Southern States Bancshares(SSBK) - 2024 Q4 - Annual Report

Acquisition and Expansion - The company completed the acquisition of Century Bank of Georgia on July 31, 2024, expanding its presence in Georgia with two new offices[31] - Southern States focuses on organic growth and acquisitions, recently acquiring Century Bank[146] - Southern States may pursue strategic acquisitions to expand its business, but such acquisitions require regulatory approval[177] Employee and Workforce - As of December 31, 2024, the company had a total of 209 employees, with 206 classified as full-time[43] - Approximately 25% of the company's employees own stock, reflecting a commitment to employee engagement and retention[47] - The company has a strong focus on human capital management, fostering a diverse and inclusive workforce[44] Regulatory Environment - The company is subject to extensive regulation by the Federal Reserve and the Alabama State Banking Department, impacting its operational practices[55] - Southern States must obtain prior approval from the Federal Reserve for acquisitions exceeding 5% of voting stock of a bank[67] - The Community Reinvestment Act requires banks to meet the credit needs of local communities, impacting merger and acquisition approvals[90] - Southern States has not elected to operate as a financial holding company, limiting its engagement in non-banking activities[68] - The Federal Reserve may require a bank holding company to divest subsidiaries if they pose significant risks to financial safety[70] - Poor examination ratings can restrict a bank's ability to grow, acquire new businesses, or pay dividends[71] - The federal banking agencies adopted a final rule to modernize CRA regulations, effective January 1, 2026, with new metrics-based evaluations for bank performance[93] - Small and intermediate banks are exempt from new data requirements that apply to banks with assets of at least $2.0 billion, while large banks with assets over $10.0 billion face additional data requirements[93] - The Dodd-Frank Act permanently increased the maximum amount of deposit insurance to $250,000 per depositor, impacting the company's regulatory environment[113] - The Bank Merger Act requires regulatory approval for bank mergers and acquisitions, considering factors such as CRA performance and anti-money laundering effectiveness[100] - The company is subject to various laws and regulations regarding anti-money laundering, and deficiencies could result in significant liabilities[180] Financial Performance and Risks - The company’s principal sources of income include interest and fees from loans, with principal expenses being interest on deposits and employee compensation[32] - Southern States' profitability is significantly affected by interest rate fluctuations, with net interest income being the primary source of earnings[127] - The company faces risks related to credit quality, particularly from borrowers failing to meet loan obligations, which could adversely impact financial results[136] - Southern States' allowance for estimated credit losses may not be sufficient to cover actual loan losses, potentially leading to negative impacts on net income and capital[142] - The narrowing of interest rate spreads could adversely affect Southern States' results of operations and financial condition[133] - Adverse economic conditions in Southern States' operating markets could negatively impact growth rates and loan repayment abilities[134] - The company is subject to regulatory reviews that may require increases in the allowance for estimated credit losses, affecting financial condition[144] - The potential for increased FDIC deposit insurance assessments could negatively impact earnings and limit business opportunities[164] - The company faces risks related to credit quality in its loan portfolio, which could adversely impact financial performance[155] Capital and Liquidity - The company maintains a capital surplus equal to at least 20% of its capital, complying with Alabama law[64] - The capital requirements include a minimum common equity tier 1 capital ratio of 4.5% and a total capital ratio of 8%[75] - A capital conservation buffer of 2.5% is required above the minimum risk-based capital ratios to avoid restrictions on capital distributions[76] - Southern States is classified as a "small bank holding company" with less than $3.0 billion in total consolidated assets, evaluated at the bank level[77] - Institutions classified as "well capitalized" must maintain a total risk-based capital ratio of 10% or greater[80] - The Bank must maintain a minimum common equity tier 1 capital ratio of 7% to avoid limits on capital distributions, including dividends[170] - The company may need to raise additional capital in the future to meet regulatory requirements, which could be dilutive to stockholders[167] Competition and Market Conditions - The financial services industry is highly competitive, with significant competition from both community banks and larger financial institutions[172] - Southern States' acquisition strategy may be hindered by intense competition from larger banking organizations[148] - The company may face increased competition for deposits as interest rates rise, potentially leading to higher funding costs[229] Technology and Cybersecurity - Technological advancements are crucial for Southern States' competitiveness, but the company may have fewer resources than its competitors for such investments[176] - Southern States relies heavily on third-party vendors for transaction processing, including general ledger and loan processing systems[210] - The company faces increased risks related to cyber-attacks and unauthorized access due to the growing use of online banking services[211] - Any cyber-attack or information security breach could lead to significant reputational damage and potential liability, adversely affecting financial performance[212] Stock and Market Dynamics - The company issued $48.0 million in 3.50% Fixed-to-Floating Rate Subordinated notes due 2032 and $40.0 million in 7.0% Fixed-to-Floating Rate Subordinated notes due 2032[187] - The company assumed $4.7 million in 3.50% Fixed-to-Floating Rate Subordinated notes due 2031 as a result of the acquisition of Century Bank[188] - The company has a stock repurchase program authorized for up to $10.0 million through December 31, 2024, with an extension for another $10.0 million until December 31, 2025[203] - The company’s stock price may be affected by the existence of its stock repurchase program, potentially increasing volatility[204] - Future sales of substantial amounts of common stock could adversely affect the market price and the company's ability to raise capital[184] - The market price of Southern States' common stock may be highly volatile, influenced by various economic and operational factors[182] Economic Influences - Southern States' financial condition is influenced by fiscal and monetary policies, with inflation potentially increasing operating costs and deflation affecting loan quality[214] - Changes in interest rates and the yield curve significantly impact Southern States' profitability, particularly net interest income[227] - A steeper yield curve could enhance net interest income opportunities, while a flattening yield curve may pressure net interest margins[227] - The accuracy of financial statements is contingent on the reliability of information from customers and counterparties, which could impact financial reporting[216] - Changes in accounting standards may materially affect how Southern States records and reports its financial condition and results of operations[222]