Overview of Financial Performance

The company reported net income of $10.2 million for the year ended December 31, 2024, down from $25.8 million in the prior year. This decrease was primarily due to a $9.7 million bargain purchase gain recorded in 2023 from the acquisition of Noah Bank, as well as an increase of $1.5 million in the provision for credit losses related to the CFC acquisition in 2024.

Revenue and Profit Trends

• Net interest income increased 2.3% to $66.5 million, driven by a 25.2% increase in interest and dividend income partially offset by a 70.1% increase in interest expense.
• The net interest margin decreased 55 basis points to 3.38% due to the higher cost of interest-bearing deposits.
• Non-interest income decreased 52.4% to $8.1 million, mainly due to the absence of the $9.7 million bargain purchase gain in 2023.
• Non-interest expense increased 16.4% to $56.8 million, primarily from higher salaries, occupancy costs, and merger-related expenses related to the CFC acquisition.
• The effective tax rate increased to 20.1% in 2024 from 15.1% in 2023 due to the tax benefit on the 2023 bargain purchase gain.

Strengths and Weaknesses

Strengths:

• Successful acquisition strategy, with the CFC acquisition adding $303.5 million in assets
• Diversified loan portfolio, with commercial real estate loans comprising 76.1% of the total
• Strong deposit growth of 24.2%, including a 24.4% increase in non-interest-bearing deposits

Weaknesses:

• Decrease in net income due to one-time gains in 2023 and higher credit loss provisions in 2024
• Narrowing of net interest margin due to rising deposit costs
• Increase in non-performing assets to $27.1 million, primarily from two commercial real estate loans

Outlook

The company remains focused on its acquisition strategy, having successfully integrated the CFC acquisition in 2024. However, the higher credit loss provisions and narrowing net interest margin present challenges going forward. Management will need to carefully manage interest rate risk and credit quality to maintain profitability. Overall, the company appears well-positioned to continue growing through strategic acquisitions, but will need to closely monitor its operating expenses and credit performance.