2020 Annual Report

As an emerging growth company, the Company is not subject to Accounting Standards Update No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments,” or CECL, until January 1, 2023.

2019 Compared to 2018

The allowance for loan losses increased $2.5 million as of December 31, 2019, compared to December 31, 2018, reflecting a provision for loan losses of $2.7 million and net charge-offs of $205,000 during 2019. The provision for loan losses was $2.7 million for the year ended December 31, 2019, a decrease of $875,000, compared to the provision for loan losses of $3.6 million for the year ended December 31, 2018, due primarily to continued strength in credit quality and consistent performance of the loan portfolio.

The allowance for loan losses at December 31, 2019 represented 1.18% of gross loans outstanding, compared to 1.20% at December 31, 2018.

The following table presents a summary of the activity in the allowance for loan losses for the years ended December 31, 2020, 2019, and 2018:

Year Ended December 31, December 31, December 31,

(dollars in thousands) 2018 Balance at Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,526 $ 20,031 $ 16,502 Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,750 2,700 3,575 Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (517) (388) (421) Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 183 375 Balance at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,841 $ 22,526 $ 20,031 2020 2019

Noninterest Income 2020 Compared to 2019

Noninterest income was $5.8 million for the year ended December 31, 2020, compared to $3.8 million for the year ended December 31, 2019, an increase of $2.0 million, or 52.6%. The increase was primarily due to increases in gains on sales of securities, letter of credit fees, and swap fees.

2019 Compared to 2018

Noninterest income was $3.8 million for the year ended December 31, 2019, compared to $2.5 million for the year ended December 31, 2018, an increase of $1.3 million, or 50.5%. The increase was primarily due to an increase in gains on sales of securities and foreclosed assets and an increase in swap fees, partially offset by decreased letter of credit fees.

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