2020 Annual Report

The following table presents a summary of interest and fees recognized on loans, excluding PPP loans, for the years ended December 31, 2020, 2019 and 2018:

For the year ended December 31,

2020

2019

2018

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yield on Loans, Excluding PPP Loans . . . . . . . . . . . . . . .

4.73 %

5.06 %

4.85 %

0.26

0.25

0.38

4.99 %

5.31 %

5.23 %

Interest Expense. Interest expense on interest bearing liabilities decreased $2.8 million, or 9.4%, to $26.9 million for the year ended December 31, 2020, compared to $29.6 million for the year ended December 31, 2019. The cost of interest bearing liabilities declined 50 basis points to 1.53% for the year ended December 31, 2020, compared to 2.03% for the year ended December 31, 2019. The decline was primarily due to lower rates paid on deposits, offset partially by growth of interest bearing deposits and additional subordinated debentures. Interest expense on deposits decreased to $19.8 million for the year ended December 31, 2020, compared to $24.0 million for the year ended December 31, 2019. The $4.2 million, or 17.4%, decrease in interest expense on deposits was primarily due to deposit rate cuts consistent with a lower rate environment and the repricing of time deposits. The cost of total deposits declined 49 basis points from 1.42% for the year ended December 31, 2019, to 0.93% for the year ended December 31, 2020. Interest expense on borrowings increased $1.4 million to $7.0 million for the year ended December 31, 2020, compared to $5.7 million for the year ended December 31, 2019. This increase was due to the issuance of additional subordinated debentures in 2020. Given strong deposit inflows and ample time deposit maturities over the next 12 months, the Company anticipates continued deposit repricing opportunities in the future. Moreover, the significant FHLB de-leveraging strategy executed in the fourth quarter of 2020 will begin to manifest lower interest bearing liability costs in subsequent quarters. Net interest income was $74.1 million for the year ended December 31, 2019, an increase of $9.4 million, or 14.5%, compared to $64.7 million for the year ended December 31, 2018. The increase in net interest income was largely attributable to growth in average interest earning assets, particularly strong organic growth in the loan portfolio. Net interest margin (on a fully tax-equivalent basis) for the year ended December 31, 2019 was 3.59%, compared to 3.72% for the year ended December 31, 2018, a decrease of 13 basis points. While net interest margin has benefitted from the repricing of variable rate loans and the origination of new loans at higher rates, this was outpaced by increased balances and rates on deposits and borrowings. Average interest earning assets for the year ended December 31, 2019 increased $324.7 million, or 18.4%, to $2.09 billion from $1.77 billion for the year ended December 31, 2018. This increase in average interest earning assets was due to continued organic growth in the loan portfolio as a result of increased loan production. Average interest bearing liabilities increased $217.2 million, or 17.5%, to $1.46 billion for the year ended December 31, 2019, from $1.24 billion for the year ended December 31, 2018. The increase in average interest bearing liabilities was due to an increase in interest bearing deposits and FHLB advances, partially offset by a decrease in federal funds purchased and notes payable. Average interest earning assets produced a tax-equivalent yield of 5.01% for year ended December 31, 2019, compared to 4.88% for the year ended December 31, 2018. The average rate paid on interest bearing liabilities was 2.03% for the year ended December 31, 2019, compared to 1.65% for the year ended December 31, 2018. 2019 Compared to 2018

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