2021 Annual Report

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. Provision for Loan Losses 2021 Compared to 2020 The allowance for loan losses increased $5.2 million as of December 31, 2021, compared to December 31, 2020, reflecting a provision for loan losses of $5.2 million and net recoveries of $29,000 during 2021. The provision for loan losses was $5.2 million for the year ended December 31, 2021, a decrease of $7.6 million, compared to the provision for loan losses of $12.8 million for the year ended December 31, 2020. The decrease in the provision for loan losses related to improving economic conditions and increased clarity surrounding uncertainty and evolving risks driven by the impact of the COVID-19 pandemic, offset partially by growth of the loan portfolio. The allowance for loan losses to total loans was 1.42% at December 31, 2021, compared to 1.50% at December 31, 2020. The allowance for loan losses to total loans, excluding PPP loans, was 1.43% at December 31, 2021, compared to 1.59% at December 31, 2020. As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,” or CECL, until January 1, 2023. 2020 Compared to 2019 The allowance for loan losses increased $12.3 million as of December 31, 2020, compared to December 31, 2019, reflecting a provision for loan losses of $12.8 million and net charge-offs of $435,000 during 2020. The provision for loan losses was $12.8 million for the year ended December 31, 2020, an increase of $10.1 million, compared to the provision for loan losses of $2.7 million for the year ended December 31, 2019. The increase in the provision for loan losses relates primarily to growth of the loan portfolio, economic uncertainties and evolving risks driven by the impact of the COVID-19 pandemic. The allowance for loan losses to total loans was 1.50% at December 31, 2020, compared to 1.18% at December 31, 2019. The allowance for loan losses to total loans, excluding PPP loans, was 1.59% at December 31, 2020. The following table presents a summary of the activity in the allowance for loan losses for the years ended December 31, 2021, 2020, and 2019: 2019 Balance at Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,841 $ 22,526 $ 20,031 Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,150 12,750 2,700 Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74) (517) (388) Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 82 183 Balance at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,020 $ 34,841 $ 22,526 Year Ended December 31, December 31, December 31, (dollars in thousands) 2021 2020

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