10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
☒	Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended December 31, 2023
Or
☐	Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from                   to

Commission file number: 000-28344

First Community Corporation

(Exact name of registrant as specified in its charter)

South Carolina	57-1010751
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5455 Sunset Blvd.,
Lexington, South Carolina	29072
(Address of principal executive offices)	(Zip Code)

803-951-2265

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $1.00 par value per share	FCCO	The NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☒

As of June 30, 2023, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $126,574,711 based on the closing price of $17.36 on June 30, 2023, as reported on The NASDAQ Capital Market. 7,629,005 shares of the registrant’s common stock were issued and outstanding as of March 21, 2024.

Documents Incorporated by Reference

Portions of the registrant’s Definitive Proxy Statement for its 2024 Annual Meeting of Shareholders are incorporated by reference into Part III, Items 10-14 of this Form 10-K.

TABLE OF CONTENTS

	Page No.
PART I	7
Item 1. Business	7
Item 1A. Risk Factors	30
Item 1B. Unresolved Staff Comments	46
Item 1C. Cybersecurity	46
Item 2. Properties	47
Item 3. Legal Proceedings	47
Item 4. Mine Safety Disclosures	47
PART II	48
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities	48
Item 6. [Reserved]	49
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	80
Item 8. Financial Statements and Supplementary Data	80
Consolidated Balance Sheets	84
Consolidated Statements of Income	85
Consolidated Statements of Comprehensive Income (Loss)	86
Consolidated Statements of Changes in Shareholders’ Equity	87
Consolidated Statements of Cash Flows	88
Notes to Consolidated Financial Statements	89
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	131
Item 9A. Controls and Procedures	131
Item 9B. Other Information	131
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	131
PART III	132
Item 10. Directors, Executive Officers and Corporate Governance	132
Item 11. Executive Compensation	132
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	132
Item 13. Certain Relationships and Related Transactions, and Director Independence	132
Item 14. Principal Accountant Fees and Services	132
PART IV	133
Item 15. Exhibits, Financial Statement Schedules	133
SIGNATURES	136

2

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

This report, including information included or incorporated by reference in this report, contains statements which constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may relate to, among other matters, the financial condition, results of operations, plans, objectives, future performance, and the business of our company. Forward-looking statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “approximately,” “is likely,” “would,” “could,” “should,” “will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “continue,” “assume,” “believe,” “intend,” “plan,” “forecast,” “goal,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ materially from those anticipated in our forward-looking statements include, without limitation, those described under the heading “Risk Factors” in this Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the U.S. Securities and Exchange Commission (the “SEC”) and the following:

· credit losses as a result of, among other potential factors, declining real estate values, increasing interest rates, increasing unemployment, or changes in customer payment behavior or other factors;

· the amount of our loan portfolio collateralized by real estate and weaknesses in the real estate market;

· restrictions or conditions imposed by our regulators on our operations;

· the adequacy of the level of our allowance for credit losses and the amount of credit loss provisions required in future periods;

· examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for credit losses, write-down assets, or take other actions;

· risks associated with actual or potential information gatherings, investigations or legal proceedings by customers, regulatory agencies or others;

· reduced earnings due to higher credit impairment charges resulting from additional decline in the value of our securities portfolio, specifically as a result of increasing default rates, and loss severities on the underlying real estate collateral;

· increases in competitive pressure in the banking and financial services industries;

· changes in the interest rate environment, which are affected by many factors beyond our control, including inflation, recession, unemployment, money supply, domestic and international events and changes in the United States and other financial markets, and that could reduce anticipated or actual margins; temporarily reduce the market value of our available-for-sale investment securities and temporarily reduce accumulated other comprehensive income or increase accumulated other comprehensive loss, which temporarily could reduce shareholders’ equity;

· enterprise risk management may not be effective in mitigating risk and reducing the potential for losses;

· changes in political conditions or the legislative or regulatory environment, including governmental initiatives affecting the financial services industry, including as a result of the presidential administration and congressional elections;

· general economic conditions resulting in, among other things, a deterioration in credit quality;

· changes occurring in business conditions and inflation, including the impact of inflation on us, including a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expense, which may have an adverse impact on our financial performance;

· changes in access to funding or increased regulatory requirements with regard to funding, which could impair our liquidity;

· FDIC assessment which has increased, and may continue to increase, our cost of doing business;

· cybersecurity risk related to our dependence on internal computer systems and the technology of outside service providers, as well as the potential impacts of third party security breaches, which subject us to potential business disruptions or financial losses resulting from deliberate attacks or unintentional events;

· changes in deposit flows, which may be negatively affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, and returns available to customers on alternative investments;

· changes in technology, including the increasing use of artificial intelligence;

· our current and future products, services, applications and functionality and plans to promote them;

· changes in monetary and tax policies, including potential changes in tax laws and regulations;

· changes in accounting standards, policies, estimates and practices as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC and the Public Company Accounting Oversight Board;

· our assumptions and estimates used in applying critical accounting policies, which may prove unreliable, inaccurate or not predictive of actual results;

· the rate of delinquencies and amounts of loans charged-off;

3

· the rate of loan growth in recent years and the lack of seasoning of a portion of our loan portfolio;

· our ability to maintain appropriate levels of capital, including levels of capital required under the capital rules implementing Basel III;

· our ability to successfully execute our business strategy;

· our ability to attract and retain key personnel;

· our ability to retain our existing customers, including our deposit relationships;

· our use of brokered deposits may be an unstable and/or expensive deposit source to fund earning asset growth;

· our ability to obtain brokered deposits as an additional funding source could be limited;

· adverse changes in asset quality and resulting credit risk-related losses and expenses;

· the potential effects of events beyond our control that may have a destabilizing effect on financial markets and the economy, such as epidemics and pandemics (including COVID-19), war or terrorist activities, such as the war in Ukraine, the Middle East conflict, and the conflict between China and Taiwan, disruptions in our customers’ supply chains, disruptions in transportation, essential utility outages or trade disputes and related tariffs;

· disruptions due to flooding, severe weather or other natural disasters; and

· other risks and uncertainties described under “Risk Factors” below.

Because of these and other risks and uncertainties, our actual future results may be materially different from the results indicated by any forward-looking statements. For additional information with respect to factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” under Part I, Item 1A of this Annual Report on Form 10-K. In addition, our past results of operations do not necessarily indicate our future results. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

All forward-looking statements in this report are based on information available to us as of the date of this report. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that these expectations will be achieved. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

4

Summary of Material Risks

An investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing our business, see Item 1A—Risk Factors.

Economic and Geographic-Related Risks

· Our business may be adversely affected by economic conditions.

Credit and Interest Rate Risks

· Our decisions regarding credit risk and allowance for credit losses may significantly harm our business.

· We may have higher credit losses than we have allowed for in our allowance for credit losses.

· Our concentration of credit exposure in commercial real estate means that challenges in this market could harm our business, financial condition, and results of operations.

· Limits imposed by bank regulators on commercial and multi-family real estate lending could restrict our growth and harm our earnings.

· Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.

· Our focus on lending to small to mid-sized community-based businesses may increase our credit risk.

· Our underwriting decisions may materially and adversely affect our business.

· Our financial condition could suffer if we rely on misleading information from our clients or counterparties.

· If we fail to effectively manage credit risk, our business and financial condition will suffer.

· Changes in prevailing interest rates may reduce our profitability.

Capital and Liquidity Risks

· Changes in the financial markets could impair the value of our investment portfolio.

· The Bank must adhere to strict capital requirements, which could become even stricter in the future.

Risks Related to Our Industry

· Inflationary pressures and rising prices may affect our results of operations and financial condition.

· The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve.

· Adverse developments affecting the financial services industry, such as the 2023 bank failures or concerns involving liquidity, may have a material adverse effect on our operations

· Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.

· We could experience a loss due to competition with other financial institutions or nonbank companies.

· We may be adversely affected by the soundness of other financial institutions.

· Failure to keep pace with technological changes could adversely affect our business.

· New lines of business or new products and services may subject us to additional risk.

· Consumers may decide not to use banks to complete their financial transactions.

· We use brokered deposits, which may be an unstable and costly source of funding for asset growth.

· Our ability to obtain brokered deposits as an additional funding source may become limited.

· Consumers may decide not to use banks to complete their financial transactions.

Risks Related to Our Strategy

· We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.

· We may be exposed to difficulties in combining the operations of acquired businesses into our own operations, which may prevent us from achieving the expected benefits from our acquisition activities.

· New or acquired banking office facilities and other facilities may not be profitable.

Risks Related to Our Human Capital

· We are dependent on key individuals, and the loss of one or more of these individuals could limit our growth and adversely affect our prospects.

5

Operational Risks

· System or infrastructure failures, including cyber-attacks, could disrupt our operations, lead to the disclosure of confidential information, harm our reputation, or increase costs and losses.

· Our information systems may experience failure, interruption or breach in security.

· We are at risk of increased losses from fraud.

· Our use of third party vendors and our other ongoing third party business relationships are subject to increasing regulatory requirements and attention.

· If we fail to maintain our reputation, our performance may be harmed.

Legal, Accounting, Regulatory and Compliance Risks

· We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business.

· Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.

· Failure to comply with federal and state fair lending laws could result in significant penalties for us.

· Changes in accounting standards could materially affect our financial statements.

· The Federal Reserve may require us to commit capital resources to support the Bank.

· We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

· We are involved in various claims and lawsuits related to our business. Litigation is uncertain, making it difficult to determine the expenses and ultimate exposure for many of these matters.

· We may become involved in suits, legal proceedings, investigations, and proceedings by governmental and self-regulatory agencies, which could have adverse consequences.

· Changes in tax laws and regulations or their interpretations could negatively impact us.

· A reduction in our ability to realize deferred tax assets could negatively affect our operating results.

Risks Related to an Investment In our Common Stock

· Our ability to pay cash dividends is limited, and future dividends may not be able to be paid even if we desire to.

· Our stock price may be volatile, which could result in losses to our investors and litigation against us.

· Future sales of stock by shareholders, or the expectation of such sales, could lower our stock price.

· We may need to raise capital under unfavorable terms due to economic or other circumstances. Issuing common stock could dilute existing shareholders’ ownership and book value per share, potentially impacting our ability to obtain additional capital.

· Provisions of our articles of incorporation and bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover by a third party.

· An investment in our common stock is not an insured deposit.

General Risks

· Increasing scrutiny and evolving expectations with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

· Climate change could have a material adverse impact on us and our customers.

· Our historical operating results may not be indicative of our future operating results.

· A downgrade of the U.S. credit rating could harm our business, results of operations, and financial condition.  

6

PART I

Item 1. Business.

General

First Community Corporation, a bank holding company registered under the Bank Holding Company Act of 1956, was incorporated under the laws of South Carolina in November 1994 primarily to own and control all of the capital stock of First Community Bank, which commenced operations in August 1995. The Bank’s primary federal regulator is the Federal Deposit Insurance Corporation (the “FDIC”). The Bank is also regulated and examined by the South Carolina Board of Financial Institutions (the “S.C. Board”).

Unless otherwise mentioned or unless the context requires otherwise, references herein to “First Community,” the “Company” “we,” “us,” “our” or similar references mean First Community Corporation and its consolidated subsidiaries. References to the “Bank” means First Community Bank.

We engage in a commercial banking business from our main office in Lexington, South Carolina and our 22 full-service offices located in: the Midlands of South Carolina, which includes Lexington County (6 offices), Richland County (4 offices), Newberry County (2 offices) and Kershaw County (1 office); the Upstate of South Carolina, which includes Greenville County (2 offices), Anderson County (1 office) and Pickens County (1 office); the Piedmont Region of South Carolina, which includes York County, South Carolina (1 office) and the Central Savannah River Area, which includes Aiken County, South Carolina (1 office); and in Augusta, Georgia, which includes Richmond County (2 offices) and Columbia County (1 office). We intend to close one office in downtown Augusta, Georgia on June 27, 2024 and have provided the required notices to the FDIC and the S.C. Board.

At December 31, 2023, we had approximately $1.8 billion in assets, $1.1 billion in loans, $1.5 billion in deposits, and $131.1 million in shareholders’ equity.

We offer a wide range of traditional banking products and services for professionals and small-to medium-sized businesses, including consumer and commercial, mortgage, brokerage and investment, and insurance services. We also offer online banking to our customers. We have grown organically and through acquisitions.

Our stock trades on The NASDAQ Capital Market under the symbol “FCCO”.

Available Information

We provide our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) on our website at www.firstcommunitysc.com/ under the About section, under the Investors link. These filings are made accessible as soon as reasonably practicable after they have been filed electronically with SEC. These filings are also accessible on the SEC’s website at www.sec.gov. In addition, we make available under our Investor Relations section on our website the following, among other things: (i) Code of Business Conduct and Ethics, which applies to our directors and all employees and (ii) the charters of the Audit and Compliance, Human Resources and Compensation, and Nominations and Corporate Governance Committees of our board of directors. These materials are available to the general public on our website free of charge. Printed copies of these materials are also available free of charge to shareholders who request them in writing. Please address your request to: Investor Relations, First Community Corporation, 5455 Sunset Boulevard, Lexington, South Carolina 29072. Statements of beneficial ownership of equity securities filed by directors, officers, and 10% or greater shareholders under Section 16 of the Exchange Act are also available through our website. The information on our website is not incorporated by reference into this report. 

7

Location and Service Area

The Bank is engaged in a general commercial and retail banking business, emphasizing the needs of small-to-medium sized businesses, professionals and individuals. We have a total of 13 full-service offices located in Richland, Lexington, Kershaw and Newberry Counties of South Carolina and the surrounding areas. We refer to these counties as the “Midlands” region of South Carolina. Lexington County is home to six of our branch offices. Richland County, in which we currently have four branches, is the third largest county in South Carolina. Columbia is located within Richland County and is South Carolina’s capital city and is geographically positioned in the center of the state between the industrialized Upstate region of South Carolina and the coastal city of Charleston, South Carolina. Intersected by three major interstate highways (I-20, I-77, and I-26), Columbia’s strategic location has contributed greatly to its commercial appeal and growth. With the acquisition of Savannah River Banking Company in 2014, we added a branch in Aiken, South Carolina and a branch in Augusta, Georgia (Richmond County). In 2016, we opened a loan production office in Greenville County, which we converted into a full-service office in February 2019. With the acquisition of Cornerstone Bancorp in 2017, we added a branch in each of Greenville, Pickens, and Anderson Counties of South Carolina. We refer to this three-county area as the “Upstate” region of South Carolina. In 2018, we opened a de novo branch in downtown Augusta, Georgia (Richmond County). In 2019, we opened a de novo branch in Evans, Georgia, a suburb of Augusta in Columbia County, Georgia. We refer to the three-county area of Aiken County (South Carolina), Richmond County (Georgia) and Columbia County (Georgia) as the “CSRA” region. On March 14, 2022, we opened a loan production office in York County, South Carolina. We converted this loan production office into a full-service banking office on October 20, 2022. We refer to York County, South Carolina and the surrounding area as the “Piedmont Region”.

The following table shows data as to deposits, market share and population for our four market areas (deposits in thousands):

	Total		Estimated		Total Market Deposits(2)		Our Market Deposits(2)
	Offices		Population(1)		June 30, 2023		June 30, 2023		Market Share
Midlands Region		13		844,540	$	26,688,780	$	1,085,820		4.07	%
CSRA Region		4		551,315	$	10,505,222	$	142,059		1.35	%
Upstate Region		4		910,056	$	25,121,130	$	178,476		0.71	%
Piedmont Region(3)		1		302,484	$	4,747,236	$	18,683		0.39	%

(1)	Population data is 2024 total population from S&P Global Market Intelligence.
(2)	All deposit data is based on June 30, 2023 data sourced from S&P Global Market Intelligence.
(3)	Our full-service banking office in the Piedmont Region opened on October 20, 2022.

We believe that we serve attractive banking markets with long-term growth potential and a well-educated employment base that helps to support our diverse and relatively stable local economy. According to S&P Global Market Intelligence, 2024 median household incomes for each of the counties in the regions noted above were as follows:

Richland County, SC	$	61,225
Lexington County, SC	$	69,231
Newberry County, SC	$	60,763
Kershaw County, SC	$	54,292
Greenville County, SC	$	72,599
Anderson County, SC	$	62,098
Pickens County, SC	$	52,577
Aiken County, SC	$	60,747
Richmond County, GA	$	51,710
Columbia County, GA	$	92,208
York County, SC	$	77,244

8

The county estimates noted above compare to 2024 statewide median household income estimates of $64,898 and $72,877 for South Carolina and Georgia, respectively. The principal components of the economy within our market areas are service industries, government and education, and wholesale and retail trade. The largest employers in the Midlands market area include the State of South Carolina, Prisma Health, BlueCross BlueShield of SC, the University of South Carolina, the United States Department of the Army (Fort Jackson Army Base), Richland County School District 1, Richland County School District 2, Lexington Medical Center, Lexington County School District One, and Michelin North America. The largest employers in our CSRA market area, each of which employs in excess of 3,000 people, include the U.S. Army Cyber Center of Excellence & Fort Gordon, Augusta University, NSA Augusta, Wellstar MCG Health, Richmond County School System, Piedmont Hospital, Amazon, and the Department of Energy, Savannah River Site. The Upstate region major employers include, among others, Prisma Health, Greenville County Schools, BMW Manufacturing Corp., Michelin North America, Bon Secours St. Francis Health System, AnMed Health Medical Center, Clemson University, Duke Energy Corp., GE Vernova, and the Greenville County Government. The Piedmont Region major employers include, among others, Ross Stores, Inc. – Distribution, LPL Financial, Wells Fargo Home Mortgage, Piedmont Medical Center, Comporium, Inc., and Schaeffler Group USA, Inc. We believe that this diversified economic base has reduced, and will likely continue to reduce, economic volatility in our market areas. Our markets have experienced economic and population growth over the past 10 years, and we expect that the area, as well as the service industry needed to support it, will continue to grow.

Banking Services 

We offer a full range of deposit services that are typically available in most banks and thrift institutions, including checking accounts, NOW accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates are tailored to our principal market area at rates competitive to those offered in the area. In addition, we offer certain retirement account services, such as individual retirement accounts (“IRAs”). All deposit accounts are insured by the FDIC up to the maximum amount allowed by law (currently, $250,000, subject to aggregation rules).

We also offer a full range of commercial and personal loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including acquisition of real estate and improvements), and the purchase of equipment and machinery. Consumer loans include secured and unsecured loans for financing automobiles, home improvements, education, and personal investments. We also make real estate construction and acquisition loans. We originate fixed and variable rate mortgage loans, of which some are sold into the secondary market and some are placed in our loans held-for-investment portfolio. Our lending activities are subject to a variety of lending limits imposed by federal law. While differing limits apply in certain circumstances based on the type of loan or the nature of the borrower (including the borrower’s relationship to the bank), in general, we are subject to a loans-to-one-borrower limit of an amount equal to 15% of the Bank’s unimpaired capital and surplus, or 25% of the unimpaired capital and surplus if the excess over 15% is approved by the board of directors of the Bank and is fully secured by readily marketable collateral. As a result, our lending limit will increase or decrease in response to increases or decreases in the Bank’s level of capital. Based upon the capitalization of the Bank at December 31, 2023, the maximum amount we could lend to one borrower is $24.9 million. In addition, we may not make any loans to any director, officer, employee, or 10% shareholder of the Company or the Bank unless the loan is approved by our board of directors and is made on terms not more favorable to such person than would be available to a person not affiliated with the Bank. 

Other bank services include internet banking, cash management services, safe deposit boxes, direct deposit of payroll and social security checks, and automatic drafts for various accounts. We offer non-deposit investment products and other investment brokerage services through a registered representative with an affiliation through LPL Financial. We are associated with Nyce and Plus networks of automated teller machines and MasterCard debit cards that may be used by our customers throughout South Carolina, Georgia, and other regions. We also offer VISA and MasterCard credit card services through a correspondent bank as our agent. 

We currently do not exercise trust powers, but we can begin to do so with the prior approval of our primary banking regulators, the FDIC and the S.C. Board.

9

Competition

The banking business is highly competitive. We compete as a financial intermediary with other commercial banks, savings and loan associations, credit unions and money market mutual funds operating in our market areas. As of June 30, 2023, there were 26 financial institutions operating approximately 161 offices in the Midlands market, 20 financial institutions operating 91 branches in the CSRA market, 40 financial institutions operating 223 branches in the Upstate market, and 16 financial institutions operating 46 branches in the Piedmont market. The competition among the various financial institutions is based upon a variety of factors, including interest rates offered on deposit accounts, interest rates charged on loans, credit and service charges, the quality of services rendered, the convenience of banking facilities and, in the case of loans to large commercial borrowers, relative lending limits. Size gives larger banks certain advantages in competing for business from large corporations. These advantages include higher lending limits and the ability to offer services in other areas of South Carolina and Georgia. As a result, we do not generally attempt to compete for the banking relationships of large corporations, but concentrate our efforts on small-to-medium sized businesses and individuals. We believe we have competed effectively in this market by offering quality and personal service. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks.

Human Capital

At December 31, 2023, we had 268 full-time, 14 part-time, and five seasonal/on-call employees.

We believe that our relationships with our employees are good and our employees are not represented by any collective bargaining group or agreement. Our company’s “Why,” or purpose, is “Impacting Lives for Success and Significance”, which guides our approach to our relationships with employees. The foundations of these interactions are embedded in our cultural beliefs:

Everyone Matters - We value each of our employees for the unique contribution they make to our success. While there are a variety of different positions in our company, each is an important and integral part of the work that we do. Every employee brings their own unique and diverse talents and experiences that enhance the culture of our bank and our work.

Spirit of Service - The energy and enthusiasm that our employees bring to their work creates a supportive work environment in which employees are available as a resource to one another. In addition to serving our fellow co-workers, we encourage our employees to serve our local communities. We offer company sponsored volunteer activities, as well as provide Volunteer paid time off to allow employees to support causes that are close to their heart.

Honor and Integrity - Trust is at the foundation of all that we do. We have a Code of Conduct and Business Ethics that all employees and board members read and are directed to follow that sets clear expectations with regard to personal and professional behavior.

Strong Work Ethic - Our employees take pride in the quality of the work that they do. This commitment to excellence can be seen in the work that is completed and their interactions with their co-workers and customers. While we work hard, we also make time for fun employee events designed to offer the opportunity for relaxation and social interactions among co-workers.

Excellence with Humility - Our company is blessed with dedicated and talented employees, loyal customers, supportive communities and shareholders, each of whom invest in and believe in our vision. We are humbled by the success we have experienced and are grateful for all that we have accomplished. We approach our work with a sincere appreciation for the opportunity to serve all of our stakeholder groups and we recognize it is through our collective efforts that we have been successful.

Our ability to attract, develop and retain our strong employee base is integral to our ongoing success. We believe that a good “quality of life” at work is an important part of the overall employee experience and we are very intentional about nurturing a culture that allows employees to reach their potential and enjoy professional success while also enjoying the work that they do in a positive and supportive work environment grounded in our cultural beliefs.

While we believe that our corporate culture and work environment is a competitive advantage for our company, we also recognize that employees value and deserve competitive compensation packages. We offer competitive wages and benefits for our employees and we regularly benchmark our compensation to market. Our benefits package includes medical, dental, life, disability, vision and supplemental insurance options. We also offer retirement benefits with a 401(k) plan with matching and profit sharing. In addition, we offer a generous paid time off plan that includes paid holidays.

10

Our company encourages employees to continue on a lifelong trajectory of learning, as such, we offer ongoing training to all employees through internal and external resources and encourage employees to continue with career development specific to their role to ensure they stay current with the most up-to-date information and best practices. To develop our current and future leaders, we created the First Community Bank Leadership Institute, an 18-month program that provides academic and experiential learning to teach and nurture leadership skills across our organization to support the bank now and in the future. The Bank also supports the development of employees through external educational opportunities such as various bankers’ schools that offer multi-year development programs as well as short term training classes and industry conferences.

Information about the Executive Officers of First Community Corporation

Executive officers of First Community Corporation are elected by the board of directors annually and serve at the pleasure of the board of directors. The current executive officers, and persons chosen to become executive officers, and their ages, positions with us over the past five years, and terms of office as of March 21, 2024, are as follows:

Name (age)	Position and Five Year History with Company	With the Company Since
Michael C. Crapps (65)	Chief Executive Officer and President, Director	1994
John T. Nissen (62)	Chief Banking Officer; formerly Chief Commercial and Retail Banking Officer	1995
Robin D. Brown (56)	Chief Human Resources and Marketing Officer	1994
Tanya A. Butts (65)	Chief Operations Officer/Chief Risk Officer	2016
John F. (Jack) Walker (58)	Chief Credit Officer, formerly Senior Vice President and Loan Approval and Special Assets Officer	2009
D. Shawn Jordan (56)	Chief Financial Officer, formerly Executive Vice President	2019
Vaughan R. Dozier, Jr. (43)	Co-Chief Commercial and Retail Banking Officer, formerly Senior Vice President and Regional Market President	2008
Joseph A. (Drew) Painter (46)	Co-Chief Commercial and Retail Banking Officer, formerly Senior Vice President and Regional Market President	2003

On December 14, 2023, we announced promotions and additions to our Executive Leadership Team. Effective January 1, 2024, Joseph A. “Drew” Painter and Vaughan R. Dozier, Jr. became Executive Vice Presidents in the roles of Co-Chief Commercial and Retail Banking Officers. In their roles as Co-Chief Commercial and Retail Banking Officers, Mr. Painter and Mr. Dozier will be responsible for leading First Community’s network of banking offices.

Effective July 1, 2024, J. Ted Nissen will become the CEO of First Community Bank while still retaining the role of President and will also be joining First Community’s board of directors. Michael C. “Mike” Crapps will continue in his role as President and CEO of First Community Corporation. In his role as CEO of the Bank, Mr. Nissen will be responsible for the leadership of day-to-day operations of the Bank including its mortgage and financial planning lines of business. Mr. Crapps will continue to focus on board governance, investor relations, strategy development and growth decisions, client retention and prospecting, and leadership development.

11

None of the above officers are related and there are no arrangements or understandings between them and any other person pursuant to which any of them was elected as an officer, other than arrangements or understandings with the directors or officers of the Company acting solely in their capacities as such. 

SUPERVISION AND REGULATION

Both the Company and the Bank are subject to extensive state and federal banking laws and regulations that impose specific requirements or restrictions on and provide for general regulatory oversight of virtually all aspects of our operations. These laws generally are intended primarily for the protection of customers, depositors and other consumers, the FDIC’s Deposit Insurance Fund (the “DIF”), and the banking system as a whole; not for the protection of our other creditors and shareholders.

The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of those laws and regulations on our operations. The following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects. Our operations may be affected by legislative changes and the policies of various regulatory authorities. We cannot predict the effect that fiscal or monetary policies, economic control, or new federal or state legislation may have on our business and earnings in the future.

Legislative and Regulatory Developments

We experienced heightened regulatory requirements and scrutiny following the 2008 global financial crisis, and as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Economic Growth, Regulatory Reform and Consumer Protection Act (“Regulatory Relief Act”). In addition, newer regulatory developments implemented in response to the COVID-19 pandemic, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Consolidated Appropriations Act, 2021, which enhanced and expanded certain provisions of the CARES Act, had an impact on our operations.

The CARES Act was a $2.2 trillion economic stimulus bill that was intended to provide relief in the wake of the COVID-19 pandemic. There were a number of regulatory actions intended to help mitigate the adverse economic impact of the COVID-19 pandemic on borrowers, including several mandates from the bank regulatory agencies, requiring financial institutions to work constructively with borrowers affected by the COVID-19 pandemic, many of which have expired.

Capital and Related Requirements.

Regulatory capital rules known as the Basel III rules or Basel III, impose minimum capital requirements for bank holding companies and banks. Basel III was released in the form of enforceable regulations by each of the applicable federal bank regulatory agencies. Basel III is applicable to all banking organizations that are subject to minimum capital requirements, including federal and state banks and savings and loan associations, as well as to bank and savings and loan holding companies, other than “small bank holding companies.” A small bank holding company is generally a qualifying bank holding company or savings and loan holding company with less than $3.0 billion in consolidated assets. More stringent requirements are imposed on “advanced approaches” banking organizations—generally those organizations with $250 billion or more in total consolidated assets or $10 billion or more in total foreign exposures.

12

Based on the foregoing, as a small bank holding company, we are generally not subject to the capital requirements at the holding company level unless otherwise advised by the Federal Reserve; however, our Bank remains subject to the capital requirements. Accordingly, the Bank is required to maintain the following capital levels:

· a Common Equity Tier 1 risk-based capital ratio of 4.5%;

· a Tier 1 risk-based capital ratio of 6%;

· a total risk-based capital ratio of 8%; and

· a leverage ratio of 4%.

Basel III also established a “capital conservation buffer” above the regulatory minimum capital requirements, which must consist entirely of Common Equity Tier 1 capital, which was phased in over several years. The fully phased-in capital conservation buffer of 2.500%, which became effective on January 1, 2019, resulted in the following effective minimum capital ratios for the Bank beginning in 2019: (i) a Common Equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under Basel III, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if their capital levels fall below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Under Basel III, Tier 1 capital includes two components: Common Equity Tier 1 capital and additional Tier 1 capital. The highest form of capital, Common Equity Tier 1 capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive income, otherwise referred to as AOCI, and limited amounts of minority interests that are in the form of common stock. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, Tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital generally includes the allowance for credit losses up to 1.25% of risk-weighted assets, qualifying preferred stock, subordinated debt and qualifying Tier 2 minority interests, less any deductions in Tier 2 instruments of an unconsolidated financial institution. AOCI is presumptively included in Common Equity Tier 1 capital and often would operate to reduce this category of capital. When implemented, Basel III provided a one-time opportunity at the end of the first quarter of 2015 for covered banking organizations to opt out of a large part of this treatment of AOCI. We made this opt-out election and, as a result, retained our pre-existing treatment for AOCI.

Proposed new rules for U.S. implementation of capital requirements under Basel IV rules, more recently referred to as the “Basel III Endgame”, were issued by the U.S. federal banking agencies on July 27, 2023. These proposed rules include broad-based changes to the risk-weighting framework for various credit exposures and operational risk capital requirements. However, the proposed rules generally apply only to large banking organizations with total assets of $100 billion or more, and are expected to not be applicable to us.

As part of its response to the impact of the COVID-19 pandemic, in the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule that provided banking organizations that adopted the credit impairment model, the Current Expected Credit Loss, or CECL, during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total). In connection with our adoption of CECL on January 1, 2023, we did not elect to utilize the five-year CECL transition.

In November 2019, the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets. Under the final rules, which went into effect on January 1, 2020, depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets, and trading assets plus trading liabilities of 5% or less of total consolidated assets, are deemed “qualifying community banking organizations” and are eligible to opt into the “community bank leverage ratio framework.” A qualifying community banking organization that elects to use the community bank leverage ratio framework and that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III rules and, if applicable, is considered to have met the “well capitalized” ratio requirements for purposes of its primary federal regulator’s prompt corrective action rules, discussed below. We do not have any immediate plans to elect to use the community bank leverage ratio framework but may make such an election in the future.

13

Acquisition Activities.

The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. In addition, the prior approval of the FDIC is required for a bank to merge with another bank or purchase the assets or assume the deposits of another bank. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the CRA.

On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Among other initiatives, the Executive Order encouraged the federal banking agencies to review their current merger oversight practices under the BHCA and the Bank Merger Act and adopt a plan for revitalization of such practices. In December 2021, the U.S. Department of Justice (“DOJ”) (in consultation with the Federal Reserve, the Office of the Comptroller of the Currency (“OCC”), and FDIC announced that it was seeking additional public comments on whether and how the DOJ should revise the 1995 Bank Merger Competitive Review Guidelines. The comment period closed on February 15, 2022. In March 2022, the FDIC published a Request for Information seeking information and comments regarding the laws, practices, rules, regulations, guidance, and statements of policy that apply to merger transactions involving one or more insured depository institutions, including the merger between an insured depository institution and a noninsured institution. In a May 2022 speech, the acting head of the OCC announced that he had asked his staff to work with DOJ and other federal banking agencies to review the agency’s frameworks to analyze bank mergers. In May 2022, the CFPB announced the establishment of an Office of Competition and Innovation. Additionally, the Federal Trade Commission and DOJ jointly released the 2023 Draft Merger Guidelines for public comment to strengthen the agencies’ oversight over mergers that would violate the federal antitrust laws. If adopted as proposed in draft form, the Merger Guidelines would substantially modify the existing regulatory framework for merger enforcement. It is not yet clear what effect, if any, the draft Merger Guidelines will have on the federal banking agencies as they consider revising the requirements for mergers involving banks and bank holding companies. On January 29, 2024, the OCC released a notice of proposed rulemaking to (i) amend its existing procedural regulation that provides for expedited review of a limited set of business combinations involving a national bank or federal savings association and (ii) adopt a new policy statement summarizing the OCC’s substantive approach to evaluating Bank Merger Act applications. Although we are not regulated by the OCC, such new proposed rulemaking may influence other bank regulators to revise their policies regarding business combinations.

There are many steps that must be taken by the agencies before any final changes to the framework for evaluating bank mergers can be implemented and the prospects for such action continue to be uncertain at this time; however, the adoption of more expansive or prescriptive standards may have an impact on our acquisition activities.

Change in Control.

Two statutes, the Change in Bank Control Act and the Bank Holding Company Act, together with regulations promulgated under them, require some form of regulatory review before any company may acquire “control” of a bank or a bank holding company. Under the Change in Bank Control Act, a person or company is required to file a notice with the Federal Reserve if it will, as a result of the transaction, own or control 10% or more of any class of voting securities or direct the management or policies of a bank or bank holding company and either if the bank or bank holding company has registered securities or if the acquirer would be the largest holder of that class of voting securities after the acquisition. For a change in control at the holding company level, both the Federal Reserve and the subsidiary bank’s primary federal regulator must approve the change in control; at the bank level, only the bank’s primary federal regulator is involved.

In addition, the Bank Holding Company Act prohibits any entity from acquiring 25% (5% if the acquirer is a bank holding company) or more of a bank holding company’s voting securities, or otherwise obtaining control or a controlling influence over the management or policies of a bank or bank holding company without regulatory approval. On January 30, 2020, the Federal Reserve issued a final rule (which became effective September 30, 2020) that clarified and codified the Federal Reserve’s standards for determining whether one company has control over another. The final rule established four categories of tiered presumptions of noncontrol that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of noncontrol. These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationship and restrictive contractual covenants. Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence.

14

Transactions subject to the Bank Holding Company Act are exempt from Change in Control Act requirements. For state banks, state laws, including those of South Carolina, typically require approval by the state bank regulator as well.

Transactions with Affiliates and Insiders.

The Company is a legal entity separate and distinct from the Bank and its other subsidiaries. Various legal limitations restrict the Bank from lending or otherwise supplying funds to the Company or its non-bank subsidiaries. The Company and the Bank are subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W.

Section 23A of the Federal Reserve Act places limits on the amount of loans or extensions of credit by a bank to any affiliate, including its holding company, and on a bank’s investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of any affiliates of the bank. Section 23A also applies to derivative transactions, repurchase agreements and securities lending and borrowing transactions that cause a bank to have credit exposure to an affiliate. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of the Bank’s capital and surplus and, as to all affiliates combined, to 20% of the Bank’s capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements. The Bank is forbidden to purchase low quality assets from an affiliate.

Section 23B of the Federal Reserve Act, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies. If there are no comparable transactions, a bank’s (or one of its subsidiaries’) affiliate transaction must be on terms and under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies. These requirements apply to all transactions subject to Section 23A as well as to certain other transactions.

The affiliates of a bank include any holding company of the bank, any other company under common control with the bank (including any company controlled by the same shareholders who control the bank), any subsidiary of the bank that is itself a bank, any company in which the majority of the directors or trustees also constitute a majority of the directors or trustees of the bank or holding company of the bank, any company sponsored and advised on a contractual basis by the bank or an affiliate, and any mutual fund advised by a bank or any of the bank’s affiliates. Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve decides to treat these subsidiaries as affiliates.

The Bank is also subject to certain restrictions on extensions of credit to executive officers, directors, certain principal shareholders, and their related interests. Extensions of credit include derivative transactions, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions to the extent that such transactions cause a bank to have credit exposure to an insider. Any extension of credit to an insider (i) must be made on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with unrelated third parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.

On December 22, 2020, the federal banking agencies issued an interagency statement extending the temporary relief from enforcement action against banks or asset managers, which become principal stockholders of banks, with respect to certain extensions of credit by banks that otherwise would violate Regulation O, provided the asset managers and banks satisfy certain conditions designed to ensure that there is a lack of control by the asset manager over the bank. On December 22, 2022, the federal banking agencies issued a revised interagency statement extending the temporary relief from such enforcement, which was set to expire on January 1, 2024; however, on December 15, 2023, the federal banking agencies again issued a revised interagency statement extending the temporary relief from such enforcement which will expire the sooner of January 1, 2025, or the effective date of a final Federal Reserve rule having a revision to Regulation O that addresses the treatment of extensions of credit by a bank to fund complex-controlled portfolio companies that are insiders of a bank.

First Community Corporation

We own 100% of the outstanding capital stock of the Bank, and, therefore, we are considered to be a bank holding company under the federal Bank Holding Company Act. As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve under the Bank Holding Company Act and its regulations promulgated thereunder. Moreover, as a bank holding company of a bank located in South Carolina, we also are subject to the South Carolina Banking and Branching Efficiency Act.

15

Permitted Activities. Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities:

· banking or managing or controlling banks;

· furnishing services to or performing services for our subsidiaries; and

· any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking;

Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include:

· factoring accounts receivable;

· making, acquiring, brokering or servicing loans and usual related activities;

· leasing personal or real property;

· operating a non-bank depository institution, such as a savings association;

· trust company functions;

· financial and investment advisory activities;

· conducting discount securities brokerage activities;

· underwriting and dealing in government obligations and money market instruments;

· providing specified management consulting and counseling activities;

· performing selected data processing services and support services;

· acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and

· performing selected insurance underwriting activities.

As a bank holding company, we also can elect to be treated as a “financial holding company,” which would allow us to engage in a broader array of activities. In summary, a financial holding company can engage in activities that are financial in nature or incidental or complimentary to financial activities, including insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and limited merchant banking activities. We have not sought financial holding company status but may elect such status in the future as our business matures. If we were to elect in writing for financial holding company status, each insured depository institution we control would have to be well capitalized, well managed and have at least a satisfactory rating under the Community Reinvestment Act (“CRA”) (discussed below).

The Federal Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its bank subsidiaries.

Source of Strength. There are a number of obligations and restrictions imposed by law and regulatory policy on bank holding companies with regard to their depository institution subsidiaries that are designed to minimize potential loss to depositors and to the FDIC insurance funds in the event that the depository institution becomes in danger of defaulting under its obligations to repay deposits. Under a policy of the Federal Reserve, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy. Under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become “undercapitalized” within the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (i) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan.

The Federal Reserve also has the authority under the Bank Holding Company Act to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal law grants federal bank regulatory authorities’ additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition.

16

In addition, the “cross guarantee” provisions of the Federal Deposit Insurance Act (“FDIA”) require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the FDIC as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC’s claim for damages is superior to claims of shareholders of the insured depository institution or its holding company, but is subordinate to claims of depositors, secured creditors, and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institutions.

The FDIA also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor, or shareholder. This provision would give depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute the assets of our Bank. 

Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Capital Requirements. The Federal Reserve generally imposes certain capital requirements on a bank holding company under the Bank Holding Company Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. If applicable, these requirements are essentially the same as those that apply to the Bank and are described above under “Capital and Related Requirements.” However, because the Company currently qualifies as a small bank holding company, these capital requirements do not currently apply to the Company. Subject to certain restrictions, we are able to borrow money to make a capital contribution to the Bank, and these loans may be repaid from dividends paid from the Bank to the Company. Our ability to pay dividends depends on, among other things, the Bank’s ability to pay dividends to us, which is subject to regulatory restrictions as described below in “First Community Bank—Dividends.” We are also able to raise capital for contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal and state securities laws.

Dividends. As a bank holding company, the Company’s ability to declare and pay dividends is dependent on certain federal and state regulatory considerations, including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the Company’s ability to pay dividends or otherwise engage in capital distributions.

In addition, since the Company is a legal entity separate and distinct from the Bank and does not conduct stand-alone operations, its ability to pay dividends depends on the ability of the Bank to pay dividends to it, which is also subject to regulatory restrictions as described below in “First Community Bank—Dividends.”

South Carolina State Regulation. As a South Carolina bank holding company under the South Carolina Banking and Branching Efficiency Act, we are subject to limitations on any sale to, or merger with, other financial institutions. We are not required to obtain the approval of the S.C. Board prior to acquiring the capital stock of a national bank, but we must notify them at least 15 days prior to doing so. We must receive the S.C. Board’s approval prior to engaging in the acquisition of a South Carolina state-chartered bank or another South Carolina bank holding company.

17

First Community Bank

As a South Carolina state bank, the Bank’s primary federal regulator is the FDIC, and the Bank is also regulated and examined by the S.C. Board. Deposits in the Bank are insured by the FDIC up to a maximum amount of $250,000. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.

The S.C. Board and the FDIC regulate or monitor virtually all areas of the Bank’s operations, including:

· security devices and procedures;

· adequacy of capitalization and allowance for credit losses;

· loans;

· investments;

· borrowings;

· deposits;

· mergers;

· issuances of securities;

· payment of dividends;

· interest rates payable on deposits;

· interest rates or fees chargeable on loans;

· establishment of branches;

· corporate reorganizations;

· maintenance of books and records; and

· adequacy of staff training to carry on safe lending and deposit gathering practices.

These agencies, and the federal and state laws applicable to the Bank’s operations, extensively regulate various aspects of our banking business, including, among other things, permissible types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and on deposits, the maintenance of reserves on demand deposit liabilities, and the safety and soundness of our banking practices.

Prompt Corrective Action. The FDICIA established a “prompt corrective action” program in which every bank is placed in one of five regulatory categories, depending primarily on its regulatory capital levels. The FDIC and the other federal banking regulators are permitted to take increasingly severe action as a bank’s capital position or financial condition declines below the “Adequately Capitalized” level described below. Regulators are also empowered to place in receivership or require the sale of a bank to another depository institution when a bank’s leverage ratio reaches two percent. Better capitalized institutions are generally subject to less onerous regulation and supervision than banks with lesser amounts of capital. The FDIC’s regulations set forth five capital categories, each with specific regulatory consequences. The categories are:

· Well Capitalized—The institution exceeds the required minimum level for each relevant capital measure. A well capitalized institution (i) has a total risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of 8% or greater, (iii) has a common equity Tier 1 risk-based capital ratio of 6.5% or greater, (iv) has a leverage capital ratio of 5% or greater, and (v) is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

· Adequately Capitalized—The institution meets the required minimum level for each relevant capital measure. No capital distribution may be made that would result in the institution becoming undercapitalized. An adequately capitalized institution (i) has a total risk-based capital ratio of 8% or greater, (ii) has a Tier 1 risk-based capital ratio of 6% or greater, (iii) has a common equity Tier 1 risk-based capital ratio of 4.5% or greater, and (iv) has a leverage capital ratio of 4% or greater.

· Undercapitalized—The institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution (i) has a total risk-based capital ratio of less than 8%, (ii) has a Tier 1 risk-based capital ratio of less than 6%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 4.5%, or (iv) has a leverage capital ratio of less than 4%.

· Significantly Undercapitalized—The institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized institution (i) has a total risk-based capital ratio of less than 6%, (ii) has a Tier 1 risk-based capital ratio of less than 4%, (iii) has a common equity Tier 1 risk-based capital ratio of less than 3%, or (iv) has a leverage capital ratio of less than 3%.

· Critically Undercapitalized—The institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution has a ratio of tangible equity to total assets that is equal to or less than 2%.

18

If the FDIC determines, after notice and an opportunity for hearing, that the bank is in an unsafe or unsound condition, the regulator is authorized to reclassify the bank to the next lower capital category (other than critically undercapitalized) and require the submission of a plan to correct the unsafe or unsound condition.

If a bank is not well capitalized, it cannot accept brokered deposits without prior regulatory approval. In addition, a bank that is not well capitalized cannot offer an effective yield in excess of 75 basis points over interest paid on deposits of comparable size and maturity in such institution’s normal market area for deposits accepted from within its normal market area, or national rate paid on deposits of comparable size and maturity for deposits accepted outside the bank’s normal market area. Moreover, the FDIC generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be categorized as undercapitalized. Undercapitalized institutions are subject to growth limitations (an undercapitalized institution may not acquire another institution, establish additional branch offices, or engage in any new line of business unless determined by the appropriate federal banking agency to be consistent with an accepted capital restoration plan, or unless the FDIC determines that the proposed action will further the purpose of prompt corrective action) and are required to submit a capital restoration plan. The agencies may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with the capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of an amount equal to 5.0% of the depository institution’s total assets at the time it became categorized as undercapitalized or the amount that is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is categorized as significantly undercapitalized.

Significantly undercapitalized categorized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become categorized as adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. The appropriate federal banking agency may take any action authorized for a significantly undercapitalized institution if an undercapitalized institution fails to submit an acceptable capital restoration plan or fails in any material respect to implement a plan accepted by the agency. A critically undercapitalized institution is subject to having a receiver or conservator appointed to manage its affairs and for loss of its charter to conduct banking activities.

An insured depository institution may not pay a management fee to a bank holding company controlling that institution or any other person having control of the institution if, after making the payment, the institution would be undercapitalized. In addition, an institution cannot make a capital distribution, such as a dividend or other distribution that is in substance a distribution of capital to the owners of the institution if following such a distribution the institution would be undercapitalized. Thus, if payment of such a management fee or the making of such would cause a bank to become undercapitalized, it could not pay a management fee or dividend to the bank holding company.

As of December 31, 2023, the Bank was deemed to be “well capitalized.”

Standards for Safety and Soundness. The FDIA also requires the federal banking regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset growth. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees, and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if the FDIC determines that the Bank fails to meet any standards prescribed by the guidelines, the agency may require the Bank to submit to the agency an acceptable plan to achieve compliance with the standard, as required by the FDIC. The final regulations establish deadlines for the submission and review of such safety and soundness compliance plans.

Regulatory Examination. The FDIC also requires the Bank to prepare annual reports on the Bank’s financial condition and to conduct an annual audit of its financial affairs in compliance with its minimum standards and procedures.

19

All insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate federal banking agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC, their federal regulatory agency, and state supervisor when applicable. The FDIC has developed a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition or any other report of any insured depository institution. The federal banking regulatory agencies prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to the following:

· internal controls;

· information systems and audit systems;

· loan documentation;

· credit underwriting;

· interest rate risk exposure; and

· asset quality.

Dividends. The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain circumstances. The Bank must also maintain the Common Equity Tier 1 capital conservation buffer of 2.5%, in excess of its minimum regulatory risk-based capital ratios, to avoid becoming subject to restrictions on capital distributions, including dividends, as described above.

Branching. Federal legislation permits out-of-state acquisitions by bank holding companies, interstate branching by banks, and interstate merging by banks. The Dodd-Frank Act removed previous state law restrictions on de novo interstate branching in states such as South Carolina and Georgia. This change effectively permits out of state banks to open de novo branches in states where the laws of such state would permit a bank chartered by that state to open a de novo branch. 

Anti-Tying Restrictions. Under amendments to the Bank Holding Company Act and Federal Reserve regulations, a bank is prohibited from engaging in certain tying or reciprocity arrangements with its customers. In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for these on the condition that (i) the customer obtain or provide some additional credit, property, or services from or to the bank, the bank holding company or subsidiaries thereof or (ii) the customer may not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. Certain arrangements are permissible: a bank may offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products; and certain foreign transactions are exempt from the general rule. A bank holding company or any bank affiliate also is subject to anti-tying requirements in connection with electronic benefit transfer services.

Community Reinvestment Act. The Bank is subject to certain requirements and reporting obligations under the CRA, which requires federal banking regulators to evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate- income neighborhoods. The CRA further requires these criteria to be considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could result in the imposition of additional requirements and limitations on the Bank. Additionally, financial institutions must publicly disclose the terms of various CRA-related agreements. In its most recent CRA examination, the Bank received a “satisfactory” rating.

20

In December 2019, the FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a notice of proposed rulemaking intended to (i) clarify which activities qualify for CRA credit; (ii) update where activities count for CRA credit; (iii) create a more transparent and objective method for measuring CRA performance; and (iv) provide for more transparent, consistent, and timely CRA-related data collection, recordkeeping, and reporting. However, the Federal Reserve has not joined the proposed rulemaking. In May 2020, the OCC issued its final CRA rule, which was later rescinded in December 2021. On the same day that the OCC announced its plans to rescind the CRA final rule, the OCC, FDIC, and Federal Reserve announced that they are working together to “strengthen and modernize the rules implementing the CRA.” On May 5, 2022, the OCC, FDIC, and Federal Reserve released a notice of proposed rulemaking regarding the CRA and invited public comment on the proposed rules. The comment period closed on August 5, 2022. On October 24, 2023, the OCC, the FDIC, and the Federal Reserve issued the final rule to strengthen and modernize regulations implementing the CRA. The final rule will take effect on April 1, 2024; however, compliance with the majority of the final rule’s provisions will not be required until January 1, 2026, and the data reporting requirements of the final rule will not take effect until January 1, 2027. The final rules, among other things, include: (i) applying four new performance tests to evaluate the CRA performance of large banks (assets of $2 billion or more): the Retail Lending Test, Retail Services and Products Test, Community Development Financing Test, and Community Development Services Test; (ii) retaining a strategic plan option, with modifications to reflect the new performance tests and updates to the approval standards; (iii) clarifying community development activities by updating the definition of community development, providing a process by which banks may request confirmation that an activity is eligible for community development consideration, and providing for a publicly available interagency illustrative list of qualifying community development activities; (iv) updating delineation requirements for facility-based assessment areas and establishing new retail lending assessment areas for certain large banks; (v) updating data collection, maintenance, and reporting requirements for large banks, tailoring those requirements based on large bank asset size and leveraging existing data where possible, while not imposing new data collection and reporting requirements for small and intermediate banks; and (vi) continuing public file and public notice disclosure requirements and creating a new public comment process to facilitate public engagement. Management has and will continue to evaluate any changes to the CRA’s regulations and their impact to the Bank.

Fair Lending Requirements. We are subject to certain fair lending requirements and reporting obligations involving lending operations. A number of laws and regulations provide these fair lending requirements and reporting obligations, including, at the federal level, the Equal Credit Opportunity Act (“ECOA”), as amended by the Dodd-Frank Act, and Regulation B, as well as the Fair Housing Act (“FHA”) and regulations implementing FHA found at 24 C.F.R. Part 100. ECOA and Regulation B prohibit discrimination in any aspect of a credit transaction based on a number of prohibited factors, including race or color, religion, national origin, sex, marital status, age, the applicant’s receipt of income derived from public assistance programs, and the applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act. ECOA and Regulation B include lending acts and practices that are specifically prohibited, permitted, or required, and these laws and regulations proscribe data collection requirements, legal action statute of limitations, and disclosure of the consumer’s ability to receive a copy of any appraisal(s) and valuation(s) prepared in connection with certain loans secured by dwellings. In January 2023, the OCC revised its “Fair Lending” booklet of the Comptroller’s Handbook to incorporate clarified details and risk factors for a variety of examination scenarios addressing fair lending and to update references to supervisory guidance, sound risk management practices, and applicable legal standards. While this OCC guidance does not apply to the Bank explicitly, it represents best practices guidance for the Bank. FHA prohibits discrimination in all aspects of residential real-estate related transactions based on prohibited factors, including race or color, national origin, religion, sex, familial status, and handicap.

In addition to prohibiting discrimination in credit transactions on the basis of prohibited factors, these laws and regulations can cause a lender to be liable for policies that result in a disparate treatment of or have a disparate impact on a protected class of persons. If a pattern or practice of lending discrimination is alleged by a regulator, then the matter may be referred by the agency to the DOJ for investigation. In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations, and have generally committed to strengthen their coordination efforts.

In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals.

 Financial Subsidiaries. Under the Gramm-Leach-Bliley Act, otherwise referred to as the GLBA, subject to certain conditions imposed by their respective banking regulators, national and state-chartered banks are permitted to form “financial subsidiaries” that may conduct financial or incidental activities, thereby permitting bank subsidiaries to engage in certain activities that previously were impermissible. The GLBA imposes several safeguards and restrictions on financial subsidiaries, including that the parent bank’s equity investment in the financial subsidiary be deducted from the bank’s assets and tangible equity for purposes of calculating the bank’s capital adequacy. In addition, the GLBA imposes new restrictions on transactions between a bank and its financial subsidiaries similar to restrictions applicable to transactions between banks and non-bank affiliates.

21

Consumer Protection Regulations. Activities of the Bank are subject to a variety of statutes and regulations—both at the federal and state levels—designed to protect consumers. This includes Title X of the Dodd-Frank Act, which prohibits engaging in any unfair, deceptive, or abusive acts or practices (“UDAAP”). UDAAP claims involve detecting and assessing risks to consumers and to markets for consumer financial products and services. Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as:

· the Dodd-Frank Act that created the Consumer Financial Protection Bureau (“CFPB”), an independent regulatory authority housed within the Federal Reserve, which has broad rule-making authority over a wide range of consumer laws that apply to insured depository institutions;

· the Truth-In-Lending Act (“TILA”) and Regulation Z, governing disclosures of credit terms to consumer borrowers and including substantial requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act;

· the Home Mortgage Disclosure Act (“HMDA”) and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves, and requiring collection and disclosure of data about applicant and borrower characteristics to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes;

· the Equal Credit Opportunity Act (“ECOA”) and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other prohibited factors in any aspect of a credit transaction;

· the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, and Regulation V, governing the use of consumer reports, provision of information to credit reporting agencies, certain identity theft protections, and certain credit and other disclosures, and requiring banks to have in place an “identity theft red flags” program to detect, prevent and mitigate identity theft.

· the Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending to eliminate abusive, deceptive, and unfair debt collection practices;

· the Real Estate Settlement Procedures Act (“RESPA”) and Regulation X, which governs various aspects of residential mortgage loans, including the settlement and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to compensation of service providers, insurance escrow accounts, and loss mitigation procedures;

· The Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE Act”) which mandates a nationwide licensing and registration system for residential mortgage loan originators. The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator;

· The Homeowners Protection Act (“HPA”), or the PMI Cancellation Act, provides requirements relating to private mortgage insurance (PMI) on residential mortgages, including the cancelation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums;

· The Fair Housing Act (“FHA”) prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors;

· The Servicemembers Civil Relief Act (“SCRA”) and Military Lending Act (“MLA”), providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others;

· Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners; and

· the rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

22

The deposit operations of the Bank also are subject to laws, such as the following federal laws:

· the FDIA, which, among other things, imposes a minimum amount of deposit insurance available per account to $250,000 and imposes other limits on deposit-taking;

· the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

· the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts;

· the Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

· The Expedited Funds Availability Act (“EFA Act”) and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and

· the Truth in Savings Act (“TISA”) and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts.

In light of the growing concern by regulators about relationships between chartered financial institutions and their third-party service providers, the FDIC joined the other federal supervisory agencies in passing the Interagency Guidance on Third-Party Relationships: Risk Management. This new guidance provided risk management oversight guidelines for financial institutions to incorporate in their ongoing relationships with third party vendors.

The CFPB has broad authority to regulate the offering and provision of consumer financial products and services. The CFPB has the authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with federal consumer laws. The authority to supervise and examine depository institutions with $10 billion or less in assets, such as the Bank, for compliance with federal consumer laws remains largely with those institutions’ primary regulators. However, the CFPB may participate in examinations of these smaller institutions on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. As such, the CFPB may participate in examinations of the Bank. In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated by the CFPB.

The CFPB has issued a number of significant rules that impact nearly every aspect of the lifecycle of consumer financial products and services, including rules regarding residential mortgage loans. These rules implement Dodd-Frank Act amendments to ECOA, TILA and RESPA. The CFPB continued its scrutiny of so called “pay-to-pay” and “junk fee” regimes, proposing rules related to credit card penalties. Further, the CFPB proposed rulemaking related to Residential Property Assessed Clean Entergy Financing, quality control standards for automated valuation models, and personal financial data rights (discussed in more detail above). The CFPB’s focus on fees was emphasized through its ongoing enforcement activity, including a notable enforcement action taken against Bank of America that required the payment of more than $100 million to customers, with similar size fines paid to both the CFPB and the OCC.

Bank regulators take into account compliance with consumer protection laws when considering approval of a proposed expansionary proposals.

23

Enforcement Powers. The Bank and its “institution-affiliated parties,” including its management, employee’s agent’s independent contractors and consultants, such as attorneys and accountants, and others who participate in the conduct of the financial institution’s affairs, are subject to potential civil and criminal penalties for violations of law, regulations, or written orders of a government agency. These practices can include the failure of an institution to timely file required reports or the filing of false or misleading information or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal penalties for some financial institution crimes have been increased to twenty years. In addition, regulators are provided with greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement actions include the termination of deposit insurance. Furthermore, banking agencies’ powers to issue cease-and-desist orders have been expanded. Such orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined by the ordering agency to be appropriate.

Anti-Money Laundering; the USA Patriot Act; the Office of Foreign Asset Control. Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. The program must comply with the anti-money laundering provisions of the Bank Secrecy Act (“BSA”). The Company and the Bank are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and “knowing your customer” in their dealings with foreign financial institutions, foreign customers, and other high-risk customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and certain laws provide law enforcement authorities with increased access to financial information maintained by banks. Financial institutions must comply with requirements regarding risk-based procedures for conducing ongoing customer due diligence, which requires the institutions to take appropriate steps to understand the nature and purpose of customer relationships and identify and verify the identity of the beneficial owners of legal entity customers.

Anti-money laundering obligations have been substantially strengthened as a result of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (which we refer to as the “USA PATRIOT Act”). Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications. The regulatory authorities have been active in imposing cease and desist orders and money penalty sanctions against institutions that have not complied with these requirements.

The USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (i) requiring standards for verifying customer identification at account opening; (ii) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (iii) reports by nonfinancial trades and businesses filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network for transactions exceeding $10,000; (iv) filing suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations; and (v) requires enhanced due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

Under the USA PATRIOT Act, the regulators can provide lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the applicable governmental authorities.

24

On January 1, 2021, Congress overrode former President Trump’s veto and thereby enacted the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”). The NDAA provides for one of the most significant overhauls of the BSA and related anti-money laundering laws since the USA Patriot Act. Notably, changes include:

· expansion of coordination and information sharing efforts among the agencies tasked with administering anti-money laundering and countering the financing of terrorism requirements, including the Financial Crimes Enforcement Network (“FinCEN”), the primary federal banking regulators, federal law enforcement agencies, national security agencies, the intelligence community, and financial institutions;

· providing additional penalties with respect to violations of BSA and enhancing the powers of FinCEN;

· significant updates to the beneficial ownership collection rules and the creation of a registry of beneficial ownership which will track the beneficial owners of reporting companies which may be shared with law enforcement and financial institutions conducting due diligence under certain circumstances;

· improvements to existing information sharing provisions that permit financial institutions to share information relating to suspicious activity reports with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and

· enhanced whistleblower protection provisions, allowing whistleblower(s) who provide original information which leads to successful enforcement of anti-money laundering laws in certain judicial or administrative actions resulting in certain monetary sanctions to receive up to 30 percent of the amount that is collected in monetary sanctions as well as increased protections.

The Office of Foreign Assets Control (“OFAC”), which is a division of the U.S. Department of the Treasury (the “Treasury”), is responsible for helping to ensure that United States entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of names of persons and organizations with which the Bank is prohibited from engaging in business. If the Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze such account, file a suspicious activity report, and notify the FBI. The Bank has appointed an OFAC compliance officer to oversee the inspection of its accounts and the filing of any notifications. The Bank actively checks high-risk OFAC areas such as new accounts, wire transfers and customer files. The Bank performs these checks utilizing software, which is updated each time a modification is made to the lists provided by OFAC and other agencies of Specially Designated Nationals and Blocked Persons.

25

In August 2023, the FFIEC revised and updated the examination procedures in the FFIEC’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual to provide greater transparency into the examination process and support risk-based examination work. The FFIEC, OCC, and the FDIC also continued their emphasis on the importance of oversight of third-party vendors in the BSA/AML process through updated guidance, as well as continued examine and enforcement activity against financial institutions who failed to properly supervise their third-party service providers’ BSA/AML activity.

Following the enactment of the Anti-Money Laundering Act of 2020, FinCEN began publishing rules pursuant to the Corporate Transparency Act which establishes a regime for many corporate entities to file a form with FinCEN disclosing their beneficial owners. The first of these rules, the “Reporting Rule,” sets forth which entities are required to disclose their beneficial ownership information to FinCEN and the date for compliance. Companies that qualify as either a “domestic reporting company” or a “foreign reporting company” would file with FinCEN unless one of the 23 exemptions (such as the exemptions for select banks and credit unions) apply. However, on March 1, 2024 the United States District Court of the Northern District of Alabama ruled that the Corporate Transparency Act is unconstitutional. We will monitor this litigation and its implications on the future of the Corporate Transparency Act.

Following Russia’s invasion of Ukraine, OFAC took several sanctions related actions related to the Russian financial services sector pursuant to Executive Order 14024 beginning in February 2022 including: (i) a determination by the Secretary of the Treasury with respect to the financial services sector of the Russian Federation that authorizes sanctions against persons determined to operate or to have operated in that sector; (ii) correspondent or payable-through account and payment processing prohibitions on certain Russian financial institutions; (iii) the blocking of certain Russian financial institutions; (iv) expanding sovereign debt prohibitions to apply to new issuances in the secondary market; (v) prohibitions related to new debt and equity for certain Russian entities; and (vi) a prohibition on transactions involving certain Russian government entities, including the Central Bank of the Russian Federation. In March 2022, FinCEN issued an alert advising increased vigilance for potential Russian Sanctions Evasion Attempts. Increased FinCEN scrutiny and sanctions against Russian entities continued in 2023. The Financial Action Task Force (“FATF”) continues to revise the list of high-risk jurisdictions. In October 2023, FATF removed Albania, Cayman Islands, Jordan, and Panama from its lists of Jurisdictions under Increased Monitoring and added Bulgaria.

Privacy and Data Security. There are a number of state and federal laws and regulations that govern financial privacy and cybersecurity. At the federal level, this includes the privacy protection provisions of the Gramm-Leach-Bliley Act (“GLBA”) and related regulations, including Regulation P, which govern the treatment of nonpublic personal information. Under these privacy protection provisions, we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies and notices to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.

Consumers must be notified in the event of a data breach under applicable state laws. Multiple states and Congress are considering laws or regulations which could create new individual privacy rights and impose increased obligations on companies handling personal data. For example, on November 18, 2021, the federal financial regulatory agencies published a final rule that will impose upon banking organizations and their service providers new notification requirements for significant cybersecurity incidents. Specifically, the final rule requires banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” within the meaning attributed to those terms by the final rule. Banks’ service providers are required under the final rule to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours. The final rule took effect on April 1, 2022 and banks and their service providers must have complied with the requirements of the rule by May 1, 2022. Effective December 9, 2022, the FTC’s amendments to GLBA’s Safeguards Rule went into effect and financial institutions are continuing to implement this rule including its ongoing monitoring and risk assessment protocols.

26

In February 2023, Congress introduced a new bill which would expand personal information protections that currently apply to customers and expand the notice requirements that apply to the collection of individual data. Under the bill, financial institutions must (1) inform individuals for what purpose their data is collected and how the data will be used, and (2) give individuals the opportunity to opt out of data collection. An individual may also end the sharing of the individual’s data with third parties, as well as demand the deletion of the individual’s data. While this bill has not been passed yet, it demonstrates ongoing activity in Congress and a desire to pass more stringent privacy laws. In 2023 alone, at least six bills related to consumer privacy were introduced in Congress. At the state level, seven additional states passed some form of consumer privacy protection laws, only some of which include an exemption for entities regulated under GLBA.

The CFPB also took additional action related to consumer privacy, At the beginning of the year, the CFPB issued a request for information about data brokers and invited public comment in order to understand brokers’ data collection practices and the commercial uses of personal data. The CFPB also began rulemaking to implement section 1033 of the Consumer Financial Protection Act of 2010 (CFPA). CFPA section 1033 provides that, subject to rules prescribed by the CFPB, a covered entity (for example, a bank) must make available to consumers, upon request, transaction data and other information concerning a consumer financial product or service that the consumer obtained from the covered entity..

Cybersecurity. The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If we fail to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties. In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary. For SEC Form 8-K disclosures regarding material cybersecurity incidents, smaller reporting companies, including our Company, become subject to such new requirements on June 15, 2024.

Under a final rule adopted by federal banking agencies in 2021, banking organizations are required to notify their primary banking regulator within 36 hours of determining that a “computer-security incident” has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to carry out banking operations or deliver banking products and services to a material portion of its customer base, its businesses and operations that would result in material loss, or its operations that would impact the stability of the United States.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and many states have also recently implemented or modified their data breach notification, information security and data privacy requirements. We expect this trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our customers are located.

Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Effect of Governmental Monetary Policies. Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies. In response to the COVID-19 pandemic, in 2020, the Federal Open Market Committee (“FOMC”) reduced the target federal funds rate range to between 0.0% and 0.25%; however, due in part to rising inflation, throughout 2022 the target federal funds rate range increased to between 4.25% and 4.50%. Throughout 2023, the target federal funds rate range increased to between 5.25% and 5.50%.

27

Changes in market interest rates can have a significant impact on the level of income and expense recorded on a large portion of our interest-earning assets and interest-bearing liabilities, and on the market value of all interest-earning assets, other than those possessing a short term to maturity. Furthermore, changes in market interest rates can have a significant impact on the level of mortgage originations and related mortgage non-interest income.

Insurance of Accounts and Regulation by the FDIC. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC insured institutions. It also may prohibit any FDIC insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the bank’s regulatory authority an opportunity to take such action and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

As an FDIC-insured bank, the Bank must pay deposit insurance assessments to the FDIC based on its average total assets minus its average tangible equity. The Bank’s assessment rates are currently based on its risk classification (i.e., the level of risk it poses to the FDIC’s deposit insurance fund). Institutions classified as higher risk pay assessments at higher rates than institutions that pose a lower risk.

In addition to the ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances. For example, in November 2023, the FDIC implemented a special assessment to recover the approximately $16.3 billion loss to the Deposit Insurance Fund associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank earlier in the year. However, the assessment was limited to banks with an excess of $5 billion uninsured deposits as of December 31, 2022, so we did not receive any assessment.

The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital. If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC. Management is not aware of any practice, condition or violation that might lead to termination of the Bank’s deposit insurance.

Incentive Compensation. In addition to the potential restrictions on discretionary bonus compensation under the Basel III rules, the federal bank regulatory agencies have issued guidance on incentive compensation policies (the “Incentive Compensation Guidance”) intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness of such institutions by encouraging excessive risk-taking. The Incentive Compensation Guidance, which covers all employees that have the ability to materially affect the risk profile of an institution, either individually or as part of a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should comply with the following principles: (i) provide employees incentives that appropriately balance risk and reward; (ii) be compatible with effective controls and risk-management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The scope and content of federal bank regulatory agencies’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future. In 2016, federal agencies proposed regulations which could significantly change the regulation of incentive compensation programs at financial institutions. The proposal would create four tiers of institutions based on asset size. Institutions in the top two tiers would be subject to rules much more detailed and proscriptive than are currently in effect. If interpreted aggressively by the regulators, the proposed rules could be used to prevent, as a practical matter, larger institutions from engaging in certain lines of business where substantial commission and bonus pool arrangements are the norm. In the 2016 proposal, the top two tiers included institutions with more than $50 billion of assets, which would not currently apply to us. No final rule has been adopted as of this filing. We cannot predict what final rules may be adopted, nor how they may be implemented and, therefore, it cannot be determined at this time whether compliance with such policies will adversely affect our ability to hire, retain and motivate our key employees.

In addition, the Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law in December 2017, contains certain provisions affecting performance-based compensation. Specifically, the pre-existing exception to the $1.0 million deduction limitation applicable to performance-based compensation was repealed. The deduction limitation is now applied to all compensation exceeding $1.0 million, for our covered employees, regardless of how it is classified, which could have an adverse effect on our income tax expense and net income.

28

Corporate Governance. The Dodd-Frank Act addressed many investor protection, corporate governance and executive compensation matters that affect most U.S. publicly traded companies. The Dodd-Frank Act (i) grants stockholders of U.S. publicly traded companies an advisory vote on executive compensation and so-called “golden parachute” payments, (ii) enhances independence requirements for compensation committee members, (iii) requires the SEC to adopt rules directing national securities exchanges to establish listing standards requiring all listed companies to adopt incentive-based compensation clawback policies for executive officers, and (iv) provides the SEC with authority to adopt proxy access rules that would allow stockholders of publicly traded companies to nominate candidates for election as a director and have those nominees included in a company’s proxy materials. The SEC has completed the bulk (although not all) of the rulemaking necessary to implement these provisions. However, on October 26, 2022, the SEC adopted final rules implementing the incentive-based compensation recovery (clawback) provisions of the Dodd-Frank Act. The final rules directed the stock exchanges to establish listing standards requiring listed companies to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers and to satisfy related disclosure obligations. As of December 1, 2023, the final clawback rules from The NASDAQ Stock Market were effective. The Company’s updated clawback policies were effective September 19, 2023.

Concentrations in Commercial Real Estate. Concentration risk exists when FDIC-insured institutions deploy too many assets to any one industry or segment. A concentration in commercial real estate is one example of regulatory concern. The interagency Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices guidance (“CRE Guidance”) provides supervisory criteria, including the following numerical indicators, to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny: (i) total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, exceeding 300% or more of an institution’s total risk-based capital and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more in the preceding three years or (ii) construction and land development loans exceeding 100% of total risk-based capital. The CRE Guidance does not limit banks’ levels of commercial real estate lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations. On December 18, 2015, the federal banking agencies issued a statement to reinforce prudent risk-management practices related to commercial real estate lending, having observed substantial growth in many commercial real estate asset and lending markets, increased competitive pressures, rising commercial real estate concentrations in banks, and an easing of commercial real estate underwriting standards. The federal bank agencies reminded FDIC-insured institutions to maintain underwriting discipline and exercise prudent risk-management practices to identify, measure, monitor and manage the risks arising from commercial real estate lending. In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their commercial real estate concentration risk. Based on the Bank’s loan portfolio as of December 31, 2023, its non-owner occupied commercial loans and its construction and land development loans were approximately 313% and 74% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 47% from December 31, 2020 to December 31, 2023. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and Board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and Board levels, and we continue to monitor the level of the concentration in commercial real estate loans within the Bank’s loan portfolio monthly. Management will continue to monitor the level of the concentration in commercial real estate loans within the Bank’s loan portfolio.

Proposed Legislation and Regulatory Action. From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and our operating environment in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on our financial condition or results of operations. A change in statutes, regulations, or regulatory policies applicable to the Company or the Bank could have a material effect on our business.

29

Item 1A. Risk Factors.

There are risks, many beyond our control, which could cause our results to differ significantly from management’s expectations. Some of these risk factors are described below. Any factor described in this Annual Report on Form 10-K could, by itself or together with one or more other factors, adversely affect our business, results of operations and/or financial condition. Additional risks and uncertainties not currently known to us or that we currently consider to not be material also may materially and adversely affect us. In assessing these risks, you should also refer to other information disclosed in our SEC filings, including the financial statements and notes thereto. The risks discussed below also include forward-looking statements, and actual results may differ substantially from those discussed or implied in these forward-looking statements.

Economic and Geographic-Related Risks

Our business may be adversely affected by economic conditions generally.

Our financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is highly dependent upon the business environment in the primary markets where we operate and in the U.S. as a whole. Unlike larger banks that are more geographically diversified, we are a regional bank that provides banking and financial services to customers primarily in South Carolina and Georgia. The economic conditions in these local markets may be different from, and in some instances worse than, the economic conditions in the U.S. as a whole.

Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation and price levels, monetary and trade policy, unemployment and the strength of the domestic economy and the local economy in the markets in which we operate. Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions for credit losses, adverse asset values of the collateral securing our loans and an overall material adverse effect on the quality of our loan portfolio. The majority of our loan portfolio is secured by real estate. A decline in real estate values can negatively impact our ability to recover our investment should the borrower become delinquent. Loans secured by stock or other collateral may be adversely impacted by a downturn in the economy and other factors that could reduce the recoverability of our investment. Unsecured loans are dependent on the solvency of the borrower, which can deteriorate, leaving us with a risk of loss. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability or increases in the cost of credit and capital, increases in inflation or interest rates, high unemployment, natural disasters, epidemics and pandemics (such as COVID-19), or a combination of these or other factors.

As economic conditions relating to the COVID-19 pandemic have improved, the Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse effects of the extensive pandemic-related government stimulus, which signals the potential for a continued period of economic uncertainty even though the pandemic has subsided. In addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, a potential resurgence of economic and political tensions with China, the war in Ukraine, and the Middle East conflict, all of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing, and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets or economies may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs, and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.

In addition, during 2023, concerns have arisen with respect to the financial condition of a number of banking organizations in the United States, in particular those with exposure to certain types of depositors and large portfolios of investment securities. On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed receiver of Silicon Valley Bank. On March 11, 2023, Signature Bank was similarly closed and placed into receivership and concurrently the Federal Reserve Board announced it will make available additional funding to eligible depository institutions to assist eligible banking organizations with potential liquidity needs. On May 1, 2023, First Republic Bank was closed and its assets were seized. Regulatory agencies have closed no further banks with assets greater than $150 million since the closure of First Republic Bank. While the Company’s business, balance sheet and depositor profile differs substantially from banking institutions that are the focus of the greatest scrutiny, the operating environment and public trading prices of financial services sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of the Company’s common stock and potentially its results of operations.

30

Credit and Interest Rate Risk

Our decisions regarding credit risk and allowance for credit losses may materially and adversely affect our business.

Making loans and other extensions of credit is an essential element of our business. Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans and other extensions of credit may not be repaid. The risk of nonpayment is affected by a number of factors, including:

·      the duration of the credit;	·      in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral
·      credit risks of a particular customer;
·      changes in economic and industry conditions; and

We attempt to maintain an appropriate allowance for credit losses to provide for potential losses in our loan portfolio. We periodically determine the amount of the allowance based on consideration of several factors, including:

·      an ongoing review of the quality, mix, and size of our overall loan portfolio;	·      regular reviews of loan delinquencies and loan portfolio quality; and
·      our historical credit loss experience;	·      the amount and quality of collateral, including guarantees, securing the loans.
·      evaluation of economic conditions;

There is no precise method of predicting credit losses; therefore, we face the risk that charge-offs in future periods will exceed our allowance for credit losses and that additional increases in the allowance for credit losses will be required. Additions to the allowance for credit losses would result in a decrease of our net income, and possibly our capital.

Federal and state regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in the amount of our provision or loans charged-off could have a negative effect on our operating results.

We may have higher credit losses than we have allowed for in our allowance for credit losses.

Our actual credit losses could exceed our allowance for credit losses. Our average loan size continues to increase and reliance on our historic allowance for credit losses may not be adequate. As of December 31, 2023, approximately 87.2% of our loan portfolio (excluding loans held for sale) is composed of construction (10.4%), commercial mortgage (69.9%) and commercial (6.9%) loans. Repayment of such loans is generally considered more subject to market risk than residential mortgage loans. Industry experience shows that a portion of loans will become delinquent, and a portion of loans will require partial or entire charge-off. Regardless of the underwriting criteria utilized, losses may be experienced as a result of various factors beyond our control, including, changes in market conditions affecting the value of loan collateral and problems affecting the credit of our borrowers. If we suffer credit losses that exceed our allowance for credit losses, our financial condition, liquidity, or results of operations could be materially and adversely affected. 

We have a concentration of credit exposure in commercial real estate and challenges faced by the commercial real estate market could adversely affect our business, financial condition, and results of operations.

As of December 31, 2023, we had approximately $889.8 million in loans outstanding to borrowers whereby the collateral securing the loan was commercial real estate, representing approximately 78.5% of our total loans outstanding as of that date. Approximately $273.7 million, or 24.1% of our total loans, and 30.8% of our commercial real estate loans are secured by owner-occupied properties. Commercial real estate loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. Cash flows may be affected significantly by general economic conditions, and a downturn in the local economy or in occupancy rates in the local economy where the property is located could increase the likelihood of default. Because our loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our level of non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the related provision for credit losses and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.

31

Our commercial real estate loans have grown 12.8%, or $100.9 million, since December 31, 2022. The banking regulators give commercial real estate lending greater scrutiny, and they may require banks with higher levels of commercial real estate loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within the Bank’s loan portfolio monthly.

Imposition of limits by the bank regulators on commercial and multi-family real estate lending activities could curtail our growth and adversely affect our earnings.

In 2006, the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (the “CRE Guidance”). Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where (i) total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months, or (ii) construction and land development loans exceed 100% of total risk-based capital. Our total non-owner-occupied commercial real estate loans represented 313% of the Bank’s total risk-based capital at December 31, 2023, and our construction and land development loans represented 74% of the Bank’s total risk-based capital at December 31, 2023. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 47% from December 31, 2020 to December 31, 2023.

In December 2015, the regulatory agencies released a new statement on prudent risk management for commercial real estate lending (the “2015 Statement”). In the 2015 Statement, the regulatory agencies, among other things, indicated their intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward. If the FDIC, our primary federal regulator, were to impose restrictions on the amount of commercial real estate loans we can hold in our portfolio, for reasons noted above or otherwise, our earnings would be adversely affected.

Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.

At December 31, 2023, commercial business loans comprised 6.9% of our total loan portfolio. Our commercial business loans are originated primarily based on the identified cash flow and general liquidity of the borrower and secondarily on the underlying collateral provided by the borrower and/or repayment capacity of any guarantor. The borrower’s cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use. In addition, business assets may depreciate over time, be difficult to appraise, and fluctuate in value based on the success of the business. Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and liquidity of the guarantor. If these borrowers do not have sufficient cash flows or resources to pay these loans as they come due or the value of the underlying collateral is insufficient to fully secure these loans, we may suffer losses on these loans that exceed our allowance for credit losses.

Our focus on lending to small to mid-sized community-based businesses may increase our credit risk.

Most of our commercial business and commercial real estate loans are made to small business or middle market customers. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities and have a heightened vulnerability to economic conditions. If general economic conditions in the markets in which we operate negatively impact this important customer sector, our results of operations and financial condition and the value of our common stock may be adversely affected. Moreover, a portion of these loans have been made by us in recent years and the borrowers may not have experienced a complete business or economic cycle. Furthermore, the deterioration of our borrowers’ businesses may hinder their ability to repay their loans with us, which could have a material adverse effect on our financial condition and results of operations.

32

Our underwriting decisions may materially and adversely affect our business.

While we generally underwrite the loans in our portfolio in accordance with our own internal underwriting guidelines and regulatory supervisory guidelines, in certain circumstances we have made loans which exceed either our internal underwriting guidelines, supervisory guidelines, or both. As of December 31, 2023, approximately $27.5 million of our loans, or 16.6% of the Bank’s regulatory capital (Tier 1 Capital plus allowance for credit losses), had loan-to-value ratios that exceeded regulatory supervisory guidelines, of which two loans totaling approximately $559 thousand had loan-to-value ratios of 100% or more. In addition, supervisory limits on commercial loan-to-value exceptions are set at 30% of the Bank’s tier 1 capital plus allowance for credit losses. At December 31, 2023, $18.7 million of our commercial loans, or 11.3% of the Bank’s regulatory capital, exceeded the supervisory loan-to-value ratio. The number of loans in our portfolio with loan-to-value ratios in excess of supervisory guidelines, our internal guidelines, or both could increase the risk of delinquencies and defaults in our portfolio, which could have a material adverse effect on our financial condition and results of operations.

We depend on the accuracy and completeness of information about clients and counterparties and our financial condition could be adversely affected if we rely on misleading information.

In deciding whether to extend credit or to enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information, which we do not independently verify. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, we may assume that a customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial condition and results of operations could be negatively impacted to the extent we rely on financial statements that do not comply with GAAP or are materially misleading.

If we fail to effectively manage credit risk and interest rate risk, our business and financial condition will suffer.

We must effectively manage credit risk. There are risks inherent in making any loan, including risks with respect to (i) the period of time over which the loan may be repaid, (ii) proper loan underwriting and guidelines, (iii) changes in economic and industry conditions, (iv) the credit risks of individual borrowers, and (v) risks resulting from uncertainties as to the future value of collateral. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of our loan portfolio. Any failure to manage such credit risks may materially adversely affect our business and our consolidated results of operations and financial condition.

Changes in prevailing interest rates may reduce our profitability.

Our results of operations depend in large part upon the level of our net interest income, which is the difference between interest income from interest-earning assets, such as loans and investment securities, which include mortgage-backed securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. Depending on the terms and maturities of our assets and liabilities, we believe a significant change in interest rates could potentially have a material adverse effect on our profitability. Many factors cause changes in interest rates, including governmental monetary policies and domestic and international economic and political conditions. While we intend to manage the effects of changes in interest rates by adjusting the terms, maturities, and pricing of our assets and liabilities, our efforts may not be effective, and our financial condition and results of operations could suffer.

Capital and Liquidity Risks

Changes in the financial markets could impair the value of our investment portfolio.

Our investment securities portfolio is a significant component of our total earning assets. Total investment securities averaged $541.1 million in 2023, as compared to $570.6 million in 2022. This represents 33.2% and 37.0% of the average earning assets for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023, the portfolio was 29.6% of earning assets compared to 36.2% of earning assets at December 31, 2022. Turmoil in the financial markets could impair the market value of our investment portfolio, which could adversely affect our net income and possibly our capital.

33

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available for sale securities on the date of transfer totaled approximately $16.7 million and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) and $15.7 million ($12.4 million net of tax) at December 31, 2023 and 2022, respectively.

During the three months ended September 2023, we sold $39.9 million of book value U.S. Treasuries in our available-for-sale investment securities portfolio. While this sale created a one-time pre-tax loss of $1.2 million, it provided additional liquidity which is being used to pay down borrowings and fund loan growth. The weighted average book yield of the securities sold was 1.75% and the projected earn back period is 1.6 years. Such measures transition the balance sheet to be more efficient, improves net interest margin, and positions us for higher earnings in the future.

Our HTM investments totaled $217.2 million and represented approximately 42.9% of our total investments at December 31, 2023. Our AFS investments totaled $282.2 million, or approximately 55.8% of our total investments at December 31, 2023. Investments at cost totaled $6.8 million, or approximately 1.3% of our total investments at December 31, 2023. The effective duration on our total investment securities portfolio was 3.8 at December 31, 2023.

Securities which have unrealized losses were not considered to be credit loss impaired at December 31, 2023 or “other than temporarily impaired,” at December 31, 2022 and we believe it is more likely than not we will be able to hold these until they mature or recover our current book value. We currently maintain adequate liquidity which supports our ability to hold these investments until they mature, or until there is a market price recovery. However, if we were to cease to have the ability and intent to hold these investments until maturity or the market prices do not recover, and we were to sell these securities at a loss, it could adversely affect our net income and our capital.

The Bank is subject to strict capital requirements, which could be amended to be more stringent, in the future.

The Bank is subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain and an additional capital conservation buffer. From time to time, the regulators change these regulatory capital adequacy guidelines. If we fail to meet these capital guidelines and other regulatory requirements, we or our subsidiaries may be restricted in the types of activities we may conduct and we may be prohibited from taking certain capital actions, such as paying dividends, repurchasing or redeeming capital securities, and paying certain bonuses. In particular, the capital requirements applicable under Basel III require the Bank to satisfy additional, more stringent, capital adequacy standards than it had in the past. Failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our financial condition and results of operations. In addition, these requirements could have a negative impact on our ability to lend, grow deposit balances, make acquisitions, make capital distributions in the form of dividends or share repurchases, or pay certain bonuses needed to attract and retain key personnel. Higher capital levels could also lower our return on equity.  

Risks Related to Our Industry

Inflationary pressures and rising prices may affect our results of operations and financial condition.

In 2021 through 2022, inflation rose to levels not seen for over 40 years, reaching 7.0% and 6.5%, respectively. In 2023, the annual inflation rate decreased to 3.4% but inflationary pressures are currently expected to remain elevated throughout 2024. Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk. Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.

34

The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve.

In 2020, in response to economic disruption associated with the COVID-19 pandemic, the Federal Reserve quickly reduced short-term rates to extremely low levels and acted to influence the markets to reduce long-term rates as well. During 2021, the Federal Reserve significantly reduced such “easing” actions that held down long-term rates. During 2022, the Federal Reserve switched to a tightening policy and raised short term rates significantly and rapidly throughout the year. Those actions triggered a significant decline in the values of most categories of U.S. stocks and bonds; significantly raised recessionary expectations for the U.S.; and inverted the yield curve in the U.S. for much of the last two quarters of 2022. Effects on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks. Among other things, easing strategies are intended to lower interest rates, expand the money supply, and stimulate economic activity, while tightening strategies are intended to increase interest rates, discourage borrowing, tighten the money supply, and restrain economic activity. However, in 2022, short term rates rose faster than long term rates to the point that the yield curve inverted for much of the final two quarters of 2022. This sort of phenomenon-where short term rates rise more strongly and rapidly than long-term rates can follow-is relatively common.

It is unclear when long term rates are likely to catch up. Many external factors may interfere with the effects of these plans or cause them to be changed, sometimes quickly. Such factors include significant economic trends or events as well as significant international monetary policies and events. These economic strategies have had, and will continue to have, a significant impact on our business and on many of our customers. As exemplified by the 2023 bank failures in the U.S., such strategies also can affect the U.S. and world-wide financial systems in ways that may be difficult to predict.

Adverse developments affecting the financial services industry, such as the 2023 bank failures or concerns involving liquidity, may have a material adverse effect on our operations.

The high-profile bank failures in 2023 involving Silicon Valley Bank, Signature Bank, and First Republic Bank caused general uncertainty and concern regarding the liquidity adequacy of the banking sector. Although we were not directly affected by these bank failures, the resulting speed and ease in which news, including social media commentary, led depositors to withdraw or attempt to withdraw their funds from these and other financial institutions, which then caused the stock prices of many financial institutions to become volatile. Additional bank failures could have an adverse effect on our financial condition and results of operations, either directly or through an adverse impact on certain of our customers. In response to these bank failures and the resulting market reaction, the Secretary of the Treasury approved actions enabling the FDIC to complete its resolutions of the failed banks in a manner that fully protects depositors by utilizing the Deposit Insurance Fund, including the use of Bridge Banks to assume all of the deposit obligations of the failed banks, while leaving unsecured lenders and equity holders of such institutions exposed to losses. With the risk of any additional bank failures, we may face the potential for reputational risk, deposit outflows, increased costs and competition for liquidity, and increased credit risk which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.  

Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.

Our deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and are subject to deposit insurance assessments to maintain deposit insurance. As an FDIC-insured institution, we are required to pay quarterly deposit insurance premium assessments to the FDIC. Although we cannot predict what the insurance assessment rates will be in the future, either deterioration in our risk-based capital ratios or adjustments to the base assessment rates could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

We could experience a loss due to competition with other financial institutions or nonbank companies.

We face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, community, and internet banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to offer products and services in more areas in which they do not have a physical location and for nonbanks, such as FinTech companies, to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can.

35

Our ability to compete successfully depends on a number of factors, including, among other things:

· our ability to develop, maintain, and build upon long-term customer relationships based on top quality service, high ethical standards, and safe, sound assets;

· our ability to expand our market position;

· the scope, relevance, and pricing of the products and services we offer to meet our customers’ needs and demands;

· the rate at which we introduce new products and services relative to our competitors;

· customer satisfaction with our level of service; and

· industry and general economic trends.

Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

We may be adversely affected by the soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by the bank cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the bank. Any such losses could have a material adverse effect on our financial condition and results of operations.

Failure to keep pace with technological change could adversely affect our business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. In addition, we depend on internal and outsourced technology to support all aspects of our business operations. Failure to successfully keep pace with technological changes could have a material adverse impact on our business, financial condition, and results of operations.

New lines of business or new products and services may subject us to additional risk.

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business and/or new products or services could have a material adverse effect on our business, financial condition, and results of operations.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

36

We use brokered deposits which may be an unstable and/or expensive deposit source to fund earning asset growth.

We use brokered deposits as a source of funding to support our asset growth, to augment deposits generated from our branch network and to assist in the management of our interest rate risk. We have established policies and procedures with respect to the use of brokered deposits, which require, among other things, that (i) we limit the amount of brokered deposits as a percentage of total deposits, and (ii) our Asset/Liability Committee of the board of directors and our board of directors monitor our use of brokered deposits on a regular basis, including interest rates and the total volume of such deposits in relation to our total deposits. In the event that our funding strategies call for the use of additional brokered deposits, there can be no assurance that such sources will be available, or will remain available, or that the cost of such funding sources will be reasonable. Additionally, if the Bank is no longer considered well capitalized, our ability to access new brokered deposits or retain existing brokered deposits could be affected by market conditions, regulatory requirements or a combination thereof, which could result in most, if not all, brokered deposit sources being unavailable. The inability to utilize brokered deposits as a source of funding could have an adverse effect on our financial position, results of operations and liquidity.

Further, if, as a result of competitive pressures, market interest rates, alternative investment opportunities that present more attractive returns to customers, general economic conditions or other events, the balance of our deposits decreases relative to our overall banking operations, we may need to rely more heavily on wholesale or other sources of external funding, or may have to increase deposit rates to maintain deposit levels in the future. Any such increased reliance on wholesale funding, or increases in funding rates in general, could have a negative impact on our net interest income and, consequently, on our results of operations and financial condition.

Our ability to obtain brokered deposits as an additional funding source could be limited.

We had $48.1 million, or 3.2% of total deposits in brokered deposit accounts, at December 31, 2023 and no brokered deposit accounts at December 31, 2022. We have obtained brokered certificates of deposit when obtaining them allowed us to extend the maturities of our deposits at favorable rates compared to borrowing funds with similar maturities or when we are seeking to extend the maturities of our funding to assist in the management of our interest rate risk. Unlike non-brokered certificates of deposit where the deposit amount can be withdrawn with a penalty for any reason, including increasing interest rates, a brokered certificate of deposit can only be withdrawn in the event of the death or court declared mental incompetence of the depositor. This allows us to better manage the maturity of our deposits and our interest rate risk.

The FDIC has promulgated regulations implementing limitations on brokered deposits. Under the regulations, well capitalized institutions, such as the Bank, are not subject to brokered deposit limitations, while adequately capitalized institutions are able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and subject to restrictions on the interest rate that can be paid on such deposits. Undercapitalized institutions are not permitted to accept brokered deposits. Should our capital ratios decline, this could limit our ability to replace brokered deposits when they mature. At December 31, 2023, the Bank met or exceeded all applicable requirements to be deemed “well capitalized” for purposes of these regulations. However, there can be no assurance that the Bank will continue to meet those requirements. Limitations on the Bank’s ability to accept brokered deposits for any reason (including regulatory limitations on the amount of brokered deposits in total or as a percentage of total deposits) in the future could materially adversely impact our funding costs and liquidity.

Risks Related to Our Strategy

We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.

From time to time, we may seek to acquire other financial institutions or parts of those institutions. We may also expand into new markets, like we did in York County, South Carolina in 2022, or lines of business or offer new products or services. These activities would involve a number of risks, including:

· the potential inaccuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to a target institution;

· regulatory approvals could be delayed, impeded, restrictively conditioned, or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to anti-money laundering/Bank Secrecy Act compliance, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations, CRA issues, and other similar laws and regulations;

· the time and costs of evaluating new markets, hiring or retaining experienced local management, including those from competitors, and opening new offices and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion;

· difficulty or unanticipated expense associated with converting the operating systems of the acquired or merged company;

· the incurrence and possible impairment of goodwill and other intangible assets associated with an acquisition or merger and possible adverse effects on our results of operations; and

· the risk of loss of key employees and customers of the Company or the acquired or merged company.

37

If we do not successfully manage these risks, our merger and acquisition activities could have a material adverse effect on our business, financial condition, and results of operations, including short-term and long-term liquidity, and our ability to successfully implement our strategic plan.

We may be exposed to difficulties in combining the operations of acquired businesses into our own operations, which may prevent us from achieving the expected benefits from our acquisition activities.

We may not be able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our acquisition activities. Inherent uncertainties exist in integrating the operations of an acquired business. In addition, the markets and industries in which we and our potential acquisition targets operate are highly competitive. We may lose customers or the customers of acquired entities as a result of an acquisition. We also may lose key personnel from the acquired entity as a result of an acquisition. We may not discover all known and unknown factors when examining a company for acquisition during the due diligence period. These factors could produce unintended and unexpected consequences. Undiscovered factors as a result of acquisitions, pursued by non-related third party entities, could bring civil, criminal, and financial liabilities against us, our management, and the management of those entities acquired. These factors could contribute to us not achieving the expected benefits from acquisitions within desired time frames.

New or acquired banking office facilities and other facilities may not be profitable.

We may not be able to identify profitable locations for new banking offices. The costs to start up new banking offices or to acquire existing branches, and the additional costs to operate these facilities, may increase our non-interest expense and decrease our earnings in the short term.. It may be difficult to adequately and profitably manage our growth through the establishment or purchase of additional banking offices and we can provide no assurance that any such banking offices will successfully attract enough deposits to offset the expenses of their operation. In addition, any new or acquired banking offices will be subject to regulatory approval, and there can be no assurance that we will succeed in securing such approval.

Risks Related to Our Human Capital

We are dependent on key individuals, and the loss of one or more of these key individuals could curtail our growth and adversely affect our prospects.

Michael C. Crapps, our president and chief executive officer, and Mr. Nissen, the Bank’s president and, effective July 1, 2024, also the Bank’s chief executive officer, each have extensive and long-standing ties within our primary market area and substantial experience with our operations, and each has contributed significantly to our business. If we lose the services of Mr. Crapps or Mr. Nissen, each would be difficult to replace, and our business and development could be materially and adversely affected. Our success also depends, in part, on our continued ability to attract and retain experienced loan originators, as well as other management personnel. Competition for personnel is intense, and we may not be successful in attracting or retaining qualified personnel. Our failure to compete for these personnel, or the loss of the services of several of such key personnel, could adversely affect our business strategy and materially and adversely affect our business, results of operations, and financial condition.

Operational Risks

A failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers or other third parties, including as a result of cyber attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.

We rely heavily on communications and information systems to conduct our business. Information security risks for financial institutions such as ours have increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, and terrorists, activists, and other external parties. As customer, public, and regulatory expectations regarding operational and information security have increased, our operating systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns. Our business, financial, accounting, and data processing systems, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be electrical or telecommunication outages, natural disasters such as earthquakes, tornadoes, and hurricanes, disease pandemics, events arising from local or larger scale political or social matters, including terrorist acts, and as described below, cyber attacks.

As noted above, our business relies on our digital technologies, computer and email systems, software, and networks to conduct its operations. Although we have information security procedures and controls in place, our technologies, systems, networks, and our customers’ devices may become the target of cyber attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of our or our customers’ or other third parties’ confidential information. Third parties with whom we do business or that facilitate our business activities, including financial intermediaries, or vendors that provide service or security solutions for our operations, and other unaffiliated third parties, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. 

38

While we have disaster recovery and other policies, plans and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. Our risk and exposure to these matters remains heightened because of the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of our controls, processes, and practices designed to protect our systems, computers, software, data, and networks from attack, damage or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities. Disruptions or failures in the physical infrastructure or operating systems that support our businesses and clients, or cyber attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputation damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could have a material effect on our results of operations or financial condition.

Our Information Systems May Experience Failure, Interruption or Breach in Security.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. Any failure, interruption or breach in security of these systems could result in significant disruption to our operations. Information security breaches and cybersecurity-related incidents include, but are not limited to, attempts to access information, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, theft, misuse, loss, release or destruction of data (including confidential customer information), account takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the part of external or internal parties or may result from accidental technological failure. Our technologies, systems, networks and software have been and continue to be subject to cybersecurity threats and attacks, which range from uncoordinated individual attempts to sophisticated and targeted measures directed at us. Any failures related to upgrades and maintenance of our technology and information systems could further increase our information and system security risk. Our increased use of cloud and other technologies also increases our risk of being subject to a cyber-attack. The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our customers, employees and third parties that we do business with have been, and will continue to be, targeted by parties using fraudulent emails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware programs to our information systems, the information systems of our merchants or third-party service providers and/or our customers’ personal devices, which are beyond our security control systems. Though we endeavor to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber-attacks against us, our merchants, our third-party service providers and our customers remain a serious issue.

Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risks of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even well protected information, networks, systems and facilities remain potentially vulnerable to attempted security breaches or disruptions because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement zero risk security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. Furthermore, in the event of a cyber-attack, we may be delayed in identifying or responding to the attack, which could increase the negative impact of the cyber-attack on our business, financial condition and results of operations. While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. A security breach or other significant disruption of our information systems or those related to our customers, merchants or our third-party vendors, including as a result of cyber-attacks, could (i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of our customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, governmental fines and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm our reputation or cause a decrease in the number of customers that choose to do business with us. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

39

We are at risk of increased losses from fraud.

Criminals committing fraud increasingly are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective. The fraudulent activity has taken many forms, ranging from check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information or impersonation of our clients through the use of falsified or stolen credentials. Additionally, an individual or business entity may properly identify themselves, particularly when banking online, yet seek to establish a business relationship for the purpose of perpetrating fraud. Further, in addition to fraud committed against us, we may suffer losses as a result of fraudulent activity committed against third parties. Increased deployment of technologies, such as chip card technology, defray and reduce aspects of fraud; however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer to commit fraud. Many of these data compromises are widely reported in the media. As a result of the increased sophistication of fraud activity, we have increased our spending on systems and controls to detect and prevent fraud. This will result in continued ongoing investments in the future.

Nevertheless, these investments may prove insufficient and fraudulent activity could result in losses to us or our customers; loss of business and/or customers; damage to our reputation; the incurrence of additional expenses (including the cost of notification to consumers, credit monitoring and forensics, and fees and fines imposed by the card networks); disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability any of which could have a material adverse effect on our business, financial condition and results of operations.

Our use of third party vendors and our other ongoing third party business relationships are subject to increasing regulatory requirements and attention.

We regularly use third party vendors as part of our business and have substantial ongoing business relationships with other third parties. These types of third party relationships are subject to increasingly demanding regulatory requirements and attention by our bank regulators. Recent regulation requires us to enhance our due diligence, ongoing monitoring and control over our third party vendors and other ongoing third party business relationships. We expect that our regulators will hold us responsible for deficiencies in our oversight and control of our third party relationships and in the performance of the parties with which we have these relationships. As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third party vendors or other ongoing third party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines as well as requirements for customer remediation, any of which could have a material adverse effect on our business, financial condition or results of operations.

Negative public opinion surrounding the Bank and the financial institutions industry generally could damage our reputation and adversely impact our earnings.

Reputation risk, or the risk to our business, earnings and capital from negative public opinion surrounding the Bank and the financial institutions industry generally, is inherent in our business. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, mergers and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to keep and attract clients and employees, could impair the confidence of our investors, counterparties and business partners and can affect our ability to effect transactions and can expose us to litigation and regulatory action. Although we take steps to minimize reputation risk, this risk will always be present given the nature of our business. 

Legal, Accounting, Regulatory and Compliance Risks

We are subject to extensive regulation that could restrict our activities, have an adverse impact on our operations, and impose financial requirements or limitations on the conduct of our business.

We operate in a highly regulated industry and are subject to examination, supervision, and comprehensive regulation by various regulatory agencies. We are subject to Federal Reserve regulation. The Bank is subject to extensive regulation, supervision, and examination by our primary federal regulator, the FDIC, the regulating authority that insures customer deposits; and by our state regulator, the S.C. Board. Also, as a member of the Federal Home Loan Bank (the “FHLB”), the Bank must comply with applicable regulations of the Federal Housing Finance Board and the FHLB. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our shareholders. The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit, and other activities. A sufficient claim against us under these laws could have a material adverse effect on our results of operations.

40

Failure to comply with laws, regulations or policies could also result in heightened regulatory scrutiny and in sanctions by regulatory agencies (such as a memorandum of understanding, a written supervisory agreement or a cease and desist order), civil money penalties and/or reputation damage. Any of these consequences could restrict our ability to expand our business or could require us to raise additional capital or sell assets on terms that are not advantageous to us or our shareholders and could have a material adverse effect on our business, financial condition, and results of operations. While we have policies and procedures designed to prevent any such violations, such violations may occur despite our best efforts.

Federal, state, and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.

Federal, state, and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. Loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage” may be protected from liability to a borrower for failing to make the necessary determinations. In either case, we may find it necessary to tighten our mortgage loan underwriting standards in response to the CFPB rules, which may constrain our ability to make loans consistent with our business strategies. It is our policy not to make predatory loans and to determine borrowers’ ability to repay, but the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make.

We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.

Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The DOJ, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the CRA and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition, and results of operations.

Changes in accounting standards could materially affect our financial statements.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, FASB, the SEC and our regulators change the financial accounting and reporting standards, or the interpretation thereof, and guidance that govern the preparation and disclosure of external financial statements. Such changes are beyond our control, can be hard to predict and could materially impact how we report and disclose our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, which could potentially result in a need to revise or restate prior period financial statements.

The Federal Reserve may require us to commit capital resources to support the Bank.

The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to our Bank if the Bank experiences financial distress.

A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects.

41

We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

In 2023, Republicans gained control of the U.S. House of Representatives, while Democrats retained control of the U.S. Senate. However slim the majorities, though, the net result was a split Congress, which in the past leads to less sweeping policy changes. Congressional committees with jurisdiction over the banking sector have pursued oversight and legislative initiatives in a variety of areas, including addressing climate-related risks, promoting diversity and equality within the banking industry and addressing other Environmental, Social, and Governance matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, establishing a regulatory framework for digital assets and markets, and oversight of any pandemic response and economic recovery. The prospects for the enactment of major banking reform legislation remains unclear.

Moreover, the turnover of the presidential administration in 2020 resulted in certain changes in the leadership and senior staffs of the federal banking agencies, the CFPB, CFTC, SEC, and the Treasury Department, with certain significant leadership positions yet to be permanently filled, including the Comptroller of the Currency. These changes have impacted the rulemaking, supervision, examination and enforcement priorities and policies of the agencies and likely will continue to do so over the next several years. The potential impact of the 2024 election on any additional changes in agency personnel, policies, and priorities on the financial services sector, including the Company and the Bank, cannot be predicted at this time. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us. Any future changes in federal and state laws and regulations, as well as the interpretation and implementation of such laws and regulations, could affect us in substantial and unpredictable ways, including those listed above or other ways that could have a material adverse effect on our business, financial condition, or results of operations.

We are party to various claims and lawsuits incidental to our business. Litigation is subject to many uncertainties such that the expenses and ultimate exposure with respect to many of these matters cannot be ascertained.

From time to time, we, our directors, and our management are or may be the subject of various claims and legal actions by customers, employees, shareholders and others. Whether such claims and legal actions are legitimate or unfounded, if such claims and legal actions are not resolved in our favor, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. In light of the potential cost, reputational damage and uncertainty involved in litigation, we have in the past and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations or increase our cost of doing business. Our insurance or indemnities may not cover all claims that may be asserted against us. Any judgments or settlements in any pending litigation or future claims, litigation or investigation could have a material adverse effect on our business, reputation, financial condition, and results of operations.

From time to time, we are, or may become, involved in suits, legal proceedings, information-gatherings, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.

Many aspects of the banking business involve a substantial risk of legal liability. From time to time, we are, or may become, the subject of information-gathering requests, reviews, investigations and proceedings, and other forms of regulatory inquiry, including by bank regulatory agencies, self-regulatory agencies, the SEC and law enforcement authorities. The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgements, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm.

We could be adversely affected by changes in tax laws and regulations or the interpretations of such laws and regulations.

We are subject to the income tax laws of the U.S., and its states and municipalities in which we do business. These tax laws are complex and may be subject to different interpretations. We must make judgments and interpretations about the application of these inherently complex tax laws when determining our provision for income taxes, our deferred tax assets (DTAs) and liabilities, and our valuation allowance. Changes to the tax laws, administrative rulings or court decisions could increase our provision for income taxes and reduce our net income. In addition, our ability to continue to record our DTAs is dependent on our ability to realize their value through future projected earnings. Future changes in tax laws or regulations could adversely affect our ability to record our DTAs. Loss of part or all of our DTAs would have a material adverse effect on our financial condition and results of operations.

42

Our ability to realize deferred tax assets may be reduced, which may adversely impact our results of operations.

Deferred tax assets are reported as assets on our balance sheet and represent the decrease in taxes expected to be paid in the future because of net operating losses (“NOLs”) and tax credit carryforwards and because of future reversals of temporary differences in the bases of assets and liabilities as measured by enacted tax laws and their bases as reported in the financial statements. As of December 31, 2023, we had net deferred tax assets of $11.0 million. Realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in which existing deferred tax assets are expected to become deductible for federal income tax purposes. Based on projections of future taxable income in periods in which deferred tax assets are expected to become deductible, management determined that the realization of our net deferred tax asset was more likely than not. As a result, we did not recognize a valuation allowance on our net deferred tax asset as of December 31, 2023. If it becomes more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance must be recognized. Our deferred tax asset may be further reduced in the future if estimates of future income or our tax planning strategies do not support the amount of the deferred tax assets. Charges to establish a valuation allowance with respect to our deferred tax asset could have a material adverse effect on our financial condition and results of operations.

Risks Related to an Investment in Our Common Stock

Our ability to pay cash dividends is limited, and we may be unable to pay future dividends even if we desire to do so.

The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect our ability to pay dividends or otherwise engage in capital distributions.

Our ability to pay cash dividends may be limited by regulatory restrictions, by our Bank’s ability to pay cash dividends to the Company and by our need to maintain sufficient capital to support our operations. As a South Carolina-chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. If our Bank is not permitted to pay cash dividends to us, it is unlikely that we would be able to pay cash dividends on our common stock. Moreover, holders of our common stock are entitled to receive dividends only when, and if declared by our board of directors. Although we have historically paid cash dividends on our common stock, we are not required to do so and our board of directors could reduce or eliminate our common stock dividend in the future.

Our stock price may be volatile, which could result in losses to our investors and litigation against us.

Our stock price has been volatile in the past and several factors could cause the price to fluctuate substantially in the future. These factors include but are not limited to: actual or anticipated variations in earnings, changes in analysts’ recommendations or projections, our announcement of developments related to our businesses, operations and stock performance of other companies deemed to be peers, new technology used or services offered by traditional and non-traditional competitors, news reports of trends, irrational exuberance on the part of investors, new federal banking regulations, and other issues related to the financial services industry. Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to our performance. General market declines or market volatility in the future, especially in the financial institutions sector, could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices. Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. Moreover, in the past, securities class action lawsuits have been instituted against some companies following periods of volatility in the market price of its securities. We could in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management’s attention and resources from our normal business.

Future sales of our stock by our shareholders or the perception that those sales could occur may cause our stock price to decline.

Although our common stock is listed for trading on The NASDAQ Capital Market, the trading volume in our common stock is lower than that of other larger financial services companies. A public trading market having the desired characteristics of depth, liquidity, and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the relatively low trading volume of our common stock, significant sales of our common stock in the public market, or the perception that those sales may occur, could cause the trading price of our common stock to decline or to be lower than it otherwise might be in the absence of those sales or perceptions.

43

Economic and other circumstances may require us to raise capital at times or in amounts that are unfavorable to us. If we have to issue shares of common stock, they will dilute the percentage ownership interest of existing shareholders and may dilute the book value per share of our common stock and adversely affect the terms on which we may obtain additional capital.

We may need to incur additional debt or equity financing in the future to make strategic acquisitions or investments or to strengthen our capital position. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control and our financial performance. We cannot provide assurance that such financing will be available to us on acceptable terms or at all, or if we do raise additional capital that it will not be dilutive to existing shareholders.

If we determine, for any reason, that we need to raise capital, subject to applicable NASDAQ rules, our board generally has the authority, without action by or vote of the shareholders, to issue all or part of any authorized but unissued shares of stock for any corporate purpose, including issuance of equity-based incentives under or outside of our equity compensation plans. Additionally, we are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. The market price of our common stock could decline as a result of sales by us of a large number of shares of common stock or preferred stock or similar securities in the market or from the perception that such sales could occur. If we issue preferred stock that has a preference over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding-up, or if we issue preferred stock with voting rights that dilute the voting power of the common stock, the rights of holders of the common stock or the market price of our common stock could be adversely affected. Any issuance of additional shares of stock will dilute the percentage ownership interest of our shareholders and may dilute the book value per share of our common stock. Shares we issue in connection with any such offering will increase the total number of shares and may dilute the economic and voting ownership interest of our existing shareholders.

Provisions of our articles of incorporation and bylaws, South Carolina law, and state and federal banking regulations, could delay or prevent a takeover by a third party.

Our articles of incorporation and bylaws could delay, defer, or prevent a third party takeover, despite possible benefit to the shareholders, or otherwise adversely affect the price of our common stock. Our governing documents:

· authorize a class of preferred stock that may be issued in series with terms, including voting rights, established by the board of directors without shareholder approval;

· authorize 20,000,000 shares of common stock and 10,000,000 shares of preferred stock that may be issued by the board of directors without shareholder approval;

· classify our board with staggered three-year terms, preventing a change in a majority of the board at any annual meeting;

· require advance notice of proposed nominations for election to the board of directors and business to be conducted at a shareholder meeting;

· grant the board of directors the discretion, when considering whether a proposed merger or similar transaction is in the best interests of the Company and our shareholders, to take into account the effect of the transaction on our employees, clients and suppliers and upon the communities in which we are located, to the extent permitted by South Carolina law;

· provide that the number of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office, but may not consist of fewer than nine nor more than 25 members; and

· provide that no individual who is or becomes a “business competitor” or who is or becomes affiliated with, employed by, or a representative of any individual, corporation, or other entity which the board of directors, after having such matter formally brought to its attention, determines to be in competition with us or any of our subsidiaries (any such individual, corporation, or other entity being a “business competitor”) shall be eligible to serve as a director if the board of directors determines that it would not be in our best interests for such individual to serve as a director (any financial institution having branches or affiliates within the counties in which we operate is presumed to be a business competitor unless the board of directors determines otherwise).

In addition, the South Carolina business combinations statute provides that a 10% or greater shareholder of a resident domestic corporation cannot engage in a “business combination” (as defined in the statute) with such corporation for a period of two years following the date on which the 10% shareholder became such, unless the business combination or the acquisition of shares is approved by a majority of the disinterested members of such corporation’s board of directors before the 10% shareholder’s share acquisition date. This statute further provides that at no time (even after the two-year period subsequent to such share acquisition date) may the 10% shareholder engage in a business combination with the relevant corporation unless certain approvals of the board of directors or disinterested shareholders are obtained or unless the consideration given in the combination meets certain minimum standards set forth in the statute. The law is very broad in its scope and is designed to inhibit unfriendly acquisitions, but it does not apply to corporations whose articles of incorporation contain a provision electing not to be covered by the law. Our articles of incorporation do not contain such a provision. An amendment of our articles of incorporation to that effect would, however, permit a business combination with an interested shareholder even though such status was obtained prior to the amendment.

Finally, the Change in Bank Control Act and the Bank Holding Company Act generally require filings and approvals prior to certain transactions that would result in a party acquiring control of the Company or the Bank.

44

An investment in our common stock is not an insured deposit.

Our common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you may lose some or all of your investment.  

General Risk Factors

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG related compliance costs could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. Additionally, concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions, operating process changes, among other impacts. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. Our efforts to take these risks into account in making lending and other decisions may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

Climate change could have a material adverse impact on us and our customers.

We are exposed to risks of physical impacts of climate change and risks arising from the process of transitioning to a less carbon-dependent economy. Climate change-related physical risks include increased severity and frequency of adverse weather events, such as extreme storms and flooding, and longer-term shifts in climate patterns, such as rising temperatures and sea levels and changes in precipitation amount and distribution. Such physical risks may have adverse impacts on us, both directly on our business operations and as a result of impacts on our borrowers and counterparties, such as declines in the value of loans, investments, real estate and other assets, disruptions in business operations and economic activity, including supply chains, and market volatility.

Transition risks include changes in regulations, market preferences and technologies toward a less carbon-dependent economy. The possible adverse impacts of transition risks include asset devaluations, increased operational and compliance costs, and an inability to meet regulatory or market expectations. For example, we may become subject to new or heightened regulatory requirements and stakeholder expectations regarding climate change, including those relating operational resiliency, disclosure, and financial reporting. The risks associated with climate change are rapidly changing and evolving, making them difficult to assess due to limited data and other uncertainties. We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.

Our historical operating results may not be indicative of our future operating results.

We may not be able to sustain our historical rate of growth, and, consequently, our historical results of operations will not necessarily be indicative of our future operations. Various factors, such as economic conditions, regulatory and legislative considerations, and competition, may also impede our ability to expand our market presence. If we experience a significant decrease in our historical rate of growth, our results of operations and financial condition may be adversely affected because a high percentage of our operating costs are fixed expenses.

A downgrade of the U.S. credit rating could negatively impact our business, results of operations and financial condition.

In August 2011, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the U.S. from “AAA” to “AA+”. Furthermore, in August 2023, Fitch Ratings downgraded its long-term credit rating on the U.S. from “AAA” to “AA+”. If U.S. debt ceiling, budget deficit or debt concerns, domestic or international economic or political concerns, or other factors were to result in further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness, it could adversely affect the U.S. and global financial markets and economic conditions by creating financial turmoil and uncertainty, which could weigh heavily on the global banking system. It is possible that any such impact could have a material adverse effect on our business, results of operations and financial condition.

45

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 1C. Cybersecurity

Our risk management program is designed to identify, assess, and mitigate risks across various aspects of our company, including financial, operational, regulatory, reputational, and legal. Cybersecurity is a critical component of this program, given the increasing reliance on technology and potential for cyber threats. Our Information Security Officer has primary oversight of the cybersecurity component of the Bank’s risk management program, together with our Director of Information Technology Infrastructure. Both of these individuals are key members of senior management, reporting directly to the Chief Operations/Chief Risk Officer and as discussed below, periodically to the Audit & Compliance Committee of our board of directors.

Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. The structure of our information security program is designed around the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, regulatory guidance, and other industry standards. In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness. Our Information Security Officer and Director of Information Technology Infrastructure and Chief Operations/Chief Risk Officer along with other key members of management regularly collaborate with expert resources, industry groups, and regulators to discuss cybersecurity trends and issues and identify best practices. The information security program is periodically reviewed and reported upon to the Audit & Compliance Committee of the Board with the goal of addressing changing threats, risks, and conditions.

We employ an in-depth, layered, defensive strategy that embraces a “trust by design” philosophy when designing new products, services, and technology. We leverage people, processes, and technology as part of our efforts to manage and maintain cybersecurity controls. We also employ a variety of preventative, detective and corrective controls/tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and systems designed to mitigate cyber risk, including regular and ongoing education and training, preparedness simulations, tabletop exercises, and recovery and resilience tests. We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity measures and third-party specialists. We also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain. We actively monitor our email gateways for malicious phishing email campaigns and monitor remote connections. We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program.

We maintain an Incident Response Program that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate executive officers, Board-approved committees, regulators, law enforcement and the Audit & Compliance Committee of our board of directors. The Incident Response Plan is coordinated through the Information Security Officer and key members of management are embedded into the Plan by its design. The Incident Response Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually.

Notwithstanding our defensive measures and processes, the threat posed by cyber attacks is severe. Our internal systems, processes, and controls are designed to mitigate loss from cyber attacks. To date, cybersecurity threats have not materially affected our company, but we remain diligent, nonetheless. For further discussion of risks from cybersecurity threats, see the section captioned “Our Information Systems May Experience Failure, Interruption or Breach in Security” in Item 1A. Risk Factors.

46

Governance

Our Information Security Officer is accountable for oversight, risk assessment and reporting on our information security program, leveraging the Director of Information Technology Infrastructure and other resources as needed. Responsibilities include cybersecurity risk assessment, defense operations, incident response, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, board training, employee training, and business resilience. The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function, and our second line of defense function, including the Information Security Officer, provides guidance, oversight, monitoring and challenge of the first line’s activities. The second line of defense function is separated from the first line of defense function through organizational structure and ultimately reports directly to the board of directors with a functional reporting line to the Chief Operations/Risk Officer. Both the first line of defense and the second line of defense are subject to experience and professional education requirements. In particular, our Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. Our board of directors has approved management committees including the Information Technology Steering Committee, which focuses on technology impact and business impact. This committee provides oversight and governance of the technology program and the information security program. This committee is chaired jointly by the Information Security Officer and Director of Information Technology Infrastructure and made up of key departmental managers from throughout the entire company. Two executive leadership team members oversee this committee.

The Information Security Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, to the Audit & Compliance Committee of our board of directors on a quarterly basis (or more frequently as may be required by the Incident Response Plan).The Audit & Compliance Committee of our board of directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Information Security Officer also provides quarterly reports to the Audit & Compliance Committee of our board of directors regarding the information security program and the technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The executive leadership team and the board of directors review and approve our information security and technology budgets and strategies annually.

Additionally, the Audit & Compliance Committee of our board of directors reviews our cyber security risk profile on a quarterly basis and provides a report to the full board of directors at no later than the next board meeting after their meetings.

Item 2. Properties.

Our principal place of business as well as the Bank’s is located at 5455 Sunset Boulevard, Lexington, South Carolina 29072. In addition, we currently operate 22 full-service offices located in the South Carolina counties of Lexington County (6 offices), Richland County (4 offices), Newberry County (2 offices), Kershaw County (1 office), Aiken County (1 office), Greenville County (2 offices), Anderson County (1 office), Pickens County (1 office), York County (1 office), and in the Georgia counties of Richmond County (2 offices) and Columbia County (1 office). All of these properties are owned by the Bank except for the downtown Augusta, Georgia (Richmond County), Greenville, South Carolina, and York County, South Carolina full-service branch offices, which are leased by the Bank. Although the properties owned are generally considered adequate, we have a continuing program of modernization, expansion and, when necessary, occasional replacement of facilities. We intend to close one office in downtown Augusta, Georgia on June 27, 2024 and have provided the required notices to the FDIC and the S.C. Board

.

Item 3. Legal Proceedings.

In the ordinary course of operations, we may be a party to various legal proceedings from time to time. We do not believe that there is any pending or threatened proceeding against us, which, if determined adversely, would have a material effect on our business, results of operations, or financial condition.

Item 4. Mine Safety Disclosures.

Not applicable.

47

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities.

As of February 29, 2024, there were approximately 1,776 shareholders of record of our common stock. Our common stock trades on The NASDAQ Capital Market under the trading symbol of “FCCO.”

Quarterly Common Stock Price Ranges and Dividends

The following table sets forth the high and low sales price information as reported by NASDAQ for the periods indicated, and the dividends per share declared on our common stock in each such quarter. All information has been adjusted for any stock splits and stock dividends effected during the periods presented.

	High		Low		Dividends
2023
Quarter ended March 31, 2023	$	22.25	$	18.30	$	0.14
Quarter ended June 30, 2023	$	21.50	$	16.30	$	0.14
Quarter ended September 30, 2023	$	20.00	$	16.77	$	0.14
Quarter ended December 31, 2023	$	22.00	$	17.00	$	0.14
2022
Quarter ended March 31, 2022	$	22.00	$	20.00	$	0.13
Quarter ended June 30, 2022	$	21.36	$	17.55	$	0.13
Quarter ended September 30, 2022	$	19.70	$	17.25	$	0.13
Quarter ended December 31, 2022	$	22.00	$	16.97	$	0.13

Dividend Policy

We currently intend to continue to pay quarterly cash dividends on our common stock, subject to approval by our board of directors, although we may elect not to pay dividends or to change the amount of such dividends. The payment of dividends is a decision of our board of directors based upon then-existing circumstances, including our rate of growth, profitability, financial condition, existing and anticipated capital requirements, the amount of funds legally available for the payment of cash dividends, regulatory constraints and such other factors as the board determines relevant. The Company is a legal entity separate and distinct from the Bank. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company generally should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality, and overall financial condition. The Federal Reserve has also indicated that a bank holding company should not maintain a level of cash dividends that places undue pressure on the capital of its bank subsidiaries, or that can be funded only through additional borrowings or other arrangements that undermine the bank holding company’s ability to act as a source of strength.

The Company’s ability to pay dividends is generally limited by the ability of the Bank to pay dividends to the Company. As a South Carolina-chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. In addition, the Bank must maintain a capital conservation buffer, above its regulatory minimum capital requirements, consisting entirely of Common Equity Tier 1 capital, in order to avoid restrictions with respect to its payment of dividends to the Company. 

Unregistered Sales of Equity Securities

Pursuant to our Amended and Restated Non-Employee Director Deferred Compensation Plan, non-employee directors may elect to defer all or any part of annual retainer fees payable in respect of the following calendar year to the director for his or her service on the board of directors or any committee of the board of directors. During the year, a number of deferred stock units are credited quarterly to the director’s account equal to (i) the otherwise payable amount divided by (ii) the fair market value of a share of our common stock on the last trading day of such calendar quarter. In general, a director’s vested account balance will be distributed in a lump sum of our common stock on the 30th day following the participants separation from service. During the year ended December 31, 2023, we credited an aggregate of 9,644 deferred stock units to accounts for directors who elected to defer monthly fees or annual retainer fees for 2023. These deferred stock units include dividend equivalents in the form of additional stock units. The deferred stock units were issued pursuant to an exemption from registration under the Securities Act of 1933 in reliance upon Section 4(a)(2) of the Securities Act of 1933.

48

Repurchases of Equity Securities

On April 20, 2022, we announced that our board of directors approved the repurchase of up to 375,000 shares of our common stock. No repurchases were made under the such repurchase plan before it expired at the market close on December 31, 2023.

Item 6. [Reserved].  

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this Annual Report on Form 10-K.

Overview

We are headquartered in Lexington, South Carolina and serve as the bank holding company for the Bank. We engage in a general commercial and retail banking business characterized by personalized service and local decision making, emphasizing the banking needs of small to medium-sized businesses, professionals and individuals. We operate from our main office in Lexington, South Carolina, and our 22 full-service offices located in the South Carolina counties of Lexington County (6 offices), Richland County (4 offices), Newberry County (2 offices), Kershaw County (1 office), Aiken County (1 office), Greenville County (2 offices), Anderson County (1 office), Pickens County (1 office), and York County (1 office); and in the Georgia counties of Richmond County (2 offices) and Columbia County (1 office).

The following discussion describes our results of operations for 2023, as compared to 2022 and 2021, and also analyzes our financial condition as of December 31, 2023, as compared to December 31, 2022. Like most community banks, we derive most of our income from interest we receive on our loans and investments. A primary source of funds for making these loans and investments is our deposits, on which we pay interest. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowings.

We have included a number of tables to assist in our description of these measures. For example, the “Average Balances” table shows the average balance during 2023, 2022 and 2021 of each category of our assets and liabilities, as well as the yield we earned or the rate we paid with respect to each category. A review of this table shows that our loans typically provide higher interest yields than do other types of interest earning assets, which is why we intend to channel a substantial percentage of our earning assets into our loan portfolio. Similarly, the “Rate/Volume Analysis” table helps demonstrate the impact of changing interest rates and changing volume of assets and liabilities during the years shown. We also track the sensitivity of our various categories of assets and liabilities to changes in interest rates, and we have included a “Sensitivity Analysis Table” to help explain this. Finally, we have included a number of tables that provide detail about our investment securities, our loans, our deposits and our borrowings.

There are risks inherent in all loans, so we maintain an allowance for credit losses to absorb expected losses in 2023 and probable losses in 2022 and 2021 on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for credit losses against our operating earnings. In the following section, we have included a detailed discussion of this process, as well as several tables describing our allowance for credit losses and the allocation of this allowance among our various categories of loans.

In addition to earning interest on our loans and investments, we earn income through fees and other expenses we charge to our customers. We describe the various components of this noninterest income, as well as our noninterest expense, in the following discussion. The discussion and analysis also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements. We encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this report.

49

Critical Accounting Estimates

We have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States and with general practices within the banking industry in the preparation of our financial statements. Our significant accounting policies are described in the notes to our consolidated financial statements in this report.

Certain accounting policies inherently involve a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported, which could have a material impact on the carrying values of our assets and liabilities and our results of operations. We consider these accounting policies and estimates to be critical accounting policies.  We have identified the determination of the allowance for credit losses, income taxes and deferred tax assets and liabilities, goodwill and other intangible assets, and derivative instruments to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates Therefore, management has reviewed and approved these critical accounting policies and estimates and has discussed these policies with our Audit and Compliance Committee.

Allowance for Credit Losses

As of January 1, 2023, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Update (“ASU”) 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”), which changed the methodology, accounting policies and inputs used in determining the allowance for credit losses (“ACL”). Refer to the “Application of New Accounting Guidance Adopted in 2023” section in Note 2 for more information about our CECL adoption and methodology. We believe the allowance for credit losses is the critical accounting policy that requires the most significant judgment and estimates used in preparation of our consolidated financial statements.

The allowance for credit losses represents our best estimate of credit losses on financial assets. The allowance for credit losses is assessed at least quarterly and adjustments are recorded in the provision for credit losses. These losses are estimated using historical loss rates and a projection of reasonable and supportable macroeconomic forecast, combined with additional qualitative factors. At December 31, 2023, we held an allowance for credit losses for our held-to-maturity investment securities, our loans held-for-investment and our unfunded commitments that are not unconditionally cancelable.

The allowance for credit losses represents an amount which we believe will be adequate to absorb expected losses (2023) and probable losses (2022 and 2021) on existing financial assets that may become uncollectible. Our judgment as to the adequacy of the allowance for credit losses is based on assumptions about future events, which we believe to be reasonable, but which may or may not prove to be accurate. There can be no assurance that charge-offs of financial assets in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period.

The allowance for credit losses represents management’s best estimate for our expected losses at December 31, 2023 and probable losses at December 31, 2022 and 2021, but significant downturns in circumstances relating to asset quality and economic conditions could result in a requirement for additional allowance for credit losses. Likewise, an upturn in asset quality and improved economic conditions may allow a reduction in the required allowance for credit losses. In either instance, unanticipated changes could have a significant impact on results of operations. In addition, regulatory agencies, as an integral part of their examination process, periodically review our allowance for credit losses. Such agencies may require us to recognize additions to the allowance for credit losses based on their judgments about information available to them at the time of their examination.   

Income Taxes, Deferred Tax Assets, and Deferred Tax Liabilities

We are subject to the income tax laws of the U.S., its states, and the municipalities in which we operate. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities.

50

Income taxes are provided for the tax effects of the transactions reported in our consolidated financial statements and consist of taxes currently due plus deferred taxes related to differences between the tax basis and accounting basis of certain assets and liabilities, including available-for-sale securities, allowance for credit losses, write-downs of OREO properties, write-downs on premises held-for-sale, accumulated depreciation, net operating loss carry forwards, accretion income, deferred compensation, intangible assets, and pension plan and post-retirement benefits. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

In establishing our provision for income taxes, our deferred tax assets and liabilities, and our valuation allowance, we must make judgments and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon examination or audit. Although we believe that the judgments and estimates used are reasonable, and we believe our estimates have been reasonably accurate, actual results could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement would result in a reduction in our effective income tax rate in the period of resolution.

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of fair value of the net assets we acquired (including identifiable intangibles) in purchase transactions. Other intangible assets represent premiums paid for acquisitions of core deposits (core deposit intangibles)

We test our goodwill for impairment by evaluating whether the carrying amount exceeds the asset’s fair value. This test is done annually or more frequently if events and circumstances indicate the asset might be impaired.

Derivative Instruments

We utilize derivative instruments to manage risks such as interest rate risk or market risk. Our Derivatives Policy prohibits using derivatives for speculative purposes.

Accounting for derivatives differs significantly depending on whether a derivative is designated as an accounting hedge, which is a transaction intended to reduce a risk associated with a specific asset or liability or future expected cash flow at the time it is purchased. In order to qualify as an accounting hedge, a derivative must be designated as such at inception by management and meet certain criteria. Management must also continue to evaluate whether the instrument effectively reduces the risk associated with that item. To determine if a derivative instrument continues to be an effective hedge, we must make assumptions and judgments about the continued effectiveness of the hedging strategies and the nature and timing of forecasted transactions. If our hedging strategy was to become ineffective, hedge accounting would no longer apply and the reported results of operations or financial condition could be materially affected.

51

Financial Highlights

	As of or For the Years Ended December 31,
(Dollars in thousands except per share amounts)	2023			2022			2021
Balance Sheet Data:
Total assets	$	1,827,688		$	1,672,946		$	1,584,508
Loans held for sale		4,433			1,779			7,120
Loans		1,134,019			980,857			863,702
Deposits		1,511,001			1,385,382			1,361,291
Total common shareholders’ equity		131,059			118,361			140,998
Total shareholders’ equity		131,059			118,361			140,998
Average shares outstanding, basic		7,568			7,528			7,491
Average shares outstanding, diluted		7,647			7,608			7,549
Results of Operations:
Interest income	$	72,697		$	51,117		$	47,520
Interest expense		23,805			3,174			2,241
Net interest income		48,892			47,943			45,279
Provision for (release of) credit losses		1,129			(152	)		335
Net interest income after provision for (release of) credit losses		47,763			48,095			44,944
Non-interest income		10,421			11,569			13,904
Non-interest expenses		43,144			41,253			39,201
Income before taxes		15,040			18,411			19,647
Income tax expense		3,197			3,798			4,182
Net income		11,843			14,613			15,465
Net income available to common shareholders		11,843			14,613			15,465
Per Share Data:
Basic earnings per common share	$	1.56		$	1.94		$	2.06
Diluted earnings per common share		1.55			1.92			2.05
Book value at period end		17.23			15.62			18.68
Tangible book value at period end (non-GAAP)		15.23			13.59			16.62
Dividends per common share		0.56			0.52			0.48
Asset Quality Ratios:
Non-performing assets to total assets(3)		0.05	%		0.35	%		0.09	%
Non-performing loans to period end loans		0.02	%		0.50	%		0.03	%
Net charge-offs (recoveries) to average loans		0.00	%		(0.03	)%		(0.05	)%
Allowance for credit losses to period-end total loans		1.08	%		1.16	%		1.29	%
Allowance for credit losses to non-performing assets		1,492.36	%		194.41	%		789.98	%
Selected Ratios:
Return on average assets		0.68	%		0.88	%		1.02	%
Return on average common equity:		9.59	%		11.99	%		11.22	%
Return on average tangible common equity (non-GAAP):		10.95	%		13.73	%		12.65	%
Efficiency Ratio (non-GAAP)(1)		71.23	%		68.60	%		66.09	%
Noninterest income to operating revenue(2)		17.57	%		19.44	%		23.49	%
Net interest margin (tax equivalent)		3.01	%		3.14	%		3.23	%
Equity to assets		7.17	%		7.08	%		8.90	%
Tangible common shareholders’ equity to tangible assets (non-GAAP)		6.39	%		6.21	%		8.00	%
Tier 1 risk-based capital (Bank)(4)		12.53	%		13.49	%		14.00	%
Total risk-based capital (Bank)(4)		13.58	%		14.54	%		15.80	%
Leverage (Bank)(4)		8.45	%		8.63	%		8.45	%
Average loans to average deposits(5)		73.25	%		64.92	%		68.77	%

(1)	The efficiency ratio is a key performance indicator in our industry. The ratio is calculated by dividing non-interest expense by net interest income on a tax equivalent basis and non-interest income, excluding gains (losses) on sales of securities and other assets,  non-recurring bank owned life insurance (BOLI) income, gains on insurance proceeds, and collection of summary judgments on loans charged-off at a bank we acquired. The efficiency ratio is a measure of the relationship between operating expenses and net revenue.
(2)	Operating revenue is defined as net interest income plus noninterest income.
(3)	Includes non-accrual loans, loans > 90 days delinquent and still accruing interest and other real estate owned (“OREO”).
(4)	As a small bank holding company, we are generally not subject to the capital requirements at the holding company level unless otherwise advised by the Federal Reserve; however, our Bank remains subject to capital requirements.
(5)	Includes loans held for sale.

52

Certain financial information presented above is determined by methods other than in accordance with GAAP. These non-GAAP financial measures include “efficiency ratio,” “tangible book value at period end,” “return on average tangible common equity” and “tangible common shareholders’ equity to tangible assets.” The “efficiency ratio” is defined as non-interest expense divided by the sum of net interest income on a tax equivalent basis and non-interest income, excluding gains (losses) on sales of securities and other assets, non-recurring bank owned life insurance (BOLI) income, gains on insurance proceeds, and collection of summary judgments on loans charged off at a bank we acquired. The efficiency ratio is a measure of the relationship between operating expenses and net revenue. “Tangible book value at period end” is defined as total equity reduced by recorded intangible assets divided by total common shares outstanding. “Return on average tangible common equity” is defined as net income on an annualized basis divided by average total equity reduced by average recorded intangible assets. “Tangible common shareholders’ equity to tangible assets” is defined as total common equity reduced by recorded intangible assets divided by total assets reduced by recorded intangible assets. Our management believes that these non-GAAP measures are useful because they enhance the ability of investors and management to evaluate and compare our operating results from period-to-period in a meaningful manner. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

The table below provides a reconciliation of non-GAAP measures to GAAP for the three years ended December 31:

	2023			2022			2021
Tangible book value per common share
Tangible common equity per common share (non-GAAP)	$	15.23		$	13.59		$	16.62
Effect to adjust for intangible assets		2.00			2.03			2.06
Book value per common share (GAAP)	$	17.23		$	15.62		$	18.68
Return on average tangible common equity
Return on average tangible common equity (non-GAAP)		10.95	%		13.73	%		12.65	%
Effect to adjust for intangible assets		(1.36	)%		(1.74	)%		(1.43	)%
Return on average common equity (GAAP)		9.59	%		11.99	%		11.22	%
Tangible common shareholders’ equity to tangible assets
Tangible common equity to tangible assets (non-GAAP)		6.39	%		6.21	%		8.00	%
Effect to adjust for intangible assets		0.78	%		0.87	%		0.90	%
Common equity to assets (GAAP)		7.17	%		7.08	%		8.90	%

Results of Operations

Year Ended December 31, 2023 and 2022

Our net income for the twelve months ended December 31, 2023 was $11.8 million, or $1.55 diluted earnings per common share, as compared to $14.6 million, or $1.92 diluted earnings per common share, for the twelve months ended December 31, 2022. The $2.8 million decline in net income between the two periods is primarily due to a $1.1 million decline in non-interest income, a $1.9 million increase in total non-interest expense and a $1.3 million increase in provision for credit losses, partially offset by a $949 thousand increase in net interest income and a $601 thousand reduction in income tax expense.

· The increase in net interest income results from an increase of $90.7 million in average earning assets partially offset by an 11 basis points decline in the net interest margin between the two periods.   

· The $1.1 million provision for credit losses during the twelve months ended December 31, 2023 is primarily related to a $153.2 million increase in loans held-for-investment and a $50.9 million increase in unfunded commitments net of unconditionally cancellable commitments partially offset by a reduction of five basis points in our qualitative factors (four basis points in our changes in total of past due, rated, and non-accrual / changes in total of 30-89 days past due and other loans especially mentioned qualitative factor and one basis point in our reasonable and supportable forecast alternative scenarios qualitative factor).

· The $152 thousand in release of credit losses during the twelve months ended December 31, 2022 is primarily related to the following: a decrease in our COVID-19 qualitative factor in our allowance for loan losses methodology and net recoveries during the twelve months ended December 31, 2022 partially offset by increases in our economic conditions qualitative factor due to inflation, supply chain bottlenecks, labor shortages in certain industries, and the war in Ukraine; an increase in our changes in staff qualitative factor due to the addition of a new team and new market in York County, South Carolina in March 2022; an increase in our change in total of past due, rated, and non-accrual loans qualitative factor due to a $4.1 million loan being moved to non-accrual status in June 2022; and loan growth.

53

· The decline in non-interest income is primarily related to a decline in mortgage banking income of $494 thousand and a 2023 $1.2 million loss on sale of securities partially offset by an increase of $196 thousand in gains on sale of other real estate owned, $114 thousand in other non-recurring non-interest income, and $177 thousand in other non-interest income.

o The increase in other non-recurring income was largely related to the bank owned life insurance claim of $93 thousand and gains on insurance proceeds of $28 thousand during the twelve months ended December 31, 2023. We recorded $7 thousand in other non-recurring income related to gains on insurance proceeds during the twelve months ended December 31, 2022.

o The increase in other non-interest income was primarily related to increases of $65 thousand in ATM debit card income, $48 thousand in rental income, and $26 thousand in bankcard fees.

· The increase in non-interest expense is primarily related to increased salaries and employee benefits expense of $507 thousand, increased occupancy expense of $155 thousand, increased equipment expense of $223 thousand, increased marketing and public relations expense of $237 thousand, increased FDIC Insurance assessments of $436 thousand, increased ATM/debit card processing of $189 thousand, increased software subscriptions and services of $112 thousand, increased telephone expense of $131 thousand, increased debit card and fraud losses of $137 thousand, increased director fees of $113 thousand, and increased other expense of $123 thousand, partially offset by lower other real estate expense of $420 thousand, lower investment advisory services expense of $80 thousand and lower legal and professional fees of $135 thousand.

· Our effective tax rate was 21.3% during the twelve months ended December 31, 2023 compared to 20.6% during the twelve months ended December 31, 2022.

o The effective tax rates were affected by a $122 thousand non-recurring reduction to income tax during the twelve months ended December 31, 2023 and by a $153 thousand non-recurring reduction to income tax expense during the twelve months ended December 31, 2022.

54

Year Ended December 31, 2022 and 2021

Our net income for the twelve months ended December 31, 2022 was $14.6 million, or $1.92 diluted earnings per common share, as compared to $15.5 million, or $2.05 diluted earnings per common share, for the twelve months ended December 31, 2021. The $852 thousand decline in net income between the two periods is primarily due to a $2.3 million decline in non-interest income and a $2.1 million increase in non-interest expense partially offset by a $2.7 million increase in net interest income, a $487 thousand reduction in provision for credit losses, and a $384 thousand reduction in income tax expense.

· The increase in net interest income results from an increase of $122.2 million in average earning assets partially offset by an eight basis points decline in the net interest margin between the two periods.   

· The decline in non-interest income is primarily related to declines in mortgage banking income of $2.4 million, lower gains on sale of other real estate of $122 thousand, lower gains on sale of other assets of $190 thousand, and lower other non-recurring income of $164 thousand partially offset by an increase in investment advisory fees and non-deposit commissions of $484 thousand.

o The reduction in other non-recurring income was related to the collection of $147 thousand in summary judgments related to two loans charged off at a bank, which we subsequently acquired and $24 thousand in gains on insurance proceeds during the twelve months ended December 31, 2021. We recorded $7 thousand in other non-recurring income related to gains on insurance proceeds during the twelve months ended December 31, 2022.

· The reduction in provision for credit losses is primarily related to the following: a decrease in our COVID-19 qualitative factor in our allowance for credit losses methodology and net recoveries during the twelve months ended December 31, 2022 partially offset by increases in our economic conditions qualitative factor due to inflation, supply chain bottlenecks, labor shortages in certain industries, and the war in Ukraine; an increase in our changes in staff qualitative factor due to the addition of a new team and new market in York County, South Carolina in March 2022; an increase in our change in total of past due, rated, and non-accrual loans qualitative factor due to a $4.1 million loan being moved to non-accrual status in June 2022; and loan growth.

· The increase in non-interest expense is primarily related to increased salaries and employee benefits expense of $863 thousand, increased occupancy expense of $55 thousand, increased equipment expense of $47 thousand, increased marketing and public relations expense of $86 thousand, increased legal and professional fees of $299 thousand, increased ATM/debit card and data processing expense of $428 thousand, increased other real estate expense including other real estate write-downs of $203 thousand, increased fraud expense of $106 thousand, increased travel, meals, and entertainment expense of $103 thousand, and increased postage / courier expense of $118 thousand partially offset by lower FDIC assessments of $150 thousand, lower amortization of intangibles of $43 thousand, and lower loan processing costs of $63 thousand.

· Our effective tax rate was 20.6% during the twelve months ended December 31, 2022 compared to 21.3% during the twelve months ended December 31, 2021.

o The reduction in the effective tax rate was due to lower net income before tax and a $153 thousand non-recurring reduction to income tax expense during the twelve months ended December 31, 2022.

Net Interest Income

Net interest income is our primary source of revenue. Net interest income is the difference between income earned on assets and interest paid on deposits and borrowings used to support such assets. Net interest income is determined by the rates earned on our interest-earning assets and the rates paid on our interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, and the degree of mismatch and the maturity and repricing characteristics of our interest-earning assets and interest-bearing liabilities.

55

Year Ended December 31, 2023 and 2022

Net interest income increased $949,000, or 2.0%, to $48.9 million for the twelve months ended December 31, 2023 from $47.9 million for the twelve months ended December 31, 2022. Our net interest margin declined by 11 basis points to 3.00% during the twelve months ended December 31, 2023 from 3.11% during the twelve months ended December 31, 2022. Our net interest margin, on a taxable equivalent basis, was 3.01% for the twelve months ended December 31, 2023 compared to 3.14% for the twelve months ended December 31, 2022. Average earning assets increased $90.7 million, or 5.9%, to $1.6 billion for the twelve months ended December 31, 2023 compared to $1.5 billion in the same period of 2022.

· The increase in net interest income was primarily due to a higher level of average earning assets partially offset by lower net interest margin.

· The increase in average earning assets was due to increases in total loans partially offset by declines in securities and other short-term investments.

· Market interest rates increased in 2023, driving an increase in funding costs. Earning asset yield growth, which included the benefit of a pay-fixed/receive-floating interest rate swap (the “Pay-Fixed Swap Agreement”) described below, was more than offset by the rising price of funding, leading to the net interest margin compression.

o Investment securities represented 33.2% of average total earning assets for the twelve month ended December 31, 2023 compared to 37.0% during the same period in 2022.

o Short-term investments represented 2.6% of average total earning assets for the twelve months ended December 31, 2023 compared to 3.3% during the same period in 2022.

o Loans represented 64.2% of average total earning assets for the twelve months ended December 31, 2023 compared to 59.7% during the same period in 2022.

o During 2022 and 2023, market interest rates increased significantly due to an increase in inflation.  The target range of federal funds was 5.25% - 5.50% at December 31, 2023 compared to 4.25% - 4.50% at December 31, 2022.

o Effective May 5, 2023, we entered into Pay-Fixed Swap Agreement for a notional amount of $150.0 million that was designated as a fair value hedge in order to hedge the risk of changes in the fair value of the fixed rate loans included in the closed loan portfolio. This fair value hedge converts the hedged loans from a fixed rate to a synthetic floating SOFR rate. The Pay-Fixed Swap Agreement will mature on May 5, 2026 and we will pay a fixed coupon rate of 3.58% while receiving the overnight SOFR rate.  This interest rate swap positively impacted interest on loans by $1.6 million during the twelve months ended December 31, 2023.  Loan yields and net interest margin both benefited during the twelve months ended December 31, 2023 with an increase of 16 basis points and 10 basis points, respectively.  

Average loans increased $127.7 million, or 13.9%, to $1.0 billion for the twelve months ended December 31, 2023 from $920.4 million for the same period in 2022. Average loans represented 64.2% of average earning assets during the twelve months ended December 31, 2023 compared to 59.7% of average earning assets during the same period in 2022. Our loan (including loans held-for-sale) to deposit ratio on average during 2023 was 73.2%, as compared to 64.9% during 2022. These increases were due to our growth in loans (including loans held for sale) of $127.7 million exceeding our deposit growth of $13.3 million. The loan to deposit ratio (including loans held-for-sale) increased to 75.3% at December 31, 2023 as compared to 70.9% at December 31, 2022. Our growth in loans of $155.8 million from December 31, 2022 to December 31, 2023 exceeded our growth in deposits of $125.6 million during the same period.

The growth in our average deposits and securities sold under agreements to repurchase compared to the growth in our average loans resulted in an increase in borrowings. The yield on loans increased 73 basis points to 4.99% during the twelve months ended December 31, 2023 from 4.26% during the same period in 2022 due to market interest rates and the Pay-Fixed Swap Agreement. Average securities for the twelve months ended December 31, 2023 declined $29.5 million, or 5.2%, to $541.1 million from $570.6 million during the same period in 2022. Other short-term investments declined $7.5 million to $42.9 million during the twelve months ended December 31, 2023 from $50.5 million during the same period in 2022 due to the deployment of lower yielding other short-term investments into higher yielding loans. The yield on our securities portfolio increased to 3.36% for the twelve months ended December 31, 2023 from 1.97% for the same period in 2022. The yield on our other short-term investments increased to 5.11% for the twelve months ended December 31, 2023 from 1.25% for the same period in 2022 due to the Federal Open Market Committee (FOMC) increasing the target range of federal funds during the twelve months of 2023 a total of 100 basis points and a total of 425 basis points during the twelve months of 2022 . The target range of federal funds was 5.25% - 5.50% at December 31, 2023 compared to compared to 4.25% - 4.50% at December 31, 2022.

The yield on earning assets for the twelve months ended December 31, 2023 and 2022 were 4.45% and 3.32%, respectively.

56

The cost of interest-bearing liabilities was 2.06% during the twelve months ended December 31, 2023 compared to 30 basis points during the same period in 2022. The cost of deposits, including demand deposits, was 1.16% during the twelve months ended December 31, 2023 compared to 13 basis points during the same period in 2022. The cost of funds, including demand deposits, was 1.48% during the twelve months ended December 31, 2023 compared to 21 basis points during the same period in 2022. We continue to focus on growing our pure deposits plus customer cash management repurchase agreements (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, IRAs, and customer cash management repurchase agreements) as these accounts tend to be low-cost deposits and assist us in controlling our overall cost of funds. During the twelve months ended December 31, 2023, these pure deposits plus customer cash management repurchase agreements averaged 89.9% of total deposits plus customer cash management repurchase agreements as compared to 92.2% during the same period of 2022.

Year Ended December 31, 2022 and 2021

Net interest income increased $2.7 million, or 5.9%, to $47.9 million for the twelve months ended December 31, 2022 from $45.3 million for the twelve months ended December 31, 2021. Our net interest margin declined by eight basis points to 3.11% during the twelve months ended December 31, 2022 from 3.19% during the twelve months ended December 31, 2021. Our net interest margin, on a taxable equivalent basis, was 3.14% for the twelve months ended December 31, 2022 compared to 3.23% for the twelve months ended December 31, 2021. Average earning assets increased $122.2 million, or 8.6%, to $1.5 billion for the twelve months ended December 31, 2022 compared to $1.4 billion in the same period of 2021.

· The increase in net interest income was primarily due to a higher level of average earning assets partially offset by lower net interest margin.

· The increase in average earning assets was due to increases in non-PPP loans and securities partially offset by declines in PPP loans and other short-term investments.

· Although market interest rates increased in 2022, the decline in net interest margin was due to excess liquidity generated from PPP loan proceeds, other stimulus funds related to the COVID-19 pandemic, and organic deposit growth being deployed in lower yielding securities; and due to a reduction in PPP loans, which resulted in a change in the mix of our earning assets.

o Investment securities represented 37.0% of average total earning assets for the twelve month ended December 31, 2022 compared to 32.2% during the same period in 2021.

o Interest income on PPP loans declined to $49 thousand during the twelve months ended December 31, 2022 from $3.3 million during the twelve months ended December 31, 2021 due to a reduction in PPP loans.  Average PPP loans declined to $336 thousand for the twelve months ended December 31, 2022 compared to $36.8 million during the same period in 2021.

· In June 2022, a $4.1 million loan was moved to non-accrual status, which resulted in a $51 thousand reversal to interest income in June 2022.

Average loans increased $31.4 million, or 3.5%, to $920.4 million for the twelve months ended December 31, 2022 from $889.0 million for the same period in 2021. Average PPP loans declined $36.5 million and average Non-PPP loans increased $67.9 million to $336 thousand and $920.0 million, respectively, for the twelve months ended December 31, 2022. Average loans represented 59.7% of average earning assets during the twelve months ended December 31, 2022 compared to 62.6% of average earning assets during the same period in 2021. Our loan (including loans held-for-sale) to deposit ratio on average during 2022 was 64.9%, as compared to 68.8% during 2021. These declines were due to our growth in deposits of $124.9 million exceeding our loan (including loans held-for-sale) growth of $31.4 million, net of a $36.5 million decline in PPP loans. However, the loan to deposit ratio (including loans held-for-sale) increased to 70.9% at December 31, 2022 as compared to 64.0% at December 31, 2021. Our growth in loans of $111.8 million from December 31, 2021 to December 31, 2022 exceeded our growth in deposits of $24.1 million during the same period.

The growth in our average deposits and securities sold under agreements to repurchase compared to the growth in our average loans, net of the $36.5 million decline in PPP loans resulted in the excess funds being deployed in our securities portfolio. The yield on loans declined 20 basis points to 4.26% during the twelve months ended December 31, 2022 from 4.46% during the same period in 2021 due to reduction in higher yielding PPP loans. The yield on Non-PPP loans was 4.26% during both the twelve months ended December 31, 2022 and December 31, 2021. Average securities for the twelve months ended December 31, 2022 increased $113.7 million, or 24.9%, to $570.6 million from $456.8 million during the same period in 2021. Other short-term investments declined $22.9 million to $50.5 million during the twelve months ended December 31, 2022 from $73.4 million during the same period in 2021 due to the deployment of lower yielding other short-term investments into higher yielding securities and loans. The yield on our securities portfolio increased to 1.97% for the twelve months ended December 31, 2022 from 1.69% for the same period in 2021. The yield on our other short-term investments increased to 1.25% for the twelve months ended December 31, 2022 from 0.18% for the same period in 2021 due to the Federal Open Market Committee (FOMC) increasing the target range of federal funds during the twelve months of 2022 a total of 425 basis points. The target range of federal funds was 4.25% - 4.50% at December 31, 2022 compared to compared to 0.00% - 0.25% at December 31, 2021.

The yield on earning assets for the twelve months ended December 31, 2022 and 2021 were 3.32% and 3.35%, respectively.

The cost of interest-bearing liabilities was 30 basis points during the twelve months ended December 31, 2022 compared to 24 basis points during the same period in 2021. The cost of deposits, including demand deposits, was 13 basis points during the twelve months ended December 31, 2022 compared to 13 basis points during the same period in 2021. The cost of funds, including demand deposits, was 21 basis points during the twelve months ended December 31, 2022 compared to 16 basis points during the same period in 2021. We continue to focus on growing our pure deposits plus customer cash management repurchase agreements (demand deposits, interest-bearing transaction accounts, savings deposits, money market accounts, IRAs, and customer cash management repurchase agreements) as these accounts tend to be low-cost deposits and assist us in controlling our overall cost of funds. During the twelve months ended December 31, 2022, these pure deposits plus customer cash management repurchase agreements averaged 92.2% of total deposits plus customer cash management repurchase agreements as compared to 90.6% during the same period of 2021.

57

Average Balances, Income Expenses and Rates. The following table depicts, for the periods indicated, certain information related to our average balance sheet and our average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from daily averages.

	Year ended December 31,
	2023								2022								2021
(Dollars in thousands)	Average Balance			Income/ Expense		Yield/ Rate			Average Balance			Income/ Expense		Yield/ Rate			Average Balance			Income/ Expense		Yield/ Rate
Assets
Earning assets
PPP loans	$	183		$	5		2.73	%	$	336		$	49		14.58	%	$	36,837		$	3,340		9.07	%
Non-PPP loans		1,047,935			52,312		4.99	%		920,043			39,185		4.26	%		852,136			36,331		4.26	%
Total loans(1)	$	1,048,118		$	52,317		4.99	%	$	920,379		$	39,234		4.26	%	$	888,973		$	39,671		4.46	%
Non-Taxable Securities		50,726			1,471		2.90	%		52,501			1,525		2.90	%		54,771			1,564		2.86	%
Taxable Securities		490,352			16,715		3.41	%		518,051			9,725		1.88	%		402,034			6,155		1.53	%
Int Bearing Deposits in Other Banks		42,859			2,191		5.11	%		50,435			633		1.26	%		72,823			130		0.18	%
Fed Funds Sold		56			3		5.36	%		15			—		0.00	%		564			—		0.00	%
Total earning assets	$	1,632,111		$	72,697		4.45	%	$	1,541,381		$	51,117		3.32	%	$	1,419,165		$	47,520		3.35	%
Cash and due from banks		25,278								27,034								23,668
Premises and equipment		31,145								32,274								33,780
Goodwill and other intangible assets		15,319								15,476								15,649
Other assets		54,840								48,031								38,846
Allowance for credit losses-investments		(39	)							—								—
Allowance for credit losses-loans		(11,677	)							(11,250	)							(10,750	)
Total assets	$	1,746,977							$	1,652,946							$	1,520,358
Liabilities
Interest-bearing liabilities
Interest-bearing transaction accounts	$	307,415		$	1,760		0.57	%	$	336,115		$	273		0.08	%	$	303,633		$	196		0.06	%
Money market accounts		361,994			9,721		2.69	%		308,473			943		0.31	%		273,005			471		0.17	%
Savings deposits		133,010			307		0.23	%		157,626			102		0.06	%		134,980			78		0.06	%
Time deposits		178,339			4,775		2.68	%		146,112			531		0.36	%		158,053			995		0.63	%
Fed Funds Purchased		1,100			52		4.73	%		1,496			53		3.54	%		—			—		0.00	%
Securities Sold Under Agreements to Repurchase		74,586			1,658		2.22	%		74,805			227		0.30	%		62,194			85		0.14	%
FHLB Advances		86,614			4,345		5.02	%		9,457			370		3.91	%		—			—		0.00	%
Other Long-Term Debt		14,964			1,187		7.93	%		14,964			675		4.51	%		14,964			416		2.78	%
Total interest-bearing liabilities	$	1,158,022		$	23,805		2.06	%	$	1,049,048		$	3,174		0.30	%	$	946,829		$	2,241		0.24	%
Demand deposits		450,177								469,292								423,056
Allowance for credit losses-unfunded commitments		464								—								—
Other liabilities		14,837								12,725								12,607
Shareholders’ equity	$	123,477							$	121,881							$	137,866
Total liabilities and shareholders’ equity	$	1,746,977							$	1,652,946							$	1,520,358
Cost of deposits, including demand deposits							1.16	%							0.13	%							0.13	%
Cost of funds, including demand deposits							1.48	%							0.21	%							0.16	%
Net interest spread							2.39	%							3.01	%							3.11	%
Net interest income/margin				$	48,892		3.00	%				$	47,943		3.11	%				$	45,279		3.19	%
Net interest margin (tax equivalent)(2)				$	49,176		3.01	%				$	48,455		3.14	%				$	45,776		3.23	%

(1)	All loans and deposits are domestic. Average loan balances include non-accrual loans and loans held for sale.
(2)	Based on a 21.0% marginal tax rate.

58

The following table presents the dollar amount of changes in interest income and interest expense attributable to changes in volume and the amount attributable to changes in rate. The combined effect related to volume and rate which cannot be separately identified, has been allocated proportionately, to the change due to volume and the change due to rate.

	2023 versus 2022 Increase (decrease) due to									2022 versus 2021 Increase (decrease) due to
(In thousands)	Volume			Rate			Net			Volume			Rate			Net
Assets
Earning assets
Loans	$	5,862		$	7,221		$	13,083		$	1,636		$	(2,073	)	$	(437	)
Investment securities-taxable		(51	)		(3	)		(54	)		(67	)		28			(39	)
Investment securities- nontaxable		(490	)		7,480			6,990			2,001			1,569			3,570
Interest bearing deposits in other banks		(80	)		1,638			1,558			(27	)		530			503
Fed Funds sold		—			3			3			—			—			—
Total earning assets		3,160			18,420			21,580			4,048			(451	)		3,597
Interest-bearing liabilities
Interest-bearing transaction accounts		(21	)		1,508			1,487			23			54			77
Money market accounts		191			8,587			8,778			68			404			472
Savings deposits		(13	)		218			205			14			10			24
Time deposits		142			4,102			4,244			(70	)		(394	)		(464	)
Fed funds purchased		4			(5	)		(1	)		53			—			53
Securities sold under agreements to repurchase		(1	)		1,432			1,431			20			122			142
FHLB Advances		3,842			133			3,975			370			—			370
Other long-term debt		—			512			512			—			259			259
Total interest-bearing liabilities		363			20,268			20,631			261			672			933
Net interest income							$	949								$	2,664

Market Risk and Interest Rate Sensitivity

Market risk reflects the risk of economic loss resulting from adverse changes in market prices and interest rates. The risk of loss can be measured in either diminished current market values or reduced current and potential net income. Our primary market risk is interest rate risk. We have established an Asset/Liability Committee of the board of directors (the “ALCO”), which has members from our board of directors and management to monitor and manage interest rate risk. Our ALCO

· monitors our compliance with regulatory guidance in the formulation and implementation of our interest rate risk program;

· reviews the results of our interest rate risk modeling quarterly to assess whether we have appropriately measured our interest rate risk, mitigated our exposures appropriately and confirmed that any residual risk is acceptable;

· monitors and manages the pricing and maturity of our assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on our net interest income; and

· has established policies, policy guidelines, and strategies with respect to interest rate risk exposure and liquidity.

Further, our ALCO and board of directors explicitly review our ALCO policies at least annually and review our ALCO assumptions and policy limits quarterly.

We employ a monitoring technique to measure our interest sensitivity “gap,” which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. Simulation modeling is performed to assess the impact varying interest rates and balance sheet mix assumptions will have on net interest income. We model the impact on net interest income for several different changes, to include a flattening, steepening and parallel shift in the yield curve. For each of these scenarios, we model the impact on net interest income in an increasing and decreasing rate environment of 100, 200, 300, and 400 basis points. We also periodically stress certain assumptions such as loan prepayment rates, deposit decay rates and interest rate betas to evaluate our overall sensitivity to changes in interest rates. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled changes in net interest income at no more than 10%, 15%, 20%, and 20%, respectively, in a 100, 200, 300, and 400 basis point change in interest rates over the first 12-month period subsequent to interest rate changes. Interest rate sensitivity can be managed by repricing assets or liabilities, selling securities available-for-sale, replacing an asset or liability at maturity, by adjusting the interest rate during the life of an asset or liability, or by the use of derivatives such as interest rate swaps and other hedging instruments. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates. Neither the “gap” analysis or asset/liability modeling are precise indicators of our interest sensitivity position due to the many factors that affect net interest income including, the timing, magnitude, and frequency of interest rate changes as well as changes in the volume and mix of earning assets and interest-bearing liabilities. 

59

The following table illustrates our interest rate sensitivity at December 31, 2023.

Interest Sensitivity Analysis

(Dollars in thousands)	Within One Year			One to Three Years			Three to Five Years			Over Five Years			Total
Assets
Earning assets
Interest bearing deposits	$	65,314		$	—		$	—		$	—		$	65,314
Loans(1)		261,262			308,573			342,957			221,227			1,134,019
Loans Held for Sale		4,433			—			—			—			4,433
Total Securities(2)		45,070			81,585			101,084			277,457			505,196
Total earning assets		376,079			390,158			444,041			498,684			1,708,962
Liabilities
Interest bearing liabilities
Interest bearing deposits
Interest checking accounts		15,146			30,292			30,294			227,201			302,933
Money market accounts		20,225			40,452			40,449			303,375			404,501
Savings deposits		5,932			11,862			11,862			88,966			118,622
Time deposits		221,416			28,701			2,583			(87	)		252,613
Total interest-bearing deposits		262,719			111,307			85,188			619,455			1,078,669
Borrowings		132,827			35,000			—			—			167,827
Total interest-bearing liabilities		395,546			146,307			85,188			619,455			1,246,496
Period gap	$	(19,467	)	$	243,851		$	358,853		$	(120,771	)	$	462,466
Cumulative gap	$	(19,467	)	$	224,384		$	583,237		$	462,466		$	462,466
Ratio of cumulative gap to total earning assets		(5.18	)%		29.28	%		48.19	%		27.06	%		27.06	%

(1)	Loans classified as non-accrual as of December 31, 2023 are not included in the balances.
(2)	Securities based on amortized cost.

Based on the many factors and assumptions used in simulating the effect of changes in interest rates, the following table estimates the hypothetical percentage change in net interest income at December 31, 2023 and at December 31, 2022 over the subsequent 12 months. We were primarily liability sensitive at December 31, 2023 and at December 31, 2022. Compared to December 31, 2022, we increased our non-maturity deposit interest rate betas in increasing rate environments, which increased our liability sensitivity. This was partially offset by the previously mentioned $150.0 million Pay-Fixed Swap Agreement that we entered into effective May 5, 2023. As a result, our modeling, at December 31, 2023, reflects a decrease in net interest income in a rising interest rate environment during the first 12-month period subsequent to interest rate changes. The negative impact of rising rates on net interest income is slightly less liability sensitive during the second 12-month period subsequent to interest rate changes. In a declining interest rate environment, the model reflects increases in net interest income in the down 100 basis point and down 200 basis point scenarios and declines in net interest income in the down 300 basis point and 400 basis point scenarios during the first 12-month period subsequent to interest rate changes. The positive impact in the down 100 and down 200 basis point scenarios of declining rates changes to a fairly neutral impact on net interest income during the second 12-month period subsequent to interest rate changes. The increase and decrease of 100, 200, 300, and 400 basis points, respectively, reflected in the table below assume a simultaneous and parallel change in interest rates along the entire yield curve.

60

Net Interest Income Sensitivity

Change in short-term interest rates	Hypothetical percentage change in net interest income
	December 31, 2023			December 31, 2022
+400bp		-12.24	%		-8.99	%
+300bp		-8.92	%		-6.21	%
+200bp		-5.62	%		-3.74	%
+100bp		-2.47	%		-1.82	%
Flat		—			—
-100bp		+0.94	%		+3.13	%
-200bp		+1.18	%		+1.12	%
-300bp		-1.11	%		-3.86	%
-400bp		-1.50	%		-7.25	%

During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel increases in interest rates along the entire yield curve, our net interest income is projected to decline 1.94%, 4.67%, 7.63%, and 10.68%, respectively, at December 31, 2023, and 3.44%, 6.13%, 8.23%, and 9.58%, respectively, at December 31, 2022. During the second 12-month period after 100 basis point, 200 basis point, 300 basis point, and 400 basis point simultaneous and parallel reduction in interest rates along the entire yield curve, our net interest income is projected to increase 0.51% and decline 0.03%, 3.19%, and 4.41%, respectively, at December 31, 2023, and to decline 4.92%, 12.86%, 21.14%, and 26.33%, respectively, at December 31, 2022.

We perform a valuation analysis projecting future cash flows from assets and liabilities to determine the Present Value of Equity (“PVE”) over a range of changes in market interest rates. The sensitivity of PVE to changes in interest rates is a measure of the sensitivity of earnings over a longer time horizon. Policies have been established in an effort to maintain the maximum anticipated negative impact of these modeled changes in PVE at no more than 15%, 20%, 25%, and 25%, respectively, in a 100, 200, 300, and 400 basis point change in market interest rates. Based on PVE, we were primarily asset sensitive at December 31, 2023 and at December 31, 2022.

Present Value of Equity Sensitivity

Change in present value of equity	Hypothetical percentage change in PVE
	December 31, 2023			December 31, 2022
+400bp		-1.49	%		+1.43	%
+300bp		+0.44	%		+2.61	%
+200bp		+1.54	%		+3.13	%
+100bp		+1.59	%		+2.33	%
Flat		—			—
-100bp		-3.91	%		-3.83	%
-200bp		-10.63	%		-10.00	%
-300bp		-23.39	%		-18.44	%
-400bp		-47.74	%		-25.23	%

Provision and Allowance for Credit Losses

Year Ended December 31, 2023 and 2022

On January 1, 2023, we adopted CECL, which resulted in a day one reduction of $14 thousand to the allowance for credit losses on loans offset by increases of $398 thousand to the allowance for credit losses on unfunded commitments and $43.5 thousand to the allowance for credit losses on held-to-maturity investments. Furthermore, deferred tax assets increased $90 thousand and retained earnings declined $337 thousand. Refer to the “Application of New Accounting Guidance Adopted in 2023” section in Note 2 for more information about our CECL adoption and methodology. Compared to the day one CECL results, the allowance for credit losses on loans increased $945 thousand to $12.3 million at December 31, 2023 from $11.3 million at January 1, 2023; the allowance for credit losses on unfunded commitments increased $199 thousand to $597 thousand as of December 31, 2023 from $398 thousand as of January 1, 2023; and the allowance for credit losses on held-to-maturity investments declined $14 thousand to $30 thousand at December 31, 2023 from $43.5 thousand at January 1, 2023. As of December 31, 2023, the combined allowance for credit losses for loans, unfunded commitments, and investments was $12.9 million compared to $11.8 million at January 1, 2023 and $11.3 million at December 31, 2022.

The allowance for credit losses on loans as a percentage of total loans held-for-investment was 1.08% at December 31, 2023, 1.15% at January 1, 2023, and 1.16% at December 31, 2022.

61

The total ACL is composed of three parts: the ACL for loans, the ACL for unfunded commitments, and the ACL for HTM investments. The ACL for loans is further composed of the allowance for individually assessed loans, the allowance for collectively assessed expected losses, the allowance for collectively assessed qualitative adjustments, and the allowance for collectively assessed additional allowance. The allowance for collectively assessed qualitative adjustments is calculated using a set of qualitative factors, which at December 31, 2023 included the following factors:

· changes in lending policies and procedures,

· changes in staff, markets, and products,

· change in total of 30-89 days past due and other loans especially mentioned,

· changes in the loan review system,

· change in collateral value for non-collateral dependent loans,

· changes in concentration of credits,

· changes in the legal or regulatory requirements and competition,

· data limitations

· model imprecision, and

· reasonable and supportable forecast alternative scenarios.

Refer to the “Application of New Accounting Guidance Adopted in 2023” section in Note 2 for more information about our CECL adoption and methodology. 

We have a significant portion of our loan portfolio with real estate as the underlying collateral. As of December 31, 2023 and December 31, 2022, approximately 91.7% and 91.2%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period. The allowance is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance based on information available to them at the time of their examination.

The non-performing asset ratio was 0.05% of total assets with the nominal level of $864 thousand in non-performing assets at December 31, 2023 compared to 0.35% and $5.8 million at December 31, 2022. Non-accrual loans declined to $27 thousand at December 31, 2023 from $4.9 million at December 31, 2022. The declines in both non-performing assets and non-accrual loans from December 31, 2022 to December 31, 2023 were due to non-accrual loan payoffs and paydowns primarily due to the successful resolution of two customer relationships with three non-accrual loans totaling $716 thousand, which were paid-off during the first quarter of 2023; and due to one large loan relationship totaling $3.9 million, which was resolved during the second quarter of 2023. The resolution of the $3.9 million loan relationship during the second quarter of 2023 occurred through the foreclosure process followed by the timely sale of the real estate at a gain of $105 thousand. We had $215 thousand in accruing loans past due 90 days or more at December 31, 2023 compared to $2 thousand at December 31, 2022. Loans past due 30 days or more represented 0.06% of the loan portfolio at December 31, 2023 compared to 0.06% at December 31, 2022. The ratio of classified loans plus OREO and repossessed assets declined to 1.25% of total bank regulatory risk-based capital at December 31, 2023 from 4.47% at December 31, 2022. During the twelve months ended December 31, 2023, we experienced net loan recoveries of $55 thousand (charge-offs of $24 thousand less recoveries of $79 thousand) and net overdraft charge-offs of $49 thousand (charge-offs of $63 thousand and recoveries of $14 thousand). In comparison, we experienced net loan recoveries of $361 thousand and net overdraft charge-offs of $52 thousand during the twelve months ended December 31, 2022.

There were four loans totaling $242 thousand (0.02% of total loans) included on non-performing status (non-accrual loans and loans past due 90 days and still accruing) at December 31, 2023. Two of these loans were on non-accrual status. The largest loan of the two is $24 thousand and is secured by a truck. The balance of the remaining loan on non-accrual status is $3 thousand and it is secured by a second mortgage lien. Furthermore, we had $88 thousand in accruing trouble debt restructurings, or TDRs, at December 31, 2022. We had two loans totaling $215 thousand that were accruing loans past due 90 days or more at December 31, 2023. At December 31, 2023, we considered loan relationships exceeding $500 thousand and on non-accrual status as individually assessed loans for the allowance for credit losses. At December 31, 2023, we had no individually assessed loans. At December 31, 2022, we considered a loan impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due, including both principal and interest, according to the contractual terms of the loan agreement. Non-accrual loans and accruing TDRs were considered impaired. At December 31, 2022, we had 11 impaired loans totaling $5.0 million. The specific allowance for individually assessed loans is based on the fair value of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for credit losses on our individually assessed loans at December 31, 2023 and December 31, 2022. At December 31, 2023, we had $498 thousand in loans that were delinquent 30 days to 89 days representing 0.04% of total loans compared to $564 thousand or 0.06% of total loans at December 31, 2022.

62

Year Ended December 31, 2022 and 2021

We accounted for our allowance for loan losses under the incurred loss model during 2022 and 2021. At December 31, 2022, the allowance for credit losses was $11.3 million, or 1.16% of total loans (excluding loans held-for-sale), compared to $11.2 million, or 1.29% of total loans (excluding loans held-for-sale) at December 31, 2021. Excluding PPP loans and loans held-for-sale, the allowance for credit losses was 1.16% of total loans at December 31, 2022 compared to 1.30% of total loans at December 31, 2021. The decline in the allowance for credit losses as a percentage of total loans compared to December 31, 2021 is primarily related to a reduction in the loss emergence period assumption in our COVID-19 qualitative factor, which was added to our allowance for credit losses methodology during 2020 and is discussed below. The loss emergence assumption on our COVID-19 qualitative factor was reduced to zero months at December 31, 2022 from 21 months at December 31, 2021. This reduction was partially offset by loan growth of $117.2 million; $309 thousand in net recoveries; an increase in our economic conditions qualitative factor by six basis points due to higher inflation, supply chain bottlenecks, labor shortages in certain industries, and the war in Ukraine; an increase in our change in staff qualitative factor by one basis point due to the addition of a new team and new market in York County, South Carolina in March 2022; and an increase in our change in total of past due, rated, and non-accrual loans qualitative factor by two basis points due to a $4.1 million loan being moved to non-accrual status in June 2022. This loan has a loan-to-value of 76.3% based on an appraisal received in May 2022.

During 2020, we added a qualitative factor for the COVID-19 pandemic to our allowance for credit losses methodology. This qualitative factor was based on the dollar amount of our deferrals and a one-year loss emergence period based on the highest period of annual historical loss rate since the Bank’s inception. As the pandemic worsened, we added our exposure to certain industry segments most impacted by the COVID-19 pandemic (hotels, restaurants, assisted living, and retail) to the COVID-19 qualitative factor and we extended the loss emergence period to two years based on the highest two periods of annual historical loss rates since the Bank’s inception. The loss emergence period assumption in the COVID-19 qualitative factor was reduced to zero months at December 31, 2022 from 21 months at December 31, 2021. At December 31, 2022 and December 31, 2021, the COVID-19 qualitative factor represented zero dollars and $1.9 million, respectively, of our allowance for credit losses.

Loans that we acquired in our acquisition of Cornerstone Bancorp, otherwise referred to herein as Cornerstone, in 2017 as well as in our acquisition of Savannah River Financial Corp., otherwise referred to herein as Savannah River, in 2014 are accounted for under FASB ASC 310-30. These acquired loans were initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. The credit component on loans related to cash flows not expected to be collected is not subsequently accreted (non-accretable difference) into interest income. Any remaining portion representing the excess of a loan’s or pool’s cash flows expected to be collected over the fair value is accreted (accretable difference) into interest income. At December 31, 2022 and December 31, 2021, the remaining credit component on loans attributable to acquired loans in the Cornerstone and Savannah River transactions was $81 thousand and $130 thousand, respectively.

Our provision for credit losses was a credit of $152 thousand for the twelve months ended December 31, 2022 compared to an expense of $335 thousand during the same period in 2021. The reduction in provision for credit losses is primarily related to a decrease in our COVID-19 qualitative factor in our allowance for credit losses methodology and net recoveries during the twelve months of 2022, partially offset by increases in our economic conditions, change in staff, and changes in past due, rated, and non-accrual loan qualitative factors and loan growth as discussed above.

The allowance for credit losses represents an amount that we believe will be adequate to absorb probable losses on existing loans that may become uncollectible. Our judgment as to the adequacy of the allowance for credit losses is based on assumptions about future events, which we believe to be reasonable, but which may or may not prove to be accurate. Our determination of the allowance for credit losses is based on evaluations of the collectability of loans, including consideration of factors such as the balance of impaired loans, the quality, mix, and size of our overall loan portfolio, the knowledge and depth of lending personnel, economic conditions (local and national) that may affect the borrower’s ability to repay, the amount and quality of collateral securing the loans, our historical credit loss experience, and a review of specific problem loans. We also consider qualitative factors such as changes in the lending policies and procedures, changes in the local or national economies, changes in volume or type of credits, changes in volume/severity of problem loans, quality of loan review and board of director oversight, and concentrations of credit. We charge recognized losses to the allowance and add subsequent recoveries back to the allowance for credit losses. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period.

63

We perform an analysis quarterly to assess the risk within the loan portfolio. The portfolio is segregated into similar risk components for which historical loss ratios are calculated and adjusted for identified changes in current portfolio characteristics. Historical loss ratios are calculated by product type and by regulatory credit risk classification (See Note 4 to the Consolidated Financial Statements). The annualized weighted average loss ratios over the last 36 months for loans classified as substandard, special mention and pass have been approximately 0.00%, 0.07% and 0.00%, respectively. The allowance consists of an allocated and unallocated allowance. The allocated portion is determined by types and ratings of loans within the portfolio. The unallocated portion of the allowance is established for losses that exist in the remainder of the portfolio and compensates for uncertainty in estimating the credit losses. The allocated portion of the allowance is based on historical loss experience as well as certain qualitative factors as explained above. The qualitative factors have been established based on certain assumptions made as a result of the current economic conditions and are adjusted as conditions change to be directionally consistent with these changes. The unallocated portion of the allowance is composed of factors based on management’s evaluation of various conditions that are not directly measured in the estimation of probable losses through the experience formula or specific allowances. The overall risk as measured in our three-year lookback, both quantitatively and qualitatively, does not encompass a full economic cycle. Net charge-offs in the 2009 to 2011 period averaged 63 basis points annualized in our loan portfolio. Over the most recent three-year period, our net charge-offs have experienced a modest net recovery. We currently believe the unallocated portion of our allowance represents potential risk associated throughout a full economic cycle.

We have a significant portion of our loan portfolio with real estate as the underlying collateral. At December 31, 2022 and December 31, 2021, approximately 90.8% and 90.9%, respectively, of the loan portfolio had real estate collateral. When loans, whether commercial or personal, are granted, they are based on the borrower’s ability to generate repayment cash flows from income sources sufficient to service the debt. Real estate is generally taken to reinforce the likelihood of the ultimate repayment and as a secondary source of repayment. We work closely with all our borrowers that experience cash flow or other economic problems, and we believe that we have the appropriate processes in place to monitor and identify problem credits. There can be no assurance that charge-offs of loans in future periods will not exceed the allowance for credit losses as estimated at any point in time or that provisions for credit losses will not be significant to a particular accounting period. The allowance is also subject to examination and testing for adequacy by regulatory agencies, which may consider such factors as the methodology used to determine adequacy and the size of the allowance relative to that of peer institutions. Such regulatory agencies could require us to adjust our allowance based on information available to them at the time of their examination.

The non-performing asset ratio was 0.35% of total assets with the nominal level of $5.8 million in non-performing assets at December 31, 2022 compared to 0.09% and $1.4 million at December 31, 2021. Non-accrual loans increased to $4.9 million at December 31, 2022 from $250 thousand at December 31, 2021. The increases in both non-performing assets and non-accrual loans from December 31, 2021 to December 31, 2022 were due to one $4.1 million loan that was moved to non-accrual status in June 2022. This loan had a loan-to-value of 76.3% at the time it was moved to non-accrual based on an appraisal received in May 2022. The balance of this loan is $4.0 million at December 31, 2022. Furthermore, we had one customer relationship with two loans totaling $508 thousand, which was placed on non-accrual during September 2022. This relationship had a loan-to-value of 42.5% at the time it was moved to non-accrual. The balance of this relationship increased to $550 thousand at December 31, 2022 due to a loan advance to pay real estate taxes. We had $2 thousand in accruing loans past due 90 days or more at December 31, 2022 compared to zero at December 31, 2021. Loans past due 30 days or more represented 0.06% of the loan portfolio at December 31, 2022 compared to 0.03% at December 31, 2021. The ratio of classified loans plus OREO and repossessed assets declined to 4.47% of total bank regulatory risk-based capital at December 31, 2022 from 6.27% at December 31, 2021. During the twelve months ended December 31, 2022, we experienced net loan recoveries of $361 thousand and net overdraft charge-offs of $52 thousand.

There were 12 loans totaling $4.9 million (0.50% of total loans) included on non-performing status (non-accrual loans and loans past due 90 days and still accruing) at December 31, 2022. Ten of these loans totaling $4.9 million were on non-accrual status. The largest loan included on non-accrual status is in the amount of $4.0 million and is secured by a first mortgage lien and had a loan-to-value of 76.3% at the time it was moved to non-accrual based on an appraisal received in May 2022. The average balance of the remaining nine loans on non-accrual status is approximately $104 thousand with a range between $1 and $406 thousand. Five of these loans are secured by first mortgage liens, three loans are secured by second mortgage liens, and one is secured by equipment. Furthermore, we had $88 thousand in accruing trouble debt restructurings, or TDRs, at December 31, 2022 compared to $1.4 million at December 31, 2021. This reduction was due to the payoff of one loan. We had two loans totaling $2 thousand that were accruing loans past due 90 days or more at December 31, 2022. We consider a loan impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due, including both principal and interest, according to the contractual terms of the loan agreement. Nonaccrual loans and accruing TDRs are considered impaired. At December 31, 2022, we had 11 impaired loans totaling $5.0 million compared to ten impaired loans totaling $1.7 million at December 31, 2021. These loans were measured for impairment under the fair value of collateral method or present value of expected cash flows method. For collateral dependent loans, the fair value of collateral method is used and the fair value is determined by an independent appraisal less estimated selling costs. There was no specific allowance for loan and lease losses on our impaired loans at December 31, 2022 and December 31, 2021. At December 31, 2022, we had ten loans totaling $565 thousand that were delinquent 30 days to 89 days representing 0.06% of total loans compared to $235 thousand or 0.03% of total loans at December 31, 2021.

64

The following table summarizes the activity related to our allowance for credit losses.

Allowance for Credit Losses 

(Dollars in thousands)	2023			2022			2021
Average loans outstanding (excluding loans held-for-sale)	$	1,044,983		$	914,569		$	871,551
Loans outstanding at period end (excluding loans held-for-sale)	$	1,134,019		$	980,857		$	863,702
Total nonaccrual loans	$	27		$	4,895		$	250
Loans past due 90 days and still accruing	$	215		$	2		$	—
Beginning balance of allowance	$	11,336		$	11,179		$	10,389
CECL Day 1 Adjustment		(14	)
Loans charged-off:
1-4 family residential mortgage		—			—			—
Real Estate - Construction		—			—			—
Real Estate Mortgage - Residential		—			—			—
Real Estate Mortgage - Commercial		—			—			110
Consumer - Home equity		—			1			—
Commercial		20			—			—
Consumer - Other		67			67			72
Overdrafts		—			—			—
Total loans charged-off		87			68			182
Recoveries:
1-4 family residential mortgage		—			—			—
Real Estate - Construction		2			5			—
Real Estate Mortgage - Residential		9			—			10
Real Estate Mortgage - Commercial		37			326			473
Consumer - Home equity		22			13			69
Commercial		5			17			39
Consumer - Other		18			16			46
Total recoveries		93			377			637
Net loans recovered (charged off)		6			309			455
Provision for (release of) credit losses		939			(152	)		335
Balance at period end	$	12,267		$	11,336		$	11,179
Net charge -offs (recoveries) to average loans and loans held for sale		0.00	%		(0.03	)%		(0.05	)%
Allowance as percent of total loans		1.08	%		1.16	%		1.29	%
Non-performing loans as% of total loans		0.02	%		0.50	%		0.03	%
Allowance as% of non-performing loans		5,069.01	%		194.41	%		4,471.60	%
Nonaccrual loans as% of total loans		0.00	%		0.50	%		0.03	%
Allowance as % of nonaccrual loans		45,433.33	%		231.58	%		4,471.60	%

65

The following table details net charge-offs to average loans outstanding by loan category for the years ended December 31:

(Dollars in thousands)	2023			2022			2021
Commercial
Net charge-offs (recoveries)	$	15		$	(17	)	$	(39	)
Average loans for the year	$	76,315		$	71,999		$	98,301
Net charge-offs (recoveries)/average loans		0.02	%		(0.02	)%		(0.04	)%
Real estate:
Construction
Net charge-offs (recoveries)	$	(2	)	$	(5	)	$	—
Average loans for the year	$	99,502		$	91,258		$	98,196
Net charge-offs (recoveries)/average loans		0.00	%		(0.01	)%		0.00	%
Mortgage-residential
Net charge-offs (recoveries)	$	(9	)	$	—		$	(10	)
Average loans for the year(1)	$	76,604		$	49,278		$	42,880
Net charge-offs (recoveries)/average loans(1)		(0.01	)%		0.00	%		(0.02	)%
Mortgage-commercial
Net charge-offs (recoveries)	$	(37	)	$	(326	)	$	(363	)
Average loans for the year	$	747,202		$	662,044		$	597,721
Net charge-offs (recoveries)/average loans		0.00	%		(0.05	)%		(0.06	)%
Consumer:
Home Equity
Net charge-offs (recoveries)	$	(22	)	$	(12	)	$	(69	)
Average loans for the year	$	30,884		$	27,479		$	26,399
Net charge-offs (recoveries)/average loans		(0.07	)%		(0.04	)%		(0.26	)%
Other
Net charge-offs (recoveries)	$	49		$	51		$	26
Average loans for the year	$	14,476		$	12,511		$	8,054
Net charge-offs (recoveries)/average loans		0.34	%		0.41	%		0.32	%
Total:
Net charge-offs (recoveries)	$	(6	)	$	(309	)	$	(455	)
Average loans for the year(1)	$	1,044,983		$	914,569		$	871,551
Net charge-offs (recoveries)/average loans(1)		0.00	%		(0.03	)%		(0.05	)%

⁽¹⁾ Average loans exclude loans held for sale

At December 31, 2022, loans acquired in the Cornerstone transaction are excluded from our evaluation of the adequacy of the allowance as they were measured at fair value at acquisition. The assumptions used in this evaluation included a credit component and an interest rate component. These loans amounted to approximately $5.5 million at 2022.

Accrual of interest is discontinued on loans when we believe, after considering economic and business conditions and collection efforts that a borrower’s financial condition is such that the collection of interest is doubtful. A delinquent loan is generally placed in nonaccrual status when it becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest, which has been accrued on the loan but remains unpaid, is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.

66

Non-interest Income and Expense

Non-interest Income. A significant source of noninterest income is service charges on deposit accounts. We also originate and sell residential loans on a servicing released basis in the secondary market. These loans are originated in our name. The loans have locked in price commitments to be purchased by investors at the time of closing. Therefore, these loans present very little market risk for us. We typically deliver to, and receive funding from, the investor within 30 days. Other sources of noninterest income are derived from investment advisory fees and commissions on non-deposit investment products, ATM/debit card fees, commissions on check sales, safe deposit box rent, wire transfer, official check fees, rental income, and bank owned life insurance income.

Non-interest income during the twelve months ended December 31, 2023 declined to $10.4 million from $11.6 million during the same period in 2022. The $1.1 million decline in non-interest income is primarily related to decreases in non-recurring non-interest income of $866 thousand, and mortgage banking income of $494 thousand partially offset by increases in investment advisory fees and non-deposit commissions of $32 thousand and other non-interest income of $177 thousand.

During the third quarter of 2023, we sold $39.9 million of book value U.S. Treasuries in our available-for-sale investment securities portfolio. While this sale created a one-time pre-tax loss of $1.2 million, it provided additional liquidity which is being used to pay down borrowings and fund loan growth. The weighted average book yield of the securities sold was 1.75% and the projected earn back period is 1.6 years. Such measures transition the balance sheet to be more efficient, improves net interest margin, and positions us for higher earnings in the future.

Mortgage banking income declined $494 thousand to $1.4 million during the twelve months ended December 31, 2023 from $1.9 million during the same period in 2022. Secondary mortgage production during the twelve months ended December 31, 2023 was $49.7 million compared to $65.8 million during the same period in 2022 while the gain on sale margin declined to 2.83% during the twelve months ended December 31, 2023 from 2.85% during the same period in 2022. The reduction in mortgage production was primarily due to a higher interest rate environment and low levels of home inventories.

With the headwinds of rising interest rates, we began to market an adjustable rate mortgage (ARM) product during the second quarter of 2022 to provide borrowers with an alternative to fixed-rate mortgages and to help offset anticipated mortgage production challenges. Currently, we are offering 5/6, 7/6, and 10/6 ARM loans that are originated for our loans held-for-investment portfolio. Furthermore, we added a new construction residential real estate team and product during the latter part of 2022. Total mortgage production during the twelve months ended December 31, 2023 was $135.7 million, $49.7 million of the production was originated to be sold in the secondary market, $32.5 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $53.5 million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income.

Investment advisory fees increased $32 thousand to $4.5 million during the twelve months ended December 31, 2023 from $4.5 million during the same period in 2022. Total assets under management were $755.4 million at December 31, 2023 compared to $558.8 million at December 31, 2022. Our net new assets were $39.2 million during the twelve months ended December 31, 2023. Furthermore, our investment performance for the twelve months ended December 31, 2023 was 28.2% compared to 24.2% for the S&P 500.

67

The $977 thousand in non-recurring contra non-interest income during the twelve months ended December 31, 2023 includes the previously mentioned loss on sale of securities of $1.2 million, gains on sale of other real estate owned of $151 thousand, a bank owned life insurance claim of $93 thousand, and gains on insurance proceeds of $28 thousand.  We recorded $111 thousand in other non-recurring contra income related to a loss on sale of other real estate owned of $45 thousand, due to the sale of one other real estate owned property, and a loss on sale of other assets of $73 thousand, due to the sale of one bank owned premise, partially offset by gains on insurance proceeds of $7 thousand during the twelve months ended December 31, 2022. 

Non-interest income, other increased $177 thousand during the twelve months ended December 31, 2023 compared to the same period in 2022 primarily due to increases in ATM debit card income of $65 thousand and rental income of $48 thousand.

Non-interest income during the twelve months ended December 31, 2022 was $11.6 million compared to $13.9 million during the same period in 2021. Deposit service charges declined $17 thousand to $960 thousand during the twelve months ended December 31, 2022 from $977 thousand during the same period in 2021 primarily due to customer refunds related to the completion of a project to discontinue multiple presentments on consumer returns and refund customers in a determined “lookback period” of two years. A total of $39 thousand was refunded to 477 accounts ($24 thousand was refunded to 313 active accounts and $15 thousand was refunded to 164 closed accounts). Furthermore, effective July 1, 2022, we increased the NSF de minimis amount to $50 from $5 and reduced our maximum fee per day to $140 from $210, each of which will impact our future aggregate deposit service charges. Mortgage banking income declined by $2.4 million to $1.9 million during the twelve months ended December 31, 2022 from $4.3 million during the same period in 2021. Mortgage production during the twelve months ended December 31, 2022 was $88.6 million, $65.8 million of the production was originated to be sold in the secondary market and $22.8 million of the production was originated as adjustable rate mortgage (ARM) loans for our loans held-for-investment portfolio, compared to $142.1 million, which was all produced to be sold in the secondary market during the same period in 2021. The gain on sale margin decreased to 2.85% during the twelve months ended December 31, 2022 from 3.04% during the same period in 2021. The reduction in mortgage production was primarily due to a higher interest rate environment and low housing inventory. With the headwinds of rising interest rates, we began to market an ARM product during the second quarter of 2022 to provide borrowers with an alternative to fixed-rate mortgages and to help offset anticipated mortgage production challenges. Currently, we are offering 5/1, 7/1, and 10/1 ARM loans that are originated for our loans held-for-investment portfolio. As these ARM loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income.

Investment advisory fees increased $484 thousand to $4.5 million during the twelve months ended December 31, 2022 from $4.0 million during the same period in 2021. Total assets under management declined to $558.8 million at December 31, 2022 compared to $650.9 million at December 31, 2021. While revenue in our financial planning and investment management line of business increased during the twelve months of 2022 compared to the same period in 2021, assets under management (AUM) declined due to the stock market performance in the twelve months of 2022. Our investment advisory fees trail changes in AUM. Management continues to focus on both the mortgage banking income as well as the investment advisory fees and commissions. Gain (loss) on sale of other real estate owned was a loss of $45 thousand during the twelve months ended December 31, 2022 compared to a gain of $77 thousand during the same period in 2021. The $45 thousand loss was related to the sale of one other real estate owned property during the twelve months ended December 31, 2022. Gain (loss) on sale of other assets was a loss of $73 thousand during the twelve months ended December 31, 2022 compared to a gain of $117 thousand during the same period in 2021. The $73 thousand loss in 2022 was related to the sale of one bank owned premise during the twelve months ended December 31, 2022. The $117 thousand gain in 2021 was related to a $104 thousand gain on sale of bank premise held-for-sale and a $13 thousand gain on the sale of bank owned land during the twelve months ended December 31, 2021. Other non-recurring income declined $164 thousand to $7 thousand during the twelve months ended December 31, 2022 from $171 thousand during the same period in 2021. The reduction in other non-recurring income was related to the collection of $147 thousand in summary judgments related to two loans charged off at a bank, which we subsequently acquired and $24 thousand in gains on insurance proceeds during the twelve months ended December 31, 2021. We recorded $7 thousand in other non-recurring income related to gains on insurance proceeds during the twelve months ended December 31, 2022.

68

Non-interest income, other increased $93 thousand during the twelve months ended December 31, 2022 compared to the same period in 2021 primarily due to increases in ATM/debit card income of $37 thousand, recurring income on bank owned life insurance of $28 thousand, rental income of $11 thousand, wire transfer fees of $14 thousand, and bankcard fees of $14 thousand partially offset by lower customer check sales of $19 thousand.

The following table sets forth for the periods indicated the primary components of noninterest income:

	Year ended December 31,
(In thousands)	2023			2022			2021
Deposit service charges		963			960			977
Mortgage banking income		1,406			1,900			4,319
Investment advisory fees and non-deposit commissions		4,511			4,479			3,995
Loss on sale of securities		(1,249	)		—			—
Gain (loss) on sale of other real estate owned		151			(45	)		77
Gain on sale of other assets		—			(73	)		117
Other non-recurring income		121			7			171
ATM debit card income		2,771			2,706			2,669
Recurring income on bank owned life insurance		745			721			693
Rental income		370			322			311
Other service fees including safe deposit box fees		230			251			243
Wire transfer fees		119			132			118
Other		283			209			214
Total	$	10,421		$	11,569		$	13,904

Non-interest Expense. In the very competitive financial services industry, we recognize the need to place a great deal of emphasis on expense management and continually evaluate and monitor growth in discretionary expense categories in order to control future increases.

Non-interest expense during the twelve months ended December 31, 2023 increased to $43.1 million from $41.3 million during the same period in 2022. The $1.9 million increase in non-interest expense is primarily due to increases in salaries and benefits of $507 thousand, occupancy expense of $155 thousand, equipment expense of $223 thousand, marketing and public relations of $237 thousand, FDIC assessment of $223 thousand, and other expense of $753 thousand partially offset by lower other real estate expense of $420 thousand.

· Salary and benefit expense increased $507 thousand to $25.9 million during the twelve months ended December 31, 2023 from $25.4 million during the same period in 2022. This increase is primarily a result of normal salary adjustments, the addition of six employees in our York County, South Carolina office in 2022, the addition of new mortgage lenders during the third quarter of 2022, and increased compensation levels for banking office employees implemented at the beginning of the third quarter of 2022, partially offset by lower mortgage banking commissions and annual incentive compensation. We had 268 full-time employees, 14 part-time employees, and five seasonal/on-call employees at December 31, 2023 compared to 254 full-time employees, seven part-time employees, and eight seasonal/on-call employees at December 31, 2022.

· Occupancy expense increased $155 thousand to $3.2 million during the twelve months ended December 31, 2023 compared to $3.0 million during the same period in 2022 primarily related to the opening of our York County, South Carolina office in 2022, the expansion of our Southlake operations and support location in Lexington, South Carolina, and higher maintenance expense partially offset by lower janitorial expense.

· Equipment expense increased $223 thousand to $1.6 million during the twelve months ended December 31, 2023 compared to $1.3 million during the same period in 2022 primarily due to higher equipment maintenance and repair, equipment depreciation, and auto expense.

69

· Marketing and public relations increased $237 thousand to $1.5 million during the twelve months ended December 31, 2023 from $1.3 million during the same period in 2022 primarily due to media production and campaigns.

· FDIC assessments increased $436 thousand to $904 thousand during the twelve months ended December 31, 2023 compared to $468 thousand during the same period in 2022 due to an increase in our FDIC assessment rate.

· Other real estate expenses declined $420 thousand to $112 thousand in contra expenses or credits during the twelve months ended December 31, 2023 compared to $308 thousand in expenses during the same period in 2022 primarily due to a reversal in accruals for real estate taxes on a non-accrual loan, which were either paid by the borrower or recovered as a result of the sale of the real estate.

· Other expense increased $753 thousand to $10.1 million during the twelve months ended December 31, 2023 compared to $9.4 million during the same period in 2022, which included

o Computer service expense, which includes core banking and electronic processing and services, ATM/debit card processing, software subscriptions and services and wire processing fees, increased $344 thousand primarily due to higher customer activity and enhanced technology solutions.

o Debit card and fraud losses increased $137 thousand due to an extraordinary spike in mail check fraud losses during the third quarter of 2023. We believe this spike, with over three times the normal customer-reported incidences, is directly related to confirmed local mail thefts within our markets, as well as fraudsters targeting smaller counterfeit check amounts to avoid early detection.  Our current case volumes, as reported by customers, suggest that the spike has abated.  However, because fraud risk is ever evolving, we have responded with countermeasures including deploying additional resources, and conducting a formal customer education marketing campaign called “THINK TWICE”, which requests customers who have been a victim of fraud to enhance their check authorization processes and upgrade to our current fraud detection system.

o Telephone expense increased $131 thousand primarily due to a change in our telecommunications vendor, which resulted in paying two vendors for a period of time.

o Director fees increased $113 thousand primarily due to an increase in director compensation, which includes an increase in director stock awards.

o Loan processing and closing costs increased $65 thousand due to an increase in loans.

o Correspondent services increased $51 thousand.

o Legal and professional fees declined $135 thousand primarily due to lower legal expense.

o Investment advisory services declined $80 thousand.

Non-interest expense increased $2.1 million during the twelve months ended December 31, 2022 to $41.3 million compared to $39.2 million during the same period in 2021. The $2.1 million increase in non-interest expense is primarily related to increased salaries and employee benefits expense of $863 thousand, increased occupancy expense of $55 thousand, increased equipment expense of $47 thousand, increased marketing and public relations expense of $86 thousand, increased legal and professional fees of $299 thousand, increased ATM/debit card and data processing expense of $428 thousand, increased other real estate expense including other real estate write-downs of $203 thousand, increased fraud expense of $106 thousand, increased travel, meals, and entertainment expense of $103 thousand, and increased postage / courier expense of $118 thousand partially offset by lower FDIC assessments of $150 thousand, lower amortization of intangibles of $43 thousand, and lower loan processing costs of $63 thousand.

· Salary and benefit expense increased $863 thousand to $25.4 million during the twelve months ended December 31, 2022 from $24.5 million during the same period in 2021. This increase is primarily a result of normal salary adjustments, financial planning and investment advisory commissions, the addition of six employees in our York County, South Carolina office, which opened as a loan production office on March 14, 2022 and converted to a full service branch on October 20, 2022, the addition of new mortgage lenders in the third quarter of 2022, and increased compensation levels for banking officer employees implemented at the beginning of the third quarter of 2022 partially offset by lower mortgage commissions and open positions. We had 254 full-time employees at December 31, 2022 compared to 250 at December 31, 2021.

· Occupancy expense increased $55 thousand to $3.0 million during the twelve months ended December 31, 2022 compared to $2.9 million during the same period in 2021 primarily related to major maintenance projects and our loan production office in York County, South Carolina (which converted to a full service branch on October 20, 2022) partially offset by lower janitorial services expense and lower bank premises taxes due to the sale of one bank owned property in 2022 and two bank owned properties in 2021.

· Equipment expense increased $47 thousand to $1.3 million during the twelve months ended December 31, 2022 compared to $1.3 million during the same period in 2021 primarily due to increases in auto expense and ATM and security monitoring service agreements.

70

· Marketing and public relations expense increased $86 thousand to $1.3 million during the twelve months ended December 31, 2022 compared to $1.2 million during the same period in 2021 due to larger media schedules including activity in our new York County, South Carolina market.

· FDIC assessments declined $150 thousand to $468 thousand during the twelve months ended December 31, 2022 compared to $618 thousand during the same period in 2021 due to a reduction in our FDIC assessment rate.

· Other real estate expenses increased $203 thousand to $308 thousand during the twelve months ended December 31, 2022 compared to $105 thousand during the same period in 2021 due to the accrual of $210 thousand in 2022 real estate taxes on one non-accrual loan and $69 thousand in write-downs on two other real estate owned properties during the twelve months ended December 31, 2022 compared to $50 thousand in write-downs during the same period in 2021.

· Amortization of intangibles declined $43 thousand to $158 thousand during the twelve months ended December 31, 2022 compared to $201 thousand during the same period in 2021.

· Other expense increased $991 thousand to $9.4 million during the twelve months ended December 31, 2022 compared to $8.4 million during the same period in 2021.

o ATM/debit card and data processing expense increased $428 thousand primarily due to higher ATM debit card customer activity, core processing system expenses, and enhanced technology solutions.

o Fraud expense increased $106 thousand primarily related to an isolated fraud incident.

o Travel, meals, and entertainment increased $103 thousand due to more in-person meetings from eased COVID-19 restrictions.

o Postage and courier expense increased $118 thousand partially due to higher fuel costs.

o Legal and professional fees increased $299 thousand primarily due to higher legal, professional, recruiting, and consulting fees.

o Loan processing and closing costs/fees declined $63 thousand primarily due to lower mortgage loan processing costs.

The following table sets forth for the periods indicated the primary components of noninterest expense:

	Year ended December 31,
(In thousands)	2023			2022		2021
Salaries and employee benefits	$	25,864		$	25,357	$	24,494
Occupancy		3,157			3,002		2,947
Equipment		1,566			1,343		1,296
Marketing and public relations		1,496			1,259		1,173
FDIC Insurance assessments		904			468		618
Other real estate expense		(112	)		308		105
Amortization of intangibles		158			158		201
Core banking and electronic processing and services		2,512			2,469		2,397
ATM/debit card processing		1,074			885		694
Software subscriptions and services		1,008			896		733
Supplies		134			134		116
Telephone		485			354		365
Courier		284			279		181
Correspondent services		354			303		280
Insurance		381			358		325
Debit card and Fraud losses		422			285		160
Investment advisory services		329			409		420
Loan processing and closing costs		331			266		329
Director fees		601			488		500
Legal and Professional fees		1,042			1,177		878
Shareholder expense		197			221		212
Other		957			834		777
	$	43,144		$	41,253	$	39,201

* Core banking and electronic processing and services includes core processing, bill payment, online banking, remote deposit capture, wire processing services and postage costs for mailing customer notices and statements.

71

Income Tax Expense

Our income tax expense for 2023 was $3.2 million as compared to income tax expense for the year ended December 31, 2022 of $3.8 million and $4.2 million for the year ended December 31, 2021 (see Note 14 “Income Taxes” to the Consolidated Financial Statements for additional information). We recognize deferred tax assets for future deductible amounts resulting from differences in the financial statement and tax bases of assets and liabilities and operating loss carry forwards. The deferred tax assets are established based on the amounts expected to be paid/recovered at existing tax rates. A valuation allowance is established to reduce the deferred tax asset to the level that it is more likely than not that the tax benefit will be realized. Our effective tax rate was 21.3% during the twelve months ended December 31, 2023 compared to 20.6% during the twelve months ended December 31, 2022 and compared to 21.3% during the twelve months ended December 31, 2021. The effective tax rates were affected by a $122 thousand non-recurring reduction to income tax during the twelve months ended December 31, 2023 and by a $153 thousand non-recurring reduction to income tax expense during the twelve months ended December 31, 2022. As a result of our current level of tax-exempt securities in our investment portfolio and our BOLI holdings, assuming the current corporate rate remains unchanged, our effective tax rate is expected to be approximately 21.75% to 22.25%.

Financial Position

Assets increased $154.7 million, or 9.2%, to $1.8 billion at December 31, 2023 from $1.7 billion at December 31, 2022. The $154.7 million increase in assets was primarily due to loans (excluding loans held-for-sale), which increased $153.2 million, or 15.6%, to $1.1 billion at December 31, 2023 from $980.9 million at December 31, 2022.

Earning Assets

Loans and loans held-for-sale

Loans held-for-sale increased to $4.4 million at December 31, 2023 from $1.8 million at December 31, 2022. Loans (excluding loans held-for-sale) increased $153.2 million, or 15.6%, to $1.1 billion at December 31, 2023 from $980.9 million at December 31, 2022. Total loan production, excluding mortgage secondary market and new construction residential real estate, was $198.8 million during the twelve months ended December 31, 2023 compared to $280.1 million during the same period in 2022. Advances from unfunded commercial construction loans available for draws were $100.9 million during the twelve months ended December 31, 2023. Total mortgage production during the twelve months ended December 31, 2023 was $135.7 million, $49.7 million of the production was originated to be sold in the secondary market, $32.5 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $53.5 million of the loan production was commitments for new construction residential real estate loans. Total mortgage production during the twelve months ended December 31, 2022 was $107.2 million, $65.8 million of the production was originated to be sold in the secondary market, $22.8 million of the loan production was originated as ARM loans for our loans held-for-investment portfolio, and $18.6 million of the loan production was commitments for new construction residential real estate loans. As these ARM and new construction residential real estate loans are being held on our balance sheet as loans held-for-investment, the result is additive to loan growth and interest income but results in less gain on sale fee income, which is reported in noninterest income as mortgage banking income. The increase in mortgage production was primarily due to higher ARM and construction residential real estate loan production partially offset by lower secondary market production. Payoffs and paydowns declined to $87.0 million during the twelve months ended December 31, 2023 compared to $177.1 million during the same period in 2022. The loan-to-deposit ratio (including loans held-for-sale) at December 31, 2023 and December 31, 2022 was 75.3% and 70.9%, respectively. The loan-to-deposit ratio (excluding loans held-for-sale) at December 31, 2023 and December 31, 2022 was 75.1% and 70.8%, respectively. 

One of our goals as a community bank has been, and continues to be, to grow our assets through quality loan growth by providing credit to small and mid-size businesses and individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets. Based on the Bank’s loan portfolio as of December 31, 2023, its non-owner occupied commercial real estate loans and its construction and land development loans were approximately 313% and 74% of total risk-based capital, respectively. Furthermore, our three-year growth in non-owner occupied commercial real estate loans was 47% from December 31, 2020 to December 31, 2023. We have expertise and a long history in originating and managing commercial real estate loans. We have a strong credit underwriting process, which includes management and board oversight. We perform rigorous monitoring, stress testing, and reporting of these portfolios at the management and board levels, and we continue to monitor the level of the concentration in commercial real estate loans within the Bank’s loan portfolio monthly.

Loans typically provide higher yields than the other types of earning assets. During 2023 and 2022, loans accounted for 64.2% and 59.7% of average earning assets, respectively. The loan portfolio (including held-for-sale) averaged $1.0 billion in 2023 as compared to $920.4 million in 2022. Quality loan portfolio growth continued to be a strategic focus of ours in 2023. However, with the higher loan yields, there are inherent credit and liquidity risks, which we attempt to control and counterbalance. One of our goals as a community bank continues to be to grow our assets through quality loan growth by providing credit to small and mid-size businesses, as well as individuals within the markets we serve. We remain committed to meeting the credit needs of our local markets, but adverse national and local economic conditions, as well as deterioration of our asset quality, could significantly impact our ability to grow our loan portfolio. Significant increases in regulatory capital expectations beyond the traditional “well capitalized” ratios and significantly increased regulatory burdens could impede our ability to leverage our balance sheet and expand the loan portfolio.

72

The following table shows the composition of the loan portfolio by category:

(In thousands)	2023			2022			2021
Commercial, financial & agricultural	$	78,134		$	72,409		$	69,952
Real estate:
Construction		118,225			91,223			94,969
Mortgage—residential		94,796			65,759			45,498
Mortgage—commercial		791,947			709,218			617,464
Consumer:
Home equity		34,752			28,723			27,116
Other		16,165			13,525			8,703
Total gross loans	$	1,134,019		$	980,857		$	863,702
Allowance for credit losses		(12,267	)		(11,336	)		(11,179	)
Total net loans	$	1,121,752		$	969,521		$	852,523

In the context of this discussion, a real estate mortgage loan is defined as any loan, other than loans for construction purposes, secured by real estate, regardless of the purpose of the loan. We follow the common practice of financial institutions in our market area of obtaining a security interest in real estate whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan components. Generally, we limit the loan-to-value ratio to 80%. The principal components of our loan portfolio at December 31, 2023 and 2022 were commercial mortgage loans in the amount of $791.9 million and $709.2 million, respectively, representing 69.8% and 72.3% of the portfolio, respectively, excluding loans held for sale. Significant portions of these commercial mortgage loans are made to finance owner-occupied real estate. We continue to maintain a conservative philosophy regarding our underwriting guidelines, and believe we will reduce the risk elements of the loan portfolio through strategies that diversify the lending mix.

The repayment of loans in the loan portfolio as they mature is a source of liquidity. The following table sets forth the loans maturing within specified intervals at December 31, 2023.

Loan Maturity Schedule and Sensitivity to Changes in Interest Rates

	December 31, 2023
(In thousands)	One Year or Less		Over One Year Through Five Years		Over Five Years Through Fifteen years		Over Fifteen Years		Total
Commercial, financial and agricultural	$	9,626	$	45,046	$	23,462	$	—	$	78,134
Real estate:
Construction(1)		28,735		51,257		38,233		—		118,225
Mortgage-residential		3,316		17,726		2,892		70,862		94,796
Mortgage-commercial		54,671		466,876		269,069		1,331		791,947
Consumer:
Home equity		1,940		6,475		26,337		—		34,752
Other		2,819		12,367		573		406		16,165
Total	$	101,107	$	599,747	$	360,566	$	72,599	$	1,134,019

⁽¹⁾ Included in construction loans are construction-to-permanent loans that will move to their permanent loan category upon completion of the construction phase.

Loans maturing after one year with:

Variable Rate	$	116,761
Fixed Rate		916,151
	$	1,032,912

The information presented in the above table is based on the contractual maturities of the individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon their maturity.

73

Investment Securities

Our investment securities portfolio is a significant component of our total earning assets. Investment securities declined $58.6 million to $506.2 million, net of allowance for credit losses on investments of $30 thousand, at December 31, 2023 from $564.8 million, net of allowance for credit losses on investments of zero, at December 31, 2022. The $58.6 million decline was primarily related to the previously mentioned sale of $39.9 million of book value US Treasuries in our available-for-sale investment securities portfolio and normal principal cash flows. Our investment securities portfolio averaged $541.1 million in 2023, as compared to $570.6 million in 2022, which represents 33.2% and 37.0% of the average earning assets for the years ended December 31, 2023 and 2022, respectively.

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) at December 31, 2023. The remaining pretax unrealized net holding loss on these investments was $15.7 million ($12.4 million net of tax) at December 31, 2022. Our HTM investments totaled $217.2 million and represented approximately 43% of our total investments at December 31, 2023. Our AFS investments totaled $282.2 million or approximately 56% of our total investments at December 31, 2023. Our investments at cost totaled $6.8 million or approximately 1% of our total investments at December 31, 2023. The unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative impact on the fair value of our investment securities portfolio and on accumulated other comprehensive income (loss), which is included in shareholders’ equity.  

At December 31, 2023, the estimated weighted average life of our total investment portfolio was 6.26 years, the modified duration was 4.8, the effective duration was 3.9, and the weighted average tax equivalent book yield was 3.86%. At December 31, 2022, the estimated weighted average life of our investment portfolio was 6.41 years, the modified duration was 4.32, and the weighted average tax equivalent book yield was 3.33%.

We held no debt securities rated below investment grade at December 31, 2023 and December 31, 2022.

The following table shows the Available-for Sale investment portfolio composition.

	December 31,
(Dollars in thousands)	2023		2022		2021
Securities available-for-sale at fair value:
US Treasury Securities	$	18,346	$	55,982	$	15,436
Government sponsored enterprises		2,129		2,074		2,501
Small Business Administration pools		15,721		21,088		31,273
Mortgage-backed securities		238,159		244,599		397,729
State and local government		—		—		109,848
Corporate and Other Securities		7,871		8,118		8,052
Total	$	282,226	$	331,861	$	564,839

The following table shows the Held-to-Maturity investment portfolio composition.

	December 31,
(Dollars in thousands)	2023		2022		2021
Securities held-to-maturity at fair value:
Mortgage-backed securities	$	104,250	$	113,116	$	—
Corporate and Other Securities		101,268		100,497		—
Total	$	205,518	$	213,613	$	—

74

We hold other investments carried at cost totaling $6.8 million and $4.2 million at December 31, 2023 and 2022, respectively. Other investments, at cost, include Federal Home Loan Bank (“FHLB”) stock in the amount of $5.4 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $354.1 thousand at December 31, 2023. The Company held FHLB stock in the amount of $2.9 million, corporate stock in the amount of $1.0 million, and a venture capital fund in the amount of $274.2 thousand at December 31, 2022. These are equity securities without readily determinable fair values. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB Atlanta. FHLB stock is carried at cost, and periodically evaluated for impairment based on an assessment of the ultimate recovery of par value. Both cash and stock dividends are reported as interest income. Dividends received on other investments, at cost are reported as interest income.

Investment Securities Maturity Distribution and Yields

The following table shows, at amortized cost, the expected maturities and weighted average yield, which is calculated using amortized cost as the weight and tax-equivalent book yield, of securities held at December 31, 2023:

(In thousands)
						After One But					After Five But
	Within One Year					Within Five Years					Within Ten Years					After Ten Years
Available-for-sale:	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
US Treasury Securities	$	4,998		1.02	%	$	995		0.74	%	$	14,798		1.24	%	$	—		—
Government sponsored enterprises		—		—		$	—		—			2,500		2.00	%		—		—
Small Business Administration pools	$	2		5.99	%		2,944		6.57	%		6,975		4.70	%		6,187		5.59	%
Mortgage-backed securities		3		3.61	%		3,732		4.08	%		8,451		4.26	%		243,571		4.38	%
Corporate and other securities		—		—			1,988		7.49	%		6,758		3.76	%		13		—
Total investment securities available-for-sale	$	5,003		1.02	%	$	9,658		5.29	%	$	39,482		2.98	%	$	249,772		4.41	%
(In thousands)
						After One But					After Five But
	Within One Year					Within Five Years					Within Ten Years					After Ten Years
Held-to-Maturity:	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Mortgage-backed securities	$	809		2.22	%	$	28,123		3.19	%	$	26,878		3.36	%	$	56,930		3.47	%
State and local government		—		—			14,728		3.12	%		42,117		3.39	%		47,614		3.27	%
Total investment securities held-to-maturity	$	809		2.22	%	$	42,851		3.17	%	$	68,995		3.39	%	$	104,544		3.38	%

Short-Term Investments

Short-term investments, which consist of federal funds sold, securities purchased under agreements to resell and interest bearing deposits, averaged $42.9 million in 2023, as compared to $50.5 million in 2022. The decline in short-term investments in 2023 is primarily due to loan growth exceeding deposit growth, which resulted in short-term investments used to fund loan growth. We maintain the majority of our short-term overnight investments in our account at the Federal Reserve rather than in federal funds at various correspondent banks due to the lower regulatory capital risk weighting. These funds are an immediate source of liquidity and are generally invested in an earning capacity on an overnight basis. Other short-term investments, including funds on deposit at the Federal Reserve, increased $53.9 million to $66.8 million at December 31, 2023 from $12.9 million at December 31, 2022 due to the previously mentioned sale of investment securities, the issuance of $48.1 million in brokered certificates of deposits, and higher borrowings during the twelve months ended December 31, 2023. This additional liquidity will be used to fund loan growth and or reduce borrowings.

Deposits and Other Interest-Bearing Liabilities

Deposits. Deposits increased $125.6 million, or 9.1%, to $1.5 billion at December 31, 2023 compared to $1.4 billion at December 31, 2022. Our pure deposits, which are defined as total deposits less certificates of deposits, increased $4.7 million, or 0.4%, to $1.3 billion at December 31, 2023 from $1.3 billion at December 31, 2022. We continue to focus on growing our pure deposits as a percentage of total deposits in order to better manage our overall cost of funds. Average deposits were $1.4 billion during 2023 compared to $1.4 billion in 2022. Average non-interest bearing deposits were $450.2 million in 2023 compared to $469.3 million in 2022. Average interest-bearing deposits were $980.8 million in 2023 compared to $948.3 million in 2022. Certificates of deposits increased $97.7 million to $202.5 million at December 31, 2023 from $104.9 million at December 31, 2022. To secure a cost-effective stable funding source, during the third quarter of 2023, we issued $48.2 million in brokered certificates of deposit ranging in terms from six months to three years, with the three year term callable after six months. We began using brokered deposits during the third quarter of 2023 to optimize our funding blend, as such, we had $48.1 million and zero dollars in brokered deposits at December 31, 2023 and December 31, 2022, respectively.  Total uninsured deposits were $436.6 million and $407.0 million at December 31, 2023 and December 31, 2022, respectively. Included in uninsured deposits at December 31, 2023 and December 31, 2022 were $82.8 million and $59.5 million of deposits of states or political subdivisions in the U.S., which are secured or collateralized, respectively. Total uninsured deposits, excluding these deposits that are secured or collateralized, totaled $353.8 million, or 23.4%, of total deposits at December 31, 2023 and $347.5 million, or 25.1%, of total deposits at December 31, 2022. The average balance of all customer deposit accounts at December 31, 2023 was $27,843. The average balance for consumer accounts was $14,995 and the average balance for non-consumer accounts was $61,570.

75

The following table sets forth the deposits by category:

	December 31,
	2023					2022					2021
(In thousands)	Amount		% of Deposits			Amount		% of Deposits			Amount		% of Deposits
Demand deposit accounts	$	432,333		28.6	%	$	461,010		33.3	%	$	444,688		32.7	%
Interest bearing checking accounts		302,935		20.0	%		334,540		24.1	%		331,638		24.4	%
Money market accounts		404,499		26.8	%		295,223		21.3	%		287,419		21.1	%
Savings accounts		118,623		7.9	%		161,770		11.7	%		143,765		10.5	%
Time deposits less than $100,000		128,977		8.5	%		66,410		4.8	%		74,489		5.5	%
Time deposits more than $100,000		123,634		8.2	%		66,429		4.8	%		79,292		5.8	%
Total deposits	$	1,511,001		100.0	%	$	1,385,382		100.0	%	$	1,361,291		100.0	%

Large certificate of deposit customers, whom we identify as those of $100 thousand or more, tend to be extremely sensitive to interest rate levels, making these deposits less reliable sources of funding for liquidity planning purposes than core deposits. Core deposits, which exclude time deposits of $100 thousand or more, provide a relatively stable funding source for the loan portfolio and other earning assets. Core deposits were $1.4 billion and $1.3 billion at December 31, 2023 and 2022, respectively. Time deposits greater than $250 thousand, the FDIC deposit insurance coverage limit, amounted to $17.1 million and $25.0 million at December 31, 2023 and December 31, 2022, respectively.

A stable base of deposits is expected to continue to be the primary source of funding to meet both our short-term and long-term liquidity needs in the future. The maturity distribution of time deposits is shown in the following table.

Maturities of Certificates of Deposit and Other Time Deposit of $250,000 or More

At December 31, 2023, time deposits in excess of the FDIC insurance limit were as follows:

	December 31, 2023
(In thousands)	Within Three Months		After Three Through Six Months		After Six Through Twelve Months		After Twelve Months		Total
Time deposits of $250,000 or more	$	2,470	$	3,388	$	10,858	$	412	$	17,128

Borrowed funds. Borrowed funds consist of fed funds purchased, securities sold under agreements to repurchase, FHLB advances and long-term debt. Our long-term debt is a result of issuing $15.0 million in trust preferred securities. Short-term borrowings in the form of securities sold under agreements to repurchase averaged $74.6 million, $74.8 million, and $62.2 million during 2023, 2022, and 2021, respectively. The average rates paid during these periods were 2.22%, 0.30%, and 0.14%, respectively. The balances of securities sold under agreements to repurchase were $62.9 million and $68.7 million at December 31, 2023 and December 31, 2022, respectively. The repurchase agreements all mature within one to four days and are generally originated with customers that have other relationships with us and tend to provide a stable and predictable source of funding. Federal funds purchased averaged $1.1 million, $1.5 million, and zero during 2023, 2022, and 2021, respectively. The average rates paid during these periods were 4.73%, 3.54%, and zero, respectively. The balances of federal funds purchased were zero and $22.0 million at December 31, 2023 and December 31, 2022, respectively. As a member of the FHLB, the Bank has access to advances from the FHLB for various terms and amounts. FHLB advances averaged $86.6 million, $9.5 million, and zero during 2023, 2022, and 2021, respectively. The average rates paid during these periods were 5.02%, 3.91%, and zero, respectively. The balances of FHLB advances were $90.0 million and $50.0 million at December 31, 2023 and December 31, 2022, respectively.

The $90.0 million in FHLB advances at December 31, 2023 had maturity dates between March 13, 2024, and November 3, 2026 with interest rates between 4.81% and 5.26%.

76

We issued $15.5 million in trust preferred securities on September 16, 2004. During the fourth quarter of 2015, we redeemed $500 thousand of these securities. Until the cessation of LIBOR on June 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act. The remaining debt may be redeemed in full anytime with notice and matures on September 16, 2034. Trust preferred securities averaged $15.0 million during 2023, 2022, and 2021. The average rates paid during these periods were 7.93%, 4.51%, and 2.78%, respectively. The balances of trust preferred securities were $15.0 million as of December 31, 2023 and December 31, 2022. 

At December 31, 2023 and 2022, FHLB advance maturities were as follows:

	December 31, 2023
(In thousands)	Within Three Months		After Three Through Six Months		After Six Through Twelve Months		After Twelve Months		Total
FHLB Advances	$	30,000	$	10,000	$	50,000	$	—	$	90,000
	December 31, 2022
(In thousands)	Within Three Months		After Three Through Six Months		After Six Through Twelve Months		After Twelve Months		Total
FHLB Advances	$	50,000	$	—	$	—	$	—	$	50,000

The $90 million in FHLB advances at December 31, 2023 had maturity dates between March 13, 2024 and December 9, 2023 with interest rates between 4.83% and 5.25%. The $50 million in FHLB advances at December 31, 2022 had maturity dates between January 17, 2023 and March 7, 2023 with interest rates between 4.15% and 4.63%.

Capital Adequacy and Dividend Policy

Capital Adequacy

Total shareholders’ equity increased $12.7 million, or 10.7%, to $131.1 million at December 31, 2023 from $118.4 million at December 31, 2022. Shareholders’ equity increased to 7.2% of total assets at December 31, 2023 from 7.1% at December 31, 2022 due to total asset growth of $154.7 million, or 9.2%, compared to total shareholders’ equity growth of $12.7 million, or 10.7%. The growth in assets was due to increases of $153.2 million in loans held-for-investment, $53.9 million in interest-bearing bank balances primarily held at the Federal Reserve and $2.7 million in loans held-for-sale partially offset by a decline of $58.6 million in investment securities. The $12.7 million increase in shareholders’ equity was due to a $7.6 million increase in retention of earnings resulting from $11.8 million in net income less $4.2 million in dividends; a $796 thousand increase due to employee and director stock awards; a $438 thousand increase due to our dividend reinvestment plan (DRIP); and a $4.2 million improvement in accumulated other comprehensive loss partially offset by a $300 thousand adjustment related to the implementation of CECL on January 1, 2023. The increase in accumulated other comprehensive loss was due to a decline in market interest rates, which affects the fair value of our investment securities portfolio and accumulated other comprehensive (loss) income, which is included in shareholders’ equity.

On April 20, 2022, we announced that our board of directors approved the repurchase of up to 375,000 shares of our common stock (the “2022 Repurchase Plan”), which represented approximately 5% of our 7,606,172 shares outstanding as of December 31, 2023. No repurchases were made under the 2022 Repurchase Plan prior to its expiration at the market close on December 31, 2023.

During each quarter in 2022, we paid a $0.13 per share dividend on our common stock. During each quarter in 2023, we paid an $0.14 per share dividend on our common stock. On January 24, 2024, we announced a $0.14 per share dividend payable on February 20, 2024 to shareholders of record of our common stock on February 6, 2024.

In addition, we have a dividend reinvestment plan that allows existing shareholders the option of reinvesting cash dividends as well as making optional purchases of up to $5,000 in the purchase of common stock per quarter.

77

The following table shows the return on average assets (net income divided by average total assets), return on average equity (net income divided by average equity), and equity to assets ratio for the three years ended December 31, 2023.

	2023			2022			2021
Return on average assets		0.68	%		0.88	%		1.02	%
Return on average common equity		9.59	%		11.99	%		11.22	%
Equity to assets ratio		7.17	%		7.08	%		8.90	%
Dividend Payout Ratio		35.76	%		26.78	%		23.24	%

While the Company is currently a small bank holding company and so generally is not subject to Basel III capital requirements, our Bank remains subject to such capital requirements. See “Supervision and Regulation—Basel Capital Standards” for additional information on Basel III and the Dodd-Frank Act.

The Bank exceeded the regulatory capital ratios at December 31, 2023 and 2022, as set forth in the following table:

(In thousands)	Required Amount		%			Actual Amount		%			Excess Amount		%
The Bank(1)(2):
December 31, 2023
Risk Based Capital
Tier 1	$	73,696		6.0	%	$	153,859		12.5	%	$	80,163		6.5	%
Total Capital		98,261		8.0	%		166,752		13.6	%		68,491		5.6	%
CET1		55,272		4.5	%		153,859		12.5	%		98,587		8.0	%
Tier 1 Leverage		72,830		4.0	%		153,859		8.5	%		81,029		4.5	%
December 31, 2022
Risk Based Capital
Tier 1	$	64,741		6.0	%	$	145,578		13.5	%	$	80,837		7.5	%
Total Capital		86,321		8.0	%		156,914		14.5	%		70,593		6.5	%
CET1		48,555		4.5	%		145,578		13.5	%		97,023		9.0	%
Tier 1 Leverage		67,509		4.0	%		145,578		8.6	%		78,069		4.6	%

(1)	As a small bank holding company, the Company is generally not subject to Basel III capital requirements unless otherwise advised by the Federal Reserve.
(2)	Required Amounts and Required Ratios do not include the capital conservation buffer of 2.5%.

Dividend Policy

Since we are a bank holding company, our ability to declare and pay dividends is dependent on certain federal and state regulatory considerations, including the guidelines of the Federal Reserve. The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect our ability to pay dividends or otherwise engage in capital distributions.

Because the Company is a legal entity separate and distinct from the Bank and does not conduct stand-alone operations, the Company’s ability to pay dividends depends on the ability of the Bank to pay dividends to the Company, which is also subject to regulatory restrictions. As a South Carolina-chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina state banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. In addition, the Bank must maintain a capital conservation buffer, above its regulatory minimum capital requirements, consisting entirely of Common Equity Tier 1 capital, in order to avoid restrictions with respect to its payment of dividends to First Community Corporation. The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain circumstances.

78

Liquidity Management

Liquidity management involves monitoring sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing profits. Liquidity represents our ability to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of the investment portfolio is very predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to nearly the same degree of control. Asset liquidity is provided by cash and assets which are readily marketable, or which can be pledged or will mature in the near future. Liability liquidity is provided by access to core funding sources, principally the ability to generate customer deposits in our market area. In addition, liability liquidity is provided through the ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, to borrow on a secured basis through the Federal Reserve Discount Window, and to borrow on a secured basis through securities sold under agreements to repurchase. Furthermore, the Bank is a member of the FHLB and has the ability to obtain advances for various periods of time. These advances are secured by eligible securities pledged by the Bank or assignment of eligible loans within the Bank’s portfolio.

To secure a cost-effective stable funding source, during the third quarter of 2023, we issued $48.2 million in brokered certificates of deposit ranging in terms from six months to three years, with the three year term callable after six months. Brokered certificates of deposit totaled $48.1 million at December 31, 2023. The $48.1 million in brokered deposits had maturity dates between February 9, 2024 and September 25, 2026 with interest rates between 5.30% and 5.70%. We had no brokered deposits and no listing services deposits at December 31, 2022. We believe that we have ample liquidity to meet the needs of our customers through our low cost deposits, our ability to issue brokered deposits, our ability to borrow against approved lines of credit (federal funds purchased) from correspondent banks, our ability to borrow on a secured basis through the Federal Reserve Discount Window, and our ability to obtain advances secured by certain securities and loans from the FHLB.

We generally maintain adequate liquidity and adequate capital, which along with continued retained earnings, we believe will be sufficient to fund the operations of the Bank for at least the next 12 months. Furthermore, we believe that we will have access to adequate liquidity and capital to support the long-term operations of the Bank.

Total shareholders’ equity increased $12.7 million, or 10.7%, to $131.1 million at December 31, 2023 from $118.4 million at December 31, 2022. Shareholders’ equity increased to 7.2% of total assets at December 31, 2023 from 7.1% at December 31, 2022 due to total asset growth of $154.7 million, or 9.2%, compared to total shareholders’ equity growth of $12.7 million, or 10.7%. The growth in assets was due to increases of $153.2 million in loans held-for-investment, $53.9 million in interest-bearing bank balances and $2.7 million in loans held-for-sale partially offset by a decline of $58.6 million in investment securities. The $12.7 million increase in shareholders’ equity was due to a $7.6 million increase in retention of earnings resulting from $11.8 million in net income less $4.2 million in dividends; a $796 thousand increase due to employee and director stock awards; a $438 thousand increase due to our dividend reinvestment plan (DRIP); and a $4.2 million improvement in accumulated other comprehensive loss partially offset by a $300 thousand adjustment related to the implementation of CECL on January 1, 2023. The increase in accumulated other comprehensive loss was due to a decline in market interest rates, which affects the fair value of our investment securities portfolio and accumulated other comprehensive (loss) income, which is included in shareholders’ equity.

On June 1, 2022, we reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available-for-sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) at December 31, 2023. The remaining pretax unrealized net holding loss on these investments was $15.7 million ($12.4 million net of tax) at December 31, 2022. Our HTM investments totaled $217.2 million and represented approximately 43% of our total investments at December 31, 2023. Our AFS investments totaled $282.2 million or approximately 56% of our total investments at December 31, 2023. Our investments at cost totaled $6.8 million or approximately 1% of our total investments at December 31, 2023. The unrealized losses on our investment securities are related to an increase in market interest rates, which has a temporary negative impact on the fair value of our investment securities portfolio and on accumulated other comprehensive income (loss), which is included in shareholders’ equity.  

79

The Bank maintains federal funds purchased lines in the total amount of $85.0 million with four financial institutions and $10.0 million through the Federal Reserve Discount Window. We utilized none of our federal funds purchased lines at December 31, 2023 compared to $22.0 million at December 31, 2022. The FHLB of Atlanta has approved a line of credit of up to 25.00% of the Bank’s total assets, which, when utilized, is collateralized by a pledge against specific investment securities and/or eligible loans. We had $90.0 million in FHLB advances at December 31, 2023 compared to $50.0 million at December 31, 2022. The FHLB advances at December 31, 2023 had maturity dates between March 13, 2024 and November 3, 2026 with interest rates between 4.81% and 5.26%. At December 31, 2023, we have remaining credit availability under this facility in excess of $358.9 million, subject to collateral requirements. Combined, we have total remaining credit availability, subject to collateral requirements, in excess of $453.9 million as compared to uninsured deposits excluding deposits of states or political subdivisions in the U.S., which are secured or collateralized, of $353.8 million as previously noted.

Through the operations of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. At December 31, 2023, we had issued commitments to extend unused credit of $214.2 million, including $53.1 million in unused home equity lines of credit, through various types of lending arrangements. At December 31, 2022, we had issued commitments to extend unused credit of $156.9 million, including $47.3 million in unused home equity lines of credit, through various types of lending arrangements. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate. We manage the credit risk on these commitments by subjecting them to normal underwriting and risk management processes. 

We regularly review our liquidity position and have implemented internal policies establishing guidelines for sources of asset-based liquidity and evaluate and monitor the total amount of purchased funds used to support the balance sheet and funding from noncore sources.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used by the company for general corporate purposes or for customer needs. Corporate purpose transactions are used to help manage credit, interest rate, and liquidity risk or to optimize capital. Customer transactions are used to manage customers’ requests for funding. Please refer to Note 15 of our financial statements for a discussion of our off-balance sheet arrangements.

Impact of Inflation

Unlike most industrial companies, the assets and liabilities of financial institutions such as the Company and the Bank are primarily monetary in nature. Therefore, interest rates have a more significant effect on our performance than do the effects of changes in the general rate of inflation and change in prices. In addition, interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, we are not immune from changes occurring in inflation, which risks include a decrease in demand for new mortgage loan and commercial real estate loan originations and refinancings, an increase in competition for deposits, and an increase in non-interest expenses, which may have an adverse impact on our financial performance. As discussed previously, we continually seek to manage the relationships between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 8. Financial Statements and Supplementary Data.

Additional information required under this Item 8 may be found under the accompanying Financial Statements and Notes to Financial Statements under Note 23. 

80

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2023. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework issued in 2013.

Based on that assessment, we believe that, as of December 31, 2023, our internal control over financial reporting is effective based on those criteria.

/s/ Michael C. Crapps	/s/ D. Shawn Jordan
Chief Executive Officer and President	Executive Vice President and Chief Financial Officer

81

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of First Community Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of First Community Corporation and its subsidiary (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification No. 326, Financial Instruments – Credit Losses (ASC 326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. Our opinion is not modified with respect to this matter. The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

82

Allowance for Credit Losses

As described in Note 4 to the Company’s financial statements, the Company has a loan portfolio, net of deferred fees of approximately $1.1 billion and related allowance for credit losses of approximately $12.3 million as of December 31, 2023. As described by the Company in Note 2, the Company adopted the Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (“ASC 326”) on January 1, 2023. Expected credit losses are measured on a collective basis using a non-discounted cash flow methodology with probability of default (“PD”) and loss given default (“LGD”) for all call report code cohorts. Loans not sharing similar risk characteristics are evaluated on an individual basis. Due to the minimal amount of default activity and limited charge-off history, the Bank has elected to use index PDs and LGDs comprised of rates derived from other community banks in place of the Company’s historical PDs and LGDs. The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes a 12-month PD forecast based on the peer index regression model comparing peer defaults to the national unemployment rate. Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience.

We identified the Company’s estimate of the allowance for credit losses as a critical audit matter. The principal considerations for our determination of the allowance for credit losses as a critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors, model assumptions, forecasts and forecasting periods. Auditing these complex judgments and assumptions by the Company involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included the following:

· We evaluated the appropriateness of the methodology applied in the adoption of ASC 326.

· We evaluated the relevance and the reasonableness of assumptions related to evaluation of the loan portfolio, current and forecasted economic conditions, and other risk factors used in development of the qualitative factors.

· We tested the completeness and accuracy of the significant inputs into the model including the underlying data used to develop the qualitative factors and forecasts.

· We validated the mathematical accuracy of the calculation.

· We evaluated the reasonableness of assumptions and data used by the Company in developing the qualitative factors by comparing these data points to internally developed and third-party sources, as well as other audit evidence gathered.

· Analytical procedures were performed to evaluate the directional consistency of changes that occurred in the allowance for credit losses for loans.

/s/ Elliott Davis, LLC

Firm ID: 149 

We have served as the Company’s auditor since 2006.

Columbia, South Carolina

March 21, 2024 

83

FIRST COMMUNITY CORPORATION

Consolidated Balance Sheets

	December 31,
(Dollars in thousands, except par values)	2023			2022
ASSETS
Cash and due from banks	$	27,908		$	24,464
Interest-bearing bank balances		66,787			12,937
Investment securities available-for-sale		282,226			331,862
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments		217,170			228,701
Other investments, at cost		6,800			4,191
Loans held-for-sale		4,433			1,779
Loans held-for-investment		1,134,019			980,857
Less, allowance for credit losses		12,267			11,336
Net loans held-for-investment		1,121,752			969,521
Property and equipment - net		30,589			31,277
Lease right-of-use asset		3,248			2,702
Bank owned life insurance		30,174			29,952
Other real estate owned		622			934
Intangible assets		604			761
Goodwill		14,637			14,637
Other assets		20,738			19,228
Total assets	$	1,827,688		$	1,672,946
LIABILITIES
Deposits:
Non-interest bearing	$	432,333		$	461,010
Interest bearing		1,078,668			924,372
Total deposits		1,511,001			1,385,382
Securities sold under agreements to repurchase		62,863			68,743
Federal funds purchased		—			22,000
Federal Home Loan Bank advances		90,000			50,000
Junior subordinated debt		14,964			14,964
Lease liability		3,426			2,832
Other liabilities		14,375			10,664
Total liabilities		1,696,629			1,554,585
Commitments and Contingencies (Note 15)
SHAREHOLDERS’ EQUITY
Preferred stock, par value $1.00 per share; 10,000,000 shares authorized; none issued and outstanding		—			—
Common stock, par value $1.00 per share; 20,000,000 shares authorized; issued and outstanding 7,606,172 at December 31, 2023 and 7,577,912 at December 31, 2022		7,606			7,578
Nonvested restricted stock and stock units		2,181			1,461
Additional paid in capital		93,167			92,683
Retained earnings		56,296			49,025
Accumulated other comprehensive loss		(28,191	)		(32,386	)
Total shareholders’ equity		131,059			118,361
Total liabilities and shareholders’ equity	$	1,827,688		$	1,672,946

See Notes to Consolidated Financial Statements

84

FIRST COMMUNITY CORPORATION

Consolidated Statements of Income

	Year Ended December 31,
(Dollars in thousands except per share amounts)	2023			2022			2021
Interest income:
Loans, including fees	$	52,317		$	39,234		$	39,671
Investment securities - taxable		16,715			9,725			6,155
Investment securities - non taxable		1,471			1,525			1,564
Other short term investments and CDs		2,194			633			130
Total interest income		72,697			51,117			47,520
Interest expense:
Deposits		16,563			1,849			1,740
Securities sold under agreement to repurchase		1,658			227			85
Other borrowed money		5,584			1,098			416
Total interest expense		23,805			3,174			2,241
Net interest income		48,892			47,943			45,279
Provision for (release of) credit losses		1,129			(152	)		335
Net interest income after provision for (release of) credit losses		47,763			48,095			44,944
Non-interest income:
Deposit service charges		963			960			977
Mortgage banking income		1,406			1,900			4,319
Investment advisory fees and non-deposit commissions		4,511			4,479			3,995
Loss on sale of securities		(1,249	)		—			—
Gain (loss) on sale of other real estate owned		151			(45	)		77
Gain (loss) on sale of other assets		—			(73	)		117
Other non-recurring income		121			7			171
Other		4,518			4,341			4,248
Total non-interest income		10,421			11,569			13,904
Non-interest expense:
Salaries and employee benefits		25,864			25,357			24,494
Occupancy		3,157			3,002			2,947
Equipment		1,566			1,343			1,296
Marketing and public relations		1,496			1,259			1,173
FDIC Insurance assessments		904			468			618
Other real estate expense (income)		(112	)		308			105
Amortization of intangibles		158			158			201
Other		10,111			9,358			8,367
Total non-interest expense		43,144			41,253			39,201
Net income before tax		15,040			18,411			19,647
Income tax expense		3,197			3,798			4,182
Net income	$	11,843		$	14,613		$	15,465
Basic earnings per common share	$	1.56		$	1.94		$	2.06
Diluted earnings per common share	$	1.55		$	1.92		$	2.05

See Notes to Consolidated Financial Statements

85

FIRST COMMUNITY CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

	Year ended December 31,
(Dollars in thousands)	2023		2022			2021
Net income	$	11,843	$	14,613		$	15,465
Other comprehensive income (loss):
Unrealized gain (loss) during the period on available for sale securities, net of tax (expense) benefit of $(501), $6,190, and $2,128, respectively		1,884		(23,285	)		(8,008	)
Reclassification adjustment for loss included in net income, net of tax benefit of $262, $0, and $0, respectively		987		—			—
Unrealized loss during the period on available-for-sale securities transferred to held-to-maturity, net of tax benefit of $0, $3,509, and $0, respectively		—		(13,198	)		—
Reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense of $352, $218, and $0 respectively		1,324		818			—
Other comprehensive income (loss)		4,195		(35,665	)		(8,008	)
Comprehensive income (loss)	$	16,038	$	(21,052	)	$	7,457

See Notes to Consolidated Financial Statements 

86

FIRST COMMUNITY CORPORATION

Consolidated Statements of Changes in Shareholders’ Equity

	Common Stock									Nonvested						Accumulated
(Dollars and shares in thousands)	Number Shares Issued			Common Stock			Additional Paid-in Capital			Restricted Stock and Stock Units			Retained Earnings			Other Comprehensive Income (loss)			Total
Balance, December 31, 2020		7,500		$	7,500		$	91,380		$	(283	)	$	26,453		$	11,287		$	136,337
Net income		—			—			—			—			15,465			—			15,465
Other comprehensive loss net of tax benefit of $2,128		—			—			—			—			—			(8,008	)		(8,008	)
Issuance of restricted stock		21			21			353			(374	)		—			—			—
Issuance of common stock-deferred compensation		12			12			124			—			—			—			136
Amortization of compensation on restricted stock		—			—			—			363			—			—			363
Shares forfeited		(4	)		(4	)		(66	)		—			—			—			(70	)
Dividends: Common ($0.48 per share)		—			—			—			—			(3,593	)		—			(3,593	)
Dividend reinvestment plan		20			20			348			—			—			—			368
Balance, December 31, 2021		7,549		$	7,549		$	92,139		$	(294	)	$	38,325		$	3,279		$	140,998
Net income		—			—			—			—			14,613			—			14,613
Other comprehensive loss net of tax benefit of $9,481		—			—			—			—			—			(35,665	)		(35,665	)
Issuance of restricted stock		9			9			190			(199	)		—			—			—
Issuance of common stock-deffered compensation		1			1			27			—			—			—			28
Grant of restricted stock units		—			—			—			1,447			—			—			1,447
Amortization of compensation on restricted stock		—			—			—			507			—			—			507
Shares forfeited		(2	)		(2	)		(40	)		—			—			—			(42	)
Dividends: Common ($0.52 per share)		—			—			—			—			(3,913	)		—			(3,913	)
Dividend reinvestment plan		21			21			367			—			—			—			388
Balance, December 31, 2022		7,578		$	7,578		$	92,683		$	1,461		$	49,025		$	(32,386	)	$	118,361
Net income		—			—			—			—			11,843			—			11,843
Adoption of ASU 2016-13 net of tax benefit of $90		—			—			—			—			(337	)		—			(337	)
Other comprehensive income net of tax expense of $1,115		—			—			—			—			—			4,195			4,195
Issuance of restricted stock		8			8			146			(154	)		—			—			—
Issuance of common stock-deferred compensation		2			2			39			(69	)		—			—			(28	)
Grant of restricted stock units		—			—			—			180			—			—			180
Amortization of compensation on restricted stock		—			—			—			763			—			—			763
Shares forfeited		(6	)		(6	)		(115	)		—			—			—			(121	)
Dividends: Common ($0.56 per share)		—			—			—			—			(4,235	)		—			(4,235	)
Dividend reinvestment plan		24			24			414			—			—			—			438
Balance, December 31, 2023		7,606		$	7,606		$	93,167		$	2,181		$	56,296		$	(28,191	)	$	131,059

See Notes to Consolidated Financial Statements

87

FIRST COMMUNITY CORPORATION

Consolidated Statements of Cash Flows

	Year Ended December 31,
(Amounts in thousands)	2023			2022			2021
Cash flows from operating activities:
Net income	$	11,843		$	14,613		$	15,465
Adjustments to reconcile net income to net cash (used) provided in operating activities
Depreciation		1,760			1,663			1,714
Net premium amortization AFS		(2,507	)		1,869			2,317
Net premium amortization HTM		(575	)		(264	)		—
Provision for credit losses		1,129			(152	)		335
Write-downs of other real estate owned		44			69			50
Loss (gain) loss on sale of other real estate owned		(151	)		45			(77	)
Originations of HFS loans		(50,253	)		(64,495	)		(139,773	)
Sales of HFS loans		47,599			69,836			177,673
Amortization of intangibles		158			158			201
Loss on sale of securities		1,249			—			—
Loss on fair value of equity investments		(19	)		(2	)		(4	)
Accretion on acquired loans		(81	)		(49	)		(135	)
Gain on sale of other assets		—			73			(117	)
(Increase) decrease in other assets		(1,628	)		(1,696	)		994
Increase (decrease) in other liabilities		3,658			457			(715	)
Net cash provided (used) in operating activities		12,226			22,125			57,928
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale		38,662			—			—
Purchase of investment securities available-for-sale		(6,025	)		(105,943	)		(271,293	)
Purchase of investment securities held-to-maturity		—			(11,270	)		—
Purchase of other investment securities		(2,589	)		(2,406	)		(87	)
Maturity/call of investment securities available-for-sale		21,891			61,958			53,872
Maturity/call of investment securities held-to-maturity		12,074			11,745			—
Proceeds from sale of other investments		—			—			355
Increase in loans		(153,029	)		(116,797	)		(19,100	)
Proceeds from sale of other real estate owned		419			117			201
Proceeds from sale of fixed assets		—			925			1,414
Purchase of property and equipment		(1,071	)		(1,223	)		(813	)
Net disposal of property and equipment		—			115			19
Purchase of BOLI		—			—			(850	)
Net cash used in investing activities		(89,668	)		(162,779	)		(236,282	)
Cash flows from financing activities:
Increase in deposit accounts		125,619			24,091			171,878
Increase (decrease) in Fed Funds Borrowed		(22,000	)		22,000			—
Advances from the Federal Home Loan Bank		289,000			118,000			—
Repayment of advances from the Federal Home Loan Bank		(249,000	)		(68,000	)		—
Increase in securities sold under agreements to repurchase		(5,880	)		14,527			13,302
Shares Retired		(121	)		(42	)		(70	)
Restricted Stock Units Granted		180			1,447			—
Change in non-vested restricted stock		763			507			363
Dividend reinvestment plan		438			388			368
Proceeds from (cost of) issuance of common stock-deferred compensation		(28	)		28			136
Dividends paid on Common Stock		(4,235	)		(3,913	)		(3,593	)
Net cash provided in financing activities		134,736			109,033			182,384
Net increase in cash and cash equivalents		57,294			(31,621	)		4,030
Cash and cash equivalents at beginning of year		37,401			69,022			64,992
Cash and cash equivalents at end of year	$	94,695		$	37,401		$	69,022
Supplemental disclosure:
Cash paid during the period for: interest	$	20,750		$	3,058		$	3,312
Income Taxes	$	3,574		$	3,893		$	5,097
Non-cash investing and financing activities:
Unrealized gain (loss) on securities available-for-sale, net of tax	$	2,871		$	(23,285	)	$	(8,008	)
Transfer of investment securities available-for-sale to held-to-maturity		—			245,619			—
Loans charged off	$	24		$	68		$	182
CECL transition	$	337		$	—		$	—
Transfer of loans to other real estate owned	$	44		$	—		$	145
Recognition of operating lease right of use asset	$	835		$	—		$	—
Recognition of operating lease liability	$	835		$	—		$	—

See Notes to Consolidated Financial Statements

88

FIRST COMMUNITY CORPORATION

Notes to Consolidated Financial Statements

Note 1—ORGANIZATION AND BASIS OF PRESENTATION

The consolidated financial statements include the accounts of First Community Corporation (the “Company”) and its wholly owned subsidiary, First Community Bank (the “Bank”). The Company owns all of the common stock of FCC Capital Trust I. All material intercompany transactions are eliminated in consolidation. The Company was organized on November 2, 1994, as a South Carolina corporation, and was formed to become a bank holding company. The Bank opened for business on August 17, 1995. FCC Capital Trust I is an unconsolidated special purpose subsidiary organized for the sole purpose of issuing trust preferred securities.

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses. The estimation process includes management’s judgment as to future losses on existing loans based on an internal review of the loan portfolio, including an analysis of the borrower’s current financial position, the consideration of current and anticipated economic conditions and the effect on specific borrowers. In determining the collectability of loans management also considers the fair value of underlying collateral. Various regulatory agencies, as an integral part of their examination process, review the Company’s allowance for credit losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors it is possible that the allowance for credit losses could change materially.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, due from banks, interest-bearing bank balances, federal funds sold and securities purchased under agreements to resell. Generally federal funds are sold for a one-day period and securities purchased under agreements to resell mature in less than 90 days.

Investment Securities

Investment securities are classified as either held-to-maturity, available-for-sale or trading securities. In determining such classification, securities that the Company has the positive intent and ability to hold to maturity are classified as held-to maturity and are carried at amortized cost. Securities classified as available-for-sale are carried at estimated fair values with unrealized gains and losses included in shareholders’ equity on an after-tax basis. Trading securities are carried at estimated fair value with unrealized gains and losses included in non-interest income (See Note 3).

Gains and losses on the sale of available-for-sale securities and trading securities are determined using the specific identification method. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are judged to be other than temporary are written down to fair value and charged to income in the Consolidated Statement of Income.

Premiums are recognized in interest income using the effective interest method over the period to the earliest call date. Discounts are recognized in interest income using the effective interest method to maturity.

Other Investments, At Cost

Equity Securities without readily determinable fair values include Federal Home Loan Bank (“FHLB”) of Atlanta capital stock and various other non-marketable equity investments. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB Atlanta. FHLB stock is carried at cost, and periodically evaluated for impairment based on an assessment of the ultimate recovery of par value. Both cash and stock dividends are reported as interest income. At December 31, 2023 and 2022, the Company’s investment in FHLB stock was $5.5 million and $2.9 million, respectively. Dividends received on other investments, at cost are reported as interest income.

89

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Mortgage Loans Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with an investor, are carried in the Company’s loans held for sale portfolio. These loans are primarily fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all these loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company.

The Company usually delivers to, and receives funding from, the investor within 30 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts” basis. The Company is not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination. These loans are classified as Level 2.

Loans and Allowance for Credit Losses-Loans

Loan receivables that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for credit losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the loan balance outstanding. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the effective interest method.

The allowance for credit losses is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio. Management’s determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loss experience, economic conditions and volume, growth and composition of the portfolio.

The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due, generally when a loan becomes 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to principal and then to interest income.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the asset’s estimated useful life. Estimated lives range up to 39 years for buildings and up to 10 years for furniture, fixtures, and equipment.

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of fair value of net assets acquired (including identifiable intangibles) in purchase transactions. Other intangible assets represent premiums paid for acquisitions of core deposits (core deposit intangibles). Core deposit intangibles are being amortized on a straight-line basis over seven years. Goodwill and identifiable intangible assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Qualitative factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less than fair value. During the year ended December 31, 2023 and 2022, qualitative factors indicated it was more likely than not that the carrying value of goodwill was less than fair value, thus there were no indicators of impairment and no quantitative testing was performed.

Other Real Estate Owned

Other real estate owned includes real estate acquired through foreclosure. Other real estate owned is carried at the lower of cost (principal balance at date of foreclosure) or fair value minus estimated cost to sell. Any write-downs at the date of foreclosure are charged to the allowance for credit losses. Expenses to maintain such assets, subsequent changes in the valuation allowance, and gains or losses on disposal are included in other expenses.

90

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income (loss)

The Company reports comprehensive income (loss) in accordance with Accounting Standards Codification (“ASC”) 220, “Comprehensive Income.” ASC 220 requires that all items that are required to be reported under accounting standards as comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. The disclosures requirements have been included in the Company’s consolidated statements of comprehensive income.

Mortgage Origination Fees

Mortgage origination fees relate to activities comprised of accepting residential mortgage applications, qualifying borrowers to standards established by investors and selling the mortgage loans to the investors under pre-existing commitments. The related fees received by the Company for these services are recognized at the time the loan is closed.

Advertising Expense

Marketing and public relations costs are generally expensed as incurred. External costs incurred in producing media advertising are expensed the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent. Marketing and public relations expense totaled $1.5 million, $1.3 million and $1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Income Taxes

A deferred income tax liability or asset is recognized for the estimated future effects attributable to differences in the tax bases of assets or liabilities and their reported amounts in the financial statements as well as operating loss and tax credit carry forwards. The deferred tax asset or liability is measured using the enacted tax rate expected to apply to taxable income in the period in which the deferred tax asset or liability is expected to be realized.

In 2006, the FASB issued guidance related to Accounting for Uncertainty in Income Taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB ASC Topic 740-10, “Income Taxes.” It also prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in an enterprise’s tax return.

Stock Based Compensation Cost

The Company accounts for stock-based compensation under the fair value provisions of the accounting literature. Compensation expense is recognized in salaries and employee benefits.

The fair value of each grant is estimated on the date of grant using the Black-Sholes option pricing model. No options were granted in 2023, 2022 or 2021.

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock and common stock equivalents. Common stock equivalents consist of restricted stock and restricted stock units and are computed using the treasury stock method.

Business Combinations and Method of Accounting for Loans Acquired

The Company accounts for its acquisitions under FASB ASC Topic 805, “Business Combinations,” which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for credit losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.”

91

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30, “Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality,” formerly American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of purchase dates may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. The Company considers expected prepayments and estimates the amount and timing of expected principal, interest and other cash flows for each loan or pool of loans meeting the criteria above and determines the excess of the loan’s scheduled contractual principal and contractual interest payments over all cash flows expected to be collected at acquisition as an amount that should not be accreted (non-accretable difference). The remaining amount, representing the excess of the loan’s or pool’s cash flows expected to be collected over the fair value for the loan or pool of loans, is accreted into interest income over the remaining life of the loan or pool (accretable difference). Subsequent to the acquisition date, increases in cash flows expected to be received in excess of the Company’s initial estimates are reclassified from non-accretable difference to accretable difference and are accreted into interest income on a level-yield basis over the remaining life of the loan. Decreases in cash flows expected to be collected are recognized as impairment through the provision for credit losses.

Segment Information

ASC Topic 280-10, ”Segment Reporting,” requires selected segment information of operating segments based on a management approach. The Company’s four reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by management (see Note 25, Reportable Segments, for further information).

Application of New Accounting Guidance Adopted in 2023

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology that delayed recognition until it is probable a loss has been incurred with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. Additionally, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the adoption of CECL included a decrease in the allowance for credit losses on loans of $14,300, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $397,900, which is recorded within Other Liabilities. The Company recorded an allowance for credit losses for held to maturity securities of $43,500, which is presented as a reduction to held to maturity securities outstanding. The Company recorded a net decrease to retained earnings of $337,400 as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).

The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired available-for-sale investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale securities was not deemed material.

92

The following table illustrates the impact on the allowance for credit losses (“ACL”) from the adoption of ASC 326:

(Dollars in thousands)	January 1, 2023 As Reported Under ASC 326		December 31, 2022 Pre-ASC 326 Adoption December		Impact of ASC 326 Adoption
Assets:
Held to maturity securities, at amortized cost	$	106,929	$	106,929	$	—
Allowance for credit losses on held to maturity securities:
State and local governments		43		—		43
Allowance for credit losses on held-to-maturity securities	$	43	$	—	$	43
Loans, at amortized cost	$	980,857	$	980,857	$	—
Allowance for credit losses on loans:
Commercial		1,042		849		193
Real Estate Construction		1,150		75		1,075
Real Estate Mortgage Residential		755		723		32
Real Estate Mortgage Commercial		7,686		8,569		(883	)
Consumer Home Equity		480		314		166
Consumer Other		209		170		39
Unallocated		—		636		(636	)
Allowance for credit losses on loans	$	11,322	$	11,336	$	(14	)
Liabilities:
Allowance for credit losses for unfunded commitments	$	398	$	—	$	398

The Company elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on non-accrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest.

Allowance for Credit Losses on Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $1.3 million at December 31, 2023 and was excluded from the estimate of credit losses. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Securities are analyzed individually to establish a CECL reserve.

The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed securities or state and local governments.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL or as of December 31, 2023. The state and local governments securities held by the Company are highly rated by major rating agencies.

93

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit loss related to the available-for-sale securities portfolio.

Accrued interest receivable on available-for-sale securities totaled $870,000 at December 31, 2023 and was excluded from the estimate of credit losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future, until maturity, or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $3.6 million at December 31, 2023 and was reported in other assets on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.

All accrued interest is reversed against interest income when a loan is placed on non-accrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.

The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call report code and then by risk grade grouping. Risk grade is grouped within each call report code by pass, watch, special mention, substandard, and doubtful. Other loan types are separated into their own cohorts due to specific risk characteristics for that pool of loans.

The Company has elected a non-discounted cash flow methodology with probability of default (“PD”) and loss given default (“LGD”) for all call report code cohorts (“cohorts”), as this is believed to be the most accurate model available. The PD calculation looks at the historical loan portfolio at particular points in time (each month during the lookback period) to determine the probability that loans in a certain cohort will default over the next 12-month period. A default is defined as a loan that has moved to past due 90 days and greater, non-accrual status, or experienced a charge-off during the period. Currently, the Company’s historical data is insufficient due to a minimal amount of default activity or zero defaults, therefore, management uses index PDs comprised of rates derived from the PD experience of other community banks in place of the Company’s historical PDs.

94

The LGD calculation looks at actual losses (net charge-offs) experienced over the entire lookback period for each cohort of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. All defaults (non-accrual, charge-off, or greater than 90 days past due) occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event (i.e., non-accrual or charge-off). Due to very limited charge-off history, management uses index LGDs comprised of rates derived from the LGD experience of other community banks in place of the Company’s historical LGDs.

The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes a 12-month PD forecast based on the peer index regression model comparing peer defaults to the national unemployment rate. After the forecast period, PD rates revert on a straight-line basis back to long-term historical average rates over a 12-month period.

The Company recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company adjusts the modeled historical losses by qualitative adjustments to incorporate all significant risks to form a sufficient basis to estimate the credit losses. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth and concentrations, trends in underlying collateral, as well as external factors and economic conditions not already captured.

The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The Bank has identified the following pools: 

· Loans Secured by Non-Owner Occupied Commercial Real Estate – These loans are to businesses for structures that will be leased to other commercial entities. Cash flows to pay these loans is dependent on lease payments to the business owners.

· Loans Secured by Owner Occupied Commercial Real Estate – These loans are to businesses who are housed in the building that serves as collateral. Cash flows to pay these loans is dependent on cash generated by the business.

· Commercial and Industrial Loans – These loans are to businesses for purposes other than commercial real estate, such as equipment. The loans are typically secured by the equipment purchased, and cash flows to pay these loans is dependent on cash generated by the business.

· Loans Secured by Residential Real Estate – These loans are to businesses and individuals for real estate with houses or apartment complexes on it. Cash flows to pay these loans is dependent on household income, and the collateral rises and falls in value in alignment with the residential property market.

· Loans Secured by Farmland – These loans are secured by agricultural property.

· Loans to States and Municipalities – These loans are to governments, and are backed by tax revenues.

· Loans Secured by Construction and Development – These loans are for new construction and work on the underlying land.

· Other Consumer Loans – These loans are made to consumers and are secured by collateral other than residential real estate, e.g., automobiles.

Loans that do not share risk characteristics are evaluated on an individual basis. Generally, this population includes loan relationships exceeding $500,000 and on non-accrual status, however they can also include any loan that does not share risk characteristics with its respective pool. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate. When the expected source of repayment is from a source other than the underlying collateral, impairment will generally be measured based upon the present value of expected proceeds discounted at the contractual interest rate.

Allowance for Credit Losses on Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

95

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan cohort at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

Recently Issued Accounting Standards

In March 2020, the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. In December 2022, the FASB issued amendments to extend the period of time preparers can use the reference rate reform relief guidance under ASC Topic 848 from December 31, 2023 to December 31, 2024, to address the fact that all London Interbank Offered Rate (LIBOR) tenors were not discontinued as of December 31, 2022, and some tenors will be published until June 2023. The amendments are effective immediately for all entities and applied prospectively. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2022, the FASB issued ASU 2022-02, which eliminated the previous recognition and measurement guidance for troubled debt restructurings (“TDRs”), required new disclosures for loan modifications when a borrower is experiencing financial difficulty, and required disclosures of current period gross charge-offs by year of origination in the vintage disclosures. The Company adopted this amendment effective January 1, 2023.

In March 2022, the FASB issued amendments which are intended to improve the decision usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments do not have a material effect on the Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments require disclosure of incremental segment information on an annual and interim basis for all public entities. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. Early adoption is permitted.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This amendment is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

96

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

General Risk and Uncertainties

In the normal course of business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on a different basis, than its interest-earning assets. Credit risk is the risk of default on the Company’s loan and investment portfolios that results from borrowers’ or issuer’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans and investments and the valuation of real estate held by the Company.

The Company is subject to regulations of various governmental agencies (regulatory risk). These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required credit loss allowances and operating restrictions from regulators’ judgments based on information available to them at the time of their examination.

Reclassifications

Certain captions and amounts in the 2021 and 2022 consolidated financial statements were reclassified to conform to the 2023 presentation.

Note 3—INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are summarized below:

AVAILABLE-FOR-SALE:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023
US Treasury securities	$	20,791	$	—	$	(2,445	)	$	18,346
Government Sponsored Enterprises		2,500		—		(371	)		2,129
Mortgage-backed securities		255,757		15		(17,613	)		238,159
Small Business Administration pools		16,108		24		(411	)		15,721
Corporate and other securities		8,759		—		(888	)		7,871
	$	303,915	$	39	$	(21,728	)	$	282,226
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022
US Treasury securities	$	60,552	$	—	$	(4,569	)	$	55,983
Government Sponsored Enterprises		2,500		—		(426	)		2,074
Mortgage-backed securities		263,704		10		(19,114	)		244,600
Small Business Administration pools		21,657		60		(630	)		21,087
Corporate and other securities		8,772		12		(666	)		8,118
	$	357,185	$	82	$	(25,405	)	$	331,862

97

Note 3—INVESTMENT SECURITIES (Continued)

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2021
US Treasury securities	$	15,736	$	—	$	(300	)	$	15,436
Government Sponsored Enterprises		2,499		2		—			2,501
Mortgage-backed securities		398,125		3,596		(3,992	)		397,729
Small Business Administration pools		30,835		505		(67	)		31,273
State and Local Government		105,469		4,918		(539	)		109,848
Corporate and other securities		8,024		157		(129	)		8,118
	$	560,688	$	9,178	$	(5,027	)	$	564,839

HELD-TO-MATURITY:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023
Mortgage-backed securities	$	112,740	$	—	$	(8,490	)	$	104,250
State and local government		104,430		282		(3,445	)		101,268
	$	217,170	$	282	$	(11,935	)	$	205,518
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022
Mortgage-backed securities	$	121,772		—	$	(8,656	)	$	113,116
State and local government		106,929		—		(6,432	)		100,497
	$	228,701	$	—	$	(15,088	)	$	213,613

There were no securities classified as held-to maturity at December 31, 2021.

On June 1, 2022, the Company reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available for sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) at December 31, 2023 and $15.7 million ($12.4 million net of tax) at December 31, 2022.

During the year ended December 31, 2023, the Company sold $39.9 million of book value US Treasury securities from the available-for-sale investment securities portfolio. This sale created a one-time pre-tax loss of $1.2 million and provided additional liquidity to pay down borrowings and fund loan growth. During the years ended December 31, 2022 and 2021, the Company sold no investment securities. The tax benefit applicable to the net realized loss was approximately $262, $0, and $0 for 2023, 2022 and 2021, respectively.

The following tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at December 31, 2023 and December 31, 2022. 

98

Note 3—INVESTMENT SECURITIES (Continued)

(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale securities:	Value		Loss		Value		Loss		Value		Loss
US Treasury Securities	$	—	$	—	$	18,346	$	2,445	$	18,346	$	2,445
Government Sponsored Enterprise		—		—		2,129		371		2,129		371
Mortgage-backed securities		8,164		423		223,844		17,190		232,008		17,613
Small Business Administration pools		4,253		45		7,638		366		11,891		411
Corporate and other securities		1,880		115		4,236		773		6,116		888
Total	$	14,297	$	583	$	256,193	$	21,145	$	270,490	$	21,728
(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2022	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale securities:	Value		Loss		Value		Loss		Value		Loss
US Treasury Securities	$	28,827	$	1,032	$	27,156	$	3,537	$	55,983	$	4,569
Government Sponsored Enterprise		—		—		2,074		426		2,074		426
Mortgage-backed securities		81,961		4,435		159,227		14,679		241,188		19,114
Small Business Administration pools		16,066		453		2,592		177		18,658		630
Corporate and other securities		2,128		146		3,230		520		5,358		666
Total	$	128,982	$	6,067	$	194,279	$	19,338	$	323,261	$	25,405

(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held-to-maturity securities:	Value		Loss		Value		Loss		Value		Loss
Mortgage-backed securities		—		—		104,250		8,490		104,250		8,490
State and local government		6,278		25		78,597		3,420		84,875		3,445
Total	$	6,278	$	25	$	182,847	$	11,910	$	189,125	$	11,935

  

The following table shows a roll forward of the allowance for credit losses on held to maturity securities for the year ended December 31, 2023.

	State and
	local
(Dollars in thousands)	government
Allowance for Credit Losses on Held-to-Maturity Securities:
Beginning balance, December 31, 2022	$	—
Adjustment for adoption of ASU 2016-13		(43	)
Provision for credit losses		13
Ending balance, December 31, 2023	$	(30	)

For the year ended December 31, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as non-accrual at December 31, 2023.

99

Note 3—INVESTMENT SECURITIES (Continued)

The amortized cost and fair value of investment securities at December 31, 2023, by expected maturity, follow. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. Mortgage-backed securities are included in the year corresponding with the remaining expected life.

AVAILABLE-FOR-SALE:

(Dollars in thousands)	Available-for-sale
	Amortized Cost		Fair Value
Due in one year or less	$	5,003	$	4,996
Due after one year through five years		9,658		9,328
Due after five years through ten years		39,482		35,424
Due after ten years		249,772		232,478
	$	303,915	$	282,226

HELD-TO-MATURITY:

(Dollars in thousands)	Held-to-maturity
	Amortized Cost			Fair Value
Due in one year or less	$	809		$	805
Due after one year through five years		42,349			40,915
Due after five years through ten years		74,378			71,522
Due after ten years		99,664			92,276
Allowance for Credit Losses on Held-to-Maturity Securities		(30	)		—
	$	217,170		$	205,518

Securities with an amortized cost of $160.8 million and fair value of $150.6 million at December 31, 2023 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase. Securities with an amortized cost of $290.1 million and fair value of $270.4 million at December 31, 2022 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase.

Allowance for Credit Losses on Held-to-Maturity Securities

Expected credit losses on held-to-maturity debt securities are evaluated by major security type. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Municipal securities are analyzed individually to establish a CECL reserve.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL or as of December 31, 2023.

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit loss related to the available-for-sale securities portfolio.

100

Note 4—LOANS

The following table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled $2.2 million and $1.9 million as of December 31, 2023 and December 31, 2022, respectively.

	December 31,
(Dollars in thousands)	2023		2022
Commercial	$	78,134	$	72,409
Real estate:
Construction		118,225		91,223
Mortgage-residential		94,796		65,759
Mortgage-commercial		791,947		709,218
Consumer:
Home equity		34,752		28,723
Other		16,165		13,525
Total	$	1,134,019	$	980,857

Commercial category includes $151.0 thousand and $219.0 thousand in PPP loans, net of deferred fees and costs, as of December 31, 2023 and December 31, 2022, respectively.

Activity in the allowance for credit losses was as follows:

	Years ended December 31,
(Dollars in thousands)	2023			2022			2021
Balance at the beginning of year	$	11,336		$	11,179		$	10,389
Adjustment for adoption of ASU 2016-13		(14	)
Provision for (release of) credit losses		939			(152	)		335
Charged off loans		(87	)		(68	)		(182	)
Recoveries		93			377			637
Balance at end of year	$	12,267		$	11,336		$	11,179

The detailed activity in the allowance for credit losses and the recorded investment in loans receivable as of and for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 follows:

($ in thousands)	Commercial			Real Estate Construction		Real Estate Mortgage Residential		Real Estate Mortgage Commercial			Consumer Home Equity			Consumer Other			Unallocated			Total Loans
Balance at December 31, 2022	$	849		$	75	$	723	$	8,569		$	314		$	170		$	636		$	11,336
Adjustment to allowance for adoption of ASU 2016-13		193			1,075		32		(883	)		166			39			(636	)		(14	)
Charge-offs		(20	)		—		—		—			—			(67	)		—			(87	)
Recoveries		5			2		9		37			22			18			—			93
Provision for credit losses		(92	)		185		358		423			(30	)		95			—			939
Balance at December 31, 2023	$	935		$	1,337	$	1,122	$	8,146		$	472		$	255			—		$	12,267

101

Note 4—LOANS (Continued)

(Dollars in thousands)	Commercial			Real estate Construction			Real estate Mortgage Residential		Real estate Mortgage Commercial			Consumer Home equity			Consumer Other			Unallocated		Total
2022
Allowance for credit losses:
Beginning balance	$	853		$	113		$	560	$	8,570		$	333		$	126		$	624	$	11,179
Charge-offs		—			—			—		—			(1	)		(67	)		—		(68	)
Recoveries		17			—			6		325			13			16			—		377
Provisions		(21	)		(38	)		157		(326	)		(31	)		95			12		(152	)
Ending balance	$	849		$	75		$	723	$	8,569		$	314		$	170		$	636	$	11,336
Ending balances:
Individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment		(849	)		75			723		8,569			314			170			636		11,336
Loans receivable:
Ending balance-total	$	72,409		$	91,223		$	65,759	$	709,218		$	28,723		$	13,525		$	—	$	980,857
Ending balances:
Individually evaluated for impairment		29			—			34		4,752			168			—			—		4,983
Collectively evaluated for impairment		72,380			91,223			65,725		704,466			28,555			13,525			—		975,874

The following table presents an allocation of the allowance for credit losses at the end of each of the past three years. The allocation is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount is available to absorb losses occurring in any category of loans.

Allocation of the Allowance for Credit Losses

	2023					2022					2021
(Dollars in thousands)	Amount		% of loans in category			Amount		% of loans in category			Amount		% of loans in category
Commercial	$	935		7.6	%	$	849		7.9	%	$	853		8.1	%
Real Estate Construction		1,337		10.9	%		75		0.7	%		113		1.1	%
Real Estate Mortgage:
Commercial		8,146		66.4	%		8,569		80.1	%		8,570		81.2	%
Residential		1,122		9.2	%		723		6.8	%		560		5.3	%
Consumer - Home Equity		472		3.8	%		314		2.9	%		333		3.2	%
Consumer - Other		255		2.1	%		170		1.6	%		126		1.2	%
Unallocated		—		N/A			636		N/A			624		N/A
Total	$	12,267		100.0	%	$	11,336		100.0	%	$	11,179		100.0	%

102

Note 4—LOANS (Continued)

The following tables are by loan category and present at December 31, 2022 and December 31, 2021 loans considered impaired under FASB ASC 310, “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings.

The following table presents information related to the average recorded investment and interest income recognized on impaired loans, excluding PCI loans, at December 31, 2022 and December 31, 2021.

(Dollars in thousands)
December 31, 2022	Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	27	$	2
Real estate:
Construction		—		—
Mortgage-residential		34		3
Mortgage-commercial		4,747		464
Consumer:
Home Equity		167		9
Other		—		—
With an allowance recorded:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		—		—
Mortgage-commercial		—		—
Consumer:
Home Equity		—		—
Other		—		—
Total:
Commercial		27		2
Real estate:
Construction		—		—
Mortgage-residential		34		3
Mortgage-commercial		4,747		464
Consumer:
Home Equity		167		9
Other		—		—
	$	4,975	$	478

103

(Dollars in thousands)
December 31, 2021	Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	—	$	—
Real estate:
Construction		—		—
Mortgage-residential		131		6
Mortgage-commercial		1,748		223
Consumer:
Home Equity		—		—
Other		—		—
With an allowance recorded:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		—		—
Mortgage-commercial		39		5
Consumer:
Home Equity		—		—
Other		—		—
Total:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		131		6
Mortgage-commercial		1,787		228
Consumer:
Home Equity		—		—
Other		—		—
	$	1,918	$	234

104

Note 4—LOANS (Continued)

The following tables present loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2022.

(Dollars in thousands)
December 31, 2022	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no allowance recorded:
Commercial	$	29	$	29	$	—
Real estate:
Construction		—		—		—
Mortgage-residential		34		51		—
Mortgage-commercial		4,752		5,260		—
Consumer:
Home Equity		168		168		—
Other		—		—		—
With an allowance recorded:
Commercial		—		—		—
Real estate:
Construction		—		—		—
Mortgage-residential		—		—		—
Mortgage-commercial		—		—		—
Consumer:
Home Equity		—		—		—
Other		—		—		—
Total:
Commercial		29		29		—
Real estate:
Construction		—		—		—
Mortgage-residential		34		51		—
Mortgage-commercial		4,752		5,260		—
Consumer:
Home Equity		168		168		—
Other		—		—		—
	$	1,694	$	3,705	$	—

105

Note 4—LOANS (Continued)

The following table shows the amortized cost basis at December 31, 2023 of the loans modified for borrowers experiencing financial difficulty after December 31, 2022 segregated by loan category and describes the financial effect of the modification made for a borrower experiencing financial difficulty.

	December 31, 2023
(Dollars in thousands)	Amortized cost basis		% of Total Loan Type			Financial effect
Real Estate Mortgage Residential		200		0.21	%	Deferred two monthly payments that are added to the end of the original loan term.
Total Loans	$	200	$	0.21	%

The following table depicts the performance of loans that have been modified in the last 12 months.

(Dollars in thousands)			30-89 Days		Greater than 90 Days
December 31, 2023	Current		Past Due		Past Due
Real Estate Mortgage Residential		—		200		—
Total Loans	$	—	$	200	$	—

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

106

Note 4—LOANS (Continued)

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

	Term Loans by year of Origination
($ in thousands)	2019		2020		2021		2022		2023		Prior		Revolving		Revolving Converted to Term		Total
Commercial
Pass	$	1,149	$	1,375	$	23,226	$	9,018	$	12,950	$	9,230	$	21,033	$	49	$	78,030
Special mention		—		—		—		—		—		26		—		—		26
Substandard		—		—		78		—		—		—		—		—		78
Total commercial		1,149		1,375		23,304		9,018		12,950		9,256		21,033		49		78,134
Current period gross write-offs		—		20		—		—		—		—		—		—		20
Real estate construction
Pass		6,864		—		5,074		39,514		47,992		—		18,781		—		118,225
Total real estate construction		6,864		—		5,074		39,514		47,992		—		18,781		—		118,225
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Real estate mortgage-residential
Pass		1,894		10,548		6,219		28,843		28,517		8,420		977		8,962		94,380
Special mention		—		25		—		—		—		177		—		—		202
Substandard		—		—		—		—		—		214		—		—		214
Total real estate mortgage-residential		1,894		10,573		6,219		28,843		28,517		8,811		977		8,962		94,796
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Real estate mortgage-commercial
Pass		47,962		95,120		136,892		201,380		106,125		189,983		14,038		329		791,829
Special mention		—		—		—		—		—		21		—		—		21
Substandard		—		—		—		—		—		97		—		—		97
Total real estate mortgage-commercial		47,962		95,120		136,892		201,380		106,125		190,101		14,038		329		791,947
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Consumer - home equity
Pass		—		—		—		—		—		—		33,621		—		33,621
Special mention		—		—		—		—		—		—		67		—		67
Substandard		—		—		—		—		—		—		1,064		—		1,064
Total consumer - home equity		—		—		—		—		—		—		34,752		—		34,752
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Consumer - other
Pass		420		203		435		1,164		2,043		902		10,982		—		16,149
Special mention		—		—		—		—		16		—		—		—		16
Substandard		—		—		—		—		—		—		—		—		—
Total consumer - other		420		203		435		1,164		2,059		902		10,982		—		16,165
Current period gross write-offs		—		—		—		—		—		—		67		—		67

107

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of December 31, 2023 and December 31, 2022, no loans were classified as doubtful. As of December 31, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below.

(Dollars in thousands)
			Special
December 31, 2022	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial & agricultural	$	72,333	$	47	$	29	$	—	$	72,409
Real estate:
Construction		91,223		—		—		—		91,223
Mortgage – residential		65,505		220		34		—		65,759
Mortgage – commercial		704,357		80		4,781		—		709,218
Consumer:
Home Equity		27,531		117		1,075		—		28,723
Other		13,269		93		163		—		13,525
Total	$	974,218	$	557	$	6,082	$	—	$	980,857

108

Note 4—LOANS (Continued)

The following tables are by loan category and present loans past due and on non-accrual status as of December 31, 2023 and December 31, 2022:

(Dollars in thousands) December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	19	$	7	$	—	$	24	$	50	$	78,084	$	78,134
Real estate:
Construction		—		—		—		—		—		118,225		118,225
Mortgage-residential		244		15		214		—		473		94,323		94,796
Mortgage-commercial		67		124		—		—		191		791,756		791,947
Consumer:
Home equity		—		—		—		3		3		34,749		34,752
Other		22		—		1		—		23		16,142		16,165
Total	$	352	$	146	$	215	$	27	$	740	$	1,133,279	$	1,134,019
(Dollars in thousands) December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	87	$	—	$	—	$	29	$	116	$	72,293	$	72,409
Real estate:
Construction		—		—		—		—		—		91,223		91,223
Mortgage-residential		327		—		—		34		361		65,398		65,759
Mortgage-commercial		46		8		—		4,664		4,718		704,500		709,218
Consumer:
Home equity		—		—		—		168		168		28,555		28,723
Other		96		—		2		—		98		13,427		13,525
Total	$	556	$	8	$	2	$	4,895	$	5,461	$	975,396	$	980,857

The following table is a summary of the Company’s non-accrual loans by major categories for the periods indicated.

	CECL						Incurred Loss
	December 31, 2023						December 31, 2022
(Dollars in thousands)	Non-accrual Loans with No Allowance		Non-accrual Loans with an Allowance		Total Non-accrual Loans		Non-accrual Loans
Commercial	$	—	$	24	$	24	$	29
Real Estate:
Construction		—		—		—		—
Mortgage-Residential		—		—		—		34
Mortgage-Commercial		—		—		—		4,664
Consumer Home Equity		—		3		3		168
Consumer Other		—		—		—		—
Total Loans	$	—	$	27	$	27	$	4,895

There were no collateral dependent loans that were individually evaluated for year ended December 31, 2023.

109

Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the years ended December 31, 2023 and December 31, 2022.

	For the years ended December 31,
(Dollars in thousands)	2023		2022
Balance, beginning of year	$	2,189	$	2,809
New Loans		—		3
Less loan repayments		1,131		623
Balance, end of year	$	1,058	$	2,189

Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be cancelled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $597,000 at December 31, 2023 is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2023.

(Dollars in thousands)	Total Allowance for Credit Losses - Unfunded Commitments
Balance, December 31, 2022	$	—
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13		398
Provision for unfunded commitments		199
Balance, December 31, 2023	$	597

Note 5—FAIR VALUE MEASUREMENT

The Company adopted FASB ASC Fair Value Measurement Topic 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level l Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

110

Note 5—FAIR VALUE MEASUREMENT (Continued)

FASB ASC 825-10-50 “Disclosure about Fair Value of Financial Instruments”, requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below.

Cash and short term investments—The carrying amount of these financial instruments (cash and due from banks, interest-bearing bank balances, federal funds sold and securities purchased under agreements to resell) approximates fair value. All mature within 90 days and do not present unanticipated credit concerns and are classified as Level 1.

Investment Securities—Measurement is on a recurring basis based upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for prepayment assumptions, projected credit losses, and liquidity. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, or by dealers or brokers in active over-the-counter markets. Level 2 securities include mortgage-backed securities issued both by government sponsored enterprises and private label mortgage-backed securities. Generally, these fair values are priced from established pricing models. Level 3 securities include corporate debt obligations and asset–backed securities that are less liquid or for which there is an inactive market.

Derivative Financial Instruments - Derivative instruments (pay fixed swaps) used to hedge interest rate risk related to the mortgage portfolio are reported at fair value utilizing Level 2 inputs. The fair values of the hedged item and the interest rate swap are based on derivative market data as of the valuation date. 

Other investments, at cost—The carrying value of other investments, such as FHLB stock, approximates fair value based on redemption provisions.

Loans Held for Sale—The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with an investor, are carried in the Company’s loans held for sale portfolio. These loans are fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all of these loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company and are classified as Level 2. The carrying amount of these loans approximates fair value.

Loans— The valuation of loans receivable is estimated using the exit price notion which incorporates factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, fixed rate loans and all other loans. The results are then adjusted to account for credit risk as described above.

Other Real Estate Owned (“OREO”)—OREO is carried at the lower of carrying value or fair value on a non-recurring basis. Fair value is based upon independent appraisals or management’s estimation of the collateral and is considered a Level 3 measurement.

Accrued Interest Receivable—The fair value approximates the carrying value and is classified as Level 1.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. Deposits are classified as Level 2.

Federal Home Loan Bank Advances—Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms and are classified as Level 2.

Short Term Borrowings—The carrying value of short term borrowings (securities sold under agreements to repurchase and demand notes to the Treasury) approximates fair value. These are classified as Level 2.

Junior Subordinated Debentures—The fair values of junior subordinated debentures are estimated by using discounted cash flow analyses based on incremental borrowing rates for similar types of instruments. These are classified as Level 2.

Accrued Interest Payable—The fair value approximates the carrying value and is classified as Level 1.

Commitments to Extend Credit—The fair value of these commitments is immaterial because their underlying interest rates approximate market. 

111

Note 5—FAIR VALUE MEASUREMENT (Continued)

The carrying amount and estimated fair value by classification Level of the Company’s financial instruments as of December 31, 2023 and December 31, 2022 are as follows: 

	December 31, 2023
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and short term investments	$	94,695	$	94,695	$	94,695	$	—	$	—
Available-for-sale securities		282,226		282,226		—		282,226		—
Held-to-maturity securities		217,170		205,518		—		205,518		—
Other investments, at cost		6,800		6,800		—		—		6,800
Loans held for sale		4,433		4,433		—		4,433		—
Derivative financial instruments		1,069		1,069				1,069
Net loans receivable		1,121,752		1,088,053		—		—		1,088,053
Accrued interest		5,869		5,869		5,869		—		—
Financial liabilities:
Non-interest bearing demand	$	432,333	$	432,333	$	—	$	432,333	$	—
Interest bearing demand deposits and money market accounts		707,434		707,434		—		707,434		—
Savings		118,623		118,623		—		118,623		—
Time deposits		252,611		252,137		—		252,137		—
Total deposits		1,511,001		1,510,527		—		1,510,527		—
Federal Home Loan Bank Advances		90,000		90,000		—		90,000		—
Short term borrowings		62,863		62,863		—		62,863		—
Junior subordinated debentures		14,964		13,123		—		13,123		—
Accrued interest payable		3,575		3,575		3,575		—		—

	December 31, 2022
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and short term investments	$	37,401	$	37,401	$	37,401	$	—	$	—
Available-for-sale securities		331,862		331,862		—		331,862		—
Held-to-maturity securities		228,701		213,613		—		213,613		—
Other investments, at cost		4,191		4,191		—		—		4,191
Loans held for sale		1,779		1,779		—		1,779		—
Net loans receivable		969,521		943,498		—		—		943,498
Accrued interest		5,217		5,217		5,217		—		—
Financial liabilities:
Non-interest bearing demand	$	461,010	$	461,010	$	—	$	461,010	$	—
Interest bearing demand deposits and money market accounts		629,763		629,763		—		629,763		—
Savings		161,770		161,770		—		161,770		—
Time deposits		132,839		132,825		—		132,825		—
Total deposits		1,385,382		1,385,368		—		1,385,368		—
Federal Home Loan Bank Advances		50,000		50,000		—		50,000		—
Short term borrowings		90,743		90,743		—		90,743		—
Junior subordinated debentures		14,964		13,402		—		13,402		—
Accrued interest payable		520		520		520		—		—

112

Note 5—FAIR VALUE MEASUREMENT (Continued)

The following table summarizes quantitative disclosures about the fair value for each category of assets carried at fair value as of December 31, 2023 and December 31, 2022 that are measured on a recurring basis. There were no liabilities carried at fair value as of December 31, 2023 or December 31, 2022 that are measured on a recurring basis. 

AVAILABLE-FOR-SALE:

Dollars in thousands)

Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Available- for-sale securities
US Treasury Securities	$	18,346	$	—	$	18,346	$	—
Government Sponsored Enterprises		2,129		—		2,129		—
Mortgage-backed securities		238,159		—		238,159		—
Small Business Administration pools		15,721		—		15,721		—
State and local government		—		—		—		—
Corporate and other securities		7,871		—		7,871		—
Total Available-for-sale securities		282,226		—		282,226		—
Loans held for sale		4,433		—		4,433		—
Total	$	286,659	$	—	$	286,659	$	—

(Dollars in thousands)

Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
Available- for-sale securities
US Treasury Securities	$	55,983	$	—	$	55,983	$	—
Government Sponsored Enterprises		2,074		—		2,074		—
Mortgage-backed securities		244,600		—		244,600		—
Small Business Administration pools		21,087		—		21,087		—
State and local government		—		—		—		—
Corporate and other securities		8,118		—		8,118		—
Total Available-for-sale securities		331,862		—		331,862		—
Loans held for sale		1,779		—		1,779		—
Total	$	333,641	$	—	$	333,641	$	—

The following tables summarize quantitative disclosures about the fair value for each category of assets carried at fair value as of December 31, 2023 and December 31, 2022 that are measured on a non-recurring basis. There were no liabilities carried at fair value and measured on a non-recurring basis at December 31, 2023 and 2022. 

(Dollars in thousands)
Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Other real estate owned:
Construction		145		—		—		145
Mortgage-commercial		477		—		—		477
Total other real estate owned		622		—		—		622
Total	$	622	$	—	$	—	$	622

113

Note 5—FAIR VALUE MEASUREMENT (Continued)

(Dollars in thousands)
Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial & Industrial	$	—	$	—	$	—	$	—
Real estate:
Mortgage-residential		34		—		—		34
Mortgage-commercial		4,752		—		—		4,752
Consumer:
Home equity		168		—		—		168
Other		—		—		—		—
Total impaired		4,954		—		—		4,954
Other real estate owned:
Construction		412		—		—		412
Mortgage-commercial		522		—		—		522
Total other real estate owned		934		—		—		934
Total	$	5,888	$	—	$	—	$	5,888

The Company has a large percentage of loans with real estate serving as collateral. Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the fair value of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which the Company considers to be Level 3 inputs. Third party appraisals are generally obtained when a loan is identified as being impaired or at the time it is transferred to OREO. This internal process would consist of evaluating the underlying collateral to independently obtained comparable properties. With respect to less complex or smaller credits, an internal evaluation may be performed. Generally, the independent and internal evaluations are updated annually. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)	Fair Value as of December 31, 2023		Valuation Technique		Significant Observable Inputs		Significant Unobservable Inputs
OREO	$	622		Appraisal Value/Comparison Sales/Other estimates		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost

(Dollars in thousands)	Fair Value as of December 31, 2022		Valuation Technique		Significant Observable Inputs		Significant Unobservable Inputs
OREO	$	934		Appraisal Value/Comparison Sales/Other estimates		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost
Impaired loans	$	4,954		Appraisal Value		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost

114

Note 6—PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	December 31,
(Dollars in thousands)	2023		2022
Land	$	9,804	$	9,804
Premises		28,708		28,684
Equipment		8,203		7,900
Fixed assets in progress		14		90
Property and equipment, gross		46,729		46,478
Accumulated depreciation		16,140		15,201
Property and Equipment Net	$	30,589	$	31,277

Depreciation expense included in operating expenses for the years ended December 31, 2023, 2022 and 2021 amounted to $1.8 million, $1.6 million, and $1.7 million, respectively.

As of December 31, 2023 and December 31, 2022 there were no premises held-for-sale. There was no gain or loss on premises held-for-sale during the year ended December 31, 2023. During the year ended December 31, 2022, the Company sold a warehouse that had previously been used for storage. Loss on premises held-for-sale was $73 thousand for the year ended December 31, 2022. There was no gain or loss on sale of fixed assets was for the year ended December 31, 2023 and loss on sale of fixed assets was $45 thousand for the year ended December 31, 2022.

Note 7—GOODWILL, CORE DEPOSIT INTANGIBLE

Intangible assets (excluding goodwill) consisted of the following:

	December 31,
(Dollars in thousands)	2023			2022			2021
Core deposit premiums, gross carrying amount	$	3,358		$	3,358		$	3,358
Other intangibles		538			538			538
Gross carrying amount		3,896			3,896			3,896
Accumulated amortization		(3,292	)		(3,135	)		(2,977	)
Net	$	604		$	761		$	919

Based on the core deposit and other intangibles as of December 31, 2023, the following table presents the aggregate amortization expense for each of the succeeding years ending December 31:

(Dollars in thousands)	Amount
2024	$	158
2025		157
2026		158
2027		131
2028 and thereafter
Total	$	604

Amortization of the intangibles amounted to $158 thousand, $158 thousand, and $201 thousand for the years ended December 31, 2023, 2022 and 2021, respectively. Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. Goodwill has an indefinite useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. Qualitative factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less than fair value. During the year ended December 31, 2023, qualitative factors indicated it was more likely than not that the carrying value of goodwill was less than fair value, there were no indicators of impairment and no quantitative testing was performed.

115

Note 7—GOODWILL, CORE DEPOSIT INTANGIBLE (Continued)

The Company’s carrying amount of goodwill at December 31, 2023, and 2022 and changes to the goodwill are summarized as follows:

	December 31,
(In thousands)	2023		2022
Balance—beginning of year	$	14,637	$	14,637
Acquired Goodwill		—		—
Impairment		—		—
Balance, end of year	$	14,637	$	14,637

Note 8—OTHER REAL ESTATE OWNED

The following summarizes the activity in the other real estate owned for the years ended December 31, 2023 and 2022.

	December 31,
(In thousands)	2023			2022
Balance—beginning of year	$	934		$	1,165
Additions—foreclosures		—			—
Write-downs		(44	)		(69	)
Sales		(268	)		(162	)
Balance, end of year	$	622		$	934

Note 9—DEPOSITS

The Company’s total deposits are comprised of the following at the dates indicated:

	December 31,		December 31,
(Dollars in thousands)	2023		2022
Non-interest bearing deposits	$	432,333	$	461,010
Interest bearing demand deposits and money market accounts		707,434		629,763
Savings		118,623		161,770
Time deposits		252,611		132,839
Total deposits	$	1,511,001	$	1,385,382

Time deposits above include $48.1 million and $0 in brokered deposits as of December 31, 2023 and December 31, 2022, respectively.

At December 31, 2023, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)
2024	$	221,399
2025		8,145
2026		20,483
2027		801
2028 and after		1,783
Total	$	252,611

116

Note 9—DEPOSITS (Continued)

Interest paid on time deposits of $100 thousand or more totaled $2.4 million, $280 thousand, and $538 thousand in 2023, 2022, and 2021, respectively.

Time deposits that meet or exceed the FDIC insurance limit of $250 thousand at December 31, 2023 and December 31, 2022 were $51.1 million and $25.0 million, respectively.

Deposits from directors and executive officers and their related interests at December 31, 2023 and 2022 amounted to approximately $18.0 million and $24.5 million, respectively.

The amount of overdrafts classified as loans at December 31, 2023 and 2022 were $75 thousand and $162 thousand, respectively.

Total uninsured deposits were $436.6 million and $407.0 million at December 31, 2023 and December 31, 2022, respectively. Included in uninsured deposits at December 31, 2023 and December 31, 2022 were $82.8 million and $59.5 million of collateralized public funds, respectively.

Note 10—SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY

Securities sold under agreements to repurchase generally mature within one day to four days from the transaction date. The weighted average interest rate at December 31, 2023 and 2022 was 2.83% and 0.95%, respectively. The maximum month-end balance during 2023 and 2022 was $91.8 million and $93.4 million, respectively. The average outstanding balance during the years ended December 31, 2023 and 2022 amounted to $74.6 million and $74.8 million, respectively, with an average rate paid of 2.22% and 0.30%, respectively. Securities sold under agreements to repurchase are collateralized by securities with fair market values exceeding the total balance of the agreement.

At December 31, 2023 and 2022, the Company had unused short-term lines of credit totaling $95.0 million and $70.0 million respectively.

Note 11—ADVANCES FROM FEDERAL HOME LOAN BANK

As collateral for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $31.7 million at December 31, 2023. Securities have been pledged as collateral for advances in the amount of $150.6 million as of December 31, 2023. As collateral for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $22.8 million at December 31, 2022. Securities have been pledged as collateral for advances in the amount of $72.6 million as of December 31, 2022. Advances are subject to prepayment penalties. The average advances during 2023 and 2022 were $86.6 million and $9.5 million, respectively. The average interest rate for 2023 and 2022 was 5.02% and 4.34%, respectively. The maximum outstanding amount at any month end was $125.0 million and $50.0 million for 2023 and 2022, respectively.

During the years ended December 31, 2023 and December 31, 2022 there were no advances that were prepaid. Accordingly, no losses were realized on early extinguishment.

Note 12—JUNIOR SUBORDINATED DEBT

On September 16, 2004, FCC Capital Trust I (“Trust I”), a wholly owned unconsolidated subsidiary of the Company, issued and sold floating rate securities having an aggregate liquidation amount of $15.0 million. Until the cessation of LIBOR on June 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act. The distributions are cumulative and payable in arrears. The Company has the right, subject to events of default, to defer payments of interest on the Trust I securities for a period not to exceed 20 consecutive quarters, provided no extension can extend beyond the maturity date of September 16, 2034. The Trust I securities are mandatorily redeemable upon maturity at September 16, 2034. If the Trust I securities are redeemed on or after September 16, 2009, the redemption price will be 100% of the principal amount plus accrued and unpaid interest. The Trust I security were eligible to be redeemed in whole but not in part, at any time prior to September 16, 2009 following an occurrence of a tax event, a capital treatment event or an investment company event. Currently, these securities qualify under risk-based capital guidelines as Tier 1 capital, subject to certain limitations. The Company has no current intention to exercise its right to defer payments of interest on the Trust I securities. In 2015, the Company redeemed $500 thousand of this Trust I security. This resulted in a gain of $130 thousand received in 2015.

117

Note 13—LEASES

The Company has operating leases on four of its facilities. The leases have maturities ranging from May 2027 to December 2038 some of which include extensions of multiple five-year terms. The right-of-use asset was $3.2 million and $2.7 million at December 31, 2023 and December 31, 2022, respectively. The lease liability was $3.4 million and $2.8 million at December 31, 2023 and December 31, 2022, respectively. During the twelve-month period ended December 31, 2023, the Company made cash payments in the amount of $413.1 thousand for operating leases and the lease liability was reduced by $262.8 thousand. The lease expense recognized during the twelve-month periods ended December 31, 2023, December 31, 2022, December 31, 2021 amounted to $448.5 thousand, $354.8 thousand, and $323.0 thousand, respectively. The weighted average remaining lease term as of December 31, 2023, is 11.70 years and the weighted average discount rate used is 4.29%. The following table shows future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2023.

(Dollars in thousands)
2024	$	424
2025		434
2026		444
2027		422
2028		364
Thereafter		2,344
Total undiscounted lease payments	$	4,432
Less effect of discounting		(1,006	)
Present value of estimated lease payments (lease liability)		3,426

Note 14—INCOME TAXES

Income tax expense for the years ended December 31, 2023, 2022 and 2021 consists of the following:

	Year ended December 31
(Dollars in thousands)	2023			2022			2021
Current
Federal	$	2,937		$	3,429		$	3,653
State		627			735			749
Total Current		3,564			4,164			4,402
Deferred
Federal		(327	)		(323	)		(167	)
State		(40	)		(43	)		(53	)
Total Deferred		(367	)		(366	)		(220	)
Income tax expense	$	3,197		$	3,798		$	4,182

Reconciliation from expected federal tax expense to effective income tax expense for the periods indicated are as follows:  

	Year ended December 31
(Dollars in thousands)	2023			2022			2021
Expected federal income tax expense	$	3,159		$	3,866		$	4,126
State income tax net of federal benefit		464			547			550
Tax exempt interest		(275	)		(404	)		(396	)
Increase in cash surrender value life insurance		(176	)		(151	)		(146	)
Valuation allowance		93			27			32
Life Insurance Proceeds		(19	)		—			—
Excess tax benefit of stock compensation		—			(5	)		(11	)
Other		(49	)		(82	)		27
Total	$	3,197		$	3,798		$	4,182

118

Note 14—INCOME TAXES (Continued)

The following is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities:

	December 31,
(Dollars in thousands)	2023		2022
Assets:
Allowance for credit losses	$	2,646	$	2,464
Unfunded Commitments		129		—
Excess tax basis of deductible intangible assets		38		60
Net operating loss carry forward		933		840
Excess tax basis of assets acquired		—		18
Unrealized losses on available-for-sale securities		4,406		5,169
Unrealized losses on held-to-maturity securities		2,939		3,291
Compensation expense deferred for tax purposes		1,448		1,348
Deferred loss on other-than-temporary-impairment charges		5		5
FASB 91 - Origination Income & Costs		473		405
Other Real Estate Owned		229		231
Other		145		299
Total deferred tax asset		13,391		14,130
Valuation reserve		1,009		916
Total deferred tax asset net of valuation reserve		12,382		13,214
Liabilities:
Tax depreciation in excess of book depreciation		445		619
Excess financial reporting basis of assets acquired		919		938
Unrealized gain on available-for-sale securities		—		—
Total deferred tax liabilities		1,364		1,557
Net deferred tax asset / (liability) recognized	$	11,018	$	11,657

At December 31, 2023 the Company has approximately $23.6 million in State net operating losses. A valuation allowance is established to fully offset the deferred tax asset related to these net operating losses of the holding company. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Additional amounts of these deferred tax assets considered to be realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. The net deferred asset is included in other assets on the consolidated balance sheets.

A portion of the change in the net deferred tax asset relates to unrealized gains/losses on securities available-for-sale and held-to-maturity. The tax benefit related to the change of $1.6 million has been recorded directly to accumulated other comprehensive income within shareholders’ equity. The balance in the change in net deferred tax asset results from the current period deferred tax benefit of $367 thousand. At December 31, 2023, the Company had no federal net operating loss carryforward.

Tax returns for 2020 and subsequent years are subject to examination by taxing authorities.

As of December 31, 2023, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company’s policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

Note 15—COMMITMENTS, CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES

The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments as for on-balance sheet instruments. At December 31, 2023 and 2022, the Bank had commitments to extend credit including lines of credit of $214.2 million and $156.9 million, respectively.

119

Note 15—COMMITMENTS, CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES (Continued)

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies but may include inventory, property and equipment, residential real estate and income producing commercial properties.

The primary market areas served by the Bank include the Midlands Region of South Carolina to include Lexington, Richland, Newberry, and Kershaw Counties; the Central Savannah River Region include Aiken County, South Carolina and Richmond and Columbia Counties in Georgia. With the acquisition of Cornerstone, the Bank also serves Greenville, Anderson, and Pickens Counties in South Carolina which we refer to as the Upstate Region. In 2022, the Company opened a branch in Rock Hill, South Carolina which is located in York County and referred to as the Piedmont Region. Management closely monitors its credit concentrations and attempts to diversify the portfolio within its primary market area. The Company considers concentrations of credit risk to exist when pursuant to regulatory guidelines, the amounts loaned to multiple borrowers engaged in similar business activities represent 25% or more of the Bank’s risk based capital, or approximately $41.7 million.

Based on this criteria, the Bank had five such concentrations at December 31, 2023, including $347.1 million (30.6% of total loans) to lessors of non-residential property, $142.1 million (12.5% of total loans) to lessors of residential properties, $72.7 million (6.4% of total loans) to private households, $59.9 million (5.3% of total loans) to other activities related to real estate and $56.4 million to hotels (5.0% of total loans). As reflected above, lessors of non-residential properties and lessors of residential buildings equate to approximately 209.0% and 85.6% of total regulatory capital, respectively. The risk in these portfolios is diversified over a large number of loans, approximately 488 for lessors of non-residential properties and 405 loans for lessors of residential buildings. Commercial real estate loans and commercial construction loans represent $889.8 million, or 78.5%, of the portfolio. Approximately $273.2 million, or 30.7%, of the total commercial real estate loans are owner occupied, which can tend to reduce the risk associated with these credits. Although the Bank’s loan portfolio, as well as existing commitments, reflects the diversity of its market areas, a substantial portion of its debtor’s ability to honor their contracts is dependent upon the economic stability of these areas.

The nature of the business of the Company and Bank may at times result in a certain amount of litigation. The Bank is involved in certain litigation that is considered incidental to the normal conduct of business. Management believes that the liabilities, if any, resulting from the proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows of the Company.

Note 16—REVENUE RECOGNITION

In accordance with Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies those that contain performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Deposit Service Charges: The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis. The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

120

Note 16—REVENUE RECOGNITION (Continued)

Check Card Fee Income: Check card fee income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from debit cardholder transactions through the Mastercard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the card. Certain expenses directly associated with the debit card are recorded on a net basis with the fee income. This income is recognized within “Other” below.

Gains/Losses on OREO Sales: Gains/losses on the sale of OREO are included in non-interest income and are generally recognized when the performance obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each real estate closing. 

(Dollars in thousands)	December 31,			December 31,
Non-Interest Income	2023			2022
Deposit service charges	$	963		$	960
Mortgage banking income(1)		1,406			1,900
Investment advisory fees and non-deposit commissions(1)		4,511			4,479
Loss on sale of securities(1)		(1,249	)
Gain (loss) on sale of other real estate owned		151			(45	)
Gain (loss) on sale of other assets		—			(73	)
Non-recurring income		121			7
Other (2)		4,518			4,341
Total non-interest income		10,421			11,569

⁽¹⁾ Not within the scope of ASC 606

⁽²⁾ Includes Check Card Fee income discussed above.  No other items are within the scope of ASC 606.

Note 17—OTHER INCOME AND OTHER EXPENSE

A summary of the components of other non-interest income is as follows:

	Year ended December 31,
(In thousands)	2023		2022		2021
ATM debit card income	$	2,771	$	2,706	$	2,669
Recurring income on bank owned life insurance		745		721		693
Rental income		370		322		311
Other fees including safe deposit box fees		230		251		243
Wire transfer fees		119		132		118
Other		283		209		214
Total	$	4,518	$	4,341	$	4,248

121

Note 17—OTHER INCOME AND OTHER EXPENSE (Continued)

A summary of the components of other non-interest expense is as follows:

	Year ended December 31,
(Dollars in thousands)	2023		2022		2021
Core banking/electronic processing and services	$	2,512	$	2,469	$	2,397
ATM/debit card processing		1,074		885		694
Software subscriptions and services		1,008		896		733
Supplies		134		134		116
Telephone		485		354		365
Courier		284		279		181
Correspondent services		354		303		280
Insurance		381		358		325
Debit card and Fraud losses		422		285		160
Investment advisory and non-deposit expense		329		409		420
Loan processing and closing costs		331		266		329
Director fees		601		488		500
Legal and Professional fees		1,042		1,177		878
Shareholder expense		197		221		212
Other		957		834		777
Total	$	10,111	$	9,358	$	8,367

Note 18—STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION

The table below shows the components of “nonvested restricted stock and stock units” as of the years ended December 31, 2023 and 2022.

(Dollars in thousands)	Year ended December 31,
Nonvested restricted stock and stock units	2023			2022
Non-employee director deferred compensation stock plan deferred stock units		1,439			1,260
Time-based restricted stock units - officer		235			129
Performance-based restricted stock units - officer		521			218
Restricted stock – officer and director		(14	)		(146	)
Total nonvested restricted stock and stock units		2,181			1,461

Non-Employee Director Deferred Compensation Plan

Under the Company’s Non-Employee Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021, a director may elect to defer all or any part of annual retainer and monthly meeting fees payable with respect to service on the board of directors or a committee of the board. Units of common stock are credited to the director’s account as of the last day of such calendar quarter during which the compensation is earned and are included in dilutive securities in the table above. The non-employee director’s account balance is distributed by issuance of common stock within 30 days following such director’s separation from service from the board of directors.

122

Note 18—STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Continued)

The table below shows the following information related to First Community Corporation’s Non-Employee Director Deferred Compensation Plan: accumulated share units and accrued liability as of the years ended December 31 2023, 2022 and 2021; and the related director compensation expense for the twelve months ended 2023, 2022, and 2021.

	Year ended December 31,
	2023		2022		2021
Non-employee director deferred compensation plan accumulated share units		93,488		93,488		85,764
Accrued liability (dollars in thousands)1		1,439		1,260		1,107
Related director compensation expense (dollars in thousands)		180		153		140

¹ Recorded in “Nonvested restricted stock and stock units” effective June 2022; recorded in “Other liabilities” prior to June 2022.

First Community Corporation 2021 Omnibus Equity Incentive Plan

In 2021, the Company and its shareholders adopted an omnibus equity incentive plan whereby 225,000 shares were reserved for issuance by the Company to help the company attract, retain and motivate directors, officers, employees, consultants and advisors of the Company and its subsidiaries (the “2021 Plan”). The 2021 Plan replaced the 2011 Plan.

The table below shows stock awards granted during the twelve months ended December 31, 2023, 2022, and 2021.

(In shares/units)	Twelve Months ended December 31,
	20231		20221		20212
Time-based restricted stock units - officer		12,562		11,738		—
Performance-based restricted stock units – officer3		16,750		11,738		13,301
Restricted stock – officer		—		2,201		13,301
Restricted stock – director		7,590		7,359		7,960

1	Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.
2	Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.
3	16,750 units represent the target payout with a maximum payout of 33,500 units.

The table below shows the fair value of stock awards granted during the twelve months ended December 31 2023, 2022 and 2021.

(Dollars in thousands)	Twelve months ended December 31,
	20231		20221		20212
Time-based restricted stock units - officer		255		246		—
Performance-based restricted stock units – officer3		340		246		234
Restricted stock – officer		—		46		234
Restricted stock – director		154		154		140

1	Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.
2	Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.
3	$340 thousand represents the target payout with a maximum payout of $680 thousand.

123

Note 18—STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Continued)

The table below shows the compensation expense related to stock awards granted during the twelve months ended December 31 2023, 2022 and 2021.

(Dollars in thousands)	Year ended December 31,
Compensation expense related to stock awards	2023		2022		2021
Time-based restricted stock units – officer1		163		94		19
Performance-based restricted stock units – officer2		264		153		65
Restricted stock – officer3		120		206		223
Restricted stock – director4		167		141		140

1	Expense in 2023 consists of $159.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $3.2 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $19.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
2	Expense in 2023 consists of $186.0 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
3	Expense in 2023 consists of $17.2 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $102.8 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $23.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $182.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
4	Expense in 2023 and 2022 was related to stock awards granted under the Community Corporation 2021 Omnibus Equity Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

The table below shows the First Community Corporation 2021 Omnibus Equity Incentive Plan (“2021 Incentive Plan”) initial reserve at May 19, 2021; stock awards granted under the 2021 Incentive Plan from its inception through December 31, 2023; and the remaining reserve under such plan at December 31, 2023.

(In shares / units)
First Community Corporation 2021 Omnibus Equity Incentive Plan	2023
Initial reserve – May 19, 2021		225,000
Shares / units granted
Time-based restricted stock units - officer		(24,300	)
Performance-based restricted stock units – officer1		(34,358	)
Restricted stock – officer		(2,201	)
Restricted stock – director		(14,949	)
Remaining reserve – December 31, 2023		149,192

¹ Performance-based restricted stock units are initially granted and expensed at target levels; however, they are reserved at maximum levels.

124

Note 19—EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) plan, which covers substantially all employees. Participants may contribute up to the maximum allowed by the regulations. During the years ended December 31, 2023, 2022 and 2021, the plan expense amounted to $659 thousand , $608 thousand, and $581 thousand , respectively. The Company matches 100% of the employee’s contribution up to 3% and 50% of the employee’s contribution on the next 2% of the employee’s contribution.

The Company acquired various single premium life insurance policies from DutchFork Bancshares that are used to indirectly fund fringe benefits to certain employees and officers. A salary continuation plan was established payable for two key individuals upon attainment of age 63. The plan provides for monthly benefits of $2,500 each for seventeen years for two individuals.

The Company acquires various life insurance policies to fund fringe benefits to certain key employees. The cash surrender value at December 31, 2023 and 2022 of all bank owned life insurance was $30.2 million and $30.0 million, respectively. Expenses accrued for the anticipated benefits under the salary continuation plans for the year ended December 31, 2023, 2022 and 2021 amounted to $482 thousand, $492 thousand, and $516 thousand, respectively.  

Note 20—EARNINGS PER COMMON SHARE

The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation:

	Year ended December 31,
(Amounts in thousands)	2023		2022		2021
Numerator (Included in basic and diluted earnings per share)	$	11,843	$	14,613	$	15,465
Denominator
Weighted average common shares outstanding for:
Basic earnings per common share		7,568		7,529		7,491
Dilutive securities:
Deferred compensation		79		79		58
Diluted common shares outstanding		7,647		7,608		7,549
Basic earnings per common share	$	1.56	$	1.94	$	2.06
Diluted earnings per common share	$	1.55	$	1.92	$	2.05
The average market price used in calculating assumed number of shares	$	18.70	$	19.52	$	19.68

Note 21—SHAREHOLDERS’ EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS

The Company and Bank are subject to various federal and state regulatory requirements, including regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors. The Bank is required to maintain minimum Tier 1 capital, Common Equity Tier I (CET1) capital, total risked based capital and Tier 1 leverage ratios of 6%, 4.5%, 8% and 4%, respectively.

Regulatory capital rules adopted in July 2013 and fully phased in as of January 1, 2019, which we refer to as Basel III, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,” generally holding companies with consolidated assets of less than $3 billion (such as the Company). In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.

Based on the foregoing, as a small bank holding company, we are generally not subject to the capital requirements unless otherwise advised by the Federal Reserve; however, our Bank remains subject to the capital requirements.

125

Note 21—SHAREHOLDERS’ EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS (Continued)

The Bank exceeded the minimum regulatory capital ratios at December 31, 2023 and 2022, as set forth in the following table: 

(In thousands)	Minimum Required Amount		%			Actual Amount		%			Excess Amount		%
The Bank(1)(2):
December 31, 2023
Risk Based Capital
Tier 1	$	73,696		6.0	%	$	153,859		12.5	%	$	80,163		6.5	%
Total Capital	$	98,261		8.0	%		166,752		13.6	%		68,491		5.6	%
CET1	$	55,272		4.5	%		153,859		12.5	%		98,587		8.0	%
Tier 1 Leverage	$	72,830		4.0	%		153,859		8.5	%		81,029		4.5	%
December 31, 2022
Risk Based Capital
Tier 1	$	64,741		6.0	%	$	145,578		13.5	%	$	80,837		7.5	%
Total Capital	$	86,321		8.0	%	$	156,914		14.5	%	$	70,593		6.5	%
CET1	$	48,555		4.5	%	$	145,578		13.5	%	$	97,023		9.0	%
Tier 1 Leverage	$	67,509		4.0	%	$	145,578		8.6	%	$	78,069		4.6	%

⁽¹⁾ As a small bank holding company, the Company is generally not subject to the capital requirements unless otherwise advised by the Federal Reserve.

⁽²⁾ Ratios do not include the capital conservation buffer of 2.5%.

The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs asset quality and overall financial condition. The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.

The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina State banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain circumstances.

If the Bank is not permitted to pay cash dividends to the Company, it is unlikely that we would be able to pay cash dividends on our common stock. Moreover, holders of the Company’s common stock are entitled to receive dividends only when, and if declared by the board of directors. Although the Company has historically paid cash dividends on its common stock, the Company is not required to do so, and the board of directors could reduce or eliminate our common stock dividend in the future.

126

Note 22—PARENT COMPANY FINANCIAL INFORMATION

The balance sheets, statements of operations and cash flows for First Community Corporation (Parent Only) follow:

Condensed Balance Sheets

	At December 31,
(Dollars in thousands)	2023		2022
Assets:
Cash on deposit	$	3,590	$	3,870
Investment in bank subsidiary		140,746		128,392
Other		1,941		1,288
Total assets	$	146,277	$	133,550
Liabilities:
Junior subordinated debentures	$	14,964	$	14,964
Other		254		225
Total liabilities		15,218		15,189
Shareholders’ equity		131,059		118,361
Total liabilities and shareholders’ equity	$	146,277	$	133,550

Condensed Statements of Operations

	Year ended December 31,
(Dollars in thousands)	2023			2022			2021
Income:
Interest and dividend income	$	37		$	21		$	13
Equity in undistributed earnings of subsidiary		8,495			11,431			12,386
Dividend income from bank subsidiary		5,357			4,463			4,019
Total income		13,889			15,915			16,418
Expenses:
Interest expense		1,187			675			416
Other		1,419			974			772
Total expense		2,606			1,649			1,188
Income before taxes		11,283			14,266			15,230
Income tax benefit		(560	)		(347	)		(235	)
Net income	$	11,843		$	14,613		$	15,465

127

Note 22—PARENT COMPANY FINANCIAL INFORMATION (Continued)

Condensed Statements of Cash Flows

	Year ended December 31,
(Dollars in thousands)	2023			2022			2021
Cash flows from operating activities:
Net income	$	11,843		$	14,613		$	15,465
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed earnings of subsidiary		(8,495	)		(11,431	)		(12,386	)
Other-net		(545	)		232			145
Net cash provided by operating activities		2,803			3,414			3,224
Cash flows from investing activities:
Purchase of investments at cost		(80	)		(188	)		(87	)
Net cash provided by investing activities		(80	)		(188	)		(87	)
Cash flows from financing activities:
Dividends paid: common stock		(4,235	)		(3,913	)		(3,593	)
(Cost of) Proceeds from issuance of common stock		(28	)		28			46
Dividend Reinvestment Plan		438			388			368
Change in non-vested restricted stock		180			507			—
Restricted stock units granted		763			1,447			—
Restricted shares surrendered		(121	)		(42	)		(70	)
Deferred compensation shares		—			(1,106	)		90
Net cash used in financing activities		(3,003	)		(2,691	)		(3,159	)
Increase (decrease) in cash and cash equivalents		(280	)		535			(22	)
Cash and cash equivalents at beginning of year		3,870			3,335			3,357
Cash and cash equivalents at end of year	$	3,590		$	3,870		$	3,335

Note 23—SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.

Management has reviewed events occurring through the date the financial statements were available to be issued and no subsequent events occurred requiring accrual or disclosure.

Note 24—DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company as of December 31, 2023:

			Fair Value
(Dollars in thousands)	Notional Amount		Assets		Liabilities
Fair Value Hedges:
Interest rate contracts
Pay fixed, receive variable – loans	$	150,000	$	1,069	$	—
Total derivatives	$	150,000	$	1,069	$	—

128

Note 24—DERIVATIVES (Continued)

The above derivative is under a master netting arrangement. However, as of December 31, 2023, there were no other outstanding derivative contracts. The net fair value of the hedged item and derivative item is recorded in other assets in the statement of financial condition. There were no outstanding derivative contracts as of December 31, 2022. The following represents the carrying value of hedged items in fair value hedging relationships:

	Hedge Asset		Hedge Basis Adjustment
(Dollars in thousands)	Basis		Designated		Discounted
Fair Value Hedges:
Interest rate contracts
Commercial real estate loans	$	900	$	—	$	—
Total	$	900	$	—	$	—

During the year ended December 31, 2023, income on interest settlements totaled $1.6 million. Changes in the fair value of the hedged item of $1.1 million was offset by changes in the fair value of the swap derivative of $1.1 million. The residual was a result of hedge ineffectiveness and recorded in other income on the consolidated statement of operations. No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing. No hedges were terminated during the year ended December 31, 2023.

Note 25—REPORTABLE SEGMENTS

The Company’s reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by management. The Company has four reportable segments:

· Commercial and retail banking: The Company’s primary business is to provide deposit and lending products and services to its commercial and retail customers.

· Mortgage Banking: This segment provides mortgage origination services for loans that will be sold to investors in the secondary market and consumer mortgage loans that will be held-for-investment. In the second quarter of 2022, management made the decision to include consumer mortgage held-for-investment loans in this segment. Prior to the second quarter of 2022, consumer mortgage loans held-for-investment were included in the Commercial and Retail Banking segment. Non-interest income for loans held-for-sale and loans held-for-investment is included in Mortgage Banking income and other income, respectively, on the income statement. The Mortgage Banking financial information presented below includes consumer mortgage loans held-for-investment for all periods presented. Beginning in 2022, a provision for credit loss, a cost of funds and other operating costs have been allocated to this segment.

· Investment advisory and non-deposit: This segment provides investment advisory services and non-deposit products.

· Corporate: This segment includes the parent company financial information, including interest on parent company debt and dividend income received from First Community Bank (the “Bank”).

129

The following tables present selected financial information for the Company’s reportable business segments for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.

Year ended December 31, 2023 (Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	68,874	$	3,787	$	—	$	5,393		$	(5,357	)	$	72,697
Interest expense		21,478		1,140		—		1,187			—			23,805
Net interest income	$	47,396	$	2,647	$	—	$	4,206		$	(5,357	)	$	48,892
Provision for credit losses		677		452		—		—			—			1,129
Noninterest income		4,496		1,414		4,511		—			—			10,421
Noninterest expense		35,136		3,477		3,112		1,419			—			43,144
Net income (loss) before taxes	$	16,079	$	132	$	1,399	$	2,787		$	(5,357	)	$	15,040
Income tax expense (benefit)		3,757		—		—		(560	)		—			3,197
Net income (loss)	$	12,322	$	132	$	1,399	$	3,347		$	(5,357	)	$	11,843

Year ended December 31, 2022 (Dollars in thousands)	Commercial and Retail Banking			Mortgage Banking			Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	49,238		$	1,858		$	—	$	4,484		$	(4,463	)	$	51,117
Interest expense		2,403			96			—		675			—			3,174
Net interest income	$	46,835		$	1,762		$	—	$	3,809		$	(4,463	)	$	47,943
Provision for (release of) credit losses		(392	)		240			—		—			—			(152	)
Noninterest income		5,184			1,906			4,479		—			—			11,569
Noninterest expense		33,629			3,689			2,961		974			—			41,253
Net income before taxes	$	18,782		$	(261	)	$	1,518	$	2,835		$	(4,463	)	$	18,411
Income tax expense (benefit)		4,145			—			—		(347	)		—			3,798
Net income	$	14,637		$	(261	)	$	1,518	$	3,182		$	(4,463	)	$	14,613

Year ended December 31, 2021 (Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	46,499	$	1,008	$	—	$	4,032		$	(4,019	)	$	47,520
Interest expense		1,825		—		—		416			—			2,241
Net interest income	$	44,674	$	1,008	$	—	$	3,616		$	(4,019	)	$	45,279
Provision for credit losses		335		—		—		—			—			335
Noninterest income		5,590		4,319		3,995		—			—			13,904
Noninterest expense		31,275		4,694		2,460		772			—			39,201
Net income before taxes	$	18,654	$	633	$	1,535	$	2,844		$	(4,019	)	$	19,647
Income tax expense (benefit)		4,417		—		—		(235	)		—			4,182
Net income	$	14,237	$	633	$	1,535	$	3,079		$	(4,019	)	$	15,465

(Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate		Eliminations			Consolidated
Total Assets as of December 31, 2023	$	1,727,245	$	99,310	$	5	$	174,468	$	(173,340	)	$	1,827,688
Total Assets as of December 31, 2022	$	1,616,173	$	55,845	$	—	$	165,937	$	(165,009	)	$	1,672,946

130

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2023, in accordance with Rule 13a-15 of the Exchange Act. We applied our judgment in the process of reviewing these controls and procedures, which, by their nature, can provide only reasonable assurance regarding our control objectives. Based upon that evaluation, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures as of December 31, 2023, were effective to provide reasonable assurance regarding our control objectives.

Management’s Report on Internal Controls over Financial Reporting

Management is responsible for establishing and maintaining an effective system of internal control over financial reporting (as such term is defined in Rules 13A-15(f) and 15d-15(f) under the Exchange Act). The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the effectiveness of any system of internal control over financial reporting, including the possibility of human error and circumvention or overriding of controls. Accordingly, even an effective system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the Company’s internal control over financial reporting as of December 31, 2023. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2023, the Company maintained effective internal control over financial reporting based on those criteria.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information.

Trading Plans

During the three months ended December 31, 2023, no director or “officer” of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 

Not applicable. 

131

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after December 31, 2023 in connection with our 2024 annual meeting of shareholders. The information required by Item 10 is hereby incorporated by reference from our proxy statement for our 2024 annual meeting of shareholders to be held on May 22, 2024.

We have adopted a Code of Ethics that applies to our directors, executive officers (including our principal executive officer and principal financial officer) and employees in accordance with the Sarbanes-Oxley Corporate Responsibility Act of 2002. The Code of Ethics is available on our web site at www.firstcommunitysc.com. We will disclose any future amendments to, or waivers from, provisions of these ethics policies and standards on our website as promptly as practicable, as and to the extent required under NASDAQ Stock Market listing standards and applicable SEC rules.

Item 11. Executive Compensation.

The information required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after December 31, 2023 in connection with our 2024 annual meeting of shareholders. The information required by Item 11 is hereby incorporated by reference from our proxy statement for our 2024 annual meeting of shareholders to be held on May 22, 2024.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

There are no outstanding options as of December 31, 2023.

The additional information required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after December 31, 2023 in connection with our 2024 annual meeting of shareholders. The information required by this Item 12 is set forth under “Security Ownership of Certain Beneficial Owners and Management” and hereby incorporated by reference from our proxy statement for our 2024 annual meeting of shareholders to be held on May 22, 2024.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after December 31, 2023 in connection with our 2024 annual meeting of shareholders. The information required by Item 13 is hereby incorporated by reference from our proxy statement for our 2024 annual meeting of shareholders to be held on May 22, 2024.

Item 14. Principal Accountant Fees and Services.

The information required to be disclosed by this item will be disclosed in our definitive proxy statement to be filed no later than 120 days after December 31, 2023, in connection with our 2024 annual meeting of shareholders. The information required by Item 14 is hereby incorporated by reference from our proxy statement for our 2024 annual meeting of shareholders to be held on May 22, 2024.

132

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements

The following consolidated financial statements are located in Item 8 of this report.

· Report of Independent Registered Public Accounting Firm

· Consolidated Balance Sheets as of December 31, 2023 and 2022

· Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021

· Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021

· Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2023, 2022 and 2021

· Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021

· Notes to the Consolidated Financial Statements

(a)(2) Financial Statement Schedules

These schedules have been omitted because they are not required, are not applicable or have been included in our consolidated financial statements.

(a)(3) Exhibits

The following exhibits are required to be filed with this Report on Form 10-K by Item 601 of Regulation S-K.

133

Exhibit Index

Exhibit  No.	Description of Exhibit
2.1	Agreement and Plan of Merger, dated as of April 11, 2017, by and between First Community Corporation and Cornerstone Bancorp (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on April 12, 2017).
3.1	Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on June 27, 2011).
3.2	Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on May 23, 2019).
3.3	Amended and Restated Bylaws dated May 21, 2019 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on May 22, 2019).
4.1	Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 of the Company’s Form 10-K for the period ended December 31, 2019).
10.4	Dividend Reinvestment Plan dated July 7, 2003 (incorporated by reference to Form S-3/D filed with the SEC on July 14, 2003, File No. 333-107009, April 20, 2011, File No. 333-173612, and January 31, 2019, File No. 333-229442).**
10.5	Form of Salary Continuation Agreement dated August 2, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on August 3, 2006).**
10.6	Non-Employee Director Deferred Compensation Plan approved September 30, 2006 and Form of Deferred Compensation Agreement (incorporated by reference to Exhibits 10.1 and 10.2 to the Company’s Form 8-K filed with the SEC on October 4, 2006).
10.7	First Community Corporation Non-Employee Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the period ended June 30, 2021).
10.7	Employment Agreement by and between Michael C. Crapps and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.7 of the Company’s Form 10-K for the period ended December 31, 2015).**
10.8	Employment Agreement by and between Joseph G. Sawyer and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.8 of the Company’s Form 10-K for the period ended December 31, 2015).**
10.9	Employment Agreement by and between David K. Proctor and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.9 of the Company’s Form 10-K for the period ended December 31, 2015).**
10.10	Employment Agreement by and between Robin D. Brown and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.10 of the Company’s Form 10-K for the period ended December 31, 2015).**
10.11	Employment Agreement by and between J. Ted Nissen and First Community Corporation dated December 8, 2015 (incorporated by reference to Exhibit 10.11 of the Company’s Form 10-K for the period ended December 31, 2015).**
10.12	Employment Agreement by and between Tanya A. Butts and First Community Corporation dated April 22, 2019 (incorporated by reference to Exhibit 10.12 of the Company’s Form 10-K for the period ended December 31, 2019).**
10.13	Employment Agreement by and between Donald Shawn Jordan and First Community Corporation dated November 12, 2019 (incorporated by reference to Exhibit 10.13 of the Company’s Form 10-K for the period ended December 31, 2019).**
10.14	First Community Corporation 2011 Stock Incentive Plan and Form of Stock Option Agreement and Form of Restricted Stock Agreement (incorporated by reference to Appendix A to the Company’s Proxy Statement filed with April 7, 2011).**
10.15	Amendment No. 1 to the First Community Corporation 2011 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on April 22, 2016).**
10.16	Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on April 22, 2016).**
10.17	First Community Corporation Annual Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on December 16, 2019).**
10.18	First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form S-8 (File No. 333-257550) filed with the SEC on June 30, 2021)**
10.19	Form of Time-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on February 16, 2022)**
10.20	Form of Performance-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on February 16, 2022)**

134

Exhibit  No.	Description of Exhibit
10.21	Form of Restricted Stock Agreement for Directors under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed with the SEC on February 16, 2022)**
10.22	Form of Restricted Stock Agreement for Employees under the First Community Corporation 2021 Omnibus Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed with the SEC on February 16, 2022)**
10.23	Employment Agreement by and between Vaughan R. Dozier, Jr. and First Community Corporation dated January 1, 2024
10.24	Employment Agreement by and between Joseph A.(Drew) Painter. and First Community Corporation dated January 1, 2024
10.25	Form of Time-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**
10.26	Form of Performance-based Restricted Stock Unit Agreement under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**
10.27	Form of Restricted Stock Agreement for Directors under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**
10.28	Form of Restricted Stock Agreement for Employees under the First Community Corporation 2021 Omnibus Equity Incentive Plan*,**
21.1	Subsidiaries of the Company.*
23.1	Consent of Independent Registered Public Accounting Firm—Elliott Davis, LLC.*
24.1	Power of Attorney (contained on the signature page hereto).*
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer.*
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer.*
32	Section 1350 Certifications.*
97#	First Community Corporation Clawback Policy, effective September 19, 2023.
101	The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as December 31, 2023 and December 31, 2022; (ii) Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2023, 2022 and 2021; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021; and (vi) Notes to the Consolidated Financial Statements.*
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)*

The Exhibits listed above will be furnished to any security holder free of charge upon written request to the Corporate Secretary, First Community Corporation, 5455 Sunset Blvd., Lexington, South Carolina 29072.

* Filed herewith.

** Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report on Form
10-K.

(b) See listing of Exhibits above for an indication of exhibits filed herewith.

(c) Not applicable.

135

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 21, 2024	FIRST COMMUNITY CORPORATION
	By:	/s/ Michael C. Crapps
		Michael C. Crapps
		President and Chief Executive Officer
		(Principal Executive Officer)

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael C. Crapps, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Thomas C. Brown	Director	March 21, 2024
Thomas C. Brown
/s/ Chimin J. Chao	Director and Chairman of the Board	March 21, 2024
Chimin J. Chao
/s/ Michael C. Crapps	Director, President, & Chief Executive Officer	March 21, 2024
Michael C. Crapps	(Principal Executive Officer)
/s/ W. James Kitchens, Jr.	Director and Vice Chairman of the Board	March 21, 2024
W. James Kitchens, Jr.
/s/ Ray E. Jones	Director	March 21, 2024
Ray E. Jones
/s/ Jan H. Hollar	Director	March 21, 2024
Jan H. Hollar
/s/ Mickey Layden	Director	March 21, 2024
Mickey Layden
/s/ E. Leland Reynolds	Director	March 21, 2024
E. Leland Reynolds
/s/ Alexander Snipe, Jr.	Director	March 21, 2024
Alexander Snipe, Jr.
/s/ Jane Sosebee	Director	March 21, 2024
Jane Sosebee
/s/ Roderick M. Todd, Jr.	Director	March 21, 2024
Roderick M. Todd, Jr.
/s/ D. Shawn Jordan	Chief Financial Officer	March 21, 2024
D. Shawn Jordan	(Principal Financial and Accounting Officer)

136

EX-10.23

EXHIBIT 10.23

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) effective as of January 1, 2024 is made by and between First Community Bank (the “Employer”), a wholly-owned subsidiary of First Community Corporation, a South Carolina corporation (the “Company”), and Vaughan R. Dozier, Jr., an individual resident of South Carolina (the “Executive”).

WHEREAS, the Employer, the Company and the Executive wish to and enter into this Agreement under the terms and conditions set forth herein. As of the date hereof, the Employer employs the Executive as its Executive Vice President, Chief Commercial and Retail Banking Officer – South Region. The Employer recognizes that the Executive’s contribution to the growth and success of the Employer is substantial. The Employer desires to provide for the continued employment of the Executive and to make certain changes in the Executive’s employment arrangements which the Employer has determined will reinforce and encourage the continued dedication of the Executive to the Employer and will promote the best interests of the Employer and the Company’s shareholders. The Executive is willing to terminate his interests and rights under any existing employment and change in control agreement with the Employer and to continue to serve the Employer on the terms and conditions herein provided.

Now therefore, in consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.             Employment. The Employer shall continue to employ the Executive, and the Executive shall continue to serve the Employer, as Executive Vice President, Chief Commercial and Retail Banking Officer – South Region of the Employer upon the terms and conditions set forth herein. The Executive shall have such authority and responsibilities consistent with his position as are set forth in the Employer’s Bylaws or assigned by the Employer’s board of directors (the “Board”) from time to time. The Executive shall devote his full business time, attention, skill and efforts to the performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with the Employer’s policy. The Executive may devote reasonable periods to service as a director or advisor to other organizations, to charitable and community activities, and to managing his personal investments, provided that such activities do not materially interfere with the performance of his duties hereunder and are not in conflict or competitive with, or adverse to, the interests of the Employer. The Executive agrees to conduct himself in accordance with the code of ethics for officers and employees adopted by the Employer, as amended from time to time.

2.             Term. Unless earlier terminated as provided herein, the Executive’s employment under this Agreement shall commence on the date hereof and be for a term of three years (the “Term”). At the end of each day of the Term, the Term shall be extended for an additional day so that the remaining term shall continue to be three years (unless earlier terminated as provided in Section 4); provided that the Executive or the Employer may at any time, by written notice, fix the Term to a finite term of three years commencing with the date of the notice, in which case the Agreement shall continue through its remaining term but shall not be extended absent written agreement by both the Employer and the Executive.

1

3.             Compensation and Benefits.

(a)            The Employer shall pay the Executive a rate of annual base salary of $240,000.00 which shall be paid in accordance with the Employer’s standard payroll procedures, which shall be no less frequently than monthly. The Employer shall have the right to increase this salary from time to time in accordance with the salary payment practices of the Employer. The Board shall review the Executive’s salary at least annually and may increase the Executive’s base salary if it determines in its sole discretion that an increase is appropriate.

(b)            The Executive shall participate in the Employer’s long-term equity incentive program and be eligible for the grant of stock options, restricted stock, and other awards thereunder or under any similar plan adopted by the Company. Any options or similar awards shall be issued to Executive at an exercise price of not less than the stock’s current fair market value as of the date of grant, and the number of shares subject to such grant shall be set forth on the date of grant. The Executive shall continue to be eligible for and participate in a Salary Continuation Agreement as previously entered into and as amended from time to time.

(c)            The Executive shall participate in all retirement, health, welfare insurance and other benefit plans or programs of the Employer now or hereafter applicable generally to employees of the Employer or to a class of employees that includes senior executives of the Employer. The Employer shall require and pay the cost of an annual physical for the Executive, and the Executive hereby authorizes the examining physician and other relevant persons and entities to release the results of that annual physical to the Employer (and the Executive will execute one or more separate release authorizations if and as requested by the Employer).

(d)            The Employer shall reimburse the Executive for reasonable travel and other expenses, including cell phone expenses related to the Executive’s duties, which are incurred and accounted for in accordance with the normal practices of the Employer. The Employer shall reimburse the Executive for such expenses within sixty days of Executive’s notice to Employer of such expense.

(e)            The Employer shall provide the Executive with annual paid time off, which includes sick leave, in accordance with the Employer’s benefit policy as in effect from time to time, and which shall be taken in accordance with any banking rules or regulations governing paid time off leave. Except as allowed in accordance with the Employer’s benefit policy, paid time off days may not be carried forward into following calendar years, and any payments made by the Employer to the Executive as compensation for paid time off days shall be paid in accordance with the Employer’s standard payroll procedures, which shall be no less frequently than monthly.

2

(f)            The Executive shall be eligible to receive cash bonuses based on the Executive’s achievement of specified goals and criteria. These goals and criteria may include both annual and long-term goals, may provide for vesting over a specified time period, and shall be established annually by the Human Resources Committee of the Board of Directors. Unless otherwise set forth in a bonus plan that complies with Section 409A, any bonus payment made pursuant to this Section 3(f) shall be made in a lump sum not later than March 15 of the year after the end of the year for which the bonus was earned by the Executive.

4.             Termination.

(a)            The Executive’s employment under this Agreement may be terminated prior to the end of the Term only as provided in this Section 4.

(b)            The Executive’s employment under this Agreement will be terminated upon the death of the Executive. In this event, the Employer shall pay Executive’s estate any sums due him as base salary and/or reimbursement of expenses through the end of the month during which death occurred in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly. The Employer shall also pay the Executive’s estate any bonus earned through the date of death. Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(f). Any bonus that is earned in the year of death will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of death, as applicable, and prorated through the date of the Executive’s death.

(c)            The Employer may terminate the Executive’s Employment on account of the Disability of the Executive under this Section 4(c). During the period of any Disability leading up to the Executive’s Termination of Employment under this provision, the Employer shall continue to pay the Executive his full base salary at the rate then in effect and all perquisites and other benefits (other than any bonus) in accordance with the Employer’s normal payroll schedule (and in no event less frequently than monthly) until the Executive becomes eligible for benefits under any long-term disability plan or insurance program maintained by the Employer, provided that the amount of any such payments to the Executive shall be reduced by the sum of the amounts, if any, payable to the Executive for the same period under any other disability benefit or pension plan covering the Executive. Furthermore, the Employer shall pay the Executive any bonus earned through the date of Disability. Any bonus for previous years, or the year in which the Executive’s employment is terminated in accordance with this Section 4(c), which was not yet paid will be paid pursuant to the terms as set forth in Section 3(f). Any bonus that is earned in the year of termination on account of Disability will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of termination, as applicable, and prorated through the date of termination of the Executive’s employment on account of Disability. Nothing herein shall prohibit the Employer from hiring an acting chief commercial and retail banking officer – south region during the period of any disability of the Executive.

3

(d)           The Employer may terminate the Executive’s Employment for Cause upon delivery of a Notice of Termination to the Executive. If the Executive’s employment is terminated for Cause under this provision, the Executive shall receive only any sums due to him as base salary and/or reimbursement of expenses through the date of termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly.

(e)            Except for a termination within Section 4(g), the Employer may terminate the Executive’s employment without Cause upon delivery of a Notice of Termination to the Executive. If the Executive’s employment is terminated without Cause under this provision, subject to Section 4(h) and also to the possibility of a six-month delay described in Section 20, on the sixtieth (60th) day after the date of termination, the Employer will pay to the Executive severance compensation in an amount equal to twice the amount of the Executive’s monthly base salary as in effect immediately prior to his termination of employment, and thereafter on the first day of the month for the next 10 months, the Employer shall pay to the Executive severance compensation in an amount equal to 100% of his monthly base salary as in effect immediately prior to his termination of employment. Employer shall also pay the Executive any bonus earned through the date of termination (including any amounts awarded for previous years but which were not yet vested). Any bonus for previous years, or the year in which the Executive’s employment is terminated in accordance with this Section (e), which was not yet paid will be paid pursuant to the terms as set forth in Section 3(f). Any bonus that is earned in the year of the termination of the Executive’s employment without Cause will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of termination, as applicable, and prorated through the date of the Executive’s termination of employment without Cause.

(f)            Except for a termination within Section 4(g), the Executive may terminate his employment at any time by delivering a Notice of Termination at least 14 days prior to such termination, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement. If the Executive terminates his employment under this provision, the Executive shall receive any sums due to him as base salary and/or reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly. In addition, if the Executive terminates his employment under this Section 4(f) and except for a termination within Section 4(g), and if (and only if) such termination constitutes a Retirement, then the Employer shall pay the Executive any bonus earned through the date of Retirement, as follows: (i) any bonus for previous years which was not yet paid will be paid pursuant to the terms set forth in Section 3(f), and (ii) any bonus that is earned in the year of Retirement will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of Retirement, as applicable, and prorated through the date of the Executive’s Retirement. For purposes of this Agreement, “Retirement” means a termination of employment by the Executive under this Section 4(f) that occurs upon or after both (a) the Executive’s attainment of age 65 and (b) when Executive’s years of service to the Company and its subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least ten (10).

4

(g)           If Executive’s employment is terminated by the Employer without Cause or by the Executive with Good Reason upon or during the two (2) years following a Change in Control (a “Qualifying Termination”), the Executive shall be entitled to the following:

(i) the Employer shall pay to the Executive any sums due to the Executive as base salary and/or reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly;

(ii) the Employer shall pay the Executive upon the 15th day following the date of the Qualifying Termination: (1) subject to the provisions of Section 4(h), cash compensation in a single lump sum payment in an amount equal to his then current annual base salary multiplied by two¹ (the “Base Severance”), plus (2) cash compensation in a single lump sum payment in an amount equal to the greater of (x) any cash bonus for the year of the Qualifying Termination earned through the date of the Qualifying Termination, or (y) the average annual cash bonus earned by the Executive for service during the prior three years (or, if applicable, such lesser number of such years during which the Executive was employed by the Employer for the entire year) preceding the year in which the Change in Control occurs, prorated through the date of the Qualifying Termination (based on the number of days the Executive was employed by the Employer during the year in which the Qualifying Termination occurs) (in the case of each of clause (x) and (y) minus the amount(s), if any, previously paid by the Employer to the Executive under the Employer’s annual cash bonus plan for the year in which the Qualifying Termination occurs in respect of service by the Executive during the year in which the Qualifying Termination occurs), and, in the case of each of clause (1) and (2), subject to Section 4(j) below;

(iii) in addition, Executive may continue participation, in accordance with the terms of the applicable benefits plans, in the Company’s group health plan pursuant to plan continuation rules under the Consolidated Omnibus Budget Reconciliation Act (including regulations related thereto, “COBRA”), subject to any amendments to COBRA after the date of this Agreement. In accordance with COBRA (and subject to any amendments to COBRA after the date of this Agreement), assuming Executive is covered under the Company’s group health plan as of his date of Qualifying Termination, Executive will be entitled to elect COBRA continuation coverage for the legally required COBRA period. If Executive elects COBRA coverage for group health coverage in connection with a Qualifying Termination, then, he will be obligated to pay only the portion of the full COBRA cost of the coverage equal to an active employee’s share of premiums for coverage for the respective plan year and the Company’s share of such premiums (the “Employer-Provided COBRA Premium”) shall be treated as taxable income to Executive.

¹ Robin, I believe most of your executive officers have at least 2x. Consider if this should be 1x or 2x.

5

In addition, on the date that is sixty (60) days after a Qualifying Termination, the Company shall pay to the Executive a single lump sum payment equal to six times the amount of the initial monthly Employer-Provided COBRA Premium (the “Additional Severance”).

Notwithstanding the above, the Employer’s obligations hereunder with respect to the foregoing benefits provided in this subsection (iii) shall be eliminated if and when the Executive is offered Affordable Care Act compliant group health coverage from a subsequent employer.

In addition, upon a Qualifying Termination, to the extent that “portable” life insurance coverage is offered under the Company’s life insurance programs and after a Qualifying Termination, the Executive continues to pay for “portable” life insurance coverage that was provided by the Employer immediately prior to the Qualifying Termination, the Employer shall reimburse the life insurance premiums (with respect to each such life insurance premium payment, such reimbursement shall be limited to the amount of the life insurance premium that the Employer would have paid or otherwise provided for the Executive had the Executive remained employed by the Employer) paid by the Executive with respect to such life insurance coverage with respect to the two-year period ending immediately after such Qualifying Termination.

(iv) the restrictions on any outstanding incentive awards (including restricted stock) granted to the Executive under the Company’s or the Bank’s long-term equity incentive program or any other equity incentive plan or arrangement shall lapse and such awards shall become 100% vested, all outstanding stock options and stock appreciation rights granted to the Executive shall become immediately exercisable and shall become 100% vested, and outstanding performance units granted to the Executive shall become 100% vested, in each case unless otherwise provided in the applicable award agreement and subject to the provisions of Section 4(j) below; and

(v) the Employer shall pay the Executive any unpaid bonus for years ending before the year in which the Qualifying Termination occurs pursuant to the terms set forth in Section 3(f).

(h)           With the exceptions of the express provisions of this Section 4, and the express terms of any benefit plan under which the Executive is a participant, it is agreed that, upon termination of the Executive’s Employment, the Employer shall have no obligation to the Executive for, and the Executive waives and relinquishes, any further compensation or benefits (exclusive of COBRA benefits). Unless otherwise stated in this Section 4, the effect of termination on any outstanding incentive awards, stock options, stock appreciation rights, performance units, or other incentives shall be governed by the terms of the applicable benefit or incentive plan and/or the agreements governing such incentives.

Following the termination of the Executive’s employment pursuant to Section 4(e) or Section 4(g), if (and only if) the Executive shall execute, and not timely revoke during any revocation period provided pursuant to such Release (such that the Release shall have become effective), a release prepared by the Employer (a “Release”) substantially in the form attached hereto as Exhibit A, within 60 days of the Executive’s termination of employment (the “60-Day Release Period”), then the Employer shall pay the severance described in the second sentence of Section 4(e), or the Base Severance described in Section 4(g)(ii) and the Additional Severance described in Section 4(g)(iii), as applicable. With respect to the Base Severance described in Section 4(g)(ii), in most instances, such payment will be made as soon as practicable after the Release is effective. However, if the 60-Day Release Period spans two calendar years, such Base Severance payment will be made as soon as possible in the subsequent taxable year.

6

(i)           The Employer is aware that upon the occurrence of a Change in Control, the Board, the board of directors of the Company, or a shareholder of the Company may then cause or attempt to cause the Employer to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Employer to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny the Executive the benefits to which the Executive is entitled under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that the Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of the Executive’s rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to the Executive hereunder, nor be bound to negotiate any settlement of the Executive’s rights hereunder under threat of incurring such costs. Accordingly, if at any time after a Change in Control, it should appear to the Executive that the Employer is acting or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable or for any other reason, or that the Employer has purported to terminate the Executive’s employment for Cause or is in the course of doing so in either case contrary to this Agreement, or in the event that the Employer or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or recover (other than as required by law) from the Executive the benefits provided or intended to be provided to the Executive hereunder, and the Executive has acted in good faith to perform the Executive’s obligations under this Agreement, the Employer irrevocably authorizes the Executive from time to time to retain counsel of the Executive’s choice at the expense of the Employer to represent the Executive in connection with the protection and enforcement of the Executive’s rights hereunder, including without limitation representation in connection with termination of the Executive’s employment contrary to this Agreement or with the initiation or defense of any litigation or other legal action, whether by or against the Executive or the Employer or any director, officer, shareholder or other person affiliated with the Employer, in any jurisdiction. The reasonable fees and expenses of counsel selected from time to time by the Executive as hereinabove provided shall be paid or reimbursed to the Executive by the Employer on a regular, periodic basis upon presentation by the Executive of a statement or statements prepared by such counsel. If other officers or key executives of the Employer have retained counsel in connection with the protection and enforcement of their rights under similar agreements between them and the Employer, and, unless in the Executive’s sole judgment use of common counsel could be prejudicial to the Executive or would not be likely to reduce the fees and expenses chargeable hereunder to the Employer, the Executive agrees to use the Executive’s best efforts to agree with such other officers or executives to retain common counsel.

(j)            The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for the Executive’s services to the Employer and shall not constitute “excess parachute payments” within the meaning of Section 280G of the Code. As used herein, the “Code” means the Internal Revenue Code of 1986, as amended, and any regulations thereunder. In the event that Tax Counsel (as defined below) determines that the payments provided for herein constitute “excess parachute payments,” then the payments or benefits payable hereunder or otherwise that constitute “parachute payments” within the meaning of Section 280G (“Covered Payments”) shall be reduced to an amount the value of which is $1.00 less than the maximum amount that could be paid to the Executive without the Covered Payments being treated as “excess parachute payments” under Section 280G. The Covered Payments shall be reduced by the Company pursuant to the foregoing sentence in a manner that Tax Counsel determines maximizes the Executive’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where Tax Counsel determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.

7

All determinations required to be made under this Section 4(j), and the assumptions to be utilized in arriving at such determination, shall be made by tax counsel (which may be a law firm, compensation consultant or an accounting firm) appointed by the Company (the “Tax Counsel”), which shall provide its determinations and any supporting calculations to the Company within 10 business days of having made such determination. The Tax Counsel shall consult with any compensation consultants, accounting firm and/or other legal counsel selected by the Company in determining which payments to, or for the benefit of, the Executive are to be deemed to be ‘parachute payments’ within the meaning of Section 280G(b)(2) of the Code. In connection with making determinations under this Section 4(j), Tax Counsel shall take into account, to the extent applicable, the value of any reasonable compensation for services to be rendered by the Executive before or after the applicable change in ownership or control, including the non-competition provisions, if any, applicable to the Executive under Section 9 and any other non-competition provisions that may apply to the Executive, and the Company shall cooperate in the valuation of any such services, including any non-competition provisions

(k)           If the Executive is suspended or temporarily prohibited from participating, in any way or to any degree, in the conduct of the Employer’s affairs by (1) a notice served under section 8(e) or (g) of Federal Deposit Insurance Act (12 U.S.C. 1818 (e) or (g)) or (2) as a result of any other regulatory or legal action directed at the Executive by any regulatory or law enforcement agency having jurisdiction over the Executive (each of the foregoing referred to herein as a “Suspension Action”), and if this Agreement is not terminated, the Employer’s obligations under this Agreement shall be suspended as of the earlier of the effective date of such Suspension Action or the date on which the Executive was provided notice of the Suspension Action, unless stayed by appropriate proceedings. If the charges underlying the Suspension Action are dismissed, the Bank shall:

(i) pay on the first day of the first month following such dismissal of charges (or as provided elsewhere in this Agreement) the Executive all of the compensation withheld while the obligations under this Agreement were suspended; and

(ii) reinstate any such obligations which were suspended.

Notwithstanding anything to the contrary herein, if the Executive is removed or permanently prohibited from participating, in any way or to any degree, in the conduct of the Employer’s affairs by (1) an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)) or (2) any other legal or law enforcement action (each of the foregoing referred to herein as a “Removal Action”), all obligations of the Employer under this Agreement shall terminate as of the effective date of the Removal Action, but any vested rights of the parties hereto shall not be affected.

8

Notwithstanding anything to the contrary herein, if the Employer is in default (as defined in section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but this paragraph (4)(k) shall not affect any vested rights of the parties hereto.

Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.

Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to applicable withholdings and deductions.

5.            Ownership of Work Product. The Employer shall own all Work Product arising during the course of the Executive’s employment (prior, present or future). For purposes hereof, “Work Product” shall mean all intellectual property rights, including all Trade Secrets, U.S. and international copyrights, patentable inventions, and other intellectual property rights in any programming, documentation, technology or other work product that relates to the Employer, its business or its customers and that the Executive conceives, develops, or delivers to the Employer at any time during his employment, during or outside normal working hours, in or away from the facilities of the Employer, and whether or not requested by the Employer. If the Work Product contains any materials, programming or intellectual property rights that the Executive conceived or developed prior to, and independent of, the Executive’s work for the Employer, the Executive agrees to point out the pre-existing items to the Employer and the Executive grants the Employer a worldwide, unrestricted, royalty-free right, including the right to sublicense such items. The Executive agrees to take such actions and execute such further acknowledgments and assignments as the Employer may reasonably request to give effect to this provision.

6.           Protection of Trade Secrets. The Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, the Executive agrees not to use or disclose any Trade Secrets of the Employer during or after his employment. “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list, that: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The federal Defend Trade Secrets Act (“DTSA”) states:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

9

Accordingly, the Executive shall have the right to disclose in confidence Trade Secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The Executive shall also have the right to disclose Trade Secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with the DTSA or create liability for disclosures of Trade Secrets that are expressly allowed by the DTSA.

7.            Protection of Other Confidential Information. In addition, the Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, not to use or disclose any Confidential Business Information of the Employer during his employment and for a period of 24 months following termination of the Executive’s employment. “Confidential Business Information” shall mean any internal, non-public information (other than Trade Secrets already addressed above) concerning the Employer’s financial position and results of operations (including revenues, assets, net income, etc.); annual and long-range business plans; product or service plans; marketing plans and methods; training, educational and administrative manuals; customer and supplier information and purchase histories; and employee lists. The provisions of Sections 6 and 7 shall also apply to protect Trade Secrets and Confidential Business Information of third parties provided to the Employer under an obligation of secrecy. Notwithstanding anything herein to the contrary, nothing in this Agreement shall be construed as (A) prohibiting or impeding (or enforced by the Employer in a manner that would prohibit or impede) the Executive from (i) testifying in any lawsuit, or (ii) reporting conduct to, providing truthful information to, or participating in any investigation or proceeding conducted by any federal or state government agency or self-regulatory organization in accordance with the Securities Exchange Act of 1934 (the “Exchange Act”) or the Sarbanes-Oxley Act of 2002, or any other provisions of state or federal law or regulation, or (B) require notification to or prior approval by the Employer of any activity described in clauses (i) or (ii).

8.            Return of Materials. The Executive shall surrender to the Employer, promptly upon its request and in any event upon termination of the Executive’s employment, all media, documents, notebooks, computer programs, handbooks, data files, models, samples, price lists, drawings, customer lists, prospect data, or other material of any nature whatsoever (in tangible or electronic form) in the Executive’s possession or control, including all copies thereof, relating to the Employer, its business, or its customers. Upon the request of the Employer, Executive shall certify in writing compliance with the foregoing requirement.

9.            Restrictive Covenants.

(a)            No Solicitation of Customers. During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (A) solicit, divert, or appropriate to or for a Competing Business, or (B) attempt to solicit, divert, or appropriate to or for a Competing Business, any person or entity that is or was a customer of the Employer or any of its Affiliates at any time during the 12 months prior to the date of termination and with whom the Executive has had material contact. The parties agree that solicitation of such a customer to acquire stock in a Competing Business during this time period would be a violation of this Section 9(a).

10

(b)            No Recruitment of Personnel. During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (A) solicit, divert, or hire away, or (B) attempt to solicit, divert, or hire away, to any Competing Business located in the Territory, any employee of or consultant to the Employer or any of its Affiliates, regardless of whether the employee or consultant is full-time or temporary, the employment or engagement is pursuant to written agreement, or the employment is for a determined period or is at will.

(c)            Non-Competition Agreement. During the Executive’s employment with the Employer and for a period of 12 months following any termination (as opposed to expiration) of this Agreement, the Executive shall not (without the prior written consent of the Employer) compete with the Employer or any of its Affiliates by, directly or indirectly, forming, serving as an organizer, director or officer of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company therefor if such depository institution or holding company has, or upon formation will have, one or more offices or branches located in the Territory. This restriction does not apply following a Change in Control.

(d)            Notwithstanding the foregoing, the Executive may serve as an officer of or consultant to a depository institution or holding company therefor even though such institution operates one or more offices or branches in the Territory, if the Executive’s employment does not directly involve, in whole or in part, the depository financial institution’s or holding company’s operations in the Territory.

10.           Independent Provisions. The provisions in each of the above Sections 9(a), 9(b), and 9(c) are independent, and the unenforceability of any one provision shall not affect the enforceability of any other provision.

11.           Successors; Binding Agreement. The rights and obligations of this Agreement shall bind and inure to the benefit of the surviving corporation in any merger or consolidation in which the Employer is a party, or any assignee of all or substantially all of the Employer’s business and properties. The Executive’s rights and obligations under this Agreement may not be assigned by him, except that his right to receive accrued but unpaid compensation, unreimbursed expenses and other rights, if any, provided under this Agreement which survive termination of this Agreement shall pass after death to the personal representatives of his estate.

11

12.           Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other; provided, however, that all notices to the Employer shall be directed to the attention of the Employer with a copy to the Secretary of the Employer. All notices and communications shall be deemed to have been received on the date of delivery thereof.

13.           Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of South Carolina without giving effect to the conflict of laws principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in State of South Carolina.

14.           Non-Waiver. Failure of the Employer to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be considered to be a waiver of such provisions or rights, or in any way affect the validity of this Agreement.

15.           Enforcement. The Executive agrees that in the event of any breach or threatened breach by the Executive of any covenant contained in Section 6, 7, 9(a), 9(b), or 9(c) hereof, the resulting injuries to the Employer would be difficult or impossible to estimate accurately, even though irreparable injury or damages would certainly result. Accordingly, an award of legal damages, if without other relief, would be inadequate to protect the Employer. The Executive, therefore, agrees that in the event of any such breach, the Employer shall be entitled to obtain from a court of competent jurisdiction an injunction to restrain the breach or anticipated breach of any such covenant, and to obtain any other available legal, equitable, statutory, or contractual relief. Should the Employer have cause to seek such relief, no bond shall be required from the Employer, and the Executive shall pay all attorney’s fees and court costs which the Employer may incur to the extent the Employer prevails in its enforcement action.

16.           Saving Clause. If any term, provision or condition of this Agreement is determined to be invalid, illegal or unenforceable, the remaining terms, provisions and conditions of this Agreement remain in full force, if the essential terms, provisions and conditions of this Agreement for each party remain valid, binding and enforceable. It is the intention of the parties that, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void, or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced. The Executive and the Employer hereby agree that they will negotiate in good faith to amend this Agreement from time to time to modify the terms of Sections 9(a), 9(b) or 9(c), the definition of the term “Territory,” and the definition of the term “Business,” to reflect changes in the Employer’s business and affairs so that the scope of the limitations placed on the Executive’s activities by Section 9 accomplishes the parties’ intent in relation to the then current facts and circumstances. Any such amendment shall be effective only when completed in writing and signed by the Executive and the Employer. The parties agree that all of the terms, provisions and conditions contained in Section 4 and Section 9 constitute essential terms, provisions and conditions of this Agreement. The parties further agree that no part of Section 4 is independent of any part of Section 9, and that no part of Section 9 is independent of any part of Section 4. If a material part of Section 9 is held by a court of competent jurisdiction to be invalid, illegal or unenforceable and is not revised by the court to be enforceable and enforced, then all of Section 4 shall automatically become void and unenforceable. If it is unclear or disputed whether the part of Section 9 held invalid, illegal or unenforceable (and not so revised by the court) is material, the parties shall negotiate in good faith to reach agreement on materiality or immateriality, and if they are unable to agree within a reasonable period of time, the part in question shall be deemed material. If the parties agree the part in question is not material, they shall negotiate in good faith to agree upon a modification necessary to make whole any party adversely affected by the holding of invalidly, illegality or unenforceability, and if they are not able to agree upon such a modification within a reasonable period of time, a material part of Section 9 will be deemed to have been held by a court of competent jurisdiction to be invalid, illegal or unenforceable. Each party agrees to maintain the status quo ante, to the extent necessary to avoid gaining any advantage over the other party or causing the other party to suffer a disadvantage, for so long as it is obligated to negotiate in good faith but the parties have not reached agreement. A violation of the covenant in the preceding sentence shall result in a material part of Section 4 being deemed to be invalid, illegal or unenforceable.

12

17.           Certain Definitions.

(a)           “Affiliate” shall mean any business entity controlled by, controlling or under common control with the Employer.

(b)           “Business” shall mean the operation of a depository financial institution, including, without limitation, the solicitation and acceptance of deposits of money and commercial paper, the solicitation and funding of loans and the provision of other banking services, or any other related business engaged in by the Employer or any of its Affiliates to a material extent as of the date of termination.

(c)           “Cause” shall consist of any of (A) the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, causes or is reasonably likely to cause material harm to the Employer (including harm to its business reputation), (B) the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud, (C) the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured 10 days following written notice to the Executive of such breach, (D) the receipt of any form of notice, written or otherwise, that any regulatory agency having jurisdiction over the Employer intends to institute any form of formal or informal (e.g., a memorandum of understanding which relates to the Executive’s performance) regulatory action against the Executive, the Employer or the Company (provided that the Board determines in good faith, with the Executive abstaining from participating in the consideration of and vote on the matter, that the subject matter of such action involves acts or omissions by or under the supervision of the Executive or that termination of the Executive would materially advance the Employer’s compliance with the purpose of the action or would materially assist the Employer in avoiding or reducing the restrictions or adverse effects to the Employer related to the regulatory action); (E) the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly conduct of the Employer’s business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board’s good faith and reasonable judgment, with the Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Employer’s best interest, that, if susceptible of cure remains uncured 10 days following written notice to the Executive of such specific inappropriate behavior; or (F) the failure of the Executive to devote his full business time and attention to his employment as provided under this Agreement that, if susceptible of cure, remains uncured 30 days following written notice to the Executive of such failure. In order for the Board to make a determination that termination shall be for Cause, the Board must provide the Executive with an opportunity to meet with the Board in person.

13

(d)           “Change in Control” shall mean the occurrence during the Term of any of the following events, unless such event is a result of a Non-Control Transaction or is not a 409A CIC:

(i) any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities;

(ii) any plan or proposal for the dissolution or liquidation of the Company is adopted by the shareholders of the Company;

(iii) individuals who, as of the date of this Agreement (the “Effective Date”), constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(iv) all or substantially all of the assets of the Company are sold, transferred or distributed; or

(v) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company (a “Transaction”), in each case, with respect to which either:

(1) the shareholders of the Company immediately prior to such Transaction do not, immediately after the Transaction, own more than 50% of the combined voting power of the Company or the entity surviving such Transaction (or, if the Company or the entity surviving such Transaction is then a subsidiary, the ultimate parent thereof) in substantially the same respective proportions as such shareholders’ ownership of the voting power of the Company immediately before such Transaction, or

(2) the individuals who comprise the Board immediately prior thereto do not constitute at least a majority of the board of directors of the Company, the entity surviving such transaction or, if the Company or the entity surviving such Transaction is then a subsidiary, the ultimate parent thereof.

14

Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which both (x) the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns (directly or indirectly) all or substantially all of the assets of the Company immediately following such transaction or series of transactions, and (y) the individuals who comprise the Board immediately prior to such transaction or series of transactions constitute at least a majority of the board of directors of the entity which owns (directly or indirectly) all or substantially all of the assets of the Company immediately following such transaction or series of transactions (a “Non-Control Transaction”). In addition, to the extent that any compensation constitutes or would constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, a Change in Control shall not constitute a settlement or distribution event with respect to such compensation, or an event that otherwise changes the timing of settlement or distribution of such compensation, unless the Change in Control also constitutes an event described in Section 409A(a)(2)(v) of the Code and the regulations thereto; provided that this sentence shall have no bearing on whether the right to any such compensation vests pursuant to the terms of this Agreement or the applicable award agreement.

(e)          “Competing Business” shall mean any business that, in whole or in part, is substantially engaged in the Business or a business that is substantially similar to (and in competition with) the Business.

(f)           “Disability” shall have the meaning set forth in Treasury Regulation § 1.409A-3(i)(4).

(g)          “Good Reason” shall mean that one or more of the following has occurred without the Executive’s written consent:

(i) a material negative change in the nature or scope of the Executive’s responsibilities, duties or authority as set forth in Section 1;

(ii) a material reduction in the Executive’s base salary, excluding any reduction up to 10% that is applied across the senior management group;

(iii) Executive’s required re-location to a worksite location which is more than fifty (50) miles from Executive’s then current principal worksite without Executive’s consent (such consent not to be unreasonably withheld), or

(iv) the Employer’s material breach of this Agreement (excluding any delay of payment required or permitted under Code Section 409A);

provided that, in any such case, the Executive provides written notice to the Employer that the event giving rise to such claim of Good Reason has occurred within thirty (30) days after the occurrence of such event, and such Good Reason remains uncured thirty (30) days after the Executive has provided such written notice; provided further that any resignation of the Executive’s employment for Good Reason occurs no later than thirty (30) days following the expiration of such cure period.

(h)          “Notice of Termination” shall mean a written notice of termination from the Employer or the Executive which specifies an effective date of termination, indicates the specific termination provision in this Agreement relied upon, and, in the case of a termination for Cause, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

(i)          “Terminate,” “terminated,” “termination,” or “Termination of Employment” shall mean separation from service as defined by Regulation 1.409A-1(h).

(j)           “Territory” shall mean a radius of 15 miles from (i) the main office of the Employer or (ii) any branch or loan production office of the Employer.

15

18.           Compliance with Regulatory Restrictions. Notwithstanding anything to the contrary herein, and in addition to any restrictions stated in Section 4 hereof, any compensation or other benefits paid to the Executive shall be limited to the extent required by any federal or state regulatory agency having authority over the Bank. The Executive agrees that compliance by the Bank with such regulatory restrictions, even to the extent that compensation or other benefits paid to the Executive are limited, shall not be a breach of this Agreement by the Bank.

19.           Compliance with Dodd–Frank Wall Street Reform and Consumer Protection Act. Notwithstanding anything to the contrary herein, any incentive payments to the Executive shall be subject to the Dodd–Frank Wall Street Reform and Consumer Protection Act and any regulations promulgated, and any applicable stock exchange listing requirements adopted, thereunder (collectively, the “DF Act”), including, but not limited to, clawbacks for such incentive payments as may be required by the DF Act. The Executive agrees to such amendments, agreements, or waivers that are required by the DF Act or requested by the Employer to comply with the terms of the DF Act. Executive agrees to comply with the terms of any incentive-based compensation “claw back” policy, as in effect from time to time, adopted or that may be adopted by the Employer.

20.           Compliance with Internal Revenue Code Section 409A. All payments that may be made and benefits that may be provided pursuant to this Agreement are intended to qualify for an exclusion from Section 409A of the Code and any related regulations or other pronouncements thereunder and, to the extent not excluded, to meet the requirements of Section 409A of the Code. Any payments made under Sections 3 and 4 of this Agreement which are paid on or before the last day of the applicable period for the short-term deferral exclusion under Treasury Regulation § 1.409A-1(b)(4) are intended to be excluded under such short-term deferral exclusion. Any remaining payments under Sections 3 and 4 are intended to qualify for the exclusion for separation pay plans under Treasury Regulation § 1.409A-1(b)(9). To the extent permissible, each payment made under Sections 3 and 4 shall be treated as a “separate payment”, as defined in Treasury Regulation § 1.409A-2(b)(2), for purposes of Code Section 409A. Further, notwithstanding anything to the contrary, all severance payments payable under the provisions of Section 4 shall be paid to the Executive no later than the last day of the second calendar year following the calendar year in which occurs the date of Executive’s termination of employment. None of the payments under this Agreement are intended to result in the inclusion in Executive’s federal gross income on account of a failure under Section 409A(a)(1) of the Code. The parties intend to administer and interpret this Agreement to carry out such intentions. However, Company does not represent, warrant or guarantee that any payments that may be made pursuant to this Agreement will not result in inclusion in Executive’s gross income, or any penalty, pursuant to Section 409A(a)(1) of the Code or any similar state statute or regulation. Notwithstanding any other provision of this Agreement, to the extent that the right to any payment (including the provision of benefits) hereunder provides for the “deferral of compensation” within the meaning of Section 409A(d)(1) of the Code, the payment shall be paid (or provided) in accordance with the following:

16

(a)            If the Executive is a “Specified Employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date of the Executive’s termination (the “Separation Date”), and if an exemption from the six month delay requirement of Code Section 409A(a)(2)(B)(i) is not available, then no such payment that is payable on account of the Executive’s termination shall be made or commence during the period beginning on the Separation Date and ending on the date that is six months following the Separation Date or, if earlier, on the date of the Executive’s death. The amount of any payment that would otherwise be paid to the Executive during this period shall instead be paid to the Executive on the first day of the first calendar month following the end of the period.

(b)           Payments with respect to reimbursements of expenses or benefits or provision of fringe or other in-kind benefits shall be made on or before the last day of the calendar year following the calendar year in which the relevant expense or benefit is incurred. The amount of expenses or benefits eligible for reimbursement, payment or provision during a calendar year shall not affect the expenses or benefits eligible for reimbursement, payment or provision in any other calendar year.

21.           Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. Any waiver or modification of any term of this Agreement shall be effective only if it is set forth in writing and signed by all parties hereto.

22.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[Signatures appear on following page]

17

IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its officers thereunto duly authorized, and the Executive has signed and sealed this Agreement, effective as of the date first above written.

	FIRST COMMUNITY CORPORATION FIRST COMMUNITY BANK
ATTEST:
By:	By:
Name:		Name: Michael C. Crapps
		Title: Chief Executive Officer
		EXECUTIVE
		Vaughan Dozier

18

Exhibit A

Form of Release of Claims

SEVERANCE AGREEMENT AND RELEASE

This Severance Agreement and Release (the “Agreement”) is made between Vaughan Dozier, an individual resident of South Carolina (“Employee”), First Community Bank and First Community Corporation (collectively, the “Bank”).

As used in this Agreement, the term “Employee” shall include the employee’s heirs, executors, administrators, and assigns.

On January 1, 2024, the Bank and Employee entered into an Employment Agreement (the “Employment Agreement”) governing the relationship between the parties. Section 4(e) provides that the Bank may terminate the Employment Agreement without Cause (as defined in the Employment Agreement). Section 4 of the Employment Agreement also provides that Employee shall be entitled to severance pay if the Employment Agreement is terminated without Cause (as defined in the Employment Agreement), on the condition that Employee enter into this release or a substantially similar release.

Employee desires to receive severance pay and the Bank is willing to provide severance pay on the condition the Employee enter into this Agreement.

Now, in consideration for the mutual promises and covenants set forth herein, and in full and complete settlement of all matters between Employee and the Bank, the parties agree as follows:

1.            Termination Date: The Employee agrees that his employment with the Bank terminates as of ________________ (the “Termination Date”).

2.             Severance Payments: Subsequent to his Termination Date, the Bank shall pay Employee severance pay as noted in Paragraph 4(e) of the Employment Agreement (the “Severance Payment”), less applicable deductions and withholdings.

3.             Legal Obligations

The parties acknowledge that pursuant to Section 4(h) of the Employment Agreement, they agreed that at the time of termination and as a condition of payment of severance, they would enter into this release acknowledging any remaining obligations and discharging each other from any other claims or obligations arising out of or in connection with Employee’s employment by the Bank, including the circumstances of such termination.

Employee acknowledges that the Bank has no prior legal obligations to make the payments described in Section 2 above which are exchanged for the promises of Employee set forth in this Agreement. It is specifically agreed that the payments described in Section 2 are valuable and sufficient consideration for each of the promises of Employee set forth in this Agreement and are payments in addition to anything of value to which Employee is otherwise entitled.

A-1

4.            Waiver and Release:

a)            Employee unconditionally releases and discharges the Bank, entities affiliated with the Bank, and the respective current and former officers, directors, shareholders, employees, and agents of them (collectively, the “Bank Released Parties”) from any and all causes of action, suits, damages, claims, proceedings, and demands that the Employee has ever had, or may now have, against any of the Bank Released Parties, whether asserted or unasserted, whether known or unknown, concerning any matter occurring up to and including the date of the signing of this Agreement; provided that Employee is not releasing or discharging (i) any right to enforce Section 4 of the Employment Agreement, or (ii) any exculpatory or indemnification (or advancement) provisions set forth in the articles of incorporation or bylaws of the Bank.

b)            Employee acknowledges that he is waiving and releasing, to the full extent permitted by law, all claims against the Bank Released Parties, including (but not limited to) all claims arising out of, or related in any way to, his employment with the Bank or the termination of that employment, including (but not limited to) any and all breach of contract claims, tort claims, claims of wrongful discharge, claims for breach of an express or implied employment contract, defamation claims, claims under Title VII of the Civil Rights Act of 1964 as amended, which prohibits discrimination in employment based on race, color, national origin, religion or sex, the Family and Medical Leave Act, which provides for unpaid leave for family or medical reasons, the Equal Pay Act, which prohibits paying men and women unequal pay for equal work, the Age Discrimination in Employment Act of 1967, which prohibits age discrimination in employment, the Americans with Disabilities Act, which prohibits discrimination based on disability, the Rehabilitation Act of 1973, the South Carolina Human Affairs Law, any and all other applicable local, state and federal non-discrimination statutes, the Employee Retirement Income Security Act, the Fair Labor Standards Act, the South Carolina Payment of Wages Law and all other statutes relating to employment, the common law of the State of South Carolina, or any other state, and any and all claims for attorneys’ fees.

c)            This Waiver and Release provision ((a) through (c) of this paragraph) shall be construed to release all claims to the full extent allowed by law. If any term of this paragraph shall be declared unenforceable by a court or other tribunal of competent jurisdiction, it shall not adversely affect the enforceability of the remainder of this paragraph.

d)            The Bank unconditionally releases and discharges Employee from any and all causes of action, suits, damages, claims, proceedings, and demands that the Bank has ever had, or may now have, against Employee, whether asserted or unasserted, whether known or unknown, concerning any matter occurring up to and including the date of the signing of this Agreement with the exception of any claims for breach of trust, or any act which constitutes a felony or crime involving dishonesty, theft, or fraud.

A-2

5.            Restrictive Covenants and Other Obligations

The parties agree that Section 5 – “Ownership of Work Product,” Section 6 – “Protection of Trade Secret,” Section 7 – “Protection of Confidential Information,” Section 8 – “Return of Materials,” Section 9 – “Restrictive Covenants,” Section 10 – “Independent Provisions,” Section 15 – “Enforcement,” and Section 16 – “Savings Clause,” of the Employment Agreement shall remain in full force and effect and that Employee will perform his obligations under those sections and those sections of the Employment Agreement are incorporated by reference as if set forth fully herein. In the event Employee breaches any obligation under this Section 5, the Bank’s obligation to make severance payments to Employee shall terminate immediately and the Bank shall have no further obligations to Employee.

6.            Duty of Loyalty/Nondisparagement

The parties shall not (except as required by law) communicate to anyone, whether by word or deed, whether directly or through any intermediary, and whether expressly or by suggestion or innuendo, any statement, whether characterized as one of fact or of opinion, that is intended to cause or that reasonably would be expected to cause any person to whom it is communicated to have a lowered opinion of the other party.

7.            Confidentiality Of The Terms Of This Agreement

Employee agrees not to publicize or disclose the contents of this Agreement, including the amount of the monetary payments, except (i) to his immediate family; (ii) to his attorney(s), accountant(s), and/or tax preparer(s); (iii) as may be required by law; or (iv) as necessary to enforce the terms of this Agreement. Employee further agrees that he will inform anyone to whom the terms of this Agreement are disclosed of the confidentiality requirements contained herein. Notwithstanding the foregoing, the parties agree that where business needs dictate, Employee may disclose to a third party that he has entered into an agreement with the Bank, which agreement contains restrictive covenants including noncompetition and nondisclosure provisions, one or more of which prohibit him from performing the requested service.

Employee recognizes that the disclosure of any information regarding this Agreement by him, his family, his attorneys, his accountants or financial advisors, could cause the Bank irreparable injury and damage, the amount of which would be difficult to determine. In the event the Bank establishes a violation of this paragraph of the Agreement by Employee, his attorneys, immediate family, accountants, or financial advisors, or others to whom Employee disclosed information in violation of the terms of this Agreement, the Bank shall be entitled to injunctive relief without the need for posting a bond and shall also be entitled to recover from Employee the amount of attorneys’ fees and costs incurred by the Bank in enforcing the provisions of this paragraph.

8.            Continued Cooperation

Employee agrees that he will cooperate fully with the Bank in the future regarding any matters in which he was involved during the course of his employment, and in the defense or prosecution of any claims or actions now in existence or which may be brought or threatened in the future against or on behalf of the Bank. Employee’s cooperation in connection with such matters, actions and claims shall include, without limitation, being available to meet with the Bank’s officials regarding personnel or commercial matters in which he was involved; to prepare for any proceeding (including, without limitation, depositions, consultation, discovery or trial); to provide affidavits; to assist with any audit, inspection, proceeding or other inquiry; and to act as a witness in connection with any litigation or other legal proceeding affecting the Bank. Employee further agrees that should he be contacted (directly or indirectly) by any person or entity adverse to the Bank, he shall within 48 hours notify the then-current Chairman of the Board of the Bank. Employee shall be reimbursed for any reasonable costs and expenses incurred in connection with providing such cooperation.

A-3

9.            Entire Agreement; Modification of Agreement

Except as otherwise expressly noted herein, this Agreement constitutes the entire understanding of the parties and supersedes all prior discussions, understandings, and agreements of every nature between them relating to the matters addressed herein. Accordingly, no representation, promise, or inducement not included or incorporated by reference in this Agreement shall be binding upon the parties. Employee affirms that the only consideration for the signing of this Agreement are the terms set forth above and that no other promises or assurances of any kind have been made to him by the Bank or any other entity or person as an inducement for him to sign this Agreement. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties or their respective heirs, legal representatives, successors, and assigns.

10.           Partial Invalidity

The parties agree that the provisions of this Agreement and any paragraphs, subsections, sentences, or provisions thereof shall be deemed severable and that the invalidity or unenforceability of any paragraph, subsection, sentence, or provision shall not affect the validity or enforceability of the remainder of the Agreement.

11.           Waiver

The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other subsequent breach of this Agreement.

12.          Successors and Assigns

This Agreement shall inure to and be binding upon the Bank and Employee, their respective heirs, legal representatives, successors, and assigns.

13.           Governing Law

This Agreement shall be construed in accordance with the laws of the state of South Carolina and any applicable federal laws.

14.           Headings

The headings or titles of sections and subsections of this Agreement are for convenience and reference only and do not constitute a part of this Agreement.

A-4

15.            Notice

Any notice or communication required or permitted under this Agreement shall be made in writing and sent by certified mail, return receipt requested, addressed as follows:

If to Employee:

[INSERT]

If to the Bank:

[INSERT]

16.            Representations: Employee acknowledges that:

a)            He has read this Agreement and understands its meaning and effect.

b)            He has knowingly and voluntarily entered into this Agreement of his own free will.

c)            By signing this Agreement, Employee has waived, to the full extent permitted by law, all claims against the Bank based on any actions taken by the Bank up to the date of the signing of this Agreement, and the Bank may plead this Agreement as a complete defense to any claim the Employee may assert.

d)            He would not otherwise be entitled to the consideration described in this Agreement, and that the Bank is providing such consideration in return for Employee’s agreement to be bound by the terms of this Agreement.

e)            He has been advised to consult with an attorney before signing this Agreement.

f)             He has been given up to 21 days to consider the terms of this Agreement.

g)            He has seven days, after Employee has signed the Agreement and it has been received by the Bank, to revoke it by notifying the Chairman of the Board of his intent to revoke acceptance. For such revocation to be effective, the notice of revocation must be received no later than 5:00 p.m. on the seventh day after the signed Agreement is received by the Bank. This Agreement shall not become effective or enforceable until the revocation period has expired.

h)            He is not waiving or releasing any rights or claims that may arise after the date the Employee signs this Agreement.

[Signatures appear on following page]

A-5

As to Employee:

Date Vaughan Dozier

As to First Community Bank and First Community Corporation:

Date [Title]

[SEVERANCE AGREEMENT AND RELEASE: SIGNATURE PAGE]

A-6

EX-10.24

EXHIBIT 10.24

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) effective as of January 1, 2024 is made by and between First Community Bank (the “Employer”), a wholly-owned subsidiary of First Community Corporation, a South Carolina corporation (the “Company”), and Joseph A. Painter, an individual resident of South Carolina (the “Executive”).

WHEREAS, the Employer, the Company and the Executive wish to and enter into this Agreement under the terms and conditions set forth herein. As of the date hereof, the Employer employs the Executive as its Executive Vice President, Chief Commercial and Retail Banking Officer – North Region. The Employer recognizes that the Executive’s contribution to the growth and success of the Employer is substantial. The Employer desires to provide for the continued employment of the Executive and to make certain changes in the Executive’s employment arrangements which the Employer has determined will reinforce and encourage the continued dedication of the Executive to the Employer and will promote the best interests of the Employer and the Company’s shareholders. The Executive is willing to terminate his interests and rights under any existing employment and change in control agreement with the Employer and to continue to serve the Employer on the terms and conditions herein provided.

Now therefore, in consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.            Employment. The Employer shall continue to employ the Executive, and the Executive shall continue to serve the Employer, as Executive Vice President, Chief Commercial and Retail Banking Officer – North Region of the Employer upon the terms and conditions set forth herein. The Executive shall have such authority and responsibilities consistent with his position as are set forth in the Employer’s Bylaws or assigned by the Employer’s board of directors (the “Board”) from time to time. The Executive shall devote his full business time, attention, skill and efforts to the performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with the Employer’s policy. The Executive may devote reasonable periods to service as a director or advisor to other organizations, to charitable and community activities, and to managing his personal investments, provided that such activities do not materially interfere with the performance of his duties hereunder and are not in conflict or competitive with, or adverse to, the interests of the Employer. The Executive agrees to conduct himself in accordance with the code of ethics for officers and employees adopted by the Employer, as amended from time to time.

2.            Term. Unless earlier terminated as provided herein, the Executive’s employment under this Agreement shall commence on the date hereof and be for a term of three years (the “Term”). At the end of each day of the Term, the Term shall be extended for an additional day so that the remaining term shall continue to be three years (unless earlier terminated as provided in Section 4); provided that the Executive or the Employer may at any time, by written notice, fix the Term to a finite term of three years commencing with the date of the notice, in which case the Agreement shall continue through its remaining term but shall not be extended absent written agreement by both the Employer and the Executive.

1

3.            Compensation and Benefits.

(a)           The Employer shall pay the Executive a rate of annual base salary of $240,000.00 which shall be paid in accordance with the Employer’s standard payroll procedures, which shall be no less frequently than monthly. The Employer shall have the right to increase this salary from time to time in accordance with the salary payment practices of the Employer. The Board shall review the Executive’s salary at least annually and may increase the Executive’s base salary if it determines in its sole discretion that an increase is appropriate.

(b)          The Executive shall participate in the Employer’s long-term equity incentive program and be eligible for the grant of stock options, restricted stock, and other awards thereunder or under any similar plan adopted by the Company. Any options or similar awards shall be issued to Executive at an exercise price of not less than the stock’s current fair market value as of the date of grant, and the number of shares subject to such grant shall be set forth on the date of grant. The Executive shall continue to be eligible for and participate in a Salary Continuation Agreement as previously entered into and as amended from time to time.

(c)          The Executive shall participate in all retirement, health, welfare insurance and other benefit plans or programs of the Employer now or hereafter applicable generally to employees of the Employer or to a class of employees that includes senior executives of the Employer. The Employer shall require and pay the cost of an annual physical for the Executive, and the Executive hereby authorizes the examining physician and other relevant persons and entities to release the results of that annual physical to the Employer (and the Executive will execute one or more separate release authorizations if and as requested by the Employer).

(d)          The Employer shall reimburse the Executive for reasonable travel and other expenses, including cell phone expenses related to the Executive’s duties, which are incurred and accounted for in accordance with the normal practices of the Employer. The Employer shall reimburse the Executive for such expenses within sixty days of Executive’s notice to Employer of such expense.

(e)          The Employer shall provide the Executive with annual paid time off, which includes sick leave, in accordance with the Employer’s benefit policy as in effect from time to time, and which shall be taken in accordance with any banking rules or regulations governing paid time off leave. Except as allowed in accordance with the Employer’s benefit policy, paid time off days may not be carried forward into following calendar years, and any payments made by the Employer to the Executive as compensation for paid time off days shall be paid in accordance with the Employer’s standard payroll procedures, which shall be no less frequently than monthly.

2

(f)           The Executive shall be eligible to receive cash bonuses based on the Executive’s achievement of specified goals and criteria. These goals and criteria may include both annual and long-term goals, may provide for vesting over a specified time period, and shall be established annually by the Human Resources Committee of the Board of Directors. Unless otherwise set forth in a bonus plan that complies with Section 409A, any bonus payment made pursuant to this Section 3(f) shall be made in a lump sum not later than March 15 of the year after the end of the year for which the bonus was earned by the Executive.

4.            Termination.

(a)           The Executive’s employment under this Agreement may be terminated prior to the end of the Term only as provided in this Section 4.

(b)           The Executive’s employment under this Agreement will be terminated upon the death of the Executive. In this event, the Employer shall pay Executive’s estate any sums due him as base salary and/or reimbursement of expenses through the end of the month during which death occurred in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly. The Employer shall also pay the Executive’s estate any bonus earned through the date of death. Any bonus for previous years which was not yet paid will be paid pursuant to the terms as set forth in Section 3(f). Any bonus that is earned in the year of death will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of death, as applicable, and prorated through the date of the Executive’s death.

(c)           The Employer may terminate the Executive’s Employment on account of the Disability of the Executive under this Section 4(c). During the period of any Disability leading up to the Executive’s Termination of Employment under this provision, the Employer shall continue to pay the Executive his full base salary at the rate then in effect and all perquisites and other benefits (other than any bonus) in accordance with the Employer’s normal payroll schedule (and in no event less frequently than monthly) until the Executive becomes eligible for benefits under any long-term disability plan or insurance program maintained by the Employer, provided that the amount of any such payments to the Executive shall be reduced by the sum of the amounts, if any, payable to the Executive for the same period under any other disability benefit or pension plan covering the Executive. Furthermore, the Employer shall pay the Executive any bonus earned through the date of Disability. Any bonus for previous years, or the year in which the Executive’s employment is terminated in accordance with this Section 4(c), which was not yet paid will be paid pursuant to the terms as set forth in Section 3(f). Any bonus that is earned in the year of termination on account of Disability will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of termination, as applicable, and prorated through the date of termination of the Executive’s employment on account of Disability. Nothing herein shall prohibit the Employer from hiring an acting chief commercial and retail banking officer – north region during the period of any disability of the Executive.

3

(d)           The Employer may terminate the Executive’s Employment for Cause upon delivery of a Notice of Termination to the Executive. If the Executive’s employment is terminated for Cause under this provision, the Executive shall receive only any sums due to him as base salary and/or reimbursement of expenses through the date of termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly.

(e)           Except for a termination within Section 4(g), the Employer may terminate the Executive’s employment without Cause upon delivery of a Notice of Termination to the Executive. If the Executive’s employment is terminated without Cause under this provision, subject to Section 4(h) and also to the possibility of a six-month delay described in Section 20, on the sixtieth (60th) day after the date of termination, the Employer will pay to the Executive severance compensation in an amount equal to twice the amount of the Executive’s monthly base salary as in effect immediately prior to his termination of employment, and thereafter on the first day of the month for the next 10 months, the Employer shall pay to the Executive severance compensation in an amount equal to 100% of his monthly base salary as in effect immediately prior to his termination of employment. Employer shall also pay the Executive any bonus earned through the date of termination (including any amounts awarded for previous years but which were not yet vested). Any bonus for previous years, or the year in which the Executive’s employment is terminated in accordance with this Section (e), which was not yet paid will be paid pursuant to the terms as set forth in Section 3(f). Any bonus that is earned in the year of the termination of the Executive’s employment without Cause will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of termination, as applicable, and prorated through the date of the Executive’s termination of employment without Cause.

(f)           Except for a termination within Section 4(g), the Executive may terminate his employment at any time by delivering a Notice of Termination at least 14 days prior to such termination, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement. If the Executive terminates his employment under this provision, the Executive shall receive any sums due to him as base salary and/or reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly. In addition, if the Executive terminates his employment under this Section 4(f) and except for a termination within Section 4(g), and if (and only if) such termination constitutes a Retirement, then the Employer shall pay the Executive any bonus earned through the date of Retirement, as follows: (i) any bonus for previous years which was not yet paid will be paid pursuant to the terms set forth in Section 3(f), and (ii) any bonus that is earned in the year of Retirement will be paid pursuant to the terms set forth in Section 3(f); provided that to the extent that the bonus is performance-based, the amount of the bonus (if any) will be calculated by the Company taking into account the performance of the Company for the entire year, and/or the performance of the Executive through the date of Retirement, as applicable, and prorated through the date of the Executive’s Retirement. For purposes of this Agreement, “Retirement” means a termination of employment by the Executive under this Section 4(f) that occurs upon or after both (a) the Executive’s attainment of age 65 and (b) when Executive’s years of service to the Company and its subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least ten (10).

4

(g)           If Executive’s employment is terminated by the Employer without Cause or by the Executive with Good Reason upon or during the two (2) years following a Change in Control (a “Qualifying Termination”), the Executive shall be entitled to the following:

(i) the Employer shall pay to the Executive any sums due to the Executive as base salary and/or reimbursement of expenses through the date of such termination, which shall be paid in accordance with the Employer’s normal payroll practices, which shall mean no less frequently than monthly;

(ii) the Employer shall pay the Executive upon the 15^th day following the date of the Qualifying Termination: (1) subject to the provisions of Section 4(h), cash compensation in a single lump sum payment in an amount equal to his then current annual base salary multiplied by two (the “Base Severance”), plus (2) cash compensation in a single lump sum payment in an amount equal to the greater of (x) any cash bonus for the year of the Qualifying Termination earned through the date of the Qualifying Termination, or (y) the average annual cash bonus earned by the Executive for service during the prior three years (or, if applicable, such lesser number of such years during which the Executive was employed by the Employer for the entire year) preceding the year in which the Change in Control occurs, prorated through the date of the Qualifying Termination (based on the number of days the Executive was employed by the Employer during the year in which the Qualifying Termination occurs) (in the case of each of clause (x) and (y) minus the amount(s), if any, previously paid by the Employer to the Executive under the Employer’s annual cash bonus plan for the year in which the Qualifying Termination occurs in respect of service by the Executive during the year in which the Qualifying Termination occurs), and, in the case of each of clause (1) and (2), subject to Section 4(j) below;

5

(iii) in addition, Executive may continue participation, in accordance with the terms of the applicable benefits plans, in the Company’s group health plan pursuant to plan continuation rules under the Consolidated Omnibus Budget Reconciliation Act (including regulations related thereto, “COBRA”), subject to any amendments to COBRA after the date of this Agreement. In accordance with COBRA (and subject to any amendments to COBRA after the date of this Agreement), assuming Executive is covered under the Company’s group health plan as of his date of Qualifying Termination, Executive will be entitled to elect COBRA continuation coverage for the legally required COBRA period. If Executive elects COBRA coverage for group health coverage in connection with a Qualifying Termination, then, he will be obligated to pay only the portion of the full COBRA cost of the coverage equal to an active employee’s share of premiums for coverage for the respective plan year and the Company’s share of such premiums (the “Employer-Provided COBRA Premium”) shall be treated as taxable income to Executive.

In addition, on the date that is sixty (60) days after a Qualifying Termination, the Company shall pay to the Executive a single lump sum payment equal to six times the amount of the initial monthly Employer-Provided COBRA Premium (the “Additional Severance”).

Notwithstanding the above, the Employer’s obligations hereunder with respect to the foregoing benefits provided in this subsection (iii) shall be eliminated if and when the Executive is offered Affordable Care Act compliant group health coverage from a subsequent employer.

In addition, upon a Qualifying Termination, to the extent that “portable” life insurance coverage is offered under the Company’s life insurance programs and after a Qualifying Termination, the Executive continues to pay for “portable” life insurance coverage that was provided by the Employer immediately prior to the Qualifying Termination, the Employer shall reimburse the life insurance premiums (with respect to each such life insurance premium payment, such reimbursement shall be limited to the amount of the life insurance premium that the Employer would have paid or otherwise provided for the Executive had the Executive remained employed by the Employer) paid by the Executive with respect to such life insurance coverage with respect to the two-year period ending immediately after such Qualifying Termination.

6

(iv) the restrictions on any outstanding incentive awards (including restricted stock) granted to the Executive under the Company’s or the Bank’s long-term equity incentive program or any other equity incentive plan or arrangement shall lapse and such awards shall become 100% vested, all outstanding stock options and stock appreciation rights granted to the Executive shall become immediately exercisable and shall become 100% vested, and outstanding performance units granted to the Executive shall become 100% vested, in each case unless otherwise provided in the applicable award agreement and subject to the provisions of Section 4(j) below; and

(v) the Employer shall pay the Executive any unpaid bonus for years ending before the year in which the Qualifying Termination occurs pursuant to the terms set forth in Section 3(f).

(h)          With the exceptions of the express provisions of this Section 4, and the express terms of any benefit plan under which the Executive is a participant, it is agreed that, upon termination of the Executive’s Employment, the Employer shall have no obligation to the Executive for, and the Executive waives and relinquishes, any further compensation or benefits (exclusive of COBRA benefits). Unless otherwise stated in this Section 4, the effect of termination on any outstanding incentive awards, stock options, stock appreciation rights, performance units, or other incentives shall be governed by the terms of the applicable benefit or incentive plan and/or the agreements governing such incentives.

Following the termination of the Executive’s employment pursuant to Section 4(e) or Section 4(g), if (and only if) the Executive shall execute, and not timely revoke during any revocation period provided pursuant to such Release (such that the Release shall have become effective), a release prepared by the Employer (a “Release”) substantially in the form attached hereto as Exhibit A, within 60 days of the Executive’s termination of employment (the “60-Day Release Period”), then the Employer shall pay the severance described in the second sentence of Section 4(e), or the Base Severance described in Section 4(g)(ii) and the Additional Severance described in Section 4(g)(iii), as applicable. With respect to the Base Severance described in Section 4(g)(ii), in most instances, such payment will be made as soon as practicable after the Release is effective. However, if the 60-Day Release Period spans two calendar years, such Base Severance payment will be made as soon as possible in the subsequent taxable year.

7

(i)           The Employer is aware that upon the occurrence of a Change in Control, the Board, the board of directors of the Company, or a shareholder of the Company may then cause or attempt to cause the Employer to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Employer to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny the Executive the benefits to which the Executive is entitled under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that the Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of the Executive’s rights under this Agreement by litigation or other legal action because such costs would substantially detract from the benefits intended to be extended to the Executive hereunder, nor be bound to negotiate any settlement of the Executive’s rights hereunder under threat of incurring such costs. Accordingly, if at any time after a Change in Control, it should appear to the Executive that the Employer is acting or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable or for any other reason, or that the Employer has purported to terminate the Executive’s employment for Cause or is in the course of doing so in either case contrary to this Agreement, or in the event that the Employer or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or recover (other than as required by law) from the Executive the benefits provided or intended to be provided to the Executive hereunder, and the Executive has acted in good faith to perform the Executive’s obligations under this Agreement, the Employer irrevocably authorizes the Executive from time to time to retain counsel of the Executive’s choice at the expense of the Employer to represent the Executive in connection with the protection and enforcement of the Executive’s rights hereunder, including without limitation representation in connection with termination of the Executive’s employment contrary to this Agreement or with the initiation or defense of any litigation or other legal action, whether by or against the Executive or the Employer or any director, officer, shareholder or other person affiliated with the Employer, in any jurisdiction. The reasonable fees and expenses of counsel selected from time to time by the Executive as hereinabove provided shall be paid or reimbursed to the Executive by the Employer on a regular, periodic basis upon presentation by the Executive of a statement or statements prepared by such counsel. If other officers or key executives of the Employer have retained counsel in connection with the protection and enforcement of their rights under similar agreements between them and the Employer, and, unless in the Executive’s sole judgment use of common counsel could be prejudicial to the Executive or would not be likely to reduce the fees and expenses chargeable hereunder to the Employer, the Executive agrees to use the Executive’s best efforts to agree with such other officers or executives to retain common counsel.

(j)           The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for the Executive’s services to the Employer and shall not constitute “excess parachute payments” within the meaning of Section 280G of the Code. As used herein, the “Code” means the Internal Revenue Code of 1986, as amended, and any regulations thereunder. In the event that Tax Counsel (as defined below) determines that the payments provided for herein constitute “excess parachute payments,” then the payments or benefits payable hereunder or otherwise that constitute “parachute payments” within the meaning of Section 280G (“Covered Payments”) shall be reduced to an amount the value of which is $1.00 less than the maximum amount that could be paid to the Executive without the Covered Payments being treated as “excess parachute payments” under Section 280G. The Covered Payments shall be reduced by the Company pursuant to the foregoing sentence in a manner that Tax Counsel determines maximizes the Executive’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where Tax Counsel determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.

8

All determinations required to be made under this Section 4(j), and the assumptions to be utilized in arriving at such determination, shall be made by tax counsel (which may be a law firm, compensation consultant or an accounting firm) appointed by the Company (the “Tax Counsel”), which shall provide its determinations and any supporting calculations to the Company within 10 business days of having made such determination. The Tax Counsel shall consult with any compensation consultants, accounting firm and/or other legal counsel selected by the Company in determining which payments to, or for the benefit of, the Executive are to be deemed to be ‘parachute payments’ within the meaning of Section 280G(b)(2) of the Code. In connection with making determinations under this Section 4(j), Tax Counsel shall take into account, to the extent applicable, the value of any reasonable compensation for services to be rendered by the Executive before or after the applicable change in ownership or control, including the non-competition provisions, if any, applicable to the Executive under Section 9 and any other non-competition provisions that may apply to the Executive, and the Company shall cooperate in the valuation of any such services, including any non-competition provisions

(k)           If the Executive is suspended or temporarily prohibited from participating, in any way or to any degree, in the conduct of the Employer’s affairs by (1) a notice served under section 8(e) or (g) of Federal Deposit Insurance Act (12 U.S.C. 1818 (e) or (g)) or (2) as a result of any other regulatory or legal action directed at the Executive by any regulatory or law enforcement agency having jurisdiction over the Executive (each of the foregoing referred to herein as a “Suspension Action”), and if this Agreement is not terminated, the Employer’s obligations under this Agreement shall be suspended as of the earlier of the effective date of such Suspension Action or the date on which the Executive was provided notice of the Suspension Action, unless stayed by appropriate proceedings. If the charges underlying the Suspension Action are dismissed, the Bank shall:

(i) pay on the first day of the first month following such dismissal of charges (or as provided elsewhere in this Agreement) the Executive all of the compensation withheld while the obligations under this Agreement were suspended; and

(ii) reinstate any such obligations which were suspended.

Notwithstanding anything to the contrary herein, if the Executive is removed or permanently prohibited from participating, in any way or to any degree, in the conduct of the Employer’s affairs by (1) an order issued under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(4) or (g)(1)) or (2) any other legal or law enforcement action (each of the foregoing referred to herein as a “Removal Action”), all obligations of the Employer under this Agreement shall terminate as of the effective date of the Removal Action, but any vested rights of the parties hereto shall not be affected.

Notwithstanding anything to the contrary herein, if the Employer is in default (as defined in section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement shall terminate as of the date of default, but this paragraph (4)(k) shall not affect any vested rights of the parties hereto.

9

Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder.

Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to applicable withholdings and deductions.

5.            Ownership of Work Product. The Employer shall own all Work Product arising during the course of the Executive’s employment (prior, present or future). For purposes hereof, “Work Product” shall mean all intellectual property rights, including all Trade Secrets, U.S. and international copyrights, patentable inventions, and other intellectual property rights in any programming, documentation, technology or other work product that relates to the Employer, its business or its customers and that the Executive conceives, develops, or delivers to the Employer at any time during his employment, during or outside normal working hours, in or away from the facilities of the Employer, and whether or not requested by the Employer. If the Work Product contains any materials, programming or intellectual property rights that the Executive conceived or developed prior to, and independent of, the Executive’s work for the Employer, the Executive agrees to point out the pre-existing items to the Employer and the Executive grants the Employer a worldwide, unrestricted, royalty-free right, including the right to sublicense such items. The Executive agrees to take such actions and execute such further acknowledgments and assignments as the Employer may reasonably request to give effect to this provision.

6.            Protection of Trade Secrets. The Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, the Executive agrees not to use or disclose any Trade Secrets of the Employer during or after his employment. “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list, that: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The federal Defend Trade Secrets Act (“DTSA”) states:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

10

Accordingly, the Executive shall have the right to disclose in confidence Trade Secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The Executive shall also have the right to disclose Trade Secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with the DTSA or create liability for disclosures of Trade Secrets that are expressly allowed by the DTSA.

7.            Protection of Other Confidential Information. In addition, the Executive agrees to maintain in strict confidence and, except as necessary to perform his duties for the Employer, not to use or disclose any Confidential Business Information of the Employer during his employment and for a period of 24 months following termination of the Executive’s employment. “Confidential Business Information” shall mean any internal, non-public information (other than Trade Secrets already addressed above) concerning the Employer’s financial position and results of operations (including revenues, assets, net income, etc.); annual and long-range business plans; product or service plans; marketing plans and methods; training, educational and administrative manuals; customer and supplier information and purchase histories; and employee lists. The provisions of Sections 6 and 7 shall also apply to protect Trade Secrets and Confidential Business Information of third parties provided to the Employer under an obligation of secrecy. Notwithstanding anything herein to the contrary, nothing in this Agreement shall be construed as (A) prohibiting or impeding (or enforced by the Employer in a manner that would prohibit or impede) the Executive from (i) testifying in any lawsuit, or (ii) reporting conduct to, providing truthful information to, or participating in any investigation or proceeding conducted by any federal or state government agency or self-regulatory organization in accordance with the Securities Exchange Act of 1934 (the “Exchange Act”) or the Sarbanes-Oxley Act of 2002, or any other provisions of state or federal law or regulation, or (B) require notification to or prior approval by the Employer of any activity described in clauses (i) or (ii).

8.            Return of Materials. The Executive shall surrender to the Employer, promptly upon its request and in any event upon termination of the Executive’s employment, all media, documents, notebooks, computer programs, handbooks, data files, models, samples, price lists, drawings, customer lists, prospect data, or other material of any nature whatsoever (in tangible or electronic form) in the Executive’s possession or control, including all copies thereof, relating to the Employer, its business, or its customers. Upon the request of the Employer, Executive shall certify in writing compliance with the foregoing requirement.

9.            Restrictive Covenants.

(a)           No Solicitation of Customers. During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not (except on behalf of or with the prior written consent of the Employer), either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (A) solicit, divert, or appropriate to or for a Competing Business, or (B) attempt to solicit, divert, or appropriate to or for a Competing Business, any person or entity that is or was a customer of the Employer or any of its Affiliates at any time during the 12 months prior to the date of termination and with whom the Executive has had material contact. The parties agree that solicitation of such a customer to acquire stock in a Competing Business during this time period would be a violation of this Section 9(a).

11

(b)           No Recruitment of Personnel. During the Executive’s employment with the Employer and for a period of 12 months thereafter, the Executive shall not, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, (A) solicit, divert, or hire away, or (B) attempt to solicit, divert, or hire away, to any Competing Business located in the Territory, any employee of or consultant to the Employer or any of its Affiliates, regardless of whether the employee or consultant is full-time or temporary, the employment or engagement is pursuant to written agreement, or the employment is for a determined period or is at will.

(c)           Non-Competition Agreement. During the Executive’s employment with the Employer and for a period of 12 months following any termination (as opposed to expiration) of this Agreement, the Executive shall not (without the prior written consent of the Employer) compete with the Employer or any of its Affiliates by, directly or indirectly, forming, serving as an organizer, director or officer of, or consultant to, or acquiring or maintaining more than a 1% passive investment in, a depository financial institution or holding company therefor if such depository institution or holding company has, or upon formation will have, one or more offices or branches located in the Territory. This restriction does not apply following a Change in Control.

(d)           Notwithstanding the foregoing, the Executive may serve as an officer of or consultant to a depository institution or holding company therefor even though such institution operates one or more offices or branches in the Territory, if the Executive’s employment does not directly involve, in whole or in part, the depository financial institution’s or holding company’s operations in the Territory.

10.          Independent Provisions. The provisions in each of the above Sections 9(a), 9(b), and 9(c) are independent, and the unenforceability of any one provision shall not affect the enforceability of any other provision.

11.          Successors; Binding Agreement. The rights and obligations of this Agreement shall bind and inure to the benefit of the surviving corporation in any merger or consolidation in which the Employer is a party, or any assignee of all or substantially all of the Employer’s business and properties. The Executive’s rights and obligations under this Agreement may not be assigned by him, except that his right to receive accrued but unpaid compensation, unreimbursed expenses and other rights, if any, provided under this Agreement which survive termination of this Agreement shall pass after death to the personal representatives of his estate.

12

12.           Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other; provided, however, that all notices to the Employer shall be directed to the attention of the Employer with a copy to the Secretary of the Employer. All notices and communications shall be deemed to have been received on the date of delivery thereof.

13.           Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of South Carolina without giving effect to the conflict of laws principles thereof. Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction in State of South Carolina.

14.           Non-Waiver. Failure of the Employer to enforce any of the provisions of this Agreement or any rights with respect thereto shall in no way be considered to be a waiver of such provisions or rights, or in any way affect the validity of this Agreement.

15.           Enforcement. The Executive agrees that in the event of any breach or threatened breach by the Executive of any covenant contained in Section 6, 7, 9(a), 9(b), or 9(c) hereof, the resulting injuries to the Employer would be difficult or impossible to estimate accurately, even though irreparable injury or damages would certainly result. Accordingly, an award of legal damages, if without other relief, would be inadequate to protect the Employer. The Executive, therefore, agrees that in the event of any such breach, the Employer shall be entitled to obtain from a court of competent jurisdiction an injunction to restrain the breach or anticipated breach of any such covenant, and to obtain any other available legal, equitable, statutory, or contractual relief. Should the Employer have cause to seek such relief, no bond shall be required from the Employer, and the Executive shall pay all attorney’s fees and court costs which the Employer may incur to the extent the Employer prevails in its enforcement action.

16.           Saving Clause. If any term, provision or condition of this Agreement is determined to be invalid, illegal or unenforceable, the remaining terms, provisions and conditions of this Agreement remain in full force, if the essential terms, provisions and conditions of this Agreement for each party remain valid, binding and enforceable. It is the intention of the parties that, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void, or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced. The Executive and the Employer hereby agree that they will negotiate in good faith to amend this Agreement from time to time to modify the terms of Sections 9(a), 9(b) or 9(c), the definition of the term “Territory,” and the definition of the term “Business,” to reflect changes in the Employer’s business and affairs so that the scope of the limitations placed on the Executive’s activities by Section 9 accomplishes the parties’ intent in relation to the then current facts and circumstances. Any such amendment shall be effective only when completed in writing and signed by the Executive and the Employer. The parties agree that all of the terms, provisions and conditions contained in Section 4 and Section 9 constitute essential terms, provisions and conditions of this Agreement. The parties further agree that no part of Section 4 is independent of any part of Section 9, and that no part of Section 9 is independent of any part of Section 4. If a material part of Section 9 is held by a court of competent jurisdiction to be invalid, illegal or unenforceable and is not revised by the court to be enforceable and enforced, then all of Section 4 shall automatically become void and unenforceable. If it is unclear or disputed whether the part of Section 9 held invalid, illegal or unenforceable (and not so revised by the court) is material, the parties shall negotiate in good faith to reach agreement on materiality or immateriality, and if they are unable to agree within a reasonable period of time, the part in question shall be deemed material. If the parties agree the part in question is not material, they shall negotiate in good faith to agree upon a modification necessary to make whole any party adversely affected by the holding of invalidly, illegality or unenforceability, and if they are not able to agree upon such a modification within a reasonable period of time, a material part of Section 9 will be deemed to have been held by a court of competent jurisdiction to be invalid, illegal or unenforceable. Each party agrees to maintain the status quo ante, to the extent necessary to avoid gaining any advantage over the other party or causing the other party to suffer a disadvantage, for so long as it is obligated to negotiate in good faith but the parties have not reached agreement. A violation of the covenant in the preceding sentence shall result in a material part of Section 4 being deemed to be invalid, illegal or unenforceable.

13

17.           Certain Definitions.

(a)           “Affiliate” shall mean any business entity controlled by, controlling or under common control with the Employer.

(b)           “Business” shall mean the operation of a depository financial institution, including, without limitation, the solicitation and acceptance of deposits of money and commercial paper, the solicitation and funding of loans and the provision of other banking services, or any other related business engaged in by the Employer or any of its Affiliates to a material extent as of the date of termination.

(c)           “Cause” shall consist of any of (A) the commission by the Executive of a willful act (including, without limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly negligent omission to act by the Executive, which is intended to cause, causes or is reasonably likely to cause material harm to the Employer (including harm to its business reputation), (B) the indictment of the Executive for the commission or perpetration by the Executive of any felony or any crime involving dishonesty, moral turpitude or fraud, (C) the material breach by the Executive of this Agreement that, if susceptible of cure, remains uncured 10 days following written notice to the Executive of such breach, (D) the receipt of any form of notice, written or otherwise, that any regulatory agency having jurisdiction over the Employer intends to institute any form of formal or informal (e.g., a memorandum of understanding which relates to the Executive’s performance) regulatory action against the Executive, the Employer or the Company (provided that the Board determines in good faith, with the Executive abstaining from participating in the consideration of and vote on the matter, that the subject matter of such action involves acts or omissions by or under the supervision of the Executive or that termination of the Executive would materially advance the Employer’s compliance with the purpose of the action or would materially assist the Employer in avoiding or reducing the restrictions or adverse effects to the Employer related to the regulatory action); (E) the exhibition by the Executive of a standard of behavior within the scope of his employment that is materially disruptive to the orderly conduct of the Employer’s business operations (including, without limitation, substance abuse or sexual misconduct) to a level which, in the Board’s good faith and reasonable judgment, with the Executive abstaining from participating in the consideration of and vote on the matter, is materially detrimental to the Employer’s best interest, that, if susceptible of cure remains uncured 10 days following written notice to the Executive of such specific inappropriate behavior; or (F) the failure of the Executive to devote his full business time and attention to his employment as provided under this Agreement that, if susceptible of cure, remains uncured 30 days following written notice to the Executive of such failure. In order for the Board to make a determination that termination shall be for Cause, the Board must provide the Executive with an opportunity to meet with the Board in person.

14

(d)           “Change in Control” shall mean the occurrence during the Term of any of the following events, unless such event is a result of a Non-Control Transaction or is not a 409A CIC:

(i) any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (i) the Company, (ii) any subsidiary of the Company, (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (iv) any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the “beneficial owner” (as defined in Section 13(d) of the Exchange Act), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities;

(ii) any plan or proposal for the dissolution or liquidation of the Company is adopted by the shareholders of the Company;

(iii) individuals who, as of the date of this Agreement (the “Effective Date”), constituted the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

15

(iv) all or substantially all of the assets of the Company are sold, transferred or distributed; or

(v) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company (a “Transaction”), in each case, with respect to which either:

(1) the shareholders of the Company immediately prior to such Transaction do not, immediately after the Transaction, own more than 50% of the combined voting power of the Company or the entity surviving such Transaction (or, if the Company or the entity surviving such Transaction is then a subsidiary, the ultimate parent thereof) in substantially the same respective proportions as such shareholders’ ownership of the voting power of the Company immediately before such Transaction, or

(2) the individuals who comprise the Board immediately prior thereto do not constitute at least a majority of the board of directors of the Company, the entity surviving such transaction or, if the Company or the entity surviving such Transaction is then a subsidiary, the ultimate parent thereof.

Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which both (x) the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns (directly or indirectly) all or substantially all of the assets of the Company immediately following such transaction or series of transactions, and (y) the individuals who comprise the Board immediately prior to such transaction or series of transactions constitute at least a majority of the board of directors of the entity which owns (directly or indirectly) all or substantially all of the assets of the Company immediately following such transaction or series of transactions (a “Non-Control Transaction”). In addition, to the extent that any compensation constitutes or would constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, a Change in Control shall not constitute a settlement or distribution event with respect to such compensation, or an event that otherwise changes the timing of settlement or distribution of such compensation, unless the Change in Control also constitutes an event described in Section 409A(a)(2)(v) of the Code and the regulations thereto; provided that this sentence shall have no bearing on whether the right to any such compensation vests pursuant to the terms of this Agreement or the applicable award agreement.

16

(e)           “Competing Business” shall mean any business that, in whole or in part, is substantially engaged in the Business or a business that is substantially similar to (and in competition with) the Business.

(f)            “Disability” shall have the meaning set forth in Treasury Regulation § 1.409A-3(i)(4).

(g)           “Good Reason” shall mean that one or more of the following has occurred without the Executive’s written consent:

(i) a material negative change in the nature or scope of the Executive’s responsibilities, duties or authority as set forth in Section 1;

(ii) a material reduction in the Executive’s base salary, excluding any reduction up to 10% that is applied across the senior management group;

(iii) Executive’s required re-location to a worksite location which is more than fifty (50) miles from Executive’s then current principal worksite without Executive’s consent (such consent not to be unreasonably withheld), or

(iv) the Employer’s material breach of this Agreement (excluding any delay of payment required or permitted under Code Section 409A);

provided that, in any such case, the Executive provides written notice to the Employer that the event giving rise to such claim of Good Reason has occurred within thirty (30) days after the occurrence of such event, and such Good Reason remains uncured thirty (30) days after the Executive has provided such written notice; provided further that any resignation of the Executive’s employment for Good Reason occurs no later than thirty (30) days following the expiration of such cure period.

(h)           “Notice of Termination” shall mean a written notice of termination from the Employer or the Executive which specifies an effective date of termination, indicates the specific termination provision in this Agreement relied upon, and, in the case of a termination for Cause, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

(i)            “Terminate,” “terminated,” “termination,” or “Termination of Employment” shall mean separation from service as defined by Regulation 1.409A-1(h).

(j)            “Territory” shall mean a radius of 15 miles from (i) the main office of the Employer or (ii) any branch or loan production office of the Employer.

17

18.           Compliance with Regulatory Restrictions. Notwithstanding anything to the contrary herein, and in addition to any restrictions stated in Section 4 hereof, any compensation or other benefits paid to the Executive shall be limited to the extent required by any federal or state regulatory agency having authority over the Bank. The Executive agrees that compliance by the Bank with such regulatory restrictions, even to the extent that compensation or other benefits paid to the Executive are limited, shall not be a breach of this Agreement by the Bank.

19.           Compliance with Dodd–Frank Wall Street Reform and Consumer Protection Act. Notwithstanding anything to the contrary herein, any incentive payments to the Executive shall be subject to the Dodd–Frank Wall Street Reform and Consumer Protection Act and any regulations promulgated, and any applicable stock exchange listing requirements adopted, thereunder (collectively, the “DF Act”), including, but not limited to, clawbacks for such incentive payments as may be required by the DF Act. The Executive agrees to such amendments, agreements, or waivers that are required by the DF Act or requested by the Employer to comply with the terms of the DF Act. Executive agrees to comply with the terms of any incentive-based compensation “claw back” policy, as in effect from time to time, adopted or that may be adopted by the Employer.

20.           Compliance with Internal Revenue Code Section 409A. All payments that may be made and benefits that may be provided pursuant to this Agreement are intended to qualify for an exclusion from Section 409A of the Code and any related regulations or other pronouncements thereunder and, to the extent not excluded, to meet the requirements of Section 409A of the Code. Any payments made under Sections 3 and 4 of this Agreement which are paid on or before the last day of the applicable period for the short-term deferral exclusion under Treasury Regulation § 1.409A-1(b)(4) are intended to be excluded under such short-term deferral exclusion. Any remaining payments under Sections 3 and 4 are intended to qualify for the exclusion for separation pay plans under Treasury Regulation § 1.409A-1(b)(9). To the extent permissible, each payment made under Sections 3 and 4 shall be treated as a “separate payment”, as defined in Treasury Regulation § 1.409A-2(b)(2), for purposes of Code Section 409A. Further, notwithstanding anything to the contrary, all severance payments payable under the provisions of Section 4 shall be paid to the Executive no later than the last day of the second calendar year following the calendar year in which occurs the date of Executive’s termination of employment. None of the payments under this Agreement are intended to result in the inclusion in Executive’s federal gross income on account of a failure under Section 409A(a)(1) of the Code. The parties intend to administer and interpret this Agreement to carry out such intentions. However, Company does not represent, warrant or guarantee that any payments that may be made pursuant to this Agreement will not result in inclusion in Executive’s gross income, or any penalty, pursuant to Section 409A(a)(1) of the Code or any similar state statute or regulation. Notwithstanding any other provision of this Agreement, to the extent that the right to any payment (including the provision of benefits) hereunder provides for the “deferral of compensation” within the meaning of Section 409A(d)(1) of the Code, the payment shall be paid (or provided) in accordance with the following:

18

(a)           If the Executive is a “Specified Employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date of the Executive’s termination (the “Separation Date”), and if an exemption from the six month delay requirement of Code Section 409A(a)(2)(B)(i) is not available, then no such payment that is payable on account of the Executive’s termination shall be made or commence during the period beginning on the Separation Date and ending on the date that is six months following the Separation Date or, if earlier, on the date of the Executive’s death. The amount of any payment that would otherwise be paid to the Executive during this period shall instead be paid to the Executive on the first day of the first calendar month following the end of the period.

(b)          Payments with respect to reimbursements of expenses or benefits or provision of fringe or other in-kind benefits shall be made on or before the last day of the calendar year following the calendar year in which the relevant expense or benefit is incurred. The amount of expenses or benefits eligible for reimbursement, payment or provision during a calendar year shall not affect the expenses or benefits eligible for reimbursement, payment or provision in any other calendar year.

21.           Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. Any waiver or modification of any term of this Agreement shall be effective only if it is set forth in writing and signed by all parties hereto.

22.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[Signatures appear on following page]

19

IN WITNESS WHEREOF, the Employer has caused this Agreement to be executed and its seal to be affixed hereunto by its officers thereunto duly authorized, and the Executive has signed and sealed this Agreement, effective as of the date first above written.

	FIRST COMMUNITY CORPORATION FIRST COMMUNITY BANK
ATTEST:
By:	By:
Name:	Name:	Michael C. Crapps
	Title:	Chief Executive Officer
	EXECUTIVE
	Drew Painter

20

Exhibit A

Form of Release of Claims

SEVERANCE AGREEMENT AND RELEASE

This Severance Agreement and Release (the “Agreement”) is made between Drew Painter, an individual resident of South Carolina (“Employee”), First Community Bank and First Community Corporation (collectively, the “Bank”).

As used in this Agreement, the term “Employee” shall include the employee’s heirs, executors, administrators, and assigns.

On January 1, 2024, the Bank and Employee entered into an Employment Agreement (the “Employment Agreement”) governing the relationship between the parties. Section 4(e) provides that the Bank may terminate the Employment Agreement without Cause (as defined in the Employment Agreement). Section 4 of the Employment Agreement also provides that Employee shall be entitled to severance pay if the Employment Agreement is terminated without Cause (as defined in the Employment Agreement), on the condition that Employee enter into this release or a substantially similar release.

Employee desires to receive severance pay and the Bank is willing to provide severance pay on the condition the Employee enter into this Agreement.

Now, in consideration for the mutual promises and covenants set forth herein, and in full and complete settlement of all matters between Employee and the Bank, the parties agree as follows:

1.            Termination Date: The Employee agrees that his employment with the Bank terminates as of ________________ (the “Termination Date”).

2.            Severance Payments: Subsequent to his Termination Date, the Bank shall pay Employee severance pay as noted in Paragraph 4(e) of the Employment Agreement (the “Severance Payment”), less applicable deductions and withholdings.

3.            Legal Obligations

The parties acknowledge that pursuant to Section 4(h) of the Employment Agreement, they agreed that at the time of termination and as a condition of payment of severance, they would enter into this release acknowledging any remaining obligations and discharging each other from any other claims or obligations arising out of or in connection with Employee’s employment by the Bank, including the circumstances of such termination.

Employee acknowledges that the Bank has no prior legal obligations to make the payments described in Section 2 above which are exchanged for the promises of Employee set forth in this Agreement. It is specifically agreed that the payments described in Section 2 are valuable and sufficient consideration for each of the promises of Employee set forth in this Agreement and are payments in addition to anything of value to which Employee is otherwise entitled.

A-1

4.            Waiver and Release:

a)            Employee unconditionally releases and discharges the Bank, entities affiliated with the Bank, and the respective current and former officers, directors, shareholders, employees, and agents of them (collectively, the “Bank Released Parties”) from any and all causes of action, suits, damages, claims, proceedings, and demands that the Employee has ever had, or may now have, against any of the Bank Released Parties, whether asserted or unasserted, whether known or unknown, concerning any matter occurring up to and including the date of the signing of this Agreement; provided that Employee is not releasing or discharging (i) any right to enforce Section 4 of the Employment Agreement, or (ii) any exculpatory or indemnification (or advancement) provisions set forth in the articles of incorporation or bylaws of the Bank.

b)            Employee acknowledges that he is waiving and releasing, to the full extent permitted by law, all claims against the Bank Released Parties, including (but not limited to) all claims arising out of, or related in any way to, his employment with the Bank or the termination of that employment, including (but not limited to) any and all breach of contract claims, tort claims, claims of wrongful discharge, claims for breach of an express or implied employment contract, defamation claims, claims under Title VII of the Civil Rights Act of 1964 as amended, which prohibits discrimination in employment based on race, color, national origin, religion or sex, the Family and Medical Leave Act, which provides for unpaid leave for family or medical reasons, the Equal Pay Act, which prohibits paying men and women unequal pay for equal work, the Age Discrimination in Employment Act of 1967, which prohibits age discrimination in employment, the Americans with Disabilities Act, which prohibits discrimination based on disability, the Rehabilitation Act of 1973, the South Carolina Human Affairs Law, any and all other applicable local, state and federal non-discrimination statutes, the Employee Retirement Income Security Act, the Fair Labor Standards Act, the South Carolina Payment of Wages Law and all other statutes relating to employment, the common law of the State of South Carolina, or any other state, and any and all claims for attorneys’ fees.

c)            This Waiver and Release provision ((a) through (c) of this paragraph) shall be construed to release all claims to the full extent allowed by law. If any term of this paragraph shall be declared unenforceable by a court or other tribunal of competent jurisdiction, it shall not adversely affect the enforceability of the remainder of this paragraph.

d)            The Bank unconditionally releases and discharges Employee from any and all causes of action, suits, damages, claims, proceedings, and demands that the Bank has ever had, or may now have, against Employee, whether asserted or unasserted, whether known or unknown, concerning any matter occurring up to and including the date of the signing of this Agreement with the exception of any claims for breach of trust, or any act which constitutes a felony or crime involving dishonesty, theft, or fraud.

A-2

5.            Restrictive Covenants and Other Obligations

The parties agree that Section 5 – “Ownership of Work Product,” Section 6 – “Protection of Trade Secret,” Section 7 – “Protection of Confidential Information,” Section 8 – “Return of Materials,” Section 9 – “Restrictive Covenants,” Section 10 – “Independent Provisions,” Section 15 – “Enforcement,” and Section 16 – “Savings Clause,” of the Employment Agreement shall remain in full force and effect and that Employee will perform his obligations under those sections and those sections of the Employment Agreement are incorporated by reference as if set forth fully herein. In the event Employee breaches any obligation under this Section 5, the Bank’s obligation to make severance payments to Employee shall terminate immediately and the Bank shall have no further obligations to Employee.

6.            Duty of Loyalty/Nondisparagement

The parties shall not (except as required by law) communicate to anyone, whether by word or deed, whether directly or through any intermediary, and whether expressly or by suggestion or innuendo, any statement, whether characterized as one of fact or of opinion, that is intended to cause or that reasonably would be expected to cause any person to whom it is communicated to have a lowered opinion of the other party.

7.            Confidentiality Of The Terms Of This Agreement

Employee agrees not to publicize or disclose the contents of this Agreement, including the amount of the monetary payments, except (i) to his immediate family; (ii) to his attorney(s), accountant(s), and/or tax preparer(s); (iii) as may be required by law; or (iv) as necessary to enforce the terms of this Agreement. Employee further agrees that he will inform anyone to whom the terms of this Agreement are disclosed of the confidentiality requirements contained herein. Notwithstanding the foregoing, the parties agree that where business needs dictate, Employee may disclose to a third party that he has entered into an agreement with the Bank, which agreement contains restrictive covenants including noncompetition and nondisclosure provisions, one or more of which prohibit him from performing the requested service.

Employee recognizes that the disclosure of any information regarding this Agreement by him, his family, his attorneys, his accountants or financial advisors, could cause the Bank irreparable injury and damage, the amount of which would be difficult to determine. In the event the Bank establishes a violation of this paragraph of the Agreement by Employee, his attorneys, immediate family, accountants, or financial advisors, or others to whom Employee disclosed information in violation of the terms of this Agreement, the Bank shall be entitled to injunctive relief without the need for posting a bond and shall also be entitled to recover from Employee the amount of attorneys’ fees and costs incurred by the Bank in enforcing the provisions of this paragraph.

8.            Continued Cooperation

Employee agrees that he will cooperate fully with the Bank in the future regarding any matters in which he was involved during the course of his employment, and in the defense or prosecution of any claims or actions now in existence or which may be brought or threatened in the future against or on behalf of the Bank. Employee’s cooperation in connection with such matters, actions and claims shall include, without limitation, being available to meet with the Bank’s officials regarding personnel or commercial matters in which he was involved; to prepare for any proceeding (including, without limitation, depositions, consultation, discovery or trial); to provide affidavits; to assist with any audit, inspection, proceeding or other inquiry; and to act as a witness in connection with any litigation or other legal proceeding affecting the Bank. Employee further agrees that should he be contacted (directly or indirectly) by any person or entity adverse to the Bank, he shall within 48 hours notify the then-current Chairman of the Board of the Bank. Employee shall be reimbursed for any reasonable costs and expenses incurred in connection with providing such cooperation.

A-3

9.            Entire Agreement; Modification of Agreement

Except as otherwise expressly noted herein, this Agreement constitutes the entire understanding of the parties and supersedes all prior discussions, understandings, and agreements of every nature between them relating to the matters addressed herein. Accordingly, no representation, promise, or inducement not included or incorporated by reference in this Agreement shall be binding upon the parties. Employee affirms that the only consideration for the signing of this Agreement are the terms set forth above and that no other promises or assurances of any kind have been made to him by the Bank or any other entity or person as an inducement for him to sign this Agreement. This Agreement may not be changed orally, but only by an agreement in writing signed by the parties or their respective heirs, legal representatives, successors, and assigns.

10.           Partial Invalidity

The parties agree that the provisions of this Agreement and any paragraphs, subsections, sentences, or provisions thereof shall be deemed severable and that the invalidity or unenforceability of any paragraph, subsection, sentence, or provision shall not affect the validity or enforceability of the remainder of the Agreement.

11.          Waiver

The waiver of the breach of any term or provision of this Agreement shall not operate as or be construed to be a waiver of any other subsequent breach of this Agreement.

12.          Successors and Assigns

This Agreement shall inure to and be binding upon the Bank and Employee, their respective heirs, legal representatives, successors, and assigns.

13.          Governing Law

This Agreement shall be construed in accordance with the laws of the state of South Carolina and any applicable federal laws.

14.          Headings

The headings or titles of sections and subsections of this Agreement are for convenience and reference only and do not constitute a part of this Agreement.

A-4

15.          Notice

Any notice or communication required or permitted under this Agreement shall be made in writing and sent by certified mail, return receipt requested, addressed as follows:

If to Employee:

[INSERT]

If to the Bank:

[INSERT]

16.          Representations: Employee acknowledges that:

a)            He has read this Agreement and understands its meaning and effect.

b)            He has knowingly and voluntarily entered into this Agreement of his own free will.

c)            By signing this Agreement, Employee has waived, to the full extent permitted by law, all claims against the Bank based on any actions taken by the Bank up to the date of the signing of this Agreement, and the Bank may plead this Agreement as a complete defense to any claim the Employee may assert.

d)            He would not otherwise be entitled to the consideration described in this Agreement, and that the Bank is providing such consideration in return for Employee’s agreement to be bound by the terms of this Agreement.

e)            He has been advised to consult with an attorney before signing this Agreement.

f)             He has been given up to 21 days to consider the terms of this Agreement.

g)            He has seven days, after Employee has signed the Agreement and it has been received by the Bank, to revoke it by notifying the Chairman of the Board of his intent to revoke acceptance. For such revocation to be effective, the notice of revocation must be received no later than 5:00 p.m. on the seventh day after the signed Agreement is received by the Bank. This Agreement shall not become effective or enforceable until the revocation period has expired.

h)            He is not waiving or releasing any rights or claims that may arise after the date the Employee signs this Agreement.

[Signatures appear on following page]

A-5

As to Employee:

Date	Drew Painter
As to First Community Bank and First Community Corporation:
Date	[Title]

[SEVERANCE AGREEMENT AND RELEASE: SIGNATURE PAGE]

A-6

EX-10.25

Exhibit 10.25

FIRST COMMUNITY CORPORATION

2021 Omnibus EQUITY INCENTIVE Plan

Restricted Stock UNIT Award Grant Notice

Participant Name:
Company:	First Community Corporation
Employer:
Notice:	A summary of the terms of your grant of Restricted Stock Unit Award is set out in this notice (the “Grant Notice”) but subject always to the terms of the First Community Corporation 2021 Omnibus Equity Incentive Plan (the “Plan”), and the Restricted Stock Unit Award Agreement (the “Award Agreement”) attached hereto as Exhibit A. Capitalized terms not defined in this Grant Notice but defined in the Plan or the Award Agreement will have the same definitions as in the Plan or the Award Agreement, respectively. In the event of any inconsistency between the terms of this Grant Notice, the terms of the Plan and the Award Agreement, the terms of the Plan and the Award Agreement shall prevail.
Type of Award:	Award of restricted stock units (“RSUs”), meaning the right granted to the Participant to receive one Share of Common Stock for each RSU at the end of the specified vesting period.
Common Stock:	Shares of common stock, $1.00 par value per share, of the Company.
Number of RSUs Subject to Grant:
Grant Date:	_________, 20__
Vesting Schedule:	Except as set forth in Section 2 of the Award Agreement, RSUs granted will vest (which for purposes of this Grant Notice and your Award Agreement means that you will become entitled to have Shares of Common Stock delivered to you) in accordance with the following schedule, provided that you have been continuously employed by the Company or any Subsidiary through the Third Anniversary Vesting Date except as otherwise set forth in your Award Agreement:

Third Anniversary Vesting Date	Cumulative Percentage of RSUs Vested
Third Anniversary of Grant Date (the “Third Anniversary Vesting Date”)	100%

Delivery of Shares:	Except as otherwise set forth in the Award Agreement, upon vesting, the applicable Shares of Common Stock, subject to required tax withholding, shall be transferred by the Company to the Participant 10 days after the Third Anniversary Vesting Date.
Withholding:	The Company and the Participant will comply with all federal and state laws and regulations respecting the required withholding, deposit and payment of any income, employment or other taxes relating to the Award. Unless otherwise approved by the Committee, any withholding taxes in respect of the RSUs may be satisfied through the withholding of (including by cancellation of the right to receive) whole vested Shares of Common Stock to which the Participant is otherwise entitled under this Grant Notice and the Award Agreement (provided, however, the Fair Market Value of such Shares withheld may not exceed the Company’s maximum statutory withholding obligation or, if applicable, such lesser amount as may be necessary to avoid classification of this award as a liability for financial accounting purposes).
Acceptance:	You acknowledge receipt of, and understand and agree to, this Grant Notice, the Award Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Award Agreement and the Plan set forth the entire understanding between you and the Company or any Subsidiary regarding the RSUs and supersede all prior oral and written Award Agreements on the subject.

[Signatures appear on the following page.]

2

IN WITNESS WHEREOF, the Company and the Participant have duly executed and delivered this Grant Notice as of the Grant Date. The Company and Participant, by executing this Grant Notice, hereby confirm and agree to the terms of the Restricted Stock Unit Award Agreement attached hereto as Exhibit A.

FIRST COMMUNITY CORPORATION	PARTICIPANT
By:
Print Name:	Print Name:
Title:	Address:

Attachments:

1. Restricted Stock Unit Award Agreement

2. First Community Corporation 2021 Omnibus Equity Incentive Plan

3

Exhibit A

FIRST COMMUNITY CORPORATION

Restricted Stock Unit Award Agreement

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Award Agreement (this “Award Agreement”), First Community Corporation (the “Company”) has granted the Participant, as identified in the Grant Notice, the number of restricted stock units under the First Community Corporation 2021 Omnibus Equity Incentive Plan (the “Plan”) indicated in the Grant Notice (the “RSUs”), subject to the terms of this Award Agreement. Capitalized terms not defined in this Award Agreement but defined in the Plan or the Grant Notice will have the same definitions as in the Plan or the Grant Notice, respectively.

1.Restrictions and Vesting Schedule. The RSUs are being awarded to Participant subject to the conditions set forth in this Award Agreement and the Plan. Subject to the provisions of Section 2 of this Award Agreement, the RSUs will vest as provided in the Participant’s Grant Notice. Upon vesting, Participant shall have the right to a number of Shares of Common Stock of the Company equal to the number of vested RSUs.

2.Vesting and Forfeiture of RSUs Upon Certain Events. If the Participant’s date of termination of employment or service with the Company and its Subsidiaries (the Participant’s “Termination Date”) occurs prior to the Third Anniversary Vesting Date (as set forth in the Grant Notice), then all unvested RSUs shall be immediately forfeited and cancelled and cease to be outstanding, except as provided below in this Section 2:

(a)Change of Control.

(i)Subject to Section 2(c) of this Award Agreement, if a Change of Control occurs after the Grant Date and prior to the Participant’s Termination Date (except as otherwise set forth in Section 2(c) of this Award Agreement), then Article XI of the Plan shall apply to the Participant’s outstanding RSUs. Pursuant to Section 11.3 of the Plan, with respect to any Replacement Award (and provided that a Replacement Award may take the form of a continuation of this Agreement) upon a Termination of Service of the Participant by the Company (including the Company’s Subsidiaries and the Company’s and its Subsidiaries’ respective successors) other than for Cause or by the Grantee for Good Reason, in each case, within twenty-four (24) months following the Change of Control, the vesting will be accelerated and all unvested outstanding RSUs that have not been previously forfeited or cancelled will automatically vest in full immediately as of such event. Any Replacement Award will be subject to the same terms and conditions as set forth under this Award Agreement and in the manner provided in Section 11.2 of the Plan.

4

(ii)            If a Change of Control occurs after the Grant Date and if the Participant is entitled under any agreement or arrangement to receive compensation that would constitute a parachute payment (including the acceleration of rights to settlement and delivery (vesting) of RSUs under this Award Agreement and any other equity award agreement with the Company) within the meaning of Code Section 280G, the acceleration of any vesting under this Award Agreement pursuant to Section 2(a) herein shall be cancelled or other CIC Payments (as defined below) shall be reduced to the extent necessary to cause the aggregate present value of all payments in the nature of compensation to the Participant that are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company (the “CIC Payments”) not to exceed 2.99 times the “base amount,” all within the meaning of Code Section 280G. Such cancellation of vesting or other reductions in CIC Payments shall be made, in all cases: (i) if and to the extent not already provided, accelerated, granted or paid, as applicable, on account of other CIC Payments prior to the date of such cancellation, (ii) only to the least extent necessary so that no portion of the CIC Payments after such cancellation or reduction thereof shall be subject to the excise tax imposed by Code Section 4999, and (iii) in a manner that results in the best economic benefit to the Participant (in applying these principles, any cancellation of vesting or other reduction in CIC Payments shall be made in a manner consistent with the requirements of Section 409A of the Code, and where Tax Counsel (as defined below) determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero). All determinations required to be made under this Section 2(b)(ii), and the assumptions to be utilized in arriving at such determinations, shall be made by “Tax Counsel” (which shall be a law firm, compensation consultant or accounting firm appointed by the Company) which shall provide its determinations and any supporting calculations to the Company within 10 business days of having made such determination. Tax Counsel shall consult with any compensation consultants, accounting firm and/or other legal counsel selected by the Company in determining which payments to, or for the benefit of, the Participant are to be deemed to be CIC Payments. In connection with making determinations under this Section 2(a)(ii), Tax Counsel shall take into account, to the extent applicable, the value of any reasonable compensation for services to be rendered (or for refraining from performing services) by the Participant before or after the Change of Control.

Notwithstanding the foregoing, if the Participant is a party, as of the Grant Date, to an employment or other agreement with the Company, or is a participant in a severance program sponsored by the Company, that contains express provisions regarding Section 280G and/or Section 4999 of the Code (or any similar successor provision) that apply to this Award Agreement, the Section 280G and/or Section 4999 provisions of such employment or other agreement or plan, as applicable, shall control as to this Award Agreement.

(b)Death or Permanent and Total Disability. In the event that prior to the Third Anniversary Vesting Date, the Participant (i) dies while employed by the Company or its Subsidiaries, (ii) dies after Retirement (as defined below), or (iii) suffers a Permanent and Total Disability while employed by the Company or its Subsidiaries, then all unvested outstanding RSUs that have not been previously forfeited or cancelled will automatically vest in full immediately on the date of such death or Permanent and Total Disability.

(c)Retirement. (i) If the Participant’s Termination Date is due to Retirement (as defined below) and occurs prior to the Third Anniversary Vesting Date, then the outstanding RSUs shall vest as if the Participant’s employment had not terminated (and shall be subject to Section 2(b)(ii) of this Award Agreement) provided that the Participant remains in full compliance with the restrictive covenants set forth in the Participant’s employment agreement with the Company and First Community Bank (the “Bank”), if any, through the earlier of the Third Anniversary Vesting Date or a Change of Control (and, accordingly, if at any time following the Participant’s Retirement and prior to the Third Anniversary Vesting Date and a Change of Control the Participant shall fail to comply with such restrictive covenants, if any, all of such Participant’s outstanding RSUs shall immediately be cancelled and forfeited and cease to be outstanding).

5

(ii)           If a Change of Control occurs at a time that the Participant is Retirement eligible (or has previously Retired), then all outstanding unvested RSUs that have not been previously forfeited or cancelled shall automatically vest in full immediately prior to the consummation of the Change of Control.

For purposes of this Award Agreement, “Retirement” shall have the meaning set forth in the Participant’s employment agreement with the Company and/or the Bank as of the Grant Date or, if the Participant does not have an employment agreement that defines retirement, shall mean a voluntary termination of employment by the Participant (other than for Good Reason within twenty-four (24) months following a Change of Control) that occurs upon or after both (a) the Participant’s attainment of age 65 and (b) when Participant’s years of service to the Company and its Subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least 10.¹

3.Assignment or Transfer of RSUs. Unless otherwise provided by the Board, prior to the vesting of the RSUs, Participant may not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any of the RSUs. The RSUs shall be forfeited if Participant violates or attempts to violate these transfer restrictions. After any Shares of Common Stock have been delivered, Participant shall not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any interest in a Share of Common Stock except in compliance with the provisions herein and the provisions of applicable securities laws.

4.Delivery of Shares. Outstanding RSUs that vest will be paid in an equivalent number of shares of Common Stock in a single sum payment, subject to Section 5 of this Award Agreement, as follows:

(a)except as otherwise provided in clauses (b) or (c) immediately below, 10 days after the Third Anniversary Vesting Date;

(b)with respect to RSUs that vest pursuant to Section 2(b) (Death or Total and Permanent Disability), 10 days after the date of such death or Permanent and Total Disability (or, if earlier, the Third Anniversary Vesting Date);

¹ Note to Committee: For purposes of any RSU awards to Tanya A. Butts, the definition of retirement should be “For purposes of this Award Agreement, “Retirement” shall mean a voluntary termination of employment by the Participant that occurs upon or after both (a) the Participant’s attainment of age 65 and (b) when Participant’s years of service to the Company and its Subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least 5.”

6

(c)with respect to RSUs that vests pursuant to Section 2(a) (Acceleration or Replacement Upon a Change of Control) or Section 2(c)(ii):

(i) if a Replacement Award is not provided to the Participant in respect of this Agreement in connection with such Change of Control (and provided that a Replacement Award may take the form of a continuation of this Agreement) or if RSUs vest pursuant to Section 2(c)(ii); or

(ii) pursuant to Section 11.3 (Termination of Service) of the Plan (as modified by Section 2(a) of this Agreement) following a Change of Control, if this Agreement constitutes a Replacement Award,

ten (10) days after (x) with respect to clause (c)(i) immediately above, the occurrence of such Change of Control, and (y) with respect to clause (c)(ii) immediately above, such Termination of Service; provided, however, that notwithstanding anything to the contrary in this Agreement, the Plan or any applicable Individual Agreement, with respect to any RSUs that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, if the applicable Change of Control does not also constitute an event described in Section 409A(a)(2)(v) of the Code and the regulations thereto, then such payment shall instead occur on the earliest date that such RSUs would otherwise be paid pursuant to the terms of this Agreement];

and any such payment shall be in complete satisfaction of the Participant’s RSUs (the remainder of the unvested RSUs shall be cancelled and forfeited and shall cease to be outstanding). Payment in shares of Common Stock may be made by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its discretion. Delivery of any certificates will be made to the Participant’s last address reflected on the books of the Company or its Subsidiaries unless the Company is otherwise instructed in writing.

5.Payment and Tax Withholding. Each payment of the RSUs shall be made in Shares of Common Stock. Prior to the receipt of Shares of Common Stock under this Award Agreement, the Participant shall make appropriate arrangements with the Company to provide for the amount of minimum tax withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Code and applicable state and local income and other tax laws. The Participant may satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Shares of Common Stock from the Shares of Common Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the RSUs; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock. The Fair Market Value of any such Shares so withheld (and any such previously owned and unencumbered shares of Common Stock so delivered (surrendered) to the Company) may not exceed the Company’s maximum statutory withholding obligation or, if applicable, such lesser amount as may be necessary to avoid classification of this award as a liability for financial accounting purposes.

7

6.No Ownership Rights Prior to Issuance of Common Stock. Neither the Participant nor any other person shall become the beneficial owner of the Common Stock underlying the RSU, nor have any rights of a shareholder (including, without limitation, dividend and voting rights) with respect to any such Common Stock, unless and until and after such Common Stock has been actually issued to the Participant and transferred on the books and records of the Company or its agent in accordance with the terms of the Plan and this Award Agreement.

7.Refusal to Transfer. The Company shall not be required to transfer on its books any shares of Common Stock of the Company which shall have been transferred in violation of any of the provisions set forth in this Award Agreement.

8.No Employment Rights. This Award Agreement is not an employment contract and nothing in this Award Agreement shall confer upon the Participant any right to continued employment with or service to the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment or service of the Participant at any time.

9.Employee Benefit Plans. The value of the Participant’s RSUs is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit plan (“EB Plan”) unless otherwise provided by such EB Plan.

10.Governing Plan Document. The RSUs granted hereunder are subject to all the provisions of the Plan, the provisions of which are hereby incorporated by reference herein, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this Award Agreement or the Grant Notice and those of the Plan, the provisions of the Plan shall control.

11.Adjustments. The RSUs shall be subject to adjustments as provided in Article X of the Plan.

12.Section 409A of the Code. This Award Agreement is intended to comply with Section 409A of the Code and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Award Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A of the Code. Notwithstanding any provision to the contrary herein, payments made with respect to this Award Agreement may only be made in a manner and upon an event permitted by Section 409A of the Code. Each payment, settlement and delivery made in accordance with this Award Agreement shall be treated as a “separate payment,” as defined in Treasury Regulation Section 1.409A-2(b)(2), for purposes of Section 409A of the Code. The Company shall delay the commencement of any delivery of Shares that are deferred compensation and are payable to the Participant upon his or her separation from service if the Participant is a “key employee” of the Company (as determined by the Company in accordance with procedures established by the Company that are consistent with Section 409A) to the date which is immediately following the earlier of (i) six (6) months after the date of the Participant’s separation from service or (ii) the Participant’s death, to the extent such delay is required under the provisions of Section 409A to avoid imposition of additional income and other taxes, provided that the Company and the Participant agree to take into account any exemptions available under Section 409A. For purposes of determining timing of payments, any references to retirement, resignation, or termination of employment or service shall mean a “separation of service” as defined in Section 409A.

8

The Company reserves the right to amend the terms of this Award Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code or to comply with any requirements under any Company clawback or recoupment policy regarding incentive compensation (any such policy, including such a policy that has been or hereafter may be adopted to address a specific situation before or after the situation occurs, a “clawback policy”) that is in effect as of the date of this Award Agreement or that hereafter may be adopted by the Company or the Committee and in effect at any time after the date of this Award Agreement, or “clawback” requirements under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act to which the Company may be subject. The Participant agrees that any incentive payments to the Participant under any Company annual cash bonus plan, these RSUs and any Shares of Common Stock issued hereunder (and any proceeds from the sale or disposition thereof), shall be subject to any clawback policy that is in effect as of the date of this Award Agreement or that may hereafter adopted by the Company or the Committee, as and to the extent set forth in any such clawback policy or requirements that are or become applicable to the Participant. By accepting this Award Agreement, the Participant agrees to return to the Company the full amount required by any such clawback policies that are or become applicable to the Participant.

13.Acknowledgements. No waiver of any breach of any provision of this Award Agreement by the Company shall be construed to be a waiver of any succeeding breach or as a modification of such provision. All determinations by the Committee with respect to this Award Agreement, the Grant Notice, the Plan, the RSUs or Replacement Awards, including, among other matters, with respect to the vesting, or the cancellation and forfeiture, of RSUs under this Award Agreement, shall be final and binding on the Company and the Participant.

14.Miscellaneous.

(a)Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Participant under this Agreement shall be in writing and addressed to the Participant at the Participant’s address as shown in the records of the Company, or via on-line or electronic system. Either party may designate another address in writing (or by such other method approved by the Company) from time to time. By signing this Agreement, Participant consents to receive notices and documents related to this Agreement or the Plan by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

(b)Registration of Common Stock. It is intended that any Common Stock received in respect of the RSUs shall have been registered under the Securities Act of 1933 (“Securities Act”). If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 under the Securities Act (“Rule 144”), the Participant may not sell the Common Stock received except in compliance with Rule 144. Certificates representing Common Stock issued to an “affiliate” of the Company may bear a legend setting forth such restrictions on the disposition or transfer of the Common Stock as the Company deems appropriate to comply with Federal and state securities laws. If, at any time, the Common Stock is not registered under the Securities Act, and/or there is no current prospectus in effect under the Securities Act with respect to the Common Stock, the Participant shall execute, prior to the delivery of any Common Stock to the Participant by the Company pursuant to this Award Agreement, an agreement (in such form as the Company may specify) in which the Participant represents and warrants that the Participant is purchasing or acquiring the Common Stock acquired under this Award Agreement for the Participant’s own account, for investment only and not with a view to the resale or distribution thereof, and represents and agrees that any subsequent offer for sale or distribution of any kind of such Common Stock shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with regard to the Common Stock being offered or sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Common Stock, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved by the Company, as to the applicability of such exemption thereto.

9

(c)Data Protection. By accepting this Award Agreement (whether by electronic means or otherwise), the Participant hereby consents to the holding and processing of personal data provided by him/her to the Company for all purposes necessary for the operation of the Plan. These include, but are not limited to, administering and maintaining Participant records, providing information to any registrars, brokers or their party administrators of the Plan, or providing information to future purchasers of the Company or the business in which the Participant works.

(d)Counterpart Signature Pages. This Award Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Award Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.PDF), or by an other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

(e)Successors and Assigns. This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Participant, Participant’s successors, and assigns.

(f)Governing Law. This Award Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina, without reference to principles of conflict of laws.

(g)Entire Award Agreement; Amendment. This Award Agreement, along with the Grant Notice and the Plan constitute the entire Award Agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Award Agreement may only be amended as described in Article XII of the Plan.

10

EX-10.26

Exhibit 10.26

FIRST COMMUNITY CORPORATION

2021 Omnibus EQUITY INCENTIVE Plan

PERFORMANCE-BASED Restricted Stock UNIT Award Grant Notice

Participant Name:	Employee Name
Company:	First Community Corporation
Employer:	First Community Bank
Notice:	A summary of the terms of your grant of Performance-Based Restricted Stock Unit Award is set out in this notice (the “Grant Notice”) but subject always to the terms of the First Community Corporation 2021 Omnibus Equity Incentive Plan (the “Plan”), and the Performance-Based Restricted Stock Unit Award Agreement (the “Award Agreement”) attached hereto as Exhibit A. Capitalized terms not defined in this Grant Notice but defined in the Plan or the Award Agreement will have the same definitions as in the Plan or the Award Agreement, respectively. In the event of any inconsistency between the terms of this Grant Notice, the terms of the Plan and the Award Agreement, the terms of the Plan and the Award Agreement shall prevail.
Type of Award:	Award of performance-based restricted stock units (“PRSUs”), meaning the right granted to the Participant to receive one Share of Common Stock for each PRSU at the end of the specified performance-based vesting period and contingent on attainment of the specified performance.
Stock:	Shares of common stock, $1.00 par value per share, of the Company.
Performance Period:	Date Range

Target Number of PRSUs: # of Shares, which are divided into:

·Target TSR PRSUs X [one-third, rounded down]

·Target ROAE PRSUs X [one-third, rounded down]

·Target NPA PRSUs X [one-third, rounded down]

Grant Date: Date

1

Vesting Schedule:

Except as set forth in Section 2 of the Award Agreement, PRSUs granted will vest (which for purposes of this Grant Notice and your Award Agreement means that you will become entitled to have Shares of Common Stock delivered to you) in accordance with the following schedules and terms and conditions:

Fundamental Conditions:

Except as set forth in Section 2 of the Award Agreement, you will vest in a number of PRSUs (in whole Shares of Common Stock) determined after the end of the Performance Period based on the Company’s achievement of the performance measures (the “Performance Measures”) set forth in clauses (a), (b) and (c) below (TSR, ROAE and NPA, each as defined below), provided that (except as set forth in Section 2 of the Award Agreement) no PRSUs shall vest unless each of the following conditions (the “Fundamental Conditions”) shall have been satisfied:

(i) Required Internal Soundness Measure. The Required Internal Soundness Measure set forth in the Internal Soundness Measure Policy, attached as Exhibit B hereto, shall have been achieved (the “Internal Soundness Measure Condition”);

(ii) Net Core Income. In each calendar year during the Performance Period, the Company shall have achieved Net Core Income equal to at least 80% of the Net Core Income that shall have been budgeted for such year in the budget approved by the Board for such year (the “Net Core Income Condition”). “Net Core Income” is a non-GAAP measure that excludes the after-tax effect of merger-related expense and other nonrecurring, unusual or other charges or revenues (identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or other Company filing with the U.S. Securities and Exchange Commission) that the Board, or the Committee, determines should be excluded in order to better reflect operating performance. The Board and the Committee will have discretion in determining the budgeted and the achieved Net Core Income numbers.

(iii) Continuous Employment. You must continue to be an employee of the Company or a Subsidiary of the Company until the Performance Vesting Date.

Performance Measures:

Except as set forth in Section 2 of the Award Agreement, if the Fundamental Conditions are satisfied then the determination of the number of PRSUs that vest is based on achievement of the following Performance Measures as applicable to the type of PRSU (TSR, ROAE or NPA, as defined below) determined separately.

2

(a) Total Shareholder Return PRSUs. The number of Target PRSUs set forth in the Grant Notice as TSR PRSUs are increased or decreased and vest based on TSR over the Performance Period as follows:

Performance Period	Threshold Goal	Target Goal	Stretch Goal	Maximum Goal
Date Range	TSR is 75th Percentile of Index	TSR is 100th Percentile of Index	TSR is 125th Percentile of Index	TSR is 150th Percentile of Index
Award Payout Level (percentage of Target TSR PRSUs)	50%	100%	150%	200%

For purposes of this Award, “TSR” means cumulative Share price appreciation (or depreciation) plus cumulative dividends per Share of the Company’s Common Stock, measured relative to the change in the average of the Nasdaq Bank Index (CBNK) and SNL MicroCap US Bank Index, over the Performance Period. Determination of the ending Share price will be the average closing price of a Share of Common Stock during the 30-day period ending on the last day of the Performance Period. The starting price of a Share of Common Stock will be the closing price on the last business day immediately preceding the start of the Performance Period.

(b) Return on Average Equity PRSUs. The number of Target PRSUs set forth in the Grant Notice as ROAE PRSUs shall be increased or decreased and vest based on ROAE over the Performance Period as follows:

Performance Period	Threshold Goal	Target Goal	Stretch Goal	Maximum Goal
Date Range	30th Percentile of ROAE compared to Peer Banks	50th Percentile of ROAE compared to Peer Banks	75th Percentile of ROAE compared to Peer Banks	90th Percentile of ROAE compared to Peer Banks
Payout Level(percentage of Target ROAE PRSUs)	50%	100%	150%	200%

For purposes of this Award, “Return on Average Equity” (ROAE) means the Company’s quarterly net income divided by the ending shareholders’ equity value of the Company as of the applicable quarter, averaged over the 12 calendar quarters of the Performance Period. That average is compared to the return on average equity, for the applicable quarter, of an index of peer banks/bank holding companies, pulled by the Company from S&P Global, that are publicly traded, located in the southeast and .5 to 1.5 of our asset size, over the same Performance Period.

3

(c) Non-Performing Assets PRSUs.The number of Target PRSUs set forth in the Grant Notice as NPA PRSUs shall be increased or decreased and vest based on NPA over the Performance Period as follows:

Performance Period	Threshold Goal	Target Goal	Stretch Goal	Maximum Goal
Date Range	30th Percentile of NPA compared to Peer Banks	50th Percentile of NPA compared to Peer Banks	75th Percentile of NPA compared to Peer Banks	90th Percentile of NPA compared to Peer Banks
Payout Level(percentage of Target NPA PRSUs)	50%	100%	150%	200%

For purposes of this Award, “NPA” means the Company’s non-performing assets (which includes non-accrual loans, loans > 90 days delinquent and still accruing interest and other real estate owned), divided by the total assets of the Company, as of the end of each applicable quarter, averaged over the 12 calendar quarters of the Performance Period. That average is compared to the non-performing assets as a percentage of total assets of an index of peer banks/bank holding companies, pulled by the Company from S&P Global, that are publicly traded, located in the southeast and .5 to 1.5 of our asset size, averaged over the same Performance Period.

If the Threshold Goal for a Performance Measure has not been achieved, 0% of the PRSUs that vest based on such Performance Measure will vest as a result of performance. Vesting will be prorated on a linear basis for performance between the levels of threshold, target, stretch and maximum goals. For example, if ROAE for the Performance Period is at the 40^th Percentile of ROAE compared to Peer Banks (the mid-point between threshold and target performance) then 75% (the mid-point between the Threshold Goal and Target Goal vesting percentages) of the Target ROAE PRSUs will vest. If a fraction of a PRSU would otherwise vest based on the formulas above, such fraction will be rounded to the nearest whole number (and 0.5 shall round to 1).

If the Fundamental Conditions are not satisfied, as determined by the Committee, then all PRSUs shall be cancelled and forfeited as of the Performance Vesting Date. If the Fundamental Conditions are satisfied, as determined by the Committee, the final number of Shares to be paid under your Award will be the sum of the number of TSR PRSUs, ROAE PRSUs and NPA TRSUs earned as of the end of the Performance Period which the Committee designates as vested.

Delivery of Shares:	Except as otherwise set forth in the Award Agreement, upon vesting, the applicable Shares of Common Stock, subject to required tax withholding, shall be transferred by the Company to the Participant between January 1 and March 15 of the calendar year following the end of the Performance Period (the “Fixed Delivery Period”).
Withholding:	The Company and the Participant will comply with all federal and state laws and regulations respecting the required withholding, deposit and payment of any income, employment or other taxes relating to the Award. Any withholding taxes in respect of the PRSUs may be satisfied through the withholding of (including by cancellation of the right to receive) whole vested Shares of Common Stock to which the Participant is otherwise entitled under this Grant Notice and the Award Agreement (provided, however, the Fair Market Value of such Shares withheld may not exceed the Company’s maximum statutory withholding obligation or, if applicable, such lesser amount as may be necessary to avoid classification of this award as a liability for financial accounting purposes).
Acceptance:	You acknowledge receipt of, and understand and agree to, this Grant Notice, the Award Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Award Agreement and the Plan set forth the entire understanding between you and the Company or any Subsidiary regarding the PRSUs and supersede all prior oral and written Award Agreements on the subject.

[Signatures appear on the following page.]

4

IN WITNESS WHEREOF, the Company and the Participant have duly executed and delivered this Grant Notice as of the Grant Date. The Company and Participant, by executing this Grant Notice, hereby confirm and agree to the terms of the Performance-Based Restricted Stock Unit Award Agreement attached hereto as Exhibit A.

FIRST COMMUNITY CORPORATION	PARTICIPANT
By:
Print Name: Michael C. Crapps	Print Name: Employee Name
Title: President and CEO	Address:

Attachments:

1. Performance-Based Restricted Stock Unit Award Agreement

2. First Community Corporation 2021 Omnibus Equity Incentive Plan

5

Exhibit A

FIRST COMMUNITY CORPORATION

Performance-Based Restricted Stock Unit Award Agreement

Pursuant to the Performance-Based Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Performance Restricted Stock Unit Award Agreement (this “Award Agreement”), First Community Corporation (the “Company”) has granted the Participant, as identified in the Grant Notice, a target number of performance-based restricted stock units under the First Community Corporation 2021 Omnibus Equity Incentive Plan (the “Plan”) indicated in the Grant Notice (the “PRSUs”), subject to adjustment based on performance and the terms of this Award Agreement. Capitalized terms not defined in this Award Agreement but defined in the Plan or the Grant Notice will have the same definitions as in the Plan or the Grant Notice, respectively.

1.Vesting and Determinations. The PRSUs are being awarded to Participant subject to the conditions set forth in this Award Agreement, the Grant Notice and the Plan. Subject to the provisions of Section 2 of this Award Agreement, the PRSUs will vest as provided in the Participant’s Grant Notice, this Award Agreement and the Plan for the Performance Period. As soon as practicable following the end of the Performance Period, and in any event not later than 60 days after the end of the Performance Period, the Committee will determine: (i) whether the Fundamental Conditions under Grant Notice have been satisfied and all other material terms have been satisfied, (ii) the actual performance of the Company during the Performance Period relative to the performance goals (threshold, target, stretch and maximum) for each Performance Measure set forth in the Grant Notice, and (iii) the extent to which PRSUs are vested (eligible for settlement and delivery as of the Performance Vesting Date), based on the Committee’s determinations set forth in the immediately above clauses (i) and (ii). The date of such Committee action is the referred to as the “Performance Vesting Date.” Upon vesting and adjustment for performance, Participant shall have the right to a number of Shares of Common Stock of the Company equal to the number of vested PRSUs, as determined by the Committee.

The Committee’s determinations with respect to the vesting of PRSUs under this Award Agreement: (x) shall result in cancellation and forfeiture (as of the Performance Vesting Date or Change of Control, as applicable) of any such PRSUs that are not determined by the Committee to have vested (or to have become a Fixed/Service-Based Number of PRSUs, as applicable) as of the Performance Vesting Date or Change of Control, as applicable, and (y) shall not increase the number of PRSUs of the Participant or any other Participant under the Plan. Any PRSUs that are deemed cancelled or forfeited pursuant to this Award Agreement shall no longer be deemed to be outstanding for purposes of this Grant Notice and the Award Agreement. If any index to be used to measure threshold, target, stretch and maximum Company performance with respect to any Performance Measure, as set forth above, ceases to exist during the Performance Period, or the Committee determines that any such index otherwise ceases to represent a meaningful measure of the Company’s performance relative to peer banks/bank holding companies, then the Committee may, in its good faith discretion, substitute one or more different indexes against which to measure the Company’s relative performance with respect to any such Performance Measure. All determinations by the Committee with respect to, among other matters, the Company’s actual performance with respect to any Performance Measure, any index (including, without limitation, any peer banks/bank holding companies), the Company’s performance with respect to any Performance Measure relative to any index (including, without limitation, any peer banks/bank holding companies), any Fixed/Service-Based Number of PRSUs, and the vesting or the cancellation and forfeiture of PRSUs under this Award Agreement, shall be final and binding on the Company and the Participant.

6

2.Vesting and Forfeiture of PRSUs Upon Certain Events. If the Participant’s date of termination of employment with the Company and its Subsidiaries (the Participant’s “Termination Date”) occurs prior to the Performance Vesting Date, then all unvested PRSUs shall be immediately forfeited and cancelled and cease to be outstanding, except as provided below in this Section 2:

(a)Acceleration or Replacement Upon a Change of Control.

(i)Subject to Section 4 of this Award Agreement, if a Change of Control occurs after the Grant Date and prior to both the Participant’s Termination Date (except as otherwise set forth in Section 2(c) of this Award Agreement) and the Performance Vesting Date, then Article XI of the Plan shall apply to the Participant’s outstanding PRSUs; provided that in connection with a Change of Control, without limiting the Committee’s ability to otherwise adjust Performance Measures pursuant to Article X of the Plan or to otherwise agree with a party to a definitive merger agreement or other business combination agreement in connection with a Change of Control, not later than the date of such Change of Control the Committee may in its sole discretion determine that, with respect to any Replacement Award (which may take the form of a continuation of this Award Agreement), from and after the Change of Control, the number of shares subject to such Replacement Award shall be determined based on an amount equal to equal to the greater of:

(1) the Target Number of PRSUs set forth in the Grant Notice; or

(2) the aggregate number of PRSUs that would vest based on the level of achievement of the Performance Measures applicable to such PRSUs, as determined by the Committee not later than the date of the Change of Control, taking into account performance through the latest date preceding the Change of Control as to which performance can, as a practical matter, be determined by the Committee (but not later than the end of the applicable Performance Period) (rather than taking into account performance through the latest date preceding the applicable Termination of Service as to which performance can, as a practical matter, be determined, as contemplated by Section 11.3(ii) of the Plan or taking into account performance through the end of the Performance Period, as applicable);

(such greater number, the “Fixed/Service-Based Number of PRSUs”; and the remainder of the unvested PRSUs shall be cancelled and forfeited and shall cease to be outstanding). Any such determination shall not be deemed to cause, in whole or in part, this Agreement or any other Replacement Award not to meet the requirements of Section 11.2 of the Plan or not to qualify as a Replacement Award, and, in such case vesting or forfeiture with respect to the Fixed/Service-Based Number of PRSUs following the Change of Control shall be based only on the Participant’s continued service as an active employee (and not on the Internal Soundness Measure Condition or the Net Income Condition; but subject to Sections 2(b) and (c) of this Award Agreement) through the last day of the Performance Period (subject to potential acceleration of vesting of the Fixed/Service-Based Number of PRSUs pursuant to Section 11.3 of the Plan upon a Termination of Service of the Participant by the Company (including the Company’s Subsidiaries and the Company’s and its Subsidiaries’ respective successors) other than for Cause or by the Participant for Good Reason, in each case, within twenty-four (24) months following the Change of Control). Any Replacement Award will be subject to the same terms and conditions as set forth under this Grant Agreement and otherwise in the manner provided in Section 11.2 of the Plan.

7

(ii)If a Change of Control occurs after the Grant Date and if the Participant is entitled under any agreement or arrangement to receive compensation that would constitute a parachute payment (including the acceleration of rights to settlement and delivery (vesting) of PRSUs under this Award Agreement and any other equity award agreement with the Company) within the meaning of Code Section 280G, the acceleration of any vesting under this Award Agreement pursuant to Section 2(a) herein shall be cancelled or other CIC Payments (as defined below) shall be reduced to the extent necessary to cause the aggregate present value of all payments in the nature of compensation to the Participant that are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company (the “CIC Payments”) not to exceed 2.99 times the “base amount,” all within the meaning of Code Section 280G. Such cancellation of vesting or other reductions in CIC Payments shall be made, in all cases: (i) if and to the extent not already provided, accelerated, granted or paid, as applicable, on account of other CIC Payments prior to the date of such cancellation, (ii) only to the least extent necessary so that no portion of the CIC Payments after such cancellation or reduction thereof shall be subject to the excise tax imposed by Code Section 4999, and (iii) in a manner that results in the best economic benefit to the Participant (in applying these principles, any cancellation of vesting or other reduction in CIC Payments shall be made in a manner consistent with the requirements of Section 409A of the Code, and where Tax Counsel (as defined below) determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero). All determinations required to be made under this Section 2(b)(ii), and the assumptions to be utilized in arriving at such determinations, shall be made by “Tax Counsel” (which shall be a law firm, compensation consultant or accounting firm appointed by the Company) which shall provide its determinations and any supporting calculations to the Company within 10 business days of having made such determination. Tax Counsel shall consult with any compensation consultants, accounting firm and/or other legal counsel selected by the Company in determining which payments to, or for the benefit of, the Participant are to be deemed to be CIC Payments. In connection with making determinations under this Section 2(a)(ii), Tax Counsel shall take into account, to the extent applicable, the value of any reasonable compensation for services to be rendered (or for refraining from performing services) by the Participant before or after the Change of Control.

Notwithstanding the foregoing, if the Participant is a party, as of the Grant Date, to an employment or other agreement with the Company, or is a participant in a severance program sponsored by the Company, that contains express provisions regarding Section 280G and/or Section 4999 of the Code (or any similar successor provision) that apply to this Award Agreement, the Section 280G and/or Section 4999 provisions of such employment or other agreement or plan, as applicable, shall control as to this Award Agreement.

8

(b)Death or Permanent and Total Disability. In the event that prior to the Performance Vesting Date, the Participant (i) dies while employed by the Company or its Subsidiaries, (ii) dies after Retirement (as defined below), or (iii) suffers a Permanent and Total Disability while employed by the Company or its Subsidiaries, then all outstanding PRSUs will automatically vest in full at the Target Number of PRSUs set forth in the Grant Notice or, after a Change in Control, at the Fixed/Service-Based Number of PRSUs, if applicable (and the remainder of the unvested PRSUs shall be cancelled and forfeited and shall cease to be outstanding).

(c)Retirement. If the Participant’s Termination Date is due to Retirement (as defined below) and occurs prior to the Performance Vesting Date, then the outstanding PRSUs, if any, that shall vest shall be the same number, if any, that would vest under Section 1 of this Award Agreement, or in connection with a Change of Control, Section 2(a) of this Award agreement, if applicable (and subject to Section 2(b)(ii) of this Award Agreement), if the Participant’s employment had not terminated; provided that the Participant remains in full compliance with the restrictive covenants set forth in the Participant’s employment agreement with the Company and/or First Community Bank (the “Bank”), if any, through the earlier of the Performance Vesting Date or a Change of Control (and, accordingly, if at any time following the Participant’s Retirement and prior to the earlier of the Performance Vesting Date and a Change of Control the Participant shall fail to comply with such restrictive covenants, if any, all of such Participant’s outstanding PRSUs shall immediately be cancelled and forfeited and cease to be outstanding).

For purposes of this Award Agreement, “Retirement” shall have the meaning set forth in the Participant’s employment agreement with the Company and/or the Bank as of the Grant Date or, if the Participant does not have an employment agreement that defines retirement, shall mean a voluntary termination of employment by the Participant (other than for Good Reason within twenty-four (24) months following a Change of Control) that occurs upon or after both (a) the Participant’s attainment of age 65 and (b) when Participant’s years of service to the Company and its Subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least 10.¹

3.Assignment or Transfer of PRSUs. Unless otherwise provided by the Board, prior to the vesting of the PRSUs, Participant may not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any of the PRSUs. The PRSUs shall be forfeited if Participant violates or attempts to violate these transfer restrictions. After any Shares of Common Stock have been delivered, Participant shall not directly or indirectly, by operation of law or otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge or otherwise transfer any interest in a Share of Common Stock except in compliance with the provisions herein and the provisions of applicable securities laws.

¹ Note to Committee: For purposes of any RSU awards to Tanya A. Butts, the definition of retirement should be “For purposes of this Award Agreement, “Retirement” shall mean a voluntary termination of employment by the Participant that occurs upon or after both (a) the Participant’s attainment of age 65 and (b) when Participant’s years of service to the Company and its Subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least 5.”

9

4.Delivery of Shares. Outstanding PRSUs that vest will be paid in an equivalent number of shares of Common Stock in a single sum payment, subject to Section 5 of this Award Agreement, as follows:

(a)except as otherwise provided in clauses (b) or (c) immediately below, during the Fixed Delivery Period;

(b)with respect to PRSUs that vest pursuant to Section 2(b) (Death or Total and Permanent Disability), 10 days after the date of such death or Permanent and Total Disability (or, if earlier, the last day of the Fixed Delivery Period);

(c)with respect to PRSUs that vests pursuant to Section 2(a) (Acceleration or Replacement Upon a Change of Control):

(i) if a Replacement Award is not provided to the Participant in respect of this Agreement in connection with such Change of Control (and provided that a Replacement Award may take the form of a continuation of this Agreement); or

(ii) pursuant to Section 11.3 (Termination of Service) of the Plan (as modified by Section 2(a) of this Agreement) following a Change of Control, if this Agreement constitutes a Replacement Award,

ten (10) days after (x) with respect to clause (c)(i) immediately above, the occurrence of such Change of Control, and (y) with respect to clause (c)(ii) immediately above, such Termination of Service; provided, however, that notwithstanding anything to the contrary in this Agreement, the Plan or any applicable Individual Agreement, with respect to any PRSUs that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, if the applicable Change of Control does not also constitute an event described in Section 409A(a)(2)(v) of the Code and the regulations thereto, then such payment shall instead occur on the earliest date that such PRSUs would otherwise be paid pursuant to the terms of this Agreement;

and any such payment shall be in complete satisfaction of the Participant’s PRSUs (the remainder of the unvested PRSUs shall be cancelled and forfeited and shall cease to be outstanding). Payment in shares of Common Stock may be made by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its discretion. Delivery of any certificates will be made to the Participant’s last address reflected on the books of the Company or its Subsidiaries unless the Company is otherwise instructed in writing.

10

5.Payment and Tax Withholding. Each payment of the PRSUs shall be made in Shares of Common Stock. Prior to the receipt of Shares of Common Stock under this Award Agreement, the Participant shall make appropriate arrangements with the Company to provide for the amount of minimum tax withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Code and applicable state and local income and other tax laws. The Participant may satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Shares of Common Stock from the Shares of Common Stock otherwise issuable or deliverable to the Participant as a result of the vesting of the PRSUs; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock. The Fair Market Value of any such Shares so withheld (and any such previously owned and unencumbered shares of Common Stock so delivered (surrendered) to the Company) may not exceed the Company’s maximum statutory withholding obligation or, if applicable, such lesser amount as may be necessary to avoid classification of this award as a liability for financial accounting purposes.

6.No Ownership Rights Prior to Issuance of Common Stock. Neither the Participant nor any other person shall become the beneficial owner of the Common Stock underlying the PRSU, nor have any rights of a shareholder (including, without limitation, dividend and voting rights) with respect to any such Common Stock, unless and until and after such Common Stock has been actually issued to the Participant and transferred on the books and records of the Company or its agent in accordance with the terms of the Plan and this Award Agreement.

7.Refusal to Transfer. The Company shall not be required to transfer on its books any shares of Common Stock of the Company which shall have been transferred in violation of any of the provisions set forth in this Award Agreement.

8.No Employment Rights. This Award Agreement is not an employment contract and nothing in this Award Agreement shall confer upon the Participant any right to continued employment with or service to the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment or service of the Participant at any time.

9.Employee Benefit Plans. The value of the Participant’s PRSUs is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit plan (“EB Plan”) unless otherwise provided by such EB Plan.

10.Governing Plan Document. The PRSUs granted hereunder are subject to all the provisions of the Plan, the provisions of which are hereby incorporated by reference herein, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this Award Agreement or the Grant Notice and those of the Plan, the provisions of the Plan shall control.

11.Adjustments. The PRSUs shall be subject to adjustments as provided in Article X of the Plan.

11

12.Section 409A of the Code. This Award Agreement is intended to comply with Section 409A of the Code and shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Award Agreement comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A of the Code. Notwithstanding any provision to the contrary herein, payments made with respect to this Award Agreement may only be made in a manner and upon an event permitted by Section 409A of the Code. Each payment, settlement and delivery made in accordance with this Award Agreement shall be treated as a “separate payment,” as defined in Treasury Regulation Section 1.409A-2(b)(2), for purposes of Section 409A of the Code. The Company shall delay the commencement of any delivery of Shares that are deferred compensation and are payable to the Participant upon his or her separation from service if the Participant is a “key employee” of the Company (as determined by the Company in accordance with procedures established by the Company that are consistent with Section 409A) to the date which is immediately following the earlier of (i) six (6) months after the date of the Participant’s separation from service or (ii) the Participant’s death, to the extent such delay is required under the provisions of Section 409A to avoid imposition of additional income and other taxes, provided that the Company and the Participant agree to take into account any exemptions available under Section 409A. For purposes of determining timing of payments, any references to retirement, resignation, or termination of employment or service shall mean a “separation of service” as defined in Section 409A.

The Company reserves the right to amend the terms of this Award Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code or to comply with any requirements under any Company clawback or recoupment policy regarding incentive compensation (any such policy, including such a policy that has been or hereafter may be adopted to address a specific situation before or after the situation occurs, a “clawback policy”) that is in effect as of the date of this Agreement or that may hereafter be adopted by the Company or the Committee and in effect at any time after the date of this Award Agreement, or “clawback” requirements under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act to which the Company may be subject. The Participant agrees that any incentive payments to the Participant under any Company annual cash bonus plan, these PRSUs and any Shares of Common Stock issued hereunder (and any proceeds from the sale or disposition thereof), shall be subject to any clawback policy that is in effect as of the date of this Agreement or that is hereafter adopted by the Company or the Committee, as and to the extent set forth in any such clawback policy. By accepting this Award Agreement, the Participant agrees to return to the Company the full amount required by any such clawback policies or requirements that are or become applicable to the Participant.

13.Acknowledgements. No waiver of any breach of any provision of this Award Agreement by the Company shall be construed to be a waiver of any succeeding breach or as a modification of such provision. All determinations by the Committee with respect to this Award Agreement, the Grant Notice, the Plan, the PRSUs or Replacement Awards, including, among other matters, with respect to the vesting, or the cancellation and forfeiture, of PRSUs under this Award Agreement, shall be final and binding on the Company and the Participant.

12

14.Miscellaneous.

(a)Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Secretary of the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Participant under this Agreement shall be in writing and addressed to the Participant at the Participant’s address as shown in the records of the Company, or via on-line or electronic system. Either party may designate another address in writing (or by such other method approved by the Company) from time to time. By signing this Agreement, Participant consents to receive notices and documents related to this Agreement or the Plan by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

(b)Registration of Common Stock. It is intended that any Common Stock received in respect of the PRSUs shall have been registered under the Securities Act of 1933 (“Securities Act”). If the Participant is an “affiliate” of the Company, as that term is defined in Rule 144 under the Securities Act (“Rule 144”), the Participant may not sell the Common Stock received except in compliance with Rule 144. Certificates representing Common Stock issued to an “affiliate” of the Company may bear a legend setting forth such restrictions on the disposition or transfer of the Common Stock as the Company deems appropriate to comply with Federal and state securities laws. If, at any time, the Common Stock is not registered under the Securities Act, and/or there is no current prospectus in effect under the Securities Act with respect to the Common Stock, the Participant shall execute, prior to the delivery of any Common Stock to the Participant by the Company pursuant to this Award Agreement, an agreement (in such form as the Company may specify) in which the Participant represents and warrants that the Participant is purchasing or acquiring the Common Stock acquired under this Award Agreement for the Participant’s own account, for investment only and not with a view to the resale or distribution thereof, and represents and agrees that any subsequent offer for sale or distribution of any kind of such Common Stock shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with regard to the Common Stock being offered or sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer for sale of such Common Stock, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved by the Company, as to the applicability of such exemption thereto.

(c)Data Protection. By accepting this Award Agreement (whether by electronic means or otherwise), the Participant hereby consents to the holding and processing of personal data provided by him/her to the Company for all purposes necessary for the operation of the Plan. These include, but are not limited to, administering and maintaining Participant records, providing information to any registrars, brokers or their party administrators of the Plan, or providing information to future purchasers of the Company or the business in which the Participant works.

(d)Counterpart Signature Pages. This Award Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Award Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.PDF), or by another electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

(e)Successors and Assigns. This Award Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Participant, Participant’s successors, and assigns.

(f)Governing Law. This Award Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina, without reference to principles of conflict of laws.

(g)Entire Award Agreement; Amendment. This Award Agreement, along with the Grant Notice and the Plan constitute the entire Award Agreement between the parties with respect to the subject matter hereof and supersedes and merges all prior agreements or understandings, whether written or oral. This Award Agreement may only be amended as described in Article XII of the Plan.

13

EX-10.27

Exhibit 10.27

FIRST COMMUNITY CORPORATION

2021 OMNIBUS EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT FOR DIRECTORS

THIS AGREEMENT (“Agreement”) is entered into as of this [Ÿ] day of [Ÿ] 20[Ÿ], between First Community Corporation, a South Carolina corporation (“Company”) and [Ÿ] (“Grantee”).

Background:

A.           On March 16, 2021 the Board of Directors of the Company adopted the First Community Corporation 2021 Omnibus Equity Incentive Plan (the “Plan”), and on May 19, 2021, the Company’s shareholders approved the Plan at the Company’s 2021 Annual Meeting of Shareholders.

B.           The Committee of the Company’s Board of Directors duly approved the grant of restricted shares of the Company’s common stock, par value $1.00 per share (“Common Stock”), to the Grantee on the terms described in this Agreement, and in consideration of the issuance of such restricted shares, the Grantee intends to remain as a director of the Company.

NOW, THEREFORE, as an incentive and to encourage stock ownership by the Company’s directors, and also in consideration of the premises and the mutual covenants contained herein, the Company and the Grantee agree as follows.

1. RESTRICTED STOCK.

1.1 Grant of Restricted Stock.

(a)        The Company hereby grants to the Grantee [Ÿ] shares of Common Stock (the “Restricted Stock”), subject to the restrictions described in Paragraph 1.2 of this Agreement. As the restrictions set forth in Paragraph 1.2 of this Agreement lapse in accordance with the terms of this Agreement as to all or a portion of the Restricted Stock, such shares shall no longer be considered Restricted Stock for purposes of this Agreement.

(b)       The Company hereby directs that a stock certificate or certificates representing the shares of the Restricted Stock shall be registered in the name of and issued to the Grantee or that book entries shall be made with respect thereto. Such stock certificate or certificates or book entries shall be subject to such stop-transfer orders and other restrictions as the Company may deem necessary or advisable under applicable federal and state securities laws, and the Company may cause legends to be placed on any such certificate or certificates to make appropriate reference to such restrictions.

(c)       The Company shall not be required to deliver any certificate for shares of Restricted Stock granted under this Plan until all of the following conditions have been fulfilled:

(i) the admission of such shares to listing on all stock exchanges on which the Common Stock is then listed (if required);

(ii) the completion of any registration or other qualification of such shares that the Company deems necessary or advisable under any federal or state law or under the rulings or regulations of the U.S. Securities and Exchange Commission or any other governmental regulatory body; and

(iii) the obtaining of any approval or other clearance from any federal or state governmental agency or body that the Company determines to be necessary or advisable.

1.2 Restrictions.

(a)       The Grantee shall have all rights and privileges of a shareholder as to the Restricted Stock, including the right to vote, except that, subject to Paragraph 1.3(b) hereof, the following restrictions shall apply:

(i) None of the Restricted Stock may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period (as defined below) applicable to such shares, except pursuant to rules adopted by the Company (if any); and

(ii) Except as otherwise provided in this Agreement or the Plan, the Grantee shall, during the Restricted Period (defined below), have all of the other rights of a shareholder with respect to outstanding shares of unvested Restricted Stock awarded to the Grantee including, but not limited to, the right to vote (in person or by proxy) such shares at any meeting of shareholders of the Company.

(b)       Any attempt to dispose of Restricted Stock in a manner contrary to the restrictions set forth in this Agreement shall be ineffective.

1.3 Restricted Period.

(a)       Unless this Subparagraph 1.3(a) is crossed out and initialed and other substitute provisions are added and initialed in the blank space on the following page, the restrictions set forth in Paragraph 1.2 shall apply to the shares of Restricted Stock as follows:

(i) The restricted shares will fully vest as of 12:01 AM on January 1, 20[Ÿ];

(ii) The director shall not receive any cash dividends in respect of Restricted Stock with a record date prior to the vesting date of such restricted shares;

(iii) If the Grantee’s service as a director with the Company or any Subsidiary of the Company is voluntarily or involuntarily terminated for any reason (other than death, Permanent and Total Disability, Retirement, a Change of Control, or, following a Change of Control, a Termination of Service of the Grantee by the Company (including the Company’s Subsidiaries and the Company’s and its Subsidiaries’ respective successors) other than for Cause or by the Grantee for Good Reason, in each case, within twenty-four (24) months following the Change of Control, and in each such event the vesting will be accelerated and all unvested shares of Restricted Stock that have not been previously forfeited shall be fully vested as of such event) prior to vesting of shares of Restricted Stock granted herein, all shares of Restricted Stock shall immediately and automatically be forfeited and returned to the Company. “Retirement” means that Grantee (a) has continued to serve as a director of the Company through the end of the current term for which the Grantee has been elected to serve as a director of the Company but (b) is not nominated by the Company to be re-elected to continue to serve as a director of the Company after the end of the Grantee’s current term due to age restrictions in the Company’s bylaws; in such case, Retirement shall be deemed to occur at the end of the current term for which the Grantee has been elected to serve as a director of the Company (provided that Grantee has continued to serve as a director of the Company through such date).

2

Any date on which such restrictions lapse with respect to applicable shares of Restricted Stock being referred to in this Agreement as a “Restriction Termination Date,” with the period from issuance of the Restricted Stock to the Restriction Termination Date with respect to applicable shares of Restricted Stock being referred to in this Agreement as a “Restricted Period.”

(b)        Notwithstanding Paragraph 1.2, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to the Restricted Stock.

(c)        If a Change of Control occurs after the Grant Date and prior to the Grantee’s Termination of Service, then Article XI of the Plan shall apply to all unvested shares of Restricted Stock that have not been previously forfeited (provided that unvested shares of Restricted Stock shall vest pursuant to Paragraph 1.3(a)(iii) as a result of, if applicable, a voluntarily or involuntarily termination that occurs in connection with, and is effective immediately prior to, upon or immediately after, a Change of Control). Pursuant to Section 11.3 of the Plan, with respect to any Replacement Award (and provided that a Replacement Award may take the form of a continuation of this Agreement) upon a Termination of Service of the Grantee by the Company (including the Company’s Subsidiaries and the Company’s and its Subsidiaries’ respective successors) other than for Cause or by the Grantee for Good Reason, in each case, within twenty-four (24) months following the Change of Control, the vesting will be accelerated and all unvested shares of Restricted Stock that have not been previously forfeited shall be fully vested as of such event. Any Replacement Award will be subject to the same terms and conditions as set forth under this Agreement and otherwise in the manner provided in Section 11.2 of the Plan.

(d)       The Grantee agrees to hold at least 50% of the shares granted hereunder, whether restricted shares or unrestricted shares, until the director equity ownership guideline, as set forth in this Subparagraph 1.3(d), are met with respect to the Grantee (or the Grantee ceases to be a director of the Company). The director equity ownership guideline, which shall include vested and unvested shares of Common Stock and shares of Common Stock underlying unvested time-based restricted stock units outstanding, is equal to a minimum of $100,000. Such ownership guideline shall be determined from time to time by the Committee by dividing $100,000 by the price of the Company’s Common Stock. The resulting number of shares will remain fixed as the ownership guideline for such director until otherwise updated for changes in stock price, at the sole discretion of the Committee.

3

1.4          Forfeiture. If the Grantee’s service as a director of the Company or any Subsidiary of the Company shall terminate for any reason during the Restricted Period with respect to applicable shares of Restricted Stock, all rights of the Grantee to the then remaining Restricted Stock shall terminate and be forfeited (except (i) as provided in Paragraph 1.3(a)(iii) or Paragraph 1.3(c) or as otherwise determined by the Company pursuant to Paragraph 1.3(b), or (ii) if the Grantee is then employed by the Company or any Subsidiary of the Company, in which event this Agreement shall remain in effect until the earlier of a separation from service from the Company or the vesting date of the Restricted Stock).

1.5         Reserved.

1.6          Conflicts with the Plan. The Grantee hereby agrees and acknowledges that the Restricted Stock and this Agreement shall be subject to the Plan, which is incorporated into this Agreement by reference in its entirety. To the extent the terms under this Agreement conflict with the terms of the Plan, the terms of the Plan shall control. Capitalized terms used but not otherwise defined in this Agreement have the meanings ascribed to them in the Plan.

2. NOTICES.

All notices or communications hereunder shall be in writing and addressed as follows:

To the Company:

First Community Corporation

5455 Sunset Blvd

Lexington, South Carolina 29072

Attn: Corporate Secretary

To the Grantee:

Last known address of the Grantee as appearing in the Grantee’s personnel records as maintained by the Company.

3. ASSIGNMENT.

This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Grantee and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Grantee except as permitted in the Plan.

4. ENTIRE AGREEMENT; AMENDMENT; TERMINATION.

Except as provided in Section 1.6 with respect to the Plan, this Agreement represents the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior written or oral understandings and agreements. Subject to the provisions of the Plan, this Agreement may be amended or terminated at any time by written agreement of the parties to or as provided herein. Notwithstanding the previous sentence, the Company reserves the right to amend the terms of this Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code or to comply with any requirements under any Company clawback or recoupment policy regarding incentive compensation (any such policy, including such a policy that is in effect as of the date of this Agreement or that may hereafter be adopted to address a specific situation before or after the situation occurs, a “clawback policy”) that is in effect as of the date of this Agreement or that may hereafter be adopted by the Company or the Committee and in effect at any time after the date of this Agreement, as and to the extent set forth in any such clawback policy,, or “clawback” requirements under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act to which the Company may be subject. By accepting this Agreement, the Grantee agrees to return to the Company the full amount required by any such clawback policies or requirements that are or become applicable to the Grantee.

4

This Agreement (including the arrangements described herein) is intended to not constitute deferred arrangements and to be exempt from Section 409A of the Code, and this Agreement shall be construed and interpreted in a manner that is consistent with such intent. In the event the Agreement (or any portion thereof) is determined to be subject to Section 409A, then the Agreement (or such portion) shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement are exempt from or comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.

5. GOVERNING LAW.

This Agreement and its validity, interpretation, performance and enforcement shall be governed by the substantive laws of the State of South Carolina without regard to any rules regarding conflict-of-law or choice-of-law.

6. NO RIGHT TO CONTINUED EMPLOYMENT OR DIRECTORSHIP; EFFECT ON OTHER PLANS.

This Agreement shall not, of itself, confer upon the Grantee any right with respect to continuance of employment or directorship by the Company, nor shall it interfere in any way with the right of the Company to terminate the Grantee’s employment or service at any time. Income realized by the Grantee pursuant to this Agreement shall not be included in the Grantee’s earnings for the purpose of any benefit plan of the entity in which the Grantee may be enrolled or for which the Grantee may become eligible unless otherwise specifically provided for in such plan.

7.            ACKNOWLEDGEMENTS. No waiver of any breach of any provision of this Agreement by the Company shall be construed to be a waiver of any succeeding breach or as a modification of such provision. All determinations by the Committee with respect to this Agreement, the Plan, the Restricted Stock or Replacement Awards, including, among other matters, with respect to the vesting, or the cancellation and forfeiture, of Restricted Stock under this Agreement, shall be final and binding on the Company and the Grantee.

8.            DATA PROTECTION. By accepting this Agreement (whether by electronic means or otherwise), the Grantee hereby consents to the holding and processing of personal data provided by him/her to the Company for all purposes necessary for the operation of the Plan. These include, but are not limited to, administering and maintaining Grantee records, providing information to any registrars, brokers or their party administrators of the Plan, or providing information to future purchasers of the Company or the business in which the Grantee works.

9.            COUNTERPART SIGNATURE PAGES. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.PDF), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

*         *         *         *         *

5

IN WITNESS HEREOF, the Company and the Grantee have duly executed this Agreement, as of the date written on the first page of this Agreement.

FIRST COMMUNITY CORPORATION

By:

Name:

Title:

GRANTEE

Signature:

Name:

6

EX-10.28

Exhibit 10.28

FIRST COMMUNITY CORPORATION

2021 OMNIBUS EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD AGREEMENT FOR EMPLOYEES

THIS AGREEMENT (“Agreement”) is entered into as of this [Insert Date day of Month Year] (the “Grant Date”), between First Community Corporation, a South Carolina corporation (“Company”) and [Insert Employee Name] (“Grantee”).

Background:

A.           On March 16, 2021, the Board of Directors of the Company adopted the First Community Corporation 2021 Omnibus Equity Incentive Plan (the “Plan”), and on May 19, 2021, the Company’s shareholders approved the Plan at the Company’s 2021 Annual Meeting of Shareholders.

B.            The Committee of the Company’s Board of Directors duly approved the grant of restricted shares of the Company’s common stock, par value $1.00 per share (“Common Stock”), to the Grantee on the terms described in this Agreement, and in consideration of the issuance of such restricted shares, the Grantee intends to remain in the employ of the Company and its Subsidiaries.

NOW, THEREFORE, as an employment incentive and to encourage stock ownership by employees of the Company and its Subsidiaries, and also in consideration of the premises and the mutual covenants contained herein, the Company and the Grantee agree as follows.

1. RESTRICTED STOCK.

1.1 Grant of Restricted Stock.

(a)          The Company hereby grants to the Grantee [X] shares of Common Stock (the “Restricted Stock”), subject to the restrictions described in Paragraph 1.2 of this Agreement. As the restrictions set forth in Paragraph 1.2 of this Agreement lapse in accordance with the terms of this Agreement as to all or a portion of the Restricted Stock, such shares shall no longer be considered Restricted Stock for purposes of this Agreement.

(b)          The Company hereby directs that a stock certificate or certificates representing the shares of the Restricted Stock shall be registered in the name of and issued to the Grantee or that book entries shall be made with respect thereto. Such stock certificate or certificates or book entries shall be subject to such stop-transfer orders and other restrictions as the Company may deem necessary or advisable under applicable federal and state securities laws, and the Company may cause legends to be placed on any such certificate or certificates to make appropriate reference to such restrictions.

(c)          The Company shall not be required to deliver any certificate for shares of Restricted Stock granted under this Plan until all of the following conditions have been fulfilled:

(i) the admission of such shares to listing on all stock exchanges on which the Common Stock is then listed (if required);

1

(ii) the completion of any registration or other qualification of such shares that the Company deems necessary or advisable under any federal or state law or under the rulings or regulations of the U.S. Securities and Exchange Commission or any other governmental regulatory body; and

(iii) the obtaining of any approval or other clearance from any federal or state governmental agency or body that the Company determines to be necessary or advisable.

1.2 Restrictions.

(a)          The Grantee shall have all rights and privileges of a shareholder as to the Restricted Stock, including the right to vote, except that, subject to Paragraph 1.3 hereof, the following restrictions shall apply:

(i) None of the Restricted Stock may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period (as defined below) applicable to such shares, except pursuant to rules adopted by the Company (if any); and

(ii) Except as otherwise provided in this Agreement or the Plan, the Grantee shall, during the Restricted Period (defined below), have all of the other rights of a shareholder with respect to outstanding shares of unvested Restricted Stock awarded to the Grantee including, but not limited to, the right to vote (in person or by proxy) such shares at any meeting of shareholders of the Company.

(b)         Any attempt to dispose of Restricted Stock in a manner contrary to the restrictions set forth in this Agreement shall be ineffective.

1.3 Restricted Period.

(a)          Unless this Subparagraph 1.3(a) is crossed out and initialed and other substitute provisions are added and initialed in the blank space on the following page, the restrictions set forth in Paragraph 1.2 shall apply to the shares of Restricted Stock as follows:

(i) The restricted shares will fully vest as of 12:01 AM on [Insert Month Day, Year] (3 years from the Grant Date);

(ii) The Grantee shall not receive any cash dividends in respect of Restricted Stock with a record date prior to the vesting date of such restricted shares;

(iii) If the Grantee’s employment with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason (other than (x) death, Permanent and Total Disability or Retirement, and in each such event the vesting will be accelerated and all unvested shares of Restricted Stock that have not been previously forfeited shall be fully vested as of such event, or (y) as set forth in Subparagraph 1.3(c) with respect to a Change of Control) prior to vesting of shares of Restricted Stock granted herein, all shares of Restricted Stock shall immediately and automatically be forfeited and returned to the Company. “Retirement” means a voluntary termination of employment by the Grantee that occurs upon or after both (a) the Grantee’s attainment of age 65 and (b) when Grantee’s years of service to the Company and its Subsidiaries (such years of service determined in accordance with the rules for determining years of service under the Company’s 401(k) Plan) is at least 10.

2

Any date on which such restrictions lapse with respect to applicable shares of Restricted Stock being referred to in this Agreement as a “Restriction Termination Date,” with the period from issuance of the Restricted Stock to the Restriction Termination Date with respect to applicable shares of Restricted Stock being referred to in this Agreement as a “Restricted Period.” Any periods of leave without pay taken by the Grantee prior to an applicable Restriction Termination Date shall not be treated as credited service for purposes of vesting the stock, and the applicable Restricted Period shall be extended by the length of such periods of leave unless the Company, in its sole discretion, finds that a waiver of the extension would be in the best interests of the Company.

(b)          Notwithstanding Paragraph 1.2, the Committee may, in its sole discretion, when it finds that a waiver would be in the best interests of the Company, waive in whole or in part any or all remaining restrictions with respect to the Restricted Stock.

(c)          If a Change of Control occurs after the Grant Date and prior to the Grantee’s termination of employment with the Company and its Subsidiaries, then Article XI of the Plan shall apply to all unvested shares of Restricted Stock that have not been previously forfeited. Pursuant to Section 11.3 of the Plan, with respect to any Replacement Award (and provided that a Replacement Award may take the form of a continuation of this Agreement) upon a Termination of Service of the Grantee by the Company (including the Company’s Subsidiaries and the Company’s and its Subsidiaries’ respective successors) other than for Cause or by the Grantee for Good Reason, in each case, within twenty-four (24) months following the Change of Control, the vesting will be accelerated and all unvested shares of Restricted Stock that have not been previously forfeited shall be fully vested as of such event. Any Replacement Award will be subject to the same terms and conditions as set forth under this Agreement and otherwise in the manner provided in Section 11.2 of the Plan.

If a Change of Control occurs after the Grant Date and if the Grantee is entitled under any agreement or arrangement to receive compensation that would constitute a parachute payment (including the acceleration of vesting of shares of Restricted Stock granted herein and any other equity award agreement with the Company) within the meaning of Code Section 280G, the acceleration of any vesting under this Section 1.3(c) shall be cancelled or other CIC Payments (as defined below) shall be reduced to the extent necessary to cause the aggregate present value of all payments in the nature of compensation to the Grantee that are contingent on a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company (the “CIC Payments”) not to exceed 2.99 times the “base amount,” all within the meaning of Code Section 280G. Such cancellation of vesting or other reductions in CIC Payments shall be made, in all cases: (i) if and to the extent not already provided, accelerated, granted or paid, as applicable, on account of other CIC Payments prior to the date of such cancellation, (ii) only to the least extent necessary so that no portion of the CIC Payments after such cancellation or reduction thereof shall be subject to the excise tax imposed by Code Section 4999, and (iii) in a manner that results in the best economic benefit to the Grantee (in applying these principles, any cancellation of vesting or other reduction in CIC Payments shall be made in a manner consistent with the requirements of Section 409A of the Code, and where Tax Counsel (as defined below) determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero). All determinations required to be made under this Section 1.3(c), and the assumptions to be utilized in arriving at such determinations, shall be made by “Tax Counsel” (which shall be a law firm, compensation consultant or accounting firm appointed by the Company) which shall provide its determinations and any supporting calculations to the Company within 10 business days of having made such determination. Tax Counsel shall consult with any compensation consultants, accounting firm and/or other legal counsel selected by the Company in determining which payments to, or for the benefit of, the Grantee are to be deemed to be CIC Payments. In connection with making determinations under this Section 1.3(c), Tax Counsel shall take into account, to the extent applicable, the value of any reasonable compensation for services to be rendered (or for refraining from performing services) by the Grantee before or after the Change of Control.

3

Notwithstanding the foregoing, if the Grantee is a party to an employment or other agreement with the Company, or is a participant in a severance program sponsored by the Company, that contains express provisions regarding Section 280G and/or Section 4999 of the Code (or any similar successor provision) that apply to this Agreement, the Section 280G and/or Section 4999 provisions of such employment or other agreement or plan, as applicable, shall control as to this Agreement.

1.4          Forfeiture. If the Grantee’s employment with the Company and its Subsidiaries shall terminate for any reason during the Restricted Period, then with respect to applicable shares of Restricted Stock, all rights of the Grantee to the then remaining Restricted Stock (and, if applicable, any stock dividends or other stock distributions with respect to such Restricted Stock) shall terminate and be forfeited (except as provided in Paragraph 1.3(a)(iii) or 1.3(c) or as otherwise determined by the Company pursuant to Paragraph 1.3(b)).

1.5         Withholding. Prior to the receipt of Restricted Stock under this Agreement, the Grantee shall make appropriate arrangements with the Company to provide for the amount of minimum tax withholding required by law, including without limitation Sections 3102 and 3402 or any successor section(s) of the Code and applicable state and local income and other tax laws. The Grantee may satisfy any federal, state or local tax withholding obligation by any of the following means, or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold Shares of Common Stock from the Shares of Common Stock otherwise issuable or deliverable to the Grantee as a result of the vesting of the Restricted Stock; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock. The Fair Market Value of any such Shares so withheld (and any such previously owned and unencumbered shares of Common Stock so delivered (surrendered) to the Company) may not exceed the Company’s maximum statutory withholding obligation or, if applicable, such lesser amount as may be necessary to avoid classification of this award as a liability for financial accounting purposes.

1.6          Conflicts with the Plan. The Grantee hereby agrees and acknowledges that the Restricted Stock and this Agreement shall be subject to the Plan, which is incorporated into this Agreement by reference in its entirety. To the extent the terms under this Agreement conflict with the terms of the Plan, the terms of the Plan shall control. Capitalized terms used but not otherwise defined in this Agreement have the meanings ascribed to them in the Plan.

4

2. NOTICES.

All notices or communications hereunder shall be in writing and addressed as follows:

To the Company:

First Community Corporation

5455 Sunset Blvd

Lexington, South Carolina 29072

Attn: Corporate Secretary

To the Grantee:

Last known address of the Grantee as appearing in the Grantee’s personnel records as maintained by the Company.

3. ASSIGNMENT.

This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Grantee and the assigns and successors of the Company, but neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Grantee except as permitted in the Plan.

4. ENTIRE AGREEMENT; AMENDMENT; TERMINATION.

Except as provided in Section 1.6 with respect to the Plan, this Agreement represents the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior written or oral understandings and agreements. Subject to the provisions of the Plan, this Agreement may be amended or terminated at any time by written agreement of the parties to or as provided herein. Notwithstanding the previous sentence, the Company reserves the right to amend the terms of this Agreement as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code or to comply with any requirements under any Company clawback or recoupment policy regarding incentive compensation (any such policy, including such a policy that may be adopted to address a specific situation before or after the situation occurs, a “clawback policy”) that is in effect as of the date of this Agreement or that may hereafter be adopted by the Company or the Committee and in effect at any time after the date of this Agreement, as and to the extent set forth in any such clawback policy, or “clawback” requirements under the Sarbanes-Oxley Act of 2002 or the Dodd-Frank Wall Street Reform and Consumer Protection Act to which the Company may be subject. By accepting this Agreement, the Grantee agrees to return to the Company the full amount required by any such clawback policies or requirements that are or become applicable to the Grantee.

5

This Agreement (including the arrangements described herein) is intended to not constitute deferred arrangements and to be exempt from Section 409A of the Code, and this Agreement shall be construed and interpreted in a manner that is consistent with such intent. In the event the Agreement (or any portion thereof) is determined to be subject to Section 409A, then the Agreement (or such portion) shall be construed and interpreted in a manner that is consistent with the requirements for avoiding additional taxes or penalties under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement are exempt from or comply with Section 409A of the Code and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Grantee on account of non-compliance with Section 409A of the Code.

5. GOVERNING LAW.

This Agreement and its validity, interpretation, performance and enforcement shall be governed by the substantive laws of the State of South Carolina without regard to any rules regarding conflict-of-law or choice-of-law.

6. NO RIGHT TO CONTINUED EMPLOYMENT OR DIRECTORSHIP; EFFECT ON OTHER PLANS.

This Agreement shall not, of itself, confer upon the Grantee any right with respect to continuance of employment or directorship by the Company, nor shall it interfere in any way with the right of the Company to terminate the Grantee’s employment or service at any time. Income realized by the Grantee pursuant to this Agreement shall not be included in the Grantee’s earnings for the purpose of any benefit plan of the entity in which the Grantee may be enrolled or for which the Grantee may become eligible unless otherwise specifically provided for in such plan.

7.            ACKNOWLEDGEMENTS. No waiver of any breach of any provision of this Agreement by the Company shall be construed to be a waiver of any succeeding breach or as a modification of such provision. All determinations by the Committee with respect to this Agreement, the Plan, the Restricted Stock or Replacement Awards, including, among other matters, with respect to the vesting, or the cancellation and forfeiture, of Restricted Stock under this Agreement, shall be final and binding on the Company and the Grantee.

8.            DATA PROTECTION. By accepting this Agreement (whether by electronic means or otherwise), the Grantee hereby consents to the holding and processing of personal data provided by him/her to the Company for all purposes necessary for the operation of the Plan. These include, but are not limited to, administering and maintaining Grantee records, providing information to any registrars, brokers or their party administrators of the Plan, or providing information to future purchasers of the Company or the business in which the Grantee works.

9.            COUNTERPART SIGNATURE PAGES. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.PDF), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.

*    *    *     *    *

6

IN WITNESS HEREOF, the Company and the Grantee have duly executed this Agreement, as of the date written on the first page of this Agreement.

FIRST COMMUNITY CORPORATION
By:
Name:	Michael C. Crapps
Title:	President and CEO
GRANTEE
Signature:
Name:
Title:

7

EX-21.1

Exhibit 21.1

Subsidiaries of First Community Corporation:

First Community Bank, a South Carolina state-chartered bank

FCC Capital Trust I, a Delaware statutory trust

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-170647, 333-135099, 333-119630, 333-90603, 333-175218, and 333-257550 on Form S-8 and Registration Statement No. 333-229442 on Form S-3 of First Community Corporation of our report dated March 21, 2024, relating to the consolidated financial statements  of First Community Corporation and its subsidiary, appearing in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K of First Community Corporation for the year ended December 31, 2023

/s/ Elliott Davis, LLC

Columbia, South Carolina

March 21, 2024

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certification of the Chief Executive Officer

I, Michael C. Crapps, President and Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K of First Community Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 21, 2024
	/s/ Michael C. Crapps
	Michael C. Crapps,
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certification of the Chief Financial Officer

I, D. Shawn Jordan, Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-K of First Community Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 21, 2024
	/s/ D. Shawn Jordan
	D. Shawn Jordan,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer and the Chief Financial Officer of First Community Corporation (the “Company”), each certify that, to his knowledge on the date of this certification:

1. The annual report of the Company for the period ended December 31, 2023 as filed with the Securities and Exchange Commission on this date (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael C. Crapps

Michael C. Crapps

Chief Executive Officer

March 21, 2024

/s/ D. Shawn Jordan

D. Shawn Jordan

Chief Financial Officer

March 21, 2024

EX-97.CLAWBACK

Exhibit 97#

First Community Corporation

Incentive Compensation Recovery Policy (the “Policy”)

1.     Recovery of Excess Incentive Compensation. If First Community Corporation (the “Company”) is required to prepare a Restatement, the Company’s board of directors (the “Board”) shall, unless the Board’s Human Resources and Compensation Committee (the “Compensation Committee”) determines it to be Impracticable, take reasonably prompt action to recover all Recoverable Compensation from any Covered Person. The Company’s obligation to recover Recoverable Compensation is not dependent on if or when the restated financial statements are filed. Subject to applicable law, the Board may seek to recover Recoverable Compensation by requiring a Covered Person to repay such amount to the Company; by adding “holdback” or deferral policies to incentive compensation; by adding post-vesting “holding” or “no transfer” policies to equity awards; by set-off of a Covered Person’s other compensation; by reducing future compensation; or by such other means or combination of means as the Board, in its sole discretion, determines to be appropriate. This Policy is in addition to (and not in lieu of) any right of repayment, forfeiture or off-set against any Covered Person that may be available under applicable law or otherwise (whether implemented prior to or after adoption of this Policy). The Board may, in its sole discretion and in the exercise of its business judgment, determine whether and to what extent additional action is appropriate to address the circumstances surrounding any Restatement to minimize the likelihood of any recurrence and to impose such other discipline as it deems appropriate.

2.     Administration of Policy. The Board shall have full authority to administer, amend or terminate this Policy. The Board shall, subject to the provisions of this Policy, make such determinations and interpretations and take such actions in connection with this Policy as it deems necessary, appropriate or advisable. All determinations and interpretations made by the Board shall be final, binding and conclusive. The Board may delegate any of its powers under this Policy to the Compensation Committee or any subcommittee or delegate thereof.

3.     Acknowledgement by Executive Officers. The Board shall provide notice to and seek written acknowledgement of this Policy from each Executive Officer; provided that the failure to provide such notice or obtain such acknowledgement shall have no impact on the applicability or enforceability of this Policy.

4.     No Indemnification. Notwithstanding the terms of any of the Company’s organizational documents, any corporate policy or any contract, no Covered Person shall be indemnified against the loss of any Recoverable Compensation.

5.     Disclosures. The Company shall make all disclosures and filings with respect to this Policy and maintain all documents and records that are required by the applicable rules and forms of the U.S. Securities and Exchange Commission (the “SEC”) (including, without limitation, Rule 10D-1 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and any applicable Exchange listing standard.

-1-

6.     Definitions. In addition to terms otherwise defined in this Policy, the following terms, when used in this Policy, shall have the following meanings:

“Applicable Period” means the three completed fiscal years preceding the earlier to occur of: (i) the date that the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement; or (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare a Restatement. “Applicable Period” also includes, in addition to the three fiscal year period described in the preceding sentence, any transition period (that results from a change in the Company’s fiscal year) within or immediately following that completed three fiscal year period; provided, further, a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to 12 months would be deemed a completed fiscal year.

“Covered Person” means any person who receives Recoverable Compensation.

“Exchange” means any national securities exchange or national securities association upon which the Company has a class of securities listed.

“Executive Officer” includes the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person (including any executive officer of the Company’s subsidiaries or affiliates) who performs similar policy-making functions for the Company. At a minimum, the term “Executive Officer” shall include all executive officers identified in SEC filings pursuant to Item 401(b) of Regulation S-K, 17 C.F.R. §229.401(b).

“Financial Reporting Measure” means a measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measure that is derived wholly or in part (including “non-GAAP” financial measures, such as those appearing in earnings releases) from such measures; provided, however, that any such measure need not be presented within the Company’s financial statements or included in a filing made with the SEC. Examples of Financial Reporting Measures include, but are not limited to, measures based on: revenues, net income, operating income, financial ratios, capital ratios, EBITDA, liquidity measures (such as free cash flow), return measures (such as return on assets or return on invested capital), profitability of one or more segments, and cost per employee. Stock price and total shareholder return (“TSR”) also are Financial Reporting Measures.

-2-

“Impracticable” means, after exercising a normal due process review of all the relevant facts and circumstances and taking all steps required by Exchange Act Rule 10D-1 and any applicable Exchange listing standard, the Compensation Committee determines that recovery of the Recoverable Compensation is impracticable because: (i) it has determined that the direct expense that the Company would pay to a third party to assist in enforcing this Policy and recovering the otherwise Recoverable Compensation would exceed the amount to be recovered; (ii) it has concluded that the recovery of the Recoverable Compensation would violate home country law adopted prior to November 28, 2022; or (iii) it has determined that the recovery of the Recoverable Compensation would cause a tax-qualified retirement plan, under which benefits are broadly available to the Company’s employees, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder. The Company must: (A) in the case of clause (i) of the preceding sentence, prior to making that determination, make a reasonable attempt to recover any Recoverable Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the Exchange; and (B) in the case of clause (ii) of the preceding sentence, obtain an opinion of home country counsel, acceptable to the Exchange, that recovery would result in such a violation, and provide that opinion to the Exchange.

“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure; however, it does not include: (i) base salaries; (ii) discretionary cash bonuses; (iii) awards (either cash or equity) that are based upon subjective, strategic or operational standards; and (iv) equity awards that vest solely on the passage of time.

“Received” – Incentive-Based Compensation is deemed “Received” in any Company fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.

“Recoverable Compensation” means all Incentive-Based Compensation (calculated on a pre-tax basis) Received after December 1, 2023 by a Covered Person: (i) after beginning service as an Executive Officer; (ii) who served as an Executive Officer at any time during the performance period for that Incentive-Based Compensation; (iii) while the Company had a class of securities listed on an Exchange; and (iv) during the Applicable Period, that exceeded the amount of Incentive-Based Compensation that otherwise would have been Received had the amount been determined based on the Financial Reporting Measures, as reflected in the Restatement. With respect to Incentive-Based Compensation based on stock price or TSR, when the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an accounting restatement: (i) the amount must be based on a reasonable estimate of the effect of the Restatement on the stock price or TSR upon which the Incentive-Based Compensation Received by the Covered Person originally was based; and (ii) the Company must maintain documentation of the determination of the reasonable estimate and provide such documentation to the Exchange.

“Restatement” means an accounting restatement of any of the Company’s financial statements due to the Company’s material noncompliance with any financial reporting requirement under U.S. securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements (often referred to as a “Big R” restatement), or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (often referred to as a “little r” restatement). A Restatement does not include situations in which financial statement changes did not result from material non-compliance with financial reporting requirements, such as, but not limited to retrospective: (i) application of a change in accounting principles; (ii) revision to reportable segment information due to a change in the structure of the Company’s internal organization; (iii) reclassification due to a discontinued operation; (iv) application of a change in reporting entity, such as from a reorganization of entities under common control; (v) adjustment to provision amounts in connection with a prior business combination; or (vi) revision for stock splits, stock dividends, reverse stock splits or other changes in capital structure.

Adopted by the Board of Directors on September 19, 2023

-3-

XML

Cover - USD ($)	12 Months Ended
	Dec. 31, 2023	Mar. 21, 2024	Jun. 30, 2023
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Annual Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2023
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	000-28344
Entity Registrant Name	First Community Corporation
Entity Central Index Key	0000932781
Entity Tax Identification Number	57-1010751
Entity Incorporation, State or Country Code	SC
Entity Address, Address Line One	5455 Sunset Blvd.
Entity Address, City or Town	Lexington
Entity Address, State or Province	SC
Entity Address, Postal Zip Code	29072
City Area Code	803
Local Phone Number	951-2265
Title of 12(b) Security	Common stock, $1.00 par value per share
Trading Symbol	FCCO
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 126,574,711
Entity Common Stock, Shares Outstanding		7,629,005
Auditor Name	Elliott Davis, LLC
Auditor Firm ID	149
Auditor Location	Columbia, South Carolina

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
ASSETS
Cash and due from banks	$ 27,908	$ 24,464
Interest-bearing bank balances	66,787	12,937
Investment securities available-for-sale	282,226	331,862
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments	217,170	228,701
Other investments, at cost	6,800	4,191
Loans held-for-sale	4,433	1,779
Loans held-for-investment	1,134,019	980,857
Less, allowance for credit losses	12,267	11,336
Net loans held-for-investment	1,121,752	969,521
Property and equipment - net	30,589	31,277
Lease right-of-use asset	3,248	2,702
Bank owned life insurance	30,174	29,952
Other real estate owned	622	934
Intangible assets	604	761
Goodwill	14,637	14,637
Other assets	20,738	19,228
Total assets	1,827,688	1,672,946
Deposits:
Non-interest bearing	432,333	461,010
Interest bearing	1,078,668	924,372
Total deposits	1,511,001	1,385,382
Securities sold under agreements to repurchase	62,863	68,743
Federal funds purchased		22,000
Federal Home Loan Bank advances	90,000	50,000
Junior subordinated debt	14,964	14,964
Lease liability	3,426	2,832
Other liabilities	14,375	10,664
Total liabilities	1,696,629	1,554,585
SHAREHOLDERS’ EQUITY
Preferred stock, par value $1.00 per share; 10,000,000 shares authorized; none issued and outstanding
Common stock, par value $1.00 per share; 20,000,000 shares authorized; issued and outstanding 7,606,172 at December 31, 2023 and 7,577,912 at December 31, 2022	7,606	7,578
Nonvested restricted stock and stock units	2,181	1,461
Additional paid in capital	93,167	92,683
Retained earnings	56,296	49,025
Accumulated other comprehensive loss	(28,191)	(32,386)
Total shareholders’ equity	131,059	118,361
Total liabilities and shareholders’ equity	$ 1,827,688	$ 1,672,946

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Debt Securities, Held-to-Maturity, Fair Value	$ 205,518	$ 213,613
Preferred Stock, Par Value	$ 1,000.00	$ 1,000.00
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares, Issued	7,606,172	7,577,912
Common Stock, Shares, Outstanding	7,606,172	7,577,912

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023		Dec. 31, 2022		Dec. 31, 2021
Interest income:
Loans, including fees	$ 52,317		$ 39,234		$ 39,671
Investment securities - taxable	16,715		9,725		6,155
Investment securities - non taxable	1,471		1,525		1,564
Other short term investments and CDs	2,194		633		130
Total interest income	72,697		51,117		47,520
Interest expense:
Deposits	16,563		1,849		1,740
Securities sold under agreement to repurchase	1,658		227		85
Other borrowed money	5,584		1,098		416
Total interest expense	23,805		3,174		2,241
Net interest income	48,892		47,943		45,279
Provision for (release of) credit losses	1,129		(152)		335
Net interest income after provision for (release of) credit losses	47,763		48,095		44,944
Non-interest income:
Deposit service charges	963		960		977
Mortgage banking income	1,406	[1]	1,900	[1]	4,319
Investment advisory fees and non-deposit commissions	4,511	[1]	4,479	[1]	3,995
Loss on sale of securities	(1,249)	[1]
Gain (loss) on sale of other real estate owned	151		(45)		77
Gain (loss) on sale of other assets			(73)		117
Other non-recurring income	121		7		171
Other	4,518	[2]	4,341	[2]	4,248
Total non-interest income	10,421		11,569		13,904
Non-interest expense:
Salaries and employee benefits	25,864		25,357		24,494
Occupancy	3,157		3,002		2,947
Equipment	1,566		1,343		1,296
Marketing and public relations	1,496		1,259		1,173
FDIC Insurance assessments	904		468		618
Other real estate expense (income)	(112)		308		105
Amortization of intangibles	158		158		201
Other	10,111		9,358		8,367
Total non-interest expense	43,144		41,253		39,201
Net income before tax	15,040		18,411		19,647
Income tax expense	3,197		3,798		4,182
Net income	$ 11,843		$ 14,613		$ 15,465
Basic earnings per common share	$ 1.56		$ 1.94		$ 2.06
Diluted earnings per common share	$ 1.55		$ 1.92		$ 2.05

[1] Not within the scope of ASC 606

[2] Includes Check Card Fee income discussed above.  No other items are within the scope of ASC 606.

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Statement [Abstract]
Net income	$ 11,843	$ 14,613	$ 15,465
Other comprehensive income (loss):
Unrealized gain (loss) during the period on available for sale securities, net of tax (expense) benefit of $(501), $6,190, and $2,128, respectively	1,884	(23,285)	(8,008)
Reclassification adjustment for loss included in net income, net of tax benefit of $262, $0, and $0, respectively	987
Unrealized loss during the period on available-for-sale securities transferred to held-to-maturity, net of tax benefit of $0, $3,509, and $0, respectively		(13,198)
Reclassification adjustment for amortization of unrealized losses on securities transferred from available-for-sale to held-to-maturity, net of tax expense of $352, $218, and $0 respectively	1,324	818
Other comprehensive income (loss)	4,195	(35,665)	(8,008)
Comprehensive income (loss)	$ 16,038	$ (21,052)	$ 7,457

XML

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Statement [Abstract]
Unrealized (loss) gain during the period on available-for-sale securities, taxes	$ (501)	$ 6,190	$ 2,128
Reclassification adjustment for loss (gain) included in net income, taxes	262	0	0
OCI, Debt Securities, Available-for-Sale, Transfer to Held-to-Maturity, Adjustment from AOCI for Amortization of Gain (Loss), Tax	0	3,509	0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Investment Transferred from Available-for-Sale to Equity Method, Tax	$ 352	$ 218	$ 0

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Nonvested Restricted Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Beginning balance, value at Dec. 31, 2020	$ 7,500	$ 91,380	$ (283)	$ 26,453	$ 11,287	$ 136,337
Beginning Balance, Shares at Dec. 31, 2020	7,500,000
Net income				15,465		15,465
Other comprehensive income net of tax expense of $1,115					(8,008)	(8,008)
Issuance of restricted stock	$ 21	353	(374)
Issuance of restricted stock, Shares	21,000
Issuance of common stock-deferred compensation	$ 12	124				136
Issuance of common stock-deferred compensation, Shares	12,000
Amortization of compensation on restricted stock			363			363
Shares forfeited	$ (4)	(66)				(70)
Shares forfeited, Shares	(4,000)
Dividends: Common ($0.56 per share)				(3,593)		(3,593)
Dividend reinvestment plan	$ 20	348				368
Dividend reinvestment plan, Shares	20,000
Adoption of ASU 2016-13 net of tax benefit of $90
Ending balance, value at Dec. 31, 2021	$ 7,549	92,139	(294)	38,325	3,279	140,998
Ending Balance, Shares at Dec. 31, 2021	7,549,000
Net income				14,613		14,613
Other comprehensive income net of tax expense of $1,115					(35,665)	(35,665)
Issuance of restricted stock	$ 9	190	(199)
Issuance of restricted stock, Shares	9,000
Issuance of common stock-deferred compensation	$ 1	27				28
Issuance of common stock-deferred compensation, Shares	1,000
Amortization of compensation on restricted stock			507			507
Shares forfeited	$ (2)	(40)				(42)
Shares forfeited, Shares	(2,000)
Dividends: Common ($0.56 per share)				(3,913)		(3,913)
Dividend reinvestment plan	$ 21	367				388
Dividend reinvestment plan, Shares	21,000
Grant of restricted stock units			1,447			1,447
Adoption of ASU 2016-13 net of tax benefit of $90
Ending balance, value at Dec. 31, 2022	$ 7,578	92,683	1,461	49,025	(32,386)	118,361
Ending Balance, Shares at Dec. 31, 2022	7,578,000
Net income				11,843		11,843
Other comprehensive income net of tax expense of $1,115					4,195	4,195
Issuance of restricted stock	$ 8	146	(154)
Issuance of restricted stock, Shares	8,000
Issuance of common stock-deferred compensation	$ 2	39	(69)			(28)
Issuance of common stock-deferred compensation, Shares	2,000
Amortization of compensation on restricted stock			763			763
Shares forfeited	$ (6)	(115)				(121)
Shares forfeited, Shares	(6,000)
Dividends: Common ($0.56 per share)				(4,235)		(4,235)
Dividend reinvestment plan	$ 24	414				438
Dividend reinvestment plan, Shares	24,000
Grant of restricted stock units			180			180
Adoption of ASU 2016-13 net of tax benefit of $90				(337)		(337)
Ending balance, value at Dec. 31, 2023	$ 7,606	$ 93,167	$ 2,181	$ 56,296	$ (28,191)	$ 131,059
Ending Balance, Shares at Dec. 31, 2023	7,606,000

XML

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Statement of Stockholders' Equity [Abstract]
OCI, Debt Securities, Available-for-Sale, Gain (Loss), after Adjustment, Tax	$ 1,115	$ 9,481	$ 2,128
Common Stock, Dividends, Per Share, Cash Paid	$ 0.56	$ 0.52	$ 0.48

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities:
Net income	$ 11,843	$ 14,613	$ 15,465
Adjustments to reconcile net income to net cash (used) provided in operating activities
Depreciation	1,760	1,663	1,714
Net premium amortization AFS	(2,507)	1,869	2,317
Net premium amortization HTM	(575)	(264)
Provision for credit losses	1,129	(152)	335
Write-downs of other real estate owned	44	69	50
Loss (gain) loss on sale of other real estate owned	(151)	45	(77)
Originations of HFS loans	(50,253)	(64,495)	(139,773)
Sales of HFS loans	47,599	69,836	177,673
Amortization of intangibles	158	158	201
Loss on sale of securities	1,249
Loss on fair value of equity investments	(19)	(2)	(4)
Accretion on acquired loans	(81)	(49)	(135)
Gain on sale of other assets		73	(117)
(Increase) decrease in other assets	(1,628)	(1,696)	994
Increase (decrease) in other liabilities	3,658	457	(715)
Net cash provided (used) in operating activities	12,226	22,125	57,928
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale	38,662
Purchase of investment securities available-for-sale	(6,025)	(105,943)	(271,293)
Purchase of investment securities held-to-maturity		(11,270)
Purchase of other investment securities	(2,589)	(2,406)	(87)
Maturity/call of investment securities available-for-sale	21,891	61,958	53,872
Maturity/call of investment securities held-to-maturity	12,074	11,745
Proceeds from sale of other investments			355
Increase in loans	(153,029)	(116,797)	(19,100)
Proceeds from sale of other real estate owned	419	117	201
Proceeds from sale of fixed assets		925	1,414
Purchase of property and equipment	(1,071)	(1,223)	(813)
Net disposal of property and equipment		115	19
Purchase of BOLI			(850)
Net cash used in investing activities	(89,668)	(162,779)	(236,282)
Cash flows from financing activities:
Increase in deposit accounts	125,619	24,091	171,878
Increase (decrease) in Fed Funds Borrowed	(22,000)	22,000
Advances from the Federal Home Loan Bank	289,000	118,000
Repayment of advances from the Federal Home Loan Bank	(249,000)	(68,000)
Increase in securities sold under agreements to repurchase	(5,880)	14,527	13,302
Shares Retired	(121)	(42)	(70)
Restricted Stock Units Granted	180	1,447
Change in non-vested restricted stock	763	507	363
Dividend reinvestment plan	438	388	368
Proceeds from (cost of) issuance of common stock-deferred compensation	(28)	28	136
Dividends paid on Common Stock	(4,235)	(3,913)	(3,593)
Net cash provided in financing activities	134,736	109,033	182,384
Net increase in cash and cash equivalents	57,294	(31,621)	4,030
Cash and cash equivalents at beginning of year	37,401	69,022	64,992
Cash and cash equivalents at end of year	94,695	37,401	69,022
Supplemental disclosure:
Cash paid during the period for: interest	20,750	3,058	3,312
Income Taxes	3,574	3,893	5,097
Non-cash investing and financing activities:
Unrealized gain (loss) on securities available-for-sale, net of tax	2,871	(23,285)	(8,008)
Transfer of investment securities available-for-sale to held-to-maturity		245,619
Loans charged off	24	68	182
CECL transition	337
Transfer of loans to other real estate owned	44		145
Recognition of operating lease right of use asset	835
Recognition of operating lease liability	$ 835

XML

ORGANIZATION AND BASIS OF PRESENTATION

12 Months Ended

Dec. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BASIS OF PRESENTATION

Note 1—ORGANIZATION AND BASIS OF PRESENTATION

The consolidated financial statements include the accounts of First Community Corporation (the “Company”) and its wholly owned subsidiary, First Community Bank (the “Bank”). The Company owns all of the common stock of FCC Capital Trust I. All material intercompany transactions are eliminated in consolidation. The Company was organized on November 2, 1994, as a South Carolina corporation, and was formed to become a bank holding company. The Bank opened for business on August 17, 1995. FCC Capital Trust I is an unconsolidated special purpose subsidiary organized for the sole purpose of issuing trust preferred securities.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses. The estimation process includes management’s judgment as to future losses on existing loans based on an internal review of the loan portfolio, including an analysis of the borrower’s current financial position, the consideration of current and anticipated economic conditions and the effect on specific borrowers. In determining the collectability of loans management also considers the fair value of underlying collateral. Various regulatory agencies, as an integral part of their examination process, review the Company’s allowance for credit losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors it is possible that the allowance for credit losses could change materially.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, due from banks, interest-bearing bank balances, federal funds sold and securities purchased under agreements to resell. Generally federal funds are sold for a one-day period and securities purchased under agreements to resell mature in less than 90 days.

Investment Securities

Investment securities are classified as either held-to-maturity, available-for-sale or trading securities. In determining such classification, securities that the Company has the positive intent and ability to hold to maturity are classified as held-to maturity and are carried at amortized cost. Securities classified as available-for-sale are carried at estimated fair values with unrealized gains and losses included in shareholders’ equity on an after-tax basis. Trading securities are carried at estimated fair value with unrealized gains and losses included in non-interest income (See Note 3).

Gains and losses on the sale of available-for-sale securities and trading securities are determined using the specific identification method. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are judged to be other than temporary are written down to fair value and charged to income in the Consolidated Statement of Income.

Premiums are recognized in interest income using the effective interest method over the period to the earliest call date. Discounts are recognized in interest income using the effective interest method to maturity.

Other Investments, At Cost

Equity Securities without readily determinable fair values include Federal Home Loan Bank (“FHLB”) of Atlanta capital stock and various other non-marketable equity investments. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB Atlanta. FHLB stock is carried at cost, and periodically evaluated for impairment based on an assessment of the ultimate recovery of par value. Both cash and stock dividends are reported as interest income. At December 31, 2023 and 2022, the Company’s investment in FHLB stock was $5.5 million and $2.9 million, respectively. Dividends received on other investments, at cost are reported as interest income.

Mortgage Loans Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with an investor, are carried in the Company’s loans held for sale portfolio. These loans are primarily fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all these loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company.

The Company usually delivers to, and receives funding from, the investor within 30 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts” basis. The Company is not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination. These loans are classified as Level 2.

Loans and Allowance for Credit Losses-Loans

Loan receivables that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for credit losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the loan balance outstanding. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the effective interest method.

The allowance for credit losses is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio. Management’s determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loss experience, economic conditions and volume, growth and composition of the portfolio.

The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due, generally when a loan becomes 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to principal and then to interest income.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the asset’s estimated useful life. Estimated lives range up to 39 years for buildings and up to 10 years for furniture, fixtures, and equipment.

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of fair value of net assets acquired (including identifiable intangibles) in purchase transactions. Other intangible assets represent premiums paid for acquisitions of core deposits (core deposit intangibles). Core deposit intangibles are being amortized on a straight-line basis over seven years. Goodwill and identifiable intangible assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Qualitative factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less than fair value. During the year ended December 31, 2023 and 2022, qualitative factors indicated it was more likely than not that the carrying value of goodwill was less than fair value, thus there were no indicators of impairment and no quantitative testing was performed.

Other Real Estate Owned

Other real estate owned includes real estate acquired through foreclosure. Other real estate owned is carried at the lower of cost (principal balance at date of foreclosure) or fair value minus estimated cost to sell. Any write-downs at the date of foreclosure are charged to the allowance for credit losses. Expenses to maintain such assets, subsequent changes in the valuation allowance, and gains or losses on disposal are included in other expenses.

Comprehensive Income (loss)

The Company reports comprehensive income (loss) in accordance with Accounting Standards Codification (“ASC”) 220, “Comprehensive Income.” ASC 220 requires that all items that are required to be reported under accounting standards as comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. The disclosures requirements have been included in the Company’s consolidated statements of comprehensive income.

Mortgage Origination Fees

Mortgage origination fees relate to activities comprised of accepting residential mortgage applications, qualifying borrowers to standards established by investors and selling the mortgage loans to the investors under pre-existing commitments. The related fees received by the Company for these services are recognized at the time the loan is closed.

Advertising Expense

Marketing and public relations costs are generally expensed as incurred. External costs incurred in producing media advertising are expensed the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent. Marketing and public relations expense totaled $1.5 million, $1.3 million and $1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Income Taxes

A deferred income tax liability or asset is recognized for the estimated future effects attributable to differences in the tax bases of assets or liabilities and their reported amounts in the financial statements as well as operating loss and tax credit carry forwards. The deferred tax asset or liability is measured using the enacted tax rate expected to apply to taxable income in the period in which the deferred tax asset or liability is expected to be realized.

In 2006, the FASB issued guidance related to Accounting for Uncertainty in Income Taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB ASC Topic 740-10, “Income Taxes.” It also prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in an enterprise’s tax return.

Stock Based Compensation Cost

The Company accounts for stock-based compensation under the fair value provisions of the accounting literature. Compensation expense is recognized in salaries and employee benefits.

The fair value of each grant is estimated on the date of grant using the Black-Sholes option pricing model. No options were granted in 2023, 2022 or 2021.

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock and common stock equivalents. Common stock equivalents consist of restricted stock and restricted stock units and are computed using the treasury stock method.

Business Combinations and Method of Accounting for Loans Acquired

The Company accounts for its acquisitions under FASB ASC Topic 805, “Business Combinations,” which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for credit losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.”

Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30, “Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality,” formerly American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of purchase dates may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. The Company considers expected prepayments and estimates the amount and timing of expected principal, interest and other cash flows for each loan or pool of loans meeting the criteria above and determines the excess of the loan’s scheduled contractual principal and contractual interest payments over all cash flows expected to be collected at acquisition as an amount that should not be accreted (non-accretable difference). The remaining amount, representing the excess of the loan’s or pool’s cash flows expected to be collected over the fair value for the loan or pool of loans, is accreted into interest income over the remaining life of the loan or pool (accretable difference). Subsequent to the acquisition date, increases in cash flows expected to be received in excess of the Company’s initial estimates are reclassified from non-accretable difference to accretable difference and are accreted into interest income on a level-yield basis over the remaining life of the loan. Decreases in cash flows expected to be collected are recognized as impairment through the provision for credit losses.

Segment Information

ASC Topic 280-10, ”Segment Reporting,” requires selected segment information of operating segments based on a management approach. The Company’s four reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by management (see Note 25, Reportable Segments, for further information).

Application of New Accounting Guidance Adopted in 2023

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology that delayed recognition until it is probable a loss has been incurred with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. Additionally, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the adoption of CECL included a decrease in the allowance for credit losses on loans of $14,300, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $397,900, which is recorded within Other Liabilities. The Company recorded an allowance for credit losses for held to maturity securities of $43,500, which is presented as a reduction to held to maturity securities outstanding. The Company recorded a net decrease to retained earnings of $337,400 as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).

The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired available-for-sale investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale securities was not deemed material.

The following table illustrates the impact on the allowance for credit losses (“ACL”) from the adoption of ASC 326:

(Dollars in thousands)	January 1, 2023 As Reported Under ASC 326		December 31, 2022 Pre-ASC 326 Adoption December		Impact of ASC 326 Adoption
Assets:
Held to maturity securities, at amortized cost	$	106,929	$	106,929	$	—
Allowance for credit losses on held to maturity securities:
State and local governments		43		—		43
Allowance for credit losses on held-to-maturity securities	$	43	$	—	$	43
Loans, at amortized cost	$	980,857	$	980,857	$	—
Allowance for credit losses on loans:
Commercial		1,042		849		193
Real Estate Construction		1,150		75		1,075
Real Estate Mortgage Residential		755		723		32
Real Estate Mortgage Commercial		7,686		8,569		(883	)
Consumer Home Equity		480		314		166
Consumer Other		209		170		39
Unallocated		—		636		(636	)
Allowance for credit losses on loans	$	11,322	$	11,336	$	(14	)
Liabilities:
Allowance for credit losses for unfunded commitments	$	398	$	—	$	398

The Company elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on non-accrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest.

Allowance for Credit Losses on Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $1.3 million at December 31, 2023 and was excluded from the estimate of credit losses. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Securities are analyzed individually to establish a CECL reserve.

The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed securities or state and local governments.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL or as of December 31, 2023. The state and local governments securities held by the Company are highly rated by major rating agencies.

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit loss related to the available-for-sale securities portfolio.

Accrued interest receivable on available-for-sale securities totaled $870,000 at December 31, 2023 and was excluded from the estimate of credit losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future, until maturity, or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $3.6 million at December 31, 2023 and was reported in other assets on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.

All accrued interest is reversed against interest income when a loan is placed on non-accrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.

The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call report code and then by risk grade grouping. Risk grade is grouped within each call report code by pass, watch, special mention, substandard, and doubtful. Other loan types are separated into their own cohorts due to specific risk characteristics for that pool of loans.

The Company has elected a non-discounted cash flow methodology with probability of default (“PD”) and loss given default (“LGD”) for all call report code cohorts (“cohorts”), as this is believed to be the most accurate model available. The PD calculation looks at the historical loan portfolio at particular points in time (each month during the lookback period) to determine the probability that loans in a certain cohort will default over the next 12-month period. A default is defined as a loan that has moved to past due 90 days and greater, non-accrual status, or experienced a charge-off during the period. Currently, the Company’s historical data is insufficient due to a minimal amount of default activity or zero defaults, therefore, management uses index PDs comprised of rates derived from the PD experience of other community banks in place of the Company’s historical PDs.

The LGD calculation looks at actual losses (net charge-offs) experienced over the entire lookback period for each cohort of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. All defaults (non-accrual, charge-off, or greater than 90 days past due) occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event (i.e., non-accrual or charge-off). Due to very limited charge-off history, management uses index LGDs comprised of rates derived from the LGD experience of other community banks in place of the Company’s historical LGDs.

The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes a 12-month PD forecast based on the peer index regression model comparing peer defaults to the national unemployment rate. After the forecast period, PD rates revert on a straight-line basis back to long-term historical average rates over a 12-month period.

The Company recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company adjusts the modeled historical losses by qualitative adjustments to incorporate all significant risks to form a sufficient basis to estimate the credit losses. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth and concentrations, trends in underlying collateral, as well as external factors and economic conditions not already captured.

The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The Bank has identified the following pools: 

· Loans Secured by Non-Owner Occupied Commercial Real Estate – These loans are to businesses for structures that will be leased to other commercial entities. Cash flows to pay these loans is dependent on lease payments to the business owners.

· Loans Secured by Owner Occupied Commercial Real Estate – These loans are to businesses who are housed in the building that serves as collateral. Cash flows to pay these loans is dependent on cash generated by the business.

· Commercial and Industrial Loans – These loans are to businesses for purposes other than commercial real estate, such as equipment. The loans are typically secured by the equipment purchased, and cash flows to pay these loans is dependent on cash generated by the business.

· Loans Secured by Residential Real Estate – These loans are to businesses and individuals for real estate with houses or apartment complexes on it. Cash flows to pay these loans is dependent on household income, and the collateral rises and falls in value in alignment with the residential property market.

· Loans Secured by Farmland – These loans are secured by agricultural property.

· Loans to States and Municipalities – These loans are to governments, and are backed by tax revenues.

· Loans Secured by Construction and Development – These loans are for new construction and work on the underlying land.

· Other Consumer Loans – These loans are made to consumers and are secured by collateral other than residential real estate, e.g., automobiles.

Loans that do not share risk characteristics are evaluated on an individual basis. Generally, this population includes loan relationships exceeding $500,000 and on non-accrual status, however they can also include any loan that does not share risk characteristics with its respective pool. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate. When the expected source of repayment is from a source other than the underlying collateral, impairment will generally be measured based upon the present value of expected proceeds discounted at the contractual interest rate.

Allowance for Credit Losses on Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan cohort at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

Recently Issued Accounting Standards

In March 2020, the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. In December 2022, the FASB issued amendments to extend the period of time preparers can use the reference rate reform relief guidance under ASC Topic 848 from December 31, 2023 to December 31, 2024, to address the fact that all London Interbank Offered Rate (LIBOR) tenors were not discontinued as of December 31, 2022, and some tenors will be published until June 2023. The amendments are effective immediately for all entities and applied prospectively. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2022, the FASB issued ASU 2022-02, which eliminated the previous recognition and measurement guidance for troubled debt restructurings (“TDRs”), required new disclosures for loan modifications when a borrower is experiencing financial difficulty, and required disclosures of current period gross charge-offs by year of origination in the vintage disclosures. The Company adopted this amendment effective January 1, 2023.

In March 2022, the FASB issued amendments which are intended to improve the decision usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments do not have a material effect on the Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments require disclosure of incremental segment information on an annual and interim basis for all public entities. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. Early adoption is permitted.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This amendment is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

General Risk and Uncertainties

In the normal course of business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on a different basis, than its interest-earning assets. Credit risk is the risk of default on the Company’s loan and investment portfolios that results from borrowers’ or issuer’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans and investments and the valuation of real estate held by the Company.

The Company is subject to regulations of various governmental agencies (regulatory risk). These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required credit loss allowances and operating restrictions from regulators’ judgments based on information available to them at the time of their examination.

Reclassifications

Certain captions and amounts in the 2021 and 2022 consolidated financial statements were reclassified to conform to the 2023 presentation.

XML

INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2023

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

Note 3—INVESTMENT SECURITIES

The amortized cost and estimated fair values of investment securities are summarized below:

AVAILABLE-FOR-SALE:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023
US Treasury securities	$	20,791	$	—	$	(2,445	)	$	18,346
Government Sponsored Enterprises		2,500		—		(371	)		2,129
Mortgage-backed securities		255,757		15		(17,613	)		238,159
Small Business Administration pools		16,108		24		(411	)		15,721
Corporate and other securities		8,759		—		(888	)		7,871
	$	303,915	$	39	$	(21,728	)	$	282,226
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022
US Treasury securities	$	60,552	$	—	$	(4,569	)	$	55,983
Government Sponsored Enterprises		2,500		—		(426	)		2,074
Mortgage-backed securities		263,704		10		(19,114	)		244,600
Small Business Administration pools		21,657		60		(630	)		21,087
Corporate and other securities		8,772		12		(666	)		8,118
	$	357,185	$	82	$	(25,405	)	$	331,862

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2021
US Treasury securities	$	15,736	$	—	$	(300	)	$	15,436
Government Sponsored Enterprises		2,499		2		—			2,501
Mortgage-backed securities		398,125		3,596		(3,992	)		397,729
Small Business Administration pools		30,835		505		(67	)		31,273
State and Local Government		105,469		4,918		(539	)		109,848
Corporate and other securities		8,024		157		(129	)		8,118
	$	560,688	$	9,178	$	(5,027	)	$	564,839

HELD-TO-MATURITY:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023
Mortgage-backed securities	$	112,740	$	—	$	(8,490	)	$	104,250
State and local government		104,430		282		(3,445	)		101,268
	$	217,170	$	282	$	(11,935	)	$	205,518
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022
Mortgage-backed securities	$	121,772		—	$	(8,656	)	$	113,116
State and local government		106,929		—		(6,432	)		100,497
	$	228,701	$	—	$	(15,088	)	$	213,613

There were no securities classified as held-to maturity at December 31, 2021.

On June 1, 2022, the Company reclassified $224.5 million in investments to held-to-maturity (HTM) from available-for-sale (AFS). These securities were transferred at fair value at the time of the transfer, which became the new cost basis for the securities held to maturity. The pretax unrealized net holding loss on the available for sale securities on the date of transfer totaled approximately $16.7 million, and continued to be reported as a component of accumulated other comprehensive loss. This net unrealized loss is being amortized to interest income over the remaining life of the securities as a yield adjustment. There were no gains or losses recognized as a result of this transfer. The remaining pretax unrealized net holding loss on these investments was $14.0 million ($11.1 million net of tax) at December 31, 2023 and $15.7 million ($12.4 million net of tax) at December 31, 2022.

During the year ended December 31, 2023, the Company sold $39.9 million of book value US Treasury securities from the available-for-sale investment securities portfolio. This sale created a one-time pre-tax loss of $1.2 million and provided additional liquidity to pay down borrowings and fund loan growth. During the years ended December 31, 2022 and 2021, the Company sold no investment securities. The tax benefit applicable to the net realized loss was approximately $262, $0, and $0 for 2023, 2022 and 2021, respectively.

The following tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at December 31, 2023 and December 31, 2022. 

(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale securities:	Value		Loss		Value		Loss		Value		Loss
US Treasury Securities	$	—	$	—	$	18,346	$	2,445	$	18,346	$	2,445
Government Sponsored Enterprise		—		—		2,129		371		2,129		371
Mortgage-backed securities		8,164		423		223,844		17,190		232,008		17,613
Small Business Administration pools		4,253		45		7,638		366		11,891		411
Corporate and other securities		1,880		115		4,236		773		6,116		888
Total	$	14,297	$	583	$	256,193	$	21,145	$	270,490	$	21,728
(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2022	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale securities:	Value		Loss		Value		Loss		Value		Loss
US Treasury Securities	$	28,827	$	1,032	$	27,156	$	3,537	$	55,983	$	4,569
Government Sponsored Enterprise		—		—		2,074		426		2,074		426
Mortgage-backed securities		81,961		4,435		159,227		14,679		241,188		19,114
Small Business Administration pools		16,066		453		2,592		177		18,658		630
Corporate and other securities		2,128		146		3,230		520		5,358		666
Total	$	128,982	$	6,067	$	194,279	$	19,338	$	323,261	$	25,405

(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held-to-maturity securities:	Value		Loss		Value		Loss		Value		Loss
Mortgage-backed securities		—		—		104,250		8,490		104,250		8,490
State and local government		6,278		25		78,597		3,420		84,875		3,445
Total	$	6,278	$	25	$	182,847	$	11,910	$	189,125	$	11,935

  

The following table shows a roll forward of the allowance for credit losses on held to maturity securities for the year ended December 31, 2023.

	State and
	local
(Dollars in thousands)	government
Allowance for Credit Losses on Held-to-Maturity Securities:
Beginning balance, December 31, 2022	$	—
Adjustment for adoption of ASU 2016-13		(43	)
Provision for credit losses		13
Ending balance, December 31, 2023	$	(30	)

For the year ended December 31, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as non-accrual at December 31, 2023.

The amortized cost and fair value of investment securities at December 31, 2023, by expected maturity, follow. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. Mortgage-backed securities are included in the year corresponding with the remaining expected life.

AVAILABLE-FOR-SALE:

(Dollars in thousands)	Available-for-sale
	Amortized Cost		Fair Value
Due in one year or less	$	5,003	$	4,996
Due after one year through five years		9,658		9,328
Due after five years through ten years		39,482		35,424
Due after ten years		249,772		232,478
	$	303,915	$	282,226

HELD-TO-MATURITY:

(Dollars in thousands)	Held-to-maturity
	Amortized Cost			Fair Value
Due in one year or less	$	809		$	805
Due after one year through five years		42,349			40,915
Due after five years through ten years		74,378			71,522
Due after ten years		99,664			92,276
Allowance for Credit Losses on Held-to-Maturity Securities		(30	)		—
	$	217,170		$	205,518

Securities with an amortized cost of $160.8 million and fair value of $150.6 million at December 31, 2023 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase. Securities with an amortized cost of $290.1 million and fair value of $270.4 million at December 31, 2022 were pledged to secure FHLB advances, public deposits, and securities sold under agreements to repurchase.

Allowance for Credit Losses on Held-to-Maturity Securities

Expected credit losses on held-to-maturity debt securities are evaluated by major security type. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Municipal securities are analyzed individually to establish a CECL reserve.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL or as of December 31, 2023.

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit loss related to the available-for-sale securities portfolio.

XML

LOANS

12 Months Ended

Dec. 31, 2023

Receivables [Abstract]

LOANS

Note 4—LOANS

The following table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled $2.2 million and $1.9 million as of December 31, 2023 and December 31, 2022, respectively.

	December 31,
(Dollars in thousands)	2023		2022
Commercial	$	78,134	$	72,409
Real estate:
Construction		118,225		91,223
Mortgage-residential		94,796		65,759
Mortgage-commercial		791,947		709,218
Consumer:
Home equity		34,752		28,723
Other		16,165		13,525
Total	$	1,134,019	$	980,857

Commercial category includes $151.0 thousand and $219.0 thousand in PPP loans, net of deferred fees and costs, as of December 31, 2023 and December 31, 2022, respectively.

Activity in the allowance for credit losses was as follows:

	Years ended December 31,
(Dollars in thousands)	2023			2022			2021
Balance at the beginning of year	$	11,336		$	11,179		$	10,389
Adjustment for adoption of ASU 2016-13		(14	)
Provision for (release of) credit losses		939			(152	)		335
Charged off loans		(87	)		(68	)		(182	)
Recoveries		93			377			637
Balance at end of year	$	12,267		$	11,336		$	11,179

The detailed activity in the allowance for credit losses and the recorded investment in loans receivable as of and for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 follows:

($ in thousands)	Commercial			Real Estate Construction		Real Estate Mortgage Residential		Real Estate Mortgage Commercial			Consumer Home Equity			Consumer Other			Unallocated			Total Loans
Balance at December 31, 2022	$	849		$	75	$	723	$	8,569		$	314		$	170		$	636		$	11,336
Adjustment to allowance for adoption of ASU 2016-13		193			1,075		32		(883	)		166			39			(636	)		(14	)
Charge-offs		(20	)		—		—		—			—			(67	)		—			(87	)
Recoveries		5			2		9		37			22			18			—			93
Provision for credit losses		(92	)		185		358		423			(30	)		95			—			939
Balance at December 31, 2023	$	935		$	1,337	$	1,122	$	8,146		$	472		$	255			—		$	12,267

(Dollars in thousands)	Commercial			Real estate Construction			Real estate Mortgage Residential		Real estate Mortgage Commercial			Consumer Home equity			Consumer Other			Unallocated		Total
2022
Allowance for credit losses:
Beginning balance	$	853		$	113		$	560	$	8,570		$	333		$	126		$	624	$	11,179
Charge-offs		—			—			—		—			(1	)		(67	)		—		(68	)
Recoveries		17			—			6		325			13			16			—		377
Provisions		(21	)		(38	)		157		(326	)		(31	)		95			12		(152	)
Ending balance	$	849		$	75		$	723	$	8,569		$	314		$	170		$	636	$	11,336
Ending balances:
Individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment		(849	)		75			723		8,569			314			170			636		11,336
Loans receivable:
Ending balance-total	$	72,409		$	91,223		$	65,759	$	709,218		$	28,723		$	13,525		$	—	$	980,857
Ending balances:
Individually evaluated for impairment		29			—			34		4,752			168			—			—		4,983
Collectively evaluated for impairment		72,380			91,223			65,725		704,466			28,555			13,525			—		975,874

The following table presents an allocation of the allowance for credit losses at the end of each of the past three years. The allocation is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount is available to absorb losses occurring in any category of loans.

Allocation of the Allowance for Credit Losses

	2023					2022					2021
(Dollars in thousands)	Amount		% of loans in category			Amount		% of loans in category			Amount		% of loans in category
Commercial	$	935		7.6	%	$	849		7.9	%	$	853		8.1	%
Real Estate Construction		1,337		10.9	%		75		0.7	%		113		1.1	%
Real Estate Mortgage:
Commercial		8,146		66.4	%		8,569		80.1	%		8,570		81.2	%
Residential		1,122		9.2	%		723		6.8	%		560		5.3	%
Consumer - Home Equity		472		3.8	%		314		2.9	%		333		3.2	%
Consumer - Other		255		2.1	%		170		1.6	%		126		1.2	%
Unallocated		—		N/A			636		N/A			624		N/A
Total	$	12,267		100.0	%	$	11,336		100.0	%	$	11,179		100.0	%

The following tables are by loan category and present at December 31, 2022 and December 31, 2021 loans considered impaired under FASB ASC 310, “Accounting by Creditors for Impairment of a Loan.” Impairment includes performing troubled debt restructurings.

The following table presents information related to the average recorded investment and interest income recognized on impaired loans, excluding PCI loans, at December 31, 2022 and December 31, 2021.

(Dollars in thousands)
December 31, 2022	Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	27	$	2
Real estate:
Construction		—		—
Mortgage-residential		34		3
Mortgage-commercial		4,747		464
Consumer:
Home Equity		167		9
Other		—		—
With an allowance recorded:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		—		—
Mortgage-commercial		—		—
Consumer:
Home Equity		—		—
Other		—		—
Total:
Commercial		27		2
Real estate:
Construction		—		—
Mortgage-residential		34		3
Mortgage-commercial		4,747		464
Consumer:
Home Equity		167		9
Other		—		—
	$	4,975	$	478

(Dollars in thousands)
December 31, 2021	Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	—	$	—
Real estate:
Construction		—		—
Mortgage-residential		131		6
Mortgage-commercial		1,748		223
Consumer:
Home Equity		—		—
Other		—		—
With an allowance recorded:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		—		—
Mortgage-commercial		39		5
Consumer:
Home Equity		—		—
Other		—		—
Total:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		131		6
Mortgage-commercial		1,787		228
Consumer:
Home Equity		—		—
Other		—		—
	$	1,918	$	234

The following tables present loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2022.

(Dollars in thousands)
December 31, 2022	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no allowance recorded:
Commercial	$	29	$	29	$	—
Real estate:
Construction		—		—		—
Mortgage-residential		34		51		—
Mortgage-commercial		4,752		5,260		—
Consumer:
Home Equity		168		168		—
Other		—		—		—
With an allowance recorded:
Commercial		—		—		—
Real estate:
Construction		—		—		—
Mortgage-residential		—		—		—
Mortgage-commercial		—		—		—
Consumer:
Home Equity		—		—		—
Other		—		—		—
Total:
Commercial		29		29		—
Real estate:
Construction		—		—		—
Mortgage-residential		34		51		—
Mortgage-commercial		4,752		5,260		—
Consumer:
Home Equity		168		168		—
Other		—		—		—
	$	1,694	$	3,705	$	—

The following table shows the amortized cost basis at December 31, 2023 of the loans modified for borrowers experiencing financial difficulty after December 31, 2022 segregated by loan category and describes the financial effect of the modification made for a borrower experiencing financial difficulty.

	December 31, 2023
(Dollars in thousands)	Amortized cost basis		% of Total Loan Type			Financial effect
Real Estate Mortgage Residential		200		0.21	%	Deferred two monthly payments that are added to the end of the original loan term.
Total Loans	$	200	$	0.21	%

The following table depicts the performance of loans that have been modified in the last 12 months.

(Dollars in thousands)			30-89 Days		Greater than 90 Days
December 31, 2023	Current		Past Due		Past Due
Real Estate Mortgage Residential		—		200		—
Total Loans	$	—	$	200	$	—

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

	Term Loans by year of Origination
($ in thousands)	2019		2020		2021		2022		2023		Prior		Revolving		Revolving Converted to Term		Total
Commercial
Pass	$	1,149	$	1,375	$	23,226	$	9,018	$	12,950	$	9,230	$	21,033	$	49	$	78,030
Special mention		—		—		—		—		—		26		—		—		26
Substandard		—		—		78		—		—		—		—		—		78
Total commercial		1,149		1,375		23,304		9,018		12,950		9,256		21,033		49		78,134
Current period gross write-offs		—		20		—		—		—		—		—		—		20
Real estate construction
Pass		6,864		—		5,074		39,514		47,992		—		18,781		—		118,225
Total real estate construction		6,864		—		5,074		39,514		47,992		—		18,781		—		118,225
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Real estate mortgage-residential
Pass		1,894		10,548		6,219		28,843		28,517		8,420		977		8,962		94,380
Special mention		—		25		—		—		—		177		—		—		202
Substandard		—		—		—		—		—		214		—		—		214
Total real estate mortgage-residential		1,894		10,573		6,219		28,843		28,517		8,811		977		8,962		94,796
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Real estate mortgage-commercial
Pass		47,962		95,120		136,892		201,380		106,125		189,983		14,038		329		791,829
Special mention		—		—		—		—		—		21		—		—		21
Substandard		—		—		—		—		—		97		—		—		97
Total real estate mortgage-commercial		47,962		95,120		136,892		201,380		106,125		190,101		14,038		329		791,947
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Consumer - home equity
Pass		—		—		—		—		—		—		33,621		—		33,621
Special mention		—		—		—		—		—		—		67		—		67
Substandard		—		—		—		—		—		—		1,064		—		1,064
Total consumer - home equity		—		—		—		—		—		—		34,752		—		34,752
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Consumer - other
Pass		420		203		435		1,164		2,043		902		10,982		—		16,149
Special mention		—		—		—		—		16		—		—		—		16
Substandard		—		—		—		—		—		—		—		—		—
Total consumer - other		420		203		435		1,164		2,059		902		10,982		—		16,165
Current period gross write-offs		—		—		—		—		—		—		67		—		67

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of December 31, 2023 and December 31, 2022, no loans were classified as doubtful. As of December 31, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below.

(Dollars in thousands)
			Special
December 31, 2022	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial & agricultural	$	72,333	$	47	$	29	$	—	$	72,409
Real estate:
Construction		91,223		—		—		—		91,223
Mortgage – residential		65,505		220		34		—		65,759
Mortgage – commercial		704,357		80		4,781		—		709,218
Consumer:
Home Equity		27,531		117		1,075		—		28,723
Other		13,269		93		163		—		13,525
Total	$	974,218	$	557	$	6,082	$	—	$	980,857

The following tables are by loan category and present loans past due and on non-accrual status as of December 31, 2023 and December 31, 2022:

(Dollars in thousands) December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	19	$	7	$	—	$	24	$	50	$	78,084	$	78,134
Real estate:
Construction		—		—		—		—		—		118,225		118,225
Mortgage-residential		244		15		214		—		473		94,323		94,796
Mortgage-commercial		67		124		—		—		191		791,756		791,947
Consumer:
Home equity		—		—		—		3		3		34,749		34,752
Other		22		—		1		—		23		16,142		16,165
Total	$	352	$	146	$	215	$	27	$	740	$	1,133,279	$	1,134,019
(Dollars in thousands) December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	87	$	—	$	—	$	29	$	116	$	72,293	$	72,409
Real estate:
Construction		—		—		—		—		—		91,223		91,223
Mortgage-residential		327		—		—		34		361		65,398		65,759
Mortgage-commercial		46		8		—		4,664		4,718		704,500		709,218
Consumer:
Home equity		—		—		—		168		168		28,555		28,723
Other		96		—		2		—		98		13,427		13,525
Total	$	556	$	8	$	2	$	4,895	$	5,461	$	975,396	$	980,857

The following table is a summary of the Company’s non-accrual loans by major categories for the periods indicated.

	CECL						Incurred Loss
	December 31, 2023						December 31, 2022
(Dollars in thousands)	Non-accrual Loans with No Allowance		Non-accrual Loans with an Allowance		Total Non-accrual Loans		Non-accrual Loans
Commercial	$	—	$	24	$	24	$	29
Real Estate:
Construction		—		—		—		—
Mortgage-Residential		—		—		—		34
Mortgage-Commercial		—		—		—		4,664
Consumer Home Equity		—		3		3		168
Consumer Other		—		—		—		—
Total Loans	$	—	$	27	$	27	$	4,895

There were no collateral dependent loans that were individually evaluated for year ended December 31, 2023.

Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the years ended December 31, 2023 and December 31, 2022.

	For the years ended December 31,
(Dollars in thousands)	2023		2022
Balance, beginning of year	$	2,189	$	2,809
New Loans		—		3
Less loan repayments		1,131		623
Balance, end of year	$	1,058	$	2,189

Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be cancelled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $597,000 at December 31, 2023 is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2023.

(Dollars in thousands)	Total Allowance for Credit Losses - Unfunded Commitments
Balance, December 31, 2022	$	—
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13		398
Provision for unfunded commitments		199
Balance, December 31, 2023	$	597

XML

FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

Note 5—FAIR VALUE MEASUREMENT

The Company adopted FASB ASC Fair Value Measurement Topic 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level l Quoted prices in active markets for identical assets or liabilities.

Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

FASB ASC 825-10-50 “Disclosure about Fair Value of Financial Instruments”, requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions are set forth below.

Cash and short term investments—The carrying amount of these financial instruments (cash and due from banks, interest-bearing bank balances, federal funds sold and securities purchased under agreements to resell) approximates fair value. All mature within 90 days and do not present unanticipated credit concerns and are classified as Level 1.

Investment Securities—Measurement is on a recurring basis based upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for prepayment assumptions, projected credit losses, and liquidity. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, or by dealers or brokers in active over-the-counter markets. Level 2 securities include mortgage-backed securities issued both by government sponsored enterprises and private label mortgage-backed securities. Generally, these fair values are priced from established pricing models. Level 3 securities include corporate debt obligations and asset–backed securities that are less liquid or for which there is an inactive market.

Derivative Financial Instruments - Derivative instruments (pay fixed swaps) used to hedge interest rate risk related to the mortgage portfolio are reported at fair value utilizing Level 2 inputs. The fair values of the hedged item and the interest rate swap are based on derivative market data as of the valuation date. 

Other investments, at cost—The carrying value of other investments, such as FHLB stock, approximates fair value based on redemption provisions.

Loans Held for Sale—The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with an investor, are carried in the Company’s loans held for sale portfolio. These loans are fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all of these loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company and are classified as Level 2. The carrying amount of these loans approximates fair value.

Loans— The valuation of loans receivable is estimated using the exit price notion which incorporates factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, fixed rate loans and all other loans. The results are then adjusted to account for credit risk as described above.

Other Real Estate Owned (“OREO”)—OREO is carried at the lower of carrying value or fair value on a non-recurring basis. Fair value is based upon independent appraisals or management’s estimation of the collateral and is considered a Level 3 measurement.

Accrued Interest Receivable—The fair value approximates the carrying value and is classified as Level 1.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. Deposits are classified as Level 2.

Federal Home Loan Bank Advances—Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms and are classified as Level 2.

Short Term Borrowings—The carrying value of short term borrowings (securities sold under agreements to repurchase and demand notes to the Treasury) approximates fair value. These are classified as Level 2.

Junior Subordinated Debentures—The fair values of junior subordinated debentures are estimated by using discounted cash flow analyses based on incremental borrowing rates for similar types of instruments. These are classified as Level 2.

Accrued Interest Payable—The fair value approximates the carrying value and is classified as Level 1.

Commitments to Extend Credit—The fair value of these commitments is immaterial because their underlying interest rates approximate market. 

The carrying amount and estimated fair value by classification Level of the Company’s financial instruments as of December 31, 2023 and December 31, 2022 are as follows: 

	December 31, 2023
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and short term investments	$	94,695	$	94,695	$	94,695	$	—	$	—
Available-for-sale securities		282,226		282,226		—		282,226		—
Held-to-maturity securities		217,170		205,518		—		205,518		—
Other investments, at cost		6,800		6,800		—		—		6,800
Loans held for sale		4,433		4,433		—		4,433		—
Derivative financial instruments		1,069		1,069				1,069
Net loans receivable		1,121,752		1,088,053		—		—		1,088,053
Accrued interest		5,869		5,869		5,869		—		—
Financial liabilities:
Non-interest bearing demand	$	432,333	$	432,333	$	—	$	432,333	$	—
Interest bearing demand deposits and money market accounts		707,434		707,434		—		707,434		—
Savings		118,623		118,623		—		118,623		—
Time deposits		252,611		252,137		—		252,137		—
Total deposits		1,511,001		1,510,527		—		1,510,527		—
Federal Home Loan Bank Advances		90,000		90,000		—		90,000		—
Short term borrowings		62,863		62,863		—		62,863		—
Junior subordinated debentures		14,964		13,123		—		13,123		—
Accrued interest payable		3,575		3,575		3,575		—		—

	December 31, 2022
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and short term investments	$	37,401	$	37,401	$	37,401	$	—	$	—
Available-for-sale securities		331,862		331,862		—		331,862		—
Held-to-maturity securities		228,701		213,613		—		213,613		—
Other investments, at cost		4,191		4,191		—		—		4,191
Loans held for sale		1,779		1,779		—		1,779		—
Net loans receivable		969,521		943,498		—		—		943,498
Accrued interest		5,217		5,217		5,217		—		—
Financial liabilities:
Non-interest bearing demand	$	461,010	$	461,010	$	—	$	461,010	$	—
Interest bearing demand deposits and money market accounts		629,763		629,763		—		629,763		—
Savings		161,770		161,770		—		161,770		—
Time deposits		132,839		132,825		—		132,825		—
Total deposits		1,385,382		1,385,368		—		1,385,368		—
Federal Home Loan Bank Advances		50,000		50,000		—		50,000		—
Short term borrowings		90,743		90,743		—		90,743		—
Junior subordinated debentures		14,964		13,402		—		13,402		—
Accrued interest payable		520		520		520		—		—

The following table summarizes quantitative disclosures about the fair value for each category of assets carried at fair value as of December 31, 2023 and December 31, 2022 that are measured on a recurring basis. There were no liabilities carried at fair value as of December 31, 2023 or December 31, 2022 that are measured on a recurring basis. 

AVAILABLE-FOR-SALE:

Dollars in thousands)

Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Available- for-sale securities
US Treasury Securities	$	18,346	$	—	$	18,346	$	—
Government Sponsored Enterprises		2,129		—		2,129		—
Mortgage-backed securities		238,159		—		238,159		—
Small Business Administration pools		15,721		—		15,721		—
State and local government		—		—		—		—
Corporate and other securities		7,871		—		7,871		—
Total Available-for-sale securities		282,226		—		282,226		—
Loans held for sale		4,433		—		4,433		—
Total	$	286,659	$	—	$	286,659	$	—

(Dollars in thousands)

Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
Available- for-sale securities
US Treasury Securities	$	55,983	$	—	$	55,983	$	—
Government Sponsored Enterprises		2,074		—		2,074		—
Mortgage-backed securities		244,600		—		244,600		—
Small Business Administration pools		21,087		—		21,087		—
State and local government		—		—		—		—
Corporate and other securities		8,118		—		8,118		—
Total Available-for-sale securities		331,862		—		331,862		—
Loans held for sale		1,779		—		1,779		—
Total	$	333,641	$	—	$	333,641	$	—

The following tables summarize quantitative disclosures about the fair value for each category of assets carried at fair value as of December 31, 2023 and December 31, 2022 that are measured on a non-recurring basis. There were no liabilities carried at fair value and measured on a non-recurring basis at December 31, 2023 and 2022. 

(Dollars in thousands)
Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Other real estate owned:
Construction		145		—		—		145
Mortgage-commercial		477		—		—		477
Total other real estate owned		622		—		—		622
Total	$	622	$	—	$	—	$	622

(Dollars in thousands)
Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial & Industrial	$	—	$	—	$	—	$	—
Real estate:
Mortgage-residential		34		—		—		34
Mortgage-commercial		4,752		—		—		4,752
Consumer:
Home equity		168		—		—		168
Other		—		—		—		—
Total impaired		4,954		—		—		4,954
Other real estate owned:
Construction		412		—		—		412
Mortgage-commercial		522		—		—		522
Total other real estate owned		934		—		—		934
Total	$	5,888	$	—	$	—	$	5,888

The Company has a large percentage of loans with real estate serving as collateral. Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the fair value of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which the Company considers to be Level 3 inputs. Third party appraisals are generally obtained when a loan is identified as being impaired or at the time it is transferred to OREO. This internal process would consist of evaluating the underlying collateral to independently obtained comparable properties. With respect to less complex or smaller credits, an internal evaluation may be performed. Generally, the independent and internal evaluations are updated annually. Factors considered in determining the fair value include geographic sales trends, the value of comparable surrounding properties as well as the condition of the property.

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)	Fair Value as of December 31, 2023		Valuation Technique		Significant Observable Inputs		Significant Unobservable Inputs
OREO	$	622		Appraisal Value/Comparison Sales/Other estimates		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost

(Dollars in thousands)	Fair Value as of December 31, 2022		Valuation Technique		Significant Observable Inputs		Significant Unobservable Inputs
OREO	$	934		Appraisal Value/Comparison Sales/Other estimates		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost
Impaired loans	$	4,954		Appraisal Value		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost

XML

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2023

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

Note 6—PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	December 31,
(Dollars in thousands)	2023		2022
Land	$	9,804	$	9,804
Premises		28,708		28,684
Equipment		8,203		7,900
Fixed assets in progress		14		90
Property and equipment, gross		46,729		46,478
Accumulated depreciation		16,140		15,201
Property and Equipment Net	$	30,589	$	31,277

Depreciation expense included in operating expenses for the years ended December 31, 2023, 2022 and 2021 amounted to $1.8 million, $1.6 million, and $1.7 million, respectively.

As of December 31, 2023 and December 31, 2022 there were no premises held-for-sale. There was no gain or loss on premises held-for-sale during the year ended December 31, 2023. During the year ended December 31, 2022, the Company sold a warehouse that had previously been used for storage. Loss on premises held-for-sale was $73 thousand for the year ended December 31, 2022. There was no gain or loss on sale of fixed assets was for the year ended December 31, 2023 and loss on sale of fixed assets was $45 thousand for the year ended December 31, 2022.

XML

GOODWILL, CORE DEPOSIT INTANGIBLE

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL, CORE DEPOSIT INTANGIBLE

Note 7—GOODWILL, CORE DEPOSIT INTANGIBLE

Intangible assets (excluding goodwill) consisted of the following:

	December 31,
(Dollars in thousands)	2023			2022			2021
Core deposit premiums, gross carrying amount	$	3,358		$	3,358		$	3,358
Other intangibles		538			538			538
Gross carrying amount		3,896			3,896			3,896
Accumulated amortization		(3,292	)		(3,135	)		(2,977	)
Net	$	604		$	761		$	919

Based on the core deposit and other intangibles as of December 31, 2023, the following table presents the aggregate amortization expense for each of the succeeding years ending December 31:

(Dollars in thousands)	Amount
2024	$	158
2025		157
2026		158
2027		131
2028 and thereafter
Total	$	604

Amortization of the intangibles amounted to $158 thousand, $158 thousand, and $201 thousand for the years ended December 31, 2023, 2022 and 2021, respectively. Goodwill represents the excess of the purchase price over the sum of the estimated fair values of the tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed. Goodwill has an indefinite useful life and is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. Qualitative factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less than fair value. During the year ended December 31, 2023, qualitative factors indicated it was more likely than not that the carrying value of goodwill was less than fair value, there were no indicators of impairment and no quantitative testing was performed.

Note 7—GOODWILL, CORE DEPOSIT INTANGIBLE (Continued)

The Company’s carrying amount of goodwill at December 31, 2023, and 2022 and changes to the goodwill are summarized as follows:

	December 31,
(In thousands)	2023		2022
Balance—beginning of year	$	14,637	$	14,637
Acquired Goodwill		—		—
Impairment		—		—
Balance, end of year	$	14,637	$	14,637

XML

OTHER REAL ESTATE OWNED

12 Months Ended

Dec. 31, 2023

OTHER REAL ESTATE OWNED

Note 8—OTHER REAL ESTATE OWNED

The following summarizes the activity in the other real estate owned for the years ended December 31, 2023 and 2022.

	December 31,
(In thousands)	2023			2022
Balance—beginning of year	$	934		$	1,165
Additions—foreclosures		—			—
Write-downs		(44	)		(69	)
Sales		(268	)		(162	)
Balance, end of year	$	622		$	934

XML

DEPOSITS

12 Months Ended

Dec. 31, 2023

DEPOSITS

Note 9—DEPOSITS

The Company’s total deposits are comprised of the following at the dates indicated:

	December 31,		December 31,
(Dollars in thousands)	2023		2022
Non-interest bearing deposits	$	432,333	$	461,010
Interest bearing demand deposits and money market accounts		707,434		629,763
Savings		118,623		161,770
Time deposits		252,611		132,839
Total deposits	$	1,511,001	$	1,385,382

Time deposits above include $48.1 million and $0 in brokered deposits as of December 31, 2023 and December 31, 2022, respectively.

At December 31, 2023, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)
2024	$	221,399
2025		8,145
2026		20,483
2027		801
2028 and after		1,783
Total	$	252,611

Interest paid on time deposits of $100 thousand or more totaled $2.4 million, $280 thousand, and $538 thousand in 2023, 2022, and 2021, respectively.

Time deposits that meet or exceed the FDIC insurance limit of $250 thousand at December 31, 2023 and December 31, 2022 were $51.1 million and $25.0 million, respectively.

Deposits from directors and executive officers and their related interests at December 31, 2023 and 2022 amounted to approximately $18.0 million and $24.5 million, respectively.

The amount of overdrafts classified as loans at December 31, 2023 and 2022 were $75 thousand and $162 thousand, respectively.

Total uninsured deposits were $436.6 million and $407.0 million at December 31, 2023 and December 31, 2022, respectively. Included in uninsured deposits at December 31, 2023 and December 31, 2022 were $82.8 million and $59.5 million of collateralized public funds, respectively.

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY

12 Months Ended

Dec. 31, 2023

Securities Sold Under Agreements To Repurchase And Other Borrowed Money

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY

Note 10—SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY

Securities sold under agreements to repurchase generally mature within one day to four days from the transaction date. The weighted average interest rate at December 31, 2023 and 2022 was 2.83% and 0.95%, respectively. The maximum month-end balance during 2023 and 2022 was $91.8 million and $93.4 million, respectively. The average outstanding balance during the years ended December 31, 2023 and 2022 amounted to $74.6 million and $74.8 million, respectively, with an average rate paid of 2.22% and 0.30%, respectively. Securities sold under agreements to repurchase are collateralized by securities with fair market values exceeding the total balance of the agreement.

At December 31, 2023 and 2022, the Company had unused short-term lines of credit totaling $95.0 million and $70.0 million respectively.

XML

ADVANCES FROM FEDERAL HOME LOAN BANK

12 Months Ended

Dec. 31, 2023

ADVANCES FROM FEDERAL HOME LOAN BANK

Note 11—ADVANCES FROM FEDERAL HOME LOAN BANK

As collateral for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $31.7 million at December 31, 2023. Securities have been pledged as collateral for advances in the amount of $150.6 million as of December 31, 2023. As collateral for its advances, the Company has pledged in the form of blanket liens, eligible loans, in the amount of $22.8 million at December 31, 2022. Securities have been pledged as collateral for advances in the amount of $72.6 million as of December 31, 2022. Advances are subject to prepayment penalties. The average advances during 2023 and 2022 were $86.6 million and $9.5 million, respectively. The average interest rate for 2023 and 2022 was 5.02% and 4.34%, respectively. The maximum outstanding amount at any month end was $125.0 million and $50.0 million for 2023 and 2022, respectively.

During the years ended December 31, 2023 and December 31, 2022 there were no advances that were prepaid. Accordingly, no losses were realized on early extinguishment.

XML

JUNIOR SUBORDINATED DEBT

12 Months Ended

Dec. 31, 2023

Broker-Dealer [Abstract]

JUNIOR SUBORDINATED DEBT

Note 12—JUNIOR SUBORDINATED DEBT

On September 16, 2004, FCC Capital Trust I (“Trust I”), a wholly owned unconsolidated subsidiary of the Company, issued and sold floating rate securities having an aggregate liquidation amount of $15.0 million. Until the cessation of LIBOR on June 30, 2023, the securities accrued and paid distributions quarterly at a rate of three month LIBOR plus 257 basis points, thereafter, such distributions to be paid quarterly transitioned to an adjusted Secured Overnight Financing Rate (SOFR) index in accordance with the Federal Reserve’s final rule implementing the Adjustable Interest Rate Act. The distributions are cumulative and payable in arrears. The Company has the right, subject to events of default, to defer payments of interest on the Trust I securities for a period not to exceed 20 consecutive quarters, provided no extension can extend beyond the maturity date of September 16, 2034. The Trust I securities are mandatorily redeemable upon maturity at September 16, 2034. If the Trust I securities are redeemed on or after September 16, 2009, the redemption price will be 100% of the principal amount plus accrued and unpaid interest. The Trust I security were eligible to be redeemed in whole but not in part, at any time prior to September 16, 2009 following an occurrence of a tax event, a capital treatment event or an investment company event. Currently, these securities qualify under risk-based capital guidelines as Tier 1 capital, subject to certain limitations. The Company has no current intention to exercise its right to defer payments of interest on the Trust I securities. In 2015, the Company redeemed $500 thousand of this Trust I security. This resulted in a gain of $130 thousand received in 2015.

XML

LEASES

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

LEASES

Note 13—LEASES

The Company has operating leases on four of its facilities. The leases have maturities ranging from May 2027 to December 2038 some of which include extensions of multiple five-year terms. The right-of-use asset was $3.2 million and $2.7 million at December 31, 2023 and December 31, 2022, respectively. The lease liability was $3.4 million and $2.8 million at December 31, 2023 and December 31, 2022, respectively. During the twelve-month period ended December 31, 2023, the Company made cash payments in the amount of $413.1 thousand for operating leases and the lease liability was reduced by $262.8 thousand. The lease expense recognized during the twelve-month periods ended December 31, 2023, December 31, 2022, December 31, 2021 amounted to $448.5 thousand, $354.8 thousand, and $323.0 thousand, respectively. The weighted average remaining lease term as of December 31, 2023, is 11.70 years and the weighted average discount rate used is 4.29%. The following table shows future undiscounted lease payments for operating leases with initial terms of one year or more as of December 31, 2023.

(Dollars in thousands)
2024	$	424
2025		434
2026		444
2027		422
2028		364
Thereafter		2,344
Total undiscounted lease payments	$	4,432
Less effect of discounting		(1,006	)
Present value of estimated lease payments (lease liability)		3,426

XML

INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 14—INCOME TAXES

Income tax expense for the years ended December 31, 2023, 2022 and 2021 consists of the following:

	Year ended December 31
(Dollars in thousands)	2023			2022			2021
Current
Federal	$	2,937		$	3,429		$	3,653
State		627			735			749
Total Current		3,564			4,164			4,402
Deferred
Federal		(327	)		(323	)		(167	)
State		(40	)		(43	)		(53	)
Total Deferred		(367	)		(366	)		(220	)
Income tax expense	$	3,197		$	3,798		$	4,182

Reconciliation from expected federal tax expense to effective income tax expense for the periods indicated are as follows:  

	Year ended December 31
(Dollars in thousands)	2023			2022			2021
Expected federal income tax expense	$	3,159		$	3,866		$	4,126
State income tax net of federal benefit		464			547			550
Tax exempt interest		(275	)		(404	)		(396	)
Increase in cash surrender value life insurance		(176	)		(151	)		(146	)
Valuation allowance		93			27			32
Life Insurance Proceeds		(19	)		—			—
Excess tax benefit of stock compensation		—			(5	)		(11	)
Other		(49	)		(82	)		27
Total	$	3,197		$	3,798		$	4,182

Note 14—INCOME TAXES (Continued)

The following is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities:

	December 31,
(Dollars in thousands)	2023		2022
Assets:
Allowance for credit losses	$	2,646	$	2,464
Unfunded Commitments		129		—
Excess tax basis of deductible intangible assets		38		60
Net operating loss carry forward		933		840
Excess tax basis of assets acquired		—		18
Unrealized losses on available-for-sale securities		4,406		5,169
Unrealized losses on held-to-maturity securities		2,939		3,291
Compensation expense deferred for tax purposes		1,448		1,348
Deferred loss on other-than-temporary-impairment charges		5		5
FASB 91 - Origination Income & Costs		473		405
Other Real Estate Owned		229		231
Other		145		299
Total deferred tax asset		13,391		14,130
Valuation reserve		1,009		916
Total deferred tax asset net of valuation reserve		12,382		13,214
Liabilities:
Tax depreciation in excess of book depreciation		445		619
Excess financial reporting basis of assets acquired		919		938
Unrealized gain on available-for-sale securities		—		—
Total deferred tax liabilities		1,364		1,557
Net deferred tax asset / (liability) recognized	$	11,018	$	11,657

At December 31, 2023 the Company has approximately $23.6 million in State net operating losses. A valuation allowance is established to fully offset the deferred tax asset related to these net operating losses of the holding company. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Additional amounts of these deferred tax assets considered to be realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. The net deferred asset is included in other assets on the consolidated balance sheets.

A portion of the change in the net deferred tax asset relates to unrealized gains/losses on securities available-for-sale and held-to-maturity. The tax benefit related to the change of $1.6 million has been recorded directly to accumulated other comprehensive income within shareholders’ equity. The balance in the change in net deferred tax asset results from the current period deferred tax benefit of $367 thousand. At December 31, 2023, the Company had no federal net operating loss carryforward.

Tax returns for 2020 and subsequent years are subject to examination by taxing authorities.

As of December 31, 2023, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company’s policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

XML

COMMITMENTS, CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS, CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES

Note 15—COMMITMENTS, CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES

The Bank is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of these instruments. The Bank uses the same credit policies in making commitments as for on-balance sheet instruments. At December 31, 2023 and 2022, the Bank had commitments to extend credit including lines of credit of $214.2 million and $156.9 million, respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies but may include inventory, property and equipment, residential real estate and income producing commercial properties.

The primary market areas served by the Bank include the Midlands Region of South Carolina to include Lexington, Richland, Newberry, and Kershaw Counties; the Central Savannah River Region include Aiken County, South Carolina and Richmond and Columbia Counties in Georgia. With the acquisition of Cornerstone, the Bank also serves Greenville, Anderson, and Pickens Counties in South Carolina which we refer to as the Upstate Region. In 2022, the Company opened a branch in Rock Hill, South Carolina which is located in York County and referred to as the Piedmont Region. Management closely monitors its credit concentrations and attempts to diversify the portfolio within its primary market area. The Company considers concentrations of credit risk to exist when pursuant to regulatory guidelines, the amounts loaned to multiple borrowers engaged in similar business activities represent 25% or more of the Bank’s risk based capital, or approximately $41.7 million.

Based on this criteria, the Bank had five such concentrations at December 31, 2023, including $347.1 million (30.6% of total loans) to lessors of non-residential property, $142.1 million (12.5% of total loans) to lessors of residential properties, $72.7 million (6.4% of total loans) to private households, $59.9 million (5.3% of total loans) to other activities related to real estate and $56.4 million to hotels (5.0% of total loans). As reflected above, lessors of non-residential properties and lessors of residential buildings equate to approximately 209.0% and 85.6% of total regulatory capital, respectively. The risk in these portfolios is diversified over a large number of loans, approximately 488 for lessors of non-residential properties and 405 loans for lessors of residential buildings. Commercial real estate loans and commercial construction loans represent $889.8 million, or 78.5%, of the portfolio. Approximately $273.2 million, or 30.7%, of the total commercial real estate loans are owner occupied, which can tend to reduce the risk associated with these credits. Although the Bank’s loan portfolio, as well as existing commitments, reflects the diversity of its market areas, a substantial portion of its debtor’s ability to honor their contracts is dependent upon the economic stability of these areas.

The nature of the business of the Company and Bank may at times result in a certain amount of litigation. The Bank is involved in certain litigation that is considered incidental to the normal conduct of business. Management believes that the liabilities, if any, resulting from the proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows of the Company.

XML

REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2023

Revenue Recognition

REVENUE RECOGNITION

Note 16—REVENUE RECOGNITION

In accordance with Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies those that contain performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Deposit Service Charges: The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis. The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

Check Card Fee Income: Check card fee income represents fees earned when a debit card issued by the Bank is used. The Bank earns interchange fees from debit cardholder transactions through the Mastercard payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the card. Certain expenses directly associated with the debit card are recorded on a net basis with the fee income. This income is recognized within “Other” below.

Gains/Losses on OREO Sales: Gains/losses on the sale of OREO are included in non-interest income and are generally recognized when the performance obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each real estate closing. 

(Dollars in thousands)	December 31,			December 31,
Non-Interest Income	2023			2022
Deposit service charges	$	963		$	960
Mortgage banking income(1)		1,406			1,900
Investment advisory fees and non-deposit commissions(1)		4,511			4,479
Loss on sale of securities(1)		(1,249	)
Gain (loss) on sale of other real estate owned		151			(45	)
Gain (loss) on sale of other assets		—			(73	)
Non-recurring income		121			7
Other (2)		4,518			4,341
Total non-interest income		10,421			11,569

⁽¹⁾ Not within the scope of ASC 606

⁽²⁾ Includes Check Card Fee income discussed above.  No other items are within the scope of ASC 606.

XML

OTHER INCOME AND OTHER EXPENSE

12 Months Ended

Dec. 31, 2023

Other Income and Expenses [Abstract]

OTHER INCOME AND OTHER EXPENSE

Note 17—OTHER INCOME AND OTHER EXPENSE

A summary of the components of other non-interest income is as follows:

	Year ended December 31,
(In thousands)	2023		2022		2021
ATM debit card income	$	2,771	$	2,706	$	2,669
Recurring income on bank owned life insurance		745		721		693
Rental income		370		322		311
Other fees including safe deposit box fees		230		251		243
Wire transfer fees		119		132		118
Other		283		209		214
Total	$	4,518	$	4,341	$	4,248

A summary of the components of other non-interest expense is as follows:

	Year ended December 31,
(Dollars in thousands)	2023		2022		2021
Core banking/electronic processing and services	$	2,512	$	2,469	$	2,397
ATM/debit card processing		1,074		885		694
Software subscriptions and services		1,008		896		733
Supplies		134		134		116
Telephone		485		354		365
Courier		284		279		181
Correspondent services		354		303		280
Insurance		381		358		325
Debit card and Fraud losses		422		285		160
Investment advisory and non-deposit expense		329		409		420
Loan processing and closing costs		331		266		329
Director fees		601		488		500
Legal and Professional fees		1,042		1,177		878
Shareholder expense		197		221		212
Other		957		834		777
Total	$	10,111	$	9,358	$	8,367

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION

Note 18—STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION

The table below shows the components of “nonvested restricted stock and stock units” as of the years ended December 31, 2023 and 2022.

(Dollars in thousands)	Year ended December 31,
Nonvested restricted stock and stock units	2023			2022
Non-employee director deferred compensation stock plan deferred stock units		1,439			1,260
Time-based restricted stock units - officer		235			129
Performance-based restricted stock units - officer		521			218
Restricted stock – officer and director		(14	)		(146	)
Total nonvested restricted stock and stock units		2,181			1,461

Non-Employee Director Deferred Compensation Plan

Under the Company’s Non-Employee Director Deferred Compensation Plan, as amended and restated effective as of January 1, 2021, a director may elect to defer all or any part of annual retainer and monthly meeting fees payable with respect to service on the board of directors or a committee of the board. Units of common stock are credited to the director’s account as of the last day of such calendar quarter during which the compensation is earned and are included in dilutive securities in the table above. The non-employee director’s account balance is distributed by issuance of common stock within 30 days following such director’s separation from service from the board of directors.

The table below shows the following information related to First Community Corporation’s Non-Employee Director Deferred Compensation Plan: accumulated share units and accrued liability as of the years ended December 31 2023, 2022 and 2021; and the related director compensation expense for the twelve months ended 2023, 2022, and 2021.

	Year ended December 31,
	2023		2022		2021
Non-employee director deferred compensation plan accumulated share units		93,488		93,488		85,764
Accrued liability (dollars in thousands)1		1,439		1,260		1,107
Related director compensation expense (dollars in thousands)		180		153		140

¹ Recorded in “Nonvested restricted stock and stock units” effective June 2022; recorded in “Other liabilities” prior to June 2022.

First Community Corporation 2021 Omnibus Equity Incentive Plan

In 2021, the Company and its shareholders adopted an omnibus equity incentive plan whereby 225,000 shares were reserved for issuance by the Company to help the company attract, retain and motivate directors, officers, employees, consultants and advisors of the Company and its subsidiaries (the “2021 Plan”). The 2021 Plan replaced the 2011 Plan.

The table below shows stock awards granted during the twelve months ended December 31, 2023, 2022, and 2021.

(In shares/units)	Twelve Months ended December 31,
	20231		20221		20212
Time-based restricted stock units - officer		12,562		11,738		—
Performance-based restricted stock units – officer3		16,750		11,738		13,301
Restricted stock – officer		—		2,201		13,301
Restricted stock – director		7,590		7,359		7,960

1	Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.
2	Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.
3	16,750 units represent the target payout with a maximum payout of 33,500 units.

The table below shows the fair value of stock awards granted during the twelve months ended December 31 2023, 2022 and 2021.

(Dollars in thousands)	Twelve months ended December 31,
	20231		20221		20212
Time-based restricted stock units - officer		255		246		—
Performance-based restricted stock units – officer3		340		246		234
Restricted stock – officer		—		46		234
Restricted stock – director		154		154		140

1	Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.
2	Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.
3	$340 thousand represents the target payout with a maximum payout of $680 thousand.

The table below shows the compensation expense related to stock awards granted during the twelve months ended December 31 2023, 2022 and 2021.

(Dollars in thousands)	Year ended December 31,
Compensation expense related to stock awards	2023		2022		2021
Time-based restricted stock units – officer1		163		94		19
Performance-based restricted stock units – officer2		264		153		65
Restricted stock – officer3		120		206		223
Restricted stock – director4		167		141		140

1	Expense in 2023 consists of $159.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $3.2 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $19.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
2	Expense in 2023 consists of $186.0 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
3	Expense in 2023 consists of $17.2 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $102.8 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $23.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $182.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
4	Expense in 2023 and 2022 was related to stock awards granted under the Community Corporation 2021 Omnibus Equity Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

The table below shows the First Community Corporation 2021 Omnibus Equity Incentive Plan (“2021 Incentive Plan”) initial reserve at May 19, 2021; stock awards granted under the 2021 Incentive Plan from its inception through December 31, 2023; and the remaining reserve under such plan at December 31, 2023.

(In shares / units)
First Community Corporation 2021 Omnibus Equity Incentive Plan	2023
Initial reserve – May 19, 2021		225,000
Shares / units granted
Time-based restricted stock units - officer		(24,300	)
Performance-based restricted stock units – officer1		(34,358	)
Restricted stock – officer		(2,201	)
Restricted stock – director		(14,949	)
Remaining reserve – December 31, 2023		149,192

¹ Performance-based restricted stock units are initially granted and expensed at target levels; however, they are reserved at maximum levels.

XML

EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2023

Retirement Benefits [Abstract]

EMPLOYEE BENEFIT PLANS

Note 19—EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) plan, which covers substantially all employees. Participants may contribute up to the maximum allowed by the regulations. During the years ended December 31, 2023, 2022 and 2021, the plan expense amounted to $659 thousand , $608 thousand, and $581 thousand , respectively. The Company matches 100% of the employee’s contribution up to 3% and 50% of the employee’s contribution on the next 2% of the employee’s contribution.

The Company acquired various single premium life insurance policies from DutchFork Bancshares that are used to indirectly fund fringe benefits to certain employees and officers. A salary continuation plan was established payable for two key individuals upon attainment of age 63. The plan provides for monthly benefits of $2,500 each for seventeen years for two individuals.

The Company acquires various life insurance policies to fund fringe benefits to certain key employees. The cash surrender value at December 31, 2023 and 2022 of all bank owned life insurance was $30.2 million and $30.0 million, respectively. Expenses accrued for the anticipated benefits under the salary continuation plans for the year ended December 31, 2023, 2022 and 2021 amounted to $482 thousand, $492 thousand, and $516 thousand, respectively.  

XML

EARNINGS PER COMMON SHARE

12 Months Ended

Dec. 31, 2023

Earnings Per Share [Abstract]

EARNINGS PER COMMON SHARE

Note 20—EARNINGS PER COMMON SHARE

The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation:

	Year ended December 31,
(Amounts in thousands)	2023		2022		2021
Numerator (Included in basic and diluted earnings per share)	$	11,843	$	14,613	$	15,465
Denominator
Weighted average common shares outstanding for:
Basic earnings per common share		7,568		7,529		7,491
Dilutive securities:
Deferred compensation		79		79		58
Diluted common shares outstanding		7,647		7,608		7,549
Basic earnings per common share	$	1.56	$	1.94	$	2.06
Diluted earnings per common share	$	1.55	$	1.92	$	2.05
The average market price used in calculating assumed number of shares	$	18.70	$	19.52	$	19.68

XML

SHAREHOLDERS’ EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS

12 Months Ended

Dec. 31, 2023

Equity [Abstract]

SHAREHOLDERS’ EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS

Note 21—SHAREHOLDERS’ EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS

The Company and Bank are subject to various federal and state regulatory requirements, including regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and Bank capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors. The Bank is required to maintain minimum Tier 1 capital, Common Equity Tier I (CET1) capital, total risked based capital and Tier 1 leverage ratios of 6%, 4.5%, 8% and 4%, respectively.

Regulatory capital rules adopted in July 2013 and fully phased in as of January 1, 2019, which we refer to as Basel III, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all national and state banks and savings associations regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,” generally holding companies with consolidated assets of less than $3 billion (such as the Company). In order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of our minimum risk-based capital requirements. This buffer must consist solely of common equity Tier 1, but the buffer applies to all three measurements (common equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of CET1 equal to 2.5% of risk-weighted assets.

Based on the foregoing, as a small bank holding company, we are generally not subject to the capital requirements unless otherwise advised by the Federal Reserve; however, our Bank remains subject to the capital requirements.

The Bank exceeded the minimum regulatory capital ratios at December 31, 2023 and 2022, as set forth in the following table: 

(In thousands)	Minimum Required Amount		%			Actual Amount		%			Excess Amount		%
The Bank(1)(2):
December 31, 2023
Risk Based Capital
Tier 1	$	73,696		6.0	%	$	153,859		12.5	%	$	80,163		6.5	%
Total Capital	$	98,261		8.0	%		166,752		13.6	%		68,491		5.6	%
CET1	$	55,272		4.5	%		153,859		12.5	%		98,587		8.0	%
Tier 1 Leverage	$	72,830		4.0	%		153,859		8.5	%		81,029		4.5	%
December 31, 2022
Risk Based Capital
Tier 1	$	64,741		6.0	%	$	145,578		13.5	%	$	80,837		7.5	%
Total Capital	$	86,321		8.0	%	$	156,914		14.5	%	$	70,593		6.5	%
CET1	$	48,555		4.5	%	$	145,578		13.5	%	$	97,023		9.0	%
Tier 1 Leverage	$	67,509		4.0	%	$	145,578		8.6	%	$	78,069		4.6	%

⁽¹⁾ As a small bank holding company, the Company is generally not subject to the capital requirements unless otherwise advised by the Federal Reserve.

⁽²⁾ Ratios do not include the capital conservation buffer of 2.5%.

The Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the Federal Reserve’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization’s capital needs asset quality and overall financial condition. The Federal Reserve’s policies also require that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. In addition, under the prompt corrective action regulations, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions.

The Company’s principal source of cash flow, including cash flow to pay dividends to its shareholders, is dividends it receives from the Bank. Statutory and regulatory limitations apply to the Bank’s payment of dividends to the Company. As a South Carolina chartered bank, the Bank is subject to limitations on the amount of dividends that it is permitted to pay. Unless otherwise instructed by the S.C. Board, the Bank is generally permitted under South Carolina State banking regulations to pay cash dividends of up to 100% of net income in any calendar year without obtaining the prior approval of the S.C. Board. The FDIC also has the authority under federal law to enjoin a bank from engaging in what in its opinion constitutes an unsafe or unsound practice in conducting its business, including the payment of a dividend under certain circumstances.

If the Bank is not permitted to pay cash dividends to the Company, it is unlikely that we would be able to pay cash dividends on our common stock. Moreover, holders of the Company’s common stock are entitled to receive dividends only when, and if declared by the board of directors. Although the Company has historically paid cash dividends on its common stock, the Company is not required to do so, and the board of directors could reduce or eliminate our common stock dividend in the future.

XML

PARENT COMPANY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2023

Condensed Financial Information Disclosure [Abstract]

PARENT COMPANY FINANCIAL INFORMATION

Note 22—PARENT COMPANY FINANCIAL INFORMATION

The balance sheets, statements of operations and cash flows for First Community Corporation (Parent Only) follow:

Condensed Balance Sheets

	At December 31,
(Dollars in thousands)	2023		2022
Assets:
Cash on deposit	$	3,590	$	3,870
Investment in bank subsidiary		140,746		128,392
Other		1,941		1,288
Total assets	$	146,277	$	133,550
Liabilities:
Junior subordinated debentures	$	14,964	$	14,964
Other		254		225
Total liabilities		15,218		15,189
Shareholders’ equity		131,059		118,361
Total liabilities and shareholders’ equity	$	146,277	$	133,550

Condensed Statements of Operations

	Year ended December 31,
(Dollars in thousands)	2023			2022			2021
Income:
Interest and dividend income	$	37		$	21		$	13
Equity in undistributed earnings of subsidiary		8,495			11,431			12,386
Dividend income from bank subsidiary		5,357			4,463			4,019
Total income		13,889			15,915			16,418
Expenses:
Interest expense		1,187			675			416
Other		1,419			974			772
Total expense		2,606			1,649			1,188
Income before taxes		11,283			14,266			15,230
Income tax benefit		(560	)		(347	)		(235	)
Net income	$	11,843		$	14,613		$	15,465

Note 22—PARENT COMPANY FINANCIAL INFORMATION (Continued)

Condensed Statements of Cash Flows

	Year ended December 31,
(Dollars in thousands)	2023			2022			2021
Cash flows from operating activities:
Net income	$	11,843		$	14,613		$	15,465
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed earnings of subsidiary		(8,495	)		(11,431	)		(12,386	)
Other-net		(545	)		232			145
Net cash provided by operating activities		2,803			3,414			3,224
Cash flows from investing activities:
Purchase of investments at cost		(80	)		(188	)		(87	)
Net cash provided by investing activities		(80	)		(188	)		(87	)
Cash flows from financing activities:
Dividends paid: common stock		(4,235	)		(3,913	)		(3,593	)
(Cost of) Proceeds from issuance of common stock		(28	)		28			46
Dividend Reinvestment Plan		438			388			368
Change in non-vested restricted stock		180			507			—
Restricted stock units granted		763			1,447			—
Restricted shares surrendered		(121	)		(42	)		(70	)
Deferred compensation shares		—			(1,106	)		90
Net cash used in financing activities		(3,003	)		(2,691	)		(3,159	)
Increase (decrease) in cash and cash equivalents		(280	)		535			(22	)
Cash and cash equivalents at beginning of year		3,870			3,335			3,357
Cash and cash equivalents at end of year	$	3,590		$	3,870		$	3,335

XML

SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

Note 23—SUBSEQUENT EVENTS

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date.

Management has reviewed events occurring through the date the financial statements were available to be issued and no subsequent events occurred requiring accrual or disclosure.

XML

DERIVATIVES

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

Note 24—DERIVATIVES

The Company utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position. The notional amount of the interest rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.

The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company as of December 31, 2023:

			Fair Value
(Dollars in thousands)	Notional Amount		Assets		Liabilities
Fair Value Hedges:
Interest rate contracts
Pay fixed, receive variable – loans	$	150,000	$	1,069	$	—
Total derivatives	$	150,000	$	1,069	$	—

The above derivative is under a master netting arrangement. However, as of December 31, 2023, there were no other outstanding derivative contracts. The net fair value of the hedged item and derivative item is recorded in other assets in the statement of financial condition. There were no outstanding derivative contracts as of December 31, 2022. The following represents the carrying value of hedged items in fair value hedging relationships:

	Hedge Asset		Hedge Basis Adjustment
(Dollars in thousands)	Basis		Designated		Discounted
Fair Value Hedges:
Interest rate contracts
Commercial real estate loans	$	900	$	—	$	—
Total	$	900	$	—	$	—

During the year ended December 31, 2023, income on interest settlements totaled $1.6 million. Changes in the fair value of the hedged item of $1.1 million was offset by changes in the fair value of the swap derivative of $1.1 million. The residual was a result of hedge ineffectiveness and recorded in other income on the consolidated statement of operations. No portion of the change in fair value of derivatives designated as hedges has been excluded from effectiveness testing. No hedges were terminated during the year ended December 31, 2023.

XML

REPORTABLE SEGMENTS

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

REPORTABLE SEGMENTS

Note 25—REPORTABLE SEGMENTS

The Company’s reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by management. The Company has four reportable segments:

· Commercial and retail banking: The Company’s primary business is to provide deposit and lending products and services to its commercial and retail customers.

· Mortgage Banking: This segment provides mortgage origination services for loans that will be sold to investors in the secondary market and consumer mortgage loans that will be held-for-investment. In the second quarter of 2022, management made the decision to include consumer mortgage held-for-investment loans in this segment. Prior to the second quarter of 2022, consumer mortgage loans held-for-investment were included in the Commercial and Retail Banking segment. Non-interest income for loans held-for-sale and loans held-for-investment is included in Mortgage Banking income and other income, respectively, on the income statement. The Mortgage Banking financial information presented below includes consumer mortgage loans held-for-investment for all periods presented. Beginning in 2022, a provision for credit loss, a cost of funds and other operating costs have been allocated to this segment.

· Investment advisory and non-deposit: This segment provides investment advisory services and non-deposit products.

· Corporate: This segment includes the parent company financial information, including interest on parent company debt and dividend income received from First Community Bank (the “Bank”).

The following tables present selected financial information for the Company’s reportable business segments for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.

Year ended December 31, 2023 (Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	68,874	$	3,787	$	—	$	5,393		$	(5,357	)	$	72,697
Interest expense		21,478		1,140		—		1,187			—			23,805
Net interest income	$	47,396	$	2,647	$	—	$	4,206		$	(5,357	)	$	48,892
Provision for credit losses		677		452		—		—			—			1,129
Noninterest income		4,496		1,414		4,511		—			—			10,421
Noninterest expense		35,136		3,477		3,112		1,419			—			43,144
Net income (loss) before taxes	$	16,079	$	132	$	1,399	$	2,787		$	(5,357	)	$	15,040
Income tax expense (benefit)		3,757		—		—		(560	)		—			3,197
Net income (loss)	$	12,322	$	132	$	1,399	$	3,347		$	(5,357	)	$	11,843

Year ended December 31, 2022 (Dollars in thousands)	Commercial and Retail Banking			Mortgage Banking			Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	49,238		$	1,858		$	—	$	4,484		$	(4,463	)	$	51,117
Interest expense		2,403			96			—		675			—			3,174
Net interest income	$	46,835		$	1,762		$	—	$	3,809		$	(4,463	)	$	47,943
Provision for (release of) credit losses		(392	)		240			—		—			—			(152	)
Noninterest income		5,184			1,906			4,479		—			—			11,569
Noninterest expense		33,629			3,689			2,961		974			—			41,253
Net income before taxes	$	18,782		$	(261	)	$	1,518	$	2,835		$	(4,463	)	$	18,411
Income tax expense (benefit)		4,145			—			—		(347	)		—			3,798
Net income	$	14,637		$	(261	)	$	1,518	$	3,182		$	(4,463	)	$	14,613

Year ended December 31, 2021 (Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	46,499	$	1,008	$	—	$	4,032		$	(4,019	)	$	47,520
Interest expense		1,825		—		—		416			—			2,241
Net interest income	$	44,674	$	1,008	$	—	$	3,616		$	(4,019	)	$	45,279
Provision for credit losses		335		—		—		—			—			335
Noninterest income		5,590		4,319		3,995		—			—			13,904
Noninterest expense		31,275		4,694		2,460		772			—			39,201
Net income before taxes	$	18,654	$	633	$	1,535	$	2,844		$	(4,019	)	$	19,647
Income tax expense (benefit)		4,417		—		—		(235	)		—			4,182
Net income	$	14,237	$	633	$	1,535	$	3,079		$	(4,019	)	$	15,465

(Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate		Eliminations			Consolidated
Total Assets as of December 31, 2023	$	1,727,245	$	99,310	$	5	$	174,468	$	(173,340	)	$	1,827,688
Total Assets as of December 31, 2022	$	1,616,173	$	55,845	$	—	$	165,937	$	(165,009	)	$	1,672,946

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses. The estimation process includes management’s judgment as to future losses on existing loans based on an internal review of the loan portfolio, including an analysis of the borrower’s current financial position, the consideration of current and anticipated economic conditions and the effect on specific borrowers. In determining the collectability of loans management also considers the fair value of underlying collateral. Various regulatory agencies, as an integral part of their examination process, review the Company’s allowance for credit losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Because of these factors it is possible that the allowance for credit losses could change materially.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, due from banks, interest-bearing bank balances, federal funds sold and securities purchased under agreements to resell. Generally federal funds are sold for a one-day period and securities purchased under agreements to resell mature in less than 90 days.

Investment Securities

Investment Securities

Investment securities are classified as either held-to-maturity, available-for-sale or trading securities. In determining such classification, securities that the Company has the positive intent and ability to hold to maturity are classified as held-to maturity and are carried at amortized cost. Securities classified as available-for-sale are carried at estimated fair values with unrealized gains and losses included in shareholders’ equity on an after-tax basis. Trading securities are carried at estimated fair value with unrealized gains and losses included in non-interest income (See Note 3).

Gains and losses on the sale of available-for-sale securities and trading securities are determined using the specific identification method. Declines in the fair value of individual held-to-maturity and available-for-sale securities below their cost that are judged to be other than temporary are written down to fair value and charged to income in the Consolidated Statement of Income.

Premiums are recognized in interest income using the effective interest method over the period to the earliest call date. Discounts are recognized in interest income using the effective interest method to maturity.

Other Investments, At Cost

Other Investments, At Cost

Equity Securities without readily determinable fair values include Federal Home Loan Bank (“FHLB”) of Atlanta capital stock and various other non-marketable equity investments. Investment in the FHLB of Atlanta is a condition of borrowing from the FHLB Atlanta. FHLB stock is carried at cost, and periodically evaluated for impairment based on an assessment of the ultimate recovery of par value. Both cash and stock dividends are reported as interest income. At December 31, 2023 and 2022, the Company’s investment in FHLB stock was $5.5 million and $2.9 million, respectively. Dividends received on other investments, at cost are reported as interest income.

Mortgage Loans Held for Sale

Mortgage Loans Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with an investor, are carried in the Company’s loans held for sale portfolio. These loans are primarily fixed rate residential loans that have been originated in the Company’s name and have closed. Virtually all these loans have commitments to be purchased by investors at a locked in price with the investors on the same day that the loan was locked in with the Company’s customers. Therefore, these loans present very little market risk for the Company.

The Company usually delivers to, and receives funding from, the investor within 30 days. Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts” basis. The Company is not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination. These loans are classified as Level 2.

Loans and Allowance for Credit Losses-Loans

Loans and Allowance for Credit Losses-Loans

Loan receivables that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for credit losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the loan balance outstanding. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the effective interest method.

The allowance for credit losses is maintained at a level believed to be adequate by management to absorb potential losses in the loan portfolio. Management’s determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loss experience, economic conditions and volume, growth and composition of the portfolio.

The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due, generally when a loan becomes 90 days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to principal and then to interest income.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the asset’s estimated useful life. Estimated lives range up to 39 years for buildings and up to 10 years for furniture, fixtures, and equipment.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of fair value of net assets acquired (including identifiable intangibles) in purchase transactions. Other intangible assets represent premiums paid for acquisitions of core deposits (core deposit intangibles). Core deposit intangibles are being amortized on a straight-line basis over seven years. Goodwill and identifiable intangible assets are reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Qualitative factors are assessed to first determine if it is more likely than not (more than 50%) that the carrying value of goodwill is less than fair value. During the year ended December 31, 2023 and 2022, qualitative factors indicated it was more likely than not that the carrying value of goodwill was less than fair value, thus there were no indicators of impairment and no quantitative testing was performed.

Other Real Estate Owned

Other Real Estate Owned

Other real estate owned includes real estate acquired through foreclosure. Other real estate owned is carried at the lower of cost (principal balance at date of foreclosure) or fair value minus estimated cost to sell. Any write-downs at the date of foreclosure are charged to the allowance for credit losses. Expenses to maintain such assets, subsequent changes in the valuation allowance, and gains or losses on disposal are included in other expenses.

Comprehensive Income (loss)

Comprehensive Income (loss)

The Company reports comprehensive income (loss) in accordance with Accounting Standards Codification (“ASC”) 220, “Comprehensive Income.” ASC 220 requires that all items that are required to be reported under accounting standards as comprehensive income (loss) be reported in a financial statement that is displayed with the same prominence as other financial statements. The disclosures requirements have been included in the Company’s consolidated statements of comprehensive income.

Mortgage Origination Fees

Mortgage Origination Fees

Mortgage origination fees relate to activities comprised of accepting residential mortgage applications, qualifying borrowers to standards established by investors and selling the mortgage loans to the investors under pre-existing commitments. The related fees received by the Company for these services are recognized at the time the loan is closed.

Advertising Expense

Advertising Expense

Marketing and public relations costs are generally expensed as incurred. External costs incurred in producing media advertising are expensed the first time the advertising takes place. External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent. Marketing and public relations expense totaled $1.5 million, $1.3 million and $1.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Income Taxes

Income Taxes

A deferred income tax liability or asset is recognized for the estimated future effects attributable to differences in the tax bases of assets or liabilities and their reported amounts in the financial statements as well as operating loss and tax credit carry forwards. The deferred tax asset or liability is measured using the enacted tax rate expected to apply to taxable income in the period in which the deferred tax asset or liability is expected to be realized.

In 2006, the FASB issued guidance related to Accounting for Uncertainty in Income Taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB ASC Topic 740-10, “Income Taxes.” It also prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in an enterprise’s tax return.

Stock Based Compensation Cost

Stock Based Compensation Cost

The Company accounts for stock-based compensation under the fair value provisions of the accounting literature. Compensation expense is recognized in salaries and employee benefits.

The fair value of each grant is estimated on the date of grant using the Black-Sholes option pricing model. No options were granted in 2023, 2022 or 2021.

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock and common stock equivalents. Common stock equivalents consist of restricted stock and restricted stock units and are computed using the treasury stock method.

Business Combinations and Method of Accounting for Loans Acquired

Business Combinations and Method of Accounting for Loans Acquired

The Company accounts for its acquisitions under FASB ASC Topic 805, “Business Combinations,” which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for credit losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk. Loans acquired are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820, “Fair Value Measurements and Disclosures.”

Acquired credit-impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality, found in FASB ASC Topic 310-30, “Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality,” formerly American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loans. Loans acquired in business combinations with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will not be collected are considered to be credit impaired. Evidence of credit quality deterioration as of purchase dates may include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. The Company considers expected prepayments and estimates the amount and timing of expected principal, interest and other cash flows for each loan or pool of loans meeting the criteria above and determines the excess of the loan’s scheduled contractual principal and contractual interest payments over all cash flows expected to be collected at acquisition as an amount that should not be accreted (non-accretable difference). The remaining amount, representing the excess of the loan’s or pool’s cash flows expected to be collected over the fair value for the loan or pool of loans, is accreted into interest income over the remaining life of the loan or pool (accretable difference). Subsequent to the acquisition date, increases in cash flows expected to be received in excess of the Company’s initial estimates are reclassified from non-accretable difference to accretable difference and are accreted into interest income on a level-yield basis over the remaining life of the loan. Decreases in cash flows expected to be collected are recognized as impairment through the provision for credit losses.

Segment Information

Segment Information

ASC Topic 280-10, ”Segment Reporting,” requires selected segment information of operating segments based on a management approach. The Company’s four reportable segments represent the distinct product lines the Company offers and are viewed separately for strategic planning by management (see Note 25, Reportable Segments, for further information).

Application of New Accounting Guidance Adopted in 2023

Application of New Accounting Guidance Adopted in 2023

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology that delayed recognition until it is probable a loss has been incurred with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. Additionally, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 and all related subsequent amendments thereto effective January 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment of the adoption of CECL included a decrease in the allowance for credit losses on loans of $14,300, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded loan commitments of $397,900, which is recorded within Other Liabilities. The Company recorded an allowance for credit losses for held to maturity securities of $43,500, which is presented as a reduction to held to maturity securities outstanding. The Company recorded a net decrease to retained earnings of $337,400 as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).

The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired available-for-sale investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale securities was not deemed material.

The following table illustrates the impact on the allowance for credit losses (“ACL”) from the adoption of ASC 326:

(Dollars in thousands)	January 1, 2023 As Reported Under ASC 326		December 31, 2022 Pre-ASC 326 Adoption December		Impact of ASC 326 Adoption
Assets:
Held to maturity securities, at amortized cost	$	106,929	$	106,929	$	—
Allowance for credit losses on held to maturity securities:
State and local governments		43		—		43
Allowance for credit losses on held-to-maturity securities	$	43	$	—	$	43
Loans, at amortized cost	$	980,857	$	980,857	$	—
Allowance for credit losses on loans:
Commercial		1,042		849		193
Real Estate Construction		1,150		75		1,075
Real Estate Mortgage Residential		755		723		32
Real Estate Mortgage Commercial		7,686		8,569		(883	)
Consumer Home Equity		480		314		166
Consumer Other		209		170		39
Unallocated		—		636		(636	)
Allowance for credit losses on loans	$	11,322	$	11,336	$	(14	)
Liabilities:
Allowance for credit losses for unfunded commitments	$	398	$	—	$	398

The Company elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on non-accrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest.

Allowance for Credit Losses on Held-to-Maturity Securities

Allowance for Credit Losses on Held-to-Maturity Securities

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type. Accrued interest receivable on held-to-maturity debt securities totaled $1.3 million at December 31, 2023 and was excluded from the estimate of credit losses. The held-to-maturity portfolio consists of mortgage-backed and municipal securities. Securities are generally rated BBB- or higher. Securities are analyzed individually to establish a CECL reserve.

The estimate of expected credit losses is primarily based on the ratings assigned to the securities by debt rating agencies and the average of the annual historical loss rates associated with those ratings. The Company then multiplies those loss rates, as adjusted for any modifications to reflect current conditions and reasonable and supportable forecasts as considered necessary, by the remaining lives of each individual security to arrive at a lifetime expected loss amount. Management classifies the held-to-maturity portfolio into the following major security types: mortgage-backed securities or state and local governments.

All the mortgage-backed securities (“MBS”) held by the Company are issued by government-sponsored corporations. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. As a result, no allowance for credit losses was recorded on held-to-maturity MBS at the adoption of CECL or as of December 31, 2023. The state and local governments securities held by the Company are highly rated by major rating agencies.

Allowance for Credit Losses on Available-for-Sale Securities

Allowance for Credit Losses on Available-for-Sale Securities

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, or more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings.

If either of the above criteria is not met, the Company evaluates whether the decline in fair value is the result of credit losses or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Changes in the allowance for credit loss are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit loss when management believes an available-for-sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit loss related to the available-for-sale securities portfolio.

Accrued interest receivable on available-for-sale securities totaled $870,000 at December 31, 2023 and was excluded from the estimate of credit losses.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future, until maturity, or payoff are reported at amortized cost. Amortized cost is the principal balance outstanding, net of purchase premiums and discounts and deferred fees and costs. Accrued interest receivable related to loans totaled $3.6 million at December 31, 2023 and was reported in other assets on the consolidated balance sheets. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using methods that approximate a level yield without anticipating prepayments.

The accrual of interest is generally discontinued when a loan becomes 90 days past due and is not well collateralized and in the process of collection, or when management believes, after considering economic and business conditions and collection efforts, that the principal or interest will not be collectible in the normal course of business. Past due status is based on contractual terms of the loan. A loan is considered to be past due when a scheduled payment has not been received 30 days after the contractual due date.

All accrued interest is reversed against interest income when a loan is placed on non-accrual status. Interest received on such loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, there is a sustained period of repayment performance, and future payments are reasonably assured.

Allowance for Credit Losses - Loans

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable is excluded from the estimate of credit losses.

The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call report code and then by risk grade grouping. Risk grade is grouped within each call report code by pass, watch, special mention, substandard, and doubtful. Other loan types are separated into their own cohorts due to specific risk characteristics for that pool of loans.

The Company has elected a non-discounted cash flow methodology with probability of default (“PD”) and loss given default (“LGD”) for all call report code cohorts (“cohorts”), as this is believed to be the most accurate model available. The PD calculation looks at the historical loan portfolio at particular points in time (each month during the lookback period) to determine the probability that loans in a certain cohort will default over the next 12-month period. A default is defined as a loan that has moved to past due 90 days and greater, non-accrual status, or experienced a charge-off during the period. Currently, the Company’s historical data is insufficient due to a minimal amount of default activity or zero defaults, therefore, management uses index PDs comprised of rates derived from the PD experience of other community banks in place of the Company’s historical PDs.

The LGD calculation looks at actual losses (net charge-offs) experienced over the entire lookback period for each cohort of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. All defaults (non-accrual, charge-off, or greater than 90 days past due) occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event (i.e., non-accrual or charge-off). Due to very limited charge-off history, management uses index LGDs comprised of rates derived from the LGD experience of other community banks in place of the Company’s historical LGDs.

The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the allowance for credit losses on loans. The calculation includes a 12-month PD forecast based on the peer index regression model comparing peer defaults to the national unemployment rate. After the forecast period, PD rates revert on a straight-line basis back to long-term historical average rates over a 12-month period.

The Company recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company adjusts the modeled historical losses by qualitative adjustments to incorporate all significant risks to form a sufficient basis to estimate the credit losses. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth and concentrations, trends in underlying collateral, as well as external factors and economic conditions not already captured.

The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The Bank has identified the following pools: 

· Loans Secured by Non-Owner Occupied Commercial Real Estate – These loans are to businesses for structures that will be leased to other commercial entities. Cash flows to pay these loans is dependent on lease payments to the business owners.

· Loans Secured by Owner Occupied Commercial Real Estate – These loans are to businesses who are housed in the building that serves as collateral. Cash flows to pay these loans is dependent on cash generated by the business.

· Commercial and Industrial Loans – These loans are to businesses for purposes other than commercial real estate, such as equipment. The loans are typically secured by the equipment purchased, and cash flows to pay these loans is dependent on cash generated by the business.

· Loans Secured by Residential Real Estate – These loans are to businesses and individuals for real estate with houses or apartment complexes on it. Cash flows to pay these loans is dependent on household income, and the collateral rises and falls in value in alignment with the residential property market.

· Loans Secured by Farmland – These loans are secured by agricultural property.

· Loans to States and Municipalities – These loans are to governments, and are backed by tax revenues.

· Loans Secured by Construction and Development – These loans are for new construction and work on the underlying land.

· Other Consumer Loans – These loans are made to consumers and are secured by collateral other than residential real estate, e.g., automobiles.

Loans that do not share risk characteristics are evaluated on an individual basis. Generally, this population includes loan relationships exceeding $500,000 and on non-accrual status, however they can also include any loan that does not share risk characteristics with its respective pool. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate. When the expected source of repayment is from a source other than the underlying collateral, impairment will generally be measured based upon the present value of expected proceeds discounted at the contractual interest rate.

Allowance for Credit Losses on Unfunded Commitments

Allowance for Credit Losses on Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan cohort at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company’s consolidated balance sheets.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In March 2020, the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. In December 2022, the FASB issued amendments to extend the period of time preparers can use the reference rate reform relief guidance under ASC Topic 848 from December 31, 2023 to December 31, 2024, to address the fact that all London Interbank Offered Rate (LIBOR) tenors were not discontinued as of December 31, 2022, and some tenors will be published until June 2023. The amendments are effective immediately for all entities and applied prospectively. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2022, the FASB issued ASU 2022-02, which eliminated the previous recognition and measurement guidance for troubled debt restructurings (“TDRs”), required new disclosures for loan modifications when a borrower is experiencing financial difficulty, and required disclosures of current period gross charge-offs by year of origination in the vintage disclosures. The Company adopted this amendment effective January 1, 2023.

In March 2022, the FASB issued amendments which are intended to improve the decision usefulness of information provided to investors about certain loan refinancings, restructurings, and write-offs. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments do not have a material effect on the Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments require disclosure of incremental segment information on an annual and interim basis for all public entities. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. Early adoption is permitted.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This amendment is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

General Risk and Uncertainties

General Risk and Uncertainties

In the normal course of business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on a different basis, than its interest-earning assets. Credit risk is the risk of default on the Company’s loan and investment portfolios that results from borrowers’ or issuer’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans and investments and the valuation of real estate held by the Company.

The Company is subject to regulations of various governmental agencies (regulatory risk). These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required credit loss allowances and operating restrictions from regulators’ judgments based on information available to them at the time of their examination.

Reclassifications

Reclassifications

Certain captions and amounts in the 2021 and 2022 consolidated financial statements were reclassified to conform to the 2023 presentation.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

Schedule of impact on the allowance for credit losses from the adoption of ASC 326

The following table illustrates the impact on the allowance for credit losses (“ACL”) from the adoption of ASC 326:

(Dollars in thousands)	January 1, 2023 As Reported Under ASC 326		December 31, 2022 Pre-ASC 326 Adoption December		Impact of ASC 326 Adoption
Assets:
Held to maturity securities, at amortized cost	$	106,929	$	106,929	$	—
Allowance for credit losses on held to maturity securities:
State and local governments		43		—		43
Allowance for credit losses on held-to-maturity securities	$	43	$	—	$	43
Loans, at amortized cost	$	980,857	$	980,857	$	—
Allowance for credit losses on loans:
Commercial		1,042		849		193
Real Estate Construction		1,150		75		1,075
Real Estate Mortgage Residential		755		723		32
Real Estate Mortgage Commercial		7,686		8,569		(883	)
Consumer Home Equity		480		314		166
Consumer Other		209		170		39
Unallocated		—		636		(636	)
Allowance for credit losses on loans	$	11,322	$	11,336	$	(14	)
Liabilities:
Allowance for credit losses for unfunded commitments	$	398	$	—	$	398

XML

INVESTMENT SECURITIES (Tables)

12 Months Ended

Dec. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Amortized Cost and Estimated Fair Values of Investment Securities Available-For-Sale

The amortized cost and estimated fair values of investment securities are summarized below:

AVAILABLE-FOR-SALE:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023
US Treasury securities	$	20,791	$	—	$	(2,445	)	$	18,346
Government Sponsored Enterprises		2,500		—		(371	)		2,129
Mortgage-backed securities		255,757		15		(17,613	)		238,159
Small Business Administration pools		16,108		24		(411	)		15,721
Corporate and other securities		8,759		—		(888	)		7,871
	$	303,915	$	39	$	(21,728	)	$	282,226
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022
US Treasury securities	$	60,552	$	—	$	(4,569	)	$	55,983
Government Sponsored Enterprises		2,500		—		(426	)		2,074
Mortgage-backed securities		263,704		10		(19,114	)		244,600
Small Business Administration pools		21,657		60		(630	)		21,087
Corporate and other securities		8,772		12		(666	)		8,118
	$	357,185	$	82	$	(25,405	)	$	331,862

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2021
US Treasury securities	$	15,736	$	—	$	(300	)	$	15,436
Government Sponsored Enterprises		2,499		2		—			2,501
Mortgage-backed securities		398,125		3,596		(3,992	)		397,729
Small Business Administration pools		30,835		505		(67	)		31,273
State and Local Government		105,469		4,918		(539	)		109,848
Corporate and other securities		8,024		157		(129	)		8,118
	$	560,688	$	9,178	$	(5,027	)	$	564,839

Schedule of Amortized Cost and Estimated Fair Values of Investment Securities Held-To-Maturity

HELD-TO-MATURITY:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2023
Mortgage-backed securities	$	112,740	$	—	$	(8,490	)	$	104,250
State and local government		104,430		282		(3,445	)		101,268
	$	217,170	$	282	$	(11,935	)	$	205,518
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2022
Mortgage-backed securities	$	121,772		—	$	(8,656	)	$	113,116
State and local government		106,929		—		(6,432	)		100,497
	$	228,701	$	—	$	(15,088	)	$	213,613

Schedule of gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position.

The following tables show gross unrealized losses and fair values, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at December 31, 2023 and December 31, 2022. 

(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale securities:	Value		Loss		Value		Loss		Value		Loss
US Treasury Securities	$	—	$	—	$	18,346	$	2,445	$	18,346	$	2,445
Government Sponsored Enterprise		—		—		2,129		371		2,129		371
Mortgage-backed securities		8,164		423		223,844		17,190		232,008		17,613
Small Business Administration pools		4,253		45		7,638		366		11,891		411
Corporate and other securities		1,880		115		4,236		773		6,116		888
Total	$	14,297	$	583	$	256,193	$	21,145	$	270,490	$	21,728
(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2022	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available-for-sale securities:	Value		Loss		Value		Loss		Value		Loss
US Treasury Securities	$	28,827	$	1,032	$	27,156	$	3,537	$	55,983	$	4,569
Government Sponsored Enterprise		—		—		2,074		426		2,074		426
Mortgage-backed securities		81,961		4,435		159,227		14,679		241,188		19,114
Small Business Administration pools		16,066		453		2,592		177		18,658		630
Corporate and other securities		2,128		146		3,230		520		5,358		666
Total	$	128,982	$	6,067	$	194,279	$	19,338	$	323,261	$	25,405

(Dollars in thousands)	Less than 12 months				12 months or more				Total
December 31, 2023	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held-to-maturity securities:	Value		Loss		Value		Loss		Value		Loss
Mortgage-backed securities		—		—		104,250		8,490		104,250		8,490
State and local government		6,278		25		78,597		3,420		84,875		3,445
Total	$	6,278	$	25	$	182,847	$	11,910	$	189,125	$	11,935

Schedule of allowance for credit losses on held to maturity securities

The following table shows a roll forward of the allowance for credit losses on held to maturity securities for the year ended December 31, 2023.

	State and
	local
(Dollars in thousands)	government
Allowance for Credit Losses on Held-to-Maturity Securities:
Beginning balance, December 31, 2022	$	—
Adjustment for adoption of ASU 2016-13		(43	)
Provision for credit losses		13
Ending balance, December 31, 2023	$	(30	)

Schedule of Amortized Cost and Fair Value of Investment Securities

The amortized cost and fair value of investment securities at December 31, 2023, by expected maturity, follow. Expected maturities differ from contractual maturities because borrowers may have the right to call or prepay the obligations with or without prepayment penalties. Mortgage-backed securities are included in the year corresponding with the remaining expected life.

AVAILABLE-FOR-SALE:

(Dollars in thousands)	Available-for-sale
	Amortized Cost		Fair Value
Due in one year or less	$	5,003	$	4,996
Due after one year through five years		9,658		9,328
Due after five years through ten years		39,482		35,424
Due after ten years		249,772		232,478
	$	303,915	$	282,226

HELD-TO-MATURITY:

(Dollars in thousands)	Held-to-maturity
	Amortized Cost			Fair Value
Due in one year or less	$	809		$	805
Due after one year through five years		42,349			40,915
Due after five years through ten years		74,378			71,522
Due after ten years		99,664			92,276
Allowance for Credit Losses on Held-to-Maturity Securities		(30	)		—
	$	217,170		$	205,518

XML

LOANS (Tables)

12 Months Ended

Dec. 31, 2023

Receivables [Abstract]

Schedule of Loan Portfolio

	December 31,
(Dollars in thousands)	2023		2022
Commercial	$	78,134	$	72,409
Real estate:
Construction		118,225		91,223
Mortgage-residential		94,796		65,759
Mortgage-commercial		791,947		709,218
Consumer:
Home equity		34,752		28,723
Other		16,165		13,525
Total	$	1,134,019	$	980,857

Schedule of Allowance for Credit Losses

Activity in the allowance for credit losses was as follows:

	Years ended December 31,
(Dollars in thousands)	2023			2022			2021
Balance at the beginning of year	$	11,336		$	11,179		$	10,389
Adjustment for adoption of ASU 2016-13		(14	)
Provision for (release of) credit losses		939			(152	)		335
Charged off loans		(87	)		(68	)		(182	)
Recoveries		93			377			637
Balance at end of year	$	12,267		$	11,336		$	11,179

The detailed activity in the allowance for credit losses and the recorded investment in loans receivable as of and for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 follows:

($ in thousands)	Commercial			Real Estate Construction		Real Estate Mortgage Residential		Real Estate Mortgage Commercial			Consumer Home Equity			Consumer Other			Unallocated			Total Loans
Balance at December 31, 2022	$	849		$	75	$	723	$	8,569		$	314		$	170		$	636		$	11,336
Adjustment to allowance for adoption of ASU 2016-13		193			1,075		32		(883	)		166			39			(636	)		(14	)
Charge-offs		(20	)		—		—		—			—			(67	)		—			(87	)
Recoveries		5			2		9		37			22			18			—			93
Provision for credit losses		(92	)		185		358		423			(30	)		95			—			939
Balance at December 31, 2023	$	935		$	1,337	$	1,122	$	8,146		$	472		$	255			—		$	12,267

(Dollars in thousands)	Commercial			Real estate Construction			Real estate Mortgage Residential		Real estate Mortgage Commercial			Consumer Home equity			Consumer Other			Unallocated		Total
2022
Allowance for credit losses:
Beginning balance	$	853		$	113		$	560	$	8,570		$	333		$	126		$	624	$	11,179
Charge-offs		—			—			—		—			(1	)		(67	)		—		(68	)
Recoveries		17			—			6		325			13			16			—		377
Provisions		(21	)		(38	)		157		(326	)		(31	)		95			12		(152	)
Ending balance	$	849		$	75		$	723	$	8,569		$	314		$	170		$	636	$	11,336
Ending balances:
Individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment		(849	)		75			723		8,569			314			170			636		11,336
Loans receivable:
Ending balance-total	$	72,409		$	91,223		$	65,759	$	709,218		$	28,723		$	13,525		$	—	$	980,857
Ending balances:
Individually evaluated for impairment		29			—			34		4,752			168			—			—		4,983
Collectively evaluated for impairment		72,380			91,223			65,725		704,466			28,555			13,525			—		975,874

The following table presents an allocation of the allowance for credit losses at the end of each of the past three years. The allocation is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount is available to absorb losses occurring in any category of loans.

Allocation of the Allowance for Credit Losses

	2023					2022					2021
(Dollars in thousands)	Amount		% of loans in category			Amount		% of loans in category			Amount		% of loans in category
Commercial	$	935		7.6	%	$	849		7.9	%	$	853		8.1	%
Real Estate Construction		1,337		10.9	%		75		0.7	%		113		1.1	%
Real Estate Mortgage:
Commercial		8,146		66.4	%		8,569		80.1	%		8,570		81.2	%
Residential		1,122		9.2	%		723		6.8	%		560		5.3	%
Consumer - Home Equity		472		3.8	%		314		2.9	%		333		3.2	%
Consumer - Other		255		2.1	%		170		1.6	%		126		1.2	%
Unallocated		—		N/A			636		N/A			624		N/A
Total	$	12,267		100.0	%	$	11,336		100.0	%	$	11,179		100.0	%

Schedule of loan category and loans individually evaluated and considered impaired

The following table presents information related to the average recorded investment and interest income recognized on impaired loans, excluding PCI loans, at December 31, 2022 and December 31, 2021.

(Dollars in thousands)
December 31, 2022	Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	27	$	2
Real estate:
Construction		—		—
Mortgage-residential		34		3
Mortgage-commercial		4,747		464
Consumer:
Home Equity		167		9
Other		—		—
With an allowance recorded:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		—		—
Mortgage-commercial		—		—
Consumer:
Home Equity		—		—
Other		—		—
Total:
Commercial		27		2
Real estate:
Construction		—		—
Mortgage-residential		34		3
Mortgage-commercial		4,747		464
Consumer:
Home Equity		167		9
Other		—		—
	$	4,975	$	478

(Dollars in thousands)
December 31, 2021	Average Recorded Investment		Interest Income Recognized
With no allowance recorded:
Commercial	$	—	$	—
Real estate:
Construction		—		—
Mortgage-residential		131		6
Mortgage-commercial		1,748		223
Consumer:
Home Equity		—		—
Other		—		—
With an allowance recorded:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		—		—
Mortgage-commercial		39		5
Consumer:
Home Equity		—		—
Other		—		—
Total:
Commercial		—		—
Real estate:
Construction		—		—
Mortgage-residential		131		6
Mortgage-commercial		1,787		228
Consumer:
Home Equity		—		—
Other		—		—
	$	1,918	$	234

The following tables present loans individually evaluated for impairment by class of loans, excluding PCI loans, as of December 31, 2022.

(Dollars in thousands)
December 31, 2022	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no allowance recorded:
Commercial	$	29	$	29	$	—
Real estate:
Construction		—		—		—
Mortgage-residential		34		51		—
Mortgage-commercial		4,752		5,260		—
Consumer:
Home Equity		168		168		—
Other		—		—		—
With an allowance recorded:
Commercial		—		—		—
Real estate:
Construction		—		—		—
Mortgage-residential		—		—		—
Mortgage-commercial		—		—		—
Consumer:
Home Equity		—		—		—
Other		—		—		—
Total:
Commercial		29		29		—
Real estate:
Construction		—		—		—
Mortgage-residential		34		51		—
Mortgage-commercial		4,752		5,260		—
Consumer:
Home Equity		168		168		—
Other		—		—		—
	$	1,694	$	3,705	$	—

Schedule of Amortized Cost of Loans, by Loan Category, Modified for Borrowers with Financial Difficulty

Schedule of loan category and loan by risk categories

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

	Term Loans by year of Origination
($ in thousands)	2019		2020		2021		2022		2023		Prior		Revolving		Revolving Converted to Term		Total
Commercial
Pass	$	1,149	$	1,375	$	23,226	$	9,018	$	12,950	$	9,230	$	21,033	$	49	$	78,030
Special mention		—		—		—		—		—		26		—		—		26
Substandard		—		—		78		—		—		—		—		—		78
Total commercial		1,149		1,375		23,304		9,018		12,950		9,256		21,033		49		78,134
Current period gross write-offs		—		20		—		—		—		—		—		—		20
Real estate construction
Pass		6,864		—		5,074		39,514		47,992		—		18,781		—		118,225
Total real estate construction		6,864		—		5,074		39,514		47,992		—		18,781		—		118,225
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Real estate mortgage-residential
Pass		1,894		10,548		6,219		28,843		28,517		8,420		977		8,962		94,380
Special mention		—		25		—		—		—		177		—		—		202
Substandard		—		—		—		—		—		214		—		—		214
Total real estate mortgage-residential		1,894		10,573		6,219		28,843		28,517		8,811		977		8,962		94,796
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Real estate mortgage-commercial
Pass		47,962		95,120		136,892		201,380		106,125		189,983		14,038		329		791,829
Special mention		—		—		—		—		—		21		—		—		21
Substandard		—		—		—		—		—		97		—		—		97
Total real estate mortgage-commercial		47,962		95,120		136,892		201,380		106,125		190,101		14,038		329		791,947
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Consumer - home equity
Pass		—		—		—		—		—		—		33,621		—		33,621
Special mention		—		—		—		—		—		—		67		—		67
Substandard		—		—		—		—		—		—		1,064		—		1,064
Total consumer - home equity		—		—		—		—		—		—		34,752		—		34,752
Current period gross write-offs		—		—		—		—		—		—		—		—		—
Consumer - other
Pass		420		203		435		1,164		2,043		902		10,982		—		16,149
Special mention		—		—		—		—		16		—		—		—		16
Substandard		—		—		—		—		—		—		—		—		—
Total consumer - other		420		203		435		1,164		2,059		902		10,982		—		16,165
Current period gross write-offs		—		—		—		—		—		—		67		—		67

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of December 31, 2023 and December 31, 2022, no loans were classified as doubtful. As of December 31, 2022, and based on the most recent analysis performed, the risk category of loans by class of loans is shown in the table below.

(Dollars in thousands)
			Special
December 31, 2022	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial & agricultural	$	72,333	$	47	$	29	$	—	$	72,409
Real estate:
Construction		91,223		—		—		—		91,223
Mortgage – residential		65,505		220		34		—		65,759
Mortgage – commercial		704,357		80		4,781		—		709,218
Consumer:
Home Equity		27,531		117		1,075		—		28,723
Other		13,269		93		163		—		13,525
Total	$	974,218	$	557	$	6,082	$	—	$	980,857

Schedule of Loan Category and Aging Analysis of Loans

The following tables are by loan category and present loans past due and on non-accrual status as of December 31, 2023 and December 31, 2022:

(Dollars in thousands) December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	19	$	7	$	—	$	24	$	50	$	78,084	$	78,134
Real estate:
Construction		—		—		—		—		—		118,225		118,225
Mortgage-residential		244		15		214		—		473		94,323		94,796
Mortgage-commercial		67		124		—		—		191		791,756		791,947
Consumer:
Home equity		—		—		—		3		3		34,749		34,752
Other		22		—		1		—		23		16,142		16,165
Total	$	352	$	146	$	215	$	27	$	740	$	1,133,279	$	1,134,019
(Dollars in thousands) December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days and Accruing		Nonaccrual		Total Past Due		Current		Total Loans
Commercial	$	87	$	—	$	—	$	29	$	116	$	72,293	$	72,409
Real estate:
Construction		—		—		—		—		—		91,223		91,223
Mortgage-residential		327		—		—		34		361		65,398		65,759
Mortgage-commercial		46		8		—		4,664		4,718		704,500		709,218
Consumer:
Home equity		—		—		—		168		168		28,555		28,723
Other		96		—		2		—		98		13,427		13,525
Total	$	556	$	8	$	2	$	4,895	$	5,461	$	975,396	$	980,857

Schedule of Nonaccrual Loans

The following table is a summary of the Company’s non-accrual loans by major categories for the periods indicated.

	CECL						Incurred Loss
	December 31, 2023						December 31, 2022
(Dollars in thousands)	Non-accrual Loans with No Allowance		Non-accrual Loans with an Allowance		Total Non-accrual Loans		Non-accrual Loans
Commercial	$	—	$	24	$	24	$	29
Real Estate:
Construction		—		—		—		—
Mortgage-Residential		—		—		—		34
Mortgage-Commercial		—		—		—		4,664
Consumer Home Equity		—		3		3		168
Consumer Other		—		—		—		—
Total Loans	$	—	$	27	$	27	$	4,895

Schedule of Related Party Loans

Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the years ended December 31, 2023 and December 31, 2022.

	For the years ended December 31,
(Dollars in thousands)	2023		2022
Balance, beginning of year	$	2,189	$	2,809
New Loans		—		3
Less loan repayments		1,131		623
Balance, end of year	$	1,058	$	2,189

Schedule of Unfunded Commitments

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2023.

(Dollars in thousands)	Total Allowance for Credit Losses - Unfunded Commitments
Balance, December 31, 2022	$	—
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13		398
Provision for unfunded commitments		199
Balance, December 31, 2023	$	597

XML

FAIR VALUE MEASUREMENT (Tables)

12 Months Ended

Dec. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Fair Value, by Balance Sheet Grouping

The carrying amount and estimated fair value by classification Level of the Company’s financial instruments as of December 31, 2023 and December 31, 2022 are as follows: 

	December 31, 2023
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and short term investments	$	94,695	$	94,695	$	94,695	$	—	$	—
Available-for-sale securities		282,226		282,226		—		282,226		—
Held-to-maturity securities		217,170		205,518		—		205,518		—
Other investments, at cost		6,800		6,800		—		—		6,800
Loans held for sale		4,433		4,433		—		4,433		—
Derivative financial instruments		1,069		1,069				1,069
Net loans receivable		1,121,752		1,088,053		—		—		1,088,053
Accrued interest		5,869		5,869		5,869		—		—
Financial liabilities:
Non-interest bearing demand	$	432,333	$	432,333	$	—	$	432,333	$	—
Interest bearing demand deposits and money market accounts		707,434		707,434		—		707,434		—
Savings		118,623		118,623		—		118,623		—
Time deposits		252,611		252,137		—		252,137		—
Total deposits		1,511,001		1,510,527		—		1,510,527		—
Federal Home Loan Bank Advances		90,000		90,000		—		90,000		—
Short term borrowings		62,863		62,863		—		62,863		—
Junior subordinated debentures		14,964		13,123		—		13,123		—
Accrued interest payable		3,575		3,575		3,575		—		—

	December 31, 2022
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and short term investments	$	37,401	$	37,401	$	37,401	$	—	$	—
Available-for-sale securities		331,862		331,862		—		331,862		—
Held-to-maturity securities		228,701		213,613		—		213,613		—
Other investments, at cost		4,191		4,191		—		—		4,191
Loans held for sale		1,779		1,779		—		1,779		—
Net loans receivable		969,521		943,498		—		—		943,498
Accrued interest		5,217		5,217		5,217		—		—
Financial liabilities:
Non-interest bearing demand	$	461,010	$	461,010	$	—	$	461,010	$	—
Interest bearing demand deposits and money market accounts		629,763		629,763		—		629,763		—
Savings		161,770		161,770		—		161,770		—
Time deposits		132,839		132,825		—		132,825		—
Total deposits		1,385,382		1,385,368		—		1,385,368		—
Federal Home Loan Bank Advances		50,000		50,000		—		50,000		—
Short term borrowings		90,743		90,743		—		90,743		—
Junior subordinated debentures		14,964		13,402		—		13,402		—
Accrued interest payable		520		520		520		—		—

Schedule of Fair Value, Assets Measured on Recurring Basis

The following table summarizes quantitative disclosures about the fair value for each category of assets carried at fair value as of December 31, 2023 and December 31, 2022 that are measured on a recurring basis. There were no liabilities carried at fair value as of December 31, 2023 or December 31, 2022 that are measured on a recurring basis. 

AVAILABLE-FOR-SALE:

Dollars in thousands)

Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Available- for-sale securities
US Treasury Securities	$	18,346	$	—	$	18,346	$	—
Government Sponsored Enterprises		2,129		—		2,129		—
Mortgage-backed securities		238,159		—		238,159		—
Small Business Administration pools		15,721		—		15,721		—
State and local government		—		—		—		—
Corporate and other securities		7,871		—		7,871		—
Total Available-for-sale securities		282,226		—		282,226		—
Loans held for sale		4,433		—		4,433		—
Total	$	286,659	$	—	$	286,659	$	—

(Dollars in thousands)

Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
Available- for-sale securities
US Treasury Securities	$	55,983	$	—	$	55,983	$	—
Government Sponsored Enterprises		2,074		—		2,074		—
Mortgage-backed securities		244,600		—		244,600		—
Small Business Administration pools		21,087		—		21,087		—
State and local government		—		—		—		—
Corporate and other securities		8,118		—		8,118		—
Total Available-for-sale securities		331,862		—		331,862		—
Loans held for sale		1,779		—		1,779		—
Total	$	333,641	$	—	$	333,641	$	—

Schedule of Fair Value, Assets Measured on Non-Recurring Basis

The following tables summarize quantitative disclosures about the fair value for each category of assets carried at fair value as of December 31, 2023 and December 31, 2022 that are measured on a non-recurring basis. There were no liabilities carried at fair value and measured on a non-recurring basis at December 31, 2023 and 2022. 

(Dollars in thousands)
Description	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
Other real estate owned:
Construction		145		—		—		145
Mortgage-commercial		477		—		—		477
Total other real estate owned		622		—		—		622
Total	$	622	$	—	$	—	$	622

(Dollars in thousands)
Description	December 31, 2022		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial & Industrial	$	—	$	—	$	—	$	—
Real estate:
Mortgage-residential		34		—		—		34
Mortgage-commercial		4,752		—		—		4,752
Consumer:
Home equity		168		—		—		168
Other		—		—		—		—
Total impaired		4,954		—		—		4,954
Other real estate owned:
Construction		412		—		—		412
Mortgage-commercial		522		—		—		522
Total other real estate owned		934		—		—		934
Total	$	5,888	$	—	$	—	$	5,888

Schedule of Fair Value Measurement Inputs and Valuation Techniques

For Level 3 assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and December 31, 2022, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)	Fair Value as of December 31, 2023		Valuation Technique		Significant Observable Inputs		Significant Unobservable Inputs
OREO	$	622		Appraisal Value/Comparison Sales/Other estimates		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost

(Dollars in thousands)	Fair Value as of December 31, 2022		Valuation Technique		Significant Observable Inputs		Significant Unobservable Inputs
OREO	$	934		Appraisal Value/Comparison Sales/Other estimates		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost
Impaired loans	$	4,954		Appraisal Value		Appraisals and or sales of comparable properties		Appraisals discounted 6% to 16% for sales commissions and other holding cost

XML

PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consisted of the following:

	December 31,
(Dollars in thousands)	2023		2022
Land	$	9,804	$	9,804
Premises		28,708		28,684
Equipment		8,203		7,900
Fixed assets in progress		14		90
Property and equipment, gross		46,729		46,478
Accumulated depreciation		16,140		15,201
Property and Equipment Net	$	30,589	$	31,277

XML

GOODWILL, CORE DEPOSIT INTANGIBLE (Tables)

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets excluding Goodwill

Intangible assets (excluding goodwill) consisted of the following:

	December 31,
(Dollars in thousands)	2023			2022			2021
Core deposit premiums, gross carrying amount	$	3,358		$	3,358		$	3,358
Other intangibles		538			538			538
Gross carrying amount		3,896			3,896			3,896
Accumulated amortization		(3,292	)		(3,135	)		(2,977	)
Net	$	604		$	761		$	919

Schedule of Aggregate Amortization Expenses

Based on the core deposit and other intangibles as of December 31, 2023, the following table presents the aggregate amortization expense for each of the succeeding years ending December 31:

(Dollars in thousands)	Amount
2024	$	158
2025		157
2026		158
2027		131
2028 and thereafter
Total	$	604

Schedule of Goodwill

The Company’s carrying amount of goodwill at December 31, 2023, and 2022 and changes to the goodwill are summarized as follows:

	December 31,
(In thousands)	2023		2022
Balance—beginning of year	$	14,637	$	14,637
Acquired Goodwill		—		—
Impairment		—		—
Balance, end of year	$	14,637	$	14,637

XML

OTHER REAL ESTATE OWNED (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of Other Real Estate Owned

The following summarizes the activity in the other real estate owned for the years ended December 31, 2023 and 2022.

	December 31,
(In thousands)	2023			2022
Balance—beginning of year	$	934		$	1,165
Additions—foreclosures		—			—
Write-downs		(44	)		(69	)
Sales		(268	)		(162	)
Balance, end of year	$	622		$	934

XML

DEPOSITS (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of Deposits

The Company’s total deposits are comprised of the following at the dates indicated:

	December 31,		December 31,
(Dollars in thousands)	2023		2022
Non-interest bearing deposits	$	432,333	$	461,010
Interest bearing demand deposits and money market accounts		707,434		629,763
Savings		118,623		161,770
Time deposits		252,611		132,839
Total deposits	$	1,511,001	$	1,385,382

Schedule of Scheduled Maturities of Time Deposits

At December 31, 2023, the scheduled maturities of time deposits are as follows:

(Dollars in thousands)
2024	$	221,399
2025		8,145
2026		20,483
2027		801
2028 and after		1,783
Total	$	252,611

XML

LEASES (Tables)

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Schedule of Future Undiscounted Operating Lease Payments

(Dollars in thousands)
2024	$	424
2025		434
2026		444
2027		422
2028		364
Thereafter		2,344
Total undiscounted lease payments	$	4,432
Less effect of discounting		(1,006	)
Present value of estimated lease payments (lease liability)		3,426

XML

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Schedule of Income Tax Expenses

Income tax expense for the years ended December 31, 2023, 2022 and 2021 consists of the following:

	Year ended December 31
(Dollars in thousands)	2023			2022			2021
Current
Federal	$	2,937		$	3,429		$	3,653
State		627			735			749
Total Current		3,564			4,164			4,402
Deferred
Federal		(327	)		(323	)		(167	)
State		(40	)		(43	)		(53	)
Total Deferred		(367	)		(366	)		(220	)
Income tax expense	$	3,197		$	3,798		$	4,182

Schedule of Effective Income Tax Rate Reconciliation

Reconciliation from expected federal tax expense to effective income tax expense for the periods indicated are as follows:  

	Year ended December 31
(Dollars in thousands)	2023			2022			2021
Expected federal income tax expense	$	3,159		$	3,866		$	4,126
State income tax net of federal benefit		464			547			550
Tax exempt interest		(275	)		(404	)		(396	)
Increase in cash surrender value life insurance		(176	)		(151	)		(146	)
Valuation allowance		93			27			32
Life Insurance Proceeds		(19	)		—			—
Excess tax benefit of stock compensation		—			(5	)		(11	)
Other		(49	)		(82	)		27
Total	$	3,197		$	3,798		$	4,182

Schedule of Deferred Tax Assets and Liabilities

The following is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities:

	December 31,
(Dollars in thousands)	2023		2022
Assets:
Allowance for credit losses	$	2,646	$	2,464
Unfunded Commitments		129		—
Excess tax basis of deductible intangible assets		38		60
Net operating loss carry forward		933		840
Excess tax basis of assets acquired		—		18
Unrealized losses on available-for-sale securities		4,406		5,169
Unrealized losses on held-to-maturity securities		2,939		3,291
Compensation expense deferred for tax purposes		1,448		1,348
Deferred loss on other-than-temporary-impairment charges		5		5
FASB 91 - Origination Income & Costs		473		405
Other Real Estate Owned		229		231
Other		145		299
Total deferred tax asset		13,391		14,130
Valuation reserve		1,009		916
Total deferred tax asset net of valuation reserve		12,382		13,214
Liabilities:
Tax depreciation in excess of book depreciation		445		619
Excess financial reporting basis of assets acquired		919		938
Unrealized gain on available-for-sale securities		—		—
Total deferred tax liabilities		1,364		1,557
Net deferred tax asset / (liability) recognized	$	11,018	$	11,657

XML

REVENUE RECOGNITION (Tables)

12 Months Ended

Dec. 31, 2023

Revenue Recognition

Schedule of Revenue Recognition

(Dollars in thousands)	December 31,			December 31,
Non-Interest Income	2023			2022
Deposit service charges	$	963		$	960
Mortgage banking income(1)		1,406			1,900
Investment advisory fees and non-deposit commissions(1)		4,511			4,479
Loss on sale of securities(1)		(1,249	)
Gain (loss) on sale of other real estate owned		151			(45	)
Gain (loss) on sale of other assets		—			(73	)
Non-recurring income		121			7
Other (2)		4,518			4,341
Total non-interest income		10,421			11,569

⁽¹⁾ Not within the scope of ASC 606

⁽²⁾ Includes Check Card Fee income discussed above.  No other items are within the scope of ASC 606.

XML

OTHER INCOME AND OTHER EXPENSE (Tables)

12 Months Ended

Dec. 31, 2023

Other Income and Expenses [Abstract]

Schedule of Components of Other Non-Interest Income

A summary of the components of other non-interest income is as follows:

	Year ended December 31,
(In thousands)	2023		2022		2021
ATM debit card income	$	2,771	$	2,706	$	2,669
Recurring income on bank owned life insurance		745		721		693
Rental income		370		322		311
Other fees including safe deposit box fees		230		251		243
Wire transfer fees		119		132		118
Other		283		209		214
Total	$	4,518	$	4,341	$	4,248

Schedule of Components of Other Non-Interest Expenses

A summary of the components of other non-interest expense is as follows:

	Year ended December 31,
(Dollars in thousands)	2023		2022		2021
Core banking/electronic processing and services	$	2,512	$	2,469	$	2,397
ATM/debit card processing		1,074		885		694
Software subscriptions and services		1,008		896		733
Supplies		134		134		116
Telephone		485		354		365
Courier		284		279		181
Correspondent services		354		303		280
Insurance		381		358		325
Debit card and Fraud losses		422		285		160
Investment advisory and non-deposit expense		329		409		420
Loan processing and closing costs		331		266		329
Director fees		601		488		500
Legal and Professional fees		1,042		1,177		878
Shareholder expense		197		221		212
Other		957		834		777
Total	$	10,111	$	9,358	$	8,367

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of nonvested restricted stock and stock units

The table below shows the components of “nonvested restricted stock and stock units” as of the years ended December 31, 2023 and 2022.

(Dollars in thousands)	Year ended December 31,
Nonvested restricted stock and stock units	2023			2022
Non-employee director deferred compensation stock plan deferred stock units		1,439			1,260
Time-based restricted stock units - officer		235			129
Performance-based restricted stock units - officer		521			218
Restricted stock – officer and director		(14	)		(146	)
Total nonvested restricted stock and stock units		2,181			1,461

Schedule of Non-Employee Director Deferred Compensation

The table below shows the following information related to First Community Corporation’s Non-Employee Director Deferred Compensation Plan: accumulated share units and accrued liability as of the years ended December 31 2023, 2022 and 2021; and the related director compensation expense for the twelve months ended 2023, 2022, and 2021.

	Year ended December 31,
	2023		2022		2021
Non-employee director deferred compensation plan accumulated share units		93,488		93,488		85,764
Accrued liability (dollars in thousands)1		1,439		1,260		1,107
Related director compensation expense (dollars in thousands)		180		153		140

¹ Recorded in “Nonvested restricted stock and stock units” effective June 2022; recorded in “Other liabilities” prior to June 2022.

The table below shows stock awards granted during the twelve months ended December 31, 2023, 2022, and 2021.

The table below shows stock awards granted during the twelve months ended December 31, 2023, 2022, and 2021.

(In shares/units)	Twelve Months ended December 31,
	20231		20221		20212
Time-based restricted stock units - officer		12,562		11,738		—
Performance-based restricted stock units – officer3		16,750		11,738		13,301
Restricted stock – officer		—		2,201		13,301
Restricted stock – director		7,590		7,359		7,960

1	Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.
2	Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.
3	16,750 units represent the target payout with a maximum payout of 33,500 units.

Schedule of Fair Value of Stock Awards Granted

The table below shows the fair value of stock awards granted during the twelve months ended December 31 2023, 2022 and 2021.

(Dollars in thousands)	Twelve months ended December 31,
	20231		20221		20212
Time-based restricted stock units - officer		255		246		—
Performance-based restricted stock units – officer3		340		246		234
Restricted stock – officer		—		46		234
Restricted stock – director		154		154		140

1	Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.
2	Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.
3	$340 thousand represents the target payout with a maximum payout of $680 thousand.

Schedule of Compensation Expense Related to Stock Awards Granted

The table below shows the compensation expense related to stock awards granted during the twelve months ended December 31 2023, 2022 and 2021.

(Dollars in thousands)	Year ended December 31,
Compensation expense related to stock awards	2023		2022		2021
Time-based restricted stock units – officer1		163		94		19
Performance-based restricted stock units – officer2		264		153		65
Restricted stock – officer3		120		206		223
Restricted stock – director4		167		141		140

1	Expense in 2023 consists of $159.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $3.2 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $19.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
2	Expense in 2023 consists of $186.0 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
3	Expense in 2023 consists of $17.2 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $102.8 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $23.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $182.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.
4	Expense in 2023 and 2022 was related to stock awards granted under the Community Corporation 2021 Omnibus Equity Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

Schedule of Stock Awards Granted Under 2021 Incentive Plan

The table below shows the First Community Corporation 2021 Omnibus Equity Incentive Plan (“2021 Incentive Plan”) initial reserve at May 19, 2021; stock awards granted under the 2021 Incentive Plan from its inception through December 31, 2023; and the remaining reserve under such plan at December 31, 2023.

(In shares / units)
First Community Corporation 2021 Omnibus Equity Incentive Plan	2023
Initial reserve – May 19, 2021		225,000
Shares / units granted
Time-based restricted stock units - officer		(24,300	)
Performance-based restricted stock units – officer1		(34,358	)
Restricted stock – officer		(2,201	)
Restricted stock – director		(14,949	)
Remaining reserve – December 31, 2023		149,192

¹ Performance-based restricted stock units are initially granted and expensed at target levels; however, they are reserved at maximum levels.

XML

EARNINGS PER COMMON SHARE (Tables)

12 Months Ended

Dec. 31, 2023

Earnings Per Share [Abstract]

Schedule of Earning Per Common Share

The following reconciles the numerator and denominator of the basic and diluted earnings per common share computation:

	Year ended December 31,
(Amounts in thousands)	2023		2022		2021
Numerator (Included in basic and diluted earnings per share)	$	11,843	$	14,613	$	15,465
Denominator
Weighted average common shares outstanding for:
Basic earnings per common share		7,568		7,529		7,491
Dilutive securities:
Deferred compensation		79		79		58
Diluted common shares outstanding		7,647		7,608		7,549
Basic earnings per common share	$	1.56	$	1.94	$	2.06
Diluted earnings per common share	$	1.55	$	1.92	$	2.05
The average market price used in calculating assumed number of shares	$	18.70	$	19.52	$	19.68

XML

SHAREHOLDERS’ EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS (Tables)

12 Months Ended

Dec. 31, 2023

Equity [Abstract]

Schedule of actual capital amounts and ratios as well as minimum amounts for each regulatory defined category for the bank and the company

The Bank exceeded the minimum regulatory capital ratios at December 31, 2023 and 2022, as set forth in the following table: 

(In thousands)	Minimum Required Amount		%			Actual Amount		%			Excess Amount		%
The Bank(1)(2):
December 31, 2023
Risk Based Capital
Tier 1	$	73,696		6.0	%	$	153,859		12.5	%	$	80,163		6.5	%
Total Capital	$	98,261		8.0	%		166,752		13.6	%		68,491		5.6	%
CET1	$	55,272		4.5	%		153,859		12.5	%		98,587		8.0	%
Tier 1 Leverage	$	72,830		4.0	%		153,859		8.5	%		81,029		4.5	%
December 31, 2022
Risk Based Capital
Tier 1	$	64,741		6.0	%	$	145,578		13.5	%	$	80,837		7.5	%
Total Capital	$	86,321		8.0	%	$	156,914		14.5	%	$	70,593		6.5	%
CET1	$	48,555		4.5	%	$	145,578		13.5	%	$	97,023		9.0	%
Tier 1 Leverage	$	67,509		4.0	%	$	145,578		8.6	%	$	78,069		4.6	%

⁽¹⁾ As a small bank holding company, the Company is generally not subject to the capital requirements unless otherwise advised by the Federal Reserve.

⁽²⁾ Ratios do not include the capital conservation buffer of 2.5%.

XML

PARENT COMPANY FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2023

Condensed Financial Information Disclosure [Abstract]

Condensed Balance Sheets

Condensed Balance Sheets

	At December 31,
(Dollars in thousands)	2023		2022
Assets:
Cash on deposit	$	3,590	$	3,870
Investment in bank subsidiary		140,746		128,392
Other		1,941		1,288
Total assets	$	146,277	$	133,550
Liabilities:
Junior subordinated debentures	$	14,964	$	14,964
Other		254		225
Total liabilities		15,218		15,189
Shareholders’ equity		131,059		118,361
Total liabilities and shareholders’ equity	$	146,277	$	133,550

Condensed Statements of Operations

Condensed Statements of Operations

	Year ended December 31,
(Dollars in thousands)	2023			2022			2021
Income:
Interest and dividend income	$	37		$	21		$	13
Equity in undistributed earnings of subsidiary		8,495			11,431			12,386
Dividend income from bank subsidiary		5,357			4,463			4,019
Total income		13,889			15,915			16,418
Expenses:
Interest expense		1,187			675			416
Other		1,419			974			772
Total expense		2,606			1,649			1,188
Income before taxes		11,283			14,266			15,230
Income tax benefit		(560	)		(347	)		(235	)
Net income	$	11,843		$	14,613		$	15,465

Condensed Statements of Cash Flows

Condensed Statements of Cash Flows

	Year ended December 31,
(Dollars in thousands)	2023			2022			2021
Cash flows from operating activities:
Net income	$	11,843		$	14,613		$	15,465
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed earnings of subsidiary		(8,495	)		(11,431	)		(12,386	)
Other-net		(545	)		232			145
Net cash provided by operating activities		2,803			3,414			3,224
Cash flows from investing activities:
Purchase of investments at cost		(80	)		(188	)		(87	)
Net cash provided by investing activities		(80	)		(188	)		(87	)
Cash flows from financing activities:
Dividends paid: common stock		(4,235	)		(3,913	)		(3,593	)
(Cost of) Proceeds from issuance of common stock		(28	)		28			46
Dividend Reinvestment Plan		438			388			368
Change in non-vested restricted stock		180			507			—
Restricted stock units granted		763			1,447			—
Restricted shares surrendered		(121	)		(42	)		(70	)
Deferred compensation shares		—			(1,106	)		90
Net cash used in financing activities		(3,003	)		(2,691	)		(3,159	)
Increase (decrease) in cash and cash equivalents		(280	)		535			(22	)
Cash and cash equivalents at beginning of year		3,870			3,335			3,357
Cash and cash equivalents at end of year	$	3,590		$	3,870		$	3,335

XML

DERIVATIVES (Tables)

12 Months Ended

Dec. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Gross Notional Amount and Estimated Fair Value of Derivative Instruments

The following table presents the gross notional amounts and estimated fair value of derivative instruments employed by the Company as of December 31, 2023:

			Fair Value
(Dollars in thousands)	Notional Amount		Assets		Liabilities
Fair Value Hedges:
Interest rate contracts
Pay fixed, receive variable – loans	$	150,000	$	1,069	$	—
Total derivatives	$	150,000	$	1,069	$	—

Schedule of carrying value of Hedged items in Fair Value Hedging Relationships

	Hedge Asset		Hedge Basis Adjustment
(Dollars in thousands)	Basis		Designated		Discounted
Fair Value Hedges:
Interest rate contracts
Commercial real estate loans	$	900	$	—	$	—
Total	$	900	$	—	$	—

XML

REPORTABLE SEGMENTS (Tables)

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Schedule of Company’s Reportable Segment

The following tables present selected financial information for the Company’s reportable business segments for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.

Year ended December 31, 2023 (Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	68,874	$	3,787	$	—	$	5,393		$	(5,357	)	$	72,697
Interest expense		21,478		1,140		—		1,187			—			23,805
Net interest income	$	47,396	$	2,647	$	—	$	4,206		$	(5,357	)	$	48,892
Provision for credit losses		677		452		—		—			—			1,129
Noninterest income		4,496		1,414		4,511		—			—			10,421
Noninterest expense		35,136		3,477		3,112		1,419			—			43,144
Net income (loss) before taxes	$	16,079	$	132	$	1,399	$	2,787		$	(5,357	)	$	15,040
Income tax expense (benefit)		3,757		—		—		(560	)		—			3,197
Net income (loss)	$	12,322	$	132	$	1,399	$	3,347		$	(5,357	)	$	11,843

Year ended December 31, 2022 (Dollars in thousands)	Commercial and Retail Banking			Mortgage Banking			Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	49,238		$	1,858		$	—	$	4,484		$	(4,463	)	$	51,117
Interest expense		2,403			96			—		675			—			3,174
Net interest income	$	46,835		$	1,762		$	—	$	3,809		$	(4,463	)	$	47,943
Provision for (release of) credit losses		(392	)		240			—		—			—			(152	)
Noninterest income		5,184			1,906			4,479		—			—			11,569
Noninterest expense		33,629			3,689			2,961		974			—			41,253
Net income before taxes	$	18,782		$	(261	)	$	1,518	$	2,835		$	(4,463	)	$	18,411
Income tax expense (benefit)		4,145			—			—		(347	)		—			3,798
Net income	$	14,637		$	(261	)	$	1,518	$	3,182		$	(4,463	)	$	14,613

Year ended December 31, 2021 (Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate			Eliminations			Consolidated
Dividend and Interest Income	$	46,499	$	1,008	$	—	$	4,032		$	(4,019	)	$	47,520
Interest expense		1,825		—		—		416			—			2,241
Net interest income	$	44,674	$	1,008	$	—	$	3,616		$	(4,019	)	$	45,279
Provision for credit losses		335		—		—		—			—			335
Noninterest income		5,590		4,319		3,995		—			—			13,904
Noninterest expense		31,275		4,694		2,460		772			—			39,201
Net income before taxes	$	18,654	$	633	$	1,535	$	2,844		$	(4,019	)	$	19,647
Income tax expense (benefit)		4,417		—		—		(235	)		—			4,182
Net income	$	14,237	$	633	$	1,535	$	3,079		$	(4,019	)	$	15,465

(Dollars in thousands)	Commercial and Retail Banking		Mortgage Banking		Investment advisory and non-deposit		Corporate		Eliminations			Consolidated
Total Assets as of December 31, 2023	$	1,727,245	$	99,310	$	5	$	174,468	$	(173,340	)	$	1,827,688
Total Assets as of December 31, 2022	$	1,616,173	$	55,845	$	—	$	165,937	$	(165,009	)	$	1,672,946

XML

Nature of Business and Basis of Presentation (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Jan. 01, 2023	Dec. 31, 2022
Held to maturity securities, at amortized cost	$ 217,170		$ 228,701
Allowance for credit losses on held-to-maturity securities	(30)
Loans, at amortized cost	1,134,019		980,857
US States and Political Subdivisions Debt Securities [Member]
Held to maturity securities, at amortized cost	104,430		106,929
Allowance for credit losses on held-to-maturity securities	$ (30)
Accounting Standards Update 2016-13 [Member]
Held to maturity securities, at amortized cost
Allowance for credit losses on held-to-maturity securities			43
Loans, at amortized cost
Allowance for credit losses on loans			(14)
Allowance for credit losses for unfunded commitments			398
Accounting Standards Update 2016-13 [Member] | Commercial Portfolio Segment [Member]
Allowance for credit losses on loans			193
Accounting Standards Update 2016-13 [Member] | Real Estate Construction [Member]
Allowance for credit losses on loans			1,075
Accounting Standards Update 2016-13 [Member] | Residential Portfolio Segment [Member]
Allowance for credit losses on loans			32
Accounting Standards Update 2016-13 [Member] | Real Estate Mortgage Commercial [Member]
Allowance for credit losses on loans			(883)
Accounting Standards Update 2016-13 [Member] | Consumer Home Equity [Member]
Allowance for credit losses on loans			166
Accounting Standards Update 2016-13 [Member] | Consumer Other [Member]
Allowance for credit losses on loans			39
Accounting Standards Update 2016-13 [Member] | Unallocated Financing Receivables [Member]
Allowance for credit losses on loans			(636)
Accounting Standards Update 2016-13 [Member] | US States and Political Subdivisions Debt Securities [Member]
Allowance for credit losses on held-to-maturity securities			43
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member]
Held to maturity securities, at amortized cost		$ 106,929
Allowance for credit losses on held-to-maturity securities		43
Loans, at amortized cost		980,857
Allowance for credit losses on loans		11,322
Allowance for credit losses for unfunded commitments		398
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Commercial Portfolio Segment [Member]
Allowance for credit losses on loans		1,042
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Real Estate Construction [Member]
Allowance for credit losses on loans		1,150
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Residential Portfolio Segment [Member]
Allowance for credit losses on loans		755
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Real Estate Mortgage Commercial [Member]
Allowance for credit losses on loans		7,686
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Consumer Home Equity [Member]
Allowance for credit losses on loans		480
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Consumer Other [Member]
Allowance for credit losses on loans		209
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | Unallocated Financing Receivables [Member]
Allowance for credit losses on loans
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjusted Balance [Member] | US States and Political Subdivisions Debt Securities [Member]
Allowance for credit losses on held-to-maturity securities		$ 43
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]
Held to maturity securities, at amortized cost			106,929
Allowance for credit losses on held-to-maturity securities
Loans, at amortized cost			980,857
Allowance for credit losses on loans			11,336
Allowance for credit losses for unfunded commitments
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Commercial Portfolio Segment [Member]
Allowance for credit losses on loans			849
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Real Estate Construction [Member]
Allowance for credit losses on loans			75
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Residential Portfolio Segment [Member]
Allowance for credit losses on loans			723
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Real Estate Mortgage Commercial [Member]
Allowance for credit losses on loans			8,569
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Consumer Home Equity [Member]
Allowance for credit losses on loans			314
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Consumer Other [Member]
Allowance for credit losses on loans			170
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | Unallocated Financing Receivables [Member]
Allowance for credit losses on loans			636
Accounting Standards Update 2016-13 [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] | US States and Political Subdivisions Debt Securities [Member]
Allowance for credit losses on held-to-maturity securities

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($) Number	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Property, Plant and Equipment [Line Items]
Investment in Federal Home Loan Bank Stock, Fair Value Disclosure	$ 5,500	$ 2,900
Advertising Expense	$ 1,500	$ 1,300	$ 1,200
Number of Segments | Number	4
Building [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	39 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years

XML

INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost	$ 303,915	$ 357,185	$ 560,688
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax	39	82	9,178
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax	(21,728)	(25,405)	(5,027)
Debt Securities, Available-for-Sale	282,226	331,862	564,839
US Treasury Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost	20,791	60,552	15,736
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax	(2,445)	(4,569)	(300)
Debt Securities, Available-for-Sale	18,346	55,983	15,436
US Government-sponsored Enterprises Debt Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost	2,500	2,500	2,499
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax			2
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax	(371)	(426)
Debt Securities, Available-for-Sale	2,129	2,074	2,501
Mortgage-Backed Securities, Issued by US Government Sponsored Enterprises [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost	255,757	263,704	398,125
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax	15	10	3,596
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax	(17,613)	(19,114)	(3,992)
Debt Securities, Available-for-Sale	238,159	244,600	397,729
Small Business Administration pools [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost	16,108	21,657	30,835
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax	24	60	505
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax	(411)	(630)	(67)
Debt Securities, Available-for-Sale	15,721	21,087	31,273
Corporate and other securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost	8,759	8,772	8,024
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax		12	157
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax	(888)	(666)	(129)
Debt Securities, Available-for-Sale	$ 7,871	$ 8,118	8,118
US States and Political Subdivisions Debt Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Amortized Cost			105,469
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Gain, before Tax			4,918
Debt Securities, Available-for-Sale, Accumulated Gross Unrealized Loss, before Tax			(539)
Debt Securities, Available-for-Sale			$ 109,848

XML

INVESTMENT SECURITIES (Details 2) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Marketable Securities [Line Items]
Debt Securities, Held-to-Maturity, Amortized Cost, before Allowance for Credit Loss	$ 217,170	$ 228,701
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Gain	282
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Loss	(11,935)	(15,088)
Debt Securities, Held-to-Maturity, Fair Value	205,518	213,613
Mortgage-Backed Securities, Issued by US Government Sponsored Enterprises [Member]
Marketable Securities [Line Items]
Debt Securities, Held-to-Maturity, Amortized Cost, before Allowance for Credit Loss	112,740	121,772
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Gain
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Loss	(8,490)	(8,656)
Debt Securities, Held-to-Maturity, Fair Value	104,250	113,116
US States and Political Subdivisions Debt Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Held-to-Maturity, Amortized Cost, before Allowance for Credit Loss	104,430	106,929
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Gain	282
Debt Securities, Held-to-Maturity, Accumulated Unrecognized Loss	(3,445)	(6,432)
Debt Securities, Held-to-Maturity, Fair Value	$ 101,268	$ 100,497

XML

INVESTMENT SECURITIES (Details 3) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months	$ 14,297	$ 128,982
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	583	6,067
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer	256,193	194,279
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	21,145	19,338
Debt Securities, Available-for-Sale, Unrealized Loss Position	270,490	323,261
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss	21,728	25,405
US Treasury Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months		28,827
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		1,032
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer	18,346	27,156
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	2,445	3,537
Debt Securities, Available-for-Sale, Unrealized Loss Position	18,346	55,983
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss	2,445	4,569
US Government-sponsored Enterprises Debt Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer	2,129	2,074
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	371	426
Debt Securities, Available-for-Sale, Unrealized Loss Position	2,129	2,074
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss	371	426
Mortgage-Backed Securities, Issued by US Government Sponsored Enterprises [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months	8,164	81,961
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	423	4,435
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer	223,844	159,227
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	17,190	14,679
Debt Securities, Available-for-Sale, Unrealized Loss Position	232,008	241,188
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss	17,613	19,114
Small Business Administration pools [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months	4,253	16,066
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	45	453
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer	7,638	2,592
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	366	177
Debt Securities, Available-for-Sale, Unrealized Loss Position	11,891	18,658
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss	411	630
Corporate and other securities [Member]
Marketable Securities [Line Items]
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months	1,880	2,128
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	115	146
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer	4,236	3,230
Debt Securities, Available-for-Sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	773	520
Debt Securities, Available-for-Sale, Unrealized Loss Position	6,116	5,358
Debt Securities, Available-for-Sale, Unrealized Loss Position, Accumulated Loss	$ 888	$ 666

XML

INVESTMENT SECURITIES (Details 4) $ in Thousands	Dec. 31, 2023 USD ($)
Marketable Securities [Line Items]
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	$ 6,278
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	25
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value	182,847
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	11,910
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Fair Value	189,125
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Accumulated Loss	11,935
Mortgage-Backed Securities, Issued by US Government Sponsored Enterprises [Member]
Marketable Securities [Line Items]
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value	104,250
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	8,490
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Fair Value	104,250
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Accumulated Loss	8,490
US States and Political Subdivisions Debt Securities [Member]
Marketable Securities [Line Items]
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	6,278
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	25
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value	78,597
Debt Securities, Held-to-Maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	3,420
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Fair Value	84,875
Debt Securities, Held-to-Maturity, Unrealized Loss Position, Accumulated Loss	$ 3,445

XML

INVESTMENT SECURITIES (Details 5) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($)
Marketable Securities [Line Items]
Ending balance, December 31, 2023	$ (30)
US States and Political Subdivisions Debt Securities [Member]
Marketable Securities [Line Items]
Beginning balance, December 31, 2022
Adjustment for adoption of ASU 2016-13	(43)
Provision for credit losses	13
Ending balance, December 31, 2023	$ (30)

XML

INVESTMENT SECURITIES (Details 6) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Investments, Debt and Equity Securities [Abstract]
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling within One Year, Amortized Cost	$ 5,003
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling within One Year, Fair Value	4,996
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling after One Through Five Years, Amortized Cost	9,658
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling after One Through Five Years, Fair Value	9,328
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling after 5 through 10 Years, Amortized Cost	39,482
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling after 5 through 10 Years, Fair Value	35,424
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling after 10 Years, Amortized Cost	249,772
Debt Securities, Available-for-Sale, Maturity, Allocated and Single Maturity Date, Rolling after 10 Years, Fair Value	232,478
Debt Securities, Available-for-Sale, Amortized Cost	303,915	$ 357,185	$ 560,688
Debt Securities, Available-for-Sale	282,226	331,862	$ 564,839
Debt Securities, Held-to-Maturity, Amortized Cost, after Allowance for Credit Loss, Maturity, Allocated and Single Maturity Date, Year One	809
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, Year One	805
Debt Securities, Held-to-Maturity, Amortized Cost, after Allowance for Credit Loss, Maturity, Allocated and Single Maturity Date, after Year One through Five	42,349
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, after Year One Through Five	40,915
Debt Securities, Held-to-Maturity, Amortized Cost, after Allowance for Credit Loss, Maturity, Allocated and Single Maturity Date, after Year 5 through 10	74,378
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 5 Through 10	71,522
Debt Securities, Held-to-Maturity, Amortized Cost, after Allowance for Credit Loss, Maturity, Allocated and Single Maturity Date, after Year 10	99,664
Debt Securities, Held-to-Maturity, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 10	92,276
Debt Securities, Held-to-Maturity, Allowance for Credit Loss	(30)
Debt Securities, Held-to-Maturity, Amortized Cost, before Allowance for Credit Loss	217,170	228,701
Debt Securities, Held-to-Maturity, Fair Value	$ 205,518	$ 213,613

XML

INVESTMENT SECURITIES (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Investments, Debt and Equity Securities [Abstract]
Security Owned and Pledged as Collateral, Amortized Cost	$ 160,800	$ 290,100
Security Owned And Pledged as Collateral Fair Value	$ 150,600	$ 270,400

XML

LOANS (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Total	$ 1,134,019	$ 980,857
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Total	78,134	72,409
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Total	118,225	91,223
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Total	94,796	65,759
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total	791,947	709,218
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Total	34,752	28,723
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 16,165	$ 13,525

XML

LOANS (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Receivables [Abstract]
Balance at the beginning of year	$ 11,336	$ 11,179	$ 10,389
Adjustment for adoption of ASU 2016-13	(14)
Provision for (release of) credit losses	939	(152)	335
Charged off loans	(87)	(68)	(182)
Recoveries	93	377	637
Balance at end of year	$ 12,267	$ 11,336	$ 11,179

XML

LOANS (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	$ 11,336	$ 11,179	$ 10,389
Adjustment to allowance for adoption of ASU 2016-13		(14)
Charge-offs	(87)	(68)	(182)
Recoveries	93	377	637
Provisions	939	(152)	335
Balance at end of year	12,267	11,336	11,179
Individually evaluated for impairment
Collectively evaluated for impairment		11,336
Loans held-for-investment	1,134,019	980,857
Individually evaluated for impairment		4,983
Collectively evaluated for impairment		975,874
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	849	853
Adjustment to allowance for adoption of ASU 2016-13		193
Charge-offs	(20)
Recoveries	5	17
Provisions	(92)	(21)
Balance at end of year	935	849	853
Individually evaluated for impairment
Collectively evaluated for impairment		(849)
Loans held-for-investment	78,134	72,409
Individually evaluated for impairment		29
Collectively evaluated for impairment		72,380
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	75	113
Adjustment to allowance for adoption of ASU 2016-13		1,075
Charge-offs
Recoveries	2
Provisions	185	(38)
Balance at end of year	1,337	75	113
Individually evaluated for impairment
Collectively evaluated for impairment		75
Loans held-for-investment	118,225	91,223
Individually evaluated for impairment
Collectively evaluated for impairment		91,223
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	723	560
Adjustment to allowance for adoption of ASU 2016-13		32
Charge-offs
Recoveries	9	6
Provisions	358	157
Balance at end of year	1,122	723	560
Individually evaluated for impairment
Collectively evaluated for impairment		723
Loans held-for-investment	94,796	65,759
Individually evaluated for impairment		34
Collectively evaluated for impairment		65,725
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	8,569	8,570
Adjustment to allowance for adoption of ASU 2016-13		(883)
Charge-offs
Recoveries	37	325
Provisions	423	(326)
Balance at end of year	8,146	8,569	8,570
Individually evaluated for impairment
Collectively evaluated for impairment		8,569
Loans held-for-investment	791,947	709,218
Individually evaluated for impairment		4,752
Collectively evaluated for impairment		704,466
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	314	333
Adjustment to allowance for adoption of ASU 2016-13		166
Charge-offs		(1)
Recoveries	22	13
Provisions	(30)	(31)
Balance at end of year	472	314	333
Individually evaluated for impairment
Collectively evaluated for impairment		314
Loans held-for-investment	34,752	28,723
Individually evaluated for impairment		168
Collectively evaluated for impairment		28,555
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	170	126
Adjustment to allowance for adoption of ASU 2016-13		39
Charge-offs	(67)	(67)
Recoveries	18	16
Provisions	95	95
Balance at end of year	255	170	126
Individually evaluated for impairment
Collectively evaluated for impairment		170
Loans held-for-investment	16,165	13,525
Individually evaluated for impairment
Collectively evaluated for impairment		13,525
Unallocated Financing Receivables [Member]
Financing Receivable, Past Due [Line Items]
Balance at the beginning of year	636	624
Adjustment to allowance for adoption of ASU 2016-13		(636)
Charge-offs
Recoveries
Provisions		12
Balance at end of year		636	$ 624
Individually evaluated for impairment
Collectively evaluated for impairment		636
Loans held-for-investment
Individually evaluated for impairment
Collectively evaluated for impairment

XML

LOANS (Details 4) $ in Thousands	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Financing Receivable, Past Due [Line Items]
Total	$ 12,267	$ 11,336	$ 11,179	$ 10,389
[custom:LoanWithinLoanCategoryPercentage-0]	1.000	1.000	1.000
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 935	$ 849	$ 853
[custom:LoanWithinLoanCategoryPercentage-0]	0.076	0.079	0.081
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 1,337	$ 75	$ 113
[custom:LoanWithinLoanCategoryPercentage-0]	0.109	0.007	0.011
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 8,146	$ 8,569	$ 8,570
[custom:LoanWithinLoanCategoryPercentage-0]	0.664	0.801	0.812
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 1,122	$ 723	$ 560
[custom:LoanWithinLoanCategoryPercentage-0]	0.092	0.068	0.053
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 472	$ 314	$ 333
[custom:LoanWithinLoanCategoryPercentage-0]	0.038
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 255	$ 170	$ 126
[custom:LoanWithinLoanCategoryPercentage-0]	0.021	0.016	0.012
Unallocated Financing Receivables [Member]
Financing Receivable, Past Due [Line Items]
Total		$ 636	$ 624

XML

LOANS (Details 5) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, Average Recorded Investment	$ 4,975	$ 1,918
Impaired Financing Receivable, Interest Income, Accrual Method	478	234
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment	1,694
Impaired Financing Receivable, Unpaid Principal Balance	3,705
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	27
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	2
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, Average Recorded Investment	27
Impaired Financing Receivable, Interest Income, Accrual Method	2
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	29
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	29
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment	29
Impaired Financing Receivable, Unpaid Principal Balance	29
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, Average Recorded Investment
Impaired Financing Receivable, Interest Income, Accrual Method
Impaired Financing Receivable, with No Related Allowance, Recorded Investment
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment
Impaired Financing Receivable, Unpaid Principal Balance
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	34	131
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	3	6
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, Average Recorded Investment	34	131
Impaired Financing Receivable, Interest Income, Accrual Method	3	6
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	34
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	51
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment	34
Impaired Financing Receivable, Unpaid Principal Balance	51
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	4,747	1,748
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	464	223
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		39
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method		5
Impaired Financing Receivable, Average Recorded Investment	4,747	1,787
Impaired Financing Receivable, Interest Income, Accrual Method	464	228
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	4,752
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	5,260
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment	4,752
Impaired Financing Receivable, Unpaid Principal Balance	5,260
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	167
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	9
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, Average Recorded Investment	167
Impaired Financing Receivable, Interest Income, Accrual Method	9
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	168
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	168
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment	168
Impaired Financing Receivable, Unpaid Principal Balance	168
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, Average Recorded Investment
Impaired Financing Receivable, Interest Income, Accrual Method
Impaired Financing Receivable, with No Related Allowance, Recorded Investment
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Recorded Investment
Impaired Financing Receivable, Unpaid Principal Balance

XML

LOANS (Details 6) $ in Thousands	Dec. 31, 2023 USD ($)
Financing Receivable, Past Due [Line Items]
Total Loans	$ 200
[custom:LoanWithinLoanTypePercentage-0]	0.0021
Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total Loans
Financing Receivables 30 To 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	200
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total Loans
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	$ 200
[custom:LoanWithinLoanTypePercentage-0]	0.0021
Residential Mortgage [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total Loans
Residential Mortgage [Member] | Financing Receivables 30 To 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total Loans	200
Residential Mortgage [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total Loans

XML

LOANS (Details 7) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan, Writeoff
Loans held-for-investment	1,134,019	$ 980,857
Pass [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment		974,218
Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment		557
Substandard [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment		6,082
Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	1,149
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	1,375
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	23,304
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	9,018
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	12,950
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	9,256
Financing Receivable, Excluding Accrued Interest, Revolving	21,033
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan	49
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	78,134
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year, Writeoff	20
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan, Writeoff
Current period gross charge-offs, Total	20
Loans held-for-investment	78,134	72,409
Commercial Loan [Member] | Pass [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	1,149
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	1,375
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	23,226
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	9,018
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	12,950
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	9,230
Financing Receivable, Excluding Accrued Interest, Revolving	21,033
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan	49
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	78,030
Loans held-for-investment		72,333
Commercial Loan [Member] | Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	26
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	26
Loans held-for-investment		47
Commercial Loan [Member] | Substandard [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	78
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	78
Loans held-for-investment		29
Commercial Loan [Member] | Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	6,864
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	5,074
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	39,514
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	47,992
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving	18,781
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	118,225
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan, Writeoff
Loans held-for-investment	118,225	91,223
Construction Loans [Member] | Pass [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	6,864
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	5,074
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	39,514
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	47,992
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving	18,781
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	118,225
Loans held-for-investment		91,223
Construction Loans [Member] | Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Construction Loans [Member] | Substandard [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Construction Loans [Member] | Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	1,894
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	10,573
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	6,219
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	28,843
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	28,517
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	8,811
Financing Receivable, Excluding Accrued Interest, Revolving	977
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan	8,962
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	94,796
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan, Writeoff
Current period gross charge-offs, Total
Loans held-for-investment	94,796	65,759
Residential Mortgage [Member] | Pass [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	1,894
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	10,548
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	6,219
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	28,843
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	28,517
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	8,420
Financing Receivable, Excluding Accrued Interest, Revolving	977
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan	8,962
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	94,380
Loans held-for-investment		65,505
Residential Mortgage [Member] | Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	25
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	177
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	202
Loans held-for-investment		220
Residential Mortgage [Member] | Substandard [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	214
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	214
Loans held-for-investment		34
Residential Mortgage [Member] | Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	47,962
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	95,120
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	136,892
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	201,380
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	106,125
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	190,101
Financing Receivable, Excluding Accrued Interest, Revolving	14,038
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan	329
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	791,947
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan, Writeoff
Current period gross charge-offs, Total
Loans held-for-investment	791,947	709,218
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	47,962
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	95,120
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	136,892
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	201,380
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	106,125
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	189,983
Financing Receivable, Excluding Accrued Interest, Revolving	14,038
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan	329
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	791,829
Loans held-for-investment		704,357
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	21
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	21
Loans held-for-investment		80
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	97
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	97
Loans held-for-investment		4,781
Commercial Real Estate [Member] | Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving	34,752
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	34,752
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year, Writeoff
Loans held-for-investment	34,752	28,723
Home Equity Line of Credit [Member] | Pass [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving	33,621
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	33,621
Loans held-for-investment		27,531
Home Equity Line of Credit [Member] | Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving	67
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	67
Loans held-for-investment		117
Home Equity Line of Credit [Member] | Substandard [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving	1,064
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	1,064
Loans held-for-investment		1,075
Home Equity Line of Credit [Member] | Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	420
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	203
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	435
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	1,164
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	2,059
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	902
Financing Receivable, Excluding Accrued Interest, Revolving	10,982
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	16,165
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year, Writeoff
Financing Receivable, Excluding Accrued Interest, Revolving, Writeoff	67
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan, Writeoff
Current period gross charge-offs, Total	67
Loans held-for-investment	16,165	13,525
Consumer Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year	420
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year	203
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year	435
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year	1,164
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	2,043
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year	902
Financing Receivable, Excluding Accrued Interest, Revolving	10,982
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	16,149
Loans held-for-investment		13,269
Consumer Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year	16
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss	16
Loans held-for-investment		93
Consumer Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Excluding Accrued Interest, Year Five, Originated, Four Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Four, Originated, Three Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Three, Originated, Two Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year Two, Originated, Fiscal Year before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Year One, Originated, Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Originated, More than Five Years before Current Fiscal Year
Financing Receivable, Excluding Accrued Interest, Revolving
Financing Receivable, Excluding Accrued Interest, Revolving, Converted to Term Loan
Financing Receivable, Excluding Accrued Interest, before Allowance for Credit Loss
Loans held-for-investment		163
Consumer Portfolio Segment [Member] | Doubtful [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment

XML

LOANS (Details 8) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Total	$ 1,134,019	$ 980,857
Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	352	556
Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	146	8
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	215	2
Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total	27	4,895
Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	740	5,461
Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	1,133,279	975,396
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Total	78,134	72,409
Commercial Loan [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	19	87
Commercial Loan [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	7
Commercial Loan [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Commercial Loan [Member] | Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total	24	29
Commercial Loan [Member] | Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	50	116
Commercial Loan [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	78,084	72,293
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Total	118,225	91,223
Construction Loans [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Construction Loans [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Construction Loans [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Construction Loans [Member] | Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total
Construction Loans [Member] | Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Construction Loans [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	118,225	91,223
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Total	94,796	65,759
Residential Mortgage [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	244	327
Residential Mortgage [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	15
Residential Mortgage [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	214
Residential Mortgage [Member] | Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total		34
Residential Mortgage [Member] | Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	473	361
Residential Mortgage [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	94,323	65,398
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Total	791,947	709,218
Commercial Real Estate [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	67	46
Commercial Real Estate [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	124	8
Commercial Real Estate [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Commercial Real Estate [Member] | Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total		4,664
Commercial Real Estate [Member] | Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	191	4,718
Commercial Real Estate [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	791,756	704,500
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Total	34,752	28,723
Home Equity Line of Credit [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Home Equity Line of Credit [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Home Equity Line of Credit [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Home Equity Line of Credit [Member] | Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total	3	168
Home Equity Line of Credit [Member] | Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	3	168
Home Equity Line of Credit [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	34,749	28,555
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Total	16,165	13,525
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	22	96
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	1	2
Consumer Portfolio Segment [Member] | Financing Receivables Nonaccrual [Member]
Financing Receivable, Past Due [Line Items]
Total
Consumer Portfolio Segment [Member] | Financial Asset, Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	23	98
Consumer Portfolio Segment [Member] | Financial Asset, Not Past Due [Member]
Financing Receivable, Past Due [Line Items]
Total	$ 16,142	$ 13,427

XML

LOANS (Details 9) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance	27
Financing Receivable, Nonaccrual	27	$ 4,895
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance	24
Financing Receivable, Nonaccrual	24	29
Construction Loans [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance
Financing Receivable, Nonaccrual
Residential Mortgage [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance
Financing Receivable, Nonaccrual		34
Commercial Real Estate [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance
Financing Receivable, Nonaccrual		4,664
Home Equity Line of Credit [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance	3
Financing Receivable, Nonaccrual	3	168
Consumer Portfolio Segment [Member]
Financing Receivable, Past Due [Line Items]
Financing Receivable, Nonaccrual, No Allowance
Financing Receivable, Nonaccrual, Allowance
Financing Receivable, Nonaccrual

XML

LOANS (Details 10) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Receivables [Abstract]
Balance, beginning of year	$ 2,189	$ 2,809
New Loans		3
Less loan repayments	1,131	623
Balance, end of year	$ 1,058	$ 2,189

XML

LOANS (Details 11) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Jan. 01, 2023
Financing Receivable, Past Due [Line Items]
Adjustment for adoption of ASU 2016-13	$ (14)
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13		$ (14)
Provision for unfunded commitments	1,129	(152)	$ 335
Balance, December 31, 2023		(14)
Unfunded Loan Commitment [Member]
Financing Receivable, Past Due [Line Items]
Adjustment for adoption of ASU 2016-13
Adjustment to allowance for unfunded commitments for adoption of ASU 2016-13	597			$ 398
Provision for unfunded commitments	199
Balance, December 31, 2023	$ 597

XML

LOANS (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Financing Receivable, Past Due [Line Items]
Deferred Loan Fees and Cost	$ 2,200	$ 1,900
Loans held-for-investment	1,134,019	980,857
Commercial Loan [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment	78,134	72,409
Commercial Loan [Member] | Entity Loan Modification Program [Member]
Financing Receivable, Past Due [Line Items]
Loans held-for-investment	$ 151	$ 219

XML

FAIR VALUE MEASUREMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Financial Assets:
Available-for-sale securities	$ 282,226	$ 331,862	$ 564,839
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments	217,170	228,701
Other investments, at cost	6,800	4,191
Financial liabilities:
Non-interest bearing demand	432,333	461,010
Interest bearing demand deposits and money market accounts	707,434	629,763
Savings	118,623	161,770
Time deposits	252,611	132,839
Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Cash and short term investments	94,695	37,401
Available-for-sale securities
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments
Other investments, at cost
Loans held for sale
Net loans receivable
Accrued interest	5,869	5,217
Financial liabilities:
Non-interest bearing demand
Interest bearing demand deposits and money market accounts
Savings
Time deposits
Total deposits
Federal Home Loan Bank Advances
Short term borrowings
Junior subordinated debentures
Accrued interest payable	3,575	520
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Cash and short term investments
Available-for-sale securities	282,226	331,862
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments	205,518	213,613
Other investments, at cost
Loans held for sale	4,433	1,779
Derivative financial instruments	1,069
Net loans receivable
Accrued interest
Financial liabilities:
Non-interest bearing demand	432,333	461,010
Interest bearing demand deposits and money market accounts	707,434	629,763
Savings	118,623	161,770
Time deposits	252,137	132,825
Total deposits	1,510,527	1,385,368
Federal Home Loan Bank Advances	90,000	50,000
Short term borrowings	62,863	90,743
Junior subordinated debentures	13,123	13,402
Accrued interest payable
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Cash and short term investments
Available-for-sale securities
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments
Other investments, at cost	6,800	4,191
Loans held for sale
Net loans receivable	1,088,053	943,498
Accrued interest
Financial liabilities:
Non-interest bearing demand
Interest bearing demand deposits and money market accounts
Savings
Time deposits
Total deposits
Federal Home Loan Bank Advances
Short term borrowings
Junior subordinated debentures
Accrued interest payable
Reported Value Measurement [Member]
Financial Assets:
Cash and short term investments	94,695	37,401
Available-for-sale securities	282,226	331,862
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments	217,170	228,701
Other investments, at cost	6,800	4,191
Loans held for sale	4,433	1,779
Derivative financial instruments	1,069
Net loans receivable	1,121,752	969,521
Accrued interest	5,869	5,217
Financial liabilities:
Non-interest bearing demand	432,333	461,010
Interest bearing demand deposits and money market accounts	707,434	629,763
Savings	118,623	161,770
Time deposits	252,611	132,839
Total deposits	1,511,001	1,385,382
Federal Home Loan Bank Advances	90,000	50,000
Short term borrowings	62,863	90,743
Junior subordinated debentures	14,964	14,964
Accrued interest payable	3,575	520
Estimate of Fair Value Measurement [Member]
Financial Assets:
Cash and short term investments	94,695	37,401
Available-for-sale securities	282,226	331,862
Investment securities held-to-maturity, fair value of $205,518 and $213,613 at December 31, 2023 and December 31, 2022, respectively, net of allowance for credit losses-investments	205,518	213,613
Other investments, at cost	6,800	4,191
Loans held for sale	4,433	1,779
Derivative financial instruments	1,069
Net loans receivable	1,088,053	943,498
Accrued interest	5,869	5,217
Financial liabilities:
Non-interest bearing demand	432,333	461,010
Interest bearing demand deposits and money market accounts	707,434	629,763
Savings	118,623	161,770
Time deposits	252,137	132,825
Total deposits	1,510,527	1,385,368
Federal Home Loan Bank Advances	90,000	50,000
Short term borrowings	62,863	90,743
Junior subordinated debentures	13,123	13,402
Accrued interest payable	$ 3,575	$ 520

XML

FAIR VALUE MEASUREMENT (Details 2) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	$ 282,226	$ 331,862	$ 564,839
Loans held for sale	4,433	1,779
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	282,226	331,862
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	282,226	331,862
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Loans held for sale
Total
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	282,226	331,862
Loans held for sale	4,433	1,779
Total	286,659	333,641
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Loans held for sale
Total
Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	282,226	331,862
Loans held for sale	4,433	1,779
Total	286,659	333,641
US Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	18,346	55,983	15,436
US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	18,346	55,983
US Treasury Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US Treasury Securities [Member] | Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	18,346	55,983
US Government-sponsored Enterprises Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	2,129	2,074	2,501
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	2,129	2,074
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	2,129	2,074
Collateralized Mortgage-Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Collateralized Mortgage-Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	238,159	244,600
Collateralized Mortgage-Backed Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Collateralized Mortgage-Backed Securities [Member] | Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	238,159	244,600
Small Business Administration pools [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	15,721	21,087	31,273
Small Business Administration pools [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Small Business Administration pools [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	15,721	21,087
Small Business Administration pools [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Small Business Administration pools [Member] | Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	15,721	21,087
US States and Political Subdivisions Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale			109,848
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Corporate and other securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	7,871	8,118	$ 8,118
Corporate and other securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Corporate and other securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	7,871	8,118
Corporate and other securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale
Corporate and other securities [Member] | Fair Value, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available-for-sale	$ 7,871	$ 8,118

XML

FAIR VALUE MEASUREMENT (Details 3) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	$ 622	$ 934
Total impaired	1,694
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Total
Total impaired
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Total
Total impaired
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	622	934
Total	622	5,888
Total impaired		4,954
Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	622	934
Total	622	5,888
Total impaired		4,954
Construction Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Construction Loans [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Construction Loans [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Construction Loans [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	145	412
Construction Loans [Member] | Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	145	412
Residential Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired	34
Residential Mortgage [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Total impaired
Residential Mortgage [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Total impaired
Residential Mortgage [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	477
Total impaired		34
Residential Mortgage [Member] | Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned	477
Total impaired		34
Commercial Loan [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired	29
Commercial Loan [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Commercial Loan [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Commercial Loan [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Commercial Loan [Member] | Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired	4,752
Commercial Real Estate [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Total impaired
Commercial Real Estate [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned
Total impaired
Commercial Real Estate [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned		522
Total impaired		4,752
Commercial Real Estate [Member] | Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total other real estate owned		522
Total impaired		4,752
Home Equity Line of Credit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired	168
Home Equity Line of Credit [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Home Equity Line of Credit [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Home Equity Line of Credit [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired		168
Home Equity Line of Credit [Member] | Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired		168
Consumer Portfolio Segment [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Consumer Portfolio Segment [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Consumer Portfolio Segment [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Consumer Portfolio Segment [Member] | Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired
Consumer Portfolio Segment [Member] | Fair Value, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired

XML

FAIR VALUE MEASUREMENT (Details 4) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Sep. 30, 2023
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other Real Estate, Foreclosed Assets, and Repossessed Assets	$ 622	$ 934
Impaired Financing Receivable, Recorded Investment	$ 1,694
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Value Comparison Sales Other Estimates Valuation Technique [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other Real Estate, Foreclosed Assets, and Repossessed Assets		$ 934	$ 622
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Value Comparison Sales Other Estimates Valuation Technique [Member] | Minimum [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Servicing Assets and Servicing Liabilities at Fair Value, Assumptions Used to Estimate Fair Value, Discount Rate	6.00%	6.00%
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Value Comparison Sales Other Estimates Valuation Technique [Member] | Maximum [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Servicing Assets and Servicing Liabilities at Fair Value, Assumptions Used to Estimate Fair Value, Discount Rate	16.00%	16.00%
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Value Comparison Sales Other Estimates Valuation Technique [Member] | Minimum [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Servicing Assets and Servicing Liabilities at Fair Value, Assumptions Used to Estimate Fair Value, Discount Rate		6.00%
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Value Comparison Sales Other Estimates Valuation Technique [Member] | Maximum [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Servicing Assets and Servicing Liabilities at Fair Value, Assumptions Used to Estimate Fair Value, Discount Rate		16.00%
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Value Discounted Cash Flows Valuation Technique [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired Financing Receivable, Recorded Investment		$ 4,954

XML

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 46,729	$ 46,478
Accumulated depreciation	16,140	15,201
Property and Equipment Net	30,589	31,277
Land [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	9,804	9,804
Building [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	28,708	28,684
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	8,203	7,900
Asset under Construction [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 14	$ 90

XML

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Property, Plant and Equipment [Abstract]
Depreciation	$ 1,800,000	$ 1,600,000	$ 1,700,000
Gain on premises held-for-sale		73,000,000
Gain (Loss) on Disposition of Assets		$ 45,000,000

XML

GOODWILL, CORE DEPOSIT INTANGIBLE AND OTHER ASSETS (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 3,896	$ 3,896	$ 3,896
Accumulated amortization	(3,292)	(3,135)	(2,977)
Net	604	761	919
Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	3,358	3,358	3,358
Other Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Gross carrying amount	$ 538	$ 538	$ 538

XML

GOODWILL, CORE DEPOSIT INTANGIBLE AND OTHER ASSETS (Details 2) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
2024	$ 158
2025	157
2026	158
2027	131
Net	$ 604	$ 761	$ 919

XML

GOODWILL, CORE DEPOSIT INTANGIBLE AND OTHER ASSETS (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Balance—beginning of year	$ 14,637	$ 14,637
Acquired Goodwill
Impairment
Balance, end of year	$ 14,637	$ 14,637

XML

OTHER REAL ESTATE OWNED (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Balance—beginning of year	$ 934	$ 1,165
Additions—foreclosures
Write-downs	(44)	(69)
Sales	(268)	(162)
Balance, end of year	$ 622	$ 934

XML

DEPOSITS (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Non-interest bearing deposits	$ 432,333	$ 461,010
Interest bearing demand deposits and money market accounts	707,434	629,763
Savings	118,623	161,770
Time deposits	252,611	132,839
Total deposits	$ 1,511,001	$ 1,385,382

XML

DEPOSITS (Details 2) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
2024	$ 221,399
2025	8,145
2026	20,483
2027	801
2028 and after	1,783
Total	$ 252,611	$ 132,839

XML

DEPOSITS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Guarantor Obligations [Line Items]
Interest paid on certificates of deposits of $100 thousand or more	$ 2,400	$ 280	$ 538
Time deposits FDIC insurance limit of $250 thousand	51,100	25,000
Deposits from directors and executive officers and their related interests	18,000	24,500
Amount of overdrafts classified as loans	75	162
Deposit Liability, Uninsured	436,600	407,000
Collateralized Public Fund [Member]
Guarantor Obligations [Line Items]
Deposit Liability, Uninsured	$ 82,800	$ 59,500

XML

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED MONEY (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Securities Sold Under Agreements To Repurchase And Other Borrowed Money
Weighted Average Interest Rate	2.83%	0.95%
Short-Term Debt, Maximum Month-end Outstanding Amount	$ 91,800	$ 93,400
Average outstanding balance during the year	$ 74,600	$ 74,800
Average rate paid (as a percent)	2.22%	0.30%
Unused short-term lines of credit	$ 95,000	$ 70,000

XML

ADVANCES FROM FEDERAL HOME LOAN BANK (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Variable Interest Entity [Line Items]
Federal Home Loan Bank, Advances, Activity for Year, Average Balance of Agreements Outstanding	$ 86,600	$ 9,500
Average interest rate (as a percent)	5.02%	4.34%
Federal Home Loan Bank, Advances, Activity for Year, Maximum Outstanding at any Month End	$ 125,000	$ 50,000
Asset Pledged as Collateral without Right [Member] | Federal Home Loan Bank Advances [Member]
Variable Interest Entity [Line Items]
Loans Pledged as Collateral	$ 31,700	$ 22,800

XML

JUNIOR SUBORDINATED DEBT (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Sep. 16, 2004
Junior Subordinated Debt [Member]
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Description of annual interest distribution basis	LIBOR
Annual distribution rate, basis spread (as a percent)	0.00257%
Redemption price as a percentage of the principal amount if the securities are redeemed on or after September 16, 2009	100.00%
Trust Preferred Securities Subject to Mandatory Redemption [Member] | F C C Capital Trust I [Member]
Financial Instruments Subject to Mandatory Redemption by Settlement Terms [Line Items]
Financial Instruments Subject to Mandatory Redemption, Settlement Terms, Maximum Amount		$ 15,000

XML

LEASES (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Leases [Abstract]
2024	$ 424
2025	434
2026	444
2027	422
2028	364
Thereafter	2,344
Total undiscounted lease payments	4,432
Less effect of discounting	(1,006)
Present value of estimated lease payments (lease liability)	$ 3,426	$ 2,832

XML

LEASES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Leases [Abstract]
Operating Lease Payments	$ 413,100
Operating Lease Liability Reduced	262,800
Operating Lease Expense	$ 448,500	$ 354,800	$ 323,000.0
Operating Lease, Weighted Average Remaining Lease Term	11 years 8 months 12 days
Operating Lease, Weighted Average Discount Rate, Percent	4.29%

XML

INCOME TAXES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Current
Federal	$ 2,937	$ 3,429	$ 3,653
State	627	735	749
Total Current	3,564	4,164	4,402
Deferred
Federal	(327)	(323)	(167)
State	(40)	(43)	(53)
Total Deferred	(367)	(366)	(220)
Income tax expense	$ 3,197	$ 3,798	$ 4,182

XML

INCOME TAXES (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Expected federal income tax expense	$ 3,159	$ 3,866	$ 4,126
State income tax net of federal benefit	464	547	550
Tax exempt interest	(275)	(404)	(396)
Increase in cash surrender value life insurance	(176)	(151)	(146)
Valuation allowance	93	27	32
Life Insurance Proceeds	(19)
Excess tax benefit of stock compensation		(5)	(11)
Other	(49)	(82)	27
Income tax expense	$ 3,197	$ 3,798	$ 4,182

XML

INCOME TAXES (Details 3) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Assets:
Allowance for credit losses	$ 2,646	$ 2,464
Unfunded Commitments	129
Excess tax basis of deductible intangible assets	38	60
Net operating loss carry forward	933	840
Excess tax basis of assets acquired		18
Unrealized losses on available-for-sale securities	4,406	5,169
Unrealized losses on held-to-maturity securities	2,939	3,291
Compensation expense deferred for tax purposes	1,448	1,348
Deferred loss on other-than-temporary-impairment charges	5	5
FASB 91 - Origination Income & Costs	473	405
Other Real Estate Owned	229	231
Other	145	299
Total deferred tax asset	13,391	14,130
Valuation reserve	1,009	916
Total deferred tax asset net of valuation reserve	12,382	13,214
Liabilities:
Tax depreciation in excess of book depreciation	445	619
Excess financial reporting basis of assets acquired	919	938
Unrealized gain on available-for-sale securities
Total deferred tax liabilities	1,364	1,557
Net deferred tax asset / (liability) recognized	$ 11,018	$ 11,657

XML

INCOME TAXES (Details Narrative) $ in Thousands	Dec. 31, 2023 USD ($)
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carry forward, net	$ 23,600

XML

COMMITMENTS, CONCENTRATIONS OF CREDIT RISK AND CONTINGENCIES (Details Narrative) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($) Number	Dec. 31, 2022 USD ($)
Commitments to extend credit	$ 214,200	$ 156,900
Loans held-for-investment	$ 1,134,019	$ 980,857
Subsidiaries [Member]
Concentrations of credit risk threshold amount of risk entity's risk based capital, amounts loaned to multiple borrowers engaged in similar business activities	25.00%
[custom:ConcentrationRiskThresholdAmountsLoanedToMultipleBorrowersEngagedInSimilarBusinessRiskBasedCapitalAmount-0]	$ 41,700
Number of concentration risks | Number	5
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Commercial Portfolio Segment [Member]
Loans held-for-investment	$ 889,800,000
Percentage of concentration risk	78.50%
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Commercial Real Estate Loans Related To Owner Occupied Properties [Member]
Loans held-for-investment	$ 273,200,000
Percentage of concentration risk	30.70%
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Lessors Of Non Residential Properties [Member]
Loans held-for-investment	$ 347,100,000
Percentage of concentration risk	30.60%
Concentration Risk Number of Loans | Number	488
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Lessors Of Residential Properties [Member]
Loans held-for-investment	$ 142,100,000
Percentage of concentration risk	12.50%
Concentration Risk Number of Loans | Number	405
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Private Households [Member]
Loans held-for-investment	$ 72,700,000
Percentage of concentration risk	6.40%
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Other Activities Related To Real Estate [Member]
Loans held-for-investment	$ 59,900,000
Percentage of concentration risk	5.30%
Subsidiaries [Member] | Loans Receivable [Member] | Credit Concentration Risk [Member] | Hotels [Member]
Loans held-for-investment	$ 56,400,000
Percentage of concentration risk	5.00%

XML

REVENUE RECOGNITION (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023		Dec. 31, 2022		Dec. 31, 2021
Revenue Recognition
Deposit service charges	$ 963		$ 960		$ 977
Mortgage banking income	1,406	[1]	1,900	[1]	4,319
Investment advisory fees and non-deposit commissions	4,511	[1]	4,479	[1]	3,995
Loss on sale of securities	(1,249)	[1]
Gain (loss) on sale of other real estate owned	151		(45)		77
Gain (loss) on sale of other assets			(73)		117
Non-recurring income	121		7		171
Other	4,518	[2]	4,341	[2]	4,248
Total non-interest income	$ 10,421		$ 11,569		$ 13,904

[1] Not within the scope of ASC 606

[2] Includes Check Card Fee income discussed above.  No other items are within the scope of ASC 606.

XML

OTHER INCOME AND OTHER EXPENSES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023		Dec. 31, 2022		Dec. 31, 2021
Other Income and Expenses [Abstract]
ATM debit card income	$ 2,771		$ 2,706		$ 2,669
Recurring income on bank owned life insurance	745		721		693
Rental income	370		322		311
Other fees including safe deposit box fees	230		251		243
Wire transfer fees	119		132		118
Other	283		209		214
Total	$ 4,518	[1]	$ 4,341	[1]	$ 4,248

[1] Includes Check Card Fee income discussed above.  No other items are within the scope of ASC 606.

XML

OTHER INCOME AND OTHER EXPENSES (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Other Income and Expenses [Abstract]
Core banking/electronic processing and services	$ 2,512	$ 2,469	$ 2,397
ATM/debit card processing	1,074	885	694
Software subscriptions and services	1,008	896	733
Supplies	134	134	116
Telephone	485	354	365
Courier	284	279	181
Correspondent services	354	303	280
Insurance	381	358	325
Debit card and Fraud losses	422	285	160
Investment advisory and non-deposit expense	329	409	420
Loan processing and closing costs	331	266	329
Director fees	601	488	500
Legal and Professional fees	1,042	1,177	878
Shareholder expense	197	221	212
Other	957	834	777
Total	$ 10,111	$ 9,358	$ 8,367

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]
Non-employee director deferred compensation stock plan deferred stock units	$ 1,439	$ 1,260
Time-based restricted stock units - officer	235	129
Performance-based restricted stock units - officer	521	218
Restricted stock – officer and director	(14)	(146)
Total nonvested restricted stock and stock units	$ 2,181	$ 1,461

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Details 2) - USD ($) $ in Thousands		Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Share-Based Payment Arrangement [Abstract]
Non-employee director deferred compensation plan accumulated share units		93,488	93,488	85,764
Accrued liability (dollars in thousands)	[1]	$ 1,439	$ 1,260	$ 1,107
Related director compensation expense (dollars in thousands)		$ 180	$ 153	$ 140

[1] Recorded in “Nonvested restricted stock and stock units” effective June 2022; recorded in “Other liabilities” prior to June 2022.

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Details 3) - shares		12 Months Ended
		Dec. 31, 2023	[1]	Dec. 31, 2022	[1]	Dec. 31, 2021	[2]
Share-Based Payment Arrangement [Abstract]
Time-based restricted stock units - officer		12,562		11,738
Performance-based restricted stock units – officer	[3]	16,750		11,738		13,301
Restricted stock – officer				2,201		13,301
Restricted stock – director		7,590		7,359		7,960

[1] Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.

[2] Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.

[3] 16,750 units represent the target payout with a maximum payout of 33,500 units.

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Details 4) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2023	[1]	Dec. 31, 2022	[1]	Dec. 31, 2021	[2]
Share-Based Payment Arrangement [Abstract]
Time-based restricted stock units - officer		$ 255		$ 246
Performance-based restricted stock units – officer	[3]	340		246		234
Restricted stock – officer				46		234
Restricted stock – director		$ 154		$ 154		$ 140

[1] Stock awards in 2023 and 2022 were granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan.

[2] Stock awards in 2021 were granted under the First Community Corporation 2011 Stock Incentive Plan.

[3] $340 thousand represents the target payout with a maximum payout of $680 thousand.

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Details 5) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Share-Based Payment Arrangement [Abstract]
Time-based restricted stock units – officer	[1]	$ 163	$ 94	$ 19
Performance-based restricted stock units – officer	[2]	264	153	65
Restricted stock – officer	[3]	120	206	223
Restricted stock – director	[4]	$ 167	$ 141	$ 140

[1] Expense in 2023 consists of $159.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $3.2 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $19.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

[2] Expense in 2023 consists of $186.0 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $75.1 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $78.0 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

[3] Expense in 2023 consists of $17.2 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $102.8 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2022 consists of $23.8 thousand related stock awards granted under the First Community Corporation 2021 Omnibus Equity Incentive Plan and $182.1 thousand related stock awards granted under the First Community Corporation 2011 Stock Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

[4] Expense in 2023 and 2022 was related to stock awards granted under the Community Corporation 2021 Omnibus Equity Incentive Plan. Expense in 2021 were related to stock awards granted under the First Community Corporation 2011 Stock Incentive Plan.

XML

STOCK OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND DEFERRED COMPENSATION (Details 6)	31 Months Ended
	Dec. 31, 2023 shares
Share-Based Payment Arrangement [Abstract]
Initial reserve – May 19, 2021	225,000
Time-based restricted stock units - officer	(24,300)
Performance-based restricted stock units – officer	(34,358)	[1]
Restricted stock – officer	(2,201)
Restricted stock – director	(14,949)
Remaining reserve – December 31, 2023	149,192

[1] Performance-based restricted stock units are initially granted and expensed at target levels; however, they are reserved at maximum levels.

XML

EMPLOYEE BENEFIT PLANS (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Defined Benefit Plan Disclosure [Line Items]
Defined Contribution Plan, Cost	$ 659,000	$ 608,000	$ 581,000
Defined Contribution Plan Employer Match Level One	100.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	3.00%
Defined Contribution Plan Employer Match Level Two	50.00%
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	2.00%
Cash Surrender Value of Life Insurance	$ 30,200,000	$ 30,000,000.0
Key Individuals [Member] | Salary Continuation Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Deferred Compensation Arrangement with Individual Age Of Employees Covered	63 years
Deferred Compensation Arrangement with Individual Monthly Benefits	$ 2,500
Deferred Compensation Arrangement with Individual Monthly Benefits period	17 years

XML

EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Earnings Per Share [Abstract]
Numerator (Included in basic and diluted earnings per share)	$ 11,843	$ 14,613	$ 15,465
Weighted average common shares outstanding for:
Basic earnings per common share	7,568	7,529	7,491
Dilutive securities:
Deferred compensation	79	79	58
Diluted common shares outstanding	7,647	7,608	7,549
Basic earnings per common share	$ 1.56	$ 1.94	$ 2.06
Diluted earnings per common share	1.55	1.92	2.05
The average market price used in calculating assumed number of shares	$ 18.70	$ 19.52	$ 19.68

XML

SHAREHOLDERS' EQUITY, CAPITAL REQUIREMENTS AND DIVIDEND RESTRICTIONS (Details) - Subsidiaries [Member] $ in Thousands		Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Subsidiary or Equity Method Investee [Line Items]
Banking Regulation, Tier 1 Risk-Based Capital, Capital Adequacy, Minimum	[1],[2]	$ 73,696	$ 64,741
Banking Regulation, Tier 1 Risk-Based Capital Ratio, Capital Adequacy, Minimum	[1],[2]	0.060	0.060
Banking Regulation, Tier 1 Risk-Based Capital, Actual	[1],[2]	$ 153,859	$ 145,578
Banking Regulation, Tier 1 Risk-Based Capital Ratio, Actual	[1],[2]	0.125	0.135
Banking Regulation, Tier 1 Risk-Based Capital, Well Capitalized, Minimum	[1],[2]	$ 80,163	$ 80,837
Banking Regulation, Tier 1 Risk-Based Capital Ratio, Well Capitalized, Minimum	[1],[2]	0.065	0.075
Banking Regulation, Total Risk-Based Capital, Capital Adequacy, Minimum	[1],[2]	$ 98,261	$ 86,321
Banking Regulation, Total Risk-Based Capital Ratio, Capital Adequacy, Minimum	[1],[2]	0.080	0.080
Banking Regulation, Total Capital, Actual	[1],[2]	$ 166,752	$ 156,914
Banking Regulation, Total Risk-Based Capital Ratio, Actual	[1],[2]	0.136	0.145
Banking Regulation, Total Risk-Based Capital, Well Capitalized, Minimum	[1],[2]	$ 68,491	$ 70,593
Banking Regulation, Total Risk-Based Capital Ratio, Well Capitalized, Minimum	[1],[2]	0.056	0.065
Banking Regulation, Tier 1 Leverage Capital, Capital Adequacy, Minimum	[1],[2]	$ 55,272	$ 48,555
Banking Regulation, Tier 1 Leverage Capital Ratio, Capital Adequacy, Minimum	[1],[2]	0.045	0.045
Banking Regulation, Tier 1 Leverage Capital, Actual	[1],[2]	$ 153,859	$ 145,578
Banking Regulation, Tier 1 Leverage Capital Ratio, Actual	[1],[2]	0.125	0.135
Banking Regulation, Tier 1 Leverage Capital, Well Capitalized, Minimum	[1],[2]	$ 98,587	$ 97,023
Banking Regulation, Tier 1 Leverage Capital Ratio, Well Capitalized, Minimum	[1],[2]	0.080	0.090
Common Equity Tier Required to be Categorized Adequately Capitalized Amount	[1],[2]	$ 72,830	$ 67,509
Common Equity Tier Required to be Categorized Adequately Capitalized Ratio as percent	[1],[2]	4.00%	4.00%
Common Equity Tier Actual Amount	[1],[2]	$ 153,859	$ 145,578
Common Equity Tier 1 Actual Ratio as percent	[1],[2]	850.00%	860.00%
Common Equity Tier Required to be Categorized Well Capitalized Amount	[1],[2]	$ 81,029	$ 78,069
Common Equity Tier Required to be Categorized Well Capitalized Ratio as percent	[1],[2]	4.50%	4.60%

[1] As a small bank holding company, the Company is generally not subject to the capital requirements unless otherwise advised by the Federal Reserve.

[2] Ratios do not include the capital conservation buffer of 2.5%.

XML

PARENT COMPANY FINANCIAL INFORMATION (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Assets:
Cash on deposit	$ 27,908	$ 24,464
Total assets	1,827,688	1,672,946
Liabilities:
Junior subordinated debentures	14,964	14,964
Other	14,375	10,664
Total liabilities	1,696,629	1,554,585
Shareholders’ equity	131,059	118,361	$ 140,998	$ 136,337
Total liabilities and shareholders’ equity	1,827,688	1,672,946
Parent Company [Member]
Assets:
Cash on deposit	3,590	3,870
Investment in bank subsidiary	140,746	128,392
Other	1,941	1,288
Total assets	146,277	133,550
Liabilities:
Junior subordinated debentures	14,964	14,964
Other	254	225
Total liabilities	15,218	15,189
Shareholders’ equity	131,059	118,361
Total liabilities and shareholders’ equity	$ 146,277	$ 133,550

XML

PARENT COMPANY FINANCIAL INFORMATION (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income:
Interest and dividend income	$ 72,697	$ 51,117	$ 47,520
Expenses:
Interest expense	23,805	3,174	2,241
Other	10,111	9,358	8,367
Total expense	43,144	41,253	39,201
Income tax benefit	3,197	3,798	4,182
Net income	11,843	14,613	15,465
Parent Company [Member]
Income:
Interest and dividend income	37	21	13
Equity in undistributed earnings of subsidiary	8,495	11,431	12,386
Dividend income from bank subsidiary	5,357	4,463	4,019
Total income	13,889	15,915	16,418
Expenses:
Interest expense	1,187	675	416
Other	1,419	974	772
Total expense	2,606	1,649	1,188
Income before taxes	11,283	14,266	15,230
Income tax benefit	(560)	(347)	(235)
Net income	$ 11,843	$ 14,613	$ 15,465

XML

PARENT COMPANY FINANCIAL INFORMATION (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities:
Net income	$ 11,843	$ 14,613	$ 15,465
Adjustments to reconcile net income to net cash provided by operating activities
Net cash provided by operating activities	12,226	22,125	57,928
Cash flows from investing activities:
Purchase of investments at cost	2,589	2,406	87
Net cash provided by investing activities	(89,668)	(162,779)	(236,282)
Cash flows from financing activities:
Dividends paid: common stock	(4,235)	(3,913)	(3,593)
(Cost of) Proceeds from issuance of common stock	(28)	28	136
Dividend Reinvestment Plan	438	388	368
Change in non-vested restricted stock	763	507	363
Net cash used in financing activities	134,736	109,033	182,384
Parent Company [Member]
Cash flows from operating activities:
Net income	11,843	14,613	15,465
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed earnings of subsidiary	(8,495)	(11,431)	(12,386)
Other-net	(545)	232	145
Net cash provided by operating activities	2,803	3,414	3,224
Cash flows from investing activities:
Purchase of investments at cost	(80)	(188)	(87)
Net cash provided by investing activities	(80)	(188)	(87)
Cash flows from financing activities:
Dividends paid: common stock	(4,235)	(3,913)	(3,593)
(Cost of) Proceeds from issuance of common stock	(28)	28	46
Dividend Reinvestment Plan	438	388	368
Change in non-vested restricted stock	180	507
Restricted stock units granted	763	1,447
Restricted shares surrendered	(121)	(42)	(70)
Deferred compensation shares		(1,106)	90
Net cash used in financing activities	(3,003)	(2,691)	(3,159)
Increase (decrease) in cash and cash equivalents	(280)	535	(22)
Cash and cash equivalents at beginning of year	3,870	3,335	3,357
Cash and cash equivalents at end of year	$ 3,590	$ 3,870	$ 3,335

XML

DERIVATIVES (Details) - Derivative [Member] $ in Thousands	Dec. 31, 2023 USD ($)
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Notional Amount	$ 150,000
Derivative Asset	1,069
Derivative Liability
Interest Rate Contract [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Notional Amount	150,000
Derivative Asset	1,069
Derivative Liability

XML

DERIVATIVES (Details 2) $ in Thousands	Dec. 31, 2023 USD ($)
Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total
Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total
Interest Rate Contract [Member] | Commercial Real Estate [Member] | Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total
Interest Rate Contract [Member] | Commercial Real Estate [Member] | Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total
Hedge Funds [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total	900
Hedge Funds [Member] | Interest Rate Contract [Member] | Commercial Real Estate [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total	$ 900

XML

DERIVATIVES (Details Narrative) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($)
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Income on Interest Settlements	$ 1,600

XML

REPORTABLE SEGMENTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Segment Reporting Information [Line Items]
Dividend and Interest Income	$ 72,697	$ 51,117	$ 47,520
Interest expense	23,805	3,174	2,241
Net interest income	48,892	47,943	45,279
Provision for credit losses	1,129	(152)	335
Noninterest income	10,421	11,569	13,904
Noninterest expense	43,144	41,253	39,201
Net income before taxes	15,040	18,411	19,647
Income tax expense (benefit)	3,197	3,798	4,182
Net income	11,843	14,613	15,465
Provision for credit losses	939	(152)	335
Assets	1,827,688	1,672,946
Commercial And Retail Banking [Member]
Segment Reporting Information [Line Items]
Dividend and Interest Income	68,874	49,238	46,499
Interest expense	21,478	2,403	1,825
Net interest income	47,396	46,835	44,674
Provision for credit losses	677
Noninterest income	4,496	5,184	5,590
Noninterest expense	35,136	33,629	31,275
Net income before taxes	16,079	18,782	18,654
Income tax expense (benefit)	3,757	4,145	4,417
Net income	12,322	14,637	14,237
Provision for credit losses		(392)	335
Assets	1,727,245	1,616,173
Mortgage Banking [Member]
Segment Reporting Information [Line Items]
Dividend and Interest Income	3,787	1,858	1,008
Interest expense	1,140	96
Net interest income	2,647	1,762	1,008
Provision for credit losses	452
Noninterest income	1,414	1,906	4,319
Noninterest expense	3,477	3,689	4,694
Net income before taxes	132	(261)	633
Income tax expense (benefit)
Net income	132	(261)	633
Provision for credit losses		240
Assets	99,310	55,845
Investment Advisory And Non Deposit [Member]
Segment Reporting Information [Line Items]
Dividend and Interest Income
Interest expense
Net interest income
Provision for credit losses
Noninterest income	4,511	4,479	3,995
Noninterest expense	3,112	2,961	2,460
Net income before taxes	1,399	1,518	1,535
Income tax expense (benefit)
Net income	1,399	1,518	1,535
Provision for credit losses
Assets	5
Corporate Segment [Member]
Segment Reporting Information [Line Items]
Dividend and Interest Income	5,393	4,484	4,032
Interest expense	1,187	675	416
Net interest income	4,206	3,809	3,616
Provision for credit losses
Noninterest income
Noninterest expense	1,419	974	772
Net income before taxes	2,787	2,835	2,844
Income tax expense (benefit)	(560)	(347)	(235)
Net income	3,347	3,182	3,079
Provision for credit losses
Assets	174,468	165,937
Eliminations [Member]
Segment Reporting Information [Line Items]
Dividend and Interest Income	(5,357)	(4,463)	(4,019)
Interest expense
Net interest income	(5,357)	(4,463)	(4,019)
Provision for credit losses
Noninterest income
Noninterest expense
Net income before taxes	(5,357)	(4,463)	(4,019)
Income tax expense (benefit)
Net income	(5,357)	(4,463)	(4,019)
Provision for credit losses
Assets	$ (173,340)	$ (165,009)