First munity (FCCO) - 2024 Q4 - Annual Report

Company Operations - The company operates 21 full-service offices across South Carolina and Georgia, focusing on small to medium-sized businesses and individuals [263]. Income Sources - The primary source of income is net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings [264]. - The company intends to allocate a substantial percentage of its earning assets into the loan portfolio due to higher interest yields compared to other assets [265]. Credit Losses - The allowance for credit losses is assessed quarterly, with adjustments recorded in the provision for credit losses, reflecting management's estimates of expected losses [271]. - As of December 31, 2024, the company held an allowance for credit losses for its investment securities, loans, and unfunded commitments [271]. - The company adopted FASB ASU 2016-13 on January 1, 2023, which changed the methodology for determining the allowance for credit losses [270]. - The provision for credit losses was $809 thousand for 2024, down from$1.1 million in 2023, reflecting improved economic forecasts [286]. - The allowance for credit losses on loans increased to $13.1 million at December 31, 2024, up from$12.3 million at December 31, 2023 [316]. - The total allowance for credit losses (ACL) was $13.6 million at December 31, 2024, compared to$12.9 million at December 31, 2023 [316]. - The allowance for credit losses is based on a collective methodology using a non-discounted cash flow approach, with adjustments for qualitative risk factors [430]. Financial Performance - Net income for the year ended December 31, 2024, was $14.0 million, or$1.81 diluted earnings per common share, compared to $11.8 million, or$1.55 diluted earnings per common share for 2023, reflecting a $2.1 million increase [286]. - Net interest income increased by$3.1 million due to a $154.9 million rise in average earning assets, despite a nine basis point decline in net interest margin [286]. - Non-interest income rose by$3.6 million, driven by increases in mortgage banking income ($962 thousand) and investment advisory fees ($1.7 million) [288]. - Non-interest expenses increased by $4.3 million, primarily due to a$3.4 million rise in salaries and employee benefits [288]. - Total assets as of December 31, 2024, were $1,958,021 thousand, up from$1,827,688 thousand in 2023 [282]. - Total deposits increased to $1,675,901 thousand in 2024, compared to$1,511,001 thousand in 2023, marking a growth of 10.9% [282]. - The efficiency ratio for 2024 was 71.56%, slightly up from 71.23% in 2023, indicating a marginal increase in operating expenses relative to revenue [285]. - Return on average common equity improved to 10.17% in 2024 from 9.59% in 2023, reflecting better profitability [285]. - Book value per common share increased to $18.90 in 2024, up from$17.23 in 2023, indicating a solid growth in shareholder equity [285]. Asset and Loan Growth - Average loans increased by $136.9 million, or 13.1$1.2 billion for the twelve months ended December 31, 2024, representing 66.3% of average earning assets [293]. - Total gross loans reached $1,220.5 million at December 31, 2024, up from$1,134.0 million at December 31, 2023 [370]. - The loan to deposit ratio (including loans held-for-sale) averaged 74.4% during 2024, compared to 73.2% during 2023 [293]. - The average loan portfolio (including held-for-sale) was $1.2 billion in 2024, compared to$1.0 billion in 2023 [369]. Interest Rates and Yields - The yield on loans increased by 0.62% to 5.61% during the twelve months ended December 31, 2024, from 4.99% during the same period in 2023 [294]. - The cost of interest-bearing liabilities was 2.88% during the twelve months ended December 31, 2024, compared to 2.06% during the same period in 2023 [296]. - The yield on earning assets for the twelve months ended December 31, 2024, was 5.00%, compared to 4.45% for the same period in 2023 [295]. - The effective tax rate was 21.3% during the twelve months ended December 31, 2023, compared to 20.6% during the same period in 2022 [290]. Non-Interest Income - Non-interest income for the twelve months ended December 31, 2024, increased to $14.0 million from$10.4 million in 2023, marking a $3.6 million increase [344]. - Mortgage banking income increased by$962 thousand to $2.4 million for the twelve months ended December 31, 2024, compared to$1.4 million for the same period in 2023 [346]. - Investment advisory fees rose by $1.7 million to$6.2 million during the twelve months ended December 31, 2024, compared to $4.5 million in the same period in 2023 [348]. Non-Performing Assets - The non-performing asset ratio was 0.04$810 thousand at December 31, 2024, compared to $864 thousand at December 31, 2023 [319]. - The non-performing asset ratio improved to 0.05$864 thousand [325]. - Non-accrual loans decreased significantly to $27 thousand at December 31, 2023, from$4.9 million at December 31, 2022 [325]. Shareholder Equity - Total shareholders' equity increased by $13.4 million, or 10.3$144.5 million at December 31, 2024, from $131.1 million at December 31, 2023 [395]. - Shareholders' equity as a percentage of total assets rose to 7.4$130.3 million, or 7.1% [395]. - The company reported a net income of $14.0 million for the year, with$4.4 million paid in dividends, resulting in a $9.6 million increase in retained earnings [395]. Tax and Regulatory Matters - The company is subject to complex income tax laws, which may lead to material differences in actual results compared to estimates [275]. - The effective tax rate for the year ended December 31, 2024, was 21.5$573.1 million, compared to uninsured deposits of $437.1 million [412]. - The Bank maintains federal funds purchased lines totaling$77.5 million and $10.0 million through the Federal Reserve Discount Window, with no utilization as of December 31, 2024, and 2023 [412].