Financial Performance - Total assets increased to $2,572,011 thousand as of June 30, 2024, compared to $2,446,663 thousand at December 31, 2023, reflecting a growth of approximately 5.1%[9] - Total interest income for the three months ended June 30, 2024, was $41,007 thousand, up 27.3% from $32,185 thousand for the same period in 2023[12] - Net income for the three months ended June 30, 2024, was $8,198, compared to $8,756 for the same period in 2023, representing a decrease of 6.4%[14] - Comprehensive income for the three months ended June 30, 2024, was $8,266, compared to $7,803 for the same period in 2023, an increase of 5.9%[15] - Basic earnings per share for the three months ended June 30, 2024, was $0.91, down from $1.00 in the same period last year, a decrease of 9.0%[13] - Net income for the six months ended June 30, 2024, was $16,317, with basic earnings per share of $1.82, compared to $16,427 and $1.87 for the same period in 2023, indicating a slight decrease of 0.7% in net income and 2.7% in earnings per share[62] Loans and Credit Quality - Loans, net of unearned income, rose to $2,015,434 thousand as of June 30, 2024, compared to $1,884,508 thousand at December 31, 2023, marking an increase of 6.9%[9] - The allowance for credit losses was $25,828 thousand as of June 30, 2024, compared to $24,378 thousand at December 31, 2023, reflecting a slight increase of 6.0%[9] - The provision for credit losses was $1,067 for the three months ended June 30, 2024, compared to $1,557 in the same period last year, a decrease of 31.5%[13] - The allowance for credit losses as a percentage of gross loans was 1.28% at June 30, 2024, compared to 1.24% at June 30, 2023[175] - The company continues to monitor credit quality and trends in the loan portfolio segments regularly, ensuring timely identification of problem credits[80] - The total amount of special mention loans across all categories is $967,000, down from $4,980,000 in 2023[86] Deposits and Funding - Total deposits reached $2,175,678 thousand as of June 30, 2024, up from $2,018,189 thousand at December 31, 2023, indicating a growth of 7.8%[9] - Brokered deposits rose to $288,328 as of June 30, 2024, compared to $230,858 at December 31, 2023, indicating a growth in funding sources[102] - The total balance of noninterest-bearing transaction deposits decreased to $416,068 as of June 30, 2024, from $437,959 at December 31, 2023[102] Interest Income and Expense - Total interest expense increased to $19,428 for the three months ended June 30, 2024, from $12,753 in the same period last year, reflecting a rise of 52.5%[13] - Interest income increased by $8.8 million, or 27.4%, primarily due to an 18.5% increase in average loans outstanding, which rose by $310.7 million[174] - Interest expense increased by $6.7 million, or 52.3%, due to a 21.3% increase in average interest-bearing liabilities, which rose by $329.4 million[174] Noninterest Income and Expenses - Noninterest income for the three months ended June 30, 2024, was $1,368, significantly lower than $6,862 in the same period last year, a decrease of 80.1%[13] - Total noninterest expenses decreased to $11,411 for the three months ended June 30, 2024, from $13,432 in the same period last year, a reduction of 15.0%[13] - Salaries and employee benefits decreased by $1.8 million, or 22.3%, to $6.1 million for the quarter ended June 30, 2024, primarily due to one-time retirement-related expenses[183] Capital and Regulatory Compliance - The company is classified as well capitalized under regulatory standards, meeting all capital adequacy requirements as of June 30, 2024[124] - As of June 30, 2024, the Tier 1 capital ratio to average assets for Company Bank is 8.72%, while the CET 1 capital ratio to risk-weighted assets is 9.54%[127] - The total capital ratio to risk-weighted assets for Company Bank is 14.50%, exceeding the required adequacy amount of 10.50%[127] Securities and Fair Value - The total securities available for sale as of June 30, 2024, had an amortized cost of $195,770 and a fair value of $184,510, reflecting a gross unrealized loss of $11,573[63] - The fair value of derivatives in a net liability position as of June 30, 2024, was $7,733,000, which includes accrued interest but excludes adjustments for nonperformance risk[112] - The fair value of corporate debt securities was $11,433,000 as of June 30, 2024, compared to $11,259,000 at the end of 2023, showing an increase of approximately 1.5%[139]

Financial Performance - Net income for Q2 2024 was $8,198 thousand, slightly up from $8,119 thousand in Q1 2024, but down from $16,427 thousand in Q2 2023[10] - Core net income increased to $9,058,000 from $8,128,000, representing a rise of 11.43% year-over-year[20] - Net income for the quarter was $8,198,000, compared to $8,119,000 in the previous quarter, reflecting a growth of 0.97%[20] - Net interest income for Q2 2024 was $21,579 thousand, a 3.6% increase from $20,839 thousand in Q1 2024 and an 11.0% increase from $19,432 thousand in Q2 2023[3] - Net interest income reached $21,579,000, up from $20,839,000, which is a growth of 3.54%[20] - Core net income for the second quarter of 2024 was $9.06 million, up from $8.13 million in the first quarter of 2024, representing a 11.5% increase[21] Interest Income and Margin - Total interest income for Q2 2024 reached $41,007 thousand, up 6.5% from $38,736 thousand in Q1 2024 and 27.3% from $32,185 thousand in Q2 2023[10] - Net interest margin decreased to 3.56% in Q2 2024 from 3.59% in Q1 2024, primarily due to a rise in the cost of interest-bearing deposits[4] - Total interest-earning assets increased to $2,440,425 thousand with a net interest income of $21,579 thousand, reflecting a net interest margin of 3.56%[11] - Total interest-earning assets rose to $2,388,397 million, with a net interest margin of 3.57% for the current period, down from 3.89% a year ago[13] Noninterest Income and Expenses - Total noninterest income was $1,368 thousand, reflecting a 7.9% increase from $1,268 thousand in Q1 2024 but an 80.1% decrease from $6,862 thousand in Q2 2023[5] - Total noninterest expenses increased to $11,411 thousand in Q2 2024, compared to $10,375 thousand in Q1 2024 and $13,432 thousand in Q2 2023[10] - Noninterest expense for Q2 2024 was $11.4 million, a 10.0% increase from the previous quarter, including a $1.2 million wire fraud loss[43] - Noninterest income decreased by 80.1% from $6.9 million in Q2 2023, largely due to the absence of nonrecurring income from the IRS[42] Loans and Credit Quality - Loans, net of unearned income, amounted to $2,015,434 thousand, up from $1,965,149 thousand in Q1 2024 and $1,716,512 thousand in Q2 2023[9] - Nonperforming loans totaled $3,784 million, an increase from $1,010 million in the same quarter last year, indicating a significant rise in credit risk[15] - The allowance for credit losses increased to $25,828 million, compared to $21,385 million a year earlier, showing a proactive approach to managing potential loan defaults[15] - The provision for credit losses for the second quarter of 2024 was $1.1 million, a slight decrease from $1.2 million in the first quarter of 2024[23] Assets and Equity - Total assets reached $2,572,011 thousand, up from $2,510,975 thousand in Q1 2024 and $2,277,803 thousand in Q2 2023[9] - Stockholders' equity increased to $230,581 thousand from $222,881 thousand in Q1 2024 and $197,250 thousand in Q2 2023[9] - Total stockholders' equity increased to $230.6 million at June 30, 2024, up from $222.9 million at March 31, 2024, primarily due to earnings growth[27] Future Outlook - The company plans to focus on expanding its market presence and enhancing its product offerings in the upcoming quarters[10] - Forward-looking statements indicate potential growth and strategic acquisitions, including the acquisition of Century Bank of Georgia[30] - The addition of CBB Bancorp is expected to close on August 1, enhancing loan and deposit growth in Georgia markets[46]

Core Insights - The company reported a net interest income of $21.6 million for Q2 2024, reflecting a 3.6% increase from Q1 2024, primarily driven by higher yields on interest-earning assets [15] - Noninterest income increased by 7.9% to $1.4 million in Q2 2024, attributed to higher bank-owned life insurance income and a realized net gain on securities [4] - Noninterest expense rose by 10.0% to $11.4 million in Q2 2024, influenced by a $1.2 million wire fraud loss, although partially offset by reduced salaries and benefits [5] Financial Performance - Net interest margin decreased to 3.56% in Q2 2024 from 3.59% in Q1 2024, mainly due to increased costs of interest-bearing deposits [3] - Total loans reached $2.02 billion, a 2.6% increase from Q1 2024, with nonperforming loans totaling $3.8 million, or 0.19% of gross loans [6][18] - The allowance for credit losses was 1.28% of total loans, consistent with the previous quarter, while net charge-offs decreased by 18.5% to $383,000 [7][19] Capital Ratios - The company's Tier 1 capital ratio was 8.72% as of June 30, 2024, slightly down from 8.79% in Q1 2024 [8] - Common equity tier 1 (CET1) capital ratio remained stable at 9.54% [8] Deposits and Borrowings - Total deposits increased by 3.1% to $2.18 billion, with uninsured deposits rising by 5.8% to $645.3 million [19] - Interest-bearing deposits grew by 3.9% to $1.76 billion, reflecting a 19.3% increase year-over-year [19] Asset Quality - Nonperforming loans increased by 9.8% from Q1 2024, primarily due to a commercial and industrial loan added to nonaccrual status [18] - The total nonperforming assets stood at $3.82 million, with a significant increase from the previous year [32]

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements that are inherently uncertain and subject to risks that could cause actual results to differ materially - The report contains forward-looking statements regarding future events and financial performance, which are based on current expectations, estimates, and projections. These statements are **inherently uncertain** and subject to **risks** that could cause actual results to differ materially[9](index=9&type=chunk)[10](index=10&type=chunk) - Key risk factors include the ability to manage growth, credit risk, general economic conditions, compliance with regulations (Dodd-Frank Act, Bank Secrecy Act), governmental policies, effectiveness of risk management, changes in management, geographic concentration, interest rate changes, availability and cost of credit, real estate values, competition, and risks related to mergers and acquisitions (e.g., CBB Bancorp)[11](index=11&type=chunk)[14](index=14&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements for Southern States Bancshares, Inc. and its subsidiary, Southern States Bank, for the period ended March 31, 2024, including balance sheets, income statements, comprehensive income, changes in stockholders' equity, cash flows, and detailed notes on significant accounting policies, securities, loans, deposits, and regulatory matters [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Consolidated Balance Sheet Highlights (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Total Assets | $2,510,975 | $2,446,663 | | Total Liabilities | $2,288,094 | $2,231,699 | | Total Stockholders' Equity | $222,881 | $214,964 | | Loans, net | $1,940,005 | $1,860,130 | | Total Deposits | $2,109,798 | $2,018,189 | | Cash and cash equivalents | $237,123 | $250,651 | - **Total assets increased by $64.3 million (2.6%)** from December 31, 2023, to March 31, 2024, driven primarily by an **$80.6 million increase in loans, net** of unearned income, and a **$91.6 million increase in total deposits**[16](index=16&type=chunk)[17](index=17&type=chunk) [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) This section outlines the company's financial performance over a period, showing revenues, expenses, and net income Consolidated Statements of Income Highlights (in thousands, except per share amounts) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $38,736 | $28,699 | | Total interest expense | $17,897 | $9,153 | | Net interest income | $20,839 | $19,546 | | Provision for credit losses | $1,236 | $1,181 | | Total noninterest income | $1,268 | $1,786 | | Total noninterest expenses | $10,375 | $10,158 | | Net income | $8,119 | $7,671 | | Basic earnings per share | $0.91 | $0.87 | | Diluted earnings per share | $0.90 | $0.85 | - **Net income increased by $448,000 (5.8%)** year-over-year, primarily due to a **$1.3 million increase in net interest income**, partially offset by a decrease in noninterest income and an increase in noninterest expense[20](index=20&type=chunk)[193](index=193&type=chunk) [Consolidated Statements of Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the company's comprehensive income, including net income and other comprehensive income or loss items Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $8,119 | $7,671 | | Other comprehensive (loss) income | $(22) | $1,202 | | Comprehensive income | $8,097 | $8,873 | - **Comprehensive income decreased from $8,873 thousand in Q1 2023 to $8,097 thousand in Q1 2024**, mainly due to a shift from other comprehensive income to a loss, driven by unrealized holding losses on available-for-sale securities[22](index=22&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section tracks changes in the company's equity, reflecting net income, dividends, and stock-related transactions Changes in Stockholders' Equity (in thousands, except share amounts) | Item | Balance, December 31, 2023 | Net Income | Issuance of Common Stock | Exercise of Stock Options | Issuance of Restricted Stock | Forfeiture of Restricted Stock | Stock-based Compensation | Common Stock Dividends | Other Comprehensive Loss | Balance, March 31, 2024 | | :-------------------------------- | :------------------------- | :--------- | :----------------------- | :---------------------- | :--------------------------- | :--------------------------- | :----------------------- | :--------------------- | :----------------------- | :---------------------- | | Total Stockholders' Equity | $214,964 | $8,119 | $31 | $354 | $0 | $0 | $239 | $(804) | $(22) | $222,881 | | Common Stock Shares Outstanding | 8,841,349 | — | 1,237 | 25,771 | 26,812 | (375) | — | — | — | 8,894,794 | - **Total stockholders' equity increased by $7.9 million (3.7%)** from December 31, 2023, to March 31, 2024, primarily due to net income and stock-based activities, partially offset by common stock dividends and other comprehensive loss[25](index=25&type=chunk)[220](index=220&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $11,396 | $8,939 | | Net cash used in investing activities | $(79,214) | $(66,299) | | Net cash provided by financing activities | $54,290 | $81,657 | | Net (decrease) increase in cash and cash equivalents | $(13,528) | $24,297 | | Cash and cash equivalents at end of period | $237,123 | $192,796 | - **Cash and cash equivalents decreased by $13.5 million in Q1 2024**, a reversal from a $24.3 million increase in Q1 2023. This was driven by higher net cash used in investing activities, primarily due to a significant increase in net loans, and a decrease in net cash provided by financing activities, mainly from FHLB advance repayments[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the fundamental accounting principles and estimation methods used in preparing the financial statements - The Company is a bank holding company operating Southern States Bank, a commercial bank with branches in Alabama and Georgia, offering a full range of banking services[30](index=30&type=chunk) - The financial statements are prepared using GAAP, requiring management estimates for items like allowance for credit losses, valuation of foreclosed assets, financial instruments, deferred taxes, and investment securities[32](index=32&type=chunk)[33](index=33&type=chunk) - The Company adopted ASU 2016-13 (CECL) on January 1, 2023, which requires earlier recognition of expected credit losses for financial assets and off-balance sheet exposures, with **no material impact** on consolidated financial statements[48](index=48&type=chunk)[74](index=74&type=chunk) [NOTE 2. EARNINGS PER SHARE](index=20&type=section&id=NOTE%202.%20EARNINGS%20PER%20SHARE) This note provides details on the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share (EPS) (except per share amounts) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Basic earnings per share | $0.91 | $0.87 | | Diluted earnings per share | $0.90 | $0.85 | | Weighted average common shares outstanding (Basic) | 8,913,477 | 8,762,450 | | Weighted average common shares outstanding (Diluted) | 9,043,122 | 9,044,490 | - **Basic EPS increased to $0.91 in Q1 2024 from $0.87 in Q1 2023**, while **diluted EPS increased to $0.90 from $0.85**, reflecting higher net income and a slight increase in weighted average common shares outstanding[77](index=77&type=chunk) [NOTE 3. SECURITIES](index=20&type=section&id=NOTE%203.%20SECURITIES) This note details the composition and fair value of the company's investment securities portfolio Securities Portfolio (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Total securities available for sale (Fair Value) | $177,379 | $179,000 | | Total securities held to maturity (Fair Value) | $16,098 | $16,233 | | Total securities (Fair Value) | $193,477 | $195,233 | | Total Gross Unrealized Losses | $(15,204) | $(14,997) | - The **total securities portfolio decreased slightly from $195.2 million at December 31, 2023, to $193.5 million at March 31, 2024**. Unrealized losses on securities are primarily due to interest rate changes, and the Company does not consider these credit impaired as there is no intent or requirement to sell before recovery at maturity[78](index=78&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) [NOTE 4. LOANS](index=25&type=section&id=NOTE%204.%20LOANS) This note provides a detailed breakdown of the loan portfolio, including its composition, credit quality, and allowance for credit losses Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2024 (Amount) | March 31, 2024 (% of Total) | December 31, 2023 (Amount) | December 31, 2023 (% of Total) | | :-------------------------------- | :------------------------ | :-------------------------- | :------------------------- | :--------------------------- | | Construction and development | $252,934 | 12.8% | $242,960 | 12.9% | | Residential | $238,702 | 12.1% | $224,603 | 11.9% | | Commercial | $1,182,634 | 60.0% | $1,144,867 | 60.5% | | Commercial and industrial | $288,701 | 14.7% | $269,961 | 14.3% | | Consumer and other | $8,425 | 0.4% | $8,286 | 0.4% | | Gross Loans | $1,971,396 | 100.0% | $1,890,677 | 100.0% | | Allowance for credit losses | $(25,144) | | $(24,378) | | - **Gross loans increased by $80.7 million (4.3%) to $2.0 billion** at March 31, 2024, with **commercial real estate loans remaining the largest segment at 60.0%** of total gross loans[86](index=86&type=chunk)[227](index=227&type=chunk) Allowance for Credit Losses (ACL) Activity (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Balance at beginning of period | $24,378 | $20,156 | | Provision for credit losses | $1,236 | $1,181 | | Total charge offs | $495 | $224 | | Total recoveries | $25 | $27 | | Net charge offs | $470 | $197 | | Balance at end of period | $25,144 | $19,855 | | Ratio of ACL to end of period loans | 1.28% | 1.21% | | Ratio of net charge offs to average loans | 0.10% | 0.05% | - The **allowance for credit losses increased to $25.1 million** at March 31, 2024, from $24.4 million at December 31, 2023, driven by loan growth and increases for individually analyzed loans. **Net charge-offs increased to $470,000 in Q1 2024 from $197,000 in Q1 2023**[102](index=102&type=chunk)[254](index=254&type=chunk)[257](index=257&type=chunk) Nonaccrual Loans by Category (in thousands) | Loan Type | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Commercial | $2,422 | $765 | | Commercial and industrial | $778 | $0 | | Residential | $246 | $252 | | Total Nonaccrual Loans | $3,446 | $1,017 | - **Total nonperforming loans increased significantly to $3.4 million** at March 31, 2024, from $1.0 million at December 31, 2023, primarily due to one significant commercial real estate loan and one commercial and industrial loan being placed on nonaccrual status[264](index=264&type=chunk)[266](index=266&type=chunk) [NOTE 5. DEPOSITS](index=35&type=section&id=NOTE%205.%20DEPOSITS) This note outlines the composition of the company's deposit base, including interest-bearing and noninterest-bearing accounts Deposit Composition (in thousands) | Deposit Type | March 31, 2024 (Amount) | March 31, 2024 (% of Total) | December 31, 2023 (Amount) | December 31, 2023 (% of Total) | | :-------------------------------- | :------------------------ | :-------------------------- | :------------------------- | :--------------------------- | | Noninterest-bearing transaction | $416,704 | 19.7% | $437,959 | 21.7% | | Interest-bearing transaction | $974,079 | 46.2% | $946,347 | 46.9% | | Savings | $33,909 | 1.6% | $35,412 | 1.7% | | Time deposits, $250,000 and under | $584,658 | 27.7% | $500,406 | 24.8% | | Time deposits, over $250,000 | $100,448 | 4.8% | $98,065 | 4.9% | | Total deposits | $2,109,798 | 100.0% | $2,018,189 | 100.0% | | Brokered deposits | $291,017 | 13.8% | $230,858 | 11.4% | - **Total deposits increased by $91.6 million (4.5%) to $2.1 billion** at March 31, 2024, primarily driven by a **$112.9 million increase in interest-bearing accounts**, including a **$60.2 million increase in brokered deposits**[113](index=113&type=chunk)[219](index=219&type=chunk) - **Uninsured deposits, exceeding the FDIC limit of $250,000, were $610.1 million** at March 31, 2024, representing **28.9% of total deposits**, which is considered below peer average[279](index=279&type=chunk)[293](index=293&type=chunk) [NOTE 6. SUBORDINATED NOTES](index=37&type=section&id=NOTE%206.%20SUBORDINATED%20NOTES) This note describes the terms and conditions of the company's outstanding subordinated debt securities - The Company has two series of Fixed-to-Floating Rate Subordinated Notes: **$48.0 million due February 2032** (3.5% fixed, then SOFR + 205 bps) and **$40.0 million due October 2032** (7.0% fixed, then SOFR + 306 bps)[115](index=115&type=chunk)[116](index=116&type=chunk) - Issuance costs for these notes are amortized over sixty months and recorded as interest expense[115](index=115&type=chunk)[116](index=116&type=chunk) [NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=38&type=section&id=NOTE%207.%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) This note explains the company's use of derivative instruments to manage interest rate risk and their fair value - The Company uses derivative financial instruments, primarily interest rate swaps, to manage interest rate risk, often in back-to-back arrangements with customers and third parties to minimize net risk exposure[118](index=118&type=chunk)[119](index=119&type=chunk) Fair Value of Derivative Instruments (in thousands) | Item | March 31, 2024 (Fair Value) | December 31, 2023 (Fair Value) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Interest Rate Products - asset | $7,810 | $7,691 | | Interest Rate Products - liabilities | $(7,830) | $(7,726) | | Net liability position (including accrued interest) | $7,984 | N/A | - As of March 31, 2024, the Company had a **net liability position of $7,984 thousand for derivatives**, with **$7,360 thousand in cash collateral posted**[124](index=124&type=chunk) [NOTE 8. COMMITMENTS AND CONTINGENCIES](index=39&type=section&id=NOTE%208.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's off-balance sheet commitments and potential liabilities from legal proceedings Commitments (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Commitments to extend credit | $422,436 | $501,935 | | Standby letters of credit | $4,728 | $2,846 | | Total | $427,164 | $504,781 | - **Total commitments decreased from $504.8 million at December 31, 2023, to $427.2 million at March 31, 2024**, primarily due to a reduction in commitments to extend credit[126](index=126&type=chunk)[309](index=309&type=chunk) - The Company is involved in various legal proceedings, but management believes any resulting liability would not materially affect financial statements[129](index=129&type=chunk)[336](index=336&type=chunk) [NOTE 9. CONCENTRATIONS OF CREDIT](index=39&type=section&id=NOTE%209.%20CONCENTRATIONS%20OF%20CREDIT) This note identifies significant concentrations of credit risk within the loan portfolio, primarily in real estate - The Company's loan portfolio is **highly concentrated in real estate (85%)**, primarily in Alabama and Georgia, making its collectibility susceptible to local market conditions[130](index=130&type=chunk)[131](index=131&type=chunk) - Regulatory restrictions limit credit extension to a single borrower to **20% of capital on a secured basis (approx. $61.6 million)** and **10% on an unsecured basis (approx. $30.8 million)**[132](index=132&type=chunk) [NOTE 10. STOCKHOLDERS' EQUITY](index=40&type=section&id=NOTE%2010.%20STOCKHOLDERS'%20EQUITY) This note provides details on the components of stockholders' equity, including common stock and retained earnings - As of March 31, 2024, the Company had **8,894,794 shares of common stock issued and outstanding**, an increase from 8,841,349 shares at December 31, 2023[133](index=133&type=chunk) [NOTE 11. REGULATORY MATTERS](index=40&type=section&id=NOTE%2011.%20REGULATORY%20MATTERS) This note outlines the company's compliance with regulatory capital requirements and its 'well capitalized' status - The Bank is subject to various regulatory capital requirements, including minimum ratios for total capital, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets, and Tier 1 capital to average assets, plus a **2.50% capital conservation buffer**[135](index=135&type=chunk)[136](index=136&type=chunk) Regulatory Capital Ratios (as of March 31, 2024) | Capital Ratio | Company (Actual) | Bank (Actual) | Required for Capital Adequacy | Minimums To Be "Well Capitalized" (Bank) | | :-------------------------------- | :--------------- | :-------------- | :---------------------------- | :--------------------------------------- | | Tier 1 capital (to average assets) | 8.79% | 11.67% | 4.00% | 5.00% | | CET 1 capital (to risk-weighted assets) | 9.39% | 12.47% | 7.00% | 6.50% | | Tier 1 capital (to risk-weighted assets) | 9.39% | 12.47% | 8.50% | 8.00% | | Total capital (to risk-weighted assets) | 14.42% | 13.63% | 10.50% | 10.00% | - Both the Company and the Bank **exceeded all minimum capital adequacy requirements** and were considered '**well capitalized**' as of March 31, 2024[137](index=137&type=chunk)[138](index=138&type=chunk)[141](index=141&type=chunk) [NOTE 12. FAIR VALUE OF ASSETS AND LIABILITIES](index=43&type=section&id=NOTE%2012.%20FAIR%20VALUE%20OF%20ASSETS%20AND%20LIABILITIES) This note explains the methodologies and categorization of fair value measurements for various assets and liabilities - Fair value measurements are categorized into three levels based on input observability: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) Assets Measured at Fair Value on a Recurring Basis (in thousands) | Item | March 31, 2024 (Fair Value) | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :-------------------------- | :------ | :------ | :------ | | U.S. Treasury securities | $8,688 | $0 | $8,688 | $0 | | State and municipal securities | $40,486 | $0 | $40,486 | $0 | | Mortgage-backed GSE residential/multifamily and non-GSE | $97,078 | $0 | $97,078 | $0 | | Other equity securities | $3,638 | $3,638 | $0 | $0 | | Interest Rate Products - asset | $7,810 | $0 | $7,810 | $0 | | Interest Rate Products - liabilities | $(7,830) | $0 | $(7,830) | $0 | Assets Measured at Fair Value on a Nonrecurring Basis (in thousands) | Item | March 31, 2024 (Fair Value) | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :-------------------------- | :------ | :------ | :------ | | Individually analyzed loans | $4,162 | $0 | $0 | $4,162 | | Foreclosed assets | $33 | $0 | $0 | $33 | - Individually analyzed loans and foreclosed assets are primarily measured at fair value based on collateral value, often using independent appraisals with management discounts, classifying them as **Level 3 due to significant unobservable inputs**[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key performance indicators, recent acquisition activities, and detailed analysis of interest income, noninterest income, expenses, loan portfolio quality, liquidity, and capital adequacy for the three months ended March 31, 2024, compared to prior periods [Overview](index=49&type=section&id=Overview) - Southern States Bancshares, Inc. is a bank holding company operating Southern States Bank, a full-service community banking institution with **13 offices in Alabama and Georgia**, and two loan production offices in Georgia[176](index=176&type=chunk) - **Net income for Q1 2024 was $8.1 million**, an increase from $7.7 million in Q1 2023, but a decrease from $8.9 million in Q4 2023[179](index=179&type=chunk) Key Performance Indicators (Q1 2024 vs. Q4 2023 vs. Q1 2023) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :-------------------------------- | :------ | :------ | :------ | | Net income (in millions) | $8.1 | $8.9 | $7.7 | | Annualized return on average assets (ROAA) | 1.33% | 1.53% | 1.51% | | Annualized return on average equity (ROAE) | 14.87% | 17.02% | 16.67% | | Basic earnings per common share | $0.91 | $1.00 | $0.87 | | Net interest margin | 3.59% | 3.69% | 4.07% | | Loans, net of unearned income (QoQ growth) | 4.3% | N/A | N/A | | Deposits (QoQ growth) | 4.5% | N/A | N/A | - The Company entered into an agreement on February 27, 2024, to acquire Century Bank of Georgia, with the merger expected to close in **Q3 or Q4 2024**, subject to regulatory and shareholder approvals[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Primary Factors Used to Evaluate Our Business](index=51&type=section&id=Primary%20Factors%20Used%20to%20Evaluate%20Our%20Business) This section outlines the key financial and operational metrics management uses to assess the company's performance and condition - The Company evaluates its business based on net income, return on average assets, return on average equity, net interest income, noninterest income, and noninterest expense[183](index=183&type=chunk) - Financial condition is assessed using asset quality (delinquency, nonperforming assets, credit concentrations), capital (regulatory ratios, earnings quality, growth), and liquidity (core deposits, non-customer deposits, funding sources)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) [Results of Operations for the Three Months Ended March 31, 2024 and 2023](index=52&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202024%20and%202023) [Net Interest Income](index=52&type=section&id=Net%20Interest%20Income) This section analyzes the company's primary source of earnings, derived from the difference between interest earned and interest paid Net Interest Income Analysis (in thousands, except percentages) | Item | Q1 2024 | Q1 2023 | Change (Amount) | Change (%) | | :-------------------------------- | :------ | :------ | :-------------- | :--------- | | Net interest income | $20,839 | $19,546 | $1,293 | 6.6% | | Total interest income | $38,736 | $28,699 | $10,037 | 35.0% | | Total interest expense | $17,897 | $9,153 | $8,744 | 95.5% | | Net interest spread | 2.63% | 3.33% | (0.70%) | | | Net interest margin | 3.59% | 4.07% | (0.48%) | | - **Net interest income increased by $1.3 million (6.6%)** year-over-year, driven by a **$10.0 million increase in interest income** from higher average loan balances and yields, partially offset by an **$8.7 million increase in interest expense** due to higher costs and volumes of interest-bearing liabilities[198](index=198&type=chunk) - **Net interest margin decreased to 3.59% in Q1 2024 from 4.07% in Q1 2023**, and **net interest spread decreased to 2.63% from 3.33%**, reflecting competitive rate pressures on deposit costs[198](index=198&type=chunk) [Provision for Credit Losses](index=53&type=section&id=Provision%20for%20Credit%20Losses) This section details the expense recognized for potential loan losses, reflecting changes in credit quality and loan growth Provision for Credit Losses (in thousands) | Item | Q1 2024 | Q1 2023 | | :-------------------------------- | :------ | :------ | | Provision for credit losses | $1,236 | $1,181 | | Net charge offs | $470 | $197 | | Allowance for credit losses as % of gross loans | 1.28% | 1.20% | - The **provision for credit losses was $1.2 million for both Q1 2024 and Q1 2023**, primarily based on loan growth and increases for individually analyzed loans. **Net charge-offs increased to $470,000 in Q1 2024 from $197,000 in Q1 2023**[199](index=199&type=chunk)[257](index=257&type=chunk) [Noninterest Income](index=54&type=section&id=Noninterest%20Income) This section examines income generated from sources other than interest, such as fees, service charges, and securities gains or losses Noninterest Income Components (in thousands) | Item | Q1 2024 | Q1 2023 | Change (Amount) | Change (%) | | :-------------------------------- | :------ | :------ | :-------------- | :--------- | | Total noninterest income | $1,268 | $1,786 | $(518) | (29.0%) | | Net (loss) gain on securities | $(12) | $514 | $(526) | (102.3%) | | SBA/USDA fees | $64 | $134 | $(70) | (52.2%) | | Bank card services and interchange fees | $397 | $375 | $22 | 5.9% | | Other operating income | $245 | $217 | $28 | 12.9% | - **Total noninterest income decreased by $518,000 (29.0%)** year-over-year, primarily due to a **net loss on securities in Q1 2024** compared to a net gain in Q1 2023, and a decrease in SBA/USDA fees[201](index=201&type=chunk)[205](index=205&type=chunk)[208](index=208&type=chunk) - Offsetting declines, **bank card services and interchange fees increased** due to higher transactional volume, and **other operating income increased** due to higher cash surrender value on Bank Owned Life Insurance (BOLI)[206](index=206&type=chunk)[209](index=209&type=chunk) [Noninterest Expense](index=55&type=section&id=Noninterest%20Expense) This section reviews the company's operating expenses, including salaries, benefits, and other administrative costs Noninterest Expense Components (in thousands) | Item | Q1 2024 | Q1 2023 | Change (Amount) | Change (%) | | :-------------------------------- | :------ | :------ | :-------------- | :--------- | | Total noninterest expenses | $10,375 | $10,158 | $217 | 2.1% | | Other operating expenses | $2,273 | $2,121 | $152 | 7.2% | | Other real estate expense (income) | $9 | $(49) | $58 | 118.4% | | Data processing fees | $643 | $593 | $50 | 8.4% | | Salaries and employee benefits | $6,231 | $6,311 | $(80) | (1.3%) | - **Total noninterest expense increased by $217,000 (2.1%)** year-over-year, primarily due to increases in other operating expenses (tax credit, uninsured deposit program, unfunded loan commitments), other real estate expense, and data processing fees[210](index=210&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) - **Salaries and employee benefits decreased by $80,000 (1.3%)** due to a reduction in incentive expense, employees, and restricted stock unit expenses[211](index=211&type=chunk) [Financial Condition](index=56&type=section&id=Financial%20Condition) [Loan Portfolio](index=56&type=section&id=Loan%20Portfolio) This section provides an in-depth analysis of the company's loan portfolio, including its growth, composition, and concentrations - **Loans, net of unearned income, increased by $80.6 million (4.3%) to $2.0 billion** at March 31, 2024, representing an annualized growth rate of 17.2%[217](index=217&type=chunk) - The loan portfolio is primarily concentrated in **real estate (84.9% of gross loans)**, with commercial real estate being the largest component (60.0%). **Construction and development loans increased by $10.0 million (4.1%)**, **residential multi-family loans increased by $14.1 million (6.3%)**, and **commercial real estate loans increased by $37.8 million (3.3%)**[227](index=227&type=chunk)[229](index=229&type=chunk)[234](index=234&type=chunk)[236](index=236&type=chunk)[239](index=239&type=chunk) - The regulatory concentration ratios for commercial real estate loans (**298.9%**) and C&D loans (**81.6%**) to total risk-based Bank capital remain below the 300%/100% guidelines[230](index=230&type=chunk) [Allowance for Credit Losses](index=59&type=section&id=Allowance%20for%20Credit%20Losses) This section details the methodology and changes in the allowance for credit losses, a reserve for potential loan defaults - The **allowance for credit losses (ACL) increased by $766,000 (3.1%) to $25.1 million** at March 31, 2024, driven by overall loan growth and increases for individually analyzed loans[254](index=254&type=chunk) - The **ACL for off-balance sheet financial instruments** (unfunded credit commitments and letters of credit) was **$1.3 million** at March 31, 2024, an increase from $1.2 million at December 31, 2023[253](index=253&type=chunk) Allowance for Credit Losses by Portfolio Segment (in thousands) | Loan Category | March 31, 2024 (Amount) | March 31, 2024 (% of Gross Loans) | | :-------------------------------- | :------------------------ | :-------------------------------- | | Real estate mortgages: Construction and development | $5,681 | 12.8% | | Real estate mortgages: Residential | $3,241 | 12.1% | | Real estate mortgages: Commercial | $12,047 | 60.0% | | Commercial and industrial | $4,088 | 14.7% | | Consumer and other | $87 | 0.4% | | Total | $25,144 | 100.0% | [Nonperforming Loans](index=62&type=section&id=Nonperforming%20Loans) This section defines and reports on loans that are not accruing interest or are significantly past due, indicating credit quality issues - Nonperforming loans include nonaccrual loans and loans 90 days or more past due. Interest accrual is typically discontinued when payments are 90 days past due or collectability is doubtful[260](index=260&type=chunk) - Loans are individually evaluated for impairment based on expected cash flows, market price, or collateral fair value, especially for collateral-dependent loans[261](index=261&type=chunk) [Nonperforming Assets](index=63&type=section&id=Nonperforming%20Assets) This section presents a comprehensive view of assets that are not generating income or are impaired, including nonaccrual loans and OREO Nonperforming Assets (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Nonaccrual loans | $3,446 | $1,017 | | Past due loans 90 days or more and still accruing interest | $0 | $160 | | Total nonperforming loans | $3,446 | $1,177 | | OREO | $33 | $33 | | Total nonperforming assets | $3,479 | $1,210 | | Allowance for credit losses to nonperforming loans | 729.66% | 2071.20% | | Nonperforming loans to gross loans | 0.17% | 0.06% | | Nonperforming assets to gross loans and OREO | 0.18% | 0.06% | - **Total nonperforming assets increased to $3.5 million** at March 31, 2024, from $1.2 million at December 31, 2023, primarily due to a significant increase in nonaccrual loans, particularly in commercial real estate and commercial and industrial categories[264](index=264&type=chunk)[266](index=266&type=chunk) [Securities Portfolio](index=63&type=section&id=Securities%20Portfolio) This section describes the company's investment securities, their purpose, and fair value, including unrealized gains or losses - The securities portfolio provides liquidity, manages interest rate risk, serves as an alternative interest-earning asset, and secures deposits/borrowed funds[267](index=267&type=chunk) Securities Portfolio Fair Value (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Total securities available for sale | $177,379 | $179,000 | | Total securities held to maturity | $16,098 | $16,233 | | Total securities | $193,477 | $195,233 | | Total Gross Unrealized Losses | $(15,204) | $(14,997) | - The Company evaluated securities with unrealized losses for credit impairment and determined all declines were temporary, expecting full recovery by maturity, as there is no intent or probability of selling them prematurely[269](index=269&type=chunk) [Bank Owned Life Insurance](index=66&type=section&id=Bank%20Owned%20Life%20Insurance) This section details the company's investment in BOLI policies, used for employee benefits and tax planning Bank Owned Life Insurance (BOLI) (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | BOLI Total | $30,075 | $29,884 | - Investments in BOLI policies increased to **$30.1 million** at March 31, 2024, from $29.9 million at December 31, 2023, reflecting an increase in cash surrender value, used to control employee benefit costs and for tax planning[272](index=272&type=chunk) [Deposits](index=66&type=section&id=Deposits) This section analyzes the company's deposit base, its primary funding source, including composition and growth trends - Deposits are the Company's primary funding source, offering various products including demand, interest-bearing, savings, and certificates of deposit, supplemented by brokered, QwickRate, and IntraFi network deposits[273](index=273&type=chunk)[274](index=274&type=chunk) Deposit Balances (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Total deposits | $2,109,798 | $2,018,189 | | Noninterest-bearing transaction | $416,704 | $437,959 | | Interest-bearing non-maturity accounts | $1,007,988 | $981,759 | | Time deposits | $685,106 | $598,471 | | Brokered deposits | $291,017 | $230,858 | | Uninsured deposits | $610,100 | $615,700 | - **Total deposits increased by $91.6 million (4.5%) to $2.1 billion** at March 31, 2024, with **brokered deposits increasing by $60.2 million**. Noninterest-bearing deposits decreased, while interest-bearing deposits and time deposits increased[219](index=219&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) [Borrowed Funds](index=68&type=section&id=Borrowed%20Funds) This section outlines the company's supplementary funding sources, such as FHLB advances and lines of credit - The Company uses FHLB advances, lines of credit with other banks, and the Federal Reserve Bank Discount Window as supplementary funding sources[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk) Borrowed Funds (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | FHLB advances outstanding | $52,000 | $70,000 | | FHLB borrowing capacity | $168,300 | $162,700 | | Federal funds lines of credit available | $99,200 | $89,200 | | Federal Reserve Bank Discount Window capacity | $334,300 | $295,700 | | BTFP outstanding | $8,000 | $7,000 | | First Horizon Line of Credit outstanding | $0 | $0 | - **FHLB advances decreased to $52.0 million** at March 31, 2024, from $70.0 million at December 31, 2023. The Federal Reserve Bank Term Funding Program (BTFP) ended on March 11, 2024, with **$8.0 million outstanding**[281](index=281&type=chunk)[284](index=284&type=chunk) [Subordinated Debt Securities](index=69&type=section&id=Subordinated%20Debt%20Securities) This section describes the company's long-term subordinated debt, including terms and interest rate characteristics - The Company has **$48.0 million in Fixed-to-Floating Rate Subordinated Notes due February 2032** (3.5% fixed) and **$40.0 million due October 2032** (7.0% fixed), with interest rates resetting quarterly to SOFR plus a spread after their respective fixed periods[286](index=286&type=chunk)[287](index=287&type=chunk) [Liquidity and Capital Resources](index=70&type=section&id=Liquidity%20and%20Capital%20Resources) [Liquidity](index=70&type=section&id=Liquidity) This section discusses the company's ability to meet short-term cash flow needs through liquid assets and funding sources - Liquidity is managed to meet cash flow requirements of depositors, borrowers, and operational needs at a reasonable cost, supported by liquid assets (cash, interest-bearing deposits, federal funds sold, unpledged securities) and alternative funding sources (wholesale deposits, FHLB, Federal Reserve)[288](index=288&type=chunk)[290](index=290&type=chunk) - The Company's liquidity position is strengthened by a **lower percentage of uninsured deposits (28.9% at March 31, 2024)** compared to peers, attributed to its focus on banking small businesses[293](index=293&type=chunk) [Capital Requirements](index=70&type=section&id=Capital%20Requirements) This section details the company's compliance with regulatory capital standards and its capital adequacy status - Both the Company and the Bank **exceeded all minimum regulatory capital requirements** under Basel III and were considered '**well capitalized**' for prompt corrective action purposes as of March 31, 2024[295](index=295&type=chunk)[299](index=299&type=chunk) Regulatory Capital Ratios (as of March 31, 2024) | Capital Ratio | Company (Actual) | Bank (Actual) | Required for Capital Adequacy | Minimums To Be "Well Capitalized" (Bank) | | :-------------------------------- | :--------------- | :-------------- | :---------------------------- | :--------------------------------------- | | Tier 1 capital (to average assets) | 8.79% | 11.67% | 4.00% | 5.00% | | CET 1 capital (to risk-weighted assets) | 9.39% | 12.47% | 7.00% | 6.50% | | Tier 1 capital (to risk-weighted assets) | 9.39% | 12.47% | 8.50% | 8.00% | | Total capital (to risk-weighted assets) | 14.42% | 13.63% | 10.50% | 10.00% | - The Company, as a small bank holding company, is evaluated at the bank level and on a parent-only basis, and is not subject to consolidated capital standards for regulatory purposes[299](index=299&type=chunk) [Off-Balance Sheet Arrangements](index=74&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses the company's commitments and contingent liabilities not recorded on the balance sheet - The Company engages in off-balance sheet financial instruments, including commitments to extend credit and standby letters of credit, which involve credit and interest rate risk[305](index=305&type=chunk) Off-Balance Sheet Commitments (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :---------------- | | Commitments to extend credit | $422,436 | $501,935 | | Standby letters of credit | $4,728 | $2,846 | | Total | $427,164 | $504,781 | - **Total off-balance sheet commitments decreased from $504.8 million at December 31, 2023, to $427.2 million at March 31, 2024**, primarily due to a reduction in commitments to extend credit[309](index=309&type=chunk) [Interest Rate Sensitivity and Market Risk](index=74&type=section&id=Interest%20Rate%20Sensitivity%20and%20Market%20Risk) This section assesses the company's exposure to interest rate fluctuations and its strategies for managing this market risk - The Company's primary market risk is interest rate volatility, managed by the Asset Liability Committee (ALCO) through guidelines for funds management and a measurement system for net interest rate sensitivity[310](index=310&type=chunk)[314](index=314&type=chunk) Simulated Change in Net Interest Income (12-month horizon) | Change in Interest Rates (Basis Points) | Percent Change in Net Interest Income (March 31, 2024) | Percent Change in Net Interest Income (March 31, 2023) | | :-------------------------------- | :----------------------------------------------------- | :----------------------------------------------------- | | +400 | 9.10 | 22.21 | | +300 | 7.30 | 16.86 | | +200 | 5.20 | 11.29 | | +100 | 2.80 | 5.82 | | -100 | (4.70) | (6.73) | | -200 | (8.40) | (13.78) | | -300 | (12.20) | (22.07) | | -400 | (17.20) | (29.10) | - The Company's internal policy limits estimated net interest income at risk for a one-year period to a maximum decline of **10% for a 100 basis point shift, 15% for 200 bps, 20% for 300 bps, and 25% for 400 bps**[317](index=317&type=chunk) [Impact of Inflation](index=76&type=section&id=Impact%20of%20Inflation) This section discusses how inflation and changing interest rates can affect the company's funding costs, loan demand, and asset values - Inflation and rising interest rates can lead to increased funding costs as consumers shift to higher interest-bearing instruments, potentially reducing loan originations and growth[320](index=320&type=chunk) - Higher interest rates may decrease demand for loans and reduce the value of existing fixed-rate securities, while increasing rates on variable-rate loans could positively impact net interest margin[320](index=320&type=chunk) [Critical Accounting Policies and Estimates](index=76&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) [Allowance for Credit Losses on Loans](index=76&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Loans) This critical accounting policy explains the estimation process for the allowance for credit losses on the loan portfolio - The ACL for loans is a critical estimate based on portfolio evaluation, past loss experience, asset quality trends, borrower repayment ability, collateral value, economic conditions, and regulatory recommendations, making it **inherently subjective**[324](index=324&type=chunk) - The CECL methodology involves evaluating loans with similar risk characteristics in pools, adjusting historical loss experience with forecast factors (e.g., unemployment, GDP), and applying qualitative adjustments for factors not captured quantitatively[325](index=325&type=chunk)[326](index=326&type=chunk) [Allowance for Credit Losses on Securities](index=77&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Securities) This critical accounting policy details the assessment of credit impairment and allowance for credit losses on debt securities - For held-to-maturity debt securities, the Company estimates an ACL based on amortized cost and expected credit losses, with a **zero-loss expectation for most**, except U.S. State and Municipal securities[329](index=329&type=chunk) - For available-for-sale debt securities with fair value below amortized cost, credit impairment is assessed by considering factors like fair value extent, credit ratings, and economic conditions. An ACL is recorded if the decline is credit-related and the Company intends or is required to sell[329](index=329&type=chunk) [Valuation of Foreclosed Assets](index=77&type=section&id=Valuation%20of%20Foreclosed%20Assets) This critical accounting policy describes the valuation methods for foreclosed assets, including initial recording and subsequent adjustments - Foreclosed assets are initially recorded at fair value less selling costs upon transfer and subsequently carried at the lower of carrying value or fair value less estimated costs to sell[330](index=330&type=chunk) - Valuations are based on periodic independent appraisals, adjusted for management's historical knowledge, market conditions, and expertise, making it a **significant and potentially volatile estimate**[330](index=330&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the market risk disclosures provided in the Annual Report on Form 10-K and additional information within Item 2 of this Quarterly Report, specifically concerning interest rate sensitivity and market risk - Quantitative and qualitative disclosures about market risk are cross-referenced to the Annual Report on Form 10-K and the 'Liquidity and Capital Resources — Interest Rate Sensitivity and Market Risk' section within Item 2 of this 10-Q[332](index=332&type=chunk) [Item 4. Controls and Procedures](index=78&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of March 31, 2024. No material changes to internal control over financial reporting occurred during the first quarter of 2024 - The Company's disclosure controls and procedures were evaluated and deemed **effective as of March 31, 2024**, by the CEO and CFO[333](index=333&type=chunk) - There were **no material changes** in the Company's internal control over financial reporting during Q1 2024[334](index=334&type=chunk) [Part II. Other Information](index=79&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=79&type=section&id=Item%201.%20Legal%20Proceedings) The Company and its subsidiary are involved in various legal proceedings in the ordinary course of business, but management believes none will have a material adverse effect on their financial condition or results of operations - Southern States and Southern States Bank are parties to various legal proceedings, including loan collection and security interest enforcement[336](index=336&type=chunk) - Management believes that current legal proceedings will not have a **material adverse effect** on the Company's financial condition or results of operations[336](index=336&type=chunk) [Item 1A. Risk Factors](index=79&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, noting no material changes to these factors - For information on risk factors, refer to the Annual Report on Form 10-K for the year ended December 31, 2023[337](index=337&type=chunk) - There have been **no material changes** to the risk factors disclosed in the Annual Report on Form 10-K[337](index=337&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not repurchase any shares of common stock under its publicly announced share repurchase program during the first quarter of 2024, with $10.0 million remaining authorized for repurchase until December 31, 2024 Share Repurchase Program Activity (in thousands) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Program | Dollar Value of Shares that May Yet Be Purchased Under Program | | :-------------------------------- | :----------------------------- | :--------------------------- | :-------------------------------------------------- | :------------------------------------------------------------- | | January 1 - March 31, 2024 | — | $0 | — | $10,000 | - **No shares were repurchased** under the $10.0 million share repurchase program during Q1 2024. The program was extended until December 31, 2024[339](index=339&type=chunk) [Item 3. Defaults Upon Senior Securities](index=79&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - **No defaults upon senior securities occurred**[340](index=340&type=chunk) [Item 4. Mine Safety Disclosures](index=79&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company - Mine Safety Disclosures are **not applicable**[341](index=341&type=chunk) [Item 5. Other Information](index=79&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report under this item [Item 6. Exhibits](index=80&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements, organizational documents, specimen stock certificates, indentures for subordinated notes, and certifications - The exhibits include the Agreement and Plan of Merger with CBB Bancorp, Certificate of Incorporation, Amended and Restated Bylaws, Specimen common stock certificate, Indentures for Subordinated Notes, and Certifications of Principal Executive and Financial Officers[342](index=342&type=chunk) [Signatures](index=82&type=section&id=Signatures) The report is duly signed on behalf of Southern States Bancshares, Inc. by Mark A. Chambers, Chief Executive Officer, President and Director, and Lynn J. Joyce, Senior Executive Vice President and Chief Financial Officer, on May 14, 2024 - The report was signed by Mark A. Chambers, CEO, President and Director, and Lynn J. Joyce, Senior Executive Vice President and CFO, on May 14, 2024[348](index=348&type=chunk)

615 Quintard Avenue / Anniston, AL 36201 / (256) 241-1092 Southern States Bancshares, Inc. Announces First Quarter 2024 Financial Results SOUTHERN STATES BANCSHARES, INC. (1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures. First Quarter 2024 Performance and Operational Highlights "With liquidity and capital levels, Southern States is well well-positioned to drive further growth across our fo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-K Commission File Number: 001-40727 _____________________________ Southern States Bancshares, Inc. (Exact name of registrant as specified in its charter) _____________________________ Alabama 26-2518085 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 615 Quintard Ave., Anniston, AL 36201 (Address of principal executive offices) (Zip Code) Registrant's telephone ...

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations - Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from expectations[8](index=8&type=chunk)[12](index=12&type=chunk) - Key risk factors include the ability to manage growth, credit risk, general economic conditions, regulatory compliance, interest rate changes, and competition[10](index=10&type=chunk)[13](index=13&type=chunk) [Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This item provides the unaudited condensed consolidated financial statements, including the balance sheets, statements of income, comprehensive income (loss), changes in stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and specific financial line items [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Presents the Company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Assets | $2,296,527 | $2,045,204 | $251,323 | 12.3% | | Total Liabilities | $2,094,603 | $1,863,485 | $231,118 | 12.4% | | Total Stockholders' Equity | $201,924 | $181,719 | $20,205 | 11.1% | [Consolidated Statements of Income](index=8&type=section&id=Consolidated%20Statements%20of%20Income) Details the Company's revenues, expenses, and net income over specific reporting periods, including interest income and expense | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Total Interest Income | $35,204 | $22,520 | $12,684 | 56.3% | | Total Interest Expense | $14,473 | $3,085 | $11,388 | 369.1% | | Net Interest Income | $20,731 | $19,435 | $1,296 | 6.7% | | Provision for Credit Losses | $773 | $1,663 | $(890) | -53.5% | | Total Noninterest Income | $(2,894) | $1,339 | $(4,233) | -316.1% | | Total Noninterest Expenses | $8,569 | $10,237 | $(1,668) | -16.3% | | Net Income | $6,629 | $6,700 | $(71) | -1.1% | | Basic EPS | $0.75 | $0.77 | $(0.02) | -2.6% | | Diluted EPS | $0.73 | $0.75 | $(0.02) | -2.7% | | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Total Interest Income | $96,088 | $56,144 | $39,944 | 71.1% | | Total Interest Expense | $36,379 | $5,690 | $30,689 | 539.3% | | Net Interest Income | $59,709 | $50,454 | $9,255 | 18.3% | | Provision for Credit Losses | $3,511 | $3,667 | $(156) | -4.3% | | Total Noninterest Income | $5,755 | $4,074 | $1,681 | 41.3% | | Total Noninterest Expenses | $32,159 | $29,178 | $2,981 | 10.2% | | Net Income | $23,056 | $16,479 | $6,577 | 39.9% | | Basic EPS | $2.62 | $1.87 | $0.75 | 40.1% | | Diluted EPS | $2.56 | $1.84 | $0.72 | 39.1% | [Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Reports net income and other comprehensive income (loss) components, reflecting changes in equity not from net income | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Net Income | $6,629 | $6,700 | $(71) | -1.1% | | Other Comprehensive Loss | $(2,327) | $(3,964) | $1,637 | -41.3% | | Comprehensive Income | $4,302 | $2,736 | $1,566 | 57.2% | | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Net Income | $23,056 | $16,479 | $6,577 | 39.9% | | Other Comprehensive Loss | $(2,078) | $(14,516) | $12,438 | -85.7% | | Comprehensive Income | $20,978 | $1,963 | $19,015 | 968.7% | [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Outlines the changes in stockholders' equity, including net income, dividends, and other comprehensive income (loss) | Metric | Dec 31, 2022 (in thousands) | Sep 30, 2023 (in thousands) | Change (in thousands) | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $181,719 | $201,924 | $20,205 | | Net Income | N/A | $23,056 | $23,056 | | Common Stock Dividends | N/A | $(2,391) | $(2,391) | | Other Comprehensive Loss | N/A | $(2,078) | $(2,078) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net Cash Provided by Operating Activities | $31,486 | $29,384 | $2,102 | | Net Cash Used in Investing Activities | $(207,300) | $(322,961) | $115,661 | | Net Cash Provided by Financing Activities | $223,495 | $255,683 | $(32,188) | | Net Increase (Decrease) in Cash and Cash Equivalents | $47,681 | $(37,894) | $85,575 | | Cash and Cash Equivalents at End of Year | $216,180 | $246,062 | $(29,882) | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements, clarifying accounting policies and specific line items [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the Company's nature of business, basis of financial statement presentation, key accounting estimates, and significant accounting policies for various financial instruments and activities, including the adoption of CECL - The Company is a bank holding company operating Southern States Bank, a commercial bank with branches in Alabama and Georgia, offering a full range of banking services[30](index=30&type=chunk) - The Company adopted ASU 2016-13 (CECL) on January 1, 2023, which requires earlier recognition of expected credit losses over the lifetime of financial assets, replacing the incurred loss methodology[48](index=48&type=chunk)[72](index=72&type=chunk) - Securities are classified as held to maturity (amortized cost) or available for sale (fair value with unrealized gains/losses in OCI) Other equity securities are at fair value through income, and restricted equity securities are at cost[39](index=39&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) [NOTE 2. EARNINGS PER SHARE](index=20&type=section&id=NOTE%202.%20EARNINGS%20PER%20SHARE) This note details the calculation of basic and diluted earnings per share, considering net income available to common shareholders and the dilutive effect of potential common shares from stock options and restricted stock units | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | **$0.75** | **$0.77** | **$2.62** | **$1.87** | | Diluted EPS | **$0.73** | **$0.75** | **$2.56** | **$1.84** | [NOTE 3. SECURITIES](index=21&type=section&id=NOTE%203.%20SECURITIES) This note provides a detailed breakdown of the Company's securities portfolio, including available-for-sale and held-to-maturity securities, their amortized cost, fair value, and unrealized gains/losses, along with an assessment of credit impairment | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Securities Available for Sale (Fair Value) | $169,859 | $155,544 | $14,315 | **9.2%** | | Total Securities Held to Maturity (Amortized Cost) | $19,637 | $19,652 | $(15) | **-0.1%** | | Total Securities (Fair Value) | $184,803 | $170,909 | $13,894 | **8.1%** | | Gross Unrealized Losses (Total Securities) | $(22,559) | $(19,320) | $(3,239) | **16.8%** | - Unrealized losses on **236** securities at September 30, 2023, were due to interest rate changes, not credit impairment, as the Company does not intend to sell them before recovery of amortized cost[81](index=81&type=chunk)[82](index=82&type=chunk) [NOTE 4. LOANS](index=25&type=section&id=NOTE%204.%20LOANS) This note details the composition of the loan portfolio, risk characteristics, credit risk management practices, classification of loans by risk category, collateral-dependent loans, past due status, and the allowance for credit losses, including the impact of CECL adoption | Loan Category | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Construction and development | $229,188 | $255,736 | $(26,548) | **-10.4%** | | Residential | $224,499 | $167,891 | $56,608 | **33.7%** | | Commercial | $1,049,545 | $904,872 | $144,673 | **16.0%** | | Commercial and industrial | $268,283 | $256,553 | $11,730 | **4.6%** | | Consumer and other | $8,331 | $7,655 | $676 | **8.8%** | | Gross Loans | $1,779,846 | $1,592,707 | $187,139 | **11.7%** | | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Allowance for Credit Losses | $22,181 | $20,156 | $2,025 | **10.0%** | | Nonaccrual Loans | $1,082 | $2,245 | $(1,163) | **-51.8%** | | Total Nonperforming Loans | $1,082 | $2,245 | $(1,163) | **-51.8%** | | Total Nonperforming Assets | $3,985 | $5,175 | $(1,190) | **-23.0%** | - The Company adopted CECL on January 1, 2023, resulting in a **$1.285 million** reduction in the allowance for credit losses at adoption[98](index=98&type=chunk)[100](index=100&type=chunk) [NOTE 5. DEPOSITS](index=35&type=section&id=NOTE%205.%20DEPOSITS) This note provides a breakdown of deposit classifications, including noninterest-bearing, interest-bearing transaction, savings, and time deposits, along with information on brokered deposits and the scheduled maturities of time deposits | Deposit Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Noninterest-bearing | $418,125 | $460,977 | $(42,852) | **-9.3%** | | Interest-bearing | $1,498,276 | $1,259,766 | $238,510 | **18.9%** | | Total Deposits | $1,916,401 | $1,720,743 | $195,658 | **11.4%** | | Brokered Deposits | $168,348 | $110,503 | $57,845 | **52.3%** | - As of September 30, 2023, **78.2%** of total deposits were interest-bearing, and **27.4%** were time deposits[108](index=108&type=chunk) [NOTE 6. SUBORDINATED NOTES](index=36&type=section&id=NOTE%206.%20SUBORDINATED%20NOTES) This note details the two series of fixed-to-floating rate subordinated notes issued in February and October 2022, including their principal amounts, interest rates, reset dates, and redemption terms - The Company issued **$48 million** of Fixed-to-Floating Rate Subordinated Notes in February 2022, bearing interest at **3.5%** per annum, resetting quarterly to Three-Month Term SOFR plus **205** basis points from February 2027[111](index=111&type=chunk) - An additional **$40 million** of Fixed-to-Floating Rate Subordinated Notes were issued in October 2022, bearing interest at **7.0%** per annum, resetting quarterly to Three-Month Term SOFR plus **306** basis points from October 2027[112](index=112&type=chunk) [NOTE 7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=37&type=section&id=NOTE%207.%20DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) This note explains the Company's use of derivative financial instruments, primarily non-designated interest rate swaps with commercial banking customers, which are simultaneously hedged by offsetting derivatives to minimize net risk exposure - The Company uses non-designated interest rate swaps to manage interest rate risk for customers, simultaneously hedging with offsetting derivatives to minimize its own net risk exposure[113](index=113&type=chunk)[114](index=114&type=chunk) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Notional Amount (Interest Rate Products) | $93,354 | $73,631 | | Fair Value (Other Assets) | $9,596 | $8,870 | | Fair Value (Other Liabilities) | $(9,614) | $(8,882) | [NOTE 8. COMMITMENTS AND CONTINGENCIES](index=38&type=section&id=NOTE%208.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the Company's off-balance sheet financial instruments, including commitments to extend credit and standby letters of credit, and notes that any liability from legal proceedings is not expected to have a material effect | Commitment Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Commitments to extend credit | $525,402 | $550,315 | $(24,913) | **-4.5%** | | Standby letters of credit | $3,582 | $5,632 | $(2,050) | **-36.4%** | | Total Commitments | $528,984 | $555,947 | $(26,963) | **-4.8%** | - Management believes that any liability from current legal proceedings will not have a material adverse effect on the Company's financial statements[124](index=124&type=chunk) [NOTE 9. CONCENTRATIONS OF CREDIT](index=38&type=section&id=NOTE%209.%20CONCENTRATIONS%20OF%20CREDIT) This note highlights the Company's credit concentrations, primarily in real estate loans within its Alabama and Georgia markets, and confirms adherence to regulatory lending limits - **85%** of the Company's loan portfolio is concentrated in real estate, primarily in Alabama and Georgia, making collectibility susceptible to local market conditions[125](index=125&type=chunk)[126](index=126&type=chunk) - The Company's credit extensions to any single borrower are within regulatory limits (**20%** of capital secured, **10%** unsecured)[128](index=128&type=chunk) [NOTE 10. STOCKHOLDERS' EQUITY](index=39&type=section&id=NOTE%2010.%20STOCKHOLDERS'%20EQUITY) This note provides the number of common stock shares issued and outstanding as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 | Dec 31, 2022 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Common Stock Shares Issued and Outstanding | 8,834,168 | 8,706,920 | 127,248 | **1.5%** | [NOTE 11. REGULATORY MATTERS](index=39&type=section&id=NOTE%2011.%20REGULATORY%20MATTERS) This note details the regulatory capital requirements for the Company and the Bank, including dividend restrictions, Basel III guidelines, and prompt corrective action framework, confirming that both entities met all capital adequacy requirements and the Bank was 'well capitalized' as of September 30, 2023 - The Bank is subject to dividend restrictions, with **$79.355 million** of retained earnings available for dividend declaration without regulatory approval as of September 30, 2023[130](index=130&type=chunk) - Both the Company and the Bank met all capital adequacy requirements as of September 30, 2023, with the Bank being 'well capitalized' under the prompt corrective action framework[132](index=132&type=chunk)[134](index=134&type=chunk) | Capital Ratio (Bank) | Sep 30, 2023 (Actual Ratio) | Dec 31, 2022 (Actual Ratio) | Required for Capital Adequacy | Minimum for "Well Capitalized" | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Tier 1 capital (to average assets) | **11.71%** | **12.17%** | **4.00%** | **5.00%** | | CET 1 capital (to risk-weighted assets) | **12.55%** | **12.21%** | **7.00%** | **6.50%** | | Tier 1 capital (to risk-weighted assets) | **12.55%** | **12.21%** | **8.50%** | **8.00%** | | Total capital (to risk-weighted assets) | **13.67%** | **13.24%** | **10.50%** | **10.00%** | [NOTE 12. FAIR VALUE OF ASSETS AND LIABILITIES](index=42&type=section&id=NOTE%2012.%20FAIR%20VALUE%20OF%20ASSETS%20AND%20LIABILITIES) This note describes the Company's methodology for determining fair value measurements, categorizing financial instruments into a three-level hierarchy based on input observability, and provides detailed fair value disclosures for various assets and liabilities - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) | Financial Asset | Sep 30, 2023 (Carrying Amount, in thousands) | Dec 31, 2022 (Carrying Amount, in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Cash and cash equivalents | $216,180 | $168,499 | | Securities available for sale | $169,859 | $155,544 | | Loans, net | $1,751,967 | $1,567,008 | | Deposits | $1,916,401 | $1,720,743 | - Impaired loans and foreclosed assets are measured at fair value on a nonrecurring basis, primarily using collateral appraisals with subjective management discounts, classifying them within Level 3 of the fair value hierarchy[162](index=162&type=chunk)[163](index=163&type=chunk)[165](index=165&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including an overview of performance, detailed analysis of net interest income, noninterest income, noninterest expense, asset quality, capital, liquidity, and critical accounting policies [Overview](index=49&type=section&id=Overview) This overview introduces Southern States Bancshares, Inc. as a bank holding company operating Southern States Bank, providing commercial and retail banking services across Alabama and Georgia It highlights key financial performance metrics for Q3 2023 and the impact of the Employee Retention Credit (ERC) reversal - Net income for Q3 2023 was **$6.6 million**, a slight decrease from **$6.7 million** in Q3 2022, primarily due to a **$5.1 million** reduction in noninterest income from the return of the Employee Retention Credit (**ERC**)[177](index=177&type=chunk)[178](index=178&type=chunk)[189](index=189&type=chunk) | Metric (Q3 2023) | Value | Q3 2022 Value | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Annualized ROAA | **1.15%** | **1.35%** | **-0.20%** | | Annualized ROAE | **12.96%** | **15.42%** | **-2.46%** | | Basic EPS | **$0.75** | **$0.77** | **-$0.02** | | Net Interest Margin | **3.78%** | **4.15%** | **-0.37%** | | Loans, net of unearned income (Sep 30, 2023) | **$1.8 billion** | **$1.587 billion** (Dec 31, 2022) | **+$213 million** | | Deposits (Sep 30, 2023) | **$1.9 billion** | **$1.721 billion** (Dec 31, 2022) | **+$179 million** | [Results of Operations for the Three Months Ended September 30, 2023 and 2022](index=52&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030,%202023%20and%202022) This section analyzes the Company's financial performance for the third quarter of 2023 compared to the same period in 2022, focusing on changes in net interest income, provision for credit losses, noninterest income, and noninterest expenses [Net Interest Income](index=53&type=section&id=Net%20Interest%20Income_Q3) Details the Company's net interest income, total interest income, total interest expense, net interest margin, and net interest spread for the three months ended September 30, 2023 and 2022 | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Net Interest Income | $20,731 | $19,435 | $1,296 | **6.7%** | | Total Interest Income | $35,204 | $22,520 | $12,684 | **56.3%** | | Total Interest Expense | $14,473 | $3,085 | $11,388 | **369.1%** | | Net Interest Margin | **3.78%** | **4.15%** | **-0.37%** | **-8.9%** | | Net Interest Spread | **2.84%** | **3.86%** | **-1.02%** | **-26.4%** | - The increase in interest income was primarily due to a **1.49%** increase in yield earned on average loans and a **$259.8 million** (**17.5%**) increase in average loans outstanding[196](index=196&type=chunk) - The significant increase in interest expense was due to a **2.63%** increase in the rate paid on interest-bearing liabilities and a **$319.1 million** (**24.9%**) increase in average interest-bearing liabilities[196](index=196&type=chunk) [Provision for Credit Losses](index=54&type=section&id=Provision%20for%20Credit%20Losses_Q3) Analyzes the provision for credit losses, net charge-offs (recoveries), and the allowance for credit losses as a percentage of gross loans for the three months ended September 30, 2023 and 2022 | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Provision for Credit Losses | $773 | $1,663 | $(890) | **-53.5%** | | Net Charge-offs (Recoveries) | $(23) (Net Recoveries) | $47 (Net Charge-offs) | $(70) | **-148.9%** | | Allowance for Credit Losses to Gross Loans | **1.25%** | **1.20%** | **+0.05%** | **4.2%** | [Noninterest Income](index=54&type=section&id=Noninterest%20Income_Q3) Examines the components of noninterest income, including the impact of the Employee Retention Credit (ERC), swap fees, and other operating income for the three months ended September 30, 2023 and 2022 | Noninterest Income Component | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Noninterest Income | $(2,894) | $1,339 | $(4,233) | **-316.1%** | | ERC | $(5,100) | $0 | $(5,100) | N/A | | Swap Fees | $453 | $11 | $442 | **4018.2%** | | Other Operating Income | $702 | $207 | $495 | **239.1%** | | Service Charges on Deposit Accounts | $442 | $508 | $(66) | **-13.0%** | | Mortgage Banking Activities | $158 | $218 | $(60) | **-27.5%** | [Noninterest Expense](index=56&type=section&id=Noninterest%20Expense_Q3) Reviews the breakdown of noninterest expenses, including salaries and employee benefits, professional fees, and equipment and occupancy expenses for the three months ended September 30, 2023 and 2022 | Noninterest Expense Component | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Noninterest Expense | $8,569 | $10,237 | $(1,668) | **-16.3%** | | Professional Fees Related to ERC | $(1,243) | $0 | $(1,243) | N/A | | Salaries and Employee Benefits | $5,752 | $6,152 | $(400) | **-6.5%** | | Equipment and Occupancy Expenses | $718 | $764 | $(46) | **-6.0%** | | Professional Services | $581 | $421 | $160 | **38.0%** | [Results of Operations for the Nine Months Ended September 30, 2023 and 2022](index=57&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030,%202023%20and%202022) This section analyzes the Company's financial performance for the first nine months of 2023 compared to the same period in 2022, highlighting significant increases in net income, net interest income, and noninterest income, partially offset by higher noninterest expenses and income taxes [Net Interest Income](index=58&type=section&id=Net%20Interest%20Income_9M) Details the Company's net interest income, total interest income, total interest expense, net interest margin, and net interest spread for the nine months ended September 30, 2023 and 2022 | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Net Interest Income | $59,709 | $50,454 | $9,255 | **18.3%** | | Total Interest Income | $96,088 | $56,144 | $39,944 | **71.1%** | | Total Interest Expense | $36,379 | $5,690 | $30,689 | **539.3%** | | Net Interest Margin | **3.85%** | **3.85%** | **0.00%** | **0.0%** | | Net Interest Spread | **3.00%** | **3.64%** | **-0.64%** | **-17.6%** | - Interest income growth was driven by a **1.65%** increase in yield earned on average loans and a **$302.6 million** (**22.0%**) increase in average loans outstanding[223](index=223&type=chunk) - Interest expense surged due to a **2.55%** increase in the rate paid on interest-bearing liabilities and a **$351.3 million** (**30.1%**) increase in average interest-bearing liabilities[223](index=223&type=chunk) [Provision for Credit Losses](index=59&type=section&id=Provision%20for%20Credit%20Losses_9M) Analyzes the provision for credit losses, net charge-offs (recoveries), and the allowance for credit losses as a percentage of gross loans for the nine months ended September 30, 2023 and 2022 | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Provision for Credit Losses | $3,511 | $3,667 | $(156) | **-4.3%** | | Net Charge-offs (Recoveries) | $201 (Net Charge-offs) | $88 (Net Charge-offs) | $113 | **128.4%** | | Allowance for Credit Losses to Gross Loans | **1.25%** | **1.20%** | **+0.05%** | **4.2%** | [Noninterest Income](index=59&type=section&id=Noninterest%20Income_9M) Examines the components of noninterest income, including net gain (loss) on securities, swap fees, and other operating income for the nine months ended September 30, 2023 and 2022 | Noninterest Income Component | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Total Noninterest Income | $5,755 | $4,074 | $1,681 | **41.3%** | | Net Gain (Loss) on Securities | $457 (Gain) | $(546) (Loss) | $1,003 | **-183.7%** | | Swap Fees | $622 | $48 | $574 | **1195.8%** | | Other Operating Income | $1,448 | $545 | $903 | **165.7%** | | SBA/USDA Fees | $274 | $575 | $(301) | **-52.3%** | | Mortgage Banking Activities | $446 | $717 | $(271) | **-37.8%** | [Noninterest Expense](index=61&type=section&id=Noninterest%20Expense_9M) Reviews the breakdown of noninterest expenses, including salaries and employee benefits, professional services, and other operating expenses for the nine months ended September 30, 2023 and 2022 | Noninterest Expense Component | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Total Noninterest Expense | $32,159 | $29,178 | $2,981 | **10.2%** | | Salaries and Employee Benefits | $19,926 | $17,859 | $2,067 | **11.6%** | | Professional Services | $1,606 | $1,298 | $308 | **23.7%** | | Other Operating Expenses | $6,750 | $6,191 | $559 | **9.0%** | - Salaries and employee benefits included **$1.6 million** in one-time retirement-related expenses for the former CEO and increases in equity-related expenses[236](index=236&type=chunk) - Other operating expenses increased due to provisioning for credit losses on unfunded commitments (ASC 326 adoption) and expenses from tax credit and fintech fund investments[241](index=241&type=chunk) [Financial Condition](index=63&type=section&id=Financial%20Condition) This section reviews the Company's financial position, detailing changes in assets (loans, securities, cash), liabilities (deposits), and stockholders' equity, along with an in-depth analysis of the loan portfolio, allowance for credit losses, nonperforming assets, and the securities portfolio [Total Assets, Loans, Securities, and Cash & Equivalents](index=63&type=section&id=Total%20Assets,%20Loans,%20Securities,%20and%20Cash%20%26%20Equivalents) Summarizes the Company's total assets, loans, securities portfolio, and cash and cash equivalents as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Assets | $2,296,527 | $2,045,204 | $251,323 | **12.3%** | | Loans, net of unearned income | $1,774,148 | $1,587,164 | $186,984 | **11.8%** | | Securities Portfolio | $189,496 | $175,196 | $14,300 | **8.2%** | | Cash and Cash Equivalents | $216,180 | $168,499 | $47,681 | **28.3%** | [Deposits](index=63&type=section&id=Deposits_FinancialCondition) Provides a summary of total deposits, interest-bearing deposits, noninterest-bearing deposits, and brokered deposits as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Deposits | $1,916,401 | $1,720,743 | $195,658 | **11.4%** | | Interest-bearing Deposits | $1,498,276 | $1,259,766 | $238,510 | **18.9%** | | Noninterest-bearing Deposits | $418,125 | $460,977 | $(42,852) | **-9.3%** | | Brokered Deposits | $168,348 | $110,503 | $57,845 | **52.3%** | [Stockholders' Equity](index=63&type=section&id=Stockholders'%20Equity_FinancialCondition) Summarizes the Company's total stockholders' equity as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Stockholders' Equity | $201,924 | $181,719 | $20,205 | **11.1%** | [Loan Portfolio](index=63&type=section&id=Loan%20Portfolio) Details the composition of the loan portfolio by category, including construction and development, residential, commercial, and commercial and industrial loans, as of September 30, 2023, and December 31, 2022 | Loan Category | Sep 30, 2023 (in thousands) | % of Total Loans | Dec 31, 2022 (in thousands) | % of Total Loans | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Construction and development | $229,188 | **12.9%** | $255,736 | **16.1%** | $(26,548) | **-10.4%** | | Residential | $224,499 | **12.6%** | $167,891 | **10.5%** | $56,608 | **33.7%** | | Commercial | $1,049,545 | **59.0%** | $904,872 | **56.8%** | $144,673 | **16.0%** | | Commercial and industrial | $268,283 | **15.0%** | $256,553 | **16.1%** | $11,730 | **4.6%** | | Consumer and other | $8,331 | **0.5%** | $7,655 | **0.5%** | $676 | **8.8%** | | Gross Loans | $1,779,846 | **100.0%** | $1,592,707 | **100.0%** | $187,139 | **11.7%** | - Approximately **84.5%** of gross loans were secured by real property as of September 30, 2023, geographically dispersed across Alabama and Georgia markets[255](index=255&type=chunk) - The regulatory concentration ratios for commercial real estate loans (**288.2%**) and C&D loans (**79.3%**) to total risk-based Bank capital were below the **300%**/**100%** limits[256](index=256&type=chunk)[257](index=257&type=chunk) [Loan Participations](index=66&type=section&id=Loan%20Participations) Summarizes the Company's loan participations sold and purchased as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Loan Participations Sold | $118,700 | $107,900 | $10,800 | **10.0%** | | Loan Participations Purchased | $123,900 | $114,600 | $9,300 | **8.1%** | [Allowance for Credit Losses](index=66&type=section&id=Allowance%20for%20Credit%20Losses_FinancialCondition) Provides an overview of the allowance for credit losses (ACL), including the impact of CECL adoption, provision for credit losses, net charge-offs, and ACL as a percentage of gross loans | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Allowance for Credit Losses (ACL) | $22,181 | $20,156 | $2,025 | **10.0%** | | Impact of CECL Adoption (Jan 1, 2023) | $(1,285) | N/A | N/A | N/A | | Provision for Credit Losses (9M 2023) | $3,511 | $3,667 (9M 2022) | $(156) | **-4.3%** | | Net Charge-offs (9M 2023) | $201 | $88 (9M 2022) | $113 | **128.4%** | | ACL as % of Gross Loans | **1.25%** | **1.27%** | **-0.02%** | **-1.6%** | - The allowance for credit losses on unfunded commitments was **$1.5 million** at September 30, 2023, with a **$1.3 million** impact from CECL adoption[99](index=99&type=chunk)[279](index=279&type=chunk)[283](index=283&type=chunk) [Nonperforming Loans and Assets](index=69&type=section&id=Nonperforming%20Loans%20and%20Assets) Details nonaccrual loans, total nonperforming loans, OREO, total nonperforming assets, and nonperforming loans as a percentage of gross loans | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Nonaccrual Loans | $1,082 | $2,245 | $(1,163) | **-51.8%** | | Total Nonperforming Loans | $1,082 | $2,245 | $(1,163) | **-51.8%** | | OREO | $2,903 | $2,930 | $(27) | **-0.9%** | | Total Nonperforming Assets | $3,985 | $5,175 | $(1,190) | **-23.0%** | | Nonperforming Loans to Gross Loans | **0.06%** | **0.14%** | **-0.08%** | **-57.1%** | - Foreclosed assets totaled **$2.9 million** at September 30, 2023, consisting primarily of one property, with no anticipated loss[289](index=289&type=chunk) [Securities Portfolio](index=70&type=section&id=Securities%20Portfolio) Summarizes the Company's total securities (fair value), available-for-sale securities, held-to-maturity securities, and gross unrealized losses as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Securities (Fair Value) | $184,803 | $170,909 | $13,894 | **8.1%** | | Total Securities Available for Sale (Fair Value) | $169,859 | $155,544 | $14,315 | **9.2%** | | Total Securities Held to Maturity (Amortized Cost) | $19,637 | $19,652 | $(15) | **-0.1%** | | Gross Unrealized Losses (Total Securities) | $(22,559) | $(19,320) | $(3,239) | **16.8%** | - The Company does not intend to sell securities with unrealized losses before recovery of amortized cost, as declines are considered temporary and due to interest rate changes, not credit impairment[295](index=295&type=chunk) [Bank Owned Life Insurance (BOLI)](index=72&type=section&id=Bank%20Owned%20Life%20Insurance%20(BOLI)) Summarizes the total value of Bank Owned Life Insurance (BOLI) as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | BOLI Total | $29,697 | $29,186 | $511 | **1.8%** | [Deposits](index=73&type=section&id=Deposits_FinancialCondition_Details) Provides a detailed breakdown of deposit types, including noninterest-bearing, interest-bearing transaction, savings, and time deposits, along with brokered deposits, as of September 30, 2023, and December 31, 2022 | Deposit Type | Sep 30, 2023 (in thousands) | % of Total | Dec 31, 2022 (in thousands) | % of Total | Change (in thousands) | % Change | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Total Deposits | $1,916,401 | **100.0%** | $1,720,743 | **100.0%** | $195,658 | **11.4%** | | Noninterest-bearing transaction | $418,125 | **21.8%** | $460,977 | **26.8%** | $(42,852) | **-9.3%** | | Interest-bearing transaction | $934,383 | **48.8%** | $837,127 | **48.6%** | $97,256 | **11.6%** | | Savings | $38,518 | **2.0%** | $49,235 | **2.9%** | $(10,717) | **-21.8%** | | Time deposits | $525,375 | **27.4%** | $373,404 | **21.7%** | $151,971 | **40.7%** | | Brokered Deposits | $168,348 | **8.8%** | $110,503 | **6.4%** | $57,845 | **52.3%** | - The average rate paid on total deposits increased significantly from **0.36%** in Q3 2022 to **2.29%** in Q3 2023[304](index=304&type=chunk) [Borrowed Funds](index=74&type=section&id=Borrowed%20Funds) This section details the Company's supplementary funding sources, including FHLB advances, uncollateralized federal funds lines of credit, and subordinated debt securities, outlining their amounts, interest rates, and terms [FHLB Advances](index=74&type=section&id=FHLB%20Advances) Summarizes the outstanding amount, weighted average interest rate, and borrowing capacity of FHLB advances as of September 30, 2023, and December 31, 2022 | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Amount Outstanding | $55,000 | $31,000 | $24,000 | **77.4%** | | Weighted Average Interest Rate | **4.88%** | **3.43%** | **+1.45%** | **42.3%** | | Borrowing Capacity | $203,900 | $99,500 | $104,400 | **104.9%** | [Lines of Credit](index=75&type=section&id=Lines%20of%20Credit) Details the Bank's uncollateralized federal funds lines of credit and a collateralized line of credit with First Horizon, including outstanding balances and repayment information - The Bank has **$99.2 million** in uncollateralized federal funds lines of credit, with **$5.0 million** outstanding at September 30, 2023, which was repaid on October 1, 2023[308](index=308&type=chunk) - A **$25.0 million** Line of Credit with First Horizon, collateralized by **100%** of the Bank's capital stock, had a **$0** balance outstanding at September 30, 2023[309](index=309&type=chunk) [Subordinated Debt Securities](index=75&type=section&id=Subordinated%20Debt%20Securities) Provides information on the two series of Fixed-to-Floating Rate Subordinated Notes issued in February and October 2022, including their principal amounts, initial interest rates, and reset terms - **$48.0 million** Fixed-to-Floating Rate Subordinated Notes issued in Feb 2022, with a **3.50%** initial interest rate, resetting in Feb 2027 to Three-Month Term SOFR + **205** bps[310](index=310&type=chunk) - **$40.0 million** Fixed-to-Floating Rate Subordinated Notes issued in Oct 2022, with a **7.00%** initial interest rate, resetting in Oct 2027 to Three-Month Term SOFR + **306** bps[311](index=311&type=chunk) [Liquidity and Capital Resources](index=75&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's liquidity management strategies, including liquid assets and alternative funding sources, and its adherence to regulatory capital requirements, confirming both the Company and the Bank are well-capitalized [Liquidity](index=75&type=section&id=Liquidity) Describes the Company's liquidity sources, including cash, deposits, investment securities, and borrowings, and discusses the proportion of uninsured deposits - The Company's liquidity is supported by cash, interest-bearing deposits, federal funds sold, unpledged investment securities, wholesale deposits, and borrowings from correspondent banks and FHLB[314](index=314&type=chunk) - Uninsured deposits were approximately **29.7%** of total deposits at September 30, 2023, which is believed to be below peer average due to a focus on small business banking[317](index=317&type=chunk) [Capital Requirements](index=76&type=section&id=Capital%20Requirements) Details the regulatory capital requirements for the Company and the Bank, confirming their compliance with minimum capital adequacy standards and the Bank's 'well capitalized' status - As of September 30, 2023, both the Company and the Bank exceeded all minimum bank regulatory capital requirements, and the Bank was considered "well capitalized"[319](index=319&type=chunk)[322](index=322&type=chunk) | Capital Ratio (Bank) | Sep 30, 2023 (Actual Ratio) | Dec 31, 2022 (Actual Ratio) | Required for Capital Adequacy | Minimum for "Well Capitalized" | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Tier 1 capital (to average assets) | **11.71%** | **12.17%** | **4.00%** | **5.00%** | | CET 1 capital (to risk-weighted assets) | **12.55%** | **12.21%** | **7.00%** | **6.50%** | | Tier 1 capital (to risk-weighted assets) | **12.55%** | **12.21%** | **8.50%** | **8.00%** | | Total capital (to risk-weighted assets) | **13.67%** | **13.24%** | **10.50%** | **10.00%** | [Contractual Obligations](index=78&type=section&id=Contractual%20Obligations) Presents a table summarizing the Company's contractual obligations, including time deposits, FHLB advances, subordinated debt, and other borrowings, categorized by maturity periods | Obligation Type | Within One Year (in thousands) | One to Five Years (in thousands) | After Five Years (in thousands) | Total (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :------------------- | | Time deposits | $413,265 | $112,083 | $27 | $525,375 | | FHLB advances | $43,000 | $12,000 | $0 | $55,000 | | Subordinated debt borrowings | $0 | $0 | $86,582 | $86,582 | | Other borrowings | $4,991 | $0 | $0 | $4,991 | | Total Contractual Obligations | $461,256 | $124,083 | $86,609 | $671,948 | [Off-Balance Sheet Arrangements](index=78&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company engages in off-balance sheet arrangements, including commitments to extend credit (**$525.4 million**) and standby letters of credit (**$3.6 million**) as of September 30, 2023, which involve credit and interest rate risk | Commitment Type | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Commitments to extend credit | $525,402 | $550,315 | $(24,913) | **-4.5%** | | Standby letters of credit | $3,582 | $5,632 | $(2,050) | **-36.4%** | | Total Off-Balance Sheet Commitments | $528,984 | $555,947 | $(26,963) | **-4.8%** | [Interest Rate Sensitivity and Market Risk](index=79&type=section&id=Interest%20Rate%20Sensitivity%20and%20Market%20Risk) The Company actively manages its interest rate risk through its ALCO, using simulation models and shock analyses to assess the impact of interest rate fluctuations on net interest income and fair value of equity, aiming to stay within established policy guidelines - The Company manages interest rate risk through its Asset Liability Committee (ALCO), using simulation models and shock analyses to test the impact on net interest income and fair value of equity[338](index=338&type=chunk)[339](index=339&type=chunk) - Internal policy specifies that estimated net interest income at risk for the subsequent one-year period should not decline by more than **10%** for a **100** basis point shift, **15%** for **200** bps, **20%** for **300** bps, and **25%** for **400** bps[341](index=341&type=chunk) | Change in Interest Rates (Basis Points) | Percent Change in Net Interest Income (Sep 30, 2023) | Percent Change in Net Interest Income (Sep 30, 2022) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | +400 | **4.30%** | **23.59%** | | +300 | **3.70%** | **17.63%** | | +200 | **2.70%** | **11.71%** | | +100 | **1.50%** | **5.88%** | | -100 | (**4.40%**) | (**6.68%**) | | -200 | (**7.50%**) | (**14.17%**) | | -300 | (**10.80%**) | (**22.85%**) | | -400 | (**14.40%**) | (**34.47%**) | [Impact of Inflation](index=80&type=section&id=Impact%20of%20Inflation) This section notes that interest rates have a more significant impact on a financial institution's performance than general inflation, and rising rates can increase funding costs and potentially reduce loan demand - Interest rates have a more significant impact on a financial institution's performance than general inflation due to the monetary nature of assets and liabilities[343](index=343&type=chunk)[344](index=344&type=chunk) - Increases in interest rates can lead to higher funding costs, a shift to higher interest-bearing deposits, and potentially lower loan originations[342](index=342&type=chunk) [Critical Accounting Policies and Estimates](index=81&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the critical accounting policies and significant estimates that require complex judgments, including those related to the basis of presentation, cash and cash equivalents, securities classification, loans held for sale, loans, and the allowance for credit losses - Critical accounting policies involve significant management estimates and judgments, particularly for the allowance for credit losses, valuation of financial instruments, and deferred taxes[345](index=345&type=chunk)[346](index=346&type=chunk)[352](index=352&type=chunk) - The allowance for credit losses is a highly subjective estimate based on loan portfolio evaluation, past loss experience, asset quality trends, economic conditions, and regulatory recommendations, with CECL methodology applied[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item refers to the market risk disclosures provided in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, and additional information within Item 2 of this Quarterly Report - Quantitative and qualitative disclosures about market risk are cross-referenced to the Annual Report on Form 10-K and Item 2 of this Quarterly Report[358](index=358&type=chunk) [Item 4. Controls and Procedures](index=83&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective as of September 30, 2023, and reported no material changes in internal control over financial reporting during Q3 2023 - The Company's disclosure controls and procedures were deemed effective as of September 30, 2023, following an evaluation by management, including the CEO and CFO[359](index=359&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the third quarter of 2023[360](index=360&type=chunk) [Part II. Other Information](index=84&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=84&type=section&id=Item%201.%20Legal%20Proceedings) The Company and Southern States Bank are involved in routine legal proceedings, primarily for loan collection, and management believes these will not have a material adverse effect on their financial condition or results of operations - The Company is involved in various legal proceedings in the ordinary course of business, primarily to collect loans or enforce security interests[362](index=362&type=chunk) - Management believes that none of the pending legal proceedings will have a material adverse effect on the Company's financial condition or results of operations[362](index=362&type=chunk) [Item 1A. Risk Factors](index=84&type=section&id=Item%201A.%20Risk%20Factors) This item refers to the risk factors detailed in the Annual Report on Form 10-K and highlights new or materially changed risks related to liquidity impairment, the soundness of other financial institutions, and potential increases in FDIC insurance premiums - New or materially changed risk factors include potential liquidity impairment due to deposit withdrawals or inability to raise funds, the impact of the soundness of other financial institutions, and potential increases in FDIC insurance premiums[363](index=363&type=chunk)[364](index=364&type=chunk)[367](index=367&type=chunk)[368](index=368&type=chunk) - The Company's access to funding could be impaired by factors affecting the financial services industry or the economy, such as disruptions in financial markets or negative expectations[366](index=366&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This item reports on the Company's share repurchase program, which was extended in February 2023 to authorize repurchases of up to **$10.0 million** of common stock until December 31, 2023 No shares were repurchased during Q3 2023 - The Company's share repurchase program, extended in February 2023, authorizes repurchases of up to **$10.0 million** of common stock until December 31, 2023[369](index=369&type=chunk)[370](index=370&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of the Publicly Announced Program | Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) | | :-------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :------------------------------------------------------------------------------ | | July 1 - Sep 30, 2023 | 0 | $0 | 0 | $9,021 | [Item 3. Defaults Upon Senior Securities](index=85&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item states that there were no defaults upon senior securities - There were no defaults upon senior securities[371](index=371&type=chunk) [Item 4. Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[372](index=372&type=chunk) [Item 5. Other Information](index=85&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report - No other information to report[373](index=373&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This item provides a comprehensive list of exhibits filed with the Form 10-Q, including agreements, corporate documents, certifications, and XBRL-related documents - The report includes various exhibits such as the Agreement and Plan of Merger, Certificate of Incorporation, Bylaws, Indentures for Subordinated Notes, and certifications from executive officers[374](index=374&type=chunk)[376](index=376&type=chunk) [Signatures](index=87&type=section&id=Signatures) Confirms the official submission of the report with signatures from the Chief Executive Officer and Chief Financial Officer - The report is signed by Mark A. Chambers, Chief Executive Officer and Director, and Lynn Joyce, Senior Executive Vice President and Chief Financial Officer, on November 14, 2023[380](index=380&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q _____________________________ ☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 30, 2023 or ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 001-40727 _____________________________ Southern States Bancshar ...

Financial Performance - Net income for the three months ended March 31, 2023, was $7,671 thousand, representing a 68.8% increase from $4,557 thousand for the same period in 2022[22]. - Comprehensive income for the same period was $8,873,000, compared to a loss of $1,311,000 in the prior year[24]. - Basic earnings per share for Q1 2023 were $0.87, up from $0.51 in Q1 2022, representing a growth of 70.6%[22]. - Net income for Q1 2023 was $7.7 million, down from $10.6 million in Q4 2022 and up from $4.6 million in Q1 2022[181]. - Annualized return on average assets (ROAA) was 1.51% for Q1 2023, compared to 2.11% in Q4 2022 and 1.03% in Q1 2022[185]. - Annualized return on average equity (ROAE) was 16.67% for Q1 2023, down from 23.77% in Q4 2022 and up from 10.43% in Q1 2022[185]. Interest Income and Expenses - Total interest income rose to $28,699 thousand for Q1 2023, up 80.9% from $15,872 thousand in Q1 2022, driven primarily by increased loan income[22]. - Net interest income after provision for credit losses was $18,365 thousand for Q1 2023, compared to $13,954 thousand in Q1 2022, marking a 31.5% increase[22]. - Net interest income decreased by $1.3 million, or 6.4%, to $19.5 million in Q1 2023 from $20.9 million in Q4 2022, but increased by $4.9 million, or 33.4%, from $14.7 million in Q1 2022[185]. - The increase in interest income was primarily driven by a $12.8 million increase, or 80.8%, in interest income, partially offset by a $7.9 million increase, or 651.5%, in interest expense[196]. Asset and Deposit Growth - Total assets increased to $2,135,622 thousand as of March 31, 2023, compared to $2,045,204 thousand at December 31, 2022, reflecting a growth of approximately 4.4%[18]. - Total deposits increased to $1,789,491 thousand as of March 31, 2023, up from $1,720,743 thousand at December 31, 2022, indicating a growth of approximately 4.0%[18]. - The company experienced a net increase in deposits of $68,748,000 during the quarter, contrasting with a decrease of $14,612,000 in the same period last year[30]. - Loans, net of unearned income, increased by $58.2 million, or 3.7%, to $1.6 billion as of March 31, 2023, compared to December 31, 2022[185]. Credit Losses and Provisions - The provision for credit losses was $1,181 thousand for Q1 2023, compared to $700 thousand in Q1 2022, reflecting a 68.6% increase[22]. - The allowance for credit losses decreased slightly to $19,855 thousand as of March 31, 2023, from $20,156 thousand at December 31, 2022[18]. - The allowance for credit losses as a percentage of gross loans was 1.20% at March 31, 2023, compared to 1.18% at March 31, 2022[198]. - The provision for credit losses for the three months ended March 31, 2023, was $1.2 million, up from $700,000 in the same period in 2022[197]. Noninterest Expenses - Noninterest expenses totaled $10,158 thousand for Q1 2023, an increase of 9.3% from $9,290 thousand in Q1 2022[22]. - Salaries and employee benefits accounted for $6.311 million in Q1 2023, up from $5.725 million in Q1 2022, reflecting an increase of $586,000[208]. - Total noninterest expense increased from $9.290 million in Q1 2022 to $10.158 million in Q1 2023[208]. Stockholder Equity and Share Repurchase - The company reported a total stockholders' equity of $189,663 thousand as of March 31, 2023, compared to $181,719 thousand at December 31, 2022, reflecting an increase of approximately 4.4%[19]. - The company repurchased $575,000 worth of common stock under its stock repurchase program during the quarter[30]. - The company announced a share repurchase program extension for an additional $10.0 million effective until December 31, 2023[179]. Securities and Fair Value - Total securities available for sale as of March 31, 2023, amounted to $163,550,000, down from $155,544,000 at December 31, 2022[86]. - The fair value of total securities decreased to $179,669,000 as of March 31, 2023, from $170,909,000 at December 31, 2022[87]. - The total unrealized losses on securities available for sale were $13,388,000 as of March 31, 2023[86]. - The fair value of U.S. Treasury securities as of March 31, 2023, is $8,758,000, with no Level 1 assets and $8,758,000 classified under Level 2[161]. Management and Governance - Mark Chambers was appointed as Chief Executive Officer on May 1, 2023, succeeding Stephen Whatley[180]. - The company operates through thirteen offices in Alabama and Georgia, providing a range of banking services[177].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-K Commission File Number: 001-40727 615 Quintard Ave., Anniston, AL 36201 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (256) 241-1092 Securities registered pursuant to Section 12(b) of the Act: _____________________________ | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, $5.00 par ...