Southern States Bancshares, Inc. Announces Fourth Quarter 2022 Financial Results

Southern States Bancshares, Inc

Fourth Quarter 2022 Performance and Operational Highlights

• Net income of $10.6 million, or $1.18 per diluted share
  
  

• Core net income⁽¹⁾ of $8.1 million, or $0.90 per diluted share⁽¹⁾
  
  

• Net interest income of $20.9 million, an increase of $1.4 million from the prior quarter
  
  

• Net interest margin (“NIM”) of 4.38%, up 23 basis points from the prior quarter
  
  

• NIM of 4.39% on a fully-taxable equivalent basis (“NIM - FTE”)⁽¹⁾
  
  

• Return on average assets (“ROAA”) of 2.11%; return on average stockholders’ equity (“ROAE”) of 23.77%; and return on average tangible common equity (“ROATCE”)⁽¹⁾ of 26.49%
  
  

• Core ROAA⁽¹⁾ of 1.61%; and core ROATCE⁽¹⁾ of 20.21%
  
  

• Efficiency ratio of 40.81%, an improvement from 48.94% for the prior quarter
  
  

• Linked-quarter loan growth was 18.1% annualized⁽²⁾
  
  

• Linked-quarter deposit growth was 4.6% annualized⁽²⁾
  
  

• Completed the sale of two branches resulting in a $2.4 million net gain

^{(1) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(2) The sale of two branches on October 1, 2022 resulted in a $7.3 million reduction in loans and a $66.0 million reduction in deposits. The growth percentages are net of the accounts sold.}

ANNISTON, Ala., Jan. 23, 2023 (GLOBE NEWSWIRE) -- Southern States Bancshares, Inc. (NASDAQ: SSBK) (“Southern States” or the “Company”), the holding company for Southern States Bank, an Alabama state-chartered commercial bank (the “Bank”), today reported net income of $10.6 million, or $1.18 diluted earnings per share, for the fourth quarter of 2022. This compares to net income of $6.7 million, or $0.75 diluted earnings per share, for the third quarter of 2022, and net income of $4.1 million, or $0.44 diluted earnings per share, for the fourth quarter of 2021. The Company reported core net income of $8.1 million, or $0.90 diluted core earnings per share, for the fourth quarter of 2022. This compares to core net income of $6.8 million, or $0.77 diluted core earnings per share, for the third quarter of 2022, and core net income of $4.3 million, or $0.47 diluted core earnings per share, for the fourth quarter of 2021 (see “Reconciliation of Non-GAAP Financial Measures”).

CEO Commentary

Stephen Whatley, Chairman and Chief Executive Officer of Southern States, said, “We are very pleased with our fourth-quarter and full-year results. Our talented bankers identified compelling opportunities throughout 2022, driving strong new business development. At the same time, we maintained underwriting discipline and excellent credit quality.” “We grew loans by 18.1% annualized in the fourth quarter and 27.7% for the full year, culminating a year of robust production across our economically dynamic markets. This growth, combined with an increased net interest margin, fueled the expansion of our fourth-quarter net interest income, which increased by 7.5% from the prior quarter and by 48.2% from the fourth quarter of 2021.” Mr. Whatley continued. “While our markets are healthy and our clients are cautiously optimistic, we are mindful of the slowing economic environment heading into 2023 and the lagging impact of rising interest rates on deposit costs. Our long-term commitment to prudent, selective lending and proactive expense management give us confidence in our ability to navigate the changing landscape and continue to drive strong risk-adjusted returns for our shareholders.”   “To that end, during the fourth quarter, we completed the sale of two branches as part of an ongoing effort to optimize our physical footprint. The branch sales resulted in a net gain of $2.4 million.”

Net Interest Income and Net Interest Margin

	Three Months Ended												% Change December 31, 2022 vs.
	December 31, 2022				September 30, 2022				December 31, 2021				September 30, 2022			December 31, 2021
	(Dollars in thousands)
Average interest-earning assets	$	1,893,069			$	1,859,104			$	1,519,490			1.8	%		24.6	%
Net interest income	$	20,884			$	19,435			$	14,096			7.5	%		48.2	%
Net interest margin		4.38	%			4.15	%			3.68	%		23	bps		70	bps

Net interest income for the fourth quarter of 2022 was $20.9 million, an increase of 7.5% from $19.4 million for the third quarter of 2022. The increase was primarily attributable to growth, accompanied by an increase in net interest margin.

Relative to the fourth quarter of 2021, net interest income increased $6.8 million, or 48.2%. The increase was substantially the result of growth, accompanied by an increase in net interest margin.

Net interest margin for the fourth quarter of 2022 was 4.38%, compared to 4.15% for the third quarter of 2022. The increase was primarily due to the Company’s asset sensitive balance sheet as rates increased.

Relative to the fourth quarter of 2021, net interest margin increased from 3.68%. The increase was primarily due to the Company’s asset sensitive balance sheet as rates increased, coupled with the deployment of excess liquidity.

Noninterest Income

	Three Months Ended												% Change December 31, 2022 vs.
	December 31, 2022				September 30, 2022				December 31, 2021				September 30, 2022			December 31, 2021
	(Dollars in thousands)
Service charges on deposit accounts	$	431			$	508			$	428			(15.2	)%		0.7	%
Swap fees		2				11				(6	)		(81.8	)%		(133.3	)%
SBA/USDA fees		70				95				533			(26.3	)%		(86.9	)%
Mortgage origination fees		98				218				269			(55.0	)%		(63.6	)%
Net gain (loss) on securities		(86	)			(143	)			(40	)		(39.9	)%		115.0	%
Other operating income		4,088				650				567			528.9	%		621.0	%
Total noninterest income	$	4,603			$	1,339			$	1,751			243.8	%		162.9	%

Noninterest income for the fourth quarter of 2022 was $4.6 million, an increase of 243.8% from $1.3 million for the third quarter of 2022. The fourth quarter 2022 results included a $2.6 million gain on the sale of two branches and a bank owned life insurance ("BOLI") benefit claim of $774,000. This decrease was partially offset by a decrease in mortgage fees.

Relative to the fourth quarter of 2021, noninterest income increased 162.9% from $1.8 million. The fourth quarter 2022 results included a $2.6 million gain on the sale of two branches and a BOLI benefit claim of $774,000. This increase was partially offset by a decrease in SBA/USDA fees and mortgage fees during the fourth quarter of 2022.

Noninterest Expense

	Three Months Ended												% Change December 31, 2022 vs.
	December 31, 2022				September 30, 2022				December 31, 2021				September 30, 2022			December 31, 2021
	(Dollars in thousands)
Salaries and employee benefits	$	6,738			$	6,152			$	5,563			9.5	%		21.1	%
Equipment and occupancy expenses		730				764				943			(4.5	)%		(22.6	)%
Data processing fees		711				599				563			18.7	%		26.3	%
Regulatory assessments		165				235				263			(29.8	)%		(37.3	)%
Other operating expenses		2,092				2,487				2,280			(15.9	)%		(8.2	)%
Total noninterest expenses	$	10,436			$	10,237			$	9,612			1.9	%		8.6	%

Noninterest expense for the fourth quarter of 2022 was $10.4 million, an increase of 1.9% from $10.2 million for the third quarter of 2022. The increase was primarily attributable to an increase in salaries and benefits as a result of expense related to the issuance of restricted stock units in a deferred compensation plan. Also included in the fourth quarter of 2022 was $200,000 in expenses associated with the sale of the branches. The increase was partially offset by a decrease in fraud losses as a portion was recovered in the fourth quarter of 2022.

Relative to the fourth quarter of 2021, noninterest expense increased 8.6% from $9.6 million. The increase was primarily attributable to an increase in salaries and benefits as a result of additional incentive accruals based on operating results along with expense related to the issuance of restricted stock units in a deferred compensation plan.

Loans and Credit Quality

	Three Months Ended												% Change December 31, 2022 vs.
	December 31, 2022				September 30, 2022				December 31, 2021				September 30, 2022			December 31, 2021
	(Dollars in thousands)
Core loans	$	1,592,707			$	1,530,129			$	1,244,914			4.1	%		27.9	%
PPP loans		—				—				9,203			—	%		NM
Gross loans		1,592,707				1,530,129				1,254,117			4.1	%		27.0	%
Unearned income		(5,543	)			(5,139	)			(3,817	)		7.9	%		45.2	%
Loans, net of unearned income (“Loans”)	$	1,587,164			$	1,524,990			$	1,250,300			4.1	%		26.9	%
Average loans, net of unearned (“Average loans”)	$	1,563,255			$	1,480,735			$	1,191,688			5.6	%		31.2	%
Nonperforming loans (“NPL”)	$	2,245			$	3,950			$	1,972			(43.2	)%		13.8	%
Provision for loan losses	$	1,938			$	1,663			$	732			16.5	%		164.8	%
Allowance for loan losses (“ALLL”)	$	20,156			$	18,423			$	14,844			9.4	%		35.8	%
Net charge-offs (recoveries)	$	205			$	47			$	(15	)		336.2	%		(1466.7	)%
NPL to gross loans		0.14	%			0.26	%			0.16	%
Net charge-offs (recoveries) to average loans(1)		0.05	%			—	%			—	%
ALLL to loans		1.27	%			1.21	%			1.19	%
(1) Ratio is annualized.
NM = Not meaningful

Loans, net of unearned income were $1.6 billion at December 31, 2022, up $62.2 million from September 30, 2022 and up $336.9 million from December 31, 2021. The linked-quarter increase in loans was primarily attributable to growth across our footprint.

Nonperforming loans totaled $2.2 million, or 0.14% of gross loans, at December 31, 2022, compared with $4.0 million, or 0.26% of gross loans, at September 30, 2022, and $2.0 million, or 0.16% of gross loans, at December 31, 2021. The $1.7 million net decrease in nonperforming loans in the fourth quarter was primarily attributable to one commercial real estate loan that was moved back to accruing status. The $273,000 net increase in nonperforming loans from December 31, 2021 was primarily attributable to loans being added and removed from nonaccrual status, none of which were significant.

The Company recorded a provision for loan losses of $1.9 million for the fourth quarter of 2022, compared to $1.7 million for the third quarter of 2022. The provision was primarily due to changes in our qualitative economic factors.

Net charge-offs for the fourth quarter of 2022 were $205,000, or 0.05% of average loans, compared to net charge-offs of $47,000, or 0.00% of average loans, for the third quarter of 2022, and net recoveries of $15,000, or 0.00% of average loans, for the fourth quarter of 2021.

The Company’s allowance for loan losses was 1.27% of total loans and 897.82% of nonperforming loans at December 31, 2022, compared with 1.21% of total loans and 466.41% of nonperforming loans at September 30, 2022.

Deposits

	Three Months Ended												% Change December 31, 2022 vs.
	December 31, 2022				September 30, 2022				December 31, 2021				September 30, 2022			December 31, 2021
	(Dollars in thousands)
Noninterest-bearing deposits	$	460,977			$	499,613			$	541,546			(7.7	)%		(14.9	)%
Interest-bearing deposits		1,259,766				1,267,479				1,014,905			(0.6	)%		24.1	%
Total deposits	$	1,720,743			$	1,767,092			$	1,556,451			(2.6	)%		10.6	%

Total deposits were $1.7 billion at December 31, 2022, compared with $1.8 billion at September 30, 2022 and $1.6 billion at December 31, 2021. The $46.3 million decrease in total deposits in the fourth quarter was substantially due to the sale of two branches in October, which resulted in a $66.0 million reduction in total deposits. Excluding the sale, total deposits had a net increase of $19.7 million due to a $43.7 million increase in interest-bearing account balances that more than offset a decrease of $24.0 million in noninterest-bearing deposits.

Capital

	December 31, 2022						September 30, 2022						December 31, 2021
	Company			Bank			Company			Bank			Company			Bank
Tier 1 capital ratio to average assets	8.82	%		12.17	%		8.44	%		11.49	%		9.74	%		10.44	%
Risk-based capital ratios:
Common equity tier 1 (“CET1”) capital ratio	8.82	%		12.17	%		8.73	%		11.89	%		10.35	%		11.09	%
Tier 1 capital ratio	8.82	%		12.17	%		8.73	%		11.89	%		10.35	%		11.09	%
Total capital ratio	14.29	%		13.18	%		12.26	%		12.87	%		11.33	%		12.07	%

As of December 31, 2022, total stockholders’ equity was $181.7 million, compared with $170.3 million at September 30, 2022. The increase of $11.4 million was substantially due to strong earnings growth.

About Southern States Bancshares, Inc.

Headquartered in Anniston, Alabama, Southern States Bancshares, Inc. is a bank holding company that operates primarily through its wholly-owned subsidiary, Southern States Bank. The Bank is a full service community banking institution, which offers an array of deposit, loan and other banking-related products and services to businesses and individuals in its communities. The Bank operates 13 branches in Alabama and Georgia and two loan production offices in Atlanta.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, which reflect our current expectations and beliefs with respect to, among other things, future events and our financial performance. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. This may be especially true given the inflationary environment, the COVID-19 pandemic and governmental responses. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the dates made, we cannot give any assurance that such expectations will prove correct and actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and in other SEC filings under the section entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors”. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.

These statements are often, but not always, made through the use of words or phrases such as “may,” “can,” “should,” “could,” “to be,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “likely,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “target,” “project,” “would” and “outlook,” or the negative version of those words or other similar words or phrases of a future or forward-looking nature. Forward-looking statements appear in a number of places in this press release and may include statements about business strategy and prospects for growth, operations, ability to pay dividends, competition, regulation and general economic conditions.

Contact Information
Lynn Joyce	Kevin Dobbs
(205) 820-8065	(310) 622-8245
ljoyce@ssbank.bank	ssbankir@finprofiles.com

SELECT FINANCIAL DATA
(In thousands, except share and per share amounts)
	Three Months Ended												Year Ended December 31,
	December 31, 2022				September 30, 2022				December 31, 2021					2022				2021
Results of Operations
Interest income	$	26,706			$	22,520			$	15,171			$	82,850			$	57,777
Interest expense		5,822				3,085				1,075				11,512				4,864
Net interest income		20,884				19,435				14,096				71,338				52,913
Provision for loan losses		1,938				1,663				732				5,605				2,982
Net interest income after provision		18,946				17,772				13,364				65,733				49,931
Noninterest income		4,603				1,339				1,751				8,677				10,803
Noninterest expense		10,436				10,237				9,612				39,614				36,435
Income tax expense(1)		2,521				2,174				1,445				7,725				5,732
Net income	$	10,592			$	6,700			$	4,058			$	27,071			$	18,567
Core net income(2)	$	8,081			$	6,806			$	4,256			$	24,975			$	15,956
Share and Per Share Data
Shares issued and outstanding		8,706,920				8,705,920				9,012,857				8,706,920				9,012,857
Weighted average shares outstanding:
Basic		8,707,026				8,693,745				9,012,857				8,774,860				8,198,188
Diluted		8,932,585				8,871,116				9,125,872				8,949,669				8,316,536
Earnings per share:
Basic	$	1.22			$	0.77			$	0.45			$	3.08			$	2.26
Diluted	$	1.18			$	0.75			$	0.44			$	3.02			$	2.23
Core - diluted(2)	$	0.90			$	0.77			$	0.47			$	2.79			$	1.92
Book value per share	$	20.87			$	19.56			$	19.66			$	20.87			$	19.66
Tangible book value per share(2)	$	18.79			$	17.48			$	17.62			$	18.79			$	17.62
Cash dividends declared	$	0.09			$	0.09			$	0.09			$	0.36			$	0.36
Performance and Financial Ratios
ROAA		2.11	%			1.35	%			0.99	%			1.43	%			1.23	%
ROAE		23.77	%			15.42	%			9.15	%			15.55	%			11.80	%
Core ROAA(2)		1.61	%			1.37	%			1.04	%			1.32	%			1.06	%
ROATCE(2)		26.49	%			17.24	%			10.22	%			17.37	%			13.38	%
Core ROATCE(2)		20.21	%			17.51	%			10.72	%			16.02	%			11.50	%
NIM		4.38	%			4.15	%			3.68	%			3.99	%			3.78	%
NIM - FTE(2)		4.39	%			4.17	%			3.70	%			4.01	%			3.80	%
Net interest spread		3.84	%			3.86	%			3.54	%			3.68	%			3.63	%
Yield on loans		6.05	%			5.37	%			4.75	%			5.27	%			4.89	%
Yield on interest-bearing assets		5.60	%			4.81	%			3.96	%			4.64	%			4.13	%
Cost of interest-bearing liabilities		1.76	%			0.95	%			0.42	%			0.96	%			0.50	%
Cost of funds(3)		1.29	%			0.69	%			0.30	%			0.68	%			0.36	%
Cost of interest-bearing deposits		1.52	%			0.82	%			0.39	%			0.79	%			0.47	%
Cost of total deposits		1.09	%			0.58	%			0.27	%			0.55	%			0.33	%
Noninterest deposits to total deposits		26.79	%			28.27	%			34.79	%			26.79	%			34.79	%
Total loans to total deposits		92.24	%			86.30	%			80.33	%			92.24	%			80.33	%
Efficiency ratio		40.81	%			48.94	%			60.50	%			49.12	%			57.13	%
Core efficiency ratio(2)		45.98	%			48.94	%			59.07	%			50.97	%			60.13	%

^{(1) Three months ended and year ended December 31, 2022 include a $540,000 investment tax credit.
(2) See "Reconciliation of Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measures to their most closely comparable GAAP financial measures.
(3) Includes total interest-bearing liabilities and noninterest deposits.}

SELECT FINANCIAL DATA
(In thousands)
	Three Months Ended												Year Ended December 31,
	December 31, 2022				September 30, 2022				December 31, 2021					2022				2021
Financial Condition (ending)
Total loans	$	1,587,164			$	1,524,990			$	1,250,300			$	1,587,164			$	1,250,300
Total securities		175,196				170,375				151,844				175,196				151,844
Total assets		2,044,866				2,052,725				1,782,592				2,044,866				1,782,592
Total noninterest bearing deposits		460,977				499,613				541,546				460,977				541,546
Total deposits		1,720,743				1,767,092				1,556,451				1,720,743