability with the FHLB as of December 31, 2023 and 2022, respectively. We also maintain relationships in the capital markets with brokers to issue certificates of deposit and money market accounts. Capital Requirements The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain  a higher level of capital in order to operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy. For more information, see “Item 1. Business – Regulation and Supervision – Regulation of the Company – Capital Requirements.” 63 Table of Contents The table below summarizes the capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Company’s and the Bank’s capital ratios as of December 31, 2023 and 2022. The Bank exceeded all regulatory capital requirements and was considered to be “well-capitalized” as of December 31, 2023 and 2022. As of December 31, 2023, the FDIC categorized the Bank as well-capitalized under the prompt corrective action framework. There have been no conditions or events since December 31, 2023 that management believes would change this classification. While the Company believes that it has sufficient capital to withstand an extended economic recession, its reported and regulatory capital ratios could be adversely impacted in future periods. ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","To Be Well Capitalized"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Minimum Capital Required","\u200b","Under Prompt Corrective"],["(Dollars in thousands)","\u200b","Actual","\u200b","Basel III","\u200b","Action Provisions:"],["\u200b","","Amount","","Ratio","","Amount \u2265","","Ratio \u2265","","Amount \u2265","","Ratio \u2265"],["As of December 31, 2023","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total Capital (to Risk Weighted Assets)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","$","372,482","\u200b","17.60","%","222,188","\u200b","10.50","%","N/A","","N/A","\u200b"],["Bank","\u200b","","370,459","\u200b","17.51","%","222,181","","10.50","\u200b","211,601","","10.00","%"],["Tier I Capital (to Risk Weighted Assets)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","","354,055","\u200b","16.73","%","179,867","\u200b","8.50","%","N/A","","N/A","\u200b"],["Bank","\u200b","","352,032","\u200b","16.64","%","179,861","","8.50","\u200b","169,281","","8.00","%"],["Common Tier 1 (CET1)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","","354,055","\u200b","16.73","%","148,125","\u200b","7.00","%","N/A","","N/A","\u200b"],["Bank","\u200b","","352,032","\u200b","16.64","%","148,121","","7.00","\u200b","137,541","","6.50","%"],["Tier 1 Capital (to Average Assets)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","","354,055","\u200b","10.20","%","138,790","\u200b","4.00","%","N/A","","N/A","\u200b"],["Bank","\u200b","","352,032","\u200b","10.15","%","138,763","","4.00","\u200b","173,454","","5.00","%"],["As of December 31, 2022","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total Capital (to Risk Weighted Assets)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","$","338,185","\u200b","16.68","%","212,932","\u200b","10.50","%","N/A","","N/A","\u200b"],["Bank","\u200b","","336,866","\u200b","16.61","%","212,915","","10.50","\u200b","202,777","","10.00","%"],["Tier I Capital (to Risk Weighted Assets)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","","324,297","\u200b","15.99","%","172,374","\u200b","8.50","%","N/A","","N/A","\u200b"],["Bank","\u200b","","322,978","\u200b","15.93","%","172,360","","8.50","\u200b","162,221","","8.00","%"],["Common Tier 1 (CET1)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","","324,297","\u200b","15.99","%","141,955","\u200b","7.00","%","N/A","","N/A","\u200b"],["Bank","\u200b","","322,978","\u200b","15.93","%","141,944","","7.00","\u200b","131,805","","6.50","%"],["Tier 1 Capital (to Average Assets)","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Consolidated","\u200b","","324,297","\u200b","9.57","%","135,485","\u200b","4.00","%","N/A","","N/A","\u200b"],["Bank","\u200b","","322,978","\u200b","9.54","%","135,446","","4.00","\u200b","169,307","","5.00","%"]] [[/GREPCENT_TABLE]] ​ 64 Table of Contents Contractual Obligations The following table presents supplemental information regarding total contractual obligations as of December 31, 2023: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Payments Due by Period at December 31, 2023"],["(Dollars in thousands)","","Less than 1 Year","","1-3 Years","","3-5 Years","","More than 5 Years","","Total"],["Deposits without a stated maturity","\u200b","$","1,739,325","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","\u2014","\u200b","$","1,739,325"],["Time deposits","\u200b","","956,685","\u200b","","34,626","\u200b","","301","\u200b","","\u2014","\u200b","","991,612"],["FHLB advances","\u200b","\u200b","\u2014","\u200b","\u200b","50,000","\u200b","\u200b","275,000","\u200b","\u200b","\u2014","\u200b","\u200b","325,000"],["Operating lease liabilities","\u200b","","1,810","\u200b","\u200b","3,077","\u200b","","2,166","\u200b","","1,598","\u200b","","8,651"],["Total contractual obligations","\u200b","$","2,697,820","\u200b","$","87,703","\u200b","$","277,467","\u200b","$","1,598","\u200b","$","3,064,588"]] [[/GREPCENT_TABLE]] ​ We believe that we will be able to meet our contractual obligations as they come due through the maintenance of adequate cash levels. We expect to maintain  adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. We have in place various borrowing mechanisms for both short-term and long-term liquidity needs. Off-Balance Sheet Arrangements We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount  recognized in our consolidated balance sheet. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition  established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if we deem collateral is necessary upon extension of credit, is based on management’s credit evaluation  of the counterparty. Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. They are intended to be disbursed, subject to certain condition, upon request of the borrower. The following table presents outstanding financial commitments whose contractual amount represents credit risks as of the dates indicated: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","December 31,"],["(Dollars in thousands)","","2023","","2022"],["Commitments to extend credit","","$","68,083","\u200b","$","62,334"],["Standby letters of credit","\u200b","\u200b","4,908","\u200b","\u200b","6,303"],["Total off-balance sheet commitments","\u200b","$","72,991","\u200b","$","68,637"]] [[/GREPCENT_TABLE]] ​ ​