MainStreet Bancshares(MNSB) - 2020 Q4 - Annual Report

PART I Business MainStreet Bancshares, Inc. is a commercial bank holding company operating MainStreet Bank, serving businesses and retail customers in the D.C. metro area with diverse banking services and FinTech payment solutions - MainStreet Bancshares, Inc. is a commercial bank holding company that owns 100% of MainStreet Bank, a community bank focused on serving small to medium-sized businesses, professional practices, and retail customers in Northern Virginia and the greater Washington, D.C. metropolitan area[10][12][15] - The company offers a full range of banking services through both traditional and electronic delivery, including business and consumer checking, savings, certificates of deposit, commercial, real estate, and consumer loans, with advanced online and mobile banking solutions[13][14][26] - MainStreet Bancshares, Inc. qualifies as an 'emerging growth company' under the JOBS Act, allowing for reduced reporting requirements, but has elected not to use the extended transition period for new accounting standards[17][18][19] Key Financial Metrics (as of December 31, 2020) | Metric | Value | | :----- | :---- | | Total Consolidated Assets | $1.6 billion | | Total Net Loans | $1.3 billion | | Total Deposits | $1.4 billion | | Total Stockholders' Equity | $167.7 million | | Return on Average Assets | 1.05% | | Return on Average Equity | 10.54% | | Net Charge-offs to Average Loans | 0.03% | | Non-performing Loans | $150,000 | | Non-performing Assets | $1.3 million (0.08% of total assets) | - The company's primary market area, the Washington, D.C. Metropolitan Statistical Area, is characterized by high median household income and consistent population growth, providing a strong economic environment for its growth strategies[36][37][40] - Competitive strengths include a community banking philosophy with local decision-making, a disciplined credit culture, a strong capital position (Bank exceeds 'well capitalized' guidelines), investment in advanced banking technology, and opportunities for organic growth, strategic branching, and potential acquisitions[42][43][44][45][46][47] - The loan portfolio is diversified, primarily consisting of commercial business, owner-occupied and investment commercial real estate loans, and residential real estate loans. The Bank conducts quarterly stress tests on its loan portfolio[48][49][50][52] - The Bank expanded into payment service solutions (Banking as a Service - BaaS) for Financial Technology (FinTech) companies in 2016, aiming to secure additional low-cost deposits and fee income, while developing a robust risk management infrastructure for this business line[72][73][75][76] - The Bank was classified as 'well-capitalized' as of December 31, 2020, meeting all regulatory capital standards, and has elected not to opt into the Community Bank Leverage Ratio (CBLR) framework[100][102] Risk Factors The company faces significant credit, interest rate, operational, and regulatory risks, exacerbated by the COVID-19 pandemic and intense competition - The COVID-19 pandemic poses significant risks, impacting the global economy, financial markets, interest rates, and potentially leading to increased credit losses, operational disruptions, and liquidity challenges[128][129][130] - The company has significant exposure to credit risk, particularly from commercial and residential real estate loans (11.4% owner-occupied, 26.0% investment, 26.0% construction, 14.7% residential at Dec 31, 2020), and loans to small-to-midsized businesses, which are more vulnerable to economic downturns[132][135][137][138] - The allowance for loan losses may not be adequate to cover future losses, and the implementation of the CECL accounting standard could require a significant increase in credit loss allowance[141][145][146] - Changes in interest rates, including the uncertainty surrounding the future of LIBOR, could negatively affect net interest income, the value of financial instruments, and the ability to fund operations[151][154][155][156] - Operational risks include challenges with new lines of business (like payment services for FinTechs), reliance on technological infrastructure and third-party vendors, and the potential for system failures, cyber-attacks, and fraudulent activities[162][163][164][166][170][180] - The company operates in a highly regulated environment, making it susceptible to changes in laws and regulations, including more stringent capital requirements (Basel III) and the unanticipated impacts of tax legislation like the Tax Cuts and Jobs Act[196][197][199][201][202] - Risks associated with common stock include market price volatility, subordination to preferred stock and subordinated notes, and the potential for reduced investor attractiveness due to its 'emerging growth company' status and associated reduced disclosure requirements[204][205][206][207] Unresolved Staff Comments There are no unresolved staff comments from the SEC regarding the company's filings - No unresolved staff comments were reported[218] Properties The company's properties, including seven branches, had a net book value of $9.5 million for office properties and $894,000 for equipment as of December 31, 2020 Property Net Book Values (as of December 31, 2020) | Asset Category | Net Book Value (in thousands) | | :------------- | :---------------------------- | | Office Properties | $9,500 | | Furniture, Fixtures, and Equipment | $894 | - The company operates seven Bank branches located in Herndon, Fairfax, Fairfax City, McLean, Clarendon, Leesburg Virginia, and one in Washington D.C., with a mix of owned and leased properties[15][221] Legal Proceedings The company is involved in various litigation matters that are incidental to its ordinary business operations, but management does not anticipate any of these proceedings to have a material adverse impact on its financial condition or results of operations - The company is a party to various litigation matters incidental to its ordinary conduct of business[222] - Management believes that none of these legal proceedings, individually or in the aggregate, will have a material adverse impact on the results of operations or financial condition of the Company[222] Mine Safety Disclosures This item is not applicable to the company - The disclosure requirement for Mine Safety is not applicable to MainStreet Bancshares, Inc[223] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common and preferred stock trade on Nasdaq; no common dividends have been paid, while a $17.0 million stock repurchase program was authorized in October 2020, with $13.8 million repurchased - The company's common stock is traded on the Nasdaq Capital Market under the symbol 'MNSB', with approximately 268 shareholders of record as of December 31, 2020[224] - No cash dividends have been paid on common stock to date. Future dividend policy depends on economic conditions, financial performance, capital requirements, banking regulations, and the Bank's ability to pay dividends to the Company, with preferred stock having priority dividend rights[225][226] Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2020) | Category | Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Securities remaining and available for future issuance | | :-------------------------- | :----------------------------------------------------------------------- | :-------------------------------------------------------- | :----------------------------------------------------- | | Plans approved by shareholders | 161,435 | $— | 558,805 | | Plans not approved by shareholders | — | — | — | | Total | 161,435 | $— | 558,805 | - The company issued 2,368,421 shares of common stock at $19.00 per share for a total of $49,999,999 to accredited investors on August 24, 2018, relying on Section 4(a)(2) and Rule 506 of Regulation D[230] - A new common stock repurchase program was authorized on October 22, 2020, allowing for the repurchase of up to $17.0 million of outstanding common stock. During the year ended December 31, 2020, the company repurchased 895,785 shares for approximately $13.8 million[234][235][598] - The company completed a public offering of 1,000,000 depositary shares (representing 7.50% Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock) on September 15, 2020, with an additional 150,000 shares sold via over-allotment. These depositary shares began trading on Nasdaq under 'MNSBP' on September 16, 2020[237][238][597] Selected Financial Data This section presents summarized historical consolidated financial data for MainStreet Bancshares, Inc. for 2018-2020, covering financial condition, operating results, performance, capital, and asset quality ratios Selected Financial Condition Data (in thousands) | Metric | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | | :-------------------------- | :----------- | :----------- | :----------- | | Total assets | $1,643,165 | $1,277,358 | $1,100,613 | | Total cash and cash equivalents | $107,528 | $64,844 | $58,076 | | Total investment securities | $169,934 | $116,705 | $82,157 | | Loans receivable, net | $1,230,379 | $1,030,425 | $917,125 | | Total deposits | $1,438,246 | $1,071,623 | $920,137 | | Subordinated debt | $14,834 | $14,805 | $14,776 | | Total stockholders' equity | $167,665 | $137,034 | $121,251 | Selected Operating Data (in thousands) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Interest income | $62,072 | $58,813 | $43,835 | | Interest expense | $16,095 | $19,377 | $12,666 | | Net interest income | $45,977 | $39,436 | $31,169 | | Provision for loan losses | $3,610 | $1,618 | $3,126 | | Total non-interest income | $7,493 | $4,862 | $3,239 | | Total non-interest expenses | $30,300 | $25,376 | $19,979 | | Net income | $15,717 | $13,950 | $9,209 | | Net income available to common shareholders | $15,082 | $13,950 | $9,209 | | Basic and diluted net income per common share | $1.85 | $1.69 | $1.38 | Performance Ratios | Metric | 2020 | 2019 | 2018 | | :-------------------------------------------------- | :----- | :----- | :----- | | Return on average assets | 1.05% | 1.19% | 0.97% | | Return on average equity | 10.54% | 10.79% | 10.38% | | Net interest margin | 3.21% | 3.50% | 3.41% | | Efficiency ratio | 56.67% | 57.28% | 58.07% | | Common equity tier 1 (CET1) capital to risk-weighted assets | 13.61% | 12.68% | 12.90% | | Allowance for loan losses as a percentage of total loans | 1.03% | 0.92% | 0.95% | | Net charge-offs to average outstanding loans during the period | 0.03% | 0.09% | 0.00% | | Non-performing assets as a percentage of total assets | 0.08% | 0.09% | 0.18% | Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's 2020 and 2019 financial performance, highlighting COVID-19 impacts, increased net income driven by net interest income growth, asset and deposit expansion, and maintained strong asset quality and capital - The COVID-19 pandemic significantly impacted the company's business, affecting credit risk (loan repayment, collateral values), operational risk (remote work, cybersecurity), interest rate risk (volatility), and liquidity (payment deferrals, PPP loans)[249][250][254][256][258] - Net income increased by $1.7 million (12.67%) to $15.7 million in 2020, primarily driven by a $6.5 million increase in net interest income due to higher loan volume and lower interest rates on deposits, partially offset by a $2.0 million increase in provision for loan losses and higher non-interest expenses[278] Net Interest Income and Margin | Metric | 2020 | 2019 | Change (YoY) | | :------------------ | :----- | :----- | :----------- | | Net Interest Income | $45,977K | $39,436K | +16.59% | | Net Interest Margin | 3.21% | 3.50% | -0.29 pp | | Loan Portfolio Yield | 4.89% | 5.61% | -0.72 pp | | Investment Securities Yield | 2.63% | 3.09% | -0.46 pp | | Interest-Bearing Deposits Cost | 1.58% | 2.25% | -0.67 pp | - Provision for loan losses increased to $3.6 million in 2020 from $1.6 million in 2019, primarily due to additional provisions in response to the COVID-19 pandemic and increased loan originations, including $173.1 million in PPP loans[296] Non-Interest Income (in thousands) | Category | 2020 | 2019 | % Change | | :-------------------------- | :----- | :----- | :------- | | Deposit account service charges | $1,916 | $1,668 | 14.87% | | Bank owned life insurance income | $779 | $498 | 56.43% | | Loan swap fee income | $3,510 | $989 | 254.90% | | Total Non-Interest Income | $7,493 | $4,862 | 54.11% | Non-Interest Expense (in thousands) | Category | 2020 | 2019 | % Change | | :-------------------------- | :----- | :----- | :------- | | Salaries and employee benefits | $17,937 | $15,776 | 13.70% | | FDIC insurance | $1,329 | $680 | 95.44% | | Other real estate expenses, net | $459 | $62 | 640.32% | | Total Non-Interest Expense | $30,258 | $25,376 | 19.24% | - Total assets increased by $365.8 million (28.6%) to $1.6 billion at December 31, 2020, driven by increases in gross loans receivable ($257.0 million) and available-for-sale securities ($53.2 million)[303] - Net loans increased by $207.3 million to $1.2 billion at December 31, 2020, primarily due to growth in commercial and industrial loans (including PPP) and the construction portfolio. The company reclassified $57.0 million of commercial real estate loans to loans held for sale[323] - Total deposits increased by $309.7 million in 2020, largely due to increases in non-interest bearing demand deposits and money market deposits, influenced by the PPP initiative. Brokered deposits totaled $279.9 million at year-end 2020[351][353] - The Bank was categorized as 'well capitalized' by the Federal Reserve Bank of Richmond as of December 31, 2020, meeting all capital adequacy requirements[382][384] Forward-Looking Statements The report contains forward-looking statements that are subject to risks and uncertainties, including the impact of COVID-19, economic conditions, and regulatory changes, which could cause actual results to differ materially - The report contains forward-looking statements based on management's beliefs and assumptions, which are subject to various risks and uncertainties that could cause actual results to differ materially[246][247] - Key factors that could cause actual results to differ include the impact of COVID-19, general economic conditions, competition, inflation, interest rate environment, changes in laws/regulations, ability to attract/retain employees, and cyber threats[247] COVID-19 Pandemic The COVID-19 pandemic significantly disrupted the company's operations, impacting credit, operational, interest rate, and liquidity risks, while prompting participation in the PPP and forbearance programs, alongside regulatory adjustments - The COVID-19 pandemic has created significant disruption, impacting credit risk (loan repayment, collateral values), business continuity (workforce access, third-party services), operational risk (remote work, cybersecurity), interest rate risk (volatility), liquidity (payment deferrals, PPP loans), and litigation risk[249][250][254][256][258][259] - The company participated in the Paycheck Protection Program (PPP) and instituted forbearance programs for commercial customers, offering payment deferrals or interest-only payments to preserve borrower liquidity[251][258][290][390][391][394] - Regulatory responses to COVID-19 included the Federal Reserve reducing reserve requirements to zero, temporary lowering of the Community Bank Leverage Ratio (CBLR), and guidance on not automatically classifying COVID-19 related loan modifications as Troubled Debt Restructurings (TDRs)[399][401][405][406] Critical Accounting Policies The company's critical accounting policies, including allowance for loan losses, fair value of financial instruments, and income taxes, require significant estimates and judgments - The company's critical accounting policies include the allowance for loan losses, fair value of financial instruments, income taxes, derivative financial instruments, and other real estate owned, all requiring significant estimates and judgments[263][264][269][272][274][276] - The allowance for loan losses is maintained at a level sufficient to absorb estimated probable incurred losses, determined through periodic reviews, historical loss experience, economic conditions, and specific impaired loans[264][266][267] - Fair value of financial instruments is generally based on quoted market prices or internally developed models using observable market-based parameters, with valuation adjustments for credit quality and other factors[269][270] Analysis of Results of Operations for the Years Ended December 31, 2020 and 2019 Net income increased by 12.67% in 2020, driven by a 16.59% rise in net interest income and 54.11% growth in non-interest income, despite a 123.11% increase in provision for loan losses and higher non-interest expenses Net Income Components (in thousands) | Metric | 2020 | 2019 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Interest income | $62,072 | $58,813 | 5.54% | | Interest expense | $16,095 | $19,377 | -16.94% | | Net interest income | $45,977 | $39,436 | 16.59% | | Provision for loan losses | $3,610 | $1,618 | 123.11% | | Non-interest income | $7,493 | $4,862 | 54.11% | | Non-interest expense | $30,300 | $25,376 | 19.40% | | Net income | $15,717 | $13,950 | 12.67% | | Net income available to common shareholders | $15,082 | $13,950 | 8.11% | - Net interest income increased by $6.5 million (16.59%) to $46.0 million in 2020, driven by increased loan production and a decrease in interest rates on interest-bearing deposits[278][280] - The net interest margin decreased to 3.21% in 2020 from 3.50% in 2019, primarily due to lower average rates earned on the loan portfolio and investments, partially offset by decreasing rates on the cost of funds[281] Rate/Volume Analysis of Net Interest Income Change (2020 vs 2019, in thousands) | Component | Change Due to Volume | Change Due to Rate | Total Change | | :-------------------------- | :------------------- | :----------------- | :----------- | | Interest-earning assets | $12,956 | $(9,697) | $3,259 | | Interest-bearing liabilities | $1,142 | $(4,424) | $(3,282) | | Change in Net Interest Income | $11,814 | $(5,273) | $6,541 | - Non-interest income increased by $2.6 million (54.1%) to $7.5 million in 2020, mainly due to higher deposit account service charges, increased bank-owned life insurance income, and a significant rise in loan swap fee income (up 255%)[298] - Non-interest expense increased by $4.9 million (19.4%) to $30.3 million in 2020, primarily driven by increases in salaries and employee benefits (due to supporting customer-facing staff during the pandemic), FDIC insurance, and other operating expenses (professional/consulting fees, technology investments, OREO writedown)[301] - Income tax expense increased by $489,000 (14.6%) to $3.8 million in 2020, reflecting the increase in income before income taxes. The effective federal tax rate was 19.6% in 2020[302] Comparison of Statements of Financial Condition at December 31, 2020 and at December 31, 2019 Total assets grew by 28.6% to $1.6 billion in 2020, driven by increases in gross loans and available-for-sale securities, while deposits rose by $309.7 million, and stockholders' equity increased by $30.6 million - Total assets increased by $365.8 million (28.6%) to $1.6 billion at December 31, 2020, primarily driven by growth in gross loans receivable ($257.0 million) and available-for-sale securities ($53.2 million)[303] - The total investment securities portfolio increased by $53.2 million to $169.9 million at December 31, 2020, with $147.4 million in available-for-sale securities and $22.5 million in held-to-maturity securities. No securities were sold in 2020[307][308] Loan Portfolio by Segment (in thousands) | Loan Type | Dec 31, 2020 Amount | Dec 31, 2020 Percent | Dec 31, 2019 Amount | Dec 31, 2019 Percent | | :-------------------------- | :------------------ | :------------------- | :------------------ | :------------------- | | Residential real estate | $182,499 | 14.61% | $150,848 | 14.47% | | Commercial real estate (Owner occupied) | $141,813 | 11.35% | $134,116 | 12.87% | | Commercial real estate (Non-owner occupied) | $326,117 | 26.10% | $287,754 | 27.61% | | Construction and land development | $324,906 | 26.00% | $272,620 | 26.16% | | Commercial and industrial (incl. PPP) | $230,027 | 18.41% | $121,225 | 11.63% | | Consumer – non-real estate | $44,073 | 3.53% | $75,583 | 7.26% | | Total gross loans | $1,249,435 | 100.00% | $1,042,146 | 100.00% | - Asset quality remained strong, with nonperforming assets totaling $1.2 million at December 31, 2020, representing 0.08% of total assets. Nonaccrual loans were $149,000 at year-end 2020[324][327][330] - The allowance for loan losses increased to $12.9 million at December 31, 2020, from $9.6 million in 2019, primarily due to a general qualitative factor added in response to the COVID-19 pandemic and provision expense on newly originated loans. Net charge-offs were $317,000 in 2020[343] - Total deposits increased by $309.7 million to $1.4 billion at December 31, 2020, driven by increases in non-interest bearing demand deposits and money market deposits, largely related to the PPP initiative[351][353] - Federal Home Loan Bank (FHLB) advances decreased to $0 at December 31, 2020, from $40.0 million in 2019. Subordinated debt remained stable at approximately $14.8 million[241][359] - Stockholders' equity increased by $30.6 million to $167.7 million at December 31, 2020, due to net income and a preferred stock issuance, partially offset by common share repurchases[362] Liquidity and Capital Resources The company actively manages daily liquidity through monitoring and stress testing, maintaining sufficient sources from debt securities, loan payments, deposits, and borrowings, while the Bank remains 'well capitalized' under Basel III requirements - The company manages liquidity daily using a sophisticated monitoring system and stress testing under various market conditions, maintaining sufficient sources of liquidity through unencumbered debt securities, loan payments, deposits, and FHLB/other borrowings[363][364][365][366][370] Cash Flows (in thousands) | Activity | 2020 | 2019 | | :-------------------------- | :----- | :----- | | Net cash provided by operating activities | $17,016 | $16,692 | | Net cash used in investing activities | $(313,786) | $(161,410) | | Net cash provided by financing activities | $339,454 | $151,486 | | Increase in Cash and Cash Equivalents | $42,684 | $6,768 | | Cash and Cash Equivalents, end of period | $107,528 | $64,844 | - Off-balance sheet arrangements include commitments to extend credit totaling $219.4 million and standby/commercial letters of credit totaling $1.1 million at December 31, 2020[375][376] - The Bank is subject to Basel III capital requirements and was 'well capitalized' at December 31, 2020. The Company, with consolidated assets less than $3 billion, is not currently subject to consolidated capital requirements[377][379][381][382] Non-GAAP Measures The company provides supplemental non-GAAP performance measures, such as 'Net interest margin excluding PPP loans,' to offer additional insight into financial performance, particularly regarding the impact of the Paycheck Protection Program - The company provides supplemental non-GAAP performance measures, such as 'Net interest margin excluding PPP loans' and 'Allowance for loan losses, excluding PPP to total loans,' to offer additional insight into financial performance, particularly regarding the impact of the Paycheck Protection Program[413][414][415] Non-GAAP Reconciliation (in thousands, except percentages) | Metric | 2020 | 2019 | 2018 | | :-------------------------------------------------- | :----- | :----- | :----- | | Loans held for investment, excluding PPP (non-GAAP) | $1,114,255 | $1,042,146 | $927,437 | | Net interest income, excluding PPP income (non-GAAP) | $42,212 | $39,436 | $31,170 | | Net interest margin, excluding PPP (non-GAAP) | 3.21% | 3.50% | 3.41% | | Allowance for loan losses to total loans, excluding PPP (non-GAAP) | 1.16% | 0.92% | 0.95% | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, managed by the Asset/Liability Committee to minimize adverse effects on net interest income and asset fair values, utilizing sensitivity analysis and derivative instruments - The company's most significant market risk exposure is interest rate risk, managed by the Asset/Liability Committee to minimize adverse effects on net interest income and the fair value of financial instruments[417][418] Net Interest Income Sensitivity (Year 1 Change from Level, in thousands) | Interest Rates Year 1 Forecast | Change from Level | | :-------------------------- | :---------------- | | +400 bps | 52.13% ($32,947) | | +300 bps | 40.81% ($30,496) | | +200 bps | 25.58% ($27,198) | | +100 bps | 11.53% ($24,155) | | Level | — ($21,658) | | -100 bps | -4.14% ($20,761) | | -200 bps | -10.42% ($19,400) | Economic Value of Equity (EVE) Sensitivity (as of December 31, 2020, in thousands) | Basis Point Change in Interest Rates | Estimated EVE | Estimated Increase (Decrease) EVE Amount | Estimated Increase (Decrease) EVE Percent | | :--------------------------------- | :------------ | :--------------------------------------- | :---------------------------------------- | | +400 | $201,437 | $43,017 | 27.15% | | +300 | $195,988 | $37,567 | 23.71% | | +200 | $186,031 | $27,611 | 17.43% | | +100 | $174,005 | $15,584 | 9.84% | | Level | $158,420 | — | — | | -100 | $140,750 | $(17,671) | (11.15)% | | -200 | $141,980 | $(16,441) | (10.38)% | - The company is currently asset sensitive as of December 31, 2020, and uses derivative financial instruments, such as interest rate loan swaps, to manage interest rate risk[427][428] Financial Statements and Supplementary Data This section provides the audited consolidated financial statements for 2020 and 2019, including statements of financial condition, income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes on accounting policies and regulatory matters - The consolidated financial statements for the years ended December 31, 2020 and 2019, have been audited by Yount, Hyde & Barbour, P.C., who issued an unqualified opinion[433][437] Consolidated Statements of Financial Condition (in thousands) | Asset/Liability | Dec 31, 2020 | Dec 31, 2019 | | :---------------------------------------------------------------- | :----------- | :----------- | | Total Assets | $1,643,165 | $1,277,358 | | Cash and cash equivalents | $107,528 | $64,844 | | Investment securities available-for-sale, at fair value | $147,414 | $92,791 | | Loans, net of allowance for loan losses | $1,230,379 | $1,030,425 | | Total Deposits | $1,438,246 | $1,071,623 | | Federal Home Loan Bank advances | $— | $40,000 | | Subordinated debt, net | $14,834 | $14,805 | | Total Stockholders' Equity | $167,665 | $137,034 | Consolidated Statements of Income (in thousands) | Income/Expense | 2020 | 2019 | | :-------------------------------- | :----- | :----- | | Total Interest Income | $62,072 | $58,813 | | Total Interest Expense | $16,095 | $19,377 | | Net interest income | $45,977 | $39,436 | | Provision for Loan Losses | $3,610 | $1,618 | | Total Non-Interest Income | $7,451 | $4,862 | | Total Non-Interest Expense | $30,258 | $25,376 | | Net Income | $15,717 | $13,950 | | Net Income per common share (Basic & Diluted) | $1.85 | $1.69 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2020 | 2019 | | :---------------------------------------- | :----- | :----- | | Net cash provided by operating activities | $17,016 | $16,692 | | Net cash used in investing activities | $(313,786) | $(161,410) | | Net cash provided by financing activities | $339,454 | $151,486 | | Increase in Cash and Cash Equivalents | $42,684 | $6,768 | | Cash and Cash Equivalents, end of period | $107,528 | $64,844 | - The notes to the financial statements provide detailed information on accounting policies, including the impact of recently issued accounting pronouncements like CECL and reference rate reform (LIBOR transition)[495][501] - The Bank's regulatory capital ratios as of December 31, 2020, demonstrate it is 'well capitalized' under Basel III requirements, with a Total capital ratio of 14.60% and a Tier 1 leverage ratio of 10.78%[566][567] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its independent accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[610] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported - Management, with the participation of the CEO and CFO, evaluated and concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[611] - Management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2020, using the COSO framework, and concluded it was effective[612][613] - The company's annual report does not include an attestation report from its independent registered public accounting firm regarding internal control over financial reporting, as it is permitted for non-accelerated filers, but it remains subject to FDICIA requirements[502][614] - No changes in the company's internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the fourth quarter ended December 31, 2020[616] Other Information There is no other information required to be disclosed under this item - No other information was reported under this item[617] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Annual Meeting of Shareholders proxy statement - Information required for this item is incorporated by reference to the company's definitive proxy statement for its 2021 Annual Meeting of Shareholders[619] Executive Compensation Executive compensation details are incorporated by reference from the 2021 Annual Meeting of Shareholders proxy statement - Information required for this item is incorporated by reference to the company's definitive proxy statement for its 2021 Annual Meeting of Shareholders[620] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information for beneficial owners and management is incorporated by reference from the 2021 Annual Meeting of Shareholders proxy statement - Information required for this item is incorporated by reference to the company's definitive proxy statement for its 2021 Annual Meeting of Shareholders[621] Certain Relationships and Related Transactions, and Director Independence Details on certain relationships, related transactions, and director independence are incorporated by reference from the 2021 Annual Meeting of Shareholders proxy statement - Information required for this item is incorporated by reference to the company's definitive proxy statement for its 2021 Annual Meeting of Shareholders[622] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2021 Annual Meeting of Shareholders proxy statement - Information required for this item is incorporated by reference to the company's definitive proxy statement for its 2021 Annual Meeting of Shareholders[623] PART IV Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed with the 10-K report, encompassing organizational documents, equity agreements, and certifications - The section provides a comprehensive list of exhibits, including the Agreement and Plan of Reorganization, Restated Articles of Incorporation, Bylaws, forms of stock certificates, Subordinated Note Purchase Agreement, Equity Incentive Plans, Employment Agreements, and various certifications[625] Form 10-K Summary This item indicates that a Form 10-K Summary is not applicable for this filing - The Form 10-K Summary is not applicable[626] Signatures The report concludes with the required signatures of the registrant's authorized officers and directors, certifying its submission - The report is signed by the Registrant's Chairman & Chief Executive Officer, Senior Executive Vice President and Chief Financial Officer, President, Vice President and Chief Accounting Officer, and other directors, certifying its submission[628]