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We currently operate throughout the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, from a network of banking centers and loan production offices.
−Removed: Since our founding in 2006, our mission has not changed –
−Removed: we seek to be the financial institution of choice for our markets’
−Removed: small-to-midsized businesses and their owners and employees.
−Removed: To achieve this goal, we focus on recruiting, retaining and empowering talented bankers who are intimately familiar with and well respected in the communities that they serve, and on providing market-leading products and services that add value to our customers’
+Added: Since our founding in 2006, our mission has not changed – we seek to be the financial institution of choice for our markets’ small-to-midsized businesses and their owners and employees.
+Added: To achieve this goal, we focus on recruiting, retaining and empowering talented bankers who are intimately familiar with and well respected in the communities that they serve, and on providing market-leading products and services that add value to our customers’ businesses.
We are currently one of the largest Louisiana-based financial institutions.
−Removed: As of December 31, 2022, on a consolidated basis, we had total assets of $6.0 billion, total loans of $4.6 billion, total deposits of $4.8 billion and shareholders’
−Removed: equity of $580.5 million.
−Removed: Our common stock is listed on the Nasdaq Global Select Market under the symbol “BFST”.
+Added: As of December 31, 2023, on a consolidated basis, we had total assets of $6.6 billion, total loans of $5.0 billion, total deposits of $5.2 billion and shareholders’ equity of $644.3 million.
+Added: Our common stock is listed on the Nasdaq Global Select Market under the symbol “BFST”.
Our Business Strategy
−Removed: We believe a bank should be measured by the value it adds to its customers’
−Removed: We hold that our customers’
−Removed: needs are best met through local bankers with deep market experience who are empowered with decision-making authority and supported by centralized risk management practices and advanced technology.
+Added: We believe a bank should be measured by the value it adds to its customers’ businesses.
+Added: We hold that our customers’ needs are best met through local bankers with deep market experience who are empowered with decision-making authority and supported by centralized risk management practices and advanced technology.
We understand our competitive strengths and pursue disciplined growth through the careful selection of markets and our position within those markets.
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Opportunistic Market Expansion.
−Removed:   We are well positioned to expand along the I-10/12 and I-20 corridors, East Texas markets to the west, and into the Jackson and Gulfport/Biloxi, Mississippi markets to the east, as well as growing our markets in the Dallas/Fort Worth metroplex and Houston.
+Added: We are well positioned to expand along the I-10/12 and I-20 corridors, East Texas markets to the west, and into the Jackson and Gulfport/Biloxi, Mississippi markets to the east, as well as growing our markets in the Dallas/Fort Worth metroplex and Houston.
We believe these markets have attractive demographics and a significant concentration of small-to-midsized businesses and high net worth individuals that are historically underserved by the banking industry.
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(v) the acquisition of Smith Shellnut Wilson, LLC, which operates out of the Jackson, Mississippi area, on April 1, 2021;
−Removed: and (vi) the acquisition of Texas Citizens Bancorp, Inc., which operates in Houston, on March 1, 2022, the last three of which are described in further detail below.
+Added: and (vi) the acquisition of Texas Citizens Bancorp, Inc., which operates in Houston, on March 1, 2022, the last two of which are described in further detail below.
We will carefully consider acquisition opportunities that we believe are consistent with our strategic vision and provide attractive risk-adjusted returns to our shareholders.
Recent Acquisition Activity
−Removed: Pedestal Bancshares, Inc.
−Removed: On January 22, 2020, we entered into an agreement and plan of reorganization with Pedestal Bancshares, Inc., and its wholly-owned banking subsidiary, Pedestal Bank, headquartered in Houma, Louisiana.
−Removed: The acquisition was consummated on May 1, 2020.
−Removed: As a result of the transaction, we acquired Pedestal Bank’s twenty-two branch locations across southern Louisiana, total assets of $1.4 billion, net loans of $935.8 million and total deposits of $1.2 billion.
−Removed: The acquisition expanded our presence in our South to Southwest Louisiana markets.
−Removed: Smith Shellnut Wilson, LLC ( “
+Added: Smith Shellnut Wilson, LLC ( “ SSW ” ).
On March 22, 2021, we, through b1BANK, entered into a definitive agreement to acquire SSW, a registered investment advisor with approximately $3.5 billion in assets under management, specializing in managing investment portfolios for corporations, foundations and individuals.
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On October 20, 2021, we entered into a definitive agreement to acquire Texas Citizens Bancorp, Inc.
−Removed: (“TCBI”), the parent bank holding company for Texas Citizens Bank, National Association, headquartered in Pasadena, Texas.
+Added: (“TCBI”), the parent bank holding company for Texas Citizens Bank, National Association, headquartered in Pasadena, Texas.
The acquisition was consummated on March 1, 2022.
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We primarily target small-to-midsized businesses with credit needs between $1 million and $10 million, whose banking needs are typically too complex for traditional community banks but are not large enough to attract personalized attention and service from larger institutions.
−Removed: In addition to offering the real estate lending typically available from a community bank, we began focusing heavily on our commercial and industrial (“C&I”) products after the economic downturn in 2008 and have developed extensive C&I expertise across our markets.
−Removed: C&I lending requires experienced bankers with a deep understanding of our customers’ businesses and their banking needs, which we believe is well suited for our “high touch” approach to banking.
+Added: In addition to offering the real estate lending typically available from a community bank, we began focusing heavily on our commercial and industrial (“C&I”) products after the economic downturn in 2008 and have developed extensive C&I expertise across our markets.
+Added: C&I lending requires experienced bankers with a deep understanding of our customers’ businesses and their banking needs, which we believe is well suited for our “high touch” approach to banking.
We believe that we have developed an expertise in this small-to-midsized business banking niche that is historically underserved, positioning us for meaningful growth going forward.
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True Community Banking Model .
−Removed: Despite being located in Louisiana’s largest metropolitan areas and in the two largest metropolitan areas in the state of Texas, we have a true community banking mindset.
+Added: Despite being located in Louisiana’s largest metropolitan areas and in the two largest metropolitan areas in the state of Texas, we have a true community banking mindset.
That means relationship-based banking by bankers who live and work in our markets.
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The experience and talent of our market presidents and their respective banking teams allow us to decentralize significant decision-making authority while maintaining disciplined credit practices.
−Removed: In our experience, developing credit underwriting expertise “on the front lines” promotes quality loan generation and maximizes efficiency.
+Added: In our experience, developing credit underwriting expertise “on the front lines” promotes quality loan generation and maximizes efficiency.
Further, our emphasis on asset/liability management training allows our local banking teams to understand the importance of quality core deposit funding, which we believe is vital to our continued loan growth.
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Since our founding in 2006, we have grown rapidly across the state of Louisiana, into the Dallas/Fort Worth metroplex and, into Houston.
−Removed: Each of our expansions were initiated with careful identification and recruitment of local banking teams and thoughtful consideration of each market’s different industries and credit exposures.
+Added: Each of our expansions were initiated with careful identification and recruitment of local banking teams and thoughtful consideration of each market’s different industries and credit exposures.
Our banking centers are carefully situated in locations, typically downtowns and suburban centers, optimized for small-to-midsized business customers and high net worth individuals.
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As a necessary complement to our style of sophisticated community banking, we have made significant investments to build a strong operational platform to empower our individual markets to thrive, to create operational efficiencies across our diverse markets, and to position us for future growth without commensurate growth in operational expenses.
−Removed: We have invested heavily in risk management personnel and modeling capabilities in recent years – we believe our underwriting capabilities are second to none in our markets, and our strong participation network and asset quality metrics are evidence of those capabilities.
+Added: We have invested heavily in risk management personnel and modeling capabilities in recent years – we believe our underwriting capabilities are second to none in our markets, and our strong participation network and asset quality metrics are evidence of those capabilities.
We invest in technology, which we believe will allow us to maintain staffing that is skewed towards the production side of our business and to accommodate future growth without commensurate increases in operating expenses.
−Removed: We believe our investments in technology will also allow us to maintain our “high tech/high touch” approach without the need for an extensive network of brick and mortar locations.
+Added: We believe our investments in technology will also allow us to maintain our “high tech/high touch” approach without the need for an extensive network of brick and mortar locations.
Our banking operations are currently organized into five regions in Louisiana, which include the largest metropolitan areas in the state, the Dallas/Fort Worth metroplex, and Houston, which we service through our banking centers and loan production offices.
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We offer, among other products, checking, savings and money market accounts, certificates of deposit, commercial and consumer loans, mortgage loans, real estate loans, and other installment and term loans.
−Removed: In addition, b1BANK offers our customers wealth management products, drive-through banking facilities, automated teller machines, night depository, personalized checks, credit cards, debit cards, internet banking, electronic funds transfers through ACH services, domestic and foreign wire transfers, traveler’s checks, cash management, vault services, loan and deposit sweep accounts, and lock box services.
+Added: In addition, b1BANK offers our customers wealth management products, drive-through banking facilities, automated teller machines, night depository, personalized checks, credit cards, debit cards, internet banking, electronic funds transfers through ACH services, domestic and foreign wire transfers, traveler’s checks, cash management, vault services, loan and deposit sweep accounts, and lock box services.
Lending Activities
−Removed: As a business-focused community-based financial institution, we offer a variety of business-related loans, including commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), term loans, equipment financing, acquisition, expansion and development loans, borrowing base loans, real estate construction loans, homebuilder loans, letters of credit and other loan products to small-to-midsized businesses, real estate developers, mortgage lenders, manufacturing and industrial companies and other businesses.
+Added: As a business-focused community-based financial institution, we offer a variety of business-related loans, including commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner occupied commercial properties), term loans, equipment financing, acquisition, expansion and development loans, borrowing base loans, real estate construction loans, homebuilder loans, letters of credit and other loan products to small-to-midsized businesses, real estate developers, mortgage lenders, manufacturing and industrial companies and other businesses.
We also offer various consumer loans to individuals and professionals including residential real estate loans, home equity loans, installment loans, unsecured and secured personal lines of credit, and standby letters of credit.
−Removed: Lending activities originate from the efforts of our bankers, with an emphasis on lending to small-to-midsized businesses, their owners and employees, and individuals located in our market areas.
+Added: Lending activities originate from the efforts of our bankers, with an emphasis on lending to small-to-midsized businesses, their owners and employees, and individuals located in our market areas.
Although all lending involves a degree of risk, we work to mitigate these risks through conservative underwriting policies and consistent monitoring of credit quality indicators.
Commercial and Industrial Loans .
−Removed: We make C&I loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion and development loans, borrowing base loans, letters of credit and other loan products, primarily in our target markets that are underwritten on the basis of the borrower’s ability to service the debt from income.
+Added: We make C&I loans, including commercial lines of credit, working capital loans, term loans, equipment financing, asset acquisition, expansion and development loans, borrowing base loans, accounts receivable factoring, agricultural financing, letters of credit and other loan products, primarily in our target markets that are underwritten on the basis of the borrower’s ability to service the debt from income.
We typically take as collateral a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and equipment and generally obtain a personal guaranty of the borrower or principal.
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As a result of these additional complexities, variables and risks, C&I loans require extensive underwriting and servicing.
−Removed: Construction and Development Loans .  Our construction portfolio includes loans to small-to-midsized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single family homes in our market areas.
+Added: Construction and Development Loans .
+Added: Our construction portfolio includes loans to small-to-midsized businesses to construct owner-user properties, loans to developers of commercial real estate investment properties and residential developments and, to a lesser extent, loans to individual clients for construction of single family homes in our market areas.
Construction and development loans are generally made with a term of one-to-two years with interest paid monthly.
Our underwriting policy does allow for exceptions in which the term of a construction and development loan may be longer than two years;
−Removed: however, the term must be realistic and consistent with the borrower’s documented ability to repay.
+Added: however, the term must be realistic and consistent with the borrower’s documented ability to repay.
The ratio of the loan principal to the value of the collateral, as established by independent appraisal, typically will not exceed regulatory supervisory guidelines.
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Commercial Real Estate Loans.
−Removed:   We offer real estate loans for commercial property that is owner-occupied as well as commercial property owned by real estate investors.
+Added: We offer real estate loans for commercial property that is owner-occupied as well as commercial property owned by real estate investors.
Commercial loans that are secured by owner-occupied commercial real estate and primarily collateralized by operating cash flows are also included in this category of loan.
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We generally charge an origination fee for our services.
−Removed: We typically require personal guarantees from the principal owners of the business supported by a review of the principal owners’
−Removed: personal financial statements and global debt service obligations.
−Removed: Risks associated with commercial real estate loans include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination and the quality of the borrower’s management.
−Removed: We make efforts to limit our risk by analyzing borrowers’
−Removed: cash flow and collateral value.
−Removed: The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied offices/warehouses/production facilities, office buildings, hotels, mixed-use residential/commercial properties, retail centers and multi-family properties.
+Added: We typically require personal guarantees from the principal owners of the business supported by a review of the principal owners’ personal financial statements and global debt service obligations.
+Added: Risks associated with commercial real estate loans include fluctuations in the value of real estate, the overall strength of the economy, new job creation trends, tenant vacancy rates, environmental contamination and the quality of the borrower’s management.
+Added: We make efforts to limit our risk by analyzing borrowers’ cash flow and collateral value.
+Added: The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner-occupied and non—owner occupied offices/warehouses/production facilities, office buildings, hotels, mixed-use residential/commercial properties, retail centers and multi-family properties.
Our commercial real estate loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios.
Residential Real Estate Loans.
−Removed:   We offer first and second lien 1-4 family mortgage loans, as well as home equity lines of credit, in each case primarily on owner-occupied primary residences.
+Added: We offer first and second lien 1-4 family mortgage loans, as well as home equity lines of credit, in each case primarily on owner-occupied primary residences.
Our retail consumer real estate lending products are offered primarily to consumer customers within our geographic markets.
−Removed: We also originate for resale 1-4 family mortgage loans, and those loans are included as a part of our consumer real estate loan portfolio until sold to investors.
−Removed: Although our consumer real estate loan portfolio presents lower levels of risk than our commercial, commercial real estate and construction loan portfolios, we are exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship.
+Added: Although our consumer real estate loan portfolio presents lower levels of risk than our commercial, commercial real estate and construction loan portfolios, we are exposed to risk based on fluctuations in the value of the real estate collateral securing the loan, as well as changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship.
Consumer Loans.
−Removed:   While our focus is on service to small-to-midsized businesses, we also make a variety of loans to individuals for personal, family and household purposes, including secured and unsecured installment and term loans.
−Removed: We offer consumer loans as an accommodation to our existing customers and do not market consumer loans to persons who do not have a pre-existing relationship with us.
−Removed: Our consumer loans, which are underwritten primarily based on the borrower’s financial condition and, in some cases, are unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
+Added: While our focus is on service to small-to-midsized businesses, we also make a variety of loans to individuals for personal, family and household purposes, including secured and unsecured installment and term loans.
+Added: Our consumer loans, which are underwritten primarily based on the borrower’s financial condition and, in some cases, are unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by numerous factors, including divorce, job loss, illness or other personal hardship, and fluctuations in the value of the real estate or personal property securing the consumer loan, if any.
Credit Policies and Procedures
−Removed:  We adhere to what we believe are disciplined underwriting standards, but also remain cognizant of the need to serve the credit needs of customers in our primary market areas by offering flexible loan solutions in a responsive and timely manner.
+Added: We adhere to what we believe are disciplined underwriting standards, but also remain cognizant of the need to serve the credit needs of customers in our primary market areas by offering flexible loan solutions in a responsive and timely manner.
We maintain asset quality through an emphasis on local market knowledge, long-term customer relationships, consistent and thorough underwriting for all loans and a conservative credit culture.
We also seek to maintain a broadly diversified loan portfolio across customer, product and industry types.
−Removed: Our lending policies do not provide for any loans that are highly speculative, subprime, or that have high loan-to-value ratios.
+Added: Our lending policies do not provide for any loans that are highly speculative, subprime, or that have high loan-to-value ratios.
These components, together with active credit management, are the foundation of our credit culture, which we believe is critical to enhancing the long-term value of our organization to our customers, employees, shareholders and communities.
−Removed: Credit Concentrations .  In connection with the management of our credit portfolio, we actively manage the composition of our loan portfolio, including credit concentrations.
+Added: Credit Concentrations .
+Added: In connection with the management of our credit portfolio, we actively manage the composition of our loan portfolio, including credit concentrations.
Our loan approval policies establish concentration limits with respect to industry and loan product type to enhance portfolio diversification.
−Removed: In general, loan product concentration levels, our commercial real estate concentrations, and industry concentration levels are monitored monthly and reviewed by the Bank’s board of directors.
+Added: In general, loan product concentration levels, our commercial real estate concentrations, and industry concentration levels are monitored monthly and reviewed by the Bank’s board of directors.
Loan Approval Process.
−Removed:   We seek to achieve an appropriate balance between prudent, disciplined underwriting and flexibility in our decision-making and responsiveness to our customers.
−Removed: Our board has established an “in-house” lending limit to any single customer equal to 15% of the Bank’s Tier 1 and Tier 2 Capital in the case of loans that are not fully secured, with an additional 10% of the Bank’s Tier 1 and Tier 2 Capital in the case of loans that are fully secured by readily marketable collateral having a market value, as determined by reliable and continuously available price quotations at least equal to the amount of the loan.
−Removed: The capital calculation is calculated monthly.
−Removed: As of December 31, 2022, the Bank had a legal lending limit of approximately $328.8 million for loans not fully secured with readily marketable collateral, and its “in-house” lending limit was $71.0 million as of such date.
+Added: We seek to achieve an appropriate balance between prudent, disciplined underwriting and flexibility in our decision-making and responsiveness to our customers.
+Added: As of December 31, 2023, the Board has set the “in-house” household lending limit was $60.0 million with an additional borrower “in-house” lending limit of $20.0 million as of such date.
Our credit underwriters are based throughout our footprint and service all of our markets from those locations.
Our credit approval policies provide for various levels of officer and senior management lending authority for new credits and renewals, which are based on position, capability and experience.
−Removed: We approve loans under four types of authority, Matrix (which includes Executive and Directors’
−Removed: Loan Committees), Incremental, Small Business, and Consumer authority.
−Removed: With the exception of loans secured by cash deposited with us, all commercial loans require a minimum of two approvers (the banker and one other individual with higher authority).
+Added: We approve loans under four types of authority, Matrix (which includes Executive and Directors’ Loan Committees), Incremental, Small Business, and Consumer authority.
+Added: With the exception of loans secured by cash deposited with us, all commercial loans require a minimum of two approvers (the banker and at least one other individual with higher authority).
When using the Matrix authority, senior lenders have authority up to $500,000, market presidents have authority up to $750,000, regional market presidents have authority up to $1.5 million, the chief banking officer and regional credit managers have authority up to $2.5 million, regional chairmen have authority up to $2.0 million and the Chief Executive Officer, Chief Financial Officer, and Chief Credit Officer each have authority up to $2.5 million.
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All relationships exceeding $5.0 million are approved by the Executive Loan Committee.
−Removed: All loans exceeding $10.0 million are required to be approved by the Director’s Loan Committee, which is comprised of board members.
−Removed: Loans may be approved using the Incremental authority when the relationship has already been approved using the Matrix authority, with senior lenders being able to approve up to $250,000, market presidents being able to approve up to $350,000, regional market presidents and higher authorities up to $1.5 million, cumulatively.
+Added: All relationships exceeding $10.0 million are required to be approved by the Director’s Loan Committee, which is comprised of board members.
+Added: Loans may be approved using the Incremental authority when the relationship has already been approved using the Matrix authority, with senior lenders being able to approve up to $250,000, market leaders being able to approve up to $350,000, regional presidents and higher authorities up to $1.5 million, cumulatively.
Consumer loans which present an aggregate lending exposure under $5.0 million are approved on a transactional basis by appropriate consumer lending personnel using credit underwriting software which recommends approval or decline based on Bank policy guidelines.
Loans exceeding the noted amounts or loans with policy exceptions must be approved by an appropriate override authority (including Senior or Executive level management or Loan Committee authority), which we believe provides platform scalability and furthers our fair lending compliance efforts.
−Removed: These parameters are reviewed periodically by the Bank’s board of directors.
+Added: These parameters are reviewed periodically by the Bank’s board of directors.
We believe that our credit approval process provides for thorough underwriting and efficient decision making.
−Removed: Credit Risk Management .  Credit risk management involves a partnership between our executive team and our market presidents.
+Added: Credit Risk Management .
+Added: Credit risk management involves a partnership between our executive team and our market presidents.
Loan officers, credit administration personnel and senior management proactively support collection activities.
−Removed: Our evaluation and compensation program includes significant goals, such as the percentages of past due loans and charge-offs to total loans in the officer’s portfolio and at the banking center level.
+Added: Our evaluation and compensation program includes significant goals, such as the percentages of past due loans and charge-offs to total loans in the officer’s portfolio and at the banking center level.
We believe this motivates loan officers and management to focus on the origination and maintenance of high-quality credits consistent with our strategic focus on asset quality.
Our policies require rapid notification of delinquency and prompt initiation of collection actions.
−Removed: We maintain a list of loans, or the Watch List that receive additional attention if we believe there may be a potential credit risk. 
−Removed: The Watch List is presented to the board of directors monthly. 
−Removed: Loan officers are encouraged to bring potential credit issues to the attention of credit administration personnel, and loan grades are updated as deemed appropriate. 
+Added: We maintain a list of loans, the “Watch List,” that receive additional attention if we believe there may be a potential credit risk.
+Added: The Risk Committee of the Board reviews a list of loans under foreclosure proceedings while the Impairment Committee reviews a list of impaired loans exceeding $500,000 as well as the list of Classified borrowers with exposures of $250,000 or greater.
+Added: Impairment Committee minutes are reviewed by the Risk Committee.
+Added: Loan officers are encouraged to bring potential credit issues to the attention of credit administration personnel, and loan grades are updated as deemed appropriate.
Quarterly, our internal loan review department analyzes specific segments of the loan portfolio.
−Removed: Additionally, we periodically have an independent, third-party review performed on our loan portfolio. 
−Removed: This review includes analysis of the borrower’s and guarantor’s financial condition, the Bank’s collateral position, and other credit risk factors. 
−Removed: Results of the review as well as management responses are presented to the Bank’s Risk Committee. 
−Removed: Finally, we perform stress testing on key segments of our portfolio in which we evaluate the impact of declining economic conditions on the portfolio based on previous recessionary periods. 
+Added: Additionally, we periodically have an independent, third-party review performed on our loan portfolio.
+Added: This review includes analysis of the borrower’s and guarantor’s financial condition, the Bank’s collateral position, and other credit risk factors.
+Added: Results of the review as well as management responses are presented to the Bank’s Risk Committee.
+Added: Finally, we perform stress testing on key segments of our portfolio in which we evaluate the impact of declining economic conditions on the portfolio based on previous recessionary periods.
The reporting and reviews provide management with additional information for assessing our asset quality.
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We offer business accounts and cash management services, including business checking and savings accounts, and treasury management services.
−Removed: We also provide a full range of deposit products and services, including a variety of checking and savings accounts, certificates of deposit, money market accounts, debit cards, remote deposit capture, online banking, mobile banking, e-Statements, bank-by-mail and direct deposit services.
+Added: We also provide a full range of deposit products and services, including a variety of checking and savings accounts, certificates of deposit, money market accounts, debit cards, remote deposit capture, online banking, mobile banking, e-Statements, bank-by-mail and direct deposit services.
We solicit deposits through our relationship-driven team of dedicated and accessible bankers and through community-focused marketing and have recently implemented an incentive bonus program with our bankers to encourage deposit growth.
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Our mission is to be the financial institution of choice for enterprises, their owners, and employees.
−Removed: Accordingly, we aim to attract, develop, and retain employees who can drive financial and strategic growth objectives and build long-term shareholder value while upholding our Guiding Principles:
−Removed: Relationship-Driven Team;
−Removed: Thoughtful, Disciplined Decision-Making;
−Removed: Meaningful Communication;
−Removed: Doing the Right Thing the Right Way;
+Added: Accordingly, we aim to attract, develop, and retain employees who can drive financial and strategic growth objectives and build long-term shareholder value while upholding our Guiding Principles of a relationship-driven team, thoughtful, disciplined decision-making, meaningful communication, doing the right thing the right way;
and striving to be the best through continual improvement.
−Removed: Key items related to our human capital resources are described below.
−Removed: As of December 31, 2022, we had 727 full-time and 21 part-time employees (total of 748 employees) located in Arkansas (remote), Kentucky (remote), Louisiana, Michigan (remote), Mississippi, Nevada (remote), South Dakota (remote), Tennessee (remote), Texas, and Virginia (remote).
−Removed: Full-time equivalents (FTEs) were 742.
−Removed: All of our banking centers and loan production offices are located in Louisiana and Texas, and our subsidiary registered investment advisor (RIA), Smith Shellnut Wilson, LLC, or SSW, is located in Mississippi.
+Added: Key items that drive our human capital resources are described below.
+Added: As of December 31, 2023, we proudly employ 751 full-time and 19 part-time employees (for a total of 770 employees).
+Added: Our employees reside coast to coast, with personnel located in Alabama (remote), Arkansas (remote), Illinois (remote), Kentucky (remote), Louisiana, Mississippi, Nevada (remote), North Carolina (remote), South Dakota (remote), Tennessee (remote), Texas, and Virginia (remote).
+Added: Full-time equivalents (FTEs) as of December 31, 2023, were 761.
+Added: All banking centers and loan production offices are in Louisiana and Texas, and our subsidiary registered investment advisor (RIA), Smith Shellnut Wilson, LLC, or SSW, is in Mississippi.
Our Chief Human Resources Officer reports directly to the Chief Administrative Officer and manages all aspects of the employee experience, including talent acquisition, diversity and inclusion, learning and development, talent management, compensation, and benefits.
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We have an organization-wide focus to improve recruitment and retention of women and ethnic minorities.
−Removed: In 2022, we launched our Intern Insights Program which focuses on creating a pipeline between young diverse talent and the banking industry.
+Added: In 2023, we completed a second year of our Intern Insights Program which focuses on creating a pipeline between young diverse talent and the banking industry.
Specifically, recruiting efforts focused on junior year finance and accounting majors at Southern University and A&M College in Baton Rouge, a historically black university, for our Intern Insights Program.
−Removed: Furthermore, in 2022, we implemented online exit surveys to provide feedback and help increase retention of women and ethnic minorities.
+Added: Furthermore, in 2023, we continued the use of online exit surveys to provide feedback and help increase retention of women and ethnic minorities.
As of December 31, 2023, our colleagues had the following attributes:
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Based on EEO-1 job classifications.
−Removed: Based on b1BANK’s Executive Team.
+Added: Based on b1BANK’s Executive Team.
Includes Hispanic/Latino, Black/African American, Asian, American Indian/Alaska Native, Native Hawaiian/Other Pacific Islander
+Added: In addition to our continued Diversity Equity and Inclusion (“DEI”) efforts, we have emphasized merit-based promotions in an effort to promote from within, foster talent development of our best human capital resources, and increase the our organic growth.
Compensation and Benefits .
−Removed: We strive to provide pay, benefits, and services that help meet the varying needs of our employees.
+Added: We provide pay, benefits, and services that not only meet the varying needs of our employees but are in line with our equilibrium for competitive compensation.
Compensation and benefits include market-competitive pay, health insurance options, a health reimbursement account (HRA), a flexible spending account (FSA), dependent care, employer-paid life insurance, voluntary life insurance, dental and vision insurance, employer-paid short-term disability, employer-paid long-term disability, employee assistance programs, employee discounts on our products, critical illness insurance, accident insurance, hospital indemnity insurance, pet insurance, identity and fraud protection, MetLife legal plan, paid time off, (including paid volunteer leave), training and professional development opportunities, and an employer-paid financial wellness program.
−Removed: We periodically review compensation and benefits by grade level and position to ensure similar positions are paid comparatively and to ensure that we have a competitive and valuable offering to meet the well-being and needs of our employees.
+Added: Periodic and objective reviews of compensation and benefits by grade level and position are conducted to ensure similar positions are paid comparatively and to solidify that we continuously provide a competitive and valuable offering to satisfy the well-being and needs of our employees.
Attraction, Development and Retention .
−Removed: We measure the success of our talent acquisition strategy on speed and quality of acquisition, diversity of new colleagues, retention, and overall performance metrics.
−Removed: Each of these metrics is tracked for each of the key business lines.
+Added: We measure the success of our talent acquisition strategy on quality of acquisition, diversity of new colleagues and retention.
+Added: Each of these metrics is tracked for all key business lines.
Sourcing strategies and support structures are modified to ensure that performance targets are met consistently.
−Removed: In 2022, the Talent Development team increased its volume and reach by introducing the Leading b1 program for manager development, establishing programming for the Senior Leadership Group, and rolling out a new process to place b1BANKers with External Development Programs offered by banking and community associations.
−Removed: In addition to the new programs and initiatives, the Talent Development team consistently offered ongoing training for conversion, hosted external speakers at The Learning Table (their speaker series), supported by our new internship program –
−Removed: Intern Insights, and upgraded our technology by switching its digital adoption platform to Apty and saving more than $30,000 annually.
−Removed: Overall, the establishment of new programs and processes allowed the Talent Development team to reach all employment levels and provide comprehensive learning resources for more than 700 employees.
+Added: In 2023, our Talent Development team made significant strides in enhancing and expanding our training initiatives.
+Added: Our goals were to directly benefit our clients by elevating service standards through strategic development programs.
+Added: Key among these was the integration of Submittable, which is an online platform used to streamline the submission and review processes into our internal application for external learning and development programs.
+Added: This innovative platform revolutionized how employees applied for external development programs, streamlining our application process, and improving how managers and executives review and provide feedback on applications.
+Added: Further advancements were made in our “Learning b1:
+Added: Manager Orientation” program, which underwent significant improvements with the introduction of personalized coaching sessions.
+Added: These sessions provided targeted guidance to enhance leadership skills among managers, leading to more efficient teams and, consequently, better internal and external client interactions and service quality.
+Added: Additionally, our specialized training programs, namely the “Transaction Dispute Reporting for the Frontline” and the “Mastering Currency Transaction Reports:
+Added: Compliance and Best Practices,” significantly enhanced client service and compliance standards.
+Added: These programs equipped our staff with essential skills for efficient dispute handling and deepened their understanding of critical compliance areas such as CTR’s, thereby ensuring secure, compliant client transactions and maintaining client trust in us.
+Added: This year also marked a notable enhancement in our Emergenetics training program.
+Added: This enhancement is aimed at maximizing the impact of cognitive and behavioral diversity in leadership and team collaboration.
+Added: By refining the Emergenetics training, we enabled our leaders to more effectively understand and utilize each team member’s unique strengths.
+Added: This approach fostered a more dynamic, inclusive, and effective leadership style, significantly impacting our ability to exceed client expectations through superior team performance and decision-making.
+Added: The enhancement of this innovative training program underscored our ongoing commitment to organizational excellence and superior client service.
Our average tenure is 6.7 years of service.
−Removed: During 2022, we had 352 open employee positions.
−Removed: Of the 255 positions that were filled, 188 (73.7%) were filled by external hires and the remaining 67 (26.3%) were filled by internal hires.
−Removed: We received a total of 5,183 applications.
+Added: During 2023, we had 109 internal employee promotions, 138 external hires, and 14 rehired employees.
Employee turnover for 2023 was 17.2%.
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www.b1bank.com
−Removed: Documents filed by the Company with the SEC are also available on the Company’s website, www.b1bank.com.
−Removed: Information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is not part of this Annual Report on Form 10-K.
+Added: Documents filed by the Company with the SEC are also available on the Company’s website, www.b1bank.com.
+Added: Information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is not part of this Annual Report on Form 10-K.
Supervision and Regulation
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Consequently, our growth and earnings performance will be affected not only by management decisions and general and local economic conditions, but also by the statutes administered by, and the regulations and policies of, various governmental regulatory authorities.
−Removed: These authorities include the Federal Reserve, Federal Deposit Insurance Corporation (“FDIC”), Consumer Financial Protection Bureau (“CFPB”), Louisiana Office of Financial Institutions (“OFI”), Internal Revenue Service (“IRS”) and state taxing authorities.
+Added: These authorities include the Federal Reserve, Federal Deposit Insurance Corporation (“FDIC”), Consumer Financial Protection Bureau (“CFPB”), Louisiana Office of Financial Institutions (“OFI”), Internal Revenue Service (“IRS”) and state taxing authorities.
The effect of these statutes, regulations and policies, and any changes to such statutes, regulations and policies, can be significant and cannot be predicted.
The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system, facilitate the conduct of sound monetary policy and promote fairness and transparency for financial products and services.
−Removed: The system of supervision and regulation applicable to us and our subsidiaries establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s Deposit Insurance Fund, the Bank’s depositors and the public, rather than our shareholders or creditors.
+Added: The system of supervision and regulation applicable to us and our subsidiaries establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s Deposit Insurance Fund, the Bank’s depositors and the public, rather than our shareholders or creditors.
The description below summarizes certain elements of the applicable bank regulatory framework.
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Financial holding companies may also engage in activities that are considered to be financial in nature, as well as those incidental or complementary to financial activities, including certain insurance underwriting activities.
−Removed: The Company and the Bank must each remain well capitalized and well managed and the Bank must receive a Community Reinvestment Act (“CRA”) rating of at least “satisfactory”
−Removed: at its most recent examination in order for us to maintain our status as a financial holding company.
+Added: The Company and the Bank must each remain well capitalized and well managed and the Bank must receive a Community Reinvestment Act (“CRA”) rating of at least “satisfactory” at its most recent examination in order for us to maintain our status as a financial holding company.
In addition, the Federal Reserve has the power to order a financial holding company or its subsidiaries to terminate any activity or terminate its ownership or control of any subsidiary, when it has a reasonable cause to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that financial holding company.
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The BHC Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.
−Removed: The Federal Reserve’s jurisdiction also extends to any company that we directly or indirectly control, such as any nonbank subsidiaries and other companies in which we own a controlling investment.
+Added: The Federal Reserve’s jurisdiction also extends to any company that we directly or indirectly control, such as any nonbank subsidiaries and other companies in which we own a controlling investment.
Financial Services Industry Reform.
−Removed:   In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act was enacted.
+Added: In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act was enacted.
The Dodd-Frank Act broadly affected the financial services industry by implementing changes to the financial regulatory landscape aimed at strengthening the sound operation of the financial services sector.
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However, the Jumpstart our Business Startups Act of 2012, or JOBS Act, provided certain exceptions to these requirements for so long as a publicly-traded qualifies as an emerging growth company.
−Removed: In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) revised certain aspects of the Dodd-Frank Act.
−Removed: Among other things, EGRRCPA exempts banks with less than $10 billion in assets (and total trading assets and trading liabilities of 5% or less of total assets) from Volcker Rule requirements relating to proprietary trading and clarifies definitions pertaining to Highly Volatile Commercial Real Estate (“HVCRE”), which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings.
+Added: In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”) revised certain aspects of the Dodd-Frank Act.
+Added: Among other things, EGRRCPA exempts banks with less than $10 billion in assets (and total trading assets and trading liabilities of 5% or less of total assets) from Volcker Rule requirements relating to proprietary trading and clarifies definitions pertaining to Highly Volatile Commercial Real Estate (“HVCRE”), which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings.
Further changes effected by the passage of EGRRCPA are discussed below.
Revised Rules on Regulatory Capital.
−Removed:   Regulatory capital rules pursuant to the Basel III requirements, released in July 2013 and effective January 1, 2015, implemented higher minimum capital requirements for bank holding companies and banks.
+Added: Regulatory capital rules pursuant to the Basel III requirements, released in July 2013 and effective January 1, 2015, implemented higher minimum capital requirements for bank holding companies and banks.
These rules include a new common equity Tier 1, or CET1, capital requirement and establish criteria that instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital.
The revised capital rules require banks and bank holding companies to maintain a minimum CET1 capital ratio of 4.5% of risk-based assets, a total Tier 1 capital ratio of 6.0% of risk-based assets, a total capital ratio of 8.0% of risk-based assets and a leverage ratio of 4.0% of average assets.
−Removed: The capital rules also require banks to maintain a CET1 capital ratio of 6.5%, a total Tier 1 capital ratio of 8.0%, a total capital ratio of 10.0% and a leverage ratio of 5.0% to be deemed “well capitalized”
−Removed: for purposes of certain rules and prompt corrective action requirements.
−Removed: The risk-based ratios include a “capital conservation buffer”
−Removed: of 2.5% above its minimum risk-based capital requirements that must be composed of common equity Tier 1 capital.
+Added: The capital rules also require banks to maintain a CET1 capital ratio of 6.5%, a total Tier 1 capital ratio of 8.0%, a total capital ratio of 10.0% and a leverage ratio of 5.0% to be deemed “well capitalized” for purposes of certain rules and prompt corrective action requirements.
+Added: The risk-based ratios include a “capital conservation buffer” of 2.5% above its minimum risk-based capital requirements that must be composed of common equity Tier 1 capital.
This buffer helps to ensure that banking organizations conserve capital when it is most needed, allowing them to better weather periods of economic stress.
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An institution would be subject to limitations on certain activities including payment of dividends, share repurchases and discretionary bonuses to executive officers if its capital level is below the buffered ratio.
−Removed: As of December 31, 2022, the Company’s capital meets or exceeds these capital requirements, including the buffer.
−Removed: On September 17, 2019, the FDIC and other federal bank regulatory agencies approved the community bank leverage ratio (“CBLR”) framework as part of the directive under Section 201 of the EGRRCPA.
+Added: As of December 31, 2023, the Company’s capital meets or exceeds these capital requirements, including the buffer.
+Added: On September 17, 2019, the FDIC and other federal bank regulatory agencies approved the community bank leverage ratio (“CBLR”) framework as part of the directive under Section 201 of the EGRRCPA.
This framework became effective January 1, 2020, and is available to the Bank and Company as an alternative to the Basel III risk-based capital framework.
−Removed: On April 6, 2020, as mandated under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the federal bank regulatory agencies adopted an interim final rule that temporarily reduced the minimum community bank leverage ratio requirement to 8.0% and provided a two quarter grace period for banks with a leverage ratio between 7.0% and 8.0%.
−Removed: A transition interim final rule also adopted by the federal bank regulatory agencies on April 6, 2020 provides a graduated transition from the temporary 8.0% community bank leverage ratio requirement, to the 9.0% community bank leverage ratio requirement as established under the 2019 final rule.
−Removed: Specifically, the transition interim final rule provides that the community bank leverage ratio will be 8.0% in the second quarter through fourth quarter of calendar year 2020, 8.5% in calendar year 2021, and 9.0% thereafter.
+Added: The community bank leverage ratio requirement is currently 9.0% after being temporarily reduced under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
The CBLR framework is an optional framework that is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework.
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In the event an institution becomes undercapitalized, it must submit a capital restoration plan.
−Removed: The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount.
−Removed: Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy.
−Removed: The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5.0% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be adequately capitalized.
+Added: The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount.
+Added: Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy.
+Added: The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5.0% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be adequately capitalized.
The bank regulators have greater power in situations where an institution becomes significantly or critically undercapitalized or fails to submit a capital restoration plan.
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Control Acquisitions.
−Removed: Federal and state laws, including the BHC Act and the Change in Bank Control Act, or CBCA, impose additional prior notice or approval requirements and ongoing regulatory requirements on any investor that seeks to acquire direct or indirect “control”
−Removed: of an FDIC-insured depository institution or bank holding company.
−Removed: Whether an investor “controls”
−Removed: a depository institution is based on all of the facts and circumstances surrounding the investment.
+Added: Federal and state laws, including the BHC Act and the Change in Bank Control Act, or CBCA, impose additional prior notice or approval requirements and ongoing regulatory requirements on any investor that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or bank holding company.
+Added: Whether an investor “controls” a depository institution is based on all of the facts and circumstances surrounding the investment.
As a general matter, an investor is deemed to control a depository institution or other company if the investor owns or controls 25.0% or more of any class of voting securities.
Subject to rebuttal, an investor is presumed to control a depository institution or other company if the investor owns or controls 10.0% or more of any class of voting securities and either the depository institution or company is a public company or no other person will hold a greater percentage of that class of voting securities after the acquisition.
−Removed: If an investor’s ownership of our voting securities were to exceed certain thresholds, the investor could be deemed to “control”
−Removed: us for regulatory purposes, which could subject such investor to regulatory filings or other regulatory consequences.
+Added: If an investor’s ownership of our voting securities were to exceed certain thresholds, the investor could be deemed to “control” us for regulatory purposes, which could subject such investor to regulatory filings or other regulatory consequences.
The requirements of the BHC Act and the CBCA could limit our access to capital and could limit parties who could acquire shares of our common stock.
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The Federal Reserve has issued a supervisory letter that provides that a bank holding company should not pay dividends unless:
−Removed: (1) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends;
−Removed: (2) the prospective rate of earnings retention appears to be consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries;
−Removed: and (3) the bank holding company will continue to meet minimum required capital adequacy ratios.
+Added: (1) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends;
+Added: (2) the prospective rate of earnings retention appears to be consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries;
+Added: and (3) the bank holding company will continue to meet minimum required capital adequacy ratios.
Failure to comply with the supervisory letter could result in a supervisory finding that the bank holding company is operating in an unsafe and unsound manner.
−Removed: In addition, the Company’s ability to pay dividends may also be limited as a result of the capital conservation buffer under the Basel III regulatory capital framework.
+Added: In addition, the Company’s ability to pay dividends may also be limited as a result of the capital conservation buffer under the Basel III regulatory capital framework.
In the current financial and economic environment, the Federal Reserve Board has indicated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.
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In addition, any capital loans that the Company makes to the Bank are subordinate in right of payment to deposits and to certain other indebtedness of the Bank.
−Removed: As discussed above, in certain circumstances, the Company could also be required to guarantee the capital restoration plan of the Bank, if it became undercapitalized for purposes of the Federal Reserve’s prompt corrective action regulations.
+Added: As discussed above, in certain circumstances, the Company could also be required to guarantee the capital restoration plan of the Bank, if it became undercapitalized for purposes of the Federal Reserve’s prompt corrective action regulations.
In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank under a capital restoration plan would be assumed by the bankruptcy trustee and entitled to a priority of payment.
−Removed: In the event of a bank holding company’s bankruptcy under Chapter 11 of the U.S.
+Added: In the event of a bank holding company’s bankruptcy under Chapter 11 of the U.S.
Bankruptcy Code, the trustee will be deemed to have assumed and will be required to cure immediately any deficit under any commitment by the debtor holding company to any of the federal banking agencies to maintain the capital of an insured depository institution, and any claim for breach of such obligation will generally have priority over most other unsecured claims.
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In approving acquisitions or the addition of activities, the Federal Reserve considers, among other things, whether the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.
−Removed: Notwithstanding the foregoing, the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999, effective March 11, 2000, or the GLB Act, amended the BHC Act and eliminated the barriers to affiliations among banks, securities firms, insurance companies and other financial service providers.
+Added: Notwithstanding the foregoing, the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999, effective March 11, 2000, or the GLB Act, amended the BHC Act and eliminated the barriers to affiliations among banks, securities firms, insurance companies and other financial service providers.
The GLB Act permitted bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature.
−Removed: The GLB Act defines “financial in nature”
−Removed: to include, among other things, securities underwriting, dealing and market making;
+Added: The GLB Act defines “financial in nature” to include, among other things, securities underwriting, dealing and market making;
sponsoring mutual funds and investment companies;
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Bank holding companies are not permitted to engage in unsafe and unsound banking practices.
−Removed: The Federal Reserve’s Regulation Y, for example, generally requires a bank holding company to provide the Federal Reserve with prior notice of any redemption or repurchase of its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to 10.0% or more of the bank holding company’s consolidated net worth.
+Added: The Federal Reserve’s Regulation Y, for example, generally requires a bank holding company to provide the Federal Reserve with prior notice of any redemption or repurchase of its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to 10.0% or more of the bank holding company’s consolidated net worth.
The Federal Reserve may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate any law or regulation.
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The Federal Reserve has broad authority to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices, result in breaches of fiduciary duty or which constitute violations of laws or regulations, and can assess civil money penalties or impose enforcement action for such activities.
−Removed: The penalties can be as high as $1,000,000 for each day the activity continues.
+Added: The penalties can exceed $1,000,000 for each day the activity continues.
Anti-tying Restrictions.
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The FDIC and Louisiana Office of Financial Institutions monitor the capital adequacy of the Bank by using a combination of risk-based guidelines and leverage ratios similar to those applied at the holding company level.
−Removed: These agencies consider the bank’s capital levels when taking action on various types of applications and when conducting supervisory activities related to the safety and soundness of the bank and the banking system.
+Added: These agencies consider the bank’s capital levels when taking action on various types of applications and when conducting supervisory activities related to the safety and soundness of the bank and the banking system.
Under the revised capital rules which became effective on January 1, 2015, the Bank is required to maintain four minimum capital standards:
−Removed: (1) a leverage capital ratio of at least 4.0%, (2) a common equity Tier 1 risk-based capital ratio of 4.5%, (3) a Tier 1 risk-based capital ratio of at least 6.0%, and (4) a total risk-based capital ratio of at least 8.0%.
+Added: (1) a leverage capital ratio of at least 4.0%, (2) a common equity Tier 1 risk-based capital ratio of 4.5%, (3) a Tier 1 risk-based capital ratio of at least 6.0%, and (4) a total risk-based capital ratio of at least 8.0%.
The Basel III framework also implements a requirement for all FDIC-insured banks to maintain a capital conservation buffer above the minimum capital requirements to avoid certain restrictions on capital distributions and discretionary bonus payments to executive officers.
3 unchanged sentences
For example, FDIC guidance provides that higher capital may be required to take adequate account of, among other things, interest rate risk and the risks posed by concentrations of credit, nontraditional activities or securities trading activities.
−Removed: In addition, the FDIC’s prompt corrective action regulations discussed below, in effect, increase the minimum regulatory capital ratios for banking organizations.
−Removed: Failure to meet capital guidelines could subject the Bank to a variety of enforcement remedies, including issuance of a capital directive, restrictions on business activities and other measures under the FDIC’s prompt corrective action regulations.
−Removed: Pursuant to section 201(b) of EGRRCPA, the federal bank regulatory agencies adopted a final rule in 2019 imposing a minimum community bank leverage ratio requirement of 9.0%.
−Removed: On April 6, 2020, as mandated under the CARES Act, the federal bank regulatory agencies adopted an interim final rule that temporarily reduced the minimum community bank leverage ratio requirement to 8.0% and provided a two quarter grace period for banks with a leverage ratio between 7.0% and 8.0%.
−Removed: A transition interim final rule also adopted by the federal bank regulatory agencies on April 6, 2020 provides a graduated transition from the temporary 8.0% community bank leverage ratio requirement, to the 9.0% community bank leverage ratio requirement as established under the 2019 final rule.
−Removed: Specifically, the transition interim final rule provides that the community bank leverage ratio will be 8.0% in the second quarter through fourth quarter of calendar year 2020, 8.5% in calendar year 2021, and 9.0% thereafter.
+Added: In addition, the FDIC’s prompt corrective action regulations discussed below, in effect, increase the minimum regulatory capital ratios for banking organizations.
+Added: Failure to meet capital guidelines could subject the Bank to a variety of enforcement remedies, including issuance of a capital directive, restrictions on business activities and other measures under the FDIC’s prompt corrective action regulations.
+Added: Pursuant to section 201(b) of EGRRCPA, the federal bank regulatory agencies adopted a final rule in 2019 imposing a minimum community bank leverage ratio requirement of 9.0%, which was reduced on a temporary basis under the CARES Act in 2020-2021.
As previously mentioned, the Company and Bank elected to adopt the CBLR framework for the year ended December 31, 2020 and elected to revert to the risk weighted ratios for the years ended December 31, 2023, 2022 and 2021.
Corrective Measures for Capital Deficiencies.
−Removed: The federal banking regulators are required by the Federal Deposit Insurance Act, or FDI Act, to take “prompt corrective action”
−Removed: with respect to capital-deficient institutions that are FDIC-insured.
+Added: The federal banking regulators are required by the Federal Deposit Insurance Act, or FDI Act, to take “prompt corrective action” with respect to capital-deficient institutions that are FDIC-insured.
For this purpose, a financial institution is placed in one of the following five capital tiers:
−Removed: “well capitalized,”
−Removed: “adequately capitalized,”
−Removed: “undercapitalized,”
−Removed: “significantly undercapitalized”
−Removed: and “critically undercapitalized.”
−Removed: The institution’s capital tier depends upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation.
+Added: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” The institution’s capital tier depends upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation.
To be well capitalized, a financial institution must have a total risk-based capital ratio of at least 10.0%, a Tier 1 risk-based capital ratio of at least 8.0%, a common equity Tier 1 risk-based capital ratio of at least 6.5%, and a leverage ratio of at least 5.0%, and must not be subject to any written agreement, order or directive requiring it to maintain a specific capital level for any capital measure.
1 unchanged sentence
Banks that are adequately, but not well, capitalized may not accept, renew or rollover brokered deposits except with a waiver from the Federal Reserve and are subject to restrictions on the interest rates that can be paid on its deposits.
−Removed: The FDIC’s prompt corrective action regulations also generally prohibit a bank from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the bank would thereafter be undercapitalized.
+Added: The FDIC’s prompt corrective action regulations also generally prohibit a bank from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the bank would thereafter be undercapitalized.
Undercapitalized institutions are also subject to growth limitations, may not accept, renew or rollover brokered deposits, and are required to submit a capital restoration plan.
−Removed: The agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the bank’s capital.
+Added: The agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the bank’s capital.
Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks.
Generally, subject to a narrow exception, the FDIC must appoint a receiver or conservator for an institution that is critically undercapitalized.
−Removed: The capital classification of a bank also affects the frequency of regulatory examinations, the bank’s ability to engage in certain activities and the deposit insurance premiums paid by the bank.
+Added: The capital classification of a bank also affects the frequency of regulatory examinations, the bank’s ability to engage in certain activities and the deposit insurance premiums paid by the bank.
Under Louisiana law, the Bank is permitted to establish additional branch offices within Louisiana, subject to the approval of the Louisiana Office of Financial Institutions.
As a result of the Dodd-Frank Act, the Bank may also establish additional branch offices outside of Louisiana, subject to prior regulatory approval, so long as the laws of the state where the branch is to be located would permit a state bank chartered in that state to establish a branch.
−Removed: Any new branch, whether located inside or outside of Louisiana, must also be approved by the FDIC, as the Bank’s primary federal regulator.
+Added: Any new branch, whether located inside or outside of Louisiana, must also be approved by the FDIC, as the Bank’s primary federal regulator.
The Bank may also establish offices in other states by merging with banks or by purchasing branches of other banks in other states, subject to certain restrictions.
Restrictions on Transactions with Affiliates and Insiders.
−Removed: Transactions between the Bank and its nonbanking subsidiaries and/or affiliates, including the Company, are subject to Section 23A and 23B of the Federal Reserve Act and Regulation W.
−Removed: In general, Section 23A of the Federal Reserve Act imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated parties.
+Added: Transactions between the Bank and its nonbanking subsidiaries and/or affiliates, including the Company, are subject to Section 23A and 23B of the Federal Reserve Act and Regulation W.
+Added: In general, Section 23A of the Federal Reserve Act imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated parties.
It also limits the amount of advances to third parties which are collateralized by the securities or obligations of the Company or its subsidiaries.
−Removed: Covered transactions with any single affiliate may not exceed 10.0% of the capital stock and surplus of the Bank, and covered transactions with all affiliates may not exceed, in the aggregate, 20.0% of the Bank’s capital and surplus.
−Removed: For a bank, capital stock and surplus refers to the bank’s Tier 1 and Tier 2 capital, as calculated under the risk-based capital guidelines, plus the balance of the allowance for credit losses excluded from Tier 2 capital.
−Removed: The Bank’s transactions with all of its affiliates in the aggregate are limited to 20.0% of the foregoing capital.
−Removed: “Covered transactions”
−Removed: are defined by statute to include a loan or extension of credit to an affiliate, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.
+Added: Covered transactions with any single affiliate may not exceed 10.0% of the capital stock and surplus of the Bank, and covered transactions with all affiliates may not exceed, in the aggregate, 20.0% of the Bank’s capital and surplus.
+Added: For a bank, capital stock and surplus refers to the bank’s Tier 1 and Tier 2 capital, as calculated under the risk-based capital guidelines, plus the balance of the allowance for credit losses excluded from Tier 2 capital.
+Added: The Bank’s transactions with all of its affiliates in the aggregate are limited to 20.0% of the foregoing capital.
+Added: “Covered transactions” are defined by statute to include a loan or extension of credit to an affiliate, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the Federal Reserve) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.
In addition, in connection with covered transactions that are extensions of credit, the Bank may be required to hold collateral to provide added security to the Bank, and the types of permissible collateral may be limited.
The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates, including an expansion of what types of transactions are covered transactions to include credit exposures related to derivatives, repurchase agreement and securities lending arrangements and an increase in the amount of time for which collateral requirements regarding covered transactions must be satisfied.
−Removed: Affiliate transactions are also subject to Section 23B of the Federal Reserve Act which generally requires that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons.
+Added: Affiliate transactions are also subject to Section 23B of the Federal Reserve Act which generally requires that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons.
The Federal Reserve has also issued Regulation W which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretive guidance with respect to affiliate transactions.
−Removed: The restrictions on loans to directors, executive officers, principal shareholders and their related interests (collectively referred to herein as “insiders”) contained in Section 22(h) of the Federal Reserve Act and in Regulation O promulgated by the Federal Reserve apply to all insured institutions and their subsidiaries and bank holding companies.
+Added: The restrictions on loans to directors, executive officers, principal shareholders and their related interests (collectively referred to herein as “insiders”) contained in Section 22(h) of the Federal Reserve Act and in Regulation O promulgated by the Federal Reserve apply to all insured institutions and their subsidiaries and bank holding companies.
These restrictions include limits on loans to one borrower and conditions that must be met before such a loan can be made.
There is also an aggregate limitation on all loans to insiders and their related interests.
−Removed: Generally, the aggregate of these loans cannot exceed the institution’s total unimpaired capital and surplus, although a bank’s regulators may determine that a lesser amount is appropriate.
+Added: Generally, the aggregate of these loans cannot exceed the institution’s total unimpaired capital and surplus, although a bank’s regulators may determine that a lesser amount is appropriate.
Loans to senior executive officers of a bank are even further restricted.
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Restrictions on Distribution of Bank Dividends and Assets.
−Removed:   The Bank is subject to certain restrictions on dividends under federal and state laws, regulations and policies.
−Removed: In general, the Bank may pay dividends to the Company without the approval of the Louisiana Office of Financial Institutions so long as the amount of the dividend does not exceed the Bank’s net profits earned during the current year combined with its retained net profits of the immediately preceding year.
+Added: The Bank is subject to certain restrictions on dividends under federal and state laws, regulations and policies.
+Added: In general, the Bank may pay dividends to the Company without the approval of the Louisiana Office of Financial Institutions so long as the amount of the dividend does not exceed the Bank’s net profits earned during the current year combined with its retained net profits of the immediately preceding year.
The Bank is required to obtain the approval of the Louisiana Office of Financial Institutions for any amount in excess of this threshold.
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Moreover, if, in the opinion of the FDIC, the Bank is engaged in an unsound practice (which could include the payment of dividends), the FDIC may require, generally after notice and hearing, the Bank to cease such practice.
−Removed: The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe banking practice.
+Added: The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe banking practice.
The FDIC has also issued policy statements providing that insured depository institutions generally should pay dividends only out of current operating earnings.
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The incentive compensation guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon three primary principles:
−Removed: (1) balanced risk-taking incentives, (2) compatibility with effective controls and risk management and (3) strong corporate governance.
−Removed: Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or take other actions.
−Removed: In addition, under the incentive compensation guidance, a banking organization’s federal supervisor may initiate enforcement action if the organization’s incentive compensation arrangements pose a risk to the safety and soundness of the organization.
−Removed: Further, a provision of the Basel III capital standards described above would limit discretionary bonus payments to bank executives if the institution’s regulatory capital ratios fail to exceed certain thresholds.
+Added: (1) balanced risk-taking incentives, (2) compatibility with effective controls and risk management and (3) strong corporate governance.
+Added: Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or take other actions.
+Added: In addition, under the incentive compensation guidance, a banking organization’s federal supervisor may initiate enforcement action if the organization’s incentive compensation arrangements pose a risk to the safety and soundness of the organization.
+Added: Further, a provision of the Basel III capital standards described above would limit discretionary bonus payments to bank executives if the institution’s regulatory capital ratios fail to exceed certain thresholds.
A number of federal regulatory agencies proposed rules that would require enhanced disclosure of incentive-based compensation arrangements initially in April 2011, and again in April and May 2016, but the rules have not been finalized and would mostly apply to banking organizations with over $50 billion in total assets.
The scope and content of the U.S.
−Removed: banking regulators’
−Removed: policies on executive compensation are continuing to develop and are likely to continue evolving in the future.
+Added: banking regulators’ policies on executive compensation are continuing to develop and are likely to continue evolving in the future.
Audit Reports.
−Removed: For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with GAAP, management’s certifications signed by our and the Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the financial statements, and an attestation by the auditors regarding the Bank’s internal controls must be submitted.
+Added: For insured institutions with total assets of $1.0 billion or more, financial statements prepared in accordance with U.S.
+Added: generally accepted accounting principles (“GAAP”), management’s certifications signed by our and the Bank’s chief executive officer and chief accounting or financial officer concerning management’s responsibility for the financial statements, and an attestation by the auditors regarding the Bank’s internal controls must be submitted.
For institutions with total assets of more than $3.0 billion, independent auditors may be required to review quarterly financial statements.
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The committees of such institutions must include members with experience in banking or financial management, must have access to outside counsel and must not include representatives of large customers.
−Removed: The Bank’s audit committee consists entirely of independent directors.
+Added: The Bank’s audit committee consists entirely of independent directors.
Deposit Insurance Assessments.
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The maximum amount of deposit insurance for banks and savings institutions is $250,000 per depositor.
−Removed: The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors and is calculated based on an institution’s average consolidated total assets minus average tangible equity.
+Added: The amount of FDIC assessments paid by each insured depository institution is based on its relative risk of default as measured by regulatory capital ratios and other supervisory factors and is calculated based on an institution’s average consolidated total assets minus average tangible equity.
We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.
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Subsidiary banks of financial holding companies or banks with financial subsidiaries must remain well capitalized and well managed in order to continue to engage in activities that are financial in nature without regulatory actions or restrictions.
−Removed: Such actions or restrictions could include divestiture of the “financial in nature”
−Removed: subsidiary or subsidiaries.
+Added: Such actions or restrictions could include divestiture of the “financial in nature” subsidiary or subsidiaries.
In addition, a financial holding company or a bank may not acquire a company that is engaged in activities that are financial in nature unless each of the subsidiary banks of the financial holding company or the bank has a CRA rating of satisfactory or better.
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The federal banking regulatory agencies have promulgated guidance governing financial institutions with concentrations in commercial real estate lending.
−Removed: The guidance provides that a bank has a concentration in commercial real estate lending if (1) total reported loans for acquisition, construction, land development, and other land represent 100.0% or more of total risk-based capital or (2) total reported loans secured by multi-family and nonfarm nonresidential properties and loans for acquisition, construction, land development, and other land represent 300.0% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.
+Added: The guidance provides that a bank has a concentration in commercial real estate lending if (1) total reported loans for acquisition, construction, land development, and other land represent 100.0% or more of total risk-based capital or (2) total reported loans secured by multi-family and nonfarm nonresidential properties and loans for acquisition, construction, land development, and other land represent 300.0% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months.
Owner occupied loans are excluded from this second category.
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The CRA and the regulations issued thereunder are intended to encourage banks to help meet the credit needs of their entire assessment area, including low and moderate income neighborhoods, consistent with the safe and sound operations of such banks.
−Removed: These regulations also provide for regulatory assessment of a bank’s record in meeting the needs of its assessment area when considering applications to establish branches, merger applications and applications to acquire the assets and assume the liabilities of another bank.
−Removed: The Financial Institution Reform Recovery and Enforcement Act, or FIRREA requires federal banking agencies to make public a rating of a bank’s performance under the CRA.
+Added: These regulations also provide for regulatory assessment of a bank’s record in meeting the needs of its assessment area when considering applications to establish branches, merger applications and applications to acquire the assets and assume the liabilities of another bank.
+Added: The Financial Institution Reform Recovery and Enforcement Act, or FIRREA requires federal banking agencies to make public a rating of a bank’s performance under the CRA.
In the case of a bank holding company, the CRA performance record of the banks involved in the transaction are reviewed in connection with the filing of an application to acquire ownership or control of shares or assets of a bank or to merge with any other bank holding company.
An unsatisfactory CRA record could substantially delay approval or result in denial of an application.
−Removed: The Bank received a “satisfactory”
−Removed: rating in its most recent CRA examination in April, 2020.
+Added: The Bank received a “satisfactory” rating in its most recent CRA examination in April, 2023.
Consumer Laws and Regulations.
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The CFPB has broad authority to regulate the offering and provision of consumer financial products.
−Removed: The Dodd-Frank Act gives the CFPB authority to supervise and examine depository institutions with more than $10.0 billion in assets for compliance with these federal consumer laws.
−Removed: The authority to supervise and examine depository institutions with $10.0 billion or less in assets for compliance with federal consumer laws remains largely with those institutions’
−Removed: primary regulators.
−Removed: However, the CFPB may participate in examinations of these smaller institutions on a “sampling basis”
−Removed: and may refer potential enforcement actions against such institutions to their primary regulators.
−Removed: Accordingly, the CFPB may participate in examinations of the Bank, which currently has assets of less than $10.0 billion, and could supervise and examine our other direct or indirect subsidiaries that offer consumer financial products or services.
+Added: The Dodd-Frank Act gives the CFPB authority to supervise and examine depository institutions with more than $10.0 billion in assets for compliance with these federal consumer laws.
+Added: The authority to supervise and examine depository institutions with $10.0 billion or less in assets for compliance with federal consumer laws remains largely with those institutions’ primary regulators.
+Added: However, the CFPB may participate in examinations of these smaller institutions on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators.
+Added: Accordingly, the CFPB may participate in examinations of the Bank, which currently has assets of less than $10.0 billion, and could supervise and examine our other direct or indirect subsidiaries that offer consumer financial products or services.
The CFPB also has supervisory and examination authority over certain nonbank institutions that offer consumer financial products.
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Mortgage Lending Rules.
−Removed:   The Dodd-Frank Act authorized the CFPB to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’s ability to repay.
−Removed: Under the Dodd-Frank Act and related rules, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination”
−Removed: that the consumer has a “reasonable ability”
−Removed: to repay the loan.
−Removed: The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure but provides a full or partial safe harbor from such defenses for loans that are “qualified mortgages.”
−Removed: The rules define “qualified mortgages,”
−Removed: imposing both underwriting standards –
−Removed: for example, a borrower’s debt-to-income ratio may not exceed 43.0% –
−Removed: and limits on the terms of their loans.
+Added: The Dodd-Frank Act authorized the CFPB to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’s ability to repay.
+Added: Under the Dodd-Frank Act and related rules, financial institutions may not make a residential mortgage loan unless they make a “reasonable and good faith determination” that the consumer has a “reasonable ability” to repay the loan.
+Added: The Dodd-Frank Act allows borrowers to raise certain defenses to foreclosure but provides a full or partial safe harbor from such defenses for loans that are “qualified mortgages.” The rules define “qualified mortgages,” imposing both underwriting standards – for example, a borrower’s debt-to-income ratio may not exceed 43.0% – and limits on the terms of their loans.
Certain loans, including interest-only loans and negative amortization loans, cannot be qualified mortgages.
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OFAC publishes lists of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons.
−Removed: Generally, if a bank identifies a transaction, account or wire transfer relating to a person or entity on an OFAC list, it must freeze the account or block the transaction, file a suspicious activity report and notify the appropriate authorities.
−Removed: Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution’s compliance in connection with the regulatory review of applications, including applications for bank mergers and acquisitions.
+Added: Generally, if a bank identifies a transaction, account or wire transfer relating to a person or entity on an OFAC list, it must freeze the account or block the transaction, file a suspicious activity report and notify the appropriate authorities.
+Added: Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution’s compliance in connection with the regulatory review of applications, including applications for bank mergers and acquisitions.
Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant laws and regulations, could have serious legal, reputational and financial consequences for the institution.
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In addition to applicable federal privacy regulations, the Bank is subject to certain state privacy laws.
−Removed: Federal Home Loan Bank ( “
−Removed: FHLB ”
+Added: Federal Home Loan Bank ( “ FHLB ” ) System.
The FHLB system, of which the Bank is a member, consists of 11 regional FHLBs governed and regulated by the Federal Housing Finance Board, or FHFB.
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fiscal policy and the monetary policies of the Federal Reserve.
−Removed: Some of the instruments of monetary policy available to the Federal Reserve include changes in the discount rate on member bank borrowings, the fluctuating availability of borrowings at the “discount window,”
−Removed: open market operations, the imposition of and changes in reserve requirements against member banks’
−Removed: deposits and certain borrowings by banks and their affiliates and assets of foreign branches.
+Added: Some of the instruments of monetary policy available to the Federal Reserve include changes in the discount rate on member bank borrowings, the fluctuating availability of borrowings at the “discount window,” open market operations, the imposition of and changes in reserve requirements against member banks’ deposits and certain borrowings by banks and their affiliates and assets of foreign branches.
These policies influence to a significant extent the overall growth of bank loans, investments, and deposits and the interest rates charged on loans or paid on deposits.
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Impact of Current Laws and Regulations
−Removed: The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus has a negative impact on our profitability.
+Added: The cumulative effect of these laws and regulations, while providing certain benefits, adds significantly to the cost of our operations and thus has a negative impact on our profitability.
There has also been a notable expansion in recent years of financial service providers that are not subject to the examination, oversight, and other rules and regulations to which we are subject.
Those providers, because they are not so highly regulated, may have a competitive advantage over us and may continue to draw large amounts of funds away from traditional banking institutions, with a continuing adverse effect on the banking industry in general.
+Added: Cybersecurity
+Added: We are subject to guidance and standards, as directed by federal law and prescribed by federal regulators, which necessitate the responsibility to secure nonpublic, confidential customer and consumer information and provide notice to such entities in the event their data is disclosed due to a security breach.
+Added: Under certain circumstances, federal and state regulators must also be notified in the event of a data breach as mandated by applicable state laws and federal regulations.
+Added: Financial institutions are expected to comply with such guidance and standards and to accordingly establish and employ appropriate information security and cybersecurity programs and associated risk management processes.
+Added: Cybersecurity risks are expected to increase due to the rapid evolution and sophistication of cybersecurity attacks and the accessibility of resources required for their execution.
+Added: In turn, Congress, multiple states, and federal regulators frequently issue new guidance and standards and are currently considering the enactment of additional or enhanced laws or regulations which could impose increased obligations for companies responsible for the safeguarding of nonpublic, customer and consumer information, specifically financial institutions.
+Added: On November 23, 2021, federal banking agencies issued a joint final rule requiring financial institutions to provide notification to their primary federal regulator as soon as possible and no later than 36 hours after a “computer-security incident” has been determined to be a “notification event,” as those terms are defined under the final rule.
+Added: Additionally, the rule requires bank service providers to contact each affected banking organization customer as soon as possible once the bank service provider determines it has experienced a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, covered services provided to such banking organizations for four or more hours.
+Added: On March 15, 2023, the SEC issued proposed amendments that would require registered broker-dealers, investment companies, investment advisors, and transfer agents to adopt written policies and procedures for an incident response program to address unauthorized access to or use of customer information.
+Added: Additionally, the proposed amendments would also require, with certain limited exceptions, covered institutions to provide notice to individuals whose sensitive customer information was or is reasonably likely to have been accessed or used without authorization.
+Added: The proposal would require a covered institution to provide this notice as soon as practicable but not later than 30 days after the covered institution becomes aware that an incident involving unauthorized access to, or use of customer information has occurred or is reasonably likely to have occurred.
+Added: On July 26, 2023, the SEC adopted rules requiring registrants to disclose the occurrence of cybersecurity incidents once such incidents are determined to be material in nature.
+Added: Additionally, the rule requires the annual disclosure of material information regarding cybersecurity risk management, strategy, and governance.
+Added: On October 30, 2023, the current Presidential Administration issued an Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, emphasizing the need for transparency, accountability and fairness in the secure development and use of artificial intelligence (“AI”).
+Added: The order seeks to address AI risks by providing eight guiding principles and priorities, including the development of standards, tools, and tests to help ensure AI systems are safe, secure, and trustworthy and the development of an advanced cybersecurity program to develop tools to identify and address vulnerabilities in critical software.
Future Legislation and Regulatory Reform
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.