April 12, 2023
Dear Shareholders,
Even as we celebrate our 90th year, we’re building the foundation for the next era for ABB to raise our standards to excellence in meeting the ever-rising regulatory and industry demands. Our standard for financial performance is excellent. It’s time to apply this standard to a broader field of challenges we face.
This epiphany is a lesson learned from another of my mistakes. (What, again?) In 2021, we consented to a Memorandum of Understanding (MOU) to improve our Bank Secrecy Act (BSA) Program. (An MOU is an informal agreement between the bank and the FDIC where we agree to meet their demands, and they agree not to let us open any new branches until we do.) My standard for most matters not related to our bottom line has been to be “good enough.” However, there are a number of “imperatives” in banking; BSA, Community Reinvestment Act, audit, compliance, flood insurance etc., things that must be done and done right. These are a significant burden to our bottom line but nonetheless must be paid as the price of admission. Only through excellence do we create a “margin of safety” from unexpected surprises and future MOU’s.
Excellence is a high bar but not one we’re unfamiliar with. Our financial performance is excellent. Our Audit Program went from severe regulatory criticism to excellence. Our ability in attracting and retaining new business is excellent. Many of our departments and branches are excellent. Excellence is in our wheelhouse.
We must be proactive in our pursuit of excellence, anticipating the demands of the future by seeking improvement even when we’re good enough today. Good enough is not good enough anymore.
Here are our five priorities for achieving excellence as stated in our Strategic Plan:
- Excellence in BSA by exceeding regulatory expectations resulting in the lifting of the MOU.
- Excellence in the “imperatives” by elevating our Compliance Management System to exceed the rising standards of regulatory compliance. Regulatory standards for the “imperatives” are unforgiving, with zero tolerance for error, inattention, ignorance or even a pandemic. There is no excuse.
- Excellence in customer care and operational proficiency by upgrading our core processing system to the industry-leading software, SilverLake, the flagship product of our long-term partner and leading bank software provider, Jack Henry and Associates. This upgrade provides us with state-of-the-art capabilities and assures us we will continue to offer our customers the best and latest in products and services.
- Excellence in developing ourselves. We believe people are our most valuable and appreciable asset. We’ll intentionally and continuously pour into ourselves to enhance our performance and strengthen our culture. We have appointed a Human Resource Director, enthusiastically embraced Lead Now, our homegrown people and culture development program, and are rolling out a yearlong leadership development course offered by our vendor partner Haberfeld.
- Excellence in corporate governance; including Management Information Systems, Strategic and Succession Planning, Risk Measurement, and Model Risk Management. We are resolved to prepare the bank for the future and grow stronger as we do it.
Our 2022 Net income was $26,921,770, a Return on Equity of 22.45%, the highest of all 45 SC banks…….again, and over twice the state average of 8.35%. Growth in loans and deposits were impressive at 24% and 11%, respectively. In my annual letter last year, I attributed our performance to the “Best bankers going the extra mile in our proprietary banking model.” It’s still true. Our banking model, built on community banking, home mortgages, simple and affordable deposit products, personal and auto loans, are essential to our customers. Our performance is sustainable so long as we remember what got us here; the best bankers who execute our banking model like ringing a bell! (Apologies to Chuck Berry.)
Each year our stock is appraised by Southard Financial of Memphis, Tennessee. This year’s valuation was a disappointing $721.00, up from $712.00. Here’s why: The appraisal relies heavily on our net income projections for the coming year. We develop these projections primarily for capital and dividend management, accordingly, we are always conservative in our projections. When we finalized these projections in December 2022, we accurately projected increases in interest expense but, given the stubbornness of our average loan yields to increase, we had no upward trend to support higher projections resulting in a low projected income. The good news is that finally, in March, an upward trend in interest income emerged, and we have revised our projections upward. If we continue to perform significantly above our original projections, consideration will be given to updating the appraised value as of June 30, 2023, to assure an accurate value for our shareholders wishing to sell.
Our stockholders’ meeting will be held Thursday, May 25, 2023, beginning at 11:00 at our Conference Center, 101 N. Main Street, Mullins.
