First Western Financial Inc 10-K

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our financial statements and accompanying notes, including the Report of Independent Registered Public Accounting Firm, are set forth on pages F-1 to F-51 of this Annual Report on Form 10-K. Audited Financial Statements ​ Description Page Number Report of Independent Registered Public Accounting Firm ​ F-1 Consolidated Balance Sheets as of December 31, 2020 and 2019 ​ F-2 Consolidated Statements of Income for the Years Ended December 31, 2020 and 2019 ​ F-3 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020 and 2019 ​ F-4 Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2020 and 2019 ​ F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 ​ F-6 Notes to Consolidated Financial Statements ​ F-7 ​ ​ ​ ​ 92 Table of Contents ​ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ Shareholders and the Board of Directors First Western Financial, Inc. Denver, Colorado ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of First Western Financial, Inc. (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years ended December 31, 2020 and 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019, in conformity with accounting principles generally accepted in the United States of America. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. ​ Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ ​ /s/ Crowe LLP ​ We have served as the Company’s auditor since 2013. ​ Denver, Colorado March 12, 2021 ​ F-1 Table of Contents ​ FIRST WESTERN FINANCIAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 ASSETS ​ ​ Cash and cash equivalents: ​ ​ Cash and due from banks ​ $ 2,405 ​ $ 4,180 Interest-bearing deposits in other financial institutions ​ 153,584 ​ 74,458 Total cash and cash equivalents ​ 155,989 ​ 78,638 ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities, at fair value ​ 36,666 ​ 58,903 Correspondent bank stock, at cost ​ 2,552 ​ 585 Mortgage loans held for sale ​ 161,843 ​ 48,312 Loans, net of allowance of $ 12,539 and $ 7,875 ​ 1,520,294 ​ 990,132 Premises and equipment, net ​ 5,320 ​ 5,218 Accrued interest receivable ​ 6,618 ​ 3,048 Accounts receivable ​ 4,865 ​ 5,238 Other receivables ​ ​ 1,422 ​ ​ 1,006 Other real estate owned, net ​ 194 ​ 658 Goodwill and other intangible assets, net ​ 24,258 ​ 19,714 Deferred tax assets, net ​ 6,056 ​ 5,047 Company-owned life insurance ​ 15,449 ​ 15,086 Other assets ​ 32,129 ​ 16,544 Assets held for sale ​ — ​ 3,553 Total assets ​ $ 1,973,655 ​ $ 1,251,682 ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ Deposits: ​ ​ Noninterest-bearing ​ $ 481,457 ​ $ 240,068 Interest-bearing ​ 1,138,453 ​ 846,716 Total deposits ​ 1,619,910 ​ 1,086,784 Borrowings: ​ ​ Federal Home Loan Bank Topeka and Federal Reserve borrowings ​ 149,563 ​ 10,000 Subordinated notes ​ 24,291 ​ 6,560 Accrued interest payable ​ 453 ​ 299 Other liabilities ​ 24,476 ​ 20,244 Liabilities held for sale ​ — ​ 117 Total liabilities ​ 1,818,693 ​ 1,124,004 ​ ​ ​ ​ ​ ​ ​ SHAREHOLDERS’ EQUITY ​ ​ Preferred stock - no par value; 10,000,000 shares authorized; 0 issued and outstanding ​ — ​ — Convertible preferred stock - no par value; 150,000 shares authorized; 0 shares issued and outstanding ​ — ​ — Common stock - no par value; 90,000,000 shares authorized; 7,951,773 and 7,940,168 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively ​ — ​ — Additional paid-in capital ​ 144,703 ​ 142,797 Retained earnings (accumulated deficit) ​ 9,579 ​ ( 14,955 ) Accumulated other comprehensive income (loss) ​ 680 ​ ( 164 ) Total shareholders’ equity ​ 154,962 ​ 127,678 Total liabilities and shareholders’ equity ​ $ 1,973,655 ​ $ 1,251,682 ​ See accompanying notes to consolidated financial statements. ​ F-2 Table of Contents FIRST WESTERN FINANCIAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2020 2019 Interest and dividend income: ​ ​ Loans, including fees ​ $ 51,998 ​ $ 42,045 Investment securities ​ 878 ​ 1,274 Federal funds sold and other ​ 458 ​ 1,732 Total interest and dividend income ​ 53,334 ​ 45,051 ​ ​ ​ ​ ​ ​ ​ Interest expense: ​ ​ Deposits ​ 5,794 ​ 12,263 Other borrowed funds ​ 1,438 ​ 727 Total interest expense ​ 7,232 ​ 12,990 Net interest income ​ 46,102 ​ 32,061 Less: provision for loan losses ​ 4,682 ​ 662 Net interest income, after provision for loan losses ​ 41,420 ​ 31,399 ​ ​ ​ ​ ​ ​ ​ Non-interest income: ​ ​ Trust and investment management fees ​ 19,022 ​ 18,935 Net gain on mortgage loans ​ 29,276 ​ 10,585 Bank fees ​ 1,320 ​ 1,173 Risk management and insurance fees ​ 1,199 ​ 1,205 Income on company-owned life insurance ​ 363 ​ 377 Net gain on sale of securities ​ — ​ 119 Net gain on sale of assets ​ ​ — ​ ​ 183 Total non-interest income ​ 51,180 ​ 32,577 Total income before non-interest expense ​ 92,600 ​ 63,976 ​ ​ ​ ​ ​ ​ ​ Non-interest expense: ​ ​ Salaries and employee benefits ​ 34,785 ​ 31,810 Occupancy and equipment ​ 6,009 ​ 5,562 Professional services ​ 5,035 ​ 3,519 Technology and information systems ​ 4,035 ​ 3,973 Data processing ​ 4,000 ​ 3,065 Marketing ​ 1,478 ​ 1,292 Amortization of other intangible assets ​ 14 ​ 374 Goodwill impairment ​ ​ — ​ ​ 1,572 Net loss on assets held for sale ​ ​ 553 ​ ​ — Provision for other real estate owned ​ ​ 176 ​ ​ — Other ​ 3,452 ​ 2,617 Total non-interest expense ​ 59,537 ​ 53,784 Income before income taxes ​ 33,063 ​ 10,192 Income tax expense ​ 8,529 ​ 2,183 Net income available to common shareholders ​ $ 24,534 ​ $ 8,009 Earnings per common share: ​ ​ ​ ​ ​ ​ Basic ​ $ 3.11 ​ $ 1.02 Diluted ​ $ 3.08 ​ $ 1.01 ​ See accompanying notes to consolidated financial statements. ​ F-3 Table of Contents FIRST WESTERN FINANCIAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2020 2019 Net income ​ $ 24,534 ​ $ 8,009 Other comprehensive income items, net of tax effect: ​ ​ ​ ​ ​ ​ Net change in unrealized gains on available-for-sale securities ​ 844 ​ 1,262 Reclassification adjustment for realized gains included in earnings ​ ​ — ​ ​ 94 Total other comprehensive income ​ ​ 844 ​ ​ 1,356 Comprehensive income ​ $ 25,378 ​ $ 9,365 ​ See accompanying notes to consolidated financial statements. ​ F-4 Table of Contents FIRST WESTERN FINANCIAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares ​ ​ Retained Accumulated ​ ​ ​ ​ ​ ​ Additional ​ Earnings ​ Other ​ ​ ​ ​ ​ Common ​ Paid-In ​ (Accumulated ​ Comprehensive ​ ​ ​ ​ ​ Stock ​ Capital ​ Deficit) ​ Income (Loss) ​ Total Balance, December 31, 2018 7,968,420 ​ $ 141,359 ​ $ ( 23,199 ) ​ $ ( 1,285 ) ​ $ 116,875 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ 8,009 ​ — ​ 8,009 Other comprehensive income, net of tax — ​ — ​ — ​ 1,356 ​ 1,356 Settlement of share awards ​ 15,446 ​ ( 110 ) ​ — ​ — ​ ​ ( 110 ) Adoption of ASU 2018-02 ​ — ​ ​ — ​ ​ 235 ​ ​ ( 235 ) ​ ​ — Share repurchase ( 43,698 ) ​ ​ ( 743 ) ​ ​ — ​ ​ — ​ ( 743 ) Stock-based compensation — ​ 2,291 ​ — ​ — ​ 2,291 Balance, December 31, 2019 7,940,168 ​ $ 142,797 ​ $ ( 14,955 ) ​ $ ( 164 ) ​ $ 127,678 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income — ​ — ​ 24,534 ​ — ​ 24,534 Other comprehensive income, net of tax — ​ — ​ — ​ 844 ​ 844 Settlement of share awards ​ 34,710 ​ ​ ( 261 ) ​ ​ — ​ ​ — ​ ​ ( 261 ) Share repurchase ​ ( 23,105 ) ​ ​ ( 377 ) ​ ​ — ​ ​ — ​ ​ ( 377 ) Stock-based compensation — ​ 2,544 ​ — ​ — ​ 2,544 Balance, December 31, 2020 7,951,773 ​ $ 144,703 ​ $ 9,579 ​ $ 680 ​ $ 154,962 ​ See accompanying notes to consolidated financial statements. ​ F-5 Table of Contents FIRST WESTERN FINANCIAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2020 ​ 2019 Cash flows from operating activities ​ ​ ​ Net income ​ $ 24,534 ​ $ 8,009 Adjustments to reconcile net income to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 1,105 ​ 1,671 Deferred income tax benefits, net of valuation allowance ​ ( 1,300 ) ​ ( 1,216 ) Stock-based compensation ​ 2,544 ​ 2,291 Provision for loan losses ​ 4,682 ​ 662 Net amortization of investment securities ​ 442 ​ 226 Stock dividends received on correspondent bank stock ​ ( 17 ) ​ ( 29 ) Increase in cash surrender value of company-owned life insurance ​ ( 363 ) ​ ( 377 ) Net gain on mortgage loans ​ ( 29,276 ) ​ ( 10,585 ) Origination of mortgage loans held for sale ​ ( 1,331,989 ) ​ ( 640,575 ) Proceeds from mortgage loans ​ 1,238,881 ​ 615,961 Gain on sale of securities ​ ​ — ​ ​ ( 119 ) Gain on sale of assets ​ ​ ( 43 ) ​ ​ ( 183 ) Loss on assets held for sale ​ ​ 553 ​ ​ — Loss on impairment of goodwill ​ ​ — ​ ​ 1,572 Provision for other real estate owned ​ ​ 176 ​ ​ — Accounts receivable ​ 355 ​ ( 728 ) Accrued interest receivable and other assets ​ ( 4,473 ) ​ ( 522 ) Accrued interest payable and other liabilities ​ 858 ​ 2,429 Net cash used in operating activities ​ ( 93,331 ) ​ ( 21,513 ) Cash flows from investing activities ​ ​ ​ ​ ​ ​ Activity in available-for-sale securities: ​ ​ ​ ​ ​ ​ Maturities, prepayments, and calls ​ 28,639 ​ 9,598 Sales ​ ​ — ​ ​ 7,506 Purchases ​ ( 6,000 ) ​ ( 31,063 ) Purchases of correspondent bank stock ​ ( 1,950 ) ​ ( 1,286 ) Redemption of correspondent bank stock ​ ​ — ​ ​ 3,218 Purchases of premises and equipment ​ ( 1,205 ) ​ ( 415 ) Proceeds from sale of premises and equipment ​ ​ 10 ​ ​ — Proceeds from sale of other real estate owned ​ ​ 288 ​ ​ — Net cash paid on acquisitions (Note 2) ​ ​ ( 61,316 ) ​ ​ — Loan and note receivable originations and principal collections, net ​ ( 414,486 ) ​ ( 103,937 ) Net cash used in investing activities ​ ( 456,020 ) ​ ( 116,379 ) Cash flows from financing activities ​ ​ ​ Net change in deposits ​ 470,046 ​ ​ 149,026 Proceeds from subordinated notes ​ ​ 18,000 ​ ​ — Repurchase of common stock ​ ​ ( 377 ) ​ ​ ( 743 ) Settlement of restricted stock ​ ​ ( 261 ) ​ ​ ( 110 ) Recognition of capitalized subordinated notes issuance costs ​ ​ ( 269 ) ​ ​ — Payments to Federal Reserve borrowings ​ ​ ( 69,750 ) ​ ​ — Proceeds from Federal Reserve borrowings ​ 204,313 ​ ​ — Payments to Federal Home Loan Bank Topeka borrowings ​ ( 30,000 ) ​ ​ ( 72,346 ) Proceeds from Federal Home Loan Bank Topeka borrowings ​ 35,000 ​ ​ 67,346 Net cash provided by financing activities ​ 626,702 ​ ​ 143,173 ​ ​ ​ ​ ​ ​ ​ Net change in cash and cash equivalents ​ ​ 77,351 ​ ​ 5,281 Cash and cash equivalents, beginning of year ​ 78,638 ​ ​ 73,357 Cash and cash equivalents, end of year $ 155,989 ​ $ 78,638 Supplemental cash flow information: ​ ​ Interest paid on deposits and borrowed funds ​ $ 7,078 ​ $ 12,922 Income tax payment, net of refunds received ​ ​ 11,763 ​ ​ 2,476 Cash paid for amounts included in the measurement of lease liabilities ​ ​ 5,659 ​ ​ 5,351 Supplemental noncash disclosures: ​ ​ ​ ​ ​ ​ Reclass of held for sale assets, net of liabilities ​ ​ ( 2,990 ) ​ ​ 3,436 Contingent asset resulting from sale of held for sale assets ​ ​ 3,062 ​ ​ — Adoption of ASU 2018-02 - Reclassification of stranded tax effects ​ ​ — ​ ​ 235 Change in unrealized gain on available for sale securities ​ ​ 1,113 ​ ​ 1,831 Lease right-of-use-asset obtained in exchange for lease liabilities ​ $ 3,600 ​ $ 16,580 See Note 2 - Acquisitions regarding noncash transactions included in the acquisition. ​ ​ ​ ​ ​ ​ See accompanying notes to consolidated financial statements . ​ F-6 Table of Contents FIRST WESTERN FINANCIAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Basis of Presentation : The consolidated financial statements include the accounts of First Western Financial, Inc. ("FWFI"), incorporated in Colorado on July 18, 2002, and its direct and indirect wholly-owned subsidiaries listed below (collectively referred to as the "Company", "we", "us", or "our"). FWFI is a bank holding company with financial holding company status registered with the Board of Governors of the Federal Reserve System. FWFI wholly owns the following subsidiaries: First Western Trust Bank (the "Bank") Ryder, Stilwell Inc. ("RSI"), and First Western Capital Management Company ("FWCM"). The Bank wholly owns the following subsidiaries, which are therefore indirectly wholly-owned by FWFI: First Western Merger Corporation ("Merger Corp."), and RRI, LLC ("RRI"). FWCM became inactive during the current year. RSI and RRI are also not active operating entities. The Company provides a fully-integrated suite of wealth management services including private banking, personal trust, investment management, mortgage loans, and institutional asset management services to individual and corporate clients principally in Colorado (metro Denver, Aspen, Boulder, Fort Collins and Vail Valley), Arizona (Phoenix and Scottsdale), California (Century City) and Wyoming (Jackson Hole and Laramie). The Company’s revenues are generated from its full range of product offerings as noted above, but principally from net interest income (the interest income earned on the Bank’s assets net of funding costs), fee-based wealth advisory, investment management, asset management and personal trust services, and net gains earned on mortgage loans. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") for financial information, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), and where applicable, reporting practices prescribed for the banking and investment advisory industries. Consolidation : The Company’s policy is to consolidate all majority-owned subsidiaries in which it has a controlling financial interest and variable-interest entities where the Company is deemed to be the primary beneficiary. All material intercompany accounts and transactions have been eliminated in consolidation. On May 15, 2020, the Company completed a branch purchase and assumption transaction ("Branch Acquisition") with Simmons Bank ("Simmons"). Management concluded that the acquisition represented a business combination, which is accounted for using the acquisition method, with the results of operations included in the Company’s consolidated financial statements as of the acquisition date. For additional information, see Note 2. Use of Estimates : To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ. Information available which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy, including the impact of the COVID-19 pandemic, and changes in the financial condition of borrowers. Material estimates that are particularly susceptible to significant change include: the determination of the allowance for loan losses, the evaluation of goodwill impairment, and the fair value of financial instruments. ​ The Company could experience a material adverse effect on its business as a result of the impact of the COVID-19 pandemic, and the resulting governmental actions to curtail its spread. It is at least reasonably possible that information which was available at the date of the financial statements will change in the near term due to the COVID-19 pandemic and that the effect of the change would be material to the financial statements. The extent to which the COVID-19 pandemic will impact our estimates and assumptions is highly uncertain. Concentration of Credit Risk : Most of the Company’s lending activity is to clients located in and around metro Denver, Colorado; Phoenix and Scottsdale, Arizona; and Jackson Hole and Laramie, Wyoming. The Company does not F-7 Table of Contents believe it has significant concentrations in any one industry or customer. As of December 31, 2020 and December 31, 2019, 66.9 % and 71.7 %, respectively, of the Company’s loan portfolio was secured by real estate collateral. Declines in real estate values in the primary markets the Company operates in could negatively impact the Company. Cash and Cash Equivalents : Cash and cash equivalents include cash on hand, deposits at other financial institutions with original maturities fewer than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements. Investment Securities : Investments we intend to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are recorded at fair value using current market information from a pricing service, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss), net of tax. As of December 31, 2020 and 2019, all investment securities were classified as available-for-sale. As of December 31, 2020, equity mutual funds have been recorded at fair value within the Other assets line of the Consolidated Balance Sheets with changes recorded in the Other line of the Consolidated Statements of Income. The Company invests in projects to create affordable housing. These investments are classified as Other assets on the Consolidated Balance Sheets. Investments in affordable housing projects that qualify for low-income housing tax credits ("LIHTC") are accounted for using the proportional amortization method. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other benefits received and recognized as a component of applicable income tax expense in the Consolidated Statements of Income. Net purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities, without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are recorded in earnings as realized losses in Non-interest income. ​ Management evaluates securities for other-than-temporary impairment ("OTTI") on a quarterly basis, or more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to loss on securities, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income (loss). The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. As of December 31, 2020 and 2019, no securities were determined to be other-than-temporarily impaired. ​ Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. ​ Correspondent Bank Stock : Correspondent bank stock includes stock in both the Federal Home Loan Bank of Topeka ("FHLB") and Bankers’ Bank of the West ("BBW"), which are considered restricted securities because the Company may be required to hold the stock in order to maintain the correspondent banking relationship with these institutions. No ready market exists for the FHLB stock and therefore, no quoted market values exist. For financial reporting purposes, the FHLB stock is carried at cost, classified as a restricted security and periodically evaluated for impairment based on ultimate recovery of par value. The BBW stock is carried at fair value. No impairment was recorded as of December 31, 2020 and 2019. Both cash and stock dividends are reported as income when received. ​ Mortgage Loans Held for Sale : Mortgage loans originated and intended for sale in the secondary market are carried at fair value. Net unrealized losses, if any, are recorded and charged to earnings. Servicing rights are released when the associated mortgage loans are sold. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold. F-8 Table of Contents ​ Loans : Loans the Company has the intent and ability to hold for the foreseeable future, until maturity, or until payoff are reported at their outstanding unpaid principal balances, adjusted for charge-offs and recoveries, net of deferred costs (fees) and unamortized premiums/ (unaccreted discounts), and the allowance for loan losses. Interest income is accrued on unpaid principal balances. Fees received at origination, net of certain direct origination costs for providing loan commitments and letters of credit that result in loans, are deferred and amortized to interest income over the life of the related loan or until payoff, at which time the remaining unamortized fee is recorded as interest income. Fees, net of certain direct origination costs on commitments and letters of credit, are amortized to interest income over the commitment period. ​ Past Due Loans : The accrual of interest on loans is discontinued at the time the loan becomes 90 days delinquent unless the loan is well secured and in the process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged off if collection of interest or principal is considered doubtful. Interest accrued but not collected is charged off against interest income at the time a loan is placed on non-accrual status. The interest collected on non-accrual loans is accounted for using the cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan balance is reduced to zero. Loans can be returned to accrual status when there is a sustained period of repayment performance (usually six-months or longer) and the collectability of future payments is reasonably assured. ​ Troubled Debt Restructurings : A troubled debt restructuring ("TDR") is a loan the Company, for reasons related to a borrower’s financial difficulties, grants a concession to the borrower the Company would not otherwise consider. ​ The loan terms which have been modified or restructured due to a borrower’s financial difficulty, include but are not limited to (i) a reduction in the stated interest rate of the loan, (ii) an extension of the maturity date of the loan at an interest rate below market, or (iii) a reduction of the accrued interest. ​ Loan modifications granted by the Company are reviewed on a case-by-case basis to determine if they should be considered a restructured loan. COVID-19 Loan Modifications: As a result of the COVID-19 pandemic, a loan modification program was designed and implemented to assist our clients experiencing financial stress resulting from the economic impacts caused by the global pandemic. The Company was offering loan extensions, temporary payment moratoriums, and financial covenant waivers for commercial and consumer borrowers impacted by the pandemic who have a pass risk rating and have not been delinquent over 30 days on payments in the last two years, primarily for a period of 180 days or less. During 2020, the Company’s loan portfolio included 89 loans totaling $ 160.8 million, which participated in the Company’s COVID-19 loan modification program. As of December 31, 2020, only two loans remain in their payment deferral term, including acquired loans, in the amount of $ 2.1 million, representing 0.13 % of total loans. ​ COVID-19 and CARES Act : On March 11, 2020 the World Health Organization declared the outbreak of COVID-19 a global pandemic, which continues to spread throughout the United States and the around the world. In response to the COVID-19 pandemic, the President signed the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") into law on March 27, 2020. The objective of the CARES Act is to prevent a severe economic downturn using various measures, including economic stimulus to significantly impacted industry sectors. We continue to monitor the impact of COVID-19 closely, as well as any effects that may result from the CARES Act and other government actions. However, the extent to which the COVID-19 pandemic will impact our operations and financial results is highly uncertain. The CARES Act created the paycheck protection program ("PPP"), which is administered by the Small Business Administration ("SBA"). The PPP is intended to provide loans to small businesses to pay their employees, rent, mortgage interest and utilities. The loans may be forgiven conditioned upon the client providing payroll documentation evidencing their compliant use of funds and otherwise complying with the terms of the program. The Bank is an approved SBA lender and supported the community and clients by originating PPP loans during the year ended December 31, 2020. A second round of PPP funding was made available by the SBA in January 2021 and the Company is originating loans under the F-9 Table of Contents new round of funding. PPP loans are classified in the Cash, Securities and Other portion of the loan portfolio. See Note 5 - Loans and the Allowance for Loan Losses for further discussion on our PPP loans. The CARES Act provides banks optional, temporary relief from accounting for certain loan modifications as TDRs. The modifications must be related to the adverse effects of COVID-19, and certain other criteria are required to be met in order to apply the relief. Interagency guidance from Federal Reserve and the Federal Deposit Insurance Corporation ("FDIC") confirmed with the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered a TDR. We believe our loan modification program meets that definition and have not classified any of these modifications as a TDR as of December 31, 2020. In accordance with that guidance, the Company is recognizing interest income on all loans modified for temporary payment moratoriums. See Note 5 - Loans and the Allowance for Loan Losses for further discussion on our loan modification program. All loans modified in response to COVID-19 are classified as performing and pass rated as of December 31, 2020. These loans are included in the allowance for loan loss general reserve in accordance with ASC 450-20. Management has increased our loan level reviews and portfolio monitoring to address the changing environment. The Company continues to meet regularly with clients who could be more highly impacted by the recent COVID-19 pandemic. These are borrowers in industries we believe may be more impacted by the pandemic, for instance those loans where there may be a greater than 50 % probability of a downgrade, covenant violation or 20 % reduction in collateral position. Management believes the diversity of the loan portfolio is prudent and remains consistent with the credit culture and goals of the Bank. Interest accrued during the modification term on modified loans is deferred to the end of the loan term. As of December 31, 2020, no allowance for loan loss was deemed necessary on the accrued interest balances related to loan modifications. ​ The Company is a participant in the Federal Reserve’s Main Street Lending Program ("MSLP") to support lending to small and medium-sized for profit businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. The Company may sell a 95% participation in a new MSLP loan to the Main Street Special Purpose Vehicle ("SPV") at par value. The Company must retain 5% of the MSLP loan until (i) it matures or (ii) neither the Main Street SPV nor a Governmental Assignee holds an interest in MSLP Loan in any capacity, whichever comes first. See Note 5 - Loans and the Allowance for Loan Losses for further discussion on our participation in the program. Allowance for Loan Losses: The Company’s reserve for loan losses is an estimate of the probable incurred loan losses and is comprised of (i) the allowance for loan losses and (ii) the reserve for unfunded commitments. The reserve for unfunded commitments is included in Other liabilities in the accompanying Consolidated Balance Sheets and the loan balances in the accompanying Consolidated Balance Sheets are reported net of the allowance for loan losses. The allowance for loan losses is established through a provision for loan losses, which is a noncash charge to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses. ​ The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and dollar volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and prevailing economic conditions. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. ​ We are closely monitoring the changing dynamics in the economy and the client impact driven by the COVID-19 pandemic. We have intensified our portfolio management, focusing on higher impacted industries and commercial property types. The portion of our credit exposure to the highest risk industries impacted by COVID-19, such as accommodations, transportation and restaurants, is less than 3.0 % of our loan portfolio. The Company has increased our loan level reviews and portfolio monitoring to address the changing environment and continues to engage in more frequent communication with these borrowers to better understand the impact on our borrower’s cash flows and respond proactively. While the length of time some of these businesses are unable to operate or operate at full capacity is unknown, F-10 Table of Contents it could have a significant impact on many factors that impact our borrowers and our reserve requirement. During the year ended December 31, 2020, the Company increased its allowance to account for the additional variability surrounding the loan modifications and increased economic uncertainty related to the COVID-19 pandemic. Management will continue to closely monitor the loan portfolio and analyze the economic data to assess the impact on the allowance for loan losses. ​ A loan is considered impaired when, based on current information and events, it is probable the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. ​ TDR and non-accrual loans are separately evaluated for impairment and included in the separately identified impairment disclosures. If cash flow dependent, TDR and non-accrual loans will be measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR or non-accrual loan is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For TDR and non-accrual loans that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses on loans individually identified as impaired. ​ Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting all scheduled principal and interest payments. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. ​ The allowance for loan losses is comprised of specific loan loss reserves and general loan loss reserves. The impairment of a specific loan is measured based either on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate, or (ii) the fair value of the underlying collateral, less costs to sell, if the repayment is expected to be provided predominantly by the sale of the underlying collateral. Specific impairments are measured on a loan-by-loan basis if risk characteristics are unique to an individual borrower. The general loan loss reserve covers non-impaired loans and is established by evaluating the incurred loss on homogenous pools of loans, not specifically reviewed for impairment as noted above, that have common risk characteristics. The general loan loss reserve is based on historical loss experiences adjusted for nine qualitative factors on all loans in the portfolio not considered impaired. Certain factors are applied to each pool and certain factors are applied to all non-individually reviewed loans. The nine qualitative factors the Company considers are: ​ 1. Changes in relevant economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments. 2. Levels and trends in net charge-offs. 3. The existence and effect of any concentrations of credit and changes in the level of such concentrations. 4. Changes in the nature or volume of the loan portfolio and in the terms of loans. 5. Changes in the experience, ability, and depth of lending management and other relevant staff. 6. Changes in the volume and severity of past due loans. 7. Changes in the quality of the loan review system and associated grading changes. 8. Change in the level of overdrafts. 9. Levels and status of loans modified as a result of COVID-19. The following portfolio segments have been identified: ​ ● Cash, Securities and Other— consists of consumer and commercial purpose loans that are primarily secured by securities managed and under custody with us, cash on deposit with us or life insurance policies. In addition, loans in this portfolio are collateralized with other sources of consumer collateral and an immaterial amount of each loan may be unsecured. This segment of our portfolio is affected by a variety of local and national economic factors affecting borrowers’ employment prospects, income levels, and overall economic F-11 Table of Contents sentiment. PPP loans that are fully guaranteed by the SBA are classified within this line item as of December 31, 2020. ● Construction and Development—consists of loans to finance the construction of residential and non-residential properties. These loans are dependent on the strength of the industries of the related borrowers and the risks consistent with construction projects. ● 1-4 Family Residential— consists of loans and home equity lines of credit secured by 1-4 family residential properties. These loans typically enable borrowers to purchase or refinance existing homes, most of which serve as the primary residence of the owner. In addition, some borrowers secure a commercial purpose loan with owner occupied or non-owner occupied 1-4 family residential properties. Loans in this segment are dependent on the industries tied to these loans as well as the national and local economies, and local residential and commercial real estate markets. ● Commercial Real Estate (" CRE ") , Owner Occupied and Non-Owner Occupied—consists of commercial loans collateralized by real estate. These loans may be collateralized by owner occupied or non-owner occupied real estate, as well as multi-family residential real estate. These loans are dependent on the strength of the industries of the related borrowers and the success of their businesses. ● Commercial and Industrial—consists of commercial and industrial loans, including working capital lines of credit, permanent working capital term loans, business asset loans, acquisition, expansion and development loans, and other loan products, primarily in our target markets. This portfolio primarily consists of term loans and lines of credit which are dependent on the strength of the industries of the related borrowers and the success of their businesses. This category includes MSLP loans as of December 31, 2020. The reserve for unfunded commitments represents the estimate for probable loan losses inherent in unfunded commitments to extend credit. Unfunded commitments to extend credit include commercial and standby letters of credit, unused lines of credit, and unfunded loan commitments expected to be funded. The process used to determine the reserve for unfunded commitments is consistent with the process for determining the allowance for loan losses, adjusted for estimated funding probabilities. Changes to the level of the reserve for unfunded commitments are recognized through the provision for loan losses for off-balance sheet credit exposures, included in the non-interest Other expense line of the Consolidated Statements of Income. Transfers of Financial Assets : Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Prior to participating in the MSLP, the Company obtained a true sale opinion with regards to the legal isolation condition of the contract. Legal counsel determined that given the facts and circumstances provided, consistent with the FDIC rule entitled “Treatment of financial assets transferred in connection with a securitization or participation”, 12 C.F.R. §360.6, that the MSLP documents would be considered a true sale to the buyer. As such, Management concludes the MSLP loans qualify for sales accounting treatment and are true sales contracts under GAAP. Premises and Equipment : Premises and equipment are carried at cost, net of accumulated depreciation, with the exception of artwork, which is carried at cost. Leasehold improvements are depreciated using the straight-line method and recognized over the shorter of the lease term or estimated useful lives of the assets, ranging from 7 to 15 years . Furniture/equipment and software are depreciated using the straight-line method and recognized over the estimated useful lives of the assets, ranging from 3 to 7 years . Goodwill and Other Intangible Assets : Goodwill represents the excess of purchase price over the fair value of net identifiable tangible and intangible assets acquired in business combinations. The Company has acquired other identifiable intangible assets, primarily consisting of customer relationships, non-competition agreements and recorded goodwill F-12 Table of Contents through its acquisition of financial services companies. Goodwill and other indefinite-lived intangible assets are not amortized, but are tested for impairment at the reporting unit level at least annually by applying a fair value-based test using discounted estimated future net cash flows. The Company has selected October 31 as the date to perform its annual impairment tests. Impairment exists when the carrying amount of the goodwill and other intangible assets exceeds their implied fair values. Impairment losses, if any, are recognized as a charge to non-interest expense and an adjustment to the carrying value of the goodwill or other intangible assets. Subsequent reversals of impairment charges are prohibited. Goodwill is the only intangible asset with an indefinite life on the Company’s Consolidated Balance Sheets. Other definite-lived intangible assets, including customer relationship intangibles, are amortized on a straight-line basis over periods representing the estimated remaining lives of the assets of one to fifteen years , and are evaluated for impairment when events or changes in circumstances indicate the carrying values of such assets may not be recoverable. As of December 31, 2020, the Company believes the carrying value of its goodwill not to be impaired and other intangible assets to be recoverable. Accounts Receivable : Accounts receivable primarily represents the billed but unpaid fees from trust and investment advisory services owed by clients, which are typically calculated as a percentage of average invested balances. The majority of the Company’s investment advisory clients are billed quarterly in arrears based on the daily average balance in the client’s trust or investment accounts for that quarter. Other Receivables : Other accounts receivable represents compensation paid to employees that is contingent on future employment and recognized in the Consolidated Statements of Income over the estimated service period, sales of investments and assets in which the Company has obtained a firm commitment as of the balance sheet dates, and fees due from the SBA related to PPP. Leases : Leases represent a contract that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company leases certain identified assets from third parties. Leases in which the Company is determined to be the lessee are primarily operating leases. Effective January 1, 2019, operating leases are included in the Other assets and Other liabilities line items of the Consolidated Balance Sheets and lease expense for lease payments is recognized on a straight-line basis over the lease term. Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. An ROU asset represents the right to use the underlying asset for the lease term and also includes any direct costs and payments made prior to lease commencement and excludes lease incentives. When an implicit rate is not available, an incremental borrowing rate based on the information available at commencement date is used in determining the present value of the lease payments. A lease term may include an option to extend or terminate the lease when it is reasonably certain the option will be exercised. Short-term leases of 12 months or less are excluded from accounting guidance; as a result, the lease payments are recognized on a straight-line basis over the lease term and the leases are not reflected on the Company’s Consolidated Balance Sheets. Renewal and termination options are considered when determining short-term leases. Leases are accounted for on an individual lease level. Other Real Estate Owned : Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value, less selling costs, at the date of foreclosure, establishing a new cost basis in the asset. Physical possession of residential real estate property collateralizing a residential mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through similar legal agreement. Subsequent to foreclosure, valuations are periodically performed by management, with any subsequent declines in value recorded as a charge to expense through an impairment recorded directly against the other real estate owned assets. Changes in the valuation allowance are recorded as provision for losses on other real estate owned. Revenue and expenses from operations related to other real estate owned are included in the provision on other real estate owned line of the Consolidated Statements of Income. Company-Owned Life Insurance : The Company has purchased life insurance policies on certain current and former officers and key employees. Company-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. F-13 Table of Contents Mortgage Banking Derivatives : Commitments to fund mortgage loans (interest rate locks and forward delivery commitments) to be sold in the secondary market for the future delivery of these loans are accounted for as free standing derivatives. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. In order to hedge the change in interest rates resulting from its commitments to fund the loans, the Company enters into forward commitments for future delivery of mortgage loans when interest rate locks are entered into. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in the Net gains on mortgage loans line of the Consolidated Statements of Income. Stock-Based Compensation : The Company has stock-based compensation plans that provide for the granting of stock options, restricted stock awards, restricted stock units and performance stock units to associates and non-associate directors who perform services for the Company. The Company estimates the fair value of its stock option awards on the date of grant using the Black-Scholes option-pricing model. The Company determines the fair value of the restricted and performance stock units as well as restricted stock awards based on the estimated market value of the underlying shares at the date of grant. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s policy is to recognize forfeitures as they occur. Income Taxes : Income tax expense is the total of the current year income tax due and the change in the deferred tax assets and liabilities. Deferred income tax assets and liabilities are determined using the liability method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of temporary differences between the book and tax basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Company recognizes tax benefits from uncertain tax positions when it is more-likely-than-not, based on the technical merits of the position, the tax position will be sustained upon examination, including the resolution of any appeals or litigation. Tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon resolution. The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments have historically been minimal and immaterial to financial results. The Company classifies interest and penalties, if any, as a component of income tax expense. Comprehensive Income : Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available-for-sale, net of taxes, which is also recognized as a separate component of equity. Earnings per Common Share : Earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding during each period. See Note 13 – Earnings Per Common Share for the common share equivalents that have been included and excluded from the calculation of earnings per common share. Loan Commitments and Related Financial Instruments : Financial instruments include off-balance sheet credit instruments, such as unused lines of credit, commitments to make loans and commercial and standby letters of credit. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Loss Contingencies : Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the consolidated financial statements. F-14 Table of Contents Deposits : Deposit products include money market accounts, demand deposit accounts, time-deposit accounts (typically certificates of deposit), NOW accounts (interest checking accounts), and savings accounts. Our accounts are federally insured by the FDIC up to the legal maximum amount. Borrowings : Short-term and long-term borrowing sources utilized to supplement deposits and meet liquidity needs. A blanket pledge and security agreement is in place with FHLB that requires certain loans and securities to be pledged as collateral for any outstanding borrowings under the agreement. Our borrowing facilities include various financial and other covenants, including, but not limited to, a requirement that the Bank maintains regulatory capital that is deemed "well capitalized" by federal banking agencies. Fair Value of Financial Instruments : Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 17 – Fair Value. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates. Revenue Recognition : In accordance with the Financial Accounting Standards Board ("FASB"), Revenue Contracts with Customers ("Topic 606"), trust and investment management fees are earned by providing trust and investment services to customers. The Company’s performance obligation under these contracts is satisfied over time as the services are provided. Fees are recognized monthly based on the average monthly value of the assets under management and the corresponding fee rate based on the terms of the contract. Performance based incentive fees earned with respect to investment management contracts for the year ended December 31, 2019 were immaterial. No performance based incentive fees were earned for the year ended December 31, 2020. Receivables are recorded on the Consolidated Balance Sheets in the Accounts receivable line item. Income related to trust and investment management fees, bank fees, and risk management and insurance fees on the Consolidated Statements of Income for the years ended December 31, 2020 and 2019 are considered in scope of Topic 606. Transition of LIBOR to an Alternative Reference Rate : In July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate ("LIBOR") announced that after 2021 it will no longer persuade or compel banks to submit rates for the calculation of LIBOR. In response, the Federal Reserve Board and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee to identify a set of alternative reference interest rates for possible use as market benchmarks. This committee has proposed the Secured Overnight Financing Rate ("SOFR") as its recommended alternative to U.S. dollar LIBOR, and the Federal Reserve Bank of New York began publishing SOFR rates in the second quarter of 2018. SOFR is based on a broad segment of the overnight Treasury repurchase market and is intended to be a measure of the cost of borrowing cash overnight collateralized by Treasury securities. Certain of the Company’s assets and liabilities are indexed to LIBOR, with exposure extending past December 31, 2021. The Company is currently evaluating and planning for the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement. In general, the transition away from LIBOR may result in increased market risk, credit risk, operational risk and business risk for the Company. The Company has developed a LIBOR transition plan, which addresses governance, risk management, legal, operational, systems and operations, fallback language, and other aspects of planning. The Company has prepared a timeline to transition from LIBOR before the end of 2021. Restrictions on Cash : During the year ended December 31, 2020, the Board of Governors of the Federal Reserve System reduced reserve requirement ratios to zero percent. This action eliminated reserve requirements for all depository institutions. Reclassifications : Certain items in prior year financial statements were reclassified to conform to the current presentation. Such reclassifications had no impact on net income or total shareholders’ equity. Recently adopted accounting pronouncements : The following reflect recent accounting pronouncements that have been adopted by the Company during the Company’s fiscal year ended December 31, 2020. F-15 Table of Contents In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820) ("ASU 2018-13"). ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 was effective for the Company on January 1, 2020 and did not have a material impact on the Company’s financial statement disclosures. In April 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." (" ASU 2020-04"), ASU 2020-04 is intended to provide relief for companies preparing for discontinuation of interest rates based on LIBOR. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or other reference rates expected to be discontinued. ASU 2020-04 also provides for a one-time sale and/or transfer to available-for-sale or trading to be made for held-to-maturity debt securities that both reference an eligible reference rate and were classified as held-to-maturity before January 1, 2020. ASU 2020-04 was effective for all entities as of March 12, 2020 and through December 31, 2022. Companies can apply the ASU as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The guidance requires companies to apply the guidance prospectively to contract modifications and hedging relationships while the one-time election to sell and/or transfer debt securities classified as held-to-maturity may be made any time after March 12, 2020. ASU 2020-04 was effective for the Company on March 12, 2020 and did not have a material impact on the Company’s financial statement disclosures. ​ Recently issued accounting pronouncements, not yet adopted : The following reflects pending pronouncements with an update to the expected impact since the end of the Company’s fiscal year ended December 31, 2020. In February 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, as amended ("ASU 2016-13"). ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss ("CECL") model. The CECL model is applicable to the measurement of credit losses on the financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings and the allowance for loan losses as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 was set to be effective for most public companies on January 1, 2020. However, at the October 16, 2019 FASB meeting, the FASB voted unanimously to delay the effective date of CECL adoption for smaller reporting companies ("SRCs") to January 1, 2023. During the year ended December 31, 2020, the CECL committee of the Company continued to work through its implementation plan. The Company has integrated historical and current loan level data as required by CECL and is working with its third-party vendor solution to begin evaluating the methodologies available under the CECL model on its loan portfolios. The Company also continues to evaluate documentation requirements, internal control structure, relevant data sources, and system configurations. The Company has completed a successful integration of the required fields and historical data for key loan, client and collateral data within the third-party solution and has been able to run parallels of our current allowance for loan losses calculation in the software to compare to our internal calculation and reconcile known differences. The Company has started the process of selecting the methodologies to be used for each segment of its loan portfolio and started preliminarily testing to determine the impact of each methodology. Currently, we are unable to estimate the impact the adoption of this update will have on the consolidated financial statements and disclosures. However, the Company expects the impact of the adoption will be significantly influenced by the composition and characteristics of its loan portfolios along with economic conditions prevalent as of the date of adoption. The Company expects to implement the new standard beginning January 1, 2023. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which amended existing guidance to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments require an entity to perform its annual, F-16 Table of Contents or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge of the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 was set to be effective for the Company on January 1, 2021. However, ASU 2019-10 amended the mandatory effective date for ASU 2014-07 to January 1, 2023 for SRC’s, with earlier adoption permitted. This update is not expected to have a significant impact on the financial statements and disclosures. ​ ​ ​ ​ NOTE 2 – ACQUISITIONS ​ ​ On February 10, 2020, the Company entered into a branch purchase and assumption agreement with Simmons Bank, a subsidiary of Simmons First National Corporation, to acquire all of the Simmons’ Colorado locations, including three branches and one loan production office located in Denver, as well as certain deposits, loans and other assets and liabilities. The transaction closed on May 15, 2020 with an aggregate purchase price of $ 61.6 million, including a deposit premium of 6.06 %. ​ During the third quarter 2020, the Company closed two of the branches and the loan production office acquired in the Branch Acquisition. Goodwill of $ 4.5 million was recognized in the transaction and represents expected synergies and cost savings resulting from combining the expanded footprint and expertise of the associates. ​ The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the May 15, 2020 transaction with Simmons, and reflects all adjustments made to the fair value of the opening balance sheet through December 31, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ May 15, Fair value of consideration transferred ​ 2020 Cash consideration ​ $ 61,599 Total fair value of consideration transferred ​ ​ 61,599 ​ ​ ​ ​ Assets acquired ​ ​ ​ Cash and due from banks ​ ​ 283 Loans, net ​ ​ 119,552 Core deposit intangible (1) ​ ​ 53 Accrued income and other assets ​ ​ 382 Total assets acquired ​ ​ 120,270 ​ ​ ​ ​ Liabilities assumed ​ ​ ​ Deposits ​ ​ 63,080 Accrued expenses and other liabilities ​ 96 Total liabilities assumed ​ ​ 63,176 Net assets acquired ​ ​ 57,094 Goodwill recognized ​ $ 4,505 _____________________________________ (1) The core deposit intangible was determined to have an estimated life of 10 years . ​ The fair value of net assets acquired includes fair value adjustments to loans as of the acquisition date. The fair value adjustments were determined using discounted expected cash flows. Loans had a fair value of $ 119.6 million and a contractual balance of $ 120.6 million as of May 15, 2020. The discount on the loans acquired in this transaction due to anticipated credit loss, as well as considerations for market interest rates, totaled $ 1.1 million, representing 0.9 % of their contractual balances. No allowance for loan losses related to acquired loans was recorded as a result of the Branch Acquisition. Loans acquired included short-term modifications made on a good faith basis by Simmons, in response to F-17 Table of Contents COVID-19. All of the modification were given additional review prior to the closing of the purchase and management determined that loans were performing prior to modification and were not considered impaired at purchase. There were no loans acquired that were considered to be purchased credit impaired ("PCI") loans. ​ The composition of the acquired loan portfolio as of May 15, 2020 is detailed in the table below (in thousands): ​ ​ ​ ​ ​ ​ ​ May 15, ​ 2020 Cash, Securities and Other (1) ​ $ 13,457 Construction and Development ​ 40,407 1-4 Family Residential ​ 7,252 Non-Owner Occupied CRE ​ 545 Owner Occupied CRE ​ ​ 321 Commercial and Industrial ​ ​ 58,660 Total gross loans ​ $ 120,642 _____________________________________ (1) Includes $ 12.9 million in PPP loans. ​ The Company incurred $ 0.9 million in expenses related to the acquisition during the year ended December 31, 2020. Acquisition expenses, including professional fees, are included in the Total non-interest expense line of the Consolidated Statements of Income. NOTE 3 - INVESTMENT SECURITIES The following presents the amortized cost and fair value of securities available-for-sale, with gross unrealized gains and losses recognized in accumulated other comprehensive income as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair December 31, 2020 ​ Cost ​ Gains ​ Losses ​ Value Investment securities available-for-sale: ​ ​ ​ ​ U.S. Treasury debt ​ $ 250 ​ $ 4 ​ $ — ​ $ 254 Corporate bonds ​ ​ 6,000 ​ ​ 55 ​ ​ ( 11 ) ​ ​ 6,044 Government National Mortgage Association ("GNMA") mortgage-backed securities – residential ​ 23,806 ​ 798 ​ — ​ 24,604 Federal National Mortgage Association ("FNMA") mortgage-backed securities – residential ​ ​ 1,616 ​ ​ 61 ​ ​ — ​ ​ 1,677 Corporate collateralized mortgage obligations ("CMO") and mortgage-backed securities ("MBS") ​ 4,078 ​ 62 ​ ( 53 ) ​ 4,087 Total securities available-for-sale ​ $ 35,750 ​ $ 980 ​ $ ( 64 ) ​ $ 36,666 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair December 31, 2019 ​ Cost ​ Gains ​ Losses ​ Value Investment securities available-for-sale: ​ ​ ​ ​ U.S. Treasury debt ​ $ 250 ​ $ 4 ​ $ — ​ $ 254 GNMA mortgage-backed securities – residential ​ 45,490 ​ 157 ​ ( 335 ) ​ 45,312 FNMA mortgage-backed securities – residential ​ ​ 2,935 ​ 11 ​ ( 29 ) ​ ​ 2,917 CMO and MBS ​ 10,425 ​ 40 ​ ( 45 ) ​ 10,420 Total securities available-for-sale ​ $ 59,100 ​ $ 212 ​ $ ( 409 ) ​ $ 58,903 ​ Net amortization of premiums and discounts related to mortgage securities during each of the years ended December 31, 2020 and 2019 was $ 0.4 million and $ 0.2 million, respectively, and is included in net interest income. F-18 Table of Contents As of December 31, 2020, the amortized cost and estimated fair value of available-for-sale securities have contractual maturity dates shown in the table below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately. ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Fair December 31, 2020 ​ Cost ​ Value Due within one year ​ $ 250 ​ $ 254 Due between one year and five years ​ ​ 1,250 ​ ​ 1,245 Due between five years and ten years ​ ​ 4,750 ​ ​ 4,799 Securities (agency, CMO, and MBS) ​ 29,500 ​ 30,368 Total ​ $ 35,750 ​ $ 36,666 ​ In 2014, the Company began investing in a small business investment company ("SBIC") fund administered by the Small Business Administration. During the years ended 2020 and 2019, the Company invested $ 0.5 million and $ 0.4 million, respectively, in SBIC. As of December 31, 2020 and 2019, the Company held a balance of $ 2.1 million and $ 1.6 million, respectively, with SBIC, which is included in Other assets in the accompanying Consolidated Balance Sheets. The Company may be obligated to invest up to an additional $ 0.9 million in future SBIC investments. As of December 31, 2020 and December 31, 2019, securities with carrying values totaling $ 3.7 million and $ 5.5 million, respectively, were pledged to secure various public deposits and credit facilities of the Company. As of December 31, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than the U.S. Government sponsored entities and agencies, in an amount greater than 10 % of shareholders’ equity. As of December 31, 2020 and December 31, 2019, seven securities and twenty-six securities were in an unrealized loss position, with unrealized losses totaling $ 0.1 million and $ 0.4 million, respectively. Two of the securities in an unrealized loss position as of December 31, 2020 have been in a continuous unrealized loss position for more than twelve months, and the remaining have been in a continuous unrealized loss position for less than twelve months. The unrealized loss positions were caused primarily by interest rate changes and market assumptions about prepayments of principal and interest on the underlying mortgages. Because the decline in market value is attributable to market conditions, not credit quality, and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be near or at maturity, the Company does not consider these investments to be other-than-temporarily impaired as of December 31, 2020. The following table summarizes securities with unrealized losses as of December 31, 2020 and December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands, before tax): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 Months 12 Months or Longer Total ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized December 31, 2020 ​ Value ​ Losses ​ Value ​ Losses ​ Value Losses Corporate bonds ​ ​ 3,489 ​ ​ ( 11 ) ​ ​ — ​ ​ — ​ ​ 3,489 ​ ( 11 ) Corporate CMO and MBS ​ 880 ​ ( 40 ) ​ 566 ​ ( 13 ) ​ 1,446 ​ ( 53 ) Total ​ $ 4,369 ​ $ ( 51 ) ​ $ 566 ​ $ ( 13 ) ​ $ 4,935 ​ $ ( 64 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 Months 12 Months or Longer Total ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized December 31, 2019 Value ​ Losses ​ Value ​ Losses Value Losses GNMA mortgage-backed securities - residential ​ $ 28,203 ​ $ ( 193 ) ​ $ 4,450 ​ $ ( 142 ) ​ $ 32,653 ​ $ ( 335 ) FNMA mortgage-backed securities - residential ​ ​ — ​ ​ — ​ ​ 2,347 ​ ​ ( 29 ) ​ ​ 2,347 ​ ​ ( 29 ) Corporate CMO and MBS ​ 7,780 ​ ( 45 ) ​ — ​ — ​ 7,780 ​ ( 45 ) Total ​ $ 35,983 ​ $ ( 238 ) ​ $ 6,797 ​ $ ( 171 ) ​ $ 42,780 ​ $ ( 409 ) ​ F-19 Table of Contents The Company did not sell any securities during the year ended December 31, 2020. The Company sold $ 7.5 million of securities, realized $ 0.1 million of gains, and realized no losses, from the sale of securities using the specific identification method for the year ended December 31, 2019. ​ NOTE 4 – CORRESPONDENT BANK STOCK The following presents the Company’s investments in correspondent bank stock, as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2020 ​ 2019 FHLB ​ $ 2,522 ​ $ 559 BBW ​ 30 ​ 26 Total ​ $ 2,552 ​ $ 585 ​ ​ NOTE 5 - LOANS AND THE ALLOWANCE FOR LOAN LOSSES The following presents a summary of the Company’s loans as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Cash, Securities and Other (1) ​ $ 357,020 ​ $ 146,701 Construction and Development ​ 131,111 ​ 28,120 1-4 Family Residential ​ 455,038 ​ 400,134 Non-Owner Occupied CRE ​ 281,943 ​ 165,179 Owner Occupied CRE ​ ​ 163,042 ​ ​ 127,968 Commercial and Industrial (2) ​ ​ 146,031 ​ ​ 128,457 Total loans held for investment ​ 1,534,185 ​ 996,559 Deferred costs (fees) and unamortized premiums/(unaccreted discounts), net ​ ( 1,352 ) ​ 1,448 Allowance for loan losses ​ ( 12,539 ) ​ ( 7,875 ) Loans, net ​ $ 1,520,294 ​ $ 990,132 ______________________________________ (1) Includes PPP loans of $ 142.9 million as of December 31, 2020. (2) Includes MSLP loans of $ 6.6 million as of December 31, 2020. ​ As of December 31, 2020, total loans held for investment include $ 127.2 million of performing loans purchased as part of the Branch Acquisition. See Note 2 – Acquisitions for more information. The CARES Act created the PPP, which is administered by the SBA. The PPP is intended to provide loans to small businesses to pay their employees, rent, mortgage interest and utilities. The loans may be forgiven conditioned upon the client providing payroll documentation evidencing their compliant use of funds and otherwise complying with the terms of the program. The Bank is an approved SBA lender and as of December 31, 2020, the Cash, Securities and Other portion of the loan portfolio included $ 142.9 million of PPP loans, or 40.0 % of the total category. The Company is a participant in the Federal Reserve’s MSLP to support lending to small and medium-sized for profit businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. As of December 31, 2020, the Company’s Commercial and Industrial loans included six MSLP loan with the net carrying amount of $ 6.6 million, or 4.5 % of the total category. Loan Modifications As a result of the COVID-19 pandemic, a loan modification program was designed and implemented to assist our clients experiencing financial stress resulting from the economic impacts caused by the global pandemic. The Company offered loan extensions, temporary payment moratoriums, and financial covenant waivers for commercial and consumer F-20 Table of Contents borrowers impacted by the pandemic who have a pass risk rating and have not been delinquent over 30 days on payments in the last two years . During 2020, the Company’s loan portfolio included 89 loans which were modified during the year, totaling $ 160.8 million. Two of these loans were still in their deferral period as of December 31, 2020 in the amount of $ 2.1 million. The following presents loans in their deferral period under the Company’s COVID-19 loan modification program as of December 31, 2020 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Loans ​ # of Loans Modified ​ Outstanding Balance of Modified Loans ​ % of Total Loan Balance Modified ​ Cash, Securities and Other ​ $ 357,020 ​ ​ — ​ $ — ​ ​ — % Construction and Development ​ 131,111 ​ ​ — ​ ​ — ​ ​ — ​ 1-4 Family Residential ​ 455,038 ​ ​ 1 ​ ​ 346 ​ ​ 0.02 ​ Non-Owner Occupied CRE ​ ​ 281,943 ​ ​ — ​ ​ — ​ ​ — ​ Owner Occupied CRE ​ ​ 163,042 ​ ​ 1 ​ ​ 1,716 ​ ​ 0.11 ​ Commercial and Industrial ​ 146,031 ​ ​ — ​ ​ — ​ ​ — ​ Total Loans ​ $ 1,534,185 ​ ​ 2 ​ $ 2,062 ​ ​ 0.13 % ​ The CARES Act provides banks optional, temporary relief from accounting for certain loan modifications as a TDR. The modifications must be related to the adverse effects of COVID-19, and certain other criteria are required to be met in order to apply the relief. Interagency guidance from Federal Reserve and the FDIC confirmed with the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. We believe our loan modification program meets that definition. In accordance with that guidance, the Company is recognizing interest income on all loans modified for temporary payment moratoriums, primarily for a period of 180 days or less. All loans modified in response to COVID-19 are classified as performing and pass rated as of December 31, 2020. These loans are included in the allowance for loan loss general reserve in accordance with ASC 450-20. Management has increased our loan level reviews and portfolio monitoring to address the changing environment. The Company continues to meet regularly with clients who could be more highly impacted by the recent COVID-19 pandemic. These are borrowers in accommodations, transportation and restaurant industries, which we believe may be more impacted by the pandemic, and those loans where there may be a greater than 50 % probability of a downgrade, covenant violation or 20 % reduction in collateral position. The portion of our credit exposure to the highest risk industries impacted by COVID-19, such as accommodations, transportation and restaurants, is less than 3.0 % of our loan portfolio. Management believes the diversity of the loan portfolio is prudent and remains consistent with the credit culture and goals of the Bank. F-21 Table of Contents Interest accrued during the modification term on modified loans is deferred to the end of the loan term. As of December 31, 2020, no allowance for loan loss was deemed necessary on the accrued interest balances related to loan modifications. The following presents, by class, an aging analysis of the recorded investments (excluding accrued interest receivable, deferred costs (fees), and unamortized premiums/ (unaccreted discounts) which are not material) in loans past due as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30-59 60-89 90 or Total ​ ​ Total ​ ​ Days ​ Days ​ More Days ​ Loans ​ ​ ​ ​ Recorded December 31, 2020 ​ Past Due ​ Past Due ​ Past Due ​ Past Due ​ Current ​ Investment Cash, Securities and Other ​ $ 752 ​ $ — ​ $ 48 ​ $ 800 ​ $ 356,220 ​ $ 357,020 Construction and Development ​ — ​ ​ — ​ ​ — ​ — ​ 131,111 ​ 131,111 1-4 Family Residential ​ 1,283 ​ ​ — ​ ​ — ​ 1,283 ​ 453,755 ​ 455,038 Non-Owner Occupied CRE ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 281,943 ​ ​ 281,943 Owner Occupied CRE ​ ​ 479 ​ ​ — ​ ​ — ​ ​ 479 ​ ​ 162,563 ​ ​ 163,042 Commercial and Industrial ​ 271 ​ ​ — ​ ​ 3,529 ​ 3,800 ​ 142,231 ​ 146,031 Total ​ $ 2,785 ​ $ — ​ $ 3,577 ​ $ 6,362 ​ $ 1,527,823 ​ $ 1,534,185 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30-59 60-89 90 or Total ​ ​ Total ​ ​ Days ​ Days ​ More Days ​ Loans ​ ​ ​ ​ Recorded December 31, 2019 ​ Past Due ​ Past Due ​ Past Due ​ Past Due ​ Current ​ Investment Cash, Securities and Other ​ $ 525 ​ $ — ​ $ — ​ $ 525 ​ $ 146,176 ​ $ 146,701 Construction and Development ​ — ​ — ​ — ​ — ​ 28,120 ​ 28,120 1-4 Family Residential ​ 5,688 ​ — ​ — ​ 5,688 ​ 394,446 ​ 400,134 Non-Owner Occupied CRE ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 165,179 ​ ​ 165,179 Owner Occupied CRE ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 127,968 ​ ​ 127,968 Commercial and Industrial ​ — ​ 3,110 ​ 907 ​ 4,017 ​ 124,440 ​ 128,457 Total ​ $ 6,213 ​ $ 3,110 ​ $ 907 ​ $ 10,230 ​ $ 986,329 ​ $ 996,559 ​ As of December 31, 2020 and December 31, 2019, the Company did no t have any loans which were more than 90 days delinquent and accruing interest. Non-Accrual Loans and Troubled Debt Restructurings The following presents the recorded investment in non-accrual loans by class as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Cash, Securities and Other ​ $ 50 ​ $ 2,803 Owner Occupied CRE ​ ​ 479 ​ ​ — Commercial and Industrial ​ 3,529 ​ 4,412 Total ​ $ 4,058 ​ $ 7,215 ​ Non-accrual loans classified as TDR accounted for $ 3.6 million of the recorded investment as of December 31, 2020 and $ 7.2 million as of December 31, 2019, respectively. Non-accrual loans are classified as impaired loans and individually evaluated for impairment. F-22 Table of Contents The following presents a summary of the unpaid principal balance of loans classified as TDRs as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Accruing ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ $ — ​ $ 5,055 Non-accrual ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ ​ 48 ​ ​ 2,803 Commercial and Industrial ​ ​ 3,529 ​ ​ 4,412 Total ​ ​ 3,577 ​ ​ 12,270 Allowance for loan losses associated with TDR ​ ( 1,619 ) ​ ( 833 ) Net recorded investment ​ $ 1,958 ​ $ 11,437 ​ As of December 31, 2019, the Company extended additional principal allowed under the commitment to a Commercial and Industrial borrower for operational needs, subsequent to the loan being classified as a TDR, in the amount of $ 0.2 million. This loan was fully paid off as of December 31, 2020. The Company modified one loan into a TDR during the year ended December 31, 2020. The Borrower was having difficulty making payments in accordance with the original contract terms. The Company restructured the loan including receiving a large paydown and extended the maturity and lowered the interest rate as a result of the Borrower’s financial difficulties. The loan paid off in full as of December 31, 2020. The Company modified one borrower relationship with two loans into a TDR for the year ended December 31, 2019. The borrower, who has loans that are classified as Commercial and Industrial, was not making payments in accordance with the original contract terms. The modification included an extension of the maturity date that the Company would not have otherwise considered as a result of the Borrower’s financial difficulties. The extension of maturity was for a period of approximately nine months. These two loans are currently on non-accrual and the borrower was not making payments as agreed for the year ended December 31, 2020. TDRs are reviewed individually for impairment and are included in the Company’s specific reserves in the allowance for loan losses. If charged off, the amount of the charge off is included in the Company’s charge off factors, which impact the Company’s reserves on non-impaired loans. F-23 Table of Contents The following table presents impaired loans by portfolio and related valuation allowance as of the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ December 31, 2019 ​ ​ ​ Unpaid Allowance ​ ​ ​ Unpaid Allowance ​ ​ Total ​ Contractual ​ for ​ Total ​ Contractual ​ for ​ ​ Recorded ​ Principal ​ Loan ​ Recorded ​ Principal ​ Loan ​ ​ Investment ​ Balance ​ Losses ​ Investment ​ Balance ​ Losses Impaired loans with a valuation allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ $ 2 ​ $ 2 ​ $ 2 ​ $ — ​ $ — ​ $ — Commercial and Industrial ​ ​ 3,419 ​ ​ 3,419 ​ ​ 1,619 ​ ​ 4,412 ​ ​ 4,412 ​ ​ 833 Total ​ $ 3,421 ​ $ 3,421 ​ $ 1,621 ​ $ 4,412 ​ $ 4,412 ​ $ 833 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans with no related valuation allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ $ 48 ​ $ 48 ​ $ — ​ $ 2,803 ​ $ 2,803 ​ $ — Owner Occupied CRE ​ ​ 479 ​ ​ 479 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and Industrial ​ ​ 110 ​ ​ 110 ​ ​ — ​ ​ 5,055 ​ ​ 5,055 ​ ​ — Total ​ $ 637 ​ $ 637 ​ $ — ​ $ 7,858 ​ $ 7,858 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total impaired loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ $ 50 ​ $ 50 ​ $ 2 ​ $ 2,803 ​ $ 2,803 ​ $ — Owner Occupied CRE ​ ​ 479 ​ ​ 479 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and Industrial ​ ​ 3,529 ​ ​ 3,529 ​ ​ 1,619 ​ ​ 9,467 ​ ​ 9,467 ​ ​ 833 Total ​ $ 4,058 ​ $ 4,058 ​ $ 1,621 ​ $ 12,270 ​ $ 12,270 ​ $ 833 ​ The recorded investment in loans in the previous tables excludes accrued interest, deferred costs (fees) and unamortized premiums/ (unaccreted discounts) which are not material. Interest income, if any, was recognized on the cash basis on non-accrual loans. The average balance of impaired loans and interest income recognized on impaired loans during the years ended December 31, 2020 and 2019 are included in the table below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2020 ​ 2019 ​ ​ Average ​ Interest ​ Average ​ Interest ​ ​ Recorded ​ Income ​ Recorded ​ Income ​ ​ Investment ​ Recognized ​ Investment ​ Recognized Impaired loans with a valuation allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ $ 1 ​ $ — ​ $ — ​ $ — Commercial and Industrial ​ ​ 3,453 ​ ​ — ​ ​ 1,686 ​ ​ — Total ​ $ 3,454 ​ $ — ​ $ 1,686 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans with no related valuation allowance: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ $ 1,180 ​ $ — ​ $ 6,217 ​ $ — Owner Occupied CRE ​ ​ 96 ​ ​ — ​ ​ — ​ ​ — Commercial and Industrial ​ ​ 4,893 ​ ​ 336 ​ ​ 4,499 ​ ​ 427 Total ​ $ 6,169 ​ $ 336 ​ $ 10,716 ​ $ 427 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total impaired loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, Securities, and Other ​ $ 1,181 ​ $ — ​ $ 6,217 ​ $ — Owner Occupied CRE ​ ​ 96 ​ ​ — ​ ​ — ​ ​ — Commercial and Industrial ​ ​ 8,346 ​ ​ 336 ​ ​ 6,185 ​ ​ 427 Total ​ $ 9,623 ​ $ 336 ​ $ 12,402 ​ $ 427 ​ F-24 Table of Contents Allowance for Loan Losses Allocation of a portion of the allowance for loan losses to one category of loans does not preclude its availability to absorb losses in other categories. The following presents the activity in the Company’s allowance for loan losses by portfolio class for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, ​ Construction ​ 1-4 ​ Non-Owner ​ Owner ​ Commercial ​ ​ ​ ​ Securities ​ and ​ Family ​ Occupied ​ Occupied ​ and ​ ​ ​ and Other ​ Development ​ Residential ​ CRE ​ CRE ​ Industrial ​ Total Changes in allowance for loan losses for the year ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 1,058 ​ $ 200 ​ $ 2,850 ​ $ 1,176 ​ $ 911 ​ $ 1,680 ​ $ 7,875 Provision for loan losses ​ 1,539 ​ 732 ​ 383 ​ 828 ​ 248 ​ 952 ​ 4,682 Charge-offs ​ ( 31 ) ​ — ​ — ​ — ​ — ​ — ​ ( 31 ) Recoveries ​ 13 ​ — ​ — ​ — ​ — ​ — ​ 13 Ending balance ​ $ 2,579 ​ $ 932 ​ $ 3,233 ​ $ 2,004 ​ $ 1,159 ​ $ 2,632 ​ $ 12,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as of December 31, 2020 allocated to loans evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ Individually ​ $ 2 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 1,619 ​ $ 1,621 Collectively ​ 2,577 ​ 932 ​ 3,233 ​ 2,004 ​ 1,159 ​ 1,013 ​ 10,918 Ending balance ​ $ 2,579 ​ $ 932 ​ $ 3,233 ​ $ 2,004 ​ $ 1,159 ​ $ 2,632 ​ $ 12,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans as of December 31, 2020, evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ Individually ​ $ 50 ​ $ — ​ $ — ​ $ 479 ​ $ — ​ $ 3,529 ​ $ 4,058 Collectively ​ 356,970 ​ 131,111 ​ 455,038 ​ 281,464 ​ 163,042 ​ 142,502 ​ 1,530,127 Ending balance ​ $ 357,020 ​ $ 131,111 ​ $ 455,038 ​ $ 281,943 ​ $ 163,042 ​ $ 146,031 ​ $ 1,534,185 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, ​ Construction ​ 1-4 ​ Non-Owner ​ Owner ​ Commercial ​ ​ ​ ​ Securities ​ and ​ Family ​ Occupied ​ Occupied ​ and ​ ​ ​ and Other ​ Development ​ Residential ​ CRE ​ CRE ​ Industrial ​ Total Changes in allowance for loan losses for the year ended December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 764 ​ $ 232 ​ $ 2,552 ​ $ 1,264 ​ $ 789 ​ $ 1,850 ​ $ 7,451 Provision for (recovery of) loan losses ​ 532 ​ ( 32 ) ​ 298 ​ ( 88 ) ​ 122 ​ ( 170 ) ​ 662 Charge-offs ​ ( 248 ) ​ — ​ — ​ — ​ — ​ — ​ ( 248 ) Recoveries ​ 10 ​ — ​ — ​ — ​ — ​ — ​ 10 Ending balance ​ $ 1,058 ​ $ 200 ​ $ 2,850 ​ $ 1,176 ​ $ 911 ​ $ 1,680 ​ $ 7,875 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for loan losses as of December 31, 2019 allocated to loans evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ Individually ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 833 ​ $ 833 Collectively ​ 1,058 ​ 200 ​ 2,850 ​ 1,176 ​ 911 ​ 847 ​ 7,042 Ending balance ​ $ 1,058 ​ $ 200 ​ $ 2,850 ​ $ 1,176 ​ $ 911 ​ $ 1,680 ​ $ 7,875 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans as of December 31, 2019, evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ Individually ​ $ 2,803 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 9,467 ​ $ 12,270 Collectively ​ 143,898 ​ 28,120 ​ 400,134 ​ 165,179 ​ 127,968 ​ 118,990 ​ 984,289 Ending balance ​ $ 146,701 ​ $ 28,120 ​ $ 400,134 ​ $ 165,179 ​ $ 127,968 ​ $ 128,457 ​ $ 996,559 ​ The Company categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk on a quarterly basis. The Company uses the following definitions for risk ratings: Special Mention—Loans classified as special mention have a potential weakness or borrowing relationships that require more than the usual amount of management attention. Adverse industry conditions, deteriorating financial conditions, declining trends, management problems, documentation deficiencies or other similar weaknesses may be F-25 Table of Contents evident. Ability to meet current payment schedules may be questionable, even though interest and principal are still being paid as agreed. The asset has potential weaknesses that may result in deteriorating repayment prospects if left uncorrected. Loans in this risk grade are not considered adversely classified. Substandard—Substandard loans are considered "classified" and are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Loans in this category may be placed on non-accrual status and may individually be evaluated for impairment if indicators of impairment exist. Doubtful—Loans graded Doubtful are considered "classified" and have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. However, the amount of certainty of eventual loss is not known because of specific pending factors. Loans not meeting any of the three criteria above are considered to be pass-rated loans. The following presents, by class and by credit quality indicator, the recorded investment in the Company’s loans as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ December 31, 2020 Pass Mention Substandard ​ Total Cash, Securities and Other ​ $ 356,970 ​ $ — ​ $ 50 ​ $ 357,020 Construction and Development ​ 131,111 ​ — ​ — ​ 131,111 1-4 Family Residential ​ ​ 451,918 ​ ​ — ​ ​ 3,120 ​ ​ 455,038 Non-Owner Occupied CRE ​ ​ 275,627 ​ ​ 6,316 ​ ​ — ​ ​ 281,943 Owner Occupied CRE ​ ​ 161,850 ​ ​ — ​ ​ 1,192 ​ ​ 163,042 Commercial and Industrial ​ 140,432 ​ — ​ 5,599 ​ 146,031 Total ​ $ 1,517,908 ​ $ 6,316 ​ $ 9,961 ​ $ 1,534,185 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ December 31, 2019 Pass Mention Substandard ​ Total Cash, Securities and Other ​ $ 143,898 ​ $ — ​ $ 2,803 ​ $ 146,701 Construction and Development ​ ​ 28,120 ​ — ​ — ​ ​ 28,120 1-4 Family Residential ​ ​ 395,224 ​ ​ — ​ ​ 4,910 ​ ​ 400,134 Non-Owner Occupied CRE ​ ​ 164,021 ​ ​ 1,158 ​ ​ — ​ ​ 165,179 Owner Occupied CRE ​ 127,968 ​ ​ — ​ ​ — ​ 127,968 Commercial and Industrial ​ 114,241 ​ — ​ 14,216 ​ 128,457 Total ​ $ 973,472 ​ $ 1,158 ​ $ 21,929 ​ $ 996,559 ​ ​ The Company had no loans graded doubtful as of the years ended December 31, 2020 and 2019. ​ NOTE 6 – PREMISES AND EQUIPMENT, NET The following presents a summary of the cost and accumulated depreciation of premises and equipment as of December 31 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ 2020 2019 Leasehold improvements, including artwork ​ $ 9,440 ​ $ 10,174 Equipment and software ​ 5,504 ​ 4,658 Gross premise and equipment ​ 14,944 ​ 14,832 Less: accumulated depreciation ​ ( 9,624 ) ​ ( 9,614 ) Premises and equipment, net ​ $ 5,320 ​ $ 5,218 ​ F-26 Table of Contents During the year ended December 31, 2020, the Company retired leasehold improvements, equipment and software in the amount of $ 1.1 million for an immaterial loss. During the year ended December 31, 2019, the Company retired leasehold improvements, equipment and software in the amount of $ 2.5 million that were fully depreciated and no longer in service. Depreciation expense for premises and equipment for the years ended December 31, 2020 and 2019 totaled $ 1.1 million and $ 1.3 million, respectively. Click or tap here to enter text. NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill were as follows as of December 31 (in thousands): ​ ​ ​ ​ ​ ​ ​ 2020 ​ 2019 Beginning balance $ 19,686 ​ $ 24,811 Impairment (1) ​ — ​ ​ ( 1,572 ) Reclass to held for sale (1) ​ — ​ ​ ( 3,553 ) Acquisition activity ​ 4,505 ​ ​ — Ending balance $ 24,191 ​ $ 19,686 ______________________________________ (1) Item related to sale of Capital Management segment assets, previously reported separately as the Capital Management segment. During the year ended December 31, 2020, the Company recorded $ 4.5 million of goodwill as a result of the Branch Acquisition on May 15, 2020. For additional information on goodwill and other intangible related to the acquisition, see Note 2 – Acquisitions. In 2019, an interim goodwill analysis resulted in the recognition of a goodwill impairment loss of $ 1.6 million. Additionally, the goodwill associated with Capital Management segment assets was allocated based on the relative fair value, and $ 3.6 million was reclassified to assets held for sale in 2019. The sale of these assets was completed on November 13, 2020. For changes related to the portion of goodwill reclassified to assets held for sale between segments, see Note 18 – Intangible Assets and Other Liabilities Classified as Held for Sale and Note 19 – Segment Reporting. Goodwill is tested annually for impairment on October 31 or earlier upon the occurrence of certain events. The Company identified a triggering event as a result of the economic impact of COVID-19 as of September 30, 2020 and performed a Step 1 quantitative analysis. Step 1 of the two-step goodwill impairment analysis includes the determination of the carrying value of the reporting unit, including the existing goodwill, and estimating the fair value of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, we are not required to perform the second step to the impairment test. Our Step 1 goodwill impairment analysis as of September 30, 2020 and October 31, 2020 both indicated that the Step 2 analysis was unnecessary. As of December 31, 2020, the Company’s reporting units had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value including goodwill. The qualitative assessment indicated that it was not more likely than not that the carrying value of the reporting unit exceeded its fair value. Therefore, the Company did not complete the two-step impairment test. ​ The following presents the Company’s intangible assets and related accumulated amortization as of December 31 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2019 Other intangibles ​ $ 4,593 ​ $ 4,540 Less: accumulated amortization on other intangibles ​ ( 4,526 ) ​ ( 4,512 ) Other intangible assets, net ​ $ 67 ​ $ 28 F-27 Table of Contents ​ During the year ended December 31, 2019, the Company retired intangible assets in the amount of $ 4.8 million that were fully amortized and no longer in service. ​ Amortization expense on definite-lived customer relationship and non-compete intangible assets was immaterial for the year ended December 31, 2020 and $ 0.4 million for the year ended December 31,2019. The following presents the expected amortization expense on definite-lived intangible assets existing as of December 31, 2020 (in thousands): ​ ​ ​ ​ ​ Year ​ ​ Expense 2021 ​ $ 17 Thereafter ​ ​ 50 Total ​ $ 67 ​ ​ NOTE 8 - LEASES Leases in which the Company is determined to be the lessee are primarily operating leases comprised of real estate property and office space for our corporate headquarters and profit centers with terms that extend to 2032. Certain properties contain portions that are subleased with terms that ended in 2020 that were related to the Capital Management segment. In accordance with ASC 842, operating leases are required to be recognized as a right-of-use asset with a corresponding lease liability. The following table presents the classification of the right-of-use asset and corresponding liability within the Consolidated Balance Sheets. The Company elected to not include short-term leases with initial terms of twelve months or less, on the Consolidated Balance Sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2020 ​ 2019 Lease Right-of-Use Assets Classification ​ ​ ​ ​ ​ ​ Operating lease right-of-use assets Other assets ​ $ 11,341 ​ $ 10,308 ​ ​ ​ ​ ​ ​ ​ ​ Lease Liabilities Classification ​ ​ ​ ​ ​ ​ Operating lease liabilities Other liabilities ​ $ 13,970 ​ $ 13,480 ​ The Company’s operating lease agreements typically include an option to renew the lease at the Company’s discretion. To the extent the Company is reasonably certain it will exercise the renewal option at the inception of the lease, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. ASC 842 requires the use of the rate implicit in the lease when it is readily determinable. As this rate is typically not readily determinable, at the inception of the lease, the Company uses its collateralized incremental borrowing rate over a similar term. The amount of the right-of-use asset and lease liability are impacted by the discount rate used to calculate the present value of the minimum lease payments over the term of the lease. ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 ​ 2019 Weighted-Average Remaining Lease Term ​ ​ ​ ​ ​ Operating leases 4.79 years ​ 4.91 years ​ ​ ​ ​ ​ ​ Weighted-Average Discount Rate ​ ​ ​ ​ ​ Operating leases 3.04 % ​ 3.71 % ​ The Company’s operating leases contain fixed and variable lease components and it has elected to account for all classes of underlying assets as a single lease component. Variable lease costs primarily represent common area maintenance and parking. The Company recognized lease costs in Occupancy and equipment expense in the accompanying Consolidated Statements of Income. The following table represents the Company’s net lease costs (in thousands): F-28 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2020 ​ 2019 Lease Costs ​ ​ ​ ​ ​ Operating lease cost $ 3,162 ​ $ 3,186 Variable lease cost ​ 1,894 ​ ​ 1,513 Sublease income ​ ( 232 ) ​ ​ ( 397 ) Lease costs, net $ 4,824 ​ $ 4,302 ​ The following table presents a maturity analysis of the Company’s operating lease liabilities on an annual basis for each of the next five years and total amounts thereafter as of December 31, 2020. ​ ​ ​ ​ ​ Year Ended December 31, ​ Operating Leases 2021 ​ $ 3,323 2022 ​ 3,239 2023 ​ ​ 2,937 2024 ​ 2,785 2025 ​ 1,783 Thereafter ​ 867 Total future minimum lease payments ​ $ 14,934 Less: imputed interest ​ ​ ( 964 ) Present value of net future minimum lease payments ​ $ 13,970 ​ ​ ​ ​ NOTE 9 - DEPOSITS The following presents the Company’s interest bearing deposits as of December 31, 2020 and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Money market deposit accounts ​ $ 847,430 ​ $ 615,575 Time deposits ​ 172,682 ​ 134,913 Negotiable order of withdrawal accounts ​ 113,052 ​ 91,921 Savings accounts ​ 5,289 ​ 4,307 Total interest-bearing deposits ​ $ 1,138,453 ​ $ 846,716 Aggregate time deposits of $250,000 or greater ​ $ 73,401 ​ $ 61,596 ​ Deposits acquired through acquisitions during the year ended 2020 totaled $ 63.1 million. See Note 2 – Acquisitions for more information. Overdraft balances classified as loans totaled $ 0.1 million and an immaterial amount as of December 31, 2020 and 2019, respectively. F-29 Table of Contents The following presents the scheduled maturities of all time deposits for the next five years ending December 31 (in thousands): ​ ​ ​ ​ ​ Year Ending December 31, ​ Time Deposits 2021 ​ $ 125,238 2022 ​ 23,065 2023 ​ 20,115 2024 ​ 2,550 2025 ​ 1,691 Thereafter ​ 23 Total ​ $ 172,682 ​ ​ NOTE 10 - BORROWINGS The Bank has executed a blanket pledge and security agreement with the FHLB that requires certain loans and securities be pledged as collateral for any outstanding borrowings under the agreement. The collateral pledged as of December 31, 2020 and December 31, 2019 amounted to $ 668.6 million and $ 515.5 million, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow an additional $ 441.8 million as of December 31, 2020. Each advance is payable at its maturity date. The Company had the following required maturities on FHLB borrowings as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, Maturity Date Rate % 2020 2019 August 26, 2020 ​ 1.94 ​ ​ — ​ ​ 10,000 April 22, 2022 ​ 0.37 ​ ​ 5,000 ​ ​ — May 5, 2023 ​ 0.76 ​ ​ 10,000 ​ ​ — Total ​ $ 15,000 ​ $ 10,000 ​ To bolster the effectiveness of the SBA’s PPP, the Federal Reserve is supplying liquidity to participating financial institutions through term financing collateralized by PPP loans to small businesses. The Paycheck Protection Program Liquidity Facility ("PPPLF") extends credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value. As of December 31, 2020 the Company is utilizing $ 134.6 million under the PPPLF program which is included in the FHLB and Federal Reserve borrowings line of the Consolidated Balance Sheets. The Bank has borrowing capacity associated with three unsecured federal funds lines of credit up to $ 10.0 million, $ 19.0 million, and $ 25.0 million. As of December 31, 2020 and 2019, there were no amounts outstanding on any of the federal funds lines. As of December 31, 2020 and 2019, subordinated notes (the "2016 Sub Notes") issued to various investors totaled $ 6.6 million. The 2016 Sub Notes accrue interest at a rate of 7.25 % per annum until December 31, 2021, at which time the rate will adjust each quarter to the then current 90 day LIBOR plus 587 basis points, mature on December 31, 2026, are redeemable at the option of the Company after January 1, 2022, and pay interest quarterly. On March 17, 2020, the Company completed the issuance and sale of subordinated notes (the "March 2020 Sub Notes") totaling $ 8.0 million in aggregate principal amount. The issuance included $ 0.1 million of issuance costs resulting in a net balance of $ 7.9 million as of December 31, 2020 included in the Subordinated notes line of the Consolidated Balance Sheets. The March 2020 Sub Notes accrue interest at a rate of 5.125 % per annum until March 31, 2025, at which time the rate will adjust each quarter to the then current three-month LIBOR, or an alternative rate determined in accordance with the terms of the March 2020 Sub Notes, plus 450 basis points; mature on March 31, 2030; are redeemable at the option of the Company on or after March 31, 2025; and pay interest quarterly. On November 25, 2020, the Company completed the issuance and sale of subordinated notes (the "November 2020 Sub Notes") totaling $ 10.0 million in aggregate principal amount. The issuance included $ 0.2 million of issuance F-30 Table of Contents costs resulting in a net balance of $ 9.8 million as of December 31, 2020 included in the Subordinated notes line of the Consolidated Balance Sheets. The November 2020 Sub Notes accrue interest at a rate of 4.25 % per annum until December 1, 2025, at which time the rate will adjust each quarter to the then current three-month term SOFR, or an alternative rate determined in accordance with the terms of the November 2020 Sub Notes, plus 402 basis points; mature on December 1, 2030; are redeemable at the option of the Company on or after December 1, 2025; and pay interest semi-annually prior to December 1, 2025 and quarterly after December 1, 2025. For the years ended December 31, 2020 and 2019, the Company recorded $ 0.8 million and $ 0.5 million, respectively, of interest expense related to the collective subordinated notes. The subordinated notes are included in Tier 2 capital under current regulatory guidelines and interpretations, subject to limitations. The Company’s borrowing facilities include various financial and other covenants, including, but not limited to, a requirement that the Bank maintains regulatory capital that is deemed "well capitalized" by federal banking agencies (see Note 23 – Regulatory Capital Matters). As of December 31, 2020 and 2019, the Company was in compliance with the covenant requirements. The Company had a Restated Revolving Credit Note (the "Credit Note") with a correspondent lending partner which matured on June 30, 2020 and was renewed under a new Business Loan Agreement and associated Promissory Note (the "Note") dated June 30, 2020. The Note is secured by stock of the Bank and bears interest at the one month ICE Benchmark Administration ("ICE") LIBOR plus 2.5 %. As of December 31, 2020 and 2019, there were no amounts outstanding and the borrowing capacity associated with both facilities was $ 5.0 million. ​ NOTE 11 – COMMITMENTS AND CONTINGENCIES The Company is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. Commitments may expire without being utilized. The Company’s exposure to loan loss is represented by the contractual amount of these commitments, although material losses are not anticipated. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments. The following presents the Company’s financial instruments whose contract amounts represent credit risk, as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ December 31, 2019 ​ Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit ​ $ 78,506 ​ $ 360,883 ​ $ 32,896 ​ $ 290,653 Standby letters of credit ​ ​ 1,933 ​ ​ 17,524 ​ ​ 1,759 ​ ​ 24,197 Commitments to make loans to sell ​ ​ 370,512 ​ ​ — ​ ​ 47,354 ​ ​ — Commitments to make loans ​ $ 24,225 ​ $ 25,316 ​ $ — ​ $ — ​ Unused lines of credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Several of the commitments may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the client. Unused lines of credit under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing clients. These lines of credit are uncollateralized and usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a client’s obligation to a third party. Those letters of credit are primarily issued to support public and private borrowing F-31 Table of Contents arrangements. Substantially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. The Company holds collateral supporting those commitments if deemed necessary. Commitments to make loans to sell are agreements to sell a loan to an investor in the secondary market for which the interest rate has been locked with the client provided there is no violation of any condition within the contract with either party. Commitments to make loans to sell have fixed interest rates. Since commitments may expire without being extended, total commitment amounts may not necessarily represent cash requirements. Commitments to make loans are agreements to lend to a client, provided there is no violation of any condition within the contract. Commitments to make loans generally have fixed expiration dates or other termination clauses. Since commitments may expire without being extended, total commitment amounts may not necessarily represent cash requirements. Litigation, Claims and Settlements The Company is, from time to time, involved in various legal actions arising in the normal course of business. While the ultimate outcome of any such proceedings cannot be predicted with certainty, it is the opinion of management, based on advice from legal counsel, that no proceedings exist, either individually or in the aggregate, which, if determined adversely to the Company, would have a material effect on the Company’s consolidated financial statements. ​ Without admitting or denying the SEC’s findings, FWCM agreed on July 16, 2020 to settle claims that FWCM failed reasonably to supervise its investment adviser representatives who purchased securities sold in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), for advisory clients when the clients were not qualified institutional buyers in a Rule 144A transaction, and to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940 and the rules thereunder by the adviser and its supervised persons. The Company had since replaced the FWCM President and FWCM compliance team which were in place during that time. FWCM recognized and paid a fine of $ 0.2 million to the SEC in 2020. ​ NOTE 12 – SHAREHOLDERS’ EQUITY Common Stock The Company’s common stock has no par value and each holder of common stock is entitled to one vote for each share (though certain voting restrictions may exist on non-vested restricted stock) held. On June 14, 2019, the Company announced that its board of directors had authorized a share repurchase plan (the "2019 Repurchase Plan") under which the Company may repurchase up to 300,000 shares of its common stock and that the Board of Governors of the Federal Reserve System advised the Company that it had no objection to the Company’s 2019 Repurchase Plan. The 2019 Repurchase Plan authorizes the Company to purchase its common stock from time to time in privately negotiated transactions, in the open market, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 plan promulgated by the Securities and Exchange Commissions, or otherwise in a manner that complies with applicable federal securities laws. The 2019 Repurchase Plan was in effect for a one-year period, with the timing of purchases and the number of shares repurchased under the program dependent upon a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions. The 2019 Repurchase Plan may be suspended or discontinued at any time without notice. During the years ended December 31, 2020 and 2019, the Company repurchased 22,679 shares at an average price of $ 16.50 and 43,698 shares at an average price of $ 16.51 , respectively, under the authorization of the 2019 Repurchase Plan. The 2019 Repurchase Plan expired in June 2020. On November 3, 2020, the Company announced that its board of directors authorized the repurchase of up to 400,000 shares of the Company’s common stock, no par value, from time to time, within one year (the "2020 Repurchase Plan") and that the Board of Governors of the Federal Reserve System advised the Company that it has no objection to the Company’s 2020 Repurchase Plan. The Company may repurchase shares in privately negotiated transactions, in the open market, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 promulgated by the F-32 Table of Contents Securities and Exchange Commission, or otherwise in a manner that complies with applicable federal securities laws. The 2020 Repurchase Plan does not obligate the Company to acquire a specific dollar amount or number of shares and it may be extended, modified or discontinued at any time without notice. During the year ended December 31, 2020, the Company repurchased 426 shares at an average price of $ 17.30 under the authorization of the 2020 Repurchase Plan. During the years ended December 31, 2020 and 2019, the Company sold no shares of common stock. Restricted Stock Awards In 2017, the Company issued 105,264 shares of common stock ("Restricted Stock Awards") with a value of $ 3.0 million to the sole member of EMC Holdings, LLC ("EMC"), subject to forfeiture based on his continued employment with the Company. Half of the Restricted Stock Awards ($ 1.5 million or 52,632 shares) vests ratably over five-years . The remaining $ 1.5 million, or 52,632 shares, may be earned based on performance of the mortgage division of the Company. During the year ended December 31, 2020, the Company recognized compensation expense of $ 0.1 million, representing the remaining 14,114 shares, related to the performance based awards. During the year ended December 31, 2019, the Company recognized compensation expense of $ 0.6 million, representing 38,518 shares, related to the performance-based awards. The performance based awards fully vested in the second quarter of 2020. As of December 31, 2020 and 2019, the Restricted Stock Awards have a weighted-average grant date fair value of $ 28.50 per share. The Company has recognized compensation expense of $ 0.4 million and $ 0.9 million, respectively, for all the Restricted Stock Awards. As of December 31, 2020, the Company has $ 0.5 million of unrecognized stock-based compensation expense related to the shares issued, which is expected to be recognized over a weighted average period of 1.2 years. Restricted Stock Awards represented 40,614 shares that vested during the year ended December 31, 2020. Stock-Based Compensation Plans The 2008 Stock Incentive Plan (“the 2008 Plan”) was frozen in connection with the adoption of the 2016 Plan and no new awards may be granted under the 2008 Plan. As of December 31, 2020, there were a total of 458,947 shares available for issuance under the First Western Financial, Inc. 2016 Omnibus Incentive Plan ("the 2016 Plan"). If the Awards outstanding under the 2008 Plan or the 2016 Plan are forfeited, cancelled or terminated with no consideration paid to the Company, those amounts will increase the number of shares eligible to be granted under the 2016 Plan. Stock Options The Company did not grant any stock options during the years ended December 31, 2020 and 2019. During the years ended December 31, 2020 and 2019, the Company recognized stock-based compensation expense of $ 0.2 million and $ 0.3 million, respectively. As of December 31, 2020, the Company has an immaterial amount of unrecognized stock-based compensation expense related to stock options which are unvested. That cost is expected to be recognized over a weighted-average period of less than one year. F-33 Table of Contents The following summarizes activity for nonqualified stock options for the year ended December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ ​ ​ ​ Number ​ Average ​ Remaining ​ Aggregate ​ ​ of ​ Exercise ​ Contractual ​ Intrinsic ​ Options Price Term Value Outstanding as of December 31, 2019 ​ 419,197 ​ $ 29.02 ​ ​ ​ ​ Granted ​ — ​ ​ — ​ ​ ​ ​ Exercised ​ — ​ ​ — ​ ​ ​ ​ Forfeited or expired ​ — ​ ​ — ​ ​ ​ ​ Outstanding as of December 31, 2020 ​ 419,197 ​ $ 29.02 ​ 2.5 ​ (1) Options fully vested / exercisable as of December 31, 2020 ​ 414,727 ​ $ 29.04 ​ 2.5 ​ (1) (a) Nonqualified stock options outstanding at the end of the period and those fully vested / exercisable had immaterial aggregate intrinsic values. As of December 31, 2020 and December 31, 2019, there were 414,727 and 394,020 options, respectively, that were exercisable. Exercise prices are between $ 20.00 and $ 40.00 per share, and the options are exercisable for a period of ten years from the original grant date and expire on various dates between 2022 and 2026. Restricted Stock Units Pursuant to the 2016 Plan, the Company can grant associates and non-associate directors long-term cash and stock-based compensation. During the year ended December 31, 2020, the Company granted certain associates restricted stock units which are earned over time or based on various performance measures and convert to common stock upon vesting, which are summarized here and expanded further below: The following summarizes the activity for the Time Vesting Units, the Financial Performance Units and the Market Performance Units for the year ended December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Time ​ Financial ​ Market ​ ​ Vesting ​ Performance ​ Performance ​ Units Units Units Outstanding as of December 31, 2019 ​ 209,444 ​ 69,426 ​ 14,862 Granted ​ 132,775 ​ 84,027 ​ — Vested ​ ( 54,753 ) ​ — ​ — Forfeited ​ ( 2,414 ) ​ ( 1,023 ) ​ — Outstanding as of December 31, 2020 ​ 285,052 ​ 152,430 ​ 14,862 ​ During the year ended December 31, 2020, the Company issued 34,710 shares of common stock upon the settlement of Time Vesting Units. The remaining 20,043 shares were surrendered with a combined market value at the dates of settlement of $ 0.3 million to cover employee withholding taxes. During the year ended December 31, 2019, the Company issued 15,446 shares of common stock upon the settlement of Time Vesting Units. The remaining 7,835 shares were surrendered with a combined market value at the dates of settlement of $ 0.1 million to cover employee withholding taxes. Time Vesting Units The Time Vesting Units are granted to full-time associates and board members at the date approved by the Company’s board of directors. The Company granted 132,775 Time Vesting Units with a five-year service period during the year ended December 31, 2020, that vest in equal installments of 20 % on the anniversary of the grant date, assuming continuous employment through the scheduled vesting dates. The Time Vesting Units granted in 2020 have a weighted-average grant-date fair value of $ 13.65 per unit. During the years ended December 31, 2020 and 2019, the Company recognized compensation expense of $ 1.4 million and $ 1.0 million, respectively, for the Time Vesting Units. F-34 Table of Contents As of December 31, 2020, there was $ 3.9 million of unrecognized compensation expense related to the Time Vesting Units, which is expected to be recognized over a weighted-average period of 1.9 years. Financial Performance Units Financial Performance Units are granted to certain key associates and are earned based on the Company achieving various financial performance metrics. If the Company achieves the financial metrics, which include various thresholds from 0 % up to 150 %, then the Financial Performance Units will have a subsequent vesting period. The following presents the Company’s existing Financial Performance Units as of December 31, 2020 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant Period ​ Threshold accrual Maximum issuable shares at current threshold ​ Unrecognized compensation expense ​ Weighted-Average (1) ​ Financial metric end date ​ Vesting requirement end date Prior to May 1, 2019 ​ 50 % on half; 100 % on other half 10,035 ​ $ 79 ​ 1.0 years ​ December 31, 2019 ​ December 31, 2021 May 1, 2019 through April 30, 2020 ​ 150 % 86,148 ​ ​ 527 ​ 3.1 years ​ December 31, 2021 ​ December 31, 2023 May 1, 2020 through December 31, 2020, excluding November 18, 2020 ​ 150 % 87,675 ​ ​ 627 ​ 4.0 years ​ December 31, 2022 ​ December 31, 2023 On November 18, 2020 ​ 126 % 29,268 ​ $ 397 ​ 3.9 years ​ December 31, 2022 ​ 50 % November 18, 2023 & 2025 ________________ (1) Represents the expected unrecognized stock-based compensation expense recognition period. The following presents the Company’s Financial Performance Units activity for the years noted December 31 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Units Granted ​ Compensation expense recognized Grant Period ​ 2020 2019 ​ 2020 ​ 2019 Prior to May 1, 2019 ​ — — ​ $ 64 ​ $ * May 1, 2019 through April 30, 2020 ​ 1,866 62,569 ​ ​ 312 ​ ​ 110 May 1, 2020 through December 31, 2020, excluding November 18, 2020 ​ 58,993 — ​ ​ 156 ​ ​ — On November 18, 2020 ​ 23,168 — ​ $ 17 ​ $ — ________________ *Not meaningful Market Performance Units Market Performance Units were granted to certain key associates and are earned based on growth in the value of the Company’s common stock, and were dependent on the Company completing an initial public offering of stock during a defined period of time. On July 23, 2018, the Company completed its initial public offering and the Market Performance Units performance condition was met. Subsequent to the performance condition there is also a market condition as a vesting requirement for the Market Performance Units which affects the determination of the grant date fair value. The Company estimated the grant date fair value using various valuation assumptions. During years ended December 31, 2020 and 2019, the Company recognized an immaterial amount of compensation expense for the Market Performance Units. As of December 31, 2020, there was $ 0.4 million of unrecognized compensation expense related to the Market Performance Units which is expected to be recognized over a weighted-average period of 1.5 years. If the Company’s common stock is trading at or above certain prices, over a performance period which ended on June 30, 2020, the Market Performance Units would have been determined to be earned and vest following the completion F-35 Table of Contents of a subsequent service period ending on June 30, 2022. The Company’s common stock did not trade at or above the required prices over the performance period and as a result, no Market Performance Units are eligible to be earned. NOTE 13 - EARNINGS PER COMMON SHARE The table below presents the calculation of basic and diluted earnings per common share for the periods indicated (amounts in thousands, except share and per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2020 2019 Earnings per common share - Basic ​ ​ ​ ​ ​ ​ Numerator: ​ ​ ​ ​ ​ ​ Net income ​ $ 24,534 $ 8,009 Net income available for common shareholders ​ $ 24,534 $ 8,009 ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ Basic weighted average shares ​ 7,899,278 7,890,266 Earnings per common share - basic ​ $ 3.11 ​ $ 1.02 ​ ​ ​ ​ ​ ​ ​ Earnings per common share - Diluted ​ ​ ​ ​ ​ ​ Numerator: ​ ​ ​ ​ ​ ​ Net income ​ $ 24,534 $ 8,009 Net income available for common shareholders ​ $ 24,534 $ 8,009 ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ Basic weighted average shares ​ ​ 7,899,278 ​ ​ 7,890,266 Diluted effect of common stock equivalents: ​ ​ ​ ​ ​ ​ Time Vesting Units ​ $ 32,995 ​ $ 9,315 Financial Performance Units ​ ​ 16,160 ​ ​ 2,071 Market Performance Units ​ ​ 13,471 ​ ​ 13,309 Total diluted effect of common stock equivalents ​ ​ 62,626 ​ ​ 24,695 Diluted weighted average shares ​ 7,961,904 7,914,961 Earnings per common share - diluted ​ $ 3.08 ​ $ 1.01 ​ Diluted earnings per share was computed without consideration to potentially dilutive instruments as their inclusion would have been anti-dilutive. For the years ended December 31, 2020 and 2019, potentially dilutive securities excluded from the diluted earnings per share calculation are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2020 ​ 2019 Stock options ​ 419,197 ​ ​ 433,572 Time Vesting Units ​ 88,121 ​ ​ 144,560 Financial Performance Units ​ 70,397 ​ ​ 35,256 Restricted Stock Awards ​ 36,401 ​ ​ 78,202 Total potentially dilutive securities ​ 614,116 ​ ​ 691,590 ​ F-36 Table of Contents ​ NOTE 14 - INCOME TAXES The components of the Company’s income tax expense as of December 31 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2019 Current: ​ ​ Federal ​ $ 7,970 ​ $ 3,076 State and local ​ 1,859 ​ 323 Total current tax expense ​ 9,829 ​ 3,399 Deferred: ​ ​ ​ ​ ​ ​ Federal ​ ​ ( 1,392 ) ​ ​ ( 1,338 ) State and local ​ ( 280 ) ​ 122 Valuation allowance ​ 372 ​ — Total deferred (benefit) tax ​ ( 1,300 ) ​ ( 1,216 ) Income tax expense ​ $ 8,529 ​ $ 2,183 ​ The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2020 and 2019 with income tax expense computed by applying the United States federal income tax rate of 21 % to income before income taxes (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2019 Income tax expense computed at 21 % statutory rate ​ $ 6,943 ​ $ 2,140 Differences: ​ ​ Permanent differences ​ ( 57 ) ​ ( 30 ) State taxes, net of federal expense ​ 1,150 ​ 394 Low income housing investment ​ ​ ( 36 ) ​ ​ — Valuation allowance ​ ​ 372 ​ ​ — Other, net (1) ​ 157 ​ ( 321 ) Income tax expense ​ $ 8,529 ​ $ 2,183 (1) Includes the impact of R&D tax credits. F-37 Table of Contents The following were the principal components of the Company’s deferred tax items as of December 31 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2019 Deferred tax assets: ​ ​ Net operating loss carryforwards ​ $ 577 ​ $ 545 Allowance for loan losses ​ 3,054 ​ 1,925 Deferred rent ​ 635 ​ 797 Stock-based compensation ​ 1,613 ​ 1,400 Provision on other real estate owned ​ 484 ​ 438 Other intangible assets ​ 615 ​ 723 Unrealized losses on securities, net ​ — ​ 55 Accrued bonuses ​ 898 ​ 474 Loan fees ​ 244 ​ 352 Other ​ 553 ​ 685 Total deferred tax assets ​ 8,673 ​ 7,394 Deferred tax liabilities: ​ ​ Goodwill ​ ​ ( 1,013 ) ​ ​ ( 1,354 ) Depreciation ​ ​ ( 904 ) ​ ​ ( 961 ) Unrealized gains on securities, net ​ ​ ( 236 ) ​ ​ — Other ​ ( 92 ) ​ ( 32 ) Total deferred tax liabilities ​ ( 2,245 ) ​ ( 2,347 ) Net operating loss valuation allowance ​ ​ ( 372 ) ​ ​ — Net deferred tax asset ​ $ 6,056 ​ $ 5,047 ​ The net operating loss ("NOL") carryforwards expire in tax years 2028 through 2032. As of December 31, 2020, the Company has $ 6.5 million of California NOLs available for utilization. In general, a corporation’s ability to utilize its NOL carryforwards may be substantially limited due to ownership changes that have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), as well as similar state provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax. In general, an "ownership change," as defined by Section 382 of the Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the capital (as defined) of a company by certain stockholders or public groups. During 2020, as a result of divestitures, the Company did not expect to realize the full NOL. As such, the Company recorded a $ 0.4 million valuation allowance related to the California NOLs. The Company identified no other material uncertain tax positions for which it is reasonably possible the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months. The Company and its subsidiaries file tax returns for the United States and for multiple states and localities. The United States federal income tax returns of the Company are eligible to be examined for the years 2017 and forward. There are no federal or state tax examinations currently in progress. ​ NOTE 15 – EMPLOYEE BENEFIT PLANS The Company sponsors a 401(k) Plan, which is a defined contribution plan, in which substantially all associates are eligible to participate in and associates may contribute up to 100 % of their compensation subject to certain limits based on federal tax laws. The Company may elect to make matching contributions as defined by the plan. For the years ended December 31, 2020 and 2019, the Company expensed matching contributions to the plan totaling $ 0.9 million and $ 0.7 million, respectively. The Company did not pay any expenses attributable to the plan during the years ended December 31, 2020 and 2019. NOTE 16 – RELATED-PARTY TRANSACTIONS The Bank extends credit to certain covered parties including Company directors, executive officers and their affiliates. As of December 31, 2020 and December 31, 2019, there were no delinquent or no n-performing loans to any F-38 Table of Contents executive officer or director of the Company. These covered parties, along with principal owners, management, immediate family of management or principal owners, a parent company and its subsidiaries, trusts for the benefit of employees, and other parties, may be considered related parties. The following presents a summary of related-party loan activity as of the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 December 31, 2019 Balance, beginning of year ​ $ 5,675 ​ $ 2,659 Funded loans ​ 17,348 ​ 11,618 Payments collected ​ ( 8,702 ) ​ ( 8,602 ) Balance, end of year ​ $ 14,321 ​ $ 5,675 ​ Deposits from related parties held by the Bank as of December 31, 2020 and December 31, 2019 totaled $ 26.2 million and $ 28.5 million, respectively. The Company leases office spaces from entities controlled by one of the Company’s board members. During the years ended December 31, 2020 and 2019, the Company incurred $ 0.2 million and $ 0.3 million, respectively, of expense related to these leases. The Company earned trust and investment management fees of $ 0.2 million from related parties during the years ended December 31, 2020 and 2019. Assets under management for those related parties totaled $ 92.1 million and $ 137.1 million as of December 31, 2020 and 2019, respectively. ​ NOTE 17 - FAIR VALUE Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. ​ ​ Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. ​ ​ Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. ​ The Company used the following methods and significant assumptions to estimate fair value: Investment Securities : The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Guarantee asset and liability : The guarantee asset represents the fair value of the consideration received in exchange for the credit enhancement fee. The guarantee liability represents a financial guarantee to cover the second layer of any losses on loan sold to FHLB under the MPF 125 loan sales agreement. Significant inputs in the valuation analysis are Level 3, due to the nature of this asset and the lack of market quotes. The fair value of the guarantee asset is determined using a discounted cash flow model, for which significant unobservable inputs include assumed future prepayment rates and market discount rate (Level 3). An increase in prepayment rates or discount rate would generally reduce the estimated fair value of the guarantee asset. The guarantee liability is the fair value of the guarantee assets less amortization (Level 3). ​ F-39 Table of Contents Interest Rate Lock Commitments ( " IRLC " ) and Forward Sale Commitments ( " FSC " ) : Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the commitment related to the loan is locked. The fair value estimate is based on valuation models using market data from secondary market loan sales and direct contacts with third party investors as of the measurement date and pull through assumptions (Level 3). The FSC fair value estimate reflects the potential pair off fee associated with mandatory trades by using a market differential and pair off penalty assessed by the investor (Level 3). IRLC and FSC’s are carried at fair value in the Company’s financial statements. Changes in the fair value of a IRLC and FSC’s are accounted for within the Consolidated Statements of Income. Other Real Estate Owned : Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. They are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than on an annual basis. Appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between comparable sales and income data available. Such adjustments can be significant and typically result in Level 3 classifications of the inputs for determining fair value. Other real estate owned is evaluated annually for additional impairment and adjusted accordingly. Impaired Loans : The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments can be significant and typically result in Level 3 classifications of the inputs for determining fair value. Impaired loans are evaluated monthly for additional impairment and adjusted accordingly. Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, the Company reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. The following presents assets and liabilities measured on a recurring basis as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Assets ​ Inputs ​ Inputs ​ Reported December 31, 2020 ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Balance Investment securities available-for-sale: ​ ​ ​ ​ U.S. Treasury debt ​ $ 254 ​ $ — ​ $ — ​ $ 254 Corporate bonds ​ ​ — ​ ​ 6,044 ​ ​ — ​ ​ 6,044 GNMA mortgage-backed securities - residential ​ ​ — ​ ​ 24,604 ​ ​ — ​ ​ 24,604 FNMA mortgage-backed securities - residential ​ ​ — ​ ​ 1,677 ​ ​ — ​ ​ 1,677 Corporate CMO and MBS ​ ​ — ​ ​ 4,087 ​ ​ — ​ ​ 4,087 Total securities available-for-sale ​ $ 254 ​ $ 36,412 ​ $ — ​ $ 36,666 Equity securities ​ $ 730 ​ $ — ​ $ — ​ $ 730 Guarantee asset ​ $ — ​ $ — ​ $ 232 ​ $ 232 IRLC and FSC, net ​ $ — ​ $ — ​ $ 9,752 ​ $ 9,752 Guarantee liability ​ $ — ​ $ — ​ $ ( 125 ) ​ $ ( 125 ) ​ F-40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Assets ​ Inputs ​ Inputs ​ Reported December 31, 2019 ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Balance Investment securities available-for-sale: ​ ​ ​ ​ U.S. Treasury debt ​ $ 254 ​ $ — ​ $ — ​ $ 254 GNMA mortgage-backed securities - residential ​ ​ — ​ ​ 45,312 ​ ​ — ​ ​ 45,312 FNMA mortgage-backed securities - residential ​ ​ — ​ ​ 2,917 ​ ​ — ​ ​ 2,917 Corporate CMO and MBS ​ ​ — ​ ​ 10,420 ​ ​ — ​ ​ 10,420 Total securities available-for-sale ​ $ 254 ​ $ 58,649 ​ $ — ​ $ 58,903 Equity securities ​ $ 713 ​ $ — ​ $ — ​ $ 713 IRLC and FSC, net ​ $ — ​ $ — ​ $ 1,184 ​ $ 1,184 ​ There were no transfers between levels during 2020 . All of the Company’s IRLC and FSC’s were transferred from Level 2 to Level 3 as of December 31, 2019 as a result of the review of inputs for these instruments identifying the use of pull through rates as unobservable inputs . The following presents a reconciliation for Level 3 instruments measured at fair value on a recurring basis (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2020 Guarantee Asset ​ IRLC and FSC, Net ​ Guarantee Liability Beginning balance ​ $ — ​ $ 1,184 ​ $ — Acquisitions ​ ​ — ​ ​ 44,763 ​ ​ — Originations ​ ​ — ​ ​ ( 39,985 ) ​ ​ — Sales ​ ​ 245 ​ ​ — ​ ​ 244 Gains (losses) in net income, net ​ ​ 55 ​ ​ 3,790 ​ ​ ( 119 ) Other settlements ​ ​ ( 68 ) ​ ​ — ​ ​ — Ending balance ​ $ 232 ​ $ 9,752 ​ $ 125 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2019 Guarantee Asset IRLC and FSC, Net Guarantee Liability Beginning balance ​ $ — ​ $ 421 ​ $ — Acquisitions ​ — ​ ​ 13,094 ​ ​ — Originations ​ — ​ ​ ( 10,009 ) ​ ​ — Losses in net income, net ​ ​ — ​ ​ ( 2,322 ) ​ ​ — Ending balance ​ $ — ​ $ 1,184 ​ $ — ​ Mutual funds and U.S. Treasury debt are reported at fair value utilizing Level 1 inputs. The remaining portfolio of securities are reported at fair value with Level 2 inputs provided by a pricing service. As of December 31, 2020 and December 31, 2019, the majority of the securities had credit support provided by the Federal Home Loan Mortgage Corporation, GNMA, and FNMA. Factors used to value the securities by the pricing service include: benchmark yields, reported trades, interest spreads, prepayments, and other market research. In addition, ratings and collateral quality are considered. As of December 31, 2020, equity securities, IRLC, and guarantee assets have been recorded at fair value within the Other assets line item and the FSC and guarantee liabilities have been recorded at fair value with the Other liabilities line item in the Consolidated Balance Sheets. All changes are recorded in the Other line item in the Consolidated Statement of Income. F-41 Table of Contents The following presents quantitative information about Level 3 assets measured on a recurring basis as of December 31, 2020 and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2020 ​ ​ ​ ​ ​ Valuation ​ Significant ​ Range ​ ​ Fair Value ​ Technique ​ Unobservable Input ​ (Weighted Average) Guarantee asset ​ $ 232 ​ ​ Discounted cash flow ​ ​ Discount rate Prepayment rate ​ ​ 3 % ( 3 %) 25 % ( 25 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ IRLC and FSC, net ​ ​ 9,752 ​ ​ Best execution model ​ ​ Pull through ​ ​ 55 % - 100 % ( 86 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Guarantee liability ​ $ ( 125 ) ​ ​ Discounted cash flow ​ ​ Discount rate Prepayment rate ​ ​ 3 % ( 3 %) 25 % ( 25 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2019 ​ ​ ​ ​ ​ Valuation ​ Significant ​ Range ​ ​ Fair Value ​ Technique ​ Unobservable Input ​ (Weighted Average) IRLC and FSC, net ​ $ 1,184 ​ ​ Best execution model ​ ​ Pull through ​ ​ 75 % - 100 % ( 88 %) ​ The following presents assets measured on a nonrecurring basis as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Assets ​ Inputs ​ Inputs ​ Reported December 31, 2020 ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Balance Other real estate owned: ​ ​ ​ ​ Commercial properties ​ $ — ​ $ — ​ $ 194 ​ $ 194 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total impaired loans (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ $ — ​ $ — ​ $ 1,800 ​ $ 1,800 ______________________________________ (1) An immaterial Cash, Securities and Other loan was fully reserved for using a specific allowance as of December 31, 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prices in ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ Active Markets ​ Other ​ Significant ​ ​ ​ ​ ​ for Identical ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Assets ​ Inputs ​ Inputs ​ Reported December 31, 2019 ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Balance Other real estate owned: ​ ​ ​ ​ Commercial properties ​ $ — ​ $ — ​ $ 658 ​ $ 658 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total impaired loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ $ — ​ $ — ​ $ 3,579 ​ $ 3,579 ​ The sales comparison approach was utilized for estimating the fair value of non-recurring assets. As of December 31, 2020, OREO had a carrying amount of $ 0.2 million, which is the cost basis of $ 2.1 million net of a valuation allowance of $ 1.9 million. As of December 31, 2019, OREO had a carrying amount of $ 0.7 million, which is the cost basis of $ 2.4 million net of a valuation allowance of $ 1.7 million. As of December 31, 2020, total impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had carrying values of $ 3.4 million with valuation allowances of $ 1.6 million and were F-42 Table of Contents classified as Level 3. As of December 31, 2019, impaired loans measured for impairment using the fair value of the collateral for collateral dependent loans had carrying values of $ 4.4 million with valuation allowances of $ 0.8 million and were classified as Level 3. Impaired loans accounted for specific reserves of $ 1.6 million and $ 0.8 million for the years ended December 31, 2020 and 2019. The Bank charged off an immaterial amount during the year ended December 31, 2020 from the specific reserve. The Bank charged off $ 0.2 million during the year ended December 31, 2019 from the specific reserve. The following presents quantitative information about the significant unobservable inputs used in the fair value measurement of recurring and nonrecurring non-financial instruments categorized within Level 3 of the fair value hierarchy as of December 31, 2020 and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2020 ​ ​ ​ ​ ​ Valuation ​ Significant ​ Range ​ ​ Fair Value ​ Technique ​ Unobservable Input ​ (Weighted Average) Other real estate owned: ​ ​ ​ ​ Commercial properties ​ $ 194 ​ ​ Sales contract ​ ​ Commission, cost to sell, closing costs ​ ​ 5 % ( 5 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total impaired loans (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ $ 1,800 ​ ​ Sales comparison, Market approach - guideline transaction method ​ ​ Management discount for asset/property type ​ ​ 17 % - 35 % ( 26 %) ______________________________________ (1) An immaterial Cash, Securities and Other loan was fully reserved for using a specific allowance as of December 31, 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quantitative Information about Level 3 Fair Value Measurements as of December 31, 2019 ​ ​ ​ ​ ​ Valuation ​ Significant ​ Range ​ ​ Fair Value ​ Technique ​ Unobservable Input ​ (Weighted Average) Other real estate owned: ​ ​ ​ ​ Commercial properties ​ $ 658 ​ ​ Appraisal value ​ ​ Discount rate ​ ​ 50 % ( 50 %) ​ ​ ​ ​ ​ ​ ​ ​ ​ Commission and cost to sell ​ ​ 1 % - 10 % ( 7 %) Total impaired loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and Industrial ​ $ 3,579 ​ ​ Sales comparison, Market approach - guideline transaction method ​ ​ Management discount for asset/property type ​ ​ 0 % - 50 % ( 23 %) ​ F-43 Table of Contents The following presents carrying amounts and estimated fair values for financial instruments not carried at fair value as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair Value Measurements Using: December 31, 2020 Amount ​ Level 1 ​ Level 2 ​ Level 3 Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 155,989 ​ $ 155,989 ​ $ — ​ $ — Loans, net ​ ​ 1,520,294 ​ ​ — ​ ​ — ​ ​ 1,512,699 Mortgage loans held for sale ​ ​ 161,843 ​ ​ — ​ ​ 161,843 ​ ​ — Accrued interest receivable ​ ​ 6,618 ​ ​ — ​ ​ 6,618 ​ ​ — Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ 1,619,910 ​ ​ — ​ ​ 1,621,648 ​ ​ — Borrowings: ​ ​ ​ ​ ​ ​ ​ ​ FHLB borrowings – fixed rate ​ ​ 15,000 ​ ​ — ​ ​ 15,099 ​ ​ — Federal Reserve borrowings – fixed rate ​ ​ 134,563 ​ ​ — ​ ​ 134,563 ​ ​ — Subordinated notes – fixed-to-floating rate ​ ​ 24,291 ​ ​ — ​ ​ — ​ ​ 25,750 Accrued interest payable ​ $ 453 ​ $ — ​ $ 453 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying ​ Fair Value Measurements Using: December 31, 2019 ​ Amount ​ Level 1 ​ Level 2 ​ Level 3 Assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 78,638 ​ $ 78,638 ​ $ — ​ $ — Loans, net ​ ​ 990,132 ​ ​ — ​ ​ — ​ ​ 974,142 Mortgage loans held for sale ​ ​ 48,312 ​ ​ — ​ ​ 48,312 ​ ​ — Accrued interest receivable ​ ​ 3,048 ​ ​ — ​ ​ 3,048 ​ ​ — Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ 1,086,784 ​ ​ — ​ ​ 1,089,261 ​ ​ — Borrowings: ​ ​ ​ ​ ​ ​ ​ ​ FHLB borrowings – fixed rate ​ ​ 10,000 ​ ​ — ​ ​ 10,003 ​ ​ — Subordinated notes – fixed-to-floating rate ​ ​ 6,560 ​ ​ — ​ ​ — ​ ​ 6,004 Accrued interest payable ​ $ 299 ​ $ — ​ $ 299 ​ $ — ​ The fair value estimates presented and discussed above are based on pertinent information available to management as of the dates specified. The estimated fair value amounts are based on the exit price notion set forth by ASU 2016-01. Although management is not aware of any factors that would significantly affect the estimated fair values, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since the balance sheet dates. Therefore, current estimates of fair value may differ significantly from the amounts presented herein. The methods and assumptions, not previously presented, used to estimate fair values are described as follows. Cash and Cash Equivalents and Restricted Cash : The carrying amounts of cash and cash equivalents and restricted cash approximate fair values as maturities are less than 90 days and balances are generally in accounts bearing current market interest rates. Loans, net : The fair values for all fixed-rate and variable-rate performing loans were estimated using the income approach and by discounting the projected cash flows of such loans. Principal and interest cash flows were projected based on the contractual terms of the loans, including maturity, contractual amortization and adjustments for prepayments and expected losses, where appropriate. A discount rate was developed based on the relative risk of the cash flows, taking into account the loan type, maturity and a required return on capital. Mortgage Loans Held for Sale : The fair value of mortgage loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification. F-44 Table of Contents Accrued Interest Receivable and Payable : The carrying amounts of accrued interest approximate fair value due to their short-term nature. Deposits : The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting dates. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. Borrowings: Fixed Rate Borrowings : Borrowings with fixed rates are valued using inputs such as discounted cash flows and current interest rates for similar instruments and borrowers with similar credit ratings. Fixed-to-Floating Rate Borrowings: Borrowings with fixed-to-floating rates are valued using inputs such as discounted cash flows and current interest rates for similar instruments and assume the Company will redeem the instrument prior to the first interest rate reset date. ​ NOTE 18 – ASSETS AND OTHER LIABILITIES CLASSIFIED AS HELD FOR SALE During the year ended December 31, 2019, the Company was actively seeking to sell its Los Angeles-based fixed income portfolio management team ("LA fixed income team") and certain advisory and sub-advisory arrangements. As such, the related assets and liabilities were classified as a disposal group held for sale and were presented separately in the Consolidated Balance Sheets for the year ended December 31, 2019. On November 13, 2020, the Company completed the sale of these assets. The Company has no assets or liabilities classified as a disposal group held for sale as of December 31, 2020. Intangible assets and other liabilities in disposal groups held for sale are as follows at the dates noted (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 ​ 2019 ASSETS ​ ​ ​ Goodwill ​ $ — ​ $ 3,553 Assets in disposal groups held for sale ​ $ — ​ $ 3,553 ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ Other liabilities ​ $ — ​ $ 117 Liabilities in disposal groups held for sale ​ $ — ​ $ 117 ​ NOTE 19 - SEGMENT REPORTING The Company’s reportable segments consist of Wealth Management and Mortgage. The chief operating decision maker ("CODM") is the Chief Executive Officer. The measure of profit or loss used by the CODM to identify and measure the Company’s reportable segments is income before income tax. The Company completed the sale of its LA fixed income team in the fourth quarter 2020. The LA fixed income team and the related assets made up a majority of the previously reported Capital Management Segment. As a result of the sale the Company evaluated its reportable segments and determined the remaining assets following the sale in the Capital Management segment no longer meet the thresholds of income before income tax to be a reportable segment. The residual assets that remained in the Capital Management segment are now included in the Wealth Management segment. F-45 Table of Contents The Wealth Management segment consists of operations relative to the Company’s fully integrated wealth management products and services. Services provided include deposit, loan, insurance, and trust and investment management advisory products and services. The Mortgage segment consists of operations relative to the Company’s residential mortgage service offerings. Mortgage products and services are financial in nature for which premiums are recognized, net of expenses, upon the sale of mortgage loans to third parties. For all periods presented, the Wealth Management segment includes the previously reported key metrics of the previously reported Capital Management segment. The tables below present the financial information for each segment that is specifically identifiable or based on allocations using internal methods for the years ended December 31, 2020 and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2020 ​ Wealth Management (1) ​ Mortgage ​ Consolidated Income Statement ​ ​ ​ ​ ​ ​ ​ ​ ​ Total interest income $ 53,334 $ — $ 53,334 Total interest expense ​ ​ 7,232 ​ ​ — ​ 7,232 Provision for loan losses ​ ​ 4,682 ​ ​ — ​ 4,682 Net interest income, after provision for loan losses ​ ​ 41,420 ​ ​ — ​ 41,420 Non-interest income ​ ​ 21,836 ​ ​ 29,344 ​ 51,180 Total income ​ ​ 63,256 ​ ​ 29,344 ​ 92,600 Depreciation and amortization expense ​ ​ 1,035 ​ ​ 70 ​ 1,105 All other non-interest expense ​ ​ 50,135 (2) ​ 8,297 ​ 58,432 Income before income tax ​ $ 12,086 ​ $ 20,977 $ 33,063 ​ ​ ​ ​ ​ ​ ​ ​ ​ Goodwill ​ $ 24,191 ​ $ — $ 24,191 Total assets ​ $ 1,798,416 ​ $ 175,239 $ 1,973,655 ______________________________________ (1) Includes financial information previously reported under the Capital Management segment. (2) Includes loss on assets held for sale of $ 0.6 million and $ 0.2 million SEC penalty in the previously reported Capital Management segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2019 ​ Wealth Management (1) ​ Mortgage Consolidated Income Statement ​ ​ ​ ​ ​ ​ ​ ​ Total interest income $ 45,051 ​ $ — $ 45,051 Total interest expense ​ ​ 12,990 ​ ​ — ​ 12,990 Provision for loan losses ​ ​ 662 ​ ​ — ​ 662 Net interest income, after provision for loan losses ​ ​ 31,399 ​ ​ — ​ 31,399 Non-interest income ​ ​ 21,902 ​ ​ 10,675 ​ 32,577 Total income ​ ​ 53,301 ​ ​ 10,675 ​ 63,976 Depreciation and amortization expense ​ ​ 1,453 ​ ​ 218 ​ 1,671 All other non-interest expense ​ ​ 45,696 (2) ​ 6,417 ​ 52,113 Income (loss) before income tax ​ $ 6,152 ​ $ 4,040 $ 10,192 ​ ​ ​ ​ ​ ​ ​ ​ ​ Goodwill ​ $ 19,686 ​ $ — $ 19,686 Assets held for sale ​ ​ 3,553 ​ ​ — ​ ​ 3,553 Total assets ​ $ 1,204,620 ​ $ 47,062 $ 1,251,682 _________________________________________________ (1) Includes financial information previously reported under the Capital Management segment. (2) Includes goodwill impairment charge of $ 1.6 million in the previously reported Capital Management segment. F-46 Table of Contents NOTE 20 – LOW-INCOME HOUSING TAX CREDIT INVESTMENTS On December 19, 2019, the Company invested in a low-income housing tax credit ("LIHTC") investment. As of December 31, 2020 and 2019, the balance of the investment for LIHTC was $ 1.1 million and $ 0.9 million. These balances are reflected in the Other assets line item of the Consolidated Balance Sheets. Total unfunded commitments related to the investment in the LIHTC total $ 2.2 million and $ 2.5 million as of December 31, 2020 and 2019. The Company expects to fulfill these commitments during the year ending 2021. The Company uses the proportional amortization method to account for this investment. During the year ended December 31, 2020, the Company recognized amortization expense of $ 0.2 million, which was included within the Income tax expense line item of the Consolidated Statements of Income. The Company did not recognize any amortization expense in the year ended December 31, 2019. Additionally, during the year ended December 31, 2020, the Company recognized tax credits and other benefits from this investment in the LIHTC of $ 0.1 million. The Company did not recognize any tax credits or other benefits from this investment in the year end December 31, 2019. During the years ending December 31, 2020 and 2019, the Company did not incur any impairment losses. NOTE 21 – CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY The tables below present condensed financial statements pertaining only to FWFI (in thousands). Investments in subsidiaries are stated using the equity method of accounting. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, Condensed Balance Sheets 2020 ​ 2019 ASSETS ​ ​ Cash and cash equivalents $ 14,270 $ 9,301 Investment in subsidiaries ​ ​ 157,377 ​ ​ 122,792 Loans, net ​ ​ 2,021 ​ ​ 2,091 Other assets ​ ​ 4,075 ​ ​ 597 Total assets ​ $ 177,743 ​ $ 134,781 LIABILITIES ​ ​ Subordinated notes ​ $ 24,291 ​ $ 6,560 Other liabilities (1) ​ ( 1,510 ) ​ 543 Total liabilities ​ 22,781 ​ 7,103 SHAREHOLDERS’ EQUITY ​ ​ Total shareholders’ equity ​ 154,962 ​ 127,678 Total liabilities and shareholders’ equity ​ $ 177,743 ​ $ 134,781 _________________________________________________ (1) As of December 31, 2020, taxes payable was in a receivable position as a result of timing of tax payments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Condensed Statements of Income 2020 ​ 2019 Income ​ ​ Interest income ​ $ 87 ​ $ 93 Non-interest income ​ ​ ( 1 ) ​ ​ — Total income ​ ​ 86 ​ ​ 93 Expense ​ ​ Interest expense ​ 854 ​ 476 Non-interest expense ​ ​ 355 ​ ​ 267 Total expense ​ 1,209 ​ 743 Loss before income tax and equity in undistributed income of subsidiaries ​ ( 1,123 ) ​ ( 650 ) Income tax benefit ​ ( 85 ) ​ 49 Loss before equity in undistributed income of subsidiaries ​ ​ ( 1,208 ) ​ ​ ( 601 ) Equity in undistributed income to subsidiaries ​ 25,742 ​ 8,610 Net income ​ $ 24,534 ​ $ 8,009 F-47 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Condensed Statements of Cash Flows ​ 2020 ​ 2019 Cash flows from operating activities ​ ​ Net income ​ $ 24,534 ​ $ 8,009 Adjustments: ​ ​ ​ ​ ​ ​ Current & deferred income tax (benefit)/expense ​ ​ ( 3,003 ) ​ ​ 282 Stock-based compensation ​ ​ 2,544 ​ ​ 2,291 Undistributed equity in subsidiaries ​ ​ ( 25,742 ) ​ ​ ( 8,610 ) Change in other assets ​ ( 32 ) ​ 665 Change in other liabilities ​ ​ ( 42 ) ​ ​ — Net cash (used in) provided by operating activities ​ ( 1,741 ) ​ 2,637 Cash flows from investing activities ​ ​ ​ ​ ​ ​ Investment in subsidiaries ​ ​ ( 10,453 ) ​ ​ ( 2,152 ) Loan and note receivable originations and principal collections ​ 70 ​ — Net cash used in investing activities ​ ( 10,383 ) ​ ( 2,152 ) Cash flows from financing activities ​ ​ Proceeds from subordinated notes ​ ​ 18,000 ​ ​ — Repurchase of common stock ​ ​ ( 377 ) ​ ​ ( 743 ) Settlement of restricted stock ​ ​ ( 261 ) ​ ​ ( 110 ) Recognition of capitalized subordinated notes issuance costs ​ ​ ( 269 ) ​ ​ — Net cash provided by (used in) financing activities ​ 17,093 ​ ( 853 ) ​ ​ ​ ​ ​ ​ ​ Net change in cash and cash equivalents ​ 4,969 ​ ( 368 ) Cash and cash equivalents, beginning of year ​ 9,301 ​ 9,669 Cash and cash equivalents, end of year ​ $ 14,270 ​ $ 9,301 ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information: ​ ​ ​ ​ ​ ​ Interest paid on borrowed funds ​ $ 854 ​ $ 476 Segment collapse impact to investment in subsidiary ​ ​ 2,454 ​ ​ — Segment collapse impact to deferred income tax (benefit)/expense ​ ​ 640 ​ ​ — Segment collapse impact to other assets ​ ​ ( 3,202 ) ​ ​ — Segment collapse impact to other liabilities ​ $ 108 ​ $ — ​ ​ NOTE 22 – OTHER NON-INTEREST EXPENSE Other non-interest expense as shown in the Consolidated Statements of Income is detailed in the following schedule to the extent the components exceed one percent of the aggregate of total interest income and other non-interest income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Other non-interest expense ​ 2020 ​ 2019 Corporate development and related ​ $ 1,517 ​ $ 1,468 Loan and deposit related ​ ​ 1,453 ​ ​ 729 Office supplies and deliveries ​ ​ 277 ​ ​ 223 Other ​ ​ 205 ​ ​ 197 Total other non-interest expense ​ $ 3,452 ​ $ 2,617 ​ ​ NOTE 23 - REGULATORY CAPITAL MATTERS First Western and the Bank are subject to various regulatory capital adequacy requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and, additionally for banks, the regulatory framework F-48 Table of Contents for prompt corrective action, First Western and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. First Western and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings and other factors. The final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks ("Basel III rules") has been fully phased in. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. During the year ended December 31, 2020, FWFI made a $ 10.0 million capital injection into the Bank. Management believes as of December 31, 2020, First Western and the Bank meet all capital adequacy requirements to which it is subject to. Prompt corrective action regulations for First Western and the Bank provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. The standard ratios established by First Western and the Bank’s primary regulators to measure capital require First Western and the Bank to maintain minimum amounts and ratios, set forth in the following table. These ratios are common equity Tier 1 capital ("CET 1"), Tier 1 capital and total capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). The actual capital ratios of First Western and the Bank, along with the applicable regulatory capital requirements as of December 31, 2020, were calculated in accordance with the requirements of Basel III. The final rules of Basel III also established a "capital conservation buffer" of 2.5% above new regulatory minimum capital ratios, which are fully effective following minimum ratios: (i) a CET 1 ratio of 7.0 %; (ii) a Tier 1 capital ratio of 8.5 %; and (iii) a total capital ratio of 10.5 %. Banks are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that can be utilized for such activities. As of December 31, 2020, required ratios including the capital conservation buffer were (i) CET 1 of 7.0 %; (ii) a Tier 1 capital ratio of 8.5 %; and (iii) a total capital ratio of 10.5 %. As of December 31, 2020, the most recent filings with the FDIC categorized First Western and the Bank as well capitalized under the regulatory guidelines. To be categorized as well capitalized, an institution must maintain minimum CET 1 risk-based, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as set forth in the following table. Management believes there are no conditions or events since December 31, 2020 that have changed the categorization of First Western and the Bank as well capitalized. Management believes First Western and the Bank met all capital adequacy requirements to which it is subject as of December 31, 2020 and December 31, 2019. F-49 Table of Contents The following presents the actual and required capital amounts and ratios as of December 31, 2020 and December 31, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ To be Well Capitalized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Under Prompt ​ ​ ​ ​ ​ ​ ​ Required for Capital ​ Corrective Action ​ ​ Actual ​ Adequacy Purposes (1) ​ Regulations December 31, 2020 Amount Ratio Amount Ratio Amount Ratio Tier 1 capital to risk-weighted assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ $ 133,963 10.22 % $ 78,660 6.0 % $ 104,880 8.0 % Consolidated ​ ​ 131,507 ​ 9.96 ​ ​ N/A ​ N/A ​ ​ N/A ​ N/A ​ CET1 to risk-weighted assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ 133,963 10.22 ​ 58,995 4.5 ​ 85,215 6.5 ​ Consolidated ​ ​ 131,507 ​ 9.96 ​ ​ N/A ​ N/A ​ ​ N/A ​ N/A ​ Total capital to risk-weighted assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ 146,853 11.20 ​ 104,880 8.0 ​ 131,100 10.0 ​ Consolidated ​ ​ 168,957 ​ 12.80 ​ ​ N/A ​ N/A ​ ​ N/A ​ N/A ​ Tier 1 capital to average assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ 133,963 7.62 ​ 70,301 4.0 ​ 87,877 5.0 ​ Consolidated ​ $ 131,507 ​ 7.45 % $ N/A ​ N/A % $ N/A ​ N/A % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ To be Well Capitalized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Under Prompt ​ ​ ​ ​ ​ ​ ​ Required for Capital ​ Corrective Action ​ ​ Actual ​ Adequacy Purposes (1) ​ Regulations December 31, 2019 ​ Amount Ratio ​ Amount ​ Ratio ​ Amount ​ Ratio Tier 1 capital to risk-weighted assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ $ 99,461 10.67 % $ 55,954 6.0 % $ 74,606 8.0 % Consolidated ​ ​ 105,821 ​ 11.31 ​ ​ N/A ​ N/A ​ ​ N/A ​ N/A ​ CET1 to risk-weighted assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ 99,461 10.67 ​ 41,966 4.5 ​ 60,617 6.5 ​ Consolidated ​ ​ 105,821 ​ 11.31 ​ ​ N/A ​ N/A ​ ​ N/A ​ N/A ​ Total capital to risk-weighted assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ 107,509 11.53 ​ 74,606 8.0 ​ 93,257 10.0 ​ Consolidated ​ ​ 120,429 ​ 12.87 ​ ​ N/A ​ N/A ​ ​ N/A ​ N/A ​ Tier 1 capital to average assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Bank ​ ​ 99,461 8.09 ​ 49,166 4.0 ​ 61,458 5.0 ​ Consolidated ​ $ 105,821 ​ 8.58 % $ N/A ​ N/A % $ N/A ​ N/A % ______________________________________ (1) Does not include capital conservation buffer . ​ NOTE 24 – SUBSEQUENT EVENTS (Unaudited) On January 11, 2021 the SBA reopened the PPP, to First Draw PPP Loans and began accepting applications for Second Draw PPP Loans on January 13, 2021. The PPP is intended to provide loans to small businesses to pay their employees, rent, mortgage interest and utilities. The loans may be forgiven conditioned upon the client providing payroll documentation evidencing their compliant use of funds and otherwise complying with the terms of the program. The Bank is an approved SBA lender and began accepting applications for the reopened program on January 19, 2021. As of February 28, 2021, we had received 660 applications for PPP loans from borrowers for $ 91.4 million with an average loan size of $ 0.1 million; of the applications received 410 applications for $ 68.7 million have been approved and funded by the SBA. ***** ​ ​ F-50 Table of Contents Item 9: Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.