Business Overview and History
Southern States Bancshares, Inc. (SSBK) is a bank holding company headquartered in Anniston, Alabama, operating primarily through its wholly-owned subsidiary, Southern States Bank. The Bank is a full-service community banking institution, offering an array of deposit, loan, and other banking-related products and services to businesses and individuals across its markets in Alabama and Georgia.
Southern States Bank was founded in 2001 as a community bank focused on serving the banking needs of small- to medium-sized businesses, their owners and operators, as well as other professionals, entrepreneurs, and high net worth individuals in its local markets. In its early years, the Bank concentrated on establishing a strong presence in its local markets, opening new branch locations and expanding its commercial and retail banking operations.
The Bank successfully navigated the challenges of the 2008 financial crisis, maintaining a sound balance sheet and continuing to serve its customers. This resilience demonstrated the strength of its business model and risk management practices.
In 2019, Southern States Bancshares completed a significant acquisition of East Alabama Financial Group, which expanded the Bank's presence in the Alabama market. This strategic move marked an important milestone in the company's growth strategy, as it sought to build scale and diversify its geographic reach.
Following the East Alabama Financial Group acquisition, Southern States Bancshares maintained its focus on prudent balance sheet management, emphasizing credit quality and disciplined underwriting. The Bank also invested in technology and digital banking capabilities to enhance the customer experience and improve operational efficiency.
In July 2024, Southern States Bancshares announced the completion of its acquisition of CBB Bancorp, the holding company of Century Bank of Georgia. This transaction expanded the company's footprint into the high-growth Atlanta metropolitan area, further solidifying its position as a premier community banking franchise in the Southeast. The integration of Century Bank's operations has been a key focus for the management team over the past year.
Throughout its history, Southern States Bancshares has successfully navigated various economic cycles and industry challenges, maintaining a steadfast commitment to its community banking model, conservative risk management practices, and unwavering focus on serving the financial needs of its local markets.
Financial Performance and Ratios
Southern States has demonstrated consistent financial performance, with strong profitability, asset quality, and capital ratios. As of the latest reported period ending September 30, 2024, the company reported net income of $23.7 million, with a return on average assets (ROAA) of 1.05% and a return on average equity (ROAE) of 11.89%. The Bank's net interest margin stood at 3.65%, reflecting its ability to effectively manage its interest-earning assets and liabilities.
For the most recent fiscal year 2023, Southern States reported annual revenue of $132.26 million, annual net income of $31.95 million, annual operating cash flow of $39.35 million, and annual free cash flow of $39.1 million. In the most recent quarter (Q3 2024), the company reported revenue of $26 million and net income of $7.35 million. The increase in revenue and net income compared to the prior year quarter was primarily due to the acquisition of Century Bank, which closed on July 31, 2024. This increase was partially offset by a decline in swap fees, as the company did not participate in any swap transactions during the quarter.
The company's loan portfolio totaled $2.21 billion as of September 30, 2024, with a diverse mix of commercial real estate (61.0%), commercial and industrial (14.1%), residential real estate (13.3%), construction and development (11.1%), and consumer and other loans (0.5%). Gross loans increased 16.7% from $1.89 billion as of December 31, 2023, driven by growth in all loan segments, particularly commercial real estate and residential real estate.
The allowance for credit losses was $28.06 million as of September 30, 2024, representing 1.27% of gross loans, compared to $24.38 million, or 1.29% of gross loans, as of December 31, 2023. The increase in the allowance was primarily due to overall loan growth, increases in qualitative economic factors, and additional reserves for individually analyzed loans.
Southern States' capital position remained strong, with a Tier 1 capital ratio of 12.43% and a total risk-based capital ratio of 13.59% as of September 30, 2024, well above the regulatory requirements for a "well-capitalized" institution. The company's common equity Tier 1 capital ratio stood at 12.43%, further solidifying its financial stability.
Liquidity and Funding
Southern States maintains a stable deposit base, with total deposits of $2.42 billion as of September 30, 2024, an increase of 19.9% from $2.02 billion as of December 31, 2023. The deposit mix includes a healthy balance of noninterest-bearing demand deposits (22.5%), interest-bearing transaction accounts (46.5%), savings accounts (2.2%), and time deposits (28.8%). Brokered deposits represented 8.0% of total deposits as of September 30, 2024.
In addition to its deposit base, Southern States has access to other liquidity sources, including advances from the Federal Home Loan Bank (FHLB), federal funds lines of credit, and the Federal Reserve Bank discount window. As of September 30, 2024, the company had $120.4 million in available borrowing capacity from the FHLB and $286 million in available capacity from the Federal Reserve Bank discount window. The company also maintains $114.2 million in uncollateralized, uncommitted federal funds lines of credit and a $25 million revolving line of credit with First Horizon that was extended in August 2024 and matures in August 2026.
FHLB advances totaled $22 million as of September 30, 2024, down from $70 million as of December 31, 2023. The company's debt-to-equity ratio stood at 0.45, indicating a conservative approach to leverage. Southern States held $277.86 million in cash and cash equivalents, providing ample liquidity for its operations. The company's current ratio and quick ratio both stood at 0.42, reflecting its ability to meet short-term obligations.
Acquisition and Expansion Strategy
Southern States' growth strategy has been focused on both organic expansion and strategic acquisitions. The 2024 acquisition of CBB Bancorp and its subsidiary, Century Bank of Georgia, was a significant milestone, adding six branch locations and expanding the company's presence in the attractive Atlanta metropolitan market.
The integration of Century Bank has been a key priority for Southern States, as the company works to optimize operational efficiencies, cross-sell products and services, and leverage the combined expertise and client relationships to drive further growth. The acquisition is expected to be accretive to the company's earnings and enhance its competitive position in the region.
Looking ahead, Southern States remains open to exploring additional acquisition opportunities that align with its strategic objectives and can further strengthen its franchise. The company's seasoned management team and solid financial position provide the flexibility to pursue value-enhancing transactions that can expand its geographic reach and customer base.
Risks and Challenges
As with any banking institution, Southern States faces risks and challenges inherent to the industry, including interest rate risk, credit risk, regulatory compliance, and competition from larger regional and national banks, as well as emerging financial technology (fintech) competitors.
The company's reliance on its commercial real estate (CRE) loan portfolio, which accounts for 61.0% of total loans, exposes it to potential risks associated with changes in the real estate market and economic conditions. Southern States mitigates this risk through its diversified CRE portfolio, which includes both owner-occupied and income-producing properties, as well as its prudent underwriting standards and active portfolio management.
Additionally, the Bank operates in a highly regulated environment, requiring ongoing compliance with various federal and state banking laws and regulations. Failure to maintain compliance could result in regulatory enforcement actions, fines, and reputational damage.
To address these risks, Southern States has implemented robust risk management frameworks, enhanced compliance and internal control measures, and maintained a strong capital position to withstand potential economic downturns or adverse events.
Outlook and Conclusion
Southern States Bancshares has demonstrated its ability to navigate the evolving banking landscape, delivering consistent financial performance and strategic growth. The company's recent acquisition of Century Bank has strengthened its geographic footprint and market share, positioning it for continued success in the Southeastern United States.
With a focus on serving the needs of small and medium-sized businesses, as well as high net worth individuals, Southern States has carved out a unique niche in its markets. The company's strong capital position, stable funding sources, and prudent risk management practices provide a solid foundation for future growth and shareholder value creation.
As Southern States continues to execute on its strategic initiatives, investors will closely monitor the company's ability to integrate its recent acquisition, maintain strong asset quality, and capitalize on emerging opportunities in its core markets. With its experienced management team, community-focused approach, and disciplined growth strategy, Southern States Bancshares remains well-positioned to navigate the evolving banking landscape and deliver long-term value to its shareholders.