1 unchanged sentence
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report.
+Added: The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2020 and 2019.
+Added: Discussion, analysis and comparisons of the years ended December 31, 2019 and 2018 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 Annual Report on Form 10-K for the year ended December 31, 2019.
This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions.
1 unchanged sentence
See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.
−Removed: We offer a wide range of commercial, small business, consumer and municipal banking products and services.
−Removed: We conduct our consumer and small business deposit operations primarily through online channels on a nationwide basis and have no traditional branch offices.
−Removed: Our residential mortgage products are offered nationwide primarily through an online direct-to-consumer platform and are supplemented with Central Indiana-based mortgage and construction lending.
−Removed: Our consumer lending products are primarily originated on a nationwide basis over the Internet as well as through relationships with dealerships and financing partners.
−Removed: Our commercial banking products and services are delivered through a relationship banking model and include commercial real estate (“CRE”) banking, commercial and industrial (“C&I”) banking, public finance, healthcare finance, small business lending and commercial deposits and treasury management.
−Removed: Through our CRE team, we offer single tenant lease financing on a nationwide basis in addition to traditional investor CRE and construction loans primarily within Central Indiana and adjacent markets.
−Removed: To meet the needs of commercial borrowers and depositors located primarily in Central Indiana, Phoenix, Arizona and adjacent markets, our C&I banking team provides credit solutions such as lines of credit, term loans, owner-occupied CRE loans and corporate credit cards.
−Removed: Our public finance team provides a range of public and municipal lending and leasing products to government entities on a nationwide basis.
−Removed: Our healthcare finance team was established in conjunction with our strategic partnership with Lendeavor, Inc., a San Francisco-based technology-enabled lender to healthcare practices, and provides lending for healthcare practice finance or acquisition, acquisition or refinancing owner-occupied CRE and equipment purchases.
−Removed: This portfolio segment is generally concentrated in the Western and Southwestern regions of the United States with plans to continue expanding nationwide.
−Removed: Our commercial deposits and treasury management team works with the other commercial teams to provide deposit products and treasury management services to our commercial and municipal lending customers as well as pursues commercial deposit opportunities in business segments where we have no credit relationships.
−Removed: In 2018, we identified small business as an area for potential growth in loans, revenue and deposits.
−Removed: We believe that we can differentiate ourselves from larger financial institutions through providing a full suite of services to emerging small businesses and entrepreneurs.
−Removed: We have begun adding experienced personnel to build out our capabilities in small business lending and U.S.
−Removed: government guaranteed lending programs, including loans originated under the Small Business Administration (“SBA”) guidelines.
−Removed: To accelerate our efforts in this area, on November 1, 2019, we acquired a loan portfolio, a servicing portfolio and a team of experienced small business lending servicing professionals from First Colorado National Bank.
−Removed: As of December 31, 2019, the principal balance of loans acquired was approximately $32.9 million and was comprised primarily of SBA 7(a) loans while the principal balance of the servicing portfolio acquired was approximately $104.0 million and consisted of guaranteed SBA 7(a) loans sold in the secondary market.
−Removed: We expect to continue adding personnel to build out a nationwide small business platform.
+Added: Impact of the COVID-19 Pandemic
+Added: The year 2020 was characterized by continued uncertainty as the coronavirus (“COVID-19”) pandemic persisted globally, resulting in high unemployment and market volatility.
+Added: However, federal, state and local governments have taken steps to reopen and stimulate economies, evidenced by improving economic indicators as the fourth quarter 2020 progressed.
+Added: While the effects of COVID-19 did have an impact on our operating results as of December 31, 2020, we believe the impact was consistent with the effects of COVID-19 on the overall banking industry.
+Added: The low interest rate environment following Federal Reserve rate cuts in the first quarter 2020 had a negative impact on our variable rate assets throughout 2020.
+Added: However, the low interest rate environment has also allowed us to reprice our interest-bearing deposits at lower rates, which provided a benefit to net interest income in 2020.
+Added: The benefit from lower deposit pricing is expected to continue into 2021.
+Added: Additionally, the low interest rate environment has driven residential mortgage rates to historically low levels, which has resulted in increased mortgage originations and has benefited our residential mortgage business.
+Added: At this time, the ultimate impact of COVID-19 on our business continues to remain uncertain as we cannot predict the duration of the pandemic or when the economies in which we operate will return to conditions existing prior to COVID-19.
+Added: As a result of continued measures to either contain or reduce the impact of COVID-19, or an increase in the number of reported cases or mortality rates, we may experience issues that negatively impact our business, such as a decline in the liquidity of our borrowers or volatility in interest rates.
+Added: As a digitally-focused institution without branch locations, we were able to continue serving clients when they needed us most, while minimizing operational disruptions caused by COVID-19.
+Added: Beginning in the first quarter 2020, we offered loan payment deferral programs for clients affected by COVID-19.
+Added: Loan balances on payment deferral programs peaked in late May 2020 but as of December 31, 2020, less than 1% of loan balances were in deferral status and all borrowers coming off deferrals had resumed normal payment schedules.
+Added: Despite the challenging environment, we have continued to prudently extend credit to both commercial and consumer clients.
Results of Operations
−Removed: Refer to Item 6 of this report for a summary of the Company's financial performance for the five most recent years.
During the twelve months ended December 31, 2020, net income was $29.5 million, or $2.99 per diluted share, compared to net income of $25.2 million, or $2.51 per diluted share, for the twelve months ended December 31, 2019 and net income of $21.9 million, or $2.30 per diluted share, for the twelve months ended December 31, 2018.
−Removed: The $3.3 million increase in net income for the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018 was due primarily to an $8.0 million increase in noninterest income, a $0.7 million increase in net interest income and a $0.1 million decrease in income tax expense, but was partially offset by a $3.5 million increase in noninterest expense and a $2.1 million increase in provision for loan losses.
−Removed: The increase in net income of $6.7 million for the twelve months ended December 31, 2018 compared to the twelve months ended December 31, 2017 was due primarily to an $8.3 million increase in net interest income, a $5.7 million decrease in income tax expense and a $1.0 million decrease in provision for loan losses, but was partially offset by a $6.5 million increase in noninterest expense and a $1.8 million decrease in noninterest income.
−Removed: During the twelve months ended December 31, 2019 , return on average assets was 0.65% , compared to 0.72% for the twelve months ended December 31, 2018 and 0.66% for the twelve months ended December 31, 2017 .
−Removed: During the twelve months ended December 31, 2019 , return on average shareholders’ equity was 8.52% , compared to 8.44% for the twelve months ended December 31, 2018 and 8.54% for the twelve months ended December 31, 2017 .
−Removed: In 2018, the Company recorded a $2.4 million write-down of a commercial other real estate owned property that consists of two buildings.
−Removed: The revaluation of the other real estate owned was driven by deteriorating conditions in the market where the property is located and the commencement of a marketing strategy to move the property off the Company's balance sheet.
−Removed: As a result, this write-down decreased 2018 net income by $1.9 million and diluted earnings per share by $0.20.
−Removed: Adjusted for the write-down, 2018 net income was $23.8 million and diluted earnings per share was $2.50.
−Removed: The write-down also decreased return on average assets by 6 basis points (“bps”) and return on average shareholders' equity by 74 bps.
−Removed: Adjusted for the write-down, 2018 return on average assets was 0.78% and return on average shareholders' equity was 9.18%.
−Removed: Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations.
−Removed: In 2017, as a result of the Tax Cuts and Jobs Act (“Tax Act”), the Company’s net deferred tax asset (“net DTA”) was revalued as of December 31, 2017.
−Removed: The value of the net DTA was reduced by $1.8 million with the amount of the reduction recognized as additional income tax expense in 2017.
−Removed: Consequently, this revaluation decreased 2017 diluted earnings per share by $0.26.
−Removed: Adjusted for the net DTA revaluation, 2017 net income was $17.1 million and diluted earnings per share were $2.39.
−Removed: The revaluation also decreased return on average assets by 8 bps and return on average shareholders' equity by 104 bps.
−Removed: Adjusted for the net DTA revaluation, 2017 return on average assets was 0.74% and return on average shareholders' equity was 9.58%.
−Removed: Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
+Added: The $4.2 million increase in net income for the twelve months ended December 31, 2020 compared to the twelve months ended December 31, 2019 was due primarily to a $19.5 million increase in noninterest income and a $1.6 million increase in net interest income, but was partially offset by an $11.0 million increase in noninterest expense, a $3.4 million increase in provision for loan losses and a $2.5 million increase in income tax expense.
+Added: The increase in net income of $3.3 million for the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018 was due primarily to a $8.0 million increase in noninterest income, a $0.7 million increase in net interest income and a $0.1 million decrease in income tax expense, but was partially offset by a $3.5 million increase in noninterest expense and $2.1 million increase in provision for loan losses.
+Added: During the twelve months ended December 31, 2020, return on average assets was 0.69%, compared to 0.65% for the twelve months ended December 31, 2019.
+Added: During the twelve months ended December 31, 2020, return on average shareholders’ equity was 9.39%, compared to 8.52% for the twelve months ended December 31, 2019.
+Added: Additionally, for the
+Added: twelve months ended December 31, 2020, return on average tangible common equity was 9.53% compared to 8.65% for the twelve months ended December 31, 2019.
+Added: These profitability ratios improved during 2020 as net income growth of 16.7% outpaced total average balance sheet growth of 9.6%, as well as average shareholders' equity growth of 5.9% and average tangible common equity growth of 6.0%.
+Added: Refer to the "Reconciliation of Non-GAAP Financial Measures" section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.
Consolidated Average Balance Sheets and Net Interest Income Analyses
4 unchanged sentences
Twelve Months Ended
−Removed: December 31, 2019
−Removed: December 31, 2018
−Removed: December 31, 2017
−Removed: (dollars in thousands)
−Removed: Average Balance
−Removed: Interest/Dividends
−Removed: Average Balance
−Removed: Interest/Dividends
−Removed: Average Balance
−Removed: Interest/Dividends
+Added: December 31, 2020 December 31, 2019 December 31, 2018
+Added: (dollars in thousands) Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost
Interest-earning assets
6 unchanged sentences
Noninterest earning-assets 112,659 100,696 86,713
+Added: Total assets $ 4,263,798 $ 3,890,708 $ 3,055,224
Interest-bearing liabilities
13 unchanged sentences
Interest rate spread 1
+Added: 1.38 % 1.46 % 1.93 %
Net interest margin 2
+Added: 1.55 % 1.65 % 2.09 %
Net interest margin - FTE 3
+Added: 1.68 % 1.82 % 2.25 %
1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities
2 Net interest income divided by average interest-earning assets
−Removed: 3 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate in 2019 and 2018 and a 35% tax rate in 2017.
+Added: 3 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate.
Refer to the "Reconciliation of Non-GAAP Financial Measures" section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations
4 unchanged sentences
Twelve Months Ended December 31, 2020 vs.
−Removed: December 31, 2018 Due to Changes in
−Removed: Twelve Months Ended December 31, 2018 vs.
+Added: December 31, 2019 Due to Changes in Twelve Months Ended December 31, 2019 vs.
December 31, 2018 Due to Changes in
−Removed: (amounts in thousands)
+Added: (amounts in thousands) Volume Rate Net Volume Rate Net
Interest income
3 unchanged sentences
Other earning assets 2,948 (8,352) (5,404) 5,922 (83) 5,839
+Added: Total 10,034 (20,589) (10,555) 29,761 2,186 31,947
Interest expense
1 unchanged sentence
Other borrowed funds 583 625 1,208 2,417 2,001 4,418
+Added: Total 6,828 (18,957) (12,129) 16,589 14,658 31,247
Increase (decrease) in net interest income $ 3,206 $ (1,632) $ 1,574 $ 13,172 $ (12,472) $ 700
Net interest income for the twelve months ended December 31, 2020 was $64.5 million, an increase of $1.6 million, or 2.5%, compared to $63.0 million for the twelve months ended December 31, 2019.
−Removed: The increase in net interest income was the result of a $31.9 million , or 27.7% , increase in total interest income to $147.4 million for the twelve months ended December 31, 2019 compared to $115.5 million for the twelve months ended December 31, 2018 .
−Removed: The increase in total interest income was partially offset by a $31.2 million , or 58.7% , increase in total interest expense to $84.4 million for the twelve months ended December 31, 2019 compared to $53.2 million for the twelve months ended December 31, 2018 .
−Removed: The increase in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of $511.7 million, or 21.5%, in the average balance of loans, including loans held-for-sale, and a 6 bp increase in the yield earned on loans for the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018.
−Removed: The increase in the average balance of loans was driven largely by higher average balances in the public finance, healthcare finance and single tenant lease financing portfolios.
−Removed: Further, the average balance of other earning assets increased $239.3 million during 2019 compared to 2018, primarily due to the Company carrying higher cash balances, which resulted in increased income from other earning assets.
−Removed: Finally, the average balance of the securities portfolio increased $74.3 million, or 15.3%, and the yield earned on the securities portfolio increased 16 bps, both of which contributed to increased interest income on the portfolio during 2019 compared to 2018.
−Removed: The increase in total interest expense was driven primarily by an increase in interest expense related to interest-bearing deposits as a result of a $666.6 million , or 29.3% , increase in the average balance of interest-bearing deposits for the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018 , and an increase of 49 bps in the cost of funds related to these deposits.
−Removed: The increase in the average balance of interest-bearing deposits was due primarily to higher average balances in brokered deposits, certificates of deposit and money market accounts.
−Removed: Interest expense related to other borrowed funds also contributed to the increase in total interest expense, due to a $96.3 million , or 20.6% , increase in the average balance of other borrowed funds for the twelve months ended December 31, 2019 compared to the twelve months ended December 31, 2018 and an increase of 39 bps in the cost of other borrowed funds.
−Removed: Net interest margin was 1.65% for the twelve months ended December 31, 2019 compared to 2.09% for the twelve months ended December 31, 2018.
−Removed: The decrease in net interest margin was due primarily to a 47 bp increase in the cost of interest-bearing liabilities.
−Removed: An increase in market interest rates and an increase in deposit competition during the second half of 2018 drove deposit rates higher and contributed to increased costs associated with certificates of deposits and money market account in 2019 compared to 2018.
−Removed: Further, during mid-to-late 2018, the Company initiated a liability hedging strategy using pay fixed/receive variable interest rate swaps intended to extend the duration of brokered variable rate money market deposits to increase asset sensitivity,
−Removed: reduce long-term interest rate risk and reduce volatility in total shareholders’ equity due to the impact of changes in interest rates on other comprehensive income (loss).
−Removed: This long-term funding strategy also contributed to the increase in cost of deposit funding during 2019.
−Removed: The cost of funds related to other borrowed funds increased as we used longer-term Federal Home Loan Bank advances in 2019 and 2018 to extend the duration of liabilities and reduce long-term interest rate risk.
−Removed: Additionally, the cost of other borrowed funds was impacted by the issuance of $37.0 million of 6.0% fixed-to-floating rate subordinated notes in June 2019.
−Removed: Net interest income for the twelve months ended December 31, 2018 was $62.3 million , an increase of $8.3 million , or 15.3% , compared to $54.0 million for the twelve months ended December 31, 2017 .
−Removed: The increase in net interest income was the result of a $30.8 million , or 36.3% , increase in total interest income to $115.5 million for the twelve months ended December 31, 2018 compared to $84.7 million for the twelve months ended December 31, 2017 .
−Removed: The increase in total interest income was partially offset by an $22.5 million , or 73.2% , increase in total interest expense to $53.2 million for the twelve months ended December 31, 2018 compared to $30.7 million for the twelve months ended December 31, 2017 .
−Removed: The increase in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of $700.3 million , or 41.6% , in the average balance of loans, including loans held-for-sale, as well as an increase in interest earned on securities resulting from a decrease of $10.1 million , or 2.0% , in the average balance of securities for the twelve months ended December 31, 2018 compared to the twelve months ended December 31, 2017 .
−Removed: The increase in total interest income was also due to a 19 bp increase in the yield earned on the securities portfolio, partially offset by a decline of 3 bps in the yield earned on loans, including loans held-for-sale.
−Removed: The increase in total interest expense was driven primarily by an increase in interest expense related to interest-bearing deposits as a result of a $558.4 million , or 32.6% , increase in the average balance of interest-bearing deposits for the twelve months ended December 31, 2018 compared to the twelve months ended December 31, 2017 , and an increase of 47 bps in the cost of funds related to these deposits.
−Removed: Interest expense related to other borrowed funds also contributed to the increase in total interest expense, due to a $91.9 million , or 24.4% , increase in the average balance of other borrowed funds for the twelve months ended December 31, 2018 compared to the twelve months ended December 31, 2017 , partially offset by an increase of 50 bps in the cost of other borrowed funds.
+Added: The increase in net interest income was the result of a $12.1 million, or 14.4%, decrease in total interest expense to $72.3 million for the twelve months ended December 31, 2020 compared to $84.4 million for the twelve months ended December 31, 2019.
+Added: This decrease in total interest expense was partially offset by a $10.6 million, or 7.2%, decrease in total interest income to $136.9 million for the twelve months ended December 31, 2020 compared to $147.4 million for the twelve months ended December 31, 2019.
+Added: The decrease in total interest expense was driven primarily by a decrease in interest expense related to certificates and brokered deposits and money market accounts.
+Added: Interest expense on certificates and brokered deposits decreased $11.9 million, or 21.5%, due to a decline of 27 bps in the cost of these deposits as well as a $263.9 million, or 12.3%, decrease in the average balance of these deposits.
+Added: The decrease in certificates and brokered deposit balances was driven by the Company’s pricing strategy to reduce the level of these higher cost deposits.
+Added: The decrease in interest expense related to money market accounts of $1.3 million, or 10.1%, was driven by a decline of 101 bps in the cost of these deposits, partially offset by an increase of $518.7 million, or 81.4%, in the average balance of these deposits.
+Added: Money market balances increased throughout 2020 due to targeted digital marketing efforts to grow small business accounts, as well as consumers, small businesses and commercial clients increasing their cash balances due in part to the economic uncertainty resulting from COVID-19.
+Added: The decrease in total interest income was due primarily to a decrease in interest earned on loans, including loans held-for-sale, other earning assets and securities.
+Added: Interest income earned on other earning assets decreased $5.4 million, or 61.5%, due to a decline of 182 bps in the yield earned on these assets, partially offset by an increase of $168.4 million, or 47.4%, in the average balance of other earning assets.
+Added: The increase in the average balance of other earning assets was due to higher cash balances driven by growth in the average balance of deposits.
+Added: Interest income earned on securities decreased $3.6 million, or 21.6%, due to a decline of 87 bps in the yield earned on securities, partially offset by an increase of $65.7 million, or 11.7%, in the average balance of securities.
+Added: The increase in average securities balances was due to deployment of liquidity driven by deposit growth.
+Added: Interest income earned on loans, including loans held-for-sale, decreased by $1.6 million as the yield on the loan portfolio decreased by 23 bps, but was partially offset by an increase of $131.8 million, or 4.6%, in the average balance of loans.
+Added: The increase in average loan balances was due to growth in the healthcare finance portfolio, small business lending portfolio (which included loans acquired from First Colorado National Bank in late 2019, as well as loans originated through the Paycheck Protection Program ("PPP")) and increased construction lending, but was partially offset by decreases in the residential mortgage, public finance and single tenant lease financing portfolios.
Net interest margin was 1.55% for the twelve months ended December 31, 2020 compared to 1.65% for the twelve months ended December 31, 2019.
−Removed: The decrease in net interest margin was primarily due to a 47 bp increase in the cost of interest-bearing liabilities, partially offset by a 12 bp increase in the yield on total interest-earning assets.
−Removed: The increase in the cost of total interest-bearing liabilities was due primarily to an increase in average certificates of deposits, money market balances and an increase in the related costs of those deposits.
−Removed: The increase in the cost of these deposits was due primarily to the rise of short-term interest rates throughout 2018.
−Removed: The increase in the yield on interest-earning assets was due primarily to increases in the yields earned on securities and other earning assets, partially offset by a decrease in the yield earned on loans.
−Removed: The decrease in the yield earned on loans was due primarily to continued strong growth in the public finance portfolio which typically has lower tax-exempt interest rates, partially offset by higher yields in other commercial loan categories and residential mortgage loans resulting from higher market interest rates.
+Added: The decrease in net interest margin was due primarily to a 59 bp decrease in the yield earned on interest-earning assets, but was partially offset by a 51 bp decrease in the cost of interest-bearing liabilities.
+Added: The decline in the yield earned on interest-earning assets and the decline in the cost of interest-bearing liabilities was due primarily to the continued decrease in market interest rates from the year-ago period.
+Added: Interest rates began declining during 2019 and declined significantly in 2020 following Federal Reserve interest rate cuts in March 2020 in response to the economic effects of COVID-19.
+Added: During this time, variable rate assets tied to market interest rates repriced faster than deposits.
+Added: However, as the pace of short-term market interest rate declines slowed over the course of 2020, the Company believes that yields on interest-earning assets have largely stabilized.
+Added: Furthermore, the Company has approximately $917.0 million of certificates and brokered deposits with a weighted average cost of 1.87% that mature over the next twelve months.
+Added: As the weighted average of cost of these deposits is significantly higher than current new production costs, the Company expects the cost of deposit funding to continue to decline in 2021.
Noninterest Income
4 unchanged sentences
Loan servicing revenue 1,159 166 — — —
+Added: Loan servicing asset revaluation (432) — — — —
Mortgage banking activities 24,693 11,541 5,718 7,836 12,398
Gain on sale of loans 8,298 2,074 503 395 —
−Removed: Loss on sale of securities
+Added: Gain (loss) on sale of securities 139 (458) — (8) —
+Added: Other 1,655 2,581 1,605 1,430 861
Total noninterest income $ 36,336 $ 16,789 $ 8,760 $ 10,541 $ 14,077
During the twelve months ended December 31, 2020, noninterest income totaled $36.3 million, representing an increase of $19.5 million, or 116.4%, compared to $16.8 million for the twelve months ended December 31, 2019.
−Removed: The increase in noninterest income was driven primarily by an increase of $5.8 million , or 101.8% , in revenue from mortgage banking activities, as well as a $1.6 million increase in gain on sale of loans, a $1.0 million increase in other noninterest income and a $0.2 million increase in loan servicing revenue, partially offset by a $0.5 million loss on sale of securities.
−Removed: The increase in mortgage banking revenue was due mainly to an increase in refinancing activity, as mortgage interest rates declined significantly during the year.
−Removed: The increase in gain on sale of loans was due to a higher volume of sales of single tenant lease financing loans and public finance loans, as well as our first sales of SBA 7(a) guaranteed loans.
−Removed: The increase in other noninterest income was mainly the result of the $0.5 million gain on the sale of the Company's Visa Class B shares and $0.4 million of income associated with the Company's temporary ownership of the land described in Note 5 - Premises and Equipment.
−Removed: The $0.5 million loss on sale of securities during the twelve months ended December 31, 2019 resulted from the Company selling lower-yielding agency mortgage-backed and U.S.
−Removed: Government Agency securities with a book value of $30.6 million.
−Removed: The Company did not sell any securities during the twelve months ended December 31, 2018.
−Removed: The Company also began earning loan servicing revenue from the acquired small business lending portfolio, recognizing $0.2 million in the fourth quarter 2019.
−Removed: During the twelve months ended December 31, 2018 , noninterest income totaled $8.8 million , representing a decrease of $1.8 million , or 16.9% , compared to $10.5 million for the twelve months ended December 31, 2017 .
−Removed: The decrease in noninterest income was primarily driven by a decrease of $2.1 million , or 27.0% , in mortgage banking activities, partially offset by gains on sale of loans and other noninterest income.
−Removed: The decrease in revenue from mortgage banking activities was due primarily to decreases in mortgage held-for-sale origination and sales volumes, due to a decline in mortgage refinance activity, and a decrease in gain on sale margins.
+Added: The increase in noninterest income was driven primarily by an increase in revenue from mortgage banking activities, gain on sale of loans, loan servicing revenue and gain on sale of securities, which were partially offset by lower other income and loan servicing asset revaluation.
+Added: The increase in mortgage banking revenue was due mainly to an increase in loan origination volume, driven by historically low mortgage interest rates, and higher gain-on-sale margins.
+Added: The increase in gain on sale of loans was due to gains of $6.8 million being recognized on sales of SBA 7(a) guaranteed loans and sales of portfolio loans with book values totaling $224.1 million that resulted in a gain of $1.5 million during the twelve months ended December 31, 2020, compared to the Company recognizing gains of $1.7 million on the sale of SBA 7(a) guaranteed loans and selling portfolio loans with book values of $264.7 million that resulted in a net gain of $0.4 million during the twelve months ended December 31, 2019.
+Added: The Company recognized $0.7 million of loan servicing revenue, net of the loan servicing asset revaluation, in 2020, in connection with its SBA 7(a) servicing portfolio, which includes the portfolio acquired in the fourth quarter 2019 as well as loans originated by the Company in 2020.
+Added: The increase in gain on sale of securities was due to a gain of $0.1 million being recorded during the twelve months ended December 31, 2020 compared to the twelve months ended December 31, 2019 when the Company sold lower-yielding mortgage-backed and U.S.
+Added: Government Agency securities that resulted in a loss of $0.5 million.
+Added: The decrease in other noninterest income was mainly the result of income recognized in the prior year associated with the sale of the Company’s Visa Class B shares at a gain of $0.5 million and $0.4 million of income related to the Company’s temporary ownership of the land associated with its future corporate headquarters.
+Added: Refer to Note 16 to the Company's consolidated financial statements for additional information about the Company’s new headquarters.
Noninterest Expense
10 unchanged sentences
Write-down of other real estate owned 2,065 — 2,423 — —
+Added: Other 4,423 3,709 2,936 2,484 2,222
Total noninterest expense $ 57,654 $ 46,634 $ 43,183 $ 36,723 $ 31,451
Noninterest expense for the twelve months ended December 31, 2020 was $57.7 million, compared to $46.6 million for the twelve months ended December 31, 2019.
−Removed: The increase of $3.5 million , or 8.0% , compared to the twelve months ended December 31, 2018 was due primarily to a $3.8 million increase in salaries and employee benefits , a $1.1 million increase in premises and equipment expenses, a $0.8 million increase in other expenses and a $0.6 million increase in consulting and professional services, partially offset by decreases of $2.4 million in write-down of other real estate owned ("OREO") and $0.7 million in marketing, advertising and promotion expense.
−Removed: The increase in salaries and employee benefits was primarily the result of an increase in incentive compensation associated with increased mortgage production and personnel growth.
−Removed: Recent hires in the Company's commercial lending verticals and support areas were generally in higher skilled positions, which contributed to the increase in salaries and benefits expense.
−Removed: Additionally, we had an increase in personnel due to our expansion in the small business lending area.
−Removed: The increase in premises and equipment was due primarily to higher software expenses.
−Removed: The increase in other expense was due primarily to higher OREO operating expense.
−Removed: The increase in consulting and professional services was due primarily to higher recruiting fees and third party loan review fees.
−Removed: The write-down of OREO in 2018 was due to the revaluation
−Removed: of one commercial property, as discussed earlier in the Results of Operations.
−Removed: The decrease in marketing, advertising and promotion expenses was driven by digital marketing initiatives and higher mortgage lead generation costs that occurred in 2018.
−Removed: Noninterest expense for the twelve months ended December 31, 2018 was $43.2 million , compared to $36.7 million for the twelve months ended December 31, 2017 .
−Removed: The increase of $6.5 million , or 17.6% , compared to the twelve months ended December 31, 2017 was primarily due to a $2.4 million write-down of other real estate owned, as well as increases of $2.0 million in salaries and employee benefits , $0.8 million in premises and equipment expenses and $0.5 million in deposit insurance premium expenses.
−Removed: The write-down of other real estate owned was due to the revaluation of one commercial property, consisting of two buildings, driven by deteriorating conditions in the market where the properties are located and the commencement of a marketing strategy to move the property off the Company's balance sheet.
−Removed: The increase in salaries and employee benefits was due primarily to changes in employee mix.
−Removed: Although the number of full-time employees decreased from 2017, recent hires in the Company's commercial lending verticals and support areas were generally in higher skill positions and led to an increase in employee salary and equity compensation expense.
−Removed: Additionally, the Company experienced an increase in benefits expense, primarily related to higher medical, prescription drug and dental insurance claims.
−Removed: These increases were partially offset by a decrease in bonus expense primarily related to a reduction in senior management incentive compensation due to 2018 financial performance being below the targets established under the Company's Annual Bonus Plan for 2018.
−Removed: The increase in premises and equipment was primarily due to technology-related expenses and the increase in deposit insurance premium was due primarily to the Company's year-over-year asset growth, which impacts the formula used by the FDIC to calculate deposit insurance.
+Added: The increase of $11.0 million, or 23.6%, compared to the twelve months ended December 31, 2019 was due primarily to a $7.2 million increase in salaries and employee benefits, a $2.1 million write-down of a legacy commercial OREO property, a $0.9 million increase in loan expenses, a $0.7 million increase in other expenses and a $0.3 million increase in premises and equipment.
+Added: The increase in salaries and employee benefits was primarily the result of personnel growth, mostly associated with the Company’s small business lending platform, as well as increased mortgage and small business lending incentive compensation.
+Added: The increase in loan expenses was driven primarily by costs associated with nonperforming loans.
+Added: The increase in other expenses was due primarily to a $0.3 million charitable contribution the Company made to assist small businesses and nonprofits address the economic challenges of the COVID-19 pandemic, as well as various other miscellaneous expenses, none of which were individually significant.
+Added: The increase in premises and equipment was due primarily to higher software expense.
The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the five most recent years.
7 unchanged sentences
Net deferred tax asset revaluation — — — 1,846 —
+Added: Tax credits (178) (181) (180) — —
Other differences 403 189 71 (32) 23
4 unchanged sentences
Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income.
−Removed: The Company recognized income tax expense of $2.1 million in 2018, resulting in an effective tax rate of 8.6%, compared to $7.7 million and an effective tax rate of 33.6% in 2017.
−Removed: The Company's federal statutory tax rate was 21% in 2018 and 35% in 2017.
−Removed: In 2018, the variance from the federal statutory rate was due primarily to tax-exempt income, partially offset by state income taxes.
−Removed: Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income.
−Removed: In 2017, the variance from the federal statutory rate was due primarily to tax-exempt income, partially offset by state income taxes and the net deferred tax asset revaluation as a result of the Tax Act as discussed further in the paragraph below.
−Removed: Excluding the impact of the net deferred tax asset revaluation, income tax expense in 2017 was $5.9 million and the effective tax rate was 25.5%.
−Removed: Refer to the "Reconciliation of Non-GAAP Financial Measures" section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations.
−Removed: On December 22, 2017, the Tax Act was signed into law, significantly reforming the Internal Revenue Code.
−Removed: The Tax Act, among other things, reduced the federal corporate tax rate from 35% to 21%.
−Removed: The reduction of the corporate tax rate resulted in a $1.8 million reduction to our net deferred tax asset in 2017.
+Added: The increase in the effective tax rate and income tax expense was primarily due to the increase in pre-tax earnings driven by a higher proportion of taxable revenue, including higher mortgage banking revenue and gain on sale of loans.
Financial Condition
The following table presents summary balance sheet data as of the end of the last five years.
−Removed: (amounts in thousands)
+Added: (amounts in thousands) December 31,
Balance Sheet Data:
+Added: 2020 2019 2018 2017 2016
+Added: Total assets $ 4,246,156 $ 4,100,083 $ 3,541,692 $ 2,767,687 $ 1,854,335
+Added: Loans 3,059,231 2,963,547 2,716,228 2,091,193 1,250,789
Total securities 565,851 602,730 504,095 492,484 473,371
6 unchanged sentences
Total assets increased $146.1 million, or 3.6%, to $4.2 billion as of December 31, 2020 as compared to $4.1 billion as of December 31, 2019.
−Removed: Balance sheet expansion during 2019 was funded by deposit growth of $482.6 million , or 18.1% .
−Removed: The deposit growth was deployed to fund total loan growth of $247.3 million , or 9.1% , and total securities growth of $98.6 million, or 19.6%.
−Removed: Additionally, cash balances increased $138.6 million, or 73.5%, as we carried a higher level of liquidity during 2019.
−Removed: We used loan sales and other balance sheet management strategies throughout 2019 to manage overall balance sheet and loan portfolio growth and capital utilization, as well as to help improve profitability and net interest margin.
−Removed: As part of these activities, we sold $291.2 million of portfolio residential mortgage, single tenant lease financing and public finance loans during 2019.
+Added: Balance sheet growth was driven primarily by an increase in deposits of $116.9 million, or 3.7%.
+Added: Additionally, the increase in deposits was used to fund loan growth as loan balances increased $95.7 million, or 3.2%.
+Added: As deposit growth outpaced loan growth, balance sheet liquidity increased as the combined balance of cash and securities increased $55.6 million, or 6.0%, and the percentage of loans declined modestly to 93.5% as of December 31, 2020 from 94.0% as of December 31, 2019.
+Added: As of December 31, 2020, total shareholders’ equity was $330.9 million, an increase of $26.0 million, or 8.5%, compared to December 31, 2019, due primarily to the net income earned during the year, partially offset by the increase in accumulated other comprehensive loss.
+Added: Tangible common equity totaled $326.3 million as of December 31, 2020, representing an increase of $26.0 million, or 8.7%, compared to December 31, 2019.
+Added: As the growth in both total shareholders’ equity and tangible common equity outpaced growth of 3.6% in both total assets and tangible assets, the ratio of total shareholders’ equity to total assets increased to 7.79% as of December 31, 2020 from 7.44% as of December 31, 2019 and the ratio of tangible common equity to tangible assets increased to 7.69% as of December 31, 2010 from 7.33% as of December 31, 2019.
+Added: Book value per common share increased 7.9% to $33.77 as of December 30, 2020 from $31.30 as of December 31, 2019.
+Added: Tangible book value per share increased 8.0% to $33.29 as of December 31, 2020 from $30.82 as of December 31, 2019.
+Added: The growth in both book value per common share and tangible book value per share reflects the growth in total shareholders’ equity and tangible common equity while total common shares outstanding increased slightly year-over-year, or 0.6%.
+Added: Refer to the "Reconciliation of Non-GAAP Financial Measures" section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.
Loan Portfolio Analysis
5 unchanged sentences
Investor commercial real estate 13,902 0.5 % 12,567 0.4 % 5,391 0.2 % 7,273 0.4 % 13,181 1.0 %
+Added: Construction 110,385 3.6 % 60,274 2.0 % 39,916 1.5 % 49,213 2.4 % 53,291 4.3 %
Single tenant lease financing 950,172 31.1 % 995,879 33.6 % 919,440 33.8 % 803,299 38.5 % 606,568 48.5 %
5 unchanged sentences
Residential mortgage 186,787 6.1 % 313,849 10.6 % 399,898 14.7 % 299,935 14.3 % 205,554 16.4 %
+Added: Home equity 19,857 0.6 % 24,306 0.8 % 28,735 1.1 % 30,554 1.5 % 35,036 2.8 %
Other consumer 275,692 9.0 % 295,309 10.0 % 279,771 10.3 % 227,533 10.8 % 173,449 13.9 %
2 unchanged sentences
Net deferred loan origination costs and premiums and discounts on purchased loans and other (1)
+Added: 61,264 2.0 % 43,566 1.5 % 17,384 0.6 % 4,764 0.2 % 3,605 0.3 %
+Added: Total loans 3,059,231 100.0 % 2,963,547 100.0 % 2,716,228 100.0 % 2,091,193 100.0 % 1,250,789 100.0 %
Allowance for loan losses (29,484) (21,840) (17,896) (14,970) (10,981)
−Removed: 1 Includes carrying value adjustments of $21.4 million, $5.0 million, $0.3 million, $0.0 million, $0.0 million and million as of December 31, 2019, 2018, 2017, 2016 and 2015, respectively, related to interest rate swaps associated with public finance loans.
−Removed: The Company continued to experience strong loan growth as total loans rose to $3.0 billion as of December 31, 2019, an increase of $247.3 million, or 9.1%, compared to December 31, 2018.
−Removed: Growth in commercial loan balances of $296.1 million was partially offset by a decline of $74.9 million in consumer loan balances.
−Removed: The growth in commercial loan balances was driven primarily by growth of $183.6 million in healthcare finance, $76.4 million in single tenant lease financing and $42.9 million in small business lending balances.
−Removed: Continued loan growth in healthcare finance driven by our strategic partnership with Lendeavor, Inc., a San Francisco-based technology-enabled lender, drove the increase in this category.
−Removed: Strong single tenant lease financing originations resulted in an increase in 2019, but the increase was partially offset by sales throughout the year.
−Removed: The increase in small business lending balances is due mostly to the acquisition of a loan portfolio from First Colorado National Bank, which consisted primarily of SBA 7(a) loans and had a principal balance of $32.9 million at December 31, 2019.
−Removed: The decrease in consumer loan balances was due primarily to an $86.0 million decrease in residential mortgage loan balances, driven by the sale of $100.5 million of portfolio mortgage loans in 2019, partially offset by originations in other consumer loans, including loans to finance purchases of recreational vehicles and trailers.
−Removed: The Company completed sales of single tenant lease financing loans, public finance loans and portfolio residential mortgage loans, totaling $291.2 million in the aggregate in 2019, resulting in a gain of $2.1 million in 2019.
−Removed: The Company completed sales of single tenant lease financing loans, totaling $41.1 million in the aggregate in 2018, resulting in a gain of $0.5 million.
+Added: Net loans $ 3,029,747 $ 2,941,707 $ 2,698,332 $ 2,076,223 $ 1,239,808
+Added: 1 Includes carrying value adjustments of $42.7 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2020 and $21.4 million, $5.0 million, $0.3 million, and $0.0 million as of December 31, 2019, 2018, 2017 and 2016, respectively, related to interest rate swaps associated with public finance loans.
+Added: Total loans were $3.1 billion as of December 31, 2020, an increase of $95.7 million, or 3.2%, compared to December 31, 2019.
+Added: Growth in commercial loan balances of $229.1 million, or 10.0%, was partially offset by a decline of $151.1 million, or 23.9%, in consumer loan balances.
+Added: The growth in commercial loan balances was driven primarily by increased production in healthcare finance, small business lending and construction, which was partially offset by lower balances in the public finance and single tenant lease financing loan portfolios, due primarily to sales of $106.6 million of loans in these categories during 2020, as well as a decline in commercial and industrial balances.
+Added: The growth in healthcare finance balances was due primarily to a combination of strong borrower demand following the re-opening of state and local economies across the U.S.
+Added: subsequent to shelter-in-place orders in response to COVID-19 and growth in the sales team at Provide, Inc.
+Added: (formerly known as Lendeavor, Inc.), the Company’s origination partner in this loan category.
+Added: The growth in small business lending was driven by $58.3 million of PPP loan balances originated during 2020, as well as an increase in originated SBA 7(a) loans during 2020.
+Added: The growth in construction balances was due to focused efforts to increase borrower relationships in the Central Indiana market, as well as expand relationships with existing clients.
+Added: The decrease in consumer loan balances was due primarily to the sale of $90.8 million of portfolio mortgage loans in the first quarter 2020.
+Added: Additionally, the balances of residential mortgage loans and other consumer loans were impacted by elevated prepayment activity, which more than offset new origination activity.
Loan Maturities and Rate Sensitivity
The following table shows the contractual maturity distribution intervals (without regard to repayment schedules) of the outstanding loans in our portfolio as of December 31, 2020.
−Removed: (amounts in thousands)
−Removed: Within 1 Year
−Removed: Beyond 5 Years
+Added: (amounts in thousands) Within 1 Year 1-3 Years 4-5 Years Beyond 5 Years Total
Commercial loans
2 unchanged sentences
Investor commercial real estate 3,000 8,365 629 1,908 13,902
+Added: Construction 42,070 47,139 14,137 7,039 110,385
Single tenant lease financing 52,832 94,472 177,912 624,956 950,172
5 unchanged sentences
Residential mortgage 1,592 1,659 293 183,243 186,787
+Added: Home equity 31 3,555 321 15,950 19,857
Other consumer 1,837 6,388 12,108 255,359 275,692
2 unchanged sentences
The following table shows the rate sensitivity of the outstanding loans in our portfolio by the contractual maturity distribution intervals as of December 31, 2020.
−Removed: Beginning in 2017, the Company began hedging certain long-term fixed rate loans with interest rate swaps.
−Removed: Refer to Note 18 to the Company's consolidated financial statements for further information on derivative financial instruments.
−Removed: The following table does not include the effect of interest rate swaps on fixed-rate loans that have been hedged.
−Removed: (amounts in thousands)
−Removed: Within 1 Year
−Removed: Beyond 5 Years
+Added: (amounts in thousands) Within 1 Year 1-3 Years 4-5 Years Beyond 5 Years Total
Predetermined rates $ 91,349 $ 206,317 $ 215,690 $ 2,121,641 $ 2,634,997
19 unchanged sentences
Residential mortgage 1,183 761 175 724 1,024
+Added: Home equity — — 55 83 —
Other consumer 46 33 42 32 59
31 unchanged sentences
Total troubled debt restructurings $ 3,004 $ 521 $ 410 $ 473 $ 757
−Removed: Total nonperforming assets increased $5.4 million, or 152.9%, from December 31, 2018.
−Removed: The increase in total nonperforming assets was due primarily to a $4.7 million single tenant lease financing loan relationship being placed on nonaccrual during 2019 and an increase of $0.6 million in nonaccrual residential mortgage loans.
−Removed: Total nonperforming loans increased $5.8 million compared to December 31, 2018 due primarily to the loans mentioned above, as well as an increase of $0.3 million in accruing loans that are more than 90 days past due.
−Removed: The ratio of nonperforming loans to total loans increased to 0.23% as of December 31, 2019 compared to 0.03% as of December 31, 2018 , as the rate of growth in nonperforming loans outpaced the growth in total loan balances.
−Removed: The ratio of nonperforming assets to total assets increased to 0.22% as of December 31, 2019 compared to 0.10% as of December 31, 2018 , as the rate of growth in nonperforming assets outpaced the growth in total assets.
−Removed: As of December 31, 2019 and December 31, 2018 , the Company had one commercial property in OREO with a carrying value of $2.1 million.
−Removed: This balance consists of a property with two buildings which are residential units adjacent to a university campus.
−Removed: At December 31, 2018, the Company had one residential property in other real estate owned with a carrying value of $0.6 million.
−Removed: This property was sold in 2019.
+Added: The increase in nonperforming loans of $3.6 million, or 54.8%, to $10.2 million as of December 31, 2020 compared to $6.6 million as of December 31, 2019 was due primarily to an increase in nonperforming single tenant lease financing loans with unpaid principal balances of $2.5 million and an increase in nonperforming owner-occupied commercial real estate loans with unpaid principal balances of $1.6 million that were placed on nonaccrual status during 2020, partially offset by a $0.4 million decrease in accruing residential mortgage loans that were 90 days past due and one nonaccrual owner-occupied commercial real estate loan that paid off in full during 2020.
+Added: Total nonperforming assets increased $1.5 million, or 17.2%, as of December 31, 2020 compared to December 31, 2019, due primarily to the increase in nonperforming loans discussed above, partially offset by a $2.1 million write-down of a legacy commercial OREO property in 2020.
+Added: The ratio of nonperforming loans to total loans increased to 0.33% as of December 31, 2020 compared to 0.23% as of December 31, 2019 and the ratio of nonperforming assets to total assets remained 0.22% as of December 31, 2020, consistent with 0.22% as of December 31, 2019.
+Added: Total TDRs as of December 31, 2020 were $3.0 million, up $2.5 million from December 31, 2019.
+Added: The increase was driven by one residential mortgage loan that became a TDR during the second quarter 2020 and one loan relationship in the owner-occupied real estate category that became a TDR during the fourth quarter 2020.
+Added: As of December 31, 2019, the Company had one commercial property in OREO with a carrying value of $2.1 million which was written-off during 2020.
+Added: The property consisted of two buildings that were residential units adjacent to a university campus.
+Added: The Company did not have any OREO as of December 31, 2020.
+Added: As of December 31, 2020, our financial results have reflected little impact on asset quality to date as a result of COVID-19.
+Added: However, the ultimate impact the pandemic may have on our business and asset quality is still uncertain.
+Added: We remain optimistic that the combination of government stimulus programs and the relief programs we have provided to our clients will lessen the economic stress on our borrowers.
+Added: However, if the effects of the pandemic extend for a prolonged period of time, we may experience negative trends in nonperforming loans and assets.
+Added: Non-TDR Loan Modifications due to COVID-19
+Added: The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” was issued by our banking regulators on March 22, 2020.
+Added: This guidance encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.
+Added: Additionally, Section 4013 of the CARES Act further provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified.
+Added: Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until January 1, 2022, or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates.
+Added: In accordance with this guidance, the Company offered modifications to borrowers who were both impacted by COVID-19 and current on all principal and interest payments.
+Added: As of December 31, 2020, the Company had $11.9 million in non-TDR loan modifications due to COVID-19.
+Added: Small Business Administration Paycheck Protection Program
+Added: Section 1102 of the CARES Act created the PPP, which is jointly administered by the SBA and the Department of the Treasury.
+Added: The PPP is designed to provide economic relief to small businesses nationwide adversely impacted by COVID-19.
+Added: On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act was enacted, extending the authority to continue to make PPP loans, including a provision for second draw PPP loans, through March 31, 2021.
+Added: These loans may be 100% forgiven if certain conditions, including predefined SBA approved use of the funds and certain borrower certifications are satisfied and are fully guaranteed by the SBA.
+Added: As a preferred SBA lender, we assisted our clients in
+Added: participating in the PPP to help them maintain their workforces in an uncertain and challenging environment.
+Added: The loans originated by us during 2020 bear an interest rate of 1.00% and we received weighted average origination fees of 3.86% of the amount funded, or approximately $2.3 million in total.
+Added: The Company received this fee revenue from the SBA in late June 2020 and it is being deferred over the life of the PPP loans and recognized as interest income.
+Added: As of December 31, 2020, we had 376 PPP loans totaling $50.6 million outstanding.
+Added: As of December 31, 2020, the Company processed 84 applications for forgiveness from PPP borrowers.
+Added: On December 27, 2020, additional funding was allocated to the PPP through the passage of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act.
+Added: The additional funding can be used by small businesses who have yet to receive a PPP loan as well as certain small businesses who may be eligible to receive a second PPP loan.
+Added: The Company began offering PPP loans again in the first quarter of 2021.
+Added: The Company anticipates that the majority of PPP loans it originates will ultimately be forgiven, in whole or in part, by the SBA in accordance with the terms of the program.
+Added: Management anticipates that loan forgiveness applications will continue during 2021.
Allowance for Loan Losses
4 unchanged sentences
Commercial and industrial (461) (921) (92) (271) (1,582)
+Added: Owner-occupied commercial real estate (24) — — — —
+Added: Healthcare finance (743) — — — —
+Added: Small business lending (110) — — — —
Residential mortgage (20) (76) (9) (116) (134)
+Added: Home equity — (68) — — (33)
Other consumer (804) (1,292) (1,176) (895) (440)
1 unchanged sentence
Commercial and industrial 6 29 3 69 187
−Removed: Investor commercial real estate
+Added: Healthcare finance 87 — — — —
Small business lending 19 5 — — —
Residential mortgage 4 4 5 4 30
+Added: Home equity 11 10 16 23 13
Other consumer 354 287 287 303 259
1 unchanged sentence
Balance, end of period $ 29,484 $ 21,840 $ 17,896 $ 14,970 $ 10,981
−Removed: The determination of the allowance for loan losses and the related provision for loan losses are components of our significant accounting policies as discussed within Note 1 to the consolidated financial statements.
+Added: Net charge-offs $ 1,681 $ 2,022 $ 966 $ 883 $ 1,700
+Added: Net charge-offs to average loans 0.06 % 0.07 % 0.04 % 0.05 % 0.15 %
+Added: The determination of the allowance for loan losses and the related provision for loan losses are components of our significant accounting policies as discussed within Note 1 to the Company's consolidated financial statements.
The adequacy of the allowance for loan losses and the provision are based on the review and evaluation of the loan portfolio and reflect management’s assessment of the risks and potential losses within the portfolio.
−Removed: This evaluation considers historical loss experience as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades and delinquencies within the portfolio and changes in our lending policies and practices.
+Added: This evaluation considers historical loss experience as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices.
Management actively monitors asset quality and, when appropriate, charges off loans against the allowance for loan losses.
−Removed: Although management believes it uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the economic conditions in the assumptions used to determine the size of the allowance for loan losses.
+Added: Although management believes it uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the allowance for loan losses.
The allowance for loan losses was $29.5 million as of December 31, 2020, compared to $21.8 million as of December 31, 2019.
−Removed: The increase of $3.9 million , or 22.0% , was due primarily to the continued growth in loan balances, as well as $1.8 million in specific reserves, mainly associated with the $4.7 million single tenant lease financing relationship that was placed on nonaccrual during 2019.
−Removed: The allowance for loan losses as a percentage of total loans was 0.74% as of December 31, 2019 compared to 0.66% as of December 31, 2018 , and decreased as a percentage of nonperforming loans to 324.4% as of December 31, 2019 , from to 2,013.1% as of December 31, 2018 .
−Removed: The increase in the allowance for loan losses as a percentage of total loans was due primarily to the specific reserve related to the single tenant lease financing relationship, as well as changes in the composition of the loan portfolio, as loan categories with lower reserve factors declined as a percentage of the overall loan portfolio.
−Removed: The decline in the allowance for loan losses as a percentage of nonperforming loans was driven mainly by the impact of the single tenant lease financing relationship discussed above.
−Removed: Investment Securities
+Added: While total loan balances experienced a modest increase of $95.7 million, or 3.2%, the Company made additional adjustments to qualitative factors in its allowance model to reflect the continued economic uncertainty resulting from COVID-19.
+Added: As a result, both the allowance for loan losses and the allowance as a percentage of total loans increased compared to December 31, 2019.
+Added: The allowance for loan losses as a percentage of total loans was 0.96% as of December 31, 2020, or 0.98% when excluding PPP Loans, compared to 0.74% as of December 31, 2019.
+Added: The allowance for loan losses as a percentage of nonperforming loans decreased to 289.5% as of December 31, 2020, from to 324.4% as of December 31, 2019.
+Added: The provision for loans losses was $9.3 million for the twelve months ended December 31, 2020 compared to $6.0 million for the twelve months ended December 31, 2019.
+Added: The increase in the provision for loan losses was due primarily to the additional adjustments to qualitative factors in the allowance model discussed above.
+Added: During 2020, the Company recorded net charge-offs of $1.7 million, compared to $2.0 million during 2019.
+Added: Investment Securities Portfolio
In managing the Company’s investment securities portfolio, management focuses on providing an adequate level of liquidity and managing long-term interest rate risk, while earning an adequate level of investment income without taking undue risk.
−Removed: Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” Securities that we intend to hold until maturity are classified as “held-to-maturity” securities, and all other investment securities are classified as “available-for-sale.” The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income (loss).
+Added: Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” The Company did not classify any securities as trading securities as of December 31, 2020 and 2019.
+Added: Securities that we intend to hold until maturity are classified as “held-to-maturity” securities, and all other investment securities are classified as “available-for-sale.” The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income (loss).
The Company periodically evaluates each security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary.
−Removed: As of December 31, 2019 , the unrealized losses in the Company’s investment securities portfolio were due primarily to interest rate changes.
−Removed: The Company has the ability and intent to hold all investment securities with identified impairments resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security.
+Added: As of December 31, 2020, the unrealized losses in the Company’s investment securities portfolio were due primarily to interest rate changes and elevated credit spreads resulting from the economic uncertainty of the COVID-19 pandemic.
+Added: The Company has the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security.
As of December 31, 2020, the Company did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity.
2 unchanged sentences
The following tables present the amortized cost and approximate fair value of the Company’s investment securities portfolio by security type as of the end of the last five years.
−Removed: (amounts in thousands)
+Added: (amounts in thousands) December 31,
Amortized Cost 2020 2019 2018 2017 2016
28 unchanged sentences
Total securities $ 567,080 $ 603,412 $ 503,763 $ 492,358 $ 472,897
−Removed: The approximate fair value of investment securities available-for-sale increased $59.5 million , or 12.4% , to $540.9 million as of December 31, 2019 compared to $481.3 million as of December 31, 2018 .
−Removed: The increase was due primarily to increases of $54.4 million in private-label mortgage-backed securities, $27.7 million in agency mortgage-backed securities, $5.1 million in municipal securities and $3.8 million in corporate securities.
−Removed: The increase in private-label and agency mortgage-backed securities was driven by purchases as excess liquidity was deployed, partially offset by prepayment activity and principal amortization.
−Removed: The increase in the approximate fair value of municipal securities was primarily caused by interest rate changes.
−Removed: Additional liquidity was also used to purchase corporate securities during 2019.
−Removed: These increases were offset by a decrease of $31.7 million in U.S.
−Removed: Government-sponsored agencies securities.
−Removed: The decrease in U.S.
−Removed: Government-sponsored agencies was due primarily to principal amortization and prepayments, as well as the sale of $8.5 million of lower-yielding securities.
−Removed: As of December 31, 2019 , the Company had securities with an amortized cost basis of $61.9 million designated as held-to-maturity compared to $22.8 million as of December 31, 2018, an increase of $39.1 million, due mainly to the purchase of corporate securities described above.
+Added: The approximate fair value of investment securities available-for-sale decreased $43.2 million, or 8.0%, to $497.6 million as of December 31, 2020 compared to $540.9 million as of December 31, 2019.
+Added: The decrease was due primarily to decreases of $17.5 million in agency mortgage-backed securities, $15.3 million in agency securities, $15.2 million in municipal securities and $5.5 million in private-label mortgage-backed securities.
+Added: These decreases were driven primarily by prepayments and maturities in agency and mortgage-backed securities, as well as early redemptions and maturities in municipal securities.
+Added: The decreases were partially offset by purchases of corporate securities as excess liquidity from deposit growth was deployed.
+Added: As of December 31, 2020, the Company had securities with an amortized cost basis of $68.2 million designated as held-to-maturity compared to $61.9 million as of December 31, 2019, an increase of $6.3 million, due mainly to the purchase of corporate securities.
Investment Maturities
The following table summarizes the contractual maturity schedule of the Company’s investment securities at their amortized cost and their weighted average yields at December 31, 2020.
−Removed: 1 year or less
−Removed: More than 1 year
−Removed: More than 5 years
−Removed: More than 10 years
−Removed: (dollars in thousands)
+Added: 1 year or less More than 1 year
+Added: to 5 years More than 5 years
+Added: to 10 years More than 10 years Total
+Added: (dollars in thousands) Amortized
+Added: Yield Amortized
+Added: Yield Amortized
+Added: Yield Amortized
+Added: Yield Amortized
Government-sponsored agencies
+Added: $ — 0.00 % $ 1,804 2.49 % $ 40,532 0.30 % $ 19,429 1.13 % $ 61,765 0.62 %
Municipal securities 1
+Added: — 0.00 % 4,638 2.17 % 15,096 2.53 % 77,594 2.56 % 97,328 2.54 %
Agency mortgage-backed securities 1
+Added: — 0.00 % — 0.00 % 15,519 1.67 % 226,276 1.77 % 241,795 1.76 %
Private-label mortgage-backed securities — 0.00 % — 0.00 % — 0.00 % 57,268 2.53 % 57,268 2.53 %
Asset-backed securities
+Added: — 0.00 % — 0.00 % 5,000 1.74 % — 0.00 % 5,000 1.74 %
Corporate securities — 0.00 % 23,328 1.37 % 73,743 3.80 % 5,000 3.00 % 102,071 3.20 %
Total securities $ — 0.00 % $ 29,770 1.57 % $ 149,890 2.43 % $ 385,567 2.02 % $ 565,227 2.11 %
−Removed: Other assets were $67.1 million at December 31, 2019 compared to $37.7 million at December 31, 2018.
−Removed: The increase of $29.4 million, or 77.8%, was due primarily to cash collateral pledged for interest rate swaps.
−Removed: The Company pledged $42.3 million and $7.0 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at December 31, 2019 and December 31, 2018, respectively.
−Removed: Collateral posted and received is dependent on the market valuation of the underlying hedges.
+Added: 1 Excludes the impact of interest rate swaps associated with fixed-rate securities.
+Added: Accrued Income and Other Assets
+Added: Accrued income and other assets were $64.3 million at December 31, 2020 compared to $67.1 million at December 31, 2019.
+Added: As of these dates, the Company pledged $30.6 million and $42.3 million, respectively, of cash collateral to counterparties on interest rate swap agreements as security for its obligations related to these agreements.
+Added: Collateral posted and received is dependent on the fair value of the underlying agreements as of the respective date.
+Added: The decrease in cash collateral pledged was partially offset by an increase of $4.9 million in deferred tax assets.
The following table presents the composition of the Company's deposit base as of the end of the last five years.
6 unchanged sentences
Brokered deposits 302,402 9.2 % 538,369 17.1 % 647,090 24.2 % 76,653 3.7 % 5,613 0.4 %
+Added: Total $ 3,270,885 100.0 % $ 3,153,963 100.0 % $ 2,671,351 100.0 % $ 2,084,941 100.0 % $ 1,462,867 100.0 %
Total deposits increased $116.9 million, or 3.7%, to $3.3 billion as of December 31, 2020 as compared to $3.2 billion as of December 31, 2019.
−Removed: During 2019, certificates of deposits increased $320.6 million, or 24.8%, money market accounts increased $257.9 million, or 48.8%, noninterest-bearing deposits increased $13.8 million, or 31.9%, and interest-bearing demand deposits increased $8.0 million, or 6.6%.
−Removed: These increases were partially offset by declines of $108.7 million, or 16.8%, in brokered deposits and $8.9 million, or 23.1%, in savings accounts.
−Removed: In 2019, we placed greater emphasis on increasing small business money market account balances.
−Removed: The results of these efforts successfully contributed $180.7 million to the total growth in money market balances.
+Added: During 2020, money market accounts increased $564.2 million, or 71.7%, interest-bearing deposits increased $59.6 million, or 46.2%, and noninterest-bearing demand deposits increased $39.6 million, or 69.4%.
+Added: These increases were partially offset by declines of $324.1 million, or 20.1%, in certificates of deposits and $236.0 million, or 43.8%, in brokered deposits accounts.
+Added: The Company experienced strong growth in money market balances due to targeted digital marketing efforts to grow small business accounts, as well as consumers, small businesses and commercial clients increasing their cash balances due in part to the economic uncertainty resulting from the COVID-19 pandemic.
+Added: The declines in certificates of deposits and brokered deposits were due to the maturity of higher cost balances and reduced pricing strategies designed to limit the volume of new production.
The following tables present contractual interest rates paid on time deposits, their scheduled maturities, and the scheduled maturities for time deposits $100,000 or greater.
Time Deposit Maturities at December 31, 2020
−Removed: Period to Maturity
−Removed: Percentage of Total Certificate Accounts
−Removed: (dollars in thousands)
+Added: Period to Maturity Percentage of Total Certificate Accounts
+Added: (dollars in thousands) Less than 1
+Added: year > 1 year
+Added: to 2 years > 2 years
+Added: to 3 years More than
+Added: 3 years Total
Interest Rate:
2 unchanged sentences
2.00% – 2.99% 377,936 106,768 43,964 27,343 556,011 41.9 %
+Added: 3.00% – 3.99% 37,321 8,850 36,443 43,144 125,758 9.5 %
+Added: Total $ 883,461 $ 242,053 $ 99,488 $ 100,889 $ 1,325,891 100.0 %
Time Deposit Maturities of $100,000 or Greater
−Removed: (dollars in thousands)
−Removed: December 31, 2019
+Added: (dollars in thousands) December 31, 2020
Maturity Period:
3 unchanged sentences
Over 12 months 350,566
+Added: Total $ 1,091,396
Federal Home Loan Bank Advances
9 unchanged sentences
Weighted average interest rate at end of period 1
+Added: 1.30 % 1.98 % 2.15 %
Weighted average interest rate during period 1
+Added: 1.78 % 2.15 % 1.88 %
1 Excludes the impact of interest rate swaps.
−Removed: Other Liabilities
−Removed: Other liabilities were $53.0 million at December 31, 2019 compared to $21.5 million at December 31, 2018.
−Removed: The increase of $31.5 million, or 146.9%, was due primarily to a $27.1 million decrease in the fair value of interest rate swaps.
+Added: Accrued Expenses and Other Liabilities
+Added: Accrued expenses and other liabilities were $48.4 million at December 31, 2020 compared to $53.0 million at December 31, 2019.
+Added: The decrease of $4.6 million, or 8.7%, was due primarily to an $8.0 million increase in the fair value of interest rate swap agreements.
Liquidity and Capital Resources
−Removed: While the Company believes it has sufficient liquidity and capital resources to meet its cash and capital expenditure requirements for at least the next twelve months, including any cash dividends it may pay, the Company intends to continue pursuing its growth strategy, which may require additional capital.
−Removed: If the Company is unable to secure such capital at favorable terms, its ability to execute its growth strategy could be adversely affected.
+Added: The Company believes it has sufficient liquidity and capital resources to meet its cash and capital expenditure requirements for at least the next twelve months.
+Added: The Company may explore strategic alternatives, including additional asset, deposit or revenue generation channels that complement our commercial and consumer banking platforms, which may require
+Added: additional capital.
+Added: If the Company is unable to secure such capital at favorable terms, its ability to take advantage of such opportunities could be adversely affected.
Liquidity management is the process used by the Company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations.
−Removed: Liquidity, represented by cash, investment securities and other short-duration assets is a product of the Company’s operating, investing and financing activities.
+Added: Liquidity, represented by cash and investment securities, is a product of the Company’s operating, investing and financing activities.
The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings.
While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition.
−Removed: Therefore, the Company supplements organic deposit growth and enhances interest rate risk management through brokered deposits and borrowings.
−Removed: The Company maintains cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments.
+Added: Therefore, the Company supplements deposit growth and enhances interest rate risk management through borrowings and wholesale funding, which are generally advances from the FHLB and brokered deposits.
+Added: Additionally, the Company has enhanced its liquidity management process through increased loan sale activity.
+Added: During 2020, the Company sold $188.6 million of public finance, single tenant lease financing and SBA 7(a) guaranteed loans at premiums to book value, as well as a $90.8 million pool of residential mortgage loans.
+Added: During 2019, the Company sold $237.5 million of portfolio residential mortgage, single tenant lease financing and public finance loans.
+Added: These loan sales have provided liquidity to manage overall loan portfolio growth and capital utilization.
+Added: The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments.
+Added: We modestly reduced the size of our balance sheet during the fourth quarter 2020 through continued deposit repricing as loan demand was lower than earlier in the year.
+Added: A component of this balance sheet management strategy included reducing our cash balances from the levels at September 30, 2020.
+Added: However, given the uncertainty regarding the duration and ultimate economic effect of COVID-19, we believe it will be prudent to maintain higher levels of cash on the balance sheet than we have historically maintained until the crisis passes.
+Added: We believe we have sufficient on-balance sheet liquidity, supplemented by access to additional funding sources, to manage the potential economic impact of COVID-19.
At December 31, 2020, on a consolidated basis, the Company had $917.4 million in cash and cash equivalents and investment securities available-for-sale, and $39.6 million in loans held-for-sale that were generally available for its cash needs.
4 unchanged sentences
The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits.
−Removed: At December 31, 2019 , the Company, on an unconsolidated basis, had $38.3 million in cash generally available for its cash needs.
+Added: At December 31, 2020, the Company, on an unconsolidated basis, had $40.5 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses.
The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures.
At December 31, 2020, approved outstanding loan commitments, including unused lines of credit, amounted to $263.9 million.
−Removed: Certificates of deposit scheduled to mature in one year or less at December 31, 2019 totaled $0.9 billion .
+Added: Certificates of deposit scheduled to mature in one year or less at December 31, 2020 totaled $883.5 million.
On December 18, 2018 the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to $10.0 million of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions.
13 unchanged sentences
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table.
−Removed: (dollars in thousands, except share and per share data)
−Removed: At Or For The Twelve Months Ended December 31,
+Added: (dollars in thousands, except share and per share data) At Or For The Twelve Months Ended December 31,
+Added: 2020 2019 2018 2017 2016
Total equity - GAAP $ 330,944 $ 304,913 $ 288,735 $ 224,127 $ 153,942
+Added: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687)
Tangible common equity $ 326,257 $ 300,226 $ 284,048 $ 219,440 $ 149,255
Total assets - GAAP $ 4,246,156 $ 4,100,083 $ 3,541,692 $ 2,767,687 $ 1,854,335
+Added: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687)
Tangible assets $ 4,241,469 $ 4,095,396 $ 3,537,005 $ 2,763,000 $ 1,849,648
14 unchanged sentences
Fully-taxable equivalent adjustments 1
+Added: 5,796 6,334 5,010 4,053 1,090
Net interest income - FTE $ 70,337 $ 69,301 $ 67,277 $ 58,035 $ 40,779
1 unchanged sentence
Effect of fully-taxable equivalent adjustments 1
+Added: 0.13 % 0.17 % 0.16 % 0.18 % 0.06 %
Net interest margin - FTE 1.68 % 1.82 % 2.25 % 2.57 % 2.55 %
1 Assuming a 21% tax rate in 2020, 2019 and 2018 and a 35% tax rate in 2017 and 2016
−Removed: (dollars in thousands, except share and per share data)
−Removed: At Or For The Twelve Months Ended December 31,
−Removed: Income before income taxes - GAAP
−Removed: Write-down of other real estate owned
−Removed: Adjusted income before income taxes
−Removed: Income tax provision - GAAP
−Removed: Write-down of other real estate owned
−Removed: Net deferred tax asset revaluation
−Removed: Adjusted income tax provision
−Removed: Net income - GAAP
−Removed: Write-down of other real estate owned
−Removed: Net deferred tax asset revaluation
−Removed: Adjusted net income
−Removed: Diluted average common shares outstanding
−Removed: Diluted earnings per share - GAAP
−Removed: Effect of write-down of other real estate owned
−Removed: Effect of net deferred tax asset revaluation
−Removed: Adjusted diluted earnings per share
−Removed: Return on average assets
−Removed: Effect of write-down of other real estate owned
−Removed: Effect of net deferred tax asset revaluation
−Removed: Adjusted return on average assets
−Removed: Return on average shareholders' equity
−Removed: Effect of write-down of other real estate owned
−Removed: Effect of net deferred tax asset revaluation
−Removed: Adjusted return on average shareholders' equity
−Removed: Return on average tangible common equity
−Removed: Effect of write-down of other real estate owned
−Removed: Effect of net deferred tax asset revaluation
−Removed: Adjusted return on average tangible common equity
−Removed: Effective income tax rate
−Removed: Effect of write-down of other real estate owned
−Removed: Effect of net deferred tax asset revaluation
−Removed: Adjusted effective income tax rate
Critical Accounting Policies and Estimates
1 unchanged sentence
We believe the allowance for loan losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of our consolidated financial statements.
−Removed: An estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates, expected cash flows, and estimated collateral values.
+Added: An estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates, expected cash flows, estimated collateral values, and other qualitative factors.
The allowance for loan losses represents management’s best estimate of losses inherent in the existing loan portfolio.
−Removed: The allowance for loan losses is increased by the
−Removed: provision for loan losses charged to expense and reduced by loans charged off, net of recoveries.
+Added: The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries.
Management evaluates the allowance for loan losses quarterly.
3 unchanged sentences
The methodology used to assign an allowance to a non-impaired loan is more subjective.
−Removed: Generally, the allowance assigned to non-impaired loans is determined by applying historical loss rates to existing loans with similar risk characteristics, adjusted for qualitative factors including changes in economic conditions, changes in underwriting standards, and changes in concentrations of credit risk, and changes in industry conditions.
+Added: Generally, the allowance assigned to non-impaired loans is determined by applying historical loss rates to existing loans with similar risk characteristics, adjusted for qualitative factors including changes in economic and business conditions, unemployment rates, concentrations of credit, changes in the nature and volume of the portfolio, terms of loans, risk grades, trends in charge-offs and recoveries, trends in delinquencies, nonaccrual loans, and impaired loans, and changes in lending policies and procedures.
Because the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is periodically assessed and adjusted when appropriate.
18 unchanged sentences
Impairment of Goodwill.
−Removed: As a result of the Company’s previous acquisition of Landmark Financial Corporation, goodwill, an intangible asset with an indefinite life, is reflected on the balance sheet.
+Added: As a result of a previous acquisition by the Company, goodwill, an intangible asset with an indefinite life, is reflected on the balance sheet.
Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently.
11 unchanged sentences
Fair value hedges are purchased to convert certain fixed rate assets to floating rate.
−Removed: Cash flow hedges are used to convert certain variable rate liabilities into fixed rate
+Added: Cash flow hedges are used to convert certain variable rate liabilities into fixed rate liabilities.
+Added: In June 2020, the Company terminated all fair value hedging instruments associated with loans.
At December 31, 2020 and December 31, 2019, the Company had interest rate swaps with notional amounts of $298.2 million and $725.6 million, respectively.
7 unchanged sentences
Payments Due In
−Removed: (dollars in thousands)
−Removed: Note Reference
−Removed: Less than 1 year
−Removed: More than 5 years
+Added: (dollars in thousands) Note Reference Less than 1 year 1-3 years 3-5 years More than 5 years Total
Deposits and brokered deposits without stated maturity 1
+Added: 9 $ 1,828,960 $ — $ — $ — $ 1,828,960
Certificates of deposits and brokered certificates of deposits 1
+Added: 9 919,189 401,847 120,639 250 1,441,925
FHLB advances 1,2
+Added: 10 110,000 35,000 235,020 134,896 514,916
Subordinated debt 1
+Added: 11 — — — 82,000 82,000
Operating lease commitments 6 423 354 — — 777
3 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.