2021 Annual Report

The efficiency ratio was 42.0% for the year ended December 31, 2021, compared to 49.0% for the year ended December 31, 2020. The amortization of tax credit investments and other non-routine items elevated the level of operating expenses in both years, and while the recognition of the tax credits increases operating expenses, and concurrently the efficiency ratio, it directly reduces income tax expense and the effective tax rate. The adjusted efficiency ratio, a non-GAAP financial measure, which excludes the impact of certain non-routine income and expenses from noninterest expense, mildly increased to 41.0% for the year ended December 31, 2021, compared to 40.5% for the year ended December 31, 2020. The efficiencies of the Company's "branch-light" model have positioned the Company well to continue making investments in technology as the industry adapts to evolving client behavior. 2020 Compared to 2019 Noninterest expense totaled $45.4 million for the year ended December 31, 2020, a $8.5 million, or 22.9% increase from $36.9 million for the year ended December 31, 2019. The increase was primarily driven by a $3.5 million increase in salaries and employee benefits as the result of merit increases and increased staff to meet the needs of the Company’s growth, and a $7.0 million non-recurring prepayment fee associated with the early extinguishment of $94.0 million of higher priced FHLB term advances. The increases were partially offset by a decrease of $2.5 million in amortization of tax credit investments and a decrease of $719,000 in marketing and advertising expenses. Full-time equivalent employees increased from 160 as of December 31, 2019, to 183 as of December 31, 2020. The efficiency ratio was 49.0% for the year ended December 31, 2020, compared to 47.4% for the year ended December 31, 2019. The adjusted efficiency ratio, a non-GAAP financial measure, which excludes the impact of certain non-routine income and expenses from noninterest expense, decreased to 40.5% for the year ended December 31, 2020, compared to 43.3% for the year ended December 31, 2019. The following table presents the major components of noninterest expense for the year ended December 31, 2021, compared to the year ended December 31, 2020, and the year ended December 31, 2020, compared to the year ended December 31, 2019: Noninterest Expense: Salaries and Employee Benefits. . . . . . . . . . . . . . . . . . $ 30,889 $ 25,568 $ 5,321 $ 25,568 $ 22,076 $ 3,492 Occupancy and Equipment . . . . . . . . . . . . . . . . . . . . . 3,916 3,258 658 3,258 3,085 173 FDIC Insurance Assessment . . . . . . . . . . . . . . . . . . . . 1,305 788 517 788 735 53 Data Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,222 1,027 195 1,027 647 380 Professional and Consulting Fees . . . . . . . . . . . . . . . . 2,523 1,966 557 1,966 1,690 276 Information Technology and Telecommunications . . 2,163 1,374 789 1,374 996 378 Marketing and Advertising . . . . . . . . . . . . . . . . . . . . . 1,487 788 699 788 1,507 (719) Intangible Asset Amortization . . . . . . . . . . . . . . . . . . . 191 191 — 191 191 — Amortization of Tax Credit Investments. . . . . . . . . . . 562 738 (176) 738 3,225 (2,487) Debt Prepayment Fees . . . . . . . . . . . . . . . . . . . . . . . . . 582 7,043 (6,461) 7,043 — 7,043 Other Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,255 2,646 609 2,646 2,780 (134) Totals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,095 $ 45,387 $ 2,708 $ 45,387 $ 36,932 $ 8,455 The Company expects future increases in noninterest expense as the Company continues investing in infrastructure to support balance sheet growth. Management remains focused on supporting growth primarily by adding to staff, investing in technology, and by enhancing risk controls. At the same time, management seeks to contain costs whenever prudent, which is evident in the stable nature of the adjusted efficiency ratio. Income Tax Expense The provision for income taxes includes both federal and state taxes. Fluctuations in effective tax rates reflect the differences in the inclusion or deductibility of certain income and expenses for income tax purposes and the Year Ended December 31, Year Ended December 31, Increase/ Increase/ (dollars in thousands) 2021 2020 (Decrease) 2020 2019 (Decrease)

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