2021 Annual Report

During the year ended December 31, 2021, primary liquidity increased $34.3 million due to a $48.7 million increase in securities available for sale, offset partially by a $14.5 million decrease in cash and cash equivalents, when compared to December 31, 2020. Secondary liquidity increased $328.8 million as of December 31, 2021 when compared to December 31, 2020, due to a $189.6 million increase in the borrowing capacity on the secured borrowing line with the FHLB, a $49.2 million increase in the borrowing capacity on the secured credit line with the Federal Reserve Bank, a $65.0 increase in unsecured borrowing capacity with correspondent lenders, and a $25.0 million increase from the addition of a secured revolving line of credit with a correspondent lender. In addition to primary liquidity, the Company generates liquidity from cash flows from the loan and securities portfolios and from the large base of core customer deposits, defined as noninterest bearing transaction, interest bearing transaction, savings, non-brokered money market accounts and non-brokered time deposits less than $250,000. At December 31, 2021, core deposits totaled approximately $2.52 billion and represented 85.4% of total deposits. These core deposits are normally less volatile, often with customer relationships tied to other products offered by the Company, which promote long-standing relationships and stable funding sources. The Company uses brokered deposits, the availability of which is uncertain and subject to competitive market forces and regulation, for liquidity and interest rate risk management purposes. At December 31, 2021, brokered deposits totaled $369.3 million, consisting of $238.1 million of brokered time deposits and $131.2 million of non-maturity brokered money market and transaction accounts. At December 31, 2020, brokered deposits totaled $452.3 million, consisting of $292.6 million of brokered time deposits and $159.7 million of non-maturity brokered money market and transaction accounts. The Company’s liquidity policy includes guidelines for On-Balance Sheet Liquidity (a measurement of primary liquidity to total deposits plus borrowings), Total On-Balance Sheet Liquidity with Borrowing Capacity (a measurement of primary and secondary liquidity to total deposits plus borrowings), Wholesale Funding Ratio (a measurement of total wholesale funding to total deposits plus borrowings), and other guidelines developed for measuring and maintaining liquidity. As of December 31, 2021, the Company was in compliance with all established liquidity guidelines in the policy. GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures Some of the financial data included in this report are not measures of financial performance recognized by GAAP. Management uses these non-GAAP financial measures in the analysis of performance: • "Pre-Provision Net Revenue" is defined as net interest income plus total noninterest income (excluding all gains and losses on sales of assets) minus total non-interest expense, excluding the amortization of tax credit investments and debt prepayment fees. • “Core Net Interest Margin” is defined as the ratio of net interest income (on a fully tax-equivalent basis), reduced by loan fees and PPP interest and fees, divided by interest earning assets, excluding average PPP loans. “Efficiency ratio” is defined as noninterest expense less the amortization of intangibles divided by our operating revenue, which is equal to net interest income plus noninterest income excluding gains and losses on sales of assets. In management’s judgment, the adjustments made to operating revenue allow investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to the Company’s core business. • “Adjusted Efficiency ratio” is defined as the efficiency ratio adjusted to exclude the amortization of tax credit investments and debt prepayments fees from noninterest expense. • “Adjusted Noninterest expense to average assets” is defined as the ratio of noninterest expense adjusted to exclude the amortization of tax credit investments and debt prepayment fees, divided by average assets. • “Tangible common equity” is defined as shareholders’ equity reduced by preferred stock, goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in common shareholders’ equity exclusive of changes in

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