What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 435 added, 287 removed, 693 unchanged (51% of the section changed)

10 unchanged sentences

The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward looking statements:

• The macroeconomic and other challenges and uncertainties resulting from the coronavirus (“COVID-19”) pandemic;

• Changes in the general economic, political, social and health conditions, including the macroeconomic and other challenges and uncertainties resulting from the effects of the COVID-19 pandemic;

• The timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;

• The willingness of customers to substitute competitors’ products and services for our products and services;

• Our management of risks inherent in our real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of, and our ability to sell, properties which stand as collateral for loans we make;

• Our management of liquidity risks in our operations, including, but not limited to, risks related to customer deposits, deposits in excess of the FDIC insurance coverage limits, access to capital markets and securities and market values;

• The effect of acquisitions we may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;

• Our decision to cease originating residential mortgages (See Note 26 of the Consolidated Financial Statements for further details);

• The growth and profitability of noninterest or fee income being less than expected;

1 unchanged sentence

• Changes in consumer spending and savings habits;

• The impact of climate change or government action and societal responses to climate change;

• Difficulty recruiting or retaining successful bankers, executive officers or other key personnel;

• Changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or our subsidiary bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products;

4 unchanged sentences

• Unanticipated regulatory or judicial proceedings;

• The effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the Securities and Exchange Commission, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board;

• Technological and social media changes;

• The effect of changes in accounting policies and practices, as may be adopted from time-to-time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board ("PCAOB") or the FASB;

• Cybersecurity breaches, threats, and cyber-fraud that cause the Bank to sustain financial losses;

• Technological and social media changes;

• Our management of risks inherent in the use of statistical and quantitative data and modeling;

• The strength of the United States economy, in general, and the strength of the local economies in which we conduct operations;

4 unchanged sentences

We will not update the forward looking statements to reflect actual results or changes in the factors affecting the forward looking statements.

The Company is a growth-oriented, one-bank holding company headquartered in Bethesda, Maryland, which is currently celebratin g twenty-three years of successful operations.

The Company provides general commercial and consumer banking services through the Bank, its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve System.

The Company is a growth-oriented, one-bank holding company headquartered in Bethesda, Maryland, which is currently celebrating twenty-four years of successful operations.

The Company provides general commercial and consumer banking services through the Bank, its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve.

The Company was organized in October 1997 and to be the holding company for the Bank.

2 unchanged sentences

The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion.

The Bank currently has a total of seventeen branch offices (six in Northern Virginia, six in Suburban Maryland, and five in Washington, D.C.), a principal corporate office, five lending centers (two are co-located with branches and one co-located in the principal corporate office) and one operations center.

The Bank currently has a total of sixteen branch offices (six in Suburban Maryland, five in Washington, D.C.

and five in Northern Virginia), a principal corporate office, five lending centers (two are co-located with branches and one co-located in the principal corporate office) and one operations center.

Refer to the Business Section above, which describes in detail the various banking services offered.

In general, the economy began to recover in 2021 as COVID-19 vaccines and treatments became more readily available in communities in the US and around the world.

The improvement in the overall economy in 2021 led to supply chain issues, low unemployment rates and inflation.

This led to expectations that the Federal Reserve Open Market Committee ("FOMC"), would discontinue the generally accommodative monetary policy it had pursued when the COVID-19 pandemic begin in early 2020.

Although the global economy has largely adapted operations to a world with COVID-19, certain adverse residual consequences of the pandemic continue to impact the macroeconomic environment and they may continue to persist.

The growth in economic activity and demand for goods and services, alongside labor shortages and supply chain complications and/or disruptions, has contributed greatly to rising inflationary pressures.

In 2022, the Federal Reserve Open Market Committee ("FOMC"), began a series of rate increases thereby discontinuing the generally accommodative monetary policy it had pursued when the COVID-19 pandemic began in early 2020.

In late 2022, the Federal Reserve begun tapering purchases of securities and is no longer expanding its balance sheet as aggressively.

Actual real U.S.

GDP growth for 2021 was 5.7%, in contrast to a 3.4% decrease in 2020, which was adversely impacted by the onset of COVID-19.

GDP growth for 2022 was 2.1%, in contrast to 5.7% growth in 2021 as the economy re-opened, and was adversely impacted by the effects of the COVID-19 pandemic.

Employment climbed throughout 2022 as the U.S.

3 unchanged sentences

Treasury rate averaging 2.95% in 2022 as compared to 1.45% in 2021.

The yield curve in 2021 was steeper than in 2020, but narrowed toward the end of 2021 (two year as compared to ten year U.S.

Treasury rates).

The yield curve in 2022 was inverted as rates increased sharply on the short end of the curve and remained anchored on the longer end versus a more normal shape in 2021.

As the ten year U.S.

Treasury rate increased in late 2021, the volume of residential mortgage lending began to decrease.

Overall, real estate values in most of the Company's markets were stable-to-increasing in 2021 as interest rates, although up versus the prior year, remained historically low.

Treasury rate continued to increase in 2022, the volume of residential mortgage lending continued to decrease in 2022.

Overall, real estate values in most of the Company's markets decreased moderately in 2022 as the FOMC increased interest rates in 2022 to stave off inflationary pressures.

Political gridlock continued in Washington, D.C.

over concerns of pandemic policy, public debt and deficits, as well as tax policy and spending levels.

over concerns of public debt and deficits, as well as tax policy and spending levels.

The Company’s primary market, the Washington, D.C.

metropolitan area, has continued to perform well relative to other parts of the country notwithstanding the impact of the COVID-19 pandemic, due to a stable public sector along with increased government spending.

The private sector, in particular, the Leisure and Hospitality sector still faces challenges associated with the pandemic.

In spite of these challenges, the Washington, D.C.

metropolitan area, has continued to perform well relative to other parts of the country notwithstanding the adverse effects of the COVID-19 pandemic, due to a stable public sector along with increased government spending.

The private sector, in particular, the Leisure and Hospitality sector has seen some recovery in recent years following the adverse effects of the pandemic.

The multi-family commercial real estate leasing sector, notwithstanding increased supply of units in the Bank’s market area, has held up relatively well, particularly for well-located close-in projects.

Overall, commercial real estate values have generally held up well, but we continue to be cautious of the cap rates at which some assets are trading, and therefore, we are being careful with valuations.

In spite of recent challenges, the Washington, D.C.

metropolitan area maintains a diverse economy including a large healthcare component, substantial business services and a highly educated work force.

The Company has the financial resources to meet, and has remained committed to meeting, the credit needs of its community.

The decline in the Company's loan balances in 2021 was a result of successful projects paying off, the competition to refinance at lower rates with longer amortization periods, and excess liquidity at competing banks as well as many companies and construction project sponsors.

While our loan balances declined in 2021, deposit inflows increased our liquidity levels, which increased earning assets, but negatively impacted net interest margins and resulted in a much lower loan to deposit ratio.

The Company’s capital position remained strong in 2021 as a result of good earnings that were enhanced by reversal of provisions to the ACL, improved economic conditions and improved asset quality.

Additionally, while mortgage rates increased in 2021 over 2020, the Company's residential lending group continues to contribute to earnings through the origination and sale of residential mortgages.

As a result of the Company’s strong capital position and earnings, we were able to increase our quarterly dividend several times in 2021 and continue our share repurchase program.

Although the number of shares

repurchased by the Company was much smaller in 2021, this was due to the increase in the price of the Company common stock, making repurchases less accretive to earnings per share.

The Company believes its strategy of remaining growth-oriented, retaining talented staff and maintaining focus on seeking quality lending and deposit relationships has proven successful and is evidenced in its financial and performance ratios.

The decline in the Company's loan balances in 2021 was a result of PPP loans paying off, competition refinancing at lower rates with longer amortization periods, and excess liquidity at competing banks as well as many companies and construction project sponsors.

Loan balances increased in 2022 as rising rates led to deposit disintermediation reducing our liquidity levels and earning assets.

However, rates on interest earning assets increased which ultimately had a net positive impact on the net interest margin and resulted in a higher net interest income in 2022 despite the decrease in liquidity and earning assets.

The Company’s capital position remained strong in 2022 as a result of good earnings, improved economic conditions and strong asset quality.

As a result of the Company’s strong capital position and earnings, we were able to continue our quarterly dividend in 2022.

Additionally, the Company was active in share repurchase activity as we repurchased 738,300 shares at an average price of $44.82 per share during 2022.

On December 13, 2022, the Company's Board of Directors authorized a new share repurchase program to take effect starting January 2, 2023, after the expiration of the previous repurchase program on December 31, 2022.

The Board of Directors authorized the repurchase of 1,600,000 shares of common stock, or approximately 5% of the Company's outstanding shares of common stock, under the 2023 Repurchase Program, which will expire on December 31, 2023, subject to earlier termination of the program by the Board of Directors.

The Company believes its strategy of remaining growth-oriented, retaining talented staff and maintaining focus on seeking quality lending and deposit relationships has proven successful.

Additionally, the Company believes such focus and strategy of relationship building has fostered future growth opportunities, as the Company’s reputation in the marketplace remains strong.

At December 31, 2021, the Company had total assets of approximately $11.8 billion, total loans of $7.1 billion, total deposits of $10.0 billion and seventeen branches in the Washington, D.C.

At December 31, 2022, the Company had total assets of approximately $11.2 billion, total loans of $7.6 billion, total deposits of $8.7 billion and sixteen branches in the Washington, D.C.

metropolitan area.

Impact of COVID-19

During 2020 and to a lesser extent in 2021, our business has been, and continues to be, impacted by the ongoing outbreak of COVID-19.

In March 2020, the outbreak of COVID-19 was recognized as a pandemic by the World Health Organization.

The spread of COVID-19 created a global public health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the U.S.

and globally, including the markets that we serve.

Efforts to limit the spread of COVID-19 have included quarantines, shelter-in-place orders, the closure or limiting capacity of businesses, travel restrictions, supply chain limitations and prohibitions on public gatherings, among other things, throughout many parts of the United States, including the Washington D.C.

As the COVID-19 pandemic is ongoing and dynamic in nature, there are many uncertainties, including its severity, duration, impact to our customers, employees and vendors, impact to the financial services and banking industry, impact to the economy as a whole and the level of governmental intervention (both economic and health-related).

COVID-19 has negatively affected, and is expected to continue to negatively affect the Company.

Furthermore, the sustainability of the economic recovery remains unclear and significant volatility could continue for a prolonged period as the potential exists for additional variants of COVID-19, including the recent Omicron variant, to impede the economic recovery.

CRITICAL ACCOUNTING POLICIES

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP and follow general practices within the banking industry.

5 unchanged sentences

Carrying assets and liabilities at fair value inherently results in more financial statement volatility.

Provision for Credit Losses and Provision for Unfunded Commitments

Allowance for Credit Losses and Provision for Unfunded Commitments

A consequence of lending activities is that we may incur credit losses, so we record an ACL with respect to loan receivables and a reserve for unfunded commitments (“RUC”) as estimates of those losses.

1 unchanged sentence

As a result of our January 1, 2020 adoption of FASB's Accounting Standard Codification ("ASC") 326, Measurement of Credit Losses on Financial Instruments , and its related amendments, our methodology for estimating these credit losses changed significantly from years prior to 2020.

The standard replaced the “incurred loss” approach with a “current expected credit loss” approach known as CECL, which requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures).

pool of exposures).

CECL removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.”

3 unchanged sentences

Our determination of these amounts requires significant reliance on estimates and significant judgment as to the amount and timing of expected future cash flows on loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors and the reliance on our reasonable and supportable forecasts.

The Provision for Credit Losses ("PCL") represents the expected credit losses arising from the Company's loan and AFS securities portfolios.

The PCL is determined by following:

The ACL represents the expected credit losses arising from the Company's loan and available-for-sale ("AFS") securities portfolios.

The ACL is determined as follows:

The Company uses a loan-level probability of default ("PD")/ loss given default ("LGD") cash flow method with an exposure at default ("EAD") model to estimate expected credit losses for the commercial, income producing – commercial real estate, owner occupied – commercial real estate, real estate mortgage - residential, construction – commercial and residential, construction – C&I (owner occupied), home equity and other consumer loan pools.

1 unchanged sentence

The modeling of expected prepayment speeds is based on historical internal data.

PPP loans are included in the model but do not carry a reserve, as these loans are fully guaranteed by the SBA, whose guarantee is backed by the full faith and credit of the U.S.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default.

This analysis also determines how expected probability of default will react to forecasted levels of the loss drivers.

The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime PD and LGD.

This analysis also determines how expected PD will react to forecasted levels of the loss drivers.

For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as a loss driver over our reasonable and supportable period of 18 months, and reverts back to a historical loss rate over the following twelve months on a straight-line basis.

While the COVID-19 pandemic negatively impacted unemployment projections for 2020, which informed our CECL economic forecast and increased our loss reserve for that year, there were positive signs in 2021 as the unemployment rate and economic forecast suggested the impact of the COVID-19 pandemic on credit would not be as significant as previously considered in 2020.

While the COVID-19 pandemic negatively impacted unemployment projections for 2021, which informed our CECL economic forecast and increased our loss reserve for that year, there were positive signs in 2022 as the unemployment rate and economic forecast continued to improve and suggested that the effects of the COVID-19 pandemic on credit would not be as significant as previously considered in 2021.

Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

5 unchanged sentences

Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings.

For example, the COVID-19 pandemic has negatively impacted the performance outlook in the Accommodation & Food Service segment of our loan portfolio, which informs our CECL economic forecast and continues to adversely impact our loss reserve as of December 31, 2021.

See Notes 1, 3 and 4 to the Consolidated Financial Statements, the “Provision for Credit Losses” section in Management’s Discussion and Analysis, and the COVID-19 risk factor in Item 1A for more information on the provision for credit losses.

Goodwill and Other Intangibles

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Other intangible assets represent purchased assets and mortgage servicing rights ("MSRs") that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights.

Intangible assets that have finite lives, such as core deposit intangibles, are amortized over their estimated useful lives and subject to periodic impairment testing.

Intangible assets (other than goodwill) are amortized to expense using accelerated or straight-line methods over their respective estimated useful lives.

Goodwill is subject to impairment testing at the reporting unit level, which must be conducted at least annually.

The Company performs impairment testing during the fourth quarter of each year (as of December 31) or when events or changes in circumstances indicate the assets might be impaired.

The Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Determining the fair value of a reporting unit under the goodwill impairment test is a matter of judgment and often involves the use of significant estimates and assumptions.

Similarly, estimates and assumptions are used in determining the fair value of other intangible assets.

Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions.

These approaches use significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return, projected growth rates and determination and evaluation of appropriate market comparables.

Management performed its annual assessment of goodwill as of December 31, 2021.

Based on the results of qualitative assessments of the reporting unit, the Company concluded that no impairment existed at December 31, 2021.

However, future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss.

Any resulting impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

See “Item 1A Risk Factors—Changes in the value of goodwill and intangible assets could reduce our earnings” for more information.

For example, the effects of the COVID-19 pandemic and related hybrid or fully remote working environment had negatively impacted the performance outlook in the central business district office commercial real estate segment of our loan portfolio, which informed our CECL economic forecast and continued to adversely impact our loss reserve as of December 31, 2022.

See Notes 1, 3 and 4 to the Consolidated Financial Statements, the “Provision for Credit Losses” section in Management’s Discussion and Analysis and the risk factors related to our business and economic conditions in Item 1A for more information on the provision for credit losses.

SELECTED FINANCIAL DATA

The following discussion is intended to assist in understanding the financial condition and results of operations of the Company as of and for the year ended December 31, 2022.

The information contained in this section should be read together with the December 31, 2021 audited Consolidated Financial Statements and the accompanying Notes included in Item 8.

Financial Statements And Supplementary Data of this Form 10-K.

This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.

The information contained in this section should be read together with the December 31, 2022 audited Consolidated Financial Statements and the accompanying Notes included in Item 8 Financial Statements And Supplementary Data of this Form 10-K.

This section of this Form 10-K generally discusses 2022 items and year-to-year comparisons between 2022 and 2021.

Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Form 10-K for the fiscal year ended December 31, 2021.

6 unchanged sentences

Years Ended December 31,

2021 2020 2019

Balance Sheets - Period End

Securities $ 2,623,408 $ 1,151,083 $ 843,363

Securities - available for sale $ 1,598,666 $ 2,623,408 $ 1,151,083

Securities - held to maturity 1,093,374 — —

Loans held for sale 6,734 47,218 88,205

84 unchanged sentences

RESULTS OF OPERATIONS

Net income for the years ending December 31, 2021 and 2020 were $176.7 million and $132.2 million, respectively.

Net income per basic and diluted common share for 2021 was $5.53 and $5.52, respectively, compared to $4.09 per basic and diluted common share for 2020, a 35% increase.

Net income increased in 2021 relative to 2020 primarily due to reversals from the allowance for credit losses and, to a lesser extent, net interest income on a higher asset base, partially off set by lower noninterest income and higher noninterest expense.

The most significant portion of revenue (i.e., net interest income plus noninterest income) is net interest income, which increased to $324.5 million in 2021 compared to $321.6 million for 2020.

The increase resulted from an increase in average earning assets of 14%, which offset a decline of 38 basis points in net interest margin.

The net interest margin, which measures the difference between interest income and interest expense (i.e., net interest income) as a percentage of earning assets, was 2.81% for 2021 and 3.19% for 2020, a decline of 38 basis points.

Twelve Months Ended December 31, 2022 Compared with Twelve Months Ended December 31, 2021

Net income for the years ended December 31, 2022 and 2021 was $140.9 million and $176.7 million, respectively.

Net income per basic and diluted common share for 2022 was $4.40 and $4.39, respectively, compared to $5.53 and $5.52 per basic and diluted common share, respectively for 2021, a 20% decrease.

Net income decreased in 2022 relative to 2021 primarily due to the provision reversals in the allowance for credit losses in 2021 that did not recur in 2022, increases in interest expense, lower noninterest income and higher noninterest expense which was partially offset by an increase in interest income.

The most significant portion of revenue (i.e., net interest income plus noninterest income) is net interest income, which increased to $332.9 million for 2022 compared to $324.5 million for 2021.

The increase was due to an increase in the yield on average earning assets from 3.16% to 3.74%, or 58 basis points, which was partially offset by an increase in cost of funds of 46 basis points in net interest margin due to increased rates on interest bearing deposits and other borrowings.

The net interest margin, which measures the difference between interest income and interest expense (i.e., net interest income) as a percentage of earning assets, was 2.93% for 2022 and 2.81% for 2021, an increase of 12 basis points.

The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.

The provision for credit losses in 2021 was a reversal of $20.8 million as compared to a provision of $45.6 million in 2020.

The reversal of the provision was primarily driven by the improved economic environment, adjustments to the quantitative components of the CECL model and improvements in asset quality.

F or information on the components and drivers of these changes see "Provision for Credit Losses" section below.

The provision for credit losses in 2022 was $266 thousand as compared to a reversal of $20.8 million in 2021.

For information on the components and drivers of these changes see "Provision for Credit Losses" section below.

Total noninterest income in 2022 was $23.7 million, as compared to $40.4 million in 2021, a 41% decrease.

Noninterest expenses in 2021 totaled $149.2 million, as compared to $144.2 million in 2020, a 3% increase.

Noninterest expenses in 2022 totaled $165.1 million, as compared to $149.2 million in 2021, an 11% increase.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 46.31% for 2022 as compared to 40.88% for 2021.

The adverse change in the efficiency ratio was driven by the $22.9 million settlement expenses, which increased noninterest expense and was partially offset by the $5.0 million accrual reduction related to share-based compensation awards and deferred compensation associated with our former CEO and Chairman, which reduced noninterest expense.

Refer to the “Use of Non-GAAP Financial Measures” section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Income tax expense in 2021 was $61.0 million, as compared to $43.9 million in 2020, a 39% increase.

At December 31, 2021, total loan balances (including PPP loans) were 9% lower than they were at December 31, 2020, and average loans were 8% lower in 2021 as compared to 2020.

PPP loans represented $51.1 million of total loans at the end of 2021, as compared to $454.8 million at the end of 2020.

Excluding PPP loans, loans decreased 4% in 2021, driven by higher payoffs and paydowns, which outpaced originations and advances.

The decline in PPP loans was the result of the forgiveness process and, in the second quarter of 2021, the Company's sale of a portion of the PPP loan portfolio.

Deposit growth was strong throughout 2021, and resulted in well above historical average overnight liquidity for the Company.

Deposit funding during 2021 was primarily from noninterest bearing and money market accounts.

In large part due to those inflows, total deposits at December 31, 2021 were 9% higher than deposits at December 31, 2020, while average deposits were 17% higher for 2021 compared with 2020.

This increase in deposits allowed the Company to sustain strong primary and secondary sources of liquidity and increase the size of the investment securities portfolio.

At December 31, 2022, total loan balances (including PPP loans) were 8% higher than they were at December 31, 2021, and average loans were 1% lower in 2022 as compared to 2021.

PPP loans represented just $3.3 million of total loans at the end of 2022, as compared to $51.1 million at the end of 2021.

Excluding PPP loans, adjusted loan balances, increased 9% in 2022, driven by originations and advances which outpaced payoffs and paydowns.

The decline in PPP loans was the result of the forgiveness process.

Total deposits at December 31, 2022 declined by $1.3 billion as compared to December 31, 2021.

The decline consists of $127.2 million in noninterest bearing deposits and $1.1 billion in interest bearing deposits.

This was primarily driven by a significant increase in short term interest rates and the related deposit disintermediation.

In terms of the average asset composition or mix, loans, which generally have higher yields than securities and other earning assets, represented 63.4% and 63.0% of average earning assets for 2022 and 2021, respectively.

For 2021, as compared to 2020, average loans, excluding loans held for sale, decreased $607.6 million, or 8%, driven by higher payoffs and paydowns, which outpaced originations and advances, and PPP loan forgiveness and sale.

For 2022, as compared to 2021, average loans, excluding loans held for sale, decreased $54.7 million, or 1%, driven by slightly higher payoffs and paydowns, which just outpaced originations and advances as well as PPP loan forgiveness.

Average investment securities for 2022 were 25% of average earning assets compared to 14% for 2021.

The combination of federal funds sold, interest bearing deposits with other banks and loans held for sale represented 23% and 12% of average earning assets for 2021 and 2020, respectively, as much higher levels of on-balance sheet liquidity existed throughout 2021.

These increases were driven by the decline in loans coupled with the inflow of deposits.

The ratio of common equity to total assets increased to 11.40% at December 31, 2021 from 11.16% at December 31, 2020, due to common equity growing faster rate than total assets, even with common equity reductions due to $682 thousand in share repurchase activity and $44.7 million of cash dividends declared.

The combination of federal funds sold, interest bearing deposits with other banks and loans held for sale represented 11% and 23% of average earning assets for 2022 and 2021, respectively, as lower levels of on-balance sheet liquidity existed throughout 2022.

The decrease was driven by the decline in deposits due to a significant increase in short term interest rates.

The ratio of common equity to total assets decreased to 11.02% at December 31, 2022 from 11.40% at December 31, 2021, due to the significant impact of higher rates on the unrealized loss position of the investment portfolio and resulting impact to accumulated other comprehensive income.

The impact resulted in a reduction of common equity of $185.5 million related to investment securities in addition to the $55.8 million of cash dividends declared and $33.1 million in share repurchase activity during 2022.

For 2022, the return on average assets (“ROAA”) was 1.20%, as compared to 1.49% for 2021.

Total shareholders’ equity was $1.35 billion at December 31, 2021 and $1.24 billion and 2020, an increase of 9%.

Total shareholders’ equity was $1.23 billion at December 31, 2022 as compared to $1.35 billion at December 31, 2021, a decrease of 9%.

The return on average common equity (“ROACE”) for 2022 was 10.99% as compared to 13.54% for 2021.

The return on average tangible common equity (“ROATCE”) for 2021 was 14.73% as compared to 12.03% for 2020.

The return on average tangible common equity (“ROATCE”) for 2022, a non-GAAP financial measure, was 11.97% as compared to 14.73% for 2021.

Refer to the “Use of Non-GAAP Financial Measures” section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The increase in these returns was primarily due to reversals from the allowance for credit losses and to a lesser extent net interest income on a higher asset base, partially off set by lower noninterest income and higher noninterest expense.

The decreases in these returns was primarily due to lower noninterest income, higher noninterest expense, the SEC and FRB settlements and, to a lesser extent, the non recurrence of provision reversals in the allowance for credit losses and net interest income on a lower asset base.

Net Interest Income and Net Interest Margin

2 unchanged sentences

The cost of funds represents interest expense on deposits, customer repurchase agreements and other borrowings, which consist of federal funds purchased, advances from the FHLB and subordinated notes.

Noninterest bearing deposits and capital are other components representing funding sources.

Noninterest bearing

deposits and capital are other components representing funding sources.

Changes in the volume and mix of assets and funding sources, along with the changes in yields earned and rates paid, determine changes in net interest income.

The Bank's earnings are significantly dependent upon net interest income, which is the difference between interest earned on earning assets and interest expense on interest bearing liabilities.

Net interest income represented 93% and 89% of the Company’s revenue for the years ended December 31, 2022 and December 31, 2021, respectively.

Net interest income in 2022 was $332.9 million compared to $324.5 million in 2021.

For 2021, net interest income increased 1% over the same period for 2020.

The increase resulted from an increase in average earning assets of 14%, which offset a decline of 38 basis points in net interest margin.

The net interest margin was 2.81% for 2021, as compared to 3.19% for 2020, a decline of 38 basis points.

This decline was led by a lower rate environment and the decline in loans, which generally have higher yields than securities.

Additionally, the increase in deposits, led to an increase in low yielding assets such as securities or interest bearing deposits at other banks, which contributed to net income and liquidity, but lowered net interest margin.

In 2021, average loans decreased $607.6 million or 8% and average deposits increased by $1.4 billion or 17%.

Loans, the largest component of interest income on earnings assets, had a yield of 4.62% in 2021, compared to 4.66% in 2020, a decline of 4 basis points (includes PPP loans).

The decline in yield was minimized due to disciplined loan pricing practices and the sale or forgiveness of PPP loans, which accelerated net deferred fees and cost into interest income.

Additionally, the deposit mix remained favorable, with average noninterest deposits being 34% of average total deposits, up from 31% in 2020.

In 2021, total net loans, the primary source of the Bank’s revenue, declined, although total assets increased over the same period.

Further, loan pricing pressures in the highly competitive market for high-quality commercial loans, and the cost sand implementation risks associated with pursuing loan growth, has put pressure on loan portfolio yields and consequently the Bank’s net interest margin and net income.

The 3% increase resulted from an increase in rates on earning assets, which was partially offset by increased rates on lower average balances of interest bearing deposits, as compared to 2021.

Net interest margin increased by 12 basis points to 2.93% in 2022 from 2.81% in 2021.

The increase reflects the impact of an increase in yields which more than offset the increase in the cost of funds and decrease in average earning assets.

The yield on earning assets increased by 58 basis points from 3.16% in 2021 to 3.74% in 2022 while cost of funds increased 46 basis points from 0.35% in 2021 to 0.81% in 2022.

Average interest bearing deposits with other banks and other short term investments were $1.2 billion for 2022 compared to $2.5 billion for 2021.

As a result of FRB actions related to Fed Funds interest rate increases, overall yields and rates increased in 2022 as compared to 2021, as variable rate loans adjusted upwards and an increased number of loans moved off their rate floors.

Loans, the largest component of interest income on earnings assets, had a yield of 4.97% in 2022, compared to 4.62% in 2021, an increase of 35 basis points (includes PPP loans).

Although deposits declined in 2022 due to disintermediation, the deposit mix continued to be favorable at year end, with average noninterest deposits being 38% of average total deposits, up from 34% in 2021.

In 2022, average loans, the primary source of the Bank’s revenue, decreased by 1% between 2021 and 2022.

The table below presents the average balances and rates of the major categories of the Company's assets and liabilities for the years ended December 31, 2022, 2021 and 2020.

Included in the table are two measurements, interest rate spread and net interest margin.

Interest rate spread is the difference (expressed as a percentage) between the interest rate earned on earning assets less the interest expense on interest bearing liabilities.

While the interest rate spread provides a quick comparison of earnings rates as compared to cost of funds, management believes that the net interest margin typically provides a better measurement of performance.

However, given the increase in assets and liquidity from deposits, the usefulness of net interest margin comparisons are diluted.

To illustrate, in 2021 net interest margins declined 38 basis points, which would normally be expected to lead to a decrease in net interest income;

however, since average earning assets were up 14%, net interest income increased by 0.9%.

The net interest margin (as compared to the net interest spread) includes the effect of noninterest bearing sources in its calculation and is net interest income expressed as a percentage of average earning assets.

Included in the table are measurements of interest rate spread and margin.

Interest rate spread is the difference (expressed as a percentage) between the interest rate earned on earning assets less the interest rate paid on interest bearing liabilities.

While the interest rate spread provides a quick comparison of earnings rates versus cost of funds, management believes that margin, together with net interest income, provides a better measurement of performance.

The net interest margin (as compared to net interest spread) includes the effect of noninterest bearing sources in its calculation.

Net interest margin is net interest income expressed as a percentage of average earning assets.

Eagle Bancorp, Inc.

2 unchanged sentences

Years Ended December 31,

2021 2020 2019

Balance Interest Average

6 unchanged sentences

Investment securities available-for-sale (2) 2,003,475 33,641 1.68 % 1,653,522 23,205 1.40 % 929,983 18,440 1.98 %

Investment securities held-to-maturity 857,584 17,840 2.08 % — — — % — — — %

Federal funds sold 48,402 861 1.78 % 31,667 31 0.10 % 32,781 91 0.28 %

24 unchanged sentences

Cost of funds 0.81 % 0.35 % 0.68 %

(1) L oans placed on nonaccrual status are included in average balances.

Net loan fees and late charges included in interest income on loans totaled $30.6 million, $22.3 million, and $17.8 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

(1) Loans placed on nonaccrual status are included in average balances.

Net loan fees and late charges included in interest income on loans totaled $15.3 million, $30.6 million and $22.3 million for the years ended December 31, 2022, 2021 and 2020, res pectively.

(2) Interest and fees on loans and investments exclude tax equivalent adjustments.

Rate/Volume Analysis of Net Interest Income

The rate/volume table below presents the composition of the change in net interest income for the periods indicated, as allocated between the change in net interest income due to changes in the volume of average earning assets and interest bearing liabilities and the changes in net interest income due to changes in interest rates.

As the table shows, the increase in net interest income in 2021, as compared to 2020 was due to a decrease in the volume of earning assets more than offset by lower deposit rates.

The decrease in net interest income in 2020 as compared to 2019 was a function of an increase in the volume of earning assets more than offset by a decline in the net interest margin.

2021 compared with 2020 2020 compared with 2019

As the table shows, the increase in net interest income in 2022 as compared to 2021 was due to an increase in volume of earning assets and a decrease in the volume of borrowings, which were partially offset by a change in mix along with the impact of higher deposit rates.

The increase in net interest income in 2021 as compared to 2020 was due to a decrease in the volume of earning assets, which was more than offset by lower deposit rates.

2022 compared with 2021

2021 compared with 2020

(dollars in thousands) Change

5 unchanged sentences

Loans held for sale (1,786) 158 (1,628) 116 37 153

Investment securities 14,354 (9,589) 4,765 3,522 (6,119) (2,597)

Investment securities available-for sale 4,911 5,525 10,436 14,354 (9,589) 4,765

Investment securities held-to-maturity 12,035 5,805 17,840 — — —

Interest bearing bank deposits (1,775) 11,568 9,793 2,901 (1,991) 910

10 unchanged sentences

Provision for Credit Losses

The provision for credit losses represents the amount of expense charged to current earnings to fund the ACL on loans and the ACL on available for sale investment securities.

The provision for credit losses represents the amount of expense charged to current earnings to fund the ACL on loans and the ACL on AFS investment securities and HTM investment securities.

The amount of the ACL on loans is based on many factors that reflect management’s assessment of the risk in the loan portfolio.

1 unchanged sentence

The ACL under CECL (adopted January 1, 2020) utilizes an economic forecast that is updated quarterly with the significant measure being the expected regional unemployment rate, which management estimates by using a national forecast and estimating a regional adjustment based on historical differences between the two.

The provision for credit losses was a reversal of $20.8 million in 2021, as compared to a provision of $45.6 million in 2020.

The reversal in 2021 was largely due to the improvement of the economy as the COVID-19 vaccines and treatments became widely available and the improvement in credit quality, whereas the provision in 2020 was due to a reserve build associated with the onset of the COVID-19 pandemic.

The provision for credit losses was $266 thousand in 2022, as compared to a reversal of $20.8 million in 2021.

The provisions were primarily driven by adjustments to the qualitative components of the CECL model owing to the high inflationary environment and the related uncertainty and impacts on the broader economy, offset by improvements in asset quality.

The reversal in 2021 was driven by the improved macroeconomic outlook, improvement of credits in the loan portfolio and a reduction in total loans.

The provision for unfunded commitments is presented separately on the Statement of Income.

This provision considers the probability that unfunded commitments will fund.

The provision was a reversal of $1.1 million in 2021, as compared to a provision of $1.4 million in 2020.

The provision was $1.5 million in 2022, as compared to a reversal of $1.1 million in 2021.

Management has developed a comprehensive analytical process to monitor the adequacy of the ACL.

The process and guidelines were developed utilizing, among other factors, the guidance from federal banking regulatory agencies, relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

The process is being continually enhanced and refined based on periodic review and challenge.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

2 unchanged sentences

The results of this process, in combination with conclusions of the Bank’s outside consultants’ review of the risk inherent in the loan portfolio, support management’s assessment as to the adequacy of the allowance at the balance sheet date.

Please refer to the discussion under “Critical Accounting Policies” above and in Note 1 to the Consolidated Financial Statements for an overview of the methodology management employs on a quarterly basis to assess the adequacy of the allowance and the provisions charged to expense.

Please refer to the discussion under “Critical Accounting Policies and Estimates” above and in Note 1 to the Consolidated Financial Statements for an overview of the methodology management employs on a quarterly basis to assess the adequacy of the allowance and the provisions charged to expense.

Also, refer to the table in the "Allowance for Credit Losses" section which reflects activity in the ACL.

For 2021, the ACL decreased by $34.6 million, reflecting a reversal of $20.8 million to provision for credit losses and $13.3 million in net charge-offs.

Net charge-offs of $13.3 million during 2021 represented 0.18% of average loans, excluding loans held for sale, as compared to $20.1 million or 0.26% of average loans, excluding loans held for sale, in 2020.

Net charge-offs during 2021 were attributable primarily to commercial real estate ($5.1 million) and commercial loans ($8.3 million).

The ACL for loans at year-end 2022 decreased by $521 thousand as compared to year-end 2021, reflecting a provision for credit losses of $103 thousand and $624 thousand in net charge-offs.

The $266 thousand charge to the provision for credit losses includes $163 thousand for securities and $103 thousand for loans.

Net charge-offs of $624 thousand during 2022 represented 0.01% of average loans, excluding loans held for sale, a decline from net charge-offs of $13.3 million during 2021, which represented 0.18% of average loans, excluding loans held for sale.

Net charge-offs during 2022 were attributable primarily to commercial loans net charge-offs of $848 thousand and consumer net charge-offs of $73 thousand, which was partially offset by commercial real estate recoveries of $297 thousand (net of charge-offs).

At December 31, 2022, the ACL represented 0.97% of loans outstanding, as compared to 1.06% at December 31, 2021.

2 unchanged sentences

The committees make a thorough assessment of the conditions and circumstances surrounding each delinquent loan.

The Bank’s loan policy requires that loans be placed on nonaccrual if they are ninety days past-due, unless they are well secured and in the process of collection.

Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection.

Additionally, the Credit Administration department specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The maintenance of a high quality loan portfolio, with an adequate ACL, will continue to be a primary management objective for the Company.

2 unchanged sentences

Total noninterest income for the year ended December 31, 2022 was $23.7 million as compared to $40.4 million for the year ended December 31, 2021.

The 12% decrease was due substantially to $8.0 million lower gains on sa le of residential mortgage loans which was partially offset by $1.1 million higher gains on sales of securities and $1.6 million higher fees associated with the origination, securitization, sale and servicing of FHA loans.

For the year ended December 31, 2021, service charges on deposit accounts slightly increased $146 thousand to $4.6 million from $4.4 million for the same period in 2020, an increase of 3%.

While deposits increased significantly in 2021, deposit fees continue to be waived due to the pandemic.

The 41% decrease was substantially due to lower gains on sale of residential mortgage loans of $10.3 million and lower net gains on sales of securities of $3.1 million.

The Bank recently announced that it plans to cease originating residential mortgages for sale in the first quarter of 2023 (See Note 26 of the Consolidated Financial Statements for further details).

At December 31, 2022, locked commitments for residential mortgage loans were $323.7 million, as compared to $994.5 million at December 31, 2021, a 67.45% decrease.

The rise in interest rates for residential mortgages in 2022 had a substantial negative impact on the volume of mortgage originations and in turn the sale of residential mortgages declined.

For the year ended December 31, 2022, service charges on deposits increased by $837 thousand to $5.4 million from $4.6 million for the same period in 2021, an increase of 18%.

While total deposits decreased in 2022, deposit fees increased significantly since those fees are no longer waived due to the pandemic, as they had been in 2021.

Gain on sale of loans consists of gains on the sale of residential mortgage and SBA loans.

For the year ended December 31, 2022, gain on sale of loans was $3.7 million, compared to $14.0 million in 2021, a decrease of 74%.

The decrease was driven by higher residential mortgage rates in the latter part of the year, which reduced mortgage origination volume.

The Company originates residential mortgage loans and utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to sell those loans with servicing released.

The decrease was driven by higher residential mortgage rates in 2022, which reduced mortgage origination volume.

The Company has historically originated residential mortgage loans and utilized both “mandatory delivery” and “best efforts” forward loan sale commitments to sell those loans with servicing released.

Loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale.

The Bank considers these potential recourse provisions to be a minimal risk, but has established a reserve under generally accepted accounting principles ("GAAP") for possible repurchases.

The Bank considers these potential recourse provisions to be a minimal risk, but has established a reserve under GAAP for possible repurchases.

There were no repurchases due to fraud by the borrower during the year ended December 31, 2022.

2 unchanged sentences

Residential mortgage Years Ended December 31,

(dollars in thousands) 2021 2020 % Change

(dollars in thousands) 2022

2021 % Change

Gain on sale $ 3,211 $ 13,585 (76.4) %

7 unchanged sentences

Activity in SBA loan sales to secondary markets can vary widely from year to year.

Gain on the sale of investments were $3.0 million for the year ended December 31, 2021 compared to $1.8 million for the year ended December 31, 2020.

Other income totaled $16.8 million for the year ended December 31, 2021 as compared to $15.3 million for 2020, an increase of 9%.

The FHA business unit generated income on the sale of FHA multifamily-backed GNMA securities of $5.0 million for 2021 compared to $3.4 million for 2020.

Servicing agreements relating to the Ginnie Mae ("GNMA") mortgage backed securities program require the Company to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers.

Loss on the sale of investment securities was $169 thousand for the year ended December 31, 2022, compared to a gain of $3.0 million for the year ended December 31, 2021.

Other income totaled $12.2 million for the year ended December 31, 2022 as compared to $16.8 million for 2021, a decrease of 27%.

The FHA business unit generated income on the sale of FHA multifamily-backed Ginnie Mae securities of $790 thousand for 2022 compared to $4.2 million for 2021.

Servicing agreements relating to the Ginnie Mae mortgage-backed securities program require the Company to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers.

The Company will generally recover funds advanced pursuant to these arrangements under the FHA insurance and guarantee program.

5 unchanged sentences

Total noninterest expense includes salaries and employee benefits, premises and equipment expenses, marketing and advertising, data processing, legal, accounting and professional fees, FDIC insurance premiums and other expenses.

Total noninterest expense totaled $165.1 million for 2022, as compared to $149.2 million for 2021, an 11% increase.

For 2022, the efficiency ratio (ratio of noninterest expenses to total revenue) was 46.31% as compared to 40.88% for 2021.

Refer to the “Use of Non-GAAP Financial Measures” section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The increase in 2022 as compared to 2021 was primarily associated with the $22.9 million of settlement expenses in the second quarter of 2022, which were partially offset by the salary accrual reduction of $5.0 million related to stock-based compensation awards and deferred compensation for our former CEO and Chairman in the first quarter of 2022.

Salaries and employee benefits were $84.1 million for 2022, as compared to $88.4 million for 2021, a decrease of 5%.

The primary reason for the decrease in 2022 was the reduction of the $5.0 million accrual related to stock-based compensation awards and deferred compensation for our former CEO and Chairman in the first quarter of 2022.

The accrual was originally recorded in the first quarter of 2019.

Additionally, at December 31, 2022, the Company’s full time equivalent staff numbered 496, as compared to 507 at December 31, 2021.

Premises and equipment expenses were $13.2 million for 2022 as compared to $14.9 million for 2021, a decrease of 11%.

The decrease was due to the reduction in rent expense from the closure of one location and was partially offset by normal lease increases and acceleration of leasehold amortization.

Marketing and advertising expenses were $4.7 million for 2022 as compared to $4.2 million for 2021, an increase of 13%.

Marketing and advertising expenses increased due to additional advertising, promotions and sponsorships.

Data processing expenses were $12.2 million for 2022 as compared to $11.7 million for 2021, an increase of 4%.

Legal, accounting and professional fees and expenses were $8.6 million for 2022 as compared to $11.5 million for 2021, a 25% decrease.

Legal expenses were greater in 2021 primarily due to the previously disclosed governmental investigations and related subpoenas and document requests, as well as our defense of the previously disclosed class action lawsuit.

The amount of legal fees and expenditures reported for 2022 are net of expected insurance coverage where we believe we have a high likelihood of recovery pursuant to our D&O insurance policies, but does not include any offset for potential claims we may have in the future as to which recovery is impossible to predict at this time.

Refer to Note 21 – Commitments and Contingent Liabilities to the Consolidated Financial Statements for additional information on the Company’s recent proceedings.

FDIC insurance expense was $5.0 million for 2022 as compared to $5.9 million for 2021, a decrease of 16%.

The decreases in 2022 compared to 2021 were due to a change in the institution's size, which improved metrics used in the calculation of fees.

In 2022, the Company incurred a penalty of $22.9 million in connection with the settlements with the SEC and FRB.

The amount of penalty fees was reported as noninterest expense for 2022.

No such penalty fees were incurred in 2021.

The major components of other expenses include broker fees, franchise tax, insurance expenses and director compensation.

Other expenses were $14.4 million for 2022 as compared to $12.6 million for 2021, an increase of 14%.

The increase in 2022, as compared to 2021, was primarily due to director compensation and insurance expenses.

Income Tax Expense

Income tax expense was $48.8 million for 2022 as compared to $61.0 million for 2021, resulting in an effective tax rate of 25.70% and 25.66%, respectively.

The overall reduction in tax expense for 2022 versus 2021 was primarily attributable to lower pre-tax earnings, a lower state effective tax rate and to higher levels of tax-exempt income earned during 2022.

The reductions in tax expense were partially offset by the non-deductible SEC and FRB settlements in 2022.

The effective tax rate was essentially flat for 2022 compared to 2021 because the benefits from the lower effective state tax rate and the higher tax-exempt income were offset by the impact of the non-deductible expenses.

The impact of the change in mix of the components noted above can be seen in the reconciliation of statutory federal income tax rate table in Note 14 to the Consolidated Financial Statements.

The Inflation Reduction Act of 2022 ("Inflation Reduction Act") was signed into law by president Biden on August 16, 2022.

The Inflation Reduction Act makes significant changes to the U.S.

tax law, including the introduction of a corporate alternative minimum tax of 15% of the “adjusted financial statement income” of certain domestic corporations as well as a 1% excise tax on the fair market value of stock repurchases by certain domestic corporations, effective for tax years beginning in 2023.

The Company currently does not expect the tax-related provision of the Inflation Reduction Act to have a material impact on our financial results.

Twelve Months Ended December 31, 2021 Compared with Twelve Months Ended December 31, 2020

Net income for the years ended December 31, 2021 and 2020 were $176.7 million and $132.2 million, respectively.

Net income per basic and diluted common share for 2021 was $5.53 and $5.52, respectively, compared to $4.09 per basic and diluted common share for 2020, a 35% increase.

The most significant portion of revenue (i.e., net interest income plus noninterest income) is net interest income, which increased to $324.5 million in 2021 compared to $321.6 million for 2020.

The increase resulted from an increase in average earning assets of 14%, which offset a decline of 38 basis points in net interest margin.

The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.

The provision for credit losses in 2021 was a reversal of $20.8 million as compared to a provision of $45.6 million in 2020.

The reversal of the provision was primarily driven by the improved economic environment, adjustments to the quantitative components of the CECL model and improvements in asset quality.

F or information on the components and drivers of these changes see "Provision for Credit Losses" section below.

Total noninterest income in 2021 was $40.4 million, as compared to $45.7 million in 2020, a 12% decrease.

Noninterest expenses in 2021 totaled $149.2 million, as compared to $144.2 million in 2020, a 3% increase.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 40.88% for 2021 as compared to 39.25% for 2020.