8 unchanged sentences
• Credit risk and resulting losses in our loan portfolio;
−Removed: • Our allowance for loan losses may not be adequate to absorb loan losses;
+Added: • Our Allowance for Credit Losses-Loans (“ACL-Loans”) may not be adequate to absorb loan losses;
• Changes in real estate values could also increase our credit risk;
• Changes in our executive management team;
−Removed: • Inability to successfully execute our executive management team’s strategic initiatives;
−Removed: • Our ability to successfully execute our growth initiatives such as branch openings and acquisitions;
+Added: • Our ability to successfully execute our strategic initiatives;
• Volatility and direction of market interest rates;
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In addition, the Bank pursues certain types of commercial lending opportunities outside our market, particularly where we have strong relationships.
−Removed: The Bank operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut.
+Added: The Bank operates nine branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut.
As of December 31, 2023, on a consolidated basis, we had total assets of approximately $3.2 billion, net loans of approximately $2.7 billion, total deposits of approximately $2.7 billion, and shareholders’ equity of approximately $265.8 million.
1 unchanged sentence
We have a history of building long-term client relationships and attracting new clients through what we believe is our superior service and our ability to deliver a diverse product offering.
−Removed: In addition, we believe that our strong capital position and extensive ownership, coupled with a highly respected and experienced executive management team and board of directors, give us credibility with our clients and potential clients.
−Removed: Our focus is on building a franchise with meaningful market share and consistent revenue growth complemented by operational efficiencies that we believe will produce attractive risk-adjusted returns for our shareholders.
+Added: In addition, we believe that our strong capital position and extensive inside ownership, coupled with a highly respected and experienced executive management team and board of directors, give us credibility with our clients and potential clients.
+Added: We believe our focus on building a franchise with meaningful market share and consistent revenue growth complemented by operational and technological efficiencies will produce attractive risk-adjusted returns for our shareholders.
Our History and Growth
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On October 1, 2014, we acquired Quinnipiac Bank and Trust Company, which was merged into Bankwell Bank.
−Removed: With the efforts of our strong executive management team, we continued our growth and maintained a strong track record of performance.
+Added: With the efforts of our executive management team, we continued our growth and maintained a strong track record of performance.
From December 31, 2019 through December 31, 2023, our total assets grew from $1.9 billion to $3.2 billion;
our gross loans outstanding grew from $1.6 billion to $2.7 billion and our deposits grew from $1.5 billion to $2.7 billion.
−Removed: We believe this growth was driven by our ability to provide exceptional service to our client s and our financial stability.
+Added: We believe this growth is attributable to our ability to provide exceptional service to our clients and our financial stability.
Business Strategy
−Removed: We are focused on being the banking provider of choice in our highly attractive market areas through:
+Added: We are focused on being the banking provider of choice in our highly attractive market area through:
• Responsive, Client-Centric Products and Services and a Community Focus.
−Removed: We offer a broad array of products and services which we customize to allow us to focus on building long-term relationships with our clients through high-quality, responsive and personal service.
+Added: We offer a broad array of customized products and services which allows us to focus on building long-term relationships with our clients through high-quality, responsive and personal service.
By focusing on the entire client relationship, we build the trust of our clients, which leads to long-term relationships and generates our organic growth.
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As a result, clients and potential clients within our market know about us and frequently interact with our employees which allows us to develop long-term client relationships without extensive advertising.
−Removed: • Strategic Acquisitions.
−Removed: To complement our organic growth, we focus on strategic acquisitions in or around our existing markets that further our objectives.
−Removed: We believe there are banking institutions that continue to face credit challenges, capital constraints and liquidity issues and that lack the scale and management expertise to manage the increasing regulatory burden and will likely need to partner with an institution like ours.
−Removed: As we evaluate potential acquisitions, we will continue to seek acquisitions that provide meaningful financial benefits, long-term organic growth opportunities and expense reductions, without compromising our risk profile.
• Utilization of Efficient and Scalable Infrastructure.
−Removed: We employ a systematic and calculated approach to increasing our profitability and improving our efficiencies.
−Removed: We continually upgrade our operating infrastructure, particularly in the areas of technology, data processing, and compliance.
−Removed: We believe that our scalable infrastructure provides us with an efficient operating platform from which to grow in the near term, while continuing to deliver our high-quality service, which will enhance our ability to grow and increase our returns.
+Added: We employ a systematic and calculated approach to increasing our profitability and improving our efficiencies through the use of technology.
+Added: We continually invest in our operating infrastructure, particularly in the areas of technology, data processing, risk management, and compliance.
+Added: We believe that our scalable infrastructure provides us with an efficient operating platform from which to grow in the near term, while continuing to deliver our high-quality service, which will further enhance our ability to grow and increase our returns.
• Disciplined Focus on Risk Management.
−Removed: Effective risk management is a key component of our strong corporate culture.
−Removed: We use our strong risk management process to monitor our existing loan and investment securities portfolios, support operational decision-making and improve our ability to generate earning assets with strong credit quality.
+Added: Effective risk management is a key component of our corporate culture.
+Added: We use robust risk management processes to monitor our existing loan and investment securities portfolios, support operational decision-making and improve our ability to generate earning assets with strong credit quality.
To maintain our strong credit quality, we use a comprehensive underwriting process and we seek to maintain a diversified loan portfolio and a conservative investment securities portfolio.
Board-approved policies contain approval authorities, as appropriate, and are reviewed at least annually.
−Removed: We have a Risk Management Steering Committee comprised of
−Removed: executive officers and other members of management.
−Removed: This committee reviews and assesses risks and mitigants throughout areas of the Bank on an ongoing basis.
−Removed: Internal review procedures are performed regarding anti-money laundering and consumer compliance requirements.
+Added: Additio nal risk management processes focus on the expanding risks associated with cybersecurity, regulatory compliance including BSA/AML and third party risk manageme nt.
+Added: We have a Risk Management Steering Committee comprised of senior management and other members of management tasked with the review and assessment of risks and mitigants throughout the Bank on an ongoing basis.
+Added: Additionally, internal review procedures are performed regarding anti-money laundering and consumer compliance requirements.
+Added: • Strategic Acquisitions.
+Added: To complement our organic growth, we focus on strategic acquisitions in or around our existing market that further our objectives.
+Added: We believe there are banking institutions that continue to face credit challenges, capital constraints and liquidity issues.
+Added: Some lack the scale and management expertise to manage the increasing regulatory burden and will likely need to partner with an institution like ours.
+Added: As we evaluate potential acquisitions, we will continue to seek those that provide meaningful financial benefits, long-term organic growth opportunities and expense reductions, without compromising our risk profile.
Our Competitive Strengths
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Our executive management team includes Christopher R.
−Removed: Gruseke, President and Chief Executive Officer (since 2015), Christine A.
−Removed: Chivily, Executive Vice President, Chief Credit Officer (since 2013), Matthew McNeill, Executive Vice President, Chief Banking Officer (since 2020), Courtney E.
−Removed: Sacchetti, Executive Vice President, Chief Financial Officer (since January 1, 2023), and Laura J.
−Removed: Waitz, Executive Vice President, Chief Operating Officer (since 2017).
+Added: Gruseke, President and Chief Executive Officer (since 2015), Steven H.
+Added: Brunner, Executive Vice President, Chief Risk and Operations Officer (since January 24, 2024), Christine A.
+Added: Chivily, Executive Vice President, Chief Credit Officer (since 2013), Ryan Hildebrand, Executive Vice President, Chief Innovation Officer (since July 26, 2023), Matthew McNeill, Executive Vice President, Chief Banking Officer (since 2020), and Courtney E.
+Added: Sacchetti, Executive Vice President, Chief Financial Officer (since January 1, 2023).
• Dedicated Board of Directors with Close Community Ties.
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By capitalizing on the business relationships and c lose community ties of our executive management team and directors, we are positioned to take advantage of opportunities present in our market.
−Removed: • Strong Capital Position.
+Added: • Strong Capit al Position.
At December 31, 2023, we had a 7.26% tangible common equity ratio, and the Bank had a 9.81% tier 1 leverage ratio, a 11.30% tier 1 risk-based ratio, and an 12.32% total capital to risk-weighted assets ratio.
1 unchanged sentence
• Scalable Operating Platform.
−Removed: We provide banking technology, including remote deposit capture, Internet banking and mobile banking, to offer our clients maximum flexibility and to create a scalable platform to accommodate our future growth aspirations.
+Added: We provide banking technology, including online account opening, mobile and internet banking, and remote deposit capture to offer our clients maximum flexibility and to create a scalable platform to accommodate our future grow th aspirations.
We believe that our advanced technology combined with responsive and personal service provides our clients with an exceptional banking experience.
Human Capital Resources
−Removed: At December 31, 2022, we employed a total of 136 full-time equivalent employees in Connecticut.
−Removed: It is through our team, and their ties to the communities, that we are able to dutifully support the communities we serve.
+Added: At December 31, 2023, we employ ed a total of 126 full-time equivalent employees.
+Added: It is through our team, and their ties to the communities, that we are able to dutifully suppo rt the communities we serve.
Working within, and giving back to, our local partners is the hallmark of who we are, and we believe that the strength and commitment of our workforce to our communities is what sets us apart from other banks.
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We invest in our employees’ future by sponsoring and prioritizing continued education throughout the Company’s employee ranks.
−Removed: All of our employees are able to participate in regular educational seminars run by outside parties, including but not limited to regulatory agencies and the American Bankers Association.
+Added: All of our emplo yees are able to participate in regular educational seminars run by outside parties, including but not limited to regulatory agencies and the American Bankers Association.
The Bank also participates in the American Bankers Association, Stonier School of Banking.
−Removed: In order to develop a workforce that aligns with our corporate values, we regularly sponsor local community events so that our employees can better integrate themselves in our communities.
+Added: In order to develop a workforce that aligns with our corpo rate values, we regularly sponsor local community events so that our employees can better integrate themselves in our communities.
We believe that our employees’ well-being and professional development is fostered by our outreach to the communities we serve.
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Information regarding the Company is available through the Investor Relations link at www.mybankwell.com.
−Removed: The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at
−Removed: www.sec.gov and at www.mybankwell.com under the Investor Relations link.
+Added: The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at www.sec.gov and at www.mybankwell.com under the Investor Relations link.
Information on the website is not incorporated by reference and is not a part of this annual report on Form 10-K.
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We attract these clients based on relationships and contacts that our management and our Board of Directors have within and beyond the market area.
−Removed: We do not expect to compete with large institutions for the primary banking relationships of large corporations.
+Added: We do not e xpect to compete with large institutions for the primary banking relationships of large corporations.
Many of our larger commercial bank competitors have greater name recognition and offer certain services that we do not;
−Removed: however, we believe that our presence in our market area and focus on providing superior service to professionals at small to medium-sized businesses and individual employees of such businesses are instrumental to our success.
+Added: however, we believe that our presence in our market area and focused industry sectors with attention to providing superior service is instrumental to our success.
We emphasize personalized banking services and the advantage of local decision-making in our banking businesses, and this emphasis has been well received by the public in our market area.
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We offer a wide array of commercial lending products to serve the needs of our clients.
−Removed: Commercial lending products include owner-occupied commercial real estate loans, commercial real estate investment loans, commercial loans (such as business term loans, equipment financing and lines of credit) to small and medium-sized businesses and real estate construction and development loans.
+Added: Commercial lending products include owner-occupied commercial real estate loans, commercial real estate investment loans, commercial loans (such as business term loans, equipment finan cing and lines of credit) to small and medium-sized businesses and real estate construction and development loans.
We focus our lending activities on loans that we originate to borrowers located in our market or with whom the Bank’s senior management has long-standing relationships.
−Removed: We have established an informal, internal lending limit to one relationship of up to 40% of unimpaired capital and allowance for loan losses, if secured by commercial real estate.
+Added: We have established an internal lending guideline to one relationship of up to 30% of equity capital and allowance for credit losses, if secured by commercial real estate.
A relationship in this instance is defined as loans made to different entities but with a shared borrower principal(s).
−Removed: For individual loans and loans dependent on the operation of a business, limits are set so as not to exceed the statutory maximum of 15% of unimpaired capital and allowance for loan losses.
+Added: For individual loans and loans dependent on the operation of a b usiness, limits are set so as not to exceed the statutory maximum of 15% of equity capital and allowance for credit losses.
We market our lending products and services to qualified borrowers through conveniently located banking offices, relationship networks and high touch personal service.
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We believe this gives us a competitive advantage over larger institutions that are not as nimble.
−Removed: Total loans before deferred loan fees and the allowance for loan losses were $2.7 billion at December 31, 2022.
−Removed: The following table summarizes the composition of our loan portfolio for the dates indicated.
+Added: Total loans before deferred loan fees and the ACL-Loans were $2.7 billion at December 31, 2023.
+Added: The following tables summarize the composition of our loan portfolio for the dates indicated.
At December 31,
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Residential real estate loans.
−Removed: In the fourth quarter of 2017, management made the strategic decision to no longer originate residential mortgage loans.
−Removed: As of the beginning of the third quarter of 2019, the Company no longer offered home equity loans or lines of credit.
+Added: In the fourth quarter of 2017, management made the strategic decision to cease originating residential mortgage loans.
+Added: In the third quarter of 2019, the Company stopped offering home equity loans or lines of credit.
Prior to these decisions having been made, we offered first lien one-to-four family mortgage loans, as well as home equity lines of credit, in each case primarily on owner-occupied primary residences.
−Removed: We also originated for sale one-to-four family mortgage loans, which are classified as loans held for sale 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 residential real estate loan portfolio presents lower levels of risk than our 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: The rising rate environment may also pose a risk in our residential adjustable rate mortgages and home equity lines of credit portfolios as borrowers' rates reset at increased levels.
Commercial real estate loans.
We offer real estate loans for owner-occupied commercial properties as well as commercial property owned by real estate investors.
−Removed: 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 throughout this document.
+Added: Loans that are secured by owner-occupied commercial real estate primarily collateralized by operating cash flows are also included in this loan category throughout this document.
Commercial real estate loan terms generally are limited to ten years or less, although payments may be structured on a longer amortization basis of twenty to thirty years.
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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, healthcare facilities, office buildings, industrial, mixed-use residential/commercial, retail centers and multifamily properties.
−Removed: Our commercial real estate loan portfolio presents a higher risk than our consumer real estate and consumer loan portfolios.
+Added: Our commercial real estate loan portfolio presents a higher risk than our residential real estate and consumer loan portfolios.
Construction loans.
−Removed: Our construction portfolio includes loans to small and medium-sized businesses to construct owner-used 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.
+Added: Our construction portfolio include s loans to small and medium-sized businesses to construct owner-used properties, loans to developers of commercial real estate investment properties and residential developments.
Construction and development loans are generally made with a term of one to two years and interest is paid monthly.
−Removed: The ratio of the loan principal to the value of the collateral, as established by independent appraisal, typically will not exceed industry standards.
+Added: The ratio of the loan principal to the value of the collateral, as established by independent appraisal, will not exceed industry standards.
Loan proceeds are disbursed based on the percentage of completion and only after the project has been inspected by an experienced construction lender or third-party inspector.
−Removed: Risks associated with construction loans include fluctuations in the value of real estate, project completion risk, leasing risk and change in market trends.
−Removed: We are also exposed to risk based on the ability of the construction loan borrower to refinance the debt or sell the property upon completion of the project, which may be affected by changes in market trends since the time that we funded the construction loan.
+Added: Risks associated with construction loans include fluctuations in the value of real estate, project completion risk, leasing risk and change in market trends as well as interest rate risk in a volatile or rising risk environment.
+Added: We are also exposed to risk based on the ability of the construction loan borrower to refinance the debt or sell the property upon completion of the project, which may be affected by changes in market trends including rates, since the time that we funded the construction loan.
Commercial business loans.
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We make loans secured by accounts receivable or inventory, principal typically is repaid as the assets securing the loan are converted into cash, and for loans secured with other types of collateral, principal is fully or partially amortized during the loan term with any balloon amount due at maturity.
−Removed: The quality of the commercial borrower’s management and its ability both to properly evaluate
−Removed: changes in the supply and demand characteristics affecting its markets for products and services and to effectively respond to such changes are significant factors in a commercial borrower’s creditworthiness.
+Added: The quality of the commercial borrower’s management and its ability both to properly evaluate changes in the supply and demand characteristics affecting its markets for products and services and to effectively respond to such changes are significant factors in a commercial borrower’s creditworthiness.
From time-to-time, we also make equipment loans with conservative margins, generally for a term of ten years or less, supported by the useful life of the equipment, at fixed or variable rates, with the loan fully amortizing over the term.
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Consumer loans.
−Removed: As of December 31, 2022, our consumer loans represented less than 1% of our total loan portfolio.
−Removed: While consumer loans may not remain below 1% of our portfolio, we do not expect our consumer loans to become a material component of our loan portfolio in the near future.
−Removed: Although we do not engage in any material amount of consumer lending, our cons umer loans, which are underwritten primarily based on the borrower’s financial condition and, contain both secured and unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by numerous factors, including those discussed above.
+Added: As of December 31, 2023, our consumer loans represented 1.3% of our total loan portfolio.
+Added: We do not expect our consumer loan portfolio to become a material component of our total loan portfolio as we do not engage in any material amount of consumer lending.
+Added: Our cons umer loans, which are underwritten primarily based on the borrower’s financial condition and contain both secured and unsecured credits, subject us to risk based on changes in the borrower’s financial condition, which could be affected by numerous factors, including those discussed above.
Rising interest rates may also impact the risk profile of this segment of the portfolio.
+Added: This portfolio segment includes loans to finance insurance premiums secured by the cash surrender value of life insurance and marketable securities, overdraft lines of credit, and unsecured personal loans to high net worth individuals.
Credit Policy an d Procedures
3 unchanged sentences
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 clients, employees, shareholders and communities.
−Removed: We have a service-driven, relationship-based, business-focused credit culture, rather than a price-driven, transaction-based culture.
−Removed: Accordingly, substantially all of our loans are made to borrowers located or operating in our market with whom we have ongoing relationships across various product lines.
−Removed: Loans secured by properties located in out-of-market areas that we have made are generally to borrowers who are well-known to us.
+Added: W e have a service-driven, relationship-based, business-focused credit culture, rather than a price-driven, transaction-based culture.
+Added: Accordingly, substantially all of our loans are made to borrowers either located or operating in our market or with whom we have ongoing relationships across various product lines.
+Added: Lo ans secured by properties located in out-of-market areas that we have made are generally to borrowers who are well-known to us.
These borrowers typically have strong deposit relationships with the Bank as well.
1 unchanged sentence
In connection with the management of our credit portfolio, we actively manage the composition of our loan portfolio, including credit concentrations.
−Removed: We monitor borrower and loan product concentrations continuously and review with senior management and the Board on at least a quarterly basis.
+Added: We monitor borrower and loan product concentrations continuously which are reviewed with senio r management and the Board on at least a quarterly basis.
Loan product concentrations are reviewed annually in conjunction with the portfolio’s credit quality and the business plan for the coming year.
All concentrations are monitored by our Chief Credit Officer and our Directors' Loan Committee.
−Removed: We have also established an informal, internal lending limit to one relationship of up to 40% of unimpaired capital and allowance for loan losses, if secured by commercial real estate.
−Removed: A relationship in this instance is defined as loans made to different entities but with a shared borrower principal(s).
−Removed: For individual loans and loans dependent on the operation of a business, limits are set so as not to exceed the statutory maximum of 15% of unimpaired capital and allowance for loan losses.
−Removed: Our top 20 borrowing relationships range in exposure from $49.0 million to $127.5 million an d are monitored on an on-going basis.
+Added: We have also established an internal lending guideline to one relationship of up to 30% of equity capital and allowance for credit losses, if secured by commercial real estate.
+Added: This limit is inside the regulatory limit of 50%.
+Added: A relationship in this
+Added: instance is defined as loans made to different entities but with a shared borrower principal(s).
+Added: For individual loans and loans dependent on the operation of a business, limits are set so as not to exceed the statutory maximum of 15% of equity capital and allowance for credit losses.
+Added: Our top 20 borrowing relationships range in exposure fro m $43.0 million to $92.0 million and are monitored on an on-going basis.
Loan approval process.
−Removed: We seek to achieve an appropriate balance between prudent and disciplined underwriting on the one hand and flexibility in our decision-making and responsiveness to our clients on the other hand.
+Added: We seek an appropriate balance between prudent and disciplined underwriting on the one hand and flexibility in our decision-making and responsiveness to our clients on the other hand.
Our credit approval policies have a tiered approval process, with larger exposures referred to different levels of management and the Directors’ Loan Committee, as appropriate, based on the size and type of the loan.
3 unchanged sentences
Credit risk management.
−Removed: Credit risk management involves a partnership between our relationship managers and our credit approval, credit administration, portfolio management and collections departments.
+Added: Credit risk management involves a partnership between our relationship managers and our credit approval, credit administration, portfolio management and collections personnel.
Portfolio monitoring and early problem recognition are an important aspect of maintaining our high credit quality standards.
Past due reports are reviewed on an ongoing basis and insurance and tax payment monitoring is in place.
−Removed: Our evaluation and compensation program for our relationship managers includes significant goals that we believe motivate the relationship managers to focus on high quality credit consistent with our strategic focus on asset quality.
−Removed: It is our policy to review amortizing commercial loans in excess of $1 million on an annual basis, or more frequently through the receipt of interim and annual financial statements and borrowing base certificates depending on loan structure and
+Added: It is our policy to review amortizing commercial loans in excess of $1 million on an annual basis, or more frequently through the receipt of interim and annual financial statements and borrowing base certificates depending on loan structure and covenants.
Our policies require rapid notification of delinquency and prompt initiation of collection actions.
6 unchanged sentences
This review includes an evaluation of the market conditions, the property’s or company’s trends, the borrower and guarantor status, the level of reserves required and loan accrual status.
−Removed: Additionally, we have an independent, third-party loan review performed semi-annually, which includes the accuracy of our loan risk ratings and our credit administration functions.
+Added: Additionally, we have an independent, third-party loan review performed, which includes the accuracy of our loan risk ratings and our credit administration functions.
Finally, we perform an annual stress test of our commercial loan portfolio, in which we evaluate the impact on the portfolio of declining economic conditions, including lower values and decline in net operating income which may result from lower rental rates, lower occupancy rates and higher interest rates.
1 unchanged sentence
These asset review procedures provide management with additional information for assessing our asset quality.
+Added: Response to the current environment on commercial real estate.
+Added: In response to the economic environment in 2023, the Company:
+Added: • increased and expanded its monitoring of our entire loan portfolio, with added focus on our commercial real estate loan portfolio;
+Added: • added resources in the Portfolio Management Department;
+Added: • expanded reporting to Directors' Loan Committee and the Board of Directors which includes:
+Added: ◦ upcoming commercial real estate maturity schedule, including loan to value, debt service coverage ratio, occupancy, and commentary on expected refinance or payoff status, maturity by property type and owner occupied or non-owner-occupied status;
+Added: ◦ individual loan level detail of the performance on our residential care portfolio and our insurance agency portfolio.
+Added: • expanded the scope of our third-party loan review from 60% of the loan portfolio to include all new and renewed loans originated since September 2022, all residential care loans, all commercial real estate loans secured by office properties where the loan balance is greater than one million dollars, and all loans with addresses in New York City;
+Added: • enhanced our covenant tracking and reporting to the Directors Loan Committee;
+Added: • conducted a detailed review of every general office loan in our portfolio.
+Added: As of December 31, 2023, the Bank had $193.0 million of loans collateralized by offices, which represented 7.1% of the total loan portfolio.
+Added: Most of the properties in this portfolio are in suburban locations, including all the New York State properties, which are all located
+Added: in Westchester County.
+Added: 96.9% of this portfolio was pass rated, and there were two relationships totaling $6.0 million on nonaccrual status;
+Added: • performed an additional review of our multifamily exposure.
+Added: As of December 31, 2023 , we had $257.5 million of loans collateralized by multifamily properties, which represented 9.5% of the total loan portfolio.
+Added: 100% of the portfolio is pass rated.
+Added: These properties are all located in Connecticut, New York, or New Jers ey, with the majority in suburban locations.
+Added: Nine properties totaling $52.3 million, with an average balance of $5.8 million, are in New York City.
Investment Activities
7 unchanged sentences
The investment policy is reviewed annually by our Board of Directors.
−Removed: Overall investment goals are established by our Board of Directors, Chief Financial Officer and our asset/liability management committee, or ALCO.
+Added: Overall investment goals are established by our Board of Directors, Chief Financial Officer and our Asset Liability Committee, or ALCO.
Our Board of Directors has delegated the responsibility of monitoring our investment activities to ALCO.
3 unchanged sentences
Deposits at the Bank are insured by the FDIC up to statutory limits.
−Removed: We have built a network of deposit-taking branch offices and attracted significant transaction account business through our relationship-based approach.
+Added: We gather deposits through our network of deposit-taking branch offices, online account opening, and have attracted significant transaction account business through our relationship-based approach.
Borrowed Funds
3 unchanged sentences
We utilize advances from the FHLB as part of our overall funding strategy to meet short-term liquidity needs and, to a lesser degree, manage interest rate risk arising from the difference in asset and liability maturities.
−Removed: On August 19, 2015, the Company co mpleted a private placement of $25.5 million in aggregate principal amount of fixed rate subordinated notes (the “2015 Notes”) to certain institutional investors.
−Removed: The 2015 Notes were non-callable for five years, had a stated maturity of August 15, 2025, and bore interest at a quarterly pay fixed rate of 5.75% per annum to the maturity date.
−Removed: The 2015 Notes became callable, in part or in whole, beginning August 2020.
−Removed: On May 15, 2021, the Company repaid $10.0 million of the 2015 Notes and on November 15, 2021, the Company repaid the remaining $15.5 million of the 2015 Notes.
On October 14, 2021, the Company completed a private placement of a $35.0 million fixed-to-floating rate subordinated note (the “2021 Note”) to an institutional accredited investor.
−Removed: The Company used the net proceeds to repay the 2015 Notes and intends to use the remaining proceeds for general corporate purposes.
+Added: The Company used the net proceeds to repay the outstanding balance of subordinated debt issued in 2015 and for general corporate purposes.
The 2021 Note bears interest at a fixed rate of 3.25% per year until October 14, 2026.
5 unchanged sentences
On August 19, 2022, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers, pursuant to which the Company issued and sold 6.0% fixed-to-floating rate subordinated notes due 2032 (the “2022 Notes”) in the aggregate principal amount of $35.0 million.
−Removed: The Company intends to use the net proceeds from the sale of the 2022 Notes for general corporate purposes.
−Removed: The 2022 Notes bear interest at a fixed rate of 6.0% per year, from and including August 19, 2022 to, but excluding, September 1, 2027.
−Removed: From and including September 1, 2027 to, but excluding the maturity date or early redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 326 basis points.
+Added: The Company used the net proceeds from the sale of the 2022 Notes for general corporate purposes.
+Added: The 2022 Notes bear interest at a fixed rate of 6.0% per year until August 31, 2027.
+Added: Thereafter, the interest rate will reset quarterly at a variable rate equal to the then current three-month term SOFR plus 326 basis points.
The 2022 Notes have a stated maturity of September 1, 2032 and are non-callable for five years.
−Removed: The Company may redeem the 2022 Notes, in whole or in part, at its option, on the fifth anniversary of the issue date or on any interest payment date thereafter.
−Removed: Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the 2022 Notes being redeemed, together with any accrued and unpaid interest on the 2022 Notes being redeemed to but excluding the date of redemption.
+Added: Beginning August 19, 2027, the Company may redeem the 2022 Notes, in whole or in part, at its option.
The 2022 Notes are not subject to redemption at the option of the holder.
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The Company’s existing governance and organizational structure incorporates a substantial risk management component through the following:
−Removed: • The retention of an independent accounting firm (separate from the Company’s auditors) that performs internal audit reviews;
−Removed: • The utilization of a Directors Loan Committee and ALCO, both comprised of directors of the Company;
+Added: • The retention of an independent firm (separate from the Company’s auditors) that performs internal audit reviews;
+Added: • Oversight of various risk components by committees comprised of directors of the Company, including Directors' Loan Committee (credit), ALCO (asset and liability), Audit Committee (regulatory and compliance), and Technology Committee (information security and cybersecurity);
• Outsourcing of our asset/liability calculations to a reputable third party, including a quarterly assessment of interest rate risk, reviewed and validated by ALCO;
−Removed: • A Risk Management Steering Committee which is chaired by our Chief Risk Officer.
−Removed: Risk management with respect to our lending philosophy focuses, among other things, on structuring credits to provide for multiple sources of repayment, coupled with strong underwriting by experienced relationship managers, lending and credit management.
+Added: • A Risk Management Steering Committee which is chaired by our Chief Risk and Operations Officer.
+Added: Risk management with respect to our lending philosophy focuses, among other things, on structuring credi ts to provide for multiple sources of repayment, coupled with strong underwriting by experienced relationship managers, lending and credit management.
We perform quarterly reviews of criticized loans and criticized asset action plans for those borrowers who display deteriorating financial conditions in order to monitor those relationships and implement corrective measures on a timely basis to minimize losses.
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This system is intended primarily for the protection of the Deposit Insurance Fund and bank depositors, rather than our shareholders and creditors.
−Removed: The banking agencies have broad enforcement power over bank holding companies and banks, including the authority, among other things, to enjoin “unsafe or unsound” practices, require affirmative action to correct any violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil money penalties,
−Removed: remove officers and directors, and, with respect to banks, terminate deposit insurance or place the bank into conservatorship or receivership.
+Added: The banking agencies have broad enforcement power over bank holding companies and banks, including the authority, among other things, to enjoin “unsafe or unsound” practices, require affirmative action to correct any violation or practice, issue administrative orders that can be judicially enforced, direct increases in capital, direct the sale of subsidiaries or other assets, limit dividends and distributions, restrict growth, assess civil money penalties, remove officers and directors, and, with respect to banks, terminate deposit insurance or place the bank into conservatorship or receivership.
In general, these enforcement actions may be initiated for violations of laws and regulations or unsafe or unsound practices.
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These laws, rules and regulations may change from time to time and the regulatory agencies often have broad discretion in interpreting them.
−Removed: Any change in such laws, rules or regulations, whether by the Connecticut Department of Banking, the FDIC or the Federal Reserve Board could have a material adverse impact on the financial markets in general, and our operations and activities, financial condition, results of operations, growth plans and future prospects specifically.
−Removed: Dodd-Frank Wall Street Reform and Consumer Protection Act
−Removed: The Dodd-Frank Act, which was enacted in 2008, has significantly changed the current bank regulatory structure and continues to affect the lending and investment activities and general operations of depository institutions and their holding companies.
+Added: Any change in such laws, rules or regulations, whether by the Connecticut Department of Banking, the FDIC or the Federal Reserve Board ("FRB") could have a material adverse impact on the financial markets in general, and our operations and activities, financial condition, results of operations, growth plans and future prospects specifically.
+Added: Dodd-Frank Act
+Added: The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), which was enacted in 2010, has significantly changed the current bank regulatory structure and continues to affect the lending and investment activities and general operations of depository institutions and their holding companies.
The Dodd-Frank Act created the Consumer Financial Protection Bureau with extensive powers to implement and enforce consumer protection laws.
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The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings associations with more than $10 billion in assets.
−Removed: Banks and savings associations with $10 billion or less in assets will continue to be examined for compliance with federal consumer protection and fair lending laws by their applicable primary federal bank regulators.
+Added: Banks and savings associations with $10 billion or less in assets will continue to be examined for compliance with federal consumer protection and
+Added: fair lending laws by their applicable primary federal bank regulators.
The Dodd-Frank Act also gives state attorneys general certain authority to enforce applicable federal consumer protection laws.
−Removed: The Dodd-Frank Act made many other changes to banking regulations including authorizing depository institutions, for the first time, to pay interest on business checking accounts, requiring originators of securitized loans to retain a percentage of the risk for transferred loans, establishing regulatory rate-setting for certain debit card interchange fees, establishing a number of reforms for mortgage originations, requiring bank holding companies and banks to be “well capitalized” and “well managed” in order to acquire banks located outside of their home state, requiring any bank holding company electing to be treated as a financial holding company to be “well capitalized” and “well managed” and authorizing national and state banks to establish de novo branches in any state that would permit a bank chartered in that state to open a branch at that location.
−Removed: Much of the rulemaking under the Dodd-Frank Act has been completed.
−Removed: Digesting and implementing that rulemaking has inevitably resulted in increases in our operating and compliance costs.
−Removed: The rulemaking that remains may also have a similar impact.
−Removed: In addition, many aspects of the regulatory changes made by the Dodd Frank Act continue to generate debate in political circles as well as within the regulatory agencies that oversee the banking systems and financial markets.
−Removed: While the exact scope, nature and timing of any legislative and/or regulatory changes cannot necessarily be predicted, it is likely that changes will continue to occur.
−Removed: And it is possible that the changes could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
+Added: The Dodd-Frank Act made many changes to banking regulations including authorizing depository institutions, for the first time, to pay interest on business checking accounts, requiring originators of securitized loans to retain a percentage of the risk for transferred loans, establishing regulatory rate-setting for certain debit card interchange fees, establishing a number of reforms for mortgage originations, requiring bank holding companies and banks to be “well capitalized” and “well managed” in order to acquire banks located outside of their home state, requiring any bank holding company electing to be treated as a financial holding company to be “well capitalized” and “well managed” and authorizing national and state banks to establish de novo branches in any state that would permit a bank chartered in that state to open a branch at that location.
Economic Growth Act
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Economic Growth Act”), which was enacted in May 2018, repealed or modified several provisions of the Dodd-Frank Act.
−Removed: In addition, the Economic Growth Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule, mortgage disclosures and risk weights for certain high-risk commercial real estate loans.
−Removed: Among other things, Section 201 of the Economic Growth Act required the federal banking agencies to develop regulations establishing a “community bank leverage ratio” for banks and holding companies with less than $10 billion in consolidated assets and a qualifying risk profile.
−Removed: The final rule, which became effective on January 1, 2020, provides certain qualifying institutions with an optional, simpler method to measure capital adequacy.
−Removed: Under the rule, banks and bank holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio (equal to tier 1 capital divided by average total consolidated assets) of greater than 9 percent, off-balance sheet exposures of 25% or less of total consolidated assets and trading assets plus trading liabilities of 5% or less of total consolidated assets, are eligible to opt into the community bank leverage ratio ("CBLR") framework.
−Removed: Qualifying organizations that elect to use the CBLR framework, and that maintain a leverage ratio greater than 9 percent, will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the banking agencies' capital rules.
−Removed: Qualifying organizations will also be deemed to have met the "well capitalized" ratio requirements for purposes of Section 38 of the Federal Deposit Insurance Act.
−Removed: The final rules include a two-quarter grace period during which a qualifying community banking organization that
−Removed: temporarily fails to meet any of the qualifying criteria, including the greater-than-9% leverage capital ratio requirement, is generally still deemed "well capitalized" so long as the banking organization maintains a leverage capital ratio greater than 8%.
−Removed: A banking organization that fails to maintain a leverage capital ratio greater than 8% is not permitted to use the grace period and must comply with the generally applicable requirements under the Basel III rules and file the appropriate regulatory reports.
−Removed: We do not have any immediate plans to elect to use the CBLR framework but may make such an election in the future.
+Added: In addition, the Economic Growth Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the so-called Volcker Rule, mortgage disclosures and risk weights for certain high-risk commercial real estate loans.
The Economic Growth Act provides insured depository institutions and their affiliates with less than $10 billion in total consolidated assets and limited trading activities with an exemption from the Dodd-Frank Act’s “Volcker Rule” (which generally restricts certain banking entities such as the Company and the Bank from engaging in proprietary trading activities and entering into certain relationships with hedge funds and private-equity funds).
−Removed: The FDIC, along with several other banking agencies, adopted final rules to implement the exemption contemplated by the Economic Growth Act.
−Removed: The Economic Growth Act increased the consolidated assets limit for bank holding companies covered by the Federal Reserve Board’s “Small Bank Holding Company Policy Statement” (the Policy) from $1 billion to $3 billion.
−Removed: In addition to the consolidated assets limit, a covered bank holding company may not be engaged in significant non-banking and off-balance sheet activities and may not have a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the SEC.
−Removed: The Policy also excludes covered bank holding companies from the minimum capital requirements of the Dodd-Frank Act.
−Removed: The Federal Reserve Board retains the authority to exclude any bank holding company from the Policy if such action is warranted for supervisory purposes.
−Removed: The Policy allows covered bank holding companies to operate with higher levels of debt than would normally be permitted.
−Removed: Under the Policy, a covered bank holding company is prohibited from paying dividends if its debt-to-equity ratio exceeds 1:1.
−Removed: In addition, the Federal Reserve Board expects that bank holding companies will retire all debt within 25 years of being incurred and reduce their debt to equity ratio to 30:1 or less within 12 years of incurring the debt.
−Removed: The Policy also directs that each depository institution subsidiary of a covered bank holding company remain well-capitalized.
−Removed: On August 28, 2018, the Federal Reserve Board issued an interim final rule regarding revisions to the Policy prompted by the Economic Growth Act.
−Removed: As a result of its growth, as of December 31, 2022, the Company is no longer a ‘covered bank holding company” under the Policy.
+Added: In July 2019, the FDIC, along with several other banking agencies, adopted final rules to implement the exemption contemplated by the Economic Growth Act.
The Economic Growth Act increased the consolidated assets threshold from $1 billion to $3 billion for insured depository institutions that qualify for an 18-month on-site exam cycle.
−Removed: Consistent with this statutory amendment, in August of 2018, the federal banking agencies issued an interim final rule to increase, from $1 billion to $3 billion, the total asset threshold under which an agency may apply an 18-month examination cycle for qualified institutions that have an "outstanding" or "good" composite rating.
+Added: Consistent with this statutory amendment, in August 2018, the federal banking agencies increased, from $1 billion to $3 billion, the total asset threshold under which an agency may apply an 18-month examination cycle for qualified institutions that have an "outstanding" or "good" composite rating.
+Added: In addition, the FRB raised the asset threshold under its Small Bank Holding Company Policy Statement.
+Added: Bank and savings and loan holding companies with total assets up to $3 billion are permitted to have debt levels higher than would be permitted for larger holding companies, provided that such companies meet certain other conditions such as not engaging in significant nonbanking activities and not having a material amount of debt or equity securities outstanding that are registered with the Securities and Exchange Commission.
+Added: As of June 30, 2023, the Company no longer met the definition of a Small Bank Holding Company as the Company's assets exceeded $3 billion.
+Added: Effective March 31, 2024, the Company will be subject to the larger company capital requirements as set forth in the Economic Growth Act.
The Economic Growth Act required the federal banking agencies to promulgate regulations permitting insured depository institutions that have less than $5 billion in total consolidated assets (and satisfy other conditions) to use short-form reports of condition (i.e.
1 unchanged sentence
On June 17, 2019, the federal banking agencies issued final rules to implement those streamlined reporting requirements.
−Removed: The CARES Act and Initiatives Related to COVID-19
−Removed: In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020 to provide national emergency econo mic relief measures.
−Removed: It is possible that Congress may enact additional legislation to address the social and economic disruptions caused by the pandemic.
−Removed: The Company continues to monitor any statutes, regulations and supervisory guidance related to the COVID-19 pandemic.
−Removed: On January 30, 2023, the Biden Administration announced its intent to end the national emergency and public health emergency declarations on May 11, 2023.
Connecticut Banking Laws and Supervision
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Connecticut banking laws grant banks broad lending authority.
−Removed: With certain limited exceptions, loans to any one obligor under this statutory authority may not exceed 15% and fully secured loans may not exceed an additional 10% of a bank’s equity capital and allowance for loan losses.
+Added: With certain limited exceptions, loans to any one obligor under this statutory authority may not exceed 15% and fully secured loans may not exceed an additional 10% of a bank’s equity capital and allowance for credit losses.
The Bank may pay cash dividends out of its net profits.
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Federal law also prevents an institution from paying dividends or making other capital distributions that, if by doing so, would cause it to become “under-capitalized”.
−Removed: Beginning January 1, 2016, the Basel III Capital Rules limit the
−Removed: amount of dividends the Bank can pay if its capital ratios are below the threshold levels of the capital conservation buffer established by the rules.
+Added: Beginning January 1, 2016, the Basel III Capital Rules limit the amount of dividends the Bank can pay if its capital ratios are below the threshold levels of the capital conservation buffer established by the rules.
The full capital conservation buffer of 2.5% (as a percentage of risk-weighted assets) became effective as of January 1, 2019.
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Federal Bank Holding Company Regulation
−Removed: As a bank holding company, we are subject to comprehensive regulation and regular examinations by the Federal Reserve Board.
−Removed: The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a bank holding company divest subsidiaries (including its bank subsidiaries).
+Added: As a bank holding company, we are subject to comprehensive regulation and regular examinations by the FRB.
+Added: The FRB also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a bank holding company divest subsidiaries (including its bank subsidiaries).
In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.
−Removed: Under Federal Reserve Board policy which has been codified by the Dodd-Frank Act, a bank holding company must serve as a source of strength for its subsidiary bank.
−Removed: Under this policy, the Federal Reserve Board may require, and has required in the past, a bank holding company to contribute additional capital to an under-capitalized subsidiary bank.
−Removed: A bank holding company must obtain Federal Reserve Board approval before:
+Added: Under FRB policy which has been codified by the Dodd-Frank Act, a bank holding company must serve as a source of strength for its subsidiary bank.
+Added: Under this policy, the FRB may require, and has required in the past, a bank holding company to contribute additional capital to an under-capitalized subsidiary bank.
+Added: A bank holding company must obtain FRB approval before:
(1) acquiring, directly or indirectly, ownership or control of any voting securities of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such securities (unless it already owns or controls the majority of such securities);
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The Bank Holding Company Act also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries.
−Removed: The principal exceptions to these prohibitions involve certain non-bank activities which, by statute or by Federal Reserve Board regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks.
−Removed: The list of activities permitted by the Federal Reserve Board includes, among other things:
+Added: The principal exceptions to these prohibitions involve certain non-bank activities which, by statute or by FRB regulation or order, have been identified as activities closely related to the business of banking or managing or controlling banks.
+Added: The list of activities permitted by the FRB includes, among other things:
(1) operating a savings institution, mortgage company, finance company, credit card company or factoring company;
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and (10) subject to certain limitations, providing securities brokerage services for clients.
−Removed: The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve Board’s view that a bank holding company should pay cash dividends only to the extent that the Bank Holding Company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the Bank Holding Company’s capital needs, asset quality and overall financial condition.
−Removed: The Federal Reserve Board also indicated that it would be inappropriate for a bank holding company experiencing serious financial problems to borrow funds to pay dividends.
−Removed: As discussed above, the Federal Reserve Board’s Small Bank
−Removed: Holding Company Policy Statement includes provisions regulating the payment of dividends by companies subject to that policy statement.
+Added: The FRB has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the FRB’s view that a bank holding company should pay cash dividends only to the extent that the Bank Holding Company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the Bank Holding Company’s capital needs, asset quality and overall financial condition.
+Added: The FRB also indicated that it would be inappropriate for a bank holding company experiencing serious financial problems to borrow funds to pay dividends.
+Added: As discussed above, the FRB’s Small Bank Holding Company Policy Statement includes provisions regulating the payment of dividends by companies subject to that policy statement.
Substantially all of our income is derived from, and the principal source of our liquidity is, dividends from the Bank.
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Further, the total amount of all dividends declared by a bank in any year may not exceed the sum of a bank’s net profits for the past two fiscal years, plus the portion of the year in which the dividend is paid.
−Removed: Under federal law, the Bank may not pay any dividend to us if the Bank is under-capitalized or the payment of the dividend would cause it to become under-capitalized.
+Added: Under federal law, the Bank may not pay any dividend to the holding company if the Bank is under-capitalized or the payment of the dividend would cause it to become under-capitalized.
The Basel III Capital Rules limit the amount of dividends the Bank can pay to us if its capital ratios are below the full capital conservation buffer of 2.5% (as a percentage of risk-weighted assets).
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The FDIC has also issued policy statements providing that insured depository institutions generally should pay dividends only out of current operating earnings.
−Removed: Bank holding companies are required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the consolidated net worth of the bank holding company.
−Removed: The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve Board order or any condition imposed by, or written agreement with, the Federal Reserve Board.
−Removed: This notification requirement does not apply to any bank holding company that (i) meets the well capitalized standard for commercial banks, (ii) is “well managed” within the meaning of the Federal Reserve Board regulations and (iii) is not subject to any unresolved supervisory issues.
−Removed: As discussed above, the Federal Reserve Board’s Small Bank Holding Company Policy Statement includes provisions regulating stock redemptions by companies subject to that policy statement, including when such notice requirements apply.
+Added: Bank holding companies are required to give the FRB prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the consolidated net worth of the bank holding company.
+Added: The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, FRB order or any condition imposed by, or written agreement with, the FRB.
+Added: This notification requirement does not apply to any bank holding company that (i) meets the well capitalized standard for commercial banks, (ii) is “well managed” within the meaning of the FRB regulations and (iii) is not subject to any unresolved supervisory issues.
+Added: As discussed above, the FRB’s Small Bank Holding Company Policy Statement includes provisions regulating stock redemptions by companies subject to that policy statement, including when such notice requirements apply.
Federal Bank Regulation
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or (4) take any other action that would better carry out the purpose of prompt corrective action.
−Removed: We believe that the Bank has been and will continue to be in compliance with each of the standards as they have been adopted by the FDICIA.
+Added: We believe that the Bank has been and will continue to be in compliance with each of the standards as they have been established by the FDICIA.
Capital Requirements.
−Removed: The Federal Reserve Board monitors our capital adequacy, on a consolidated basis, and the FDIC and Connecticut Department of Banking monitor the capital adequacy of the Bank.
+Added: The FRB monitors the Company's capital adequacy, on a consolidated basis, and the FDIC and Connecticut Department of Banking monitor the capital adequacy of the Bank.
The Federal Reserve, the FDIC and the other federal and state bank regulatory agencies establish regulatory capital guidelines for U.S.
1 unchanged sentence
As of January 1, 2015, the Company and the Bank became subject to new capital rules set forth by the Federal Reserve, the FDIC and the other federal and state bank regulatory agencies.
−Removed: The new capital rules revise the banking agencies’ leverage and risk-based capital requirements and the method for calculating risk weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act (the Basel III Capital Rules).
−Removed: The Basel III Capital Rules establish a new minimum common equity Tier 1 capital requirement of 4.5% of risk-weighted assets;
+Added: The revised capital rules aligned the banking agencies’ leverage and risk-based capital requirements and the method for calculating risk weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act (the Basel III Capital Rules).
+Added: The Basel III Capital Rules established a new minimum common equity Tier 1 capital requirement of 4.5% of risk-weighted assets;
set the minimum leverage ratio at 4% of total assets;
2 unchanged sentences
A “well-capitalized” institution must generally maintain capital ratios 200 basis points higher than the minimum guidelines.
−Removed: The Basel III Capital Rules also change the risk weights assigned to certain assets.
+Added: The Basel III Capital Rules also changed the risk weights assigned to certain assets.
The Basel III Capital Rules assigned a higher risk weight (150%) to loans that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.
The Basel III Capital Rules also alter the risk weighting for other assets, including marketable equity securities that are risk weighted generally at 300%.
−Removed: The Basel III Capital Rules require certain components of accumulated other comprehensive income (loss) to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised.
−Removed: The Bank did exercise its opt-out option and will exclude the unrealized gain (loss) on investment securities component of accumulated other comprehensive income (loss) from regulatory capital.
+Added: Basel III Capital Rules require certain components of accumulated other comprehensive income (loss) to be included for purposes of calculating regulatory capital requirements unless a one-time opt-out is exercised.
+Added: The Bank did exercise its opt-out option and excludes the unrealized gain (loss) on investment securities component of accumulated other comprehensive income (loss) from regulatory capital.
The Basel III Capital Rules limit a banking organization’s capital distributions and certain discretionary bonus payments to executive officers if the banking organization does not hold a “capital conservation buffer” of 2.5% in addition to the minimum risk based capital requirement.
4 unchanged sentences
Transactions with Affiliates.
−Removed: Under federal law, transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act, or FRA, and the Federal Reserve Board’s Regulation W.
+Added: Under federal law, transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act, or FRA, and the FRB’s Regulation W.
In a holding company context, at a minimum, the parent holding company of a bank and any companies which are controlled by such parent holding company are considered an affiliate of the bank.
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The FDIC has authority under federal law to appoint a conservator or receiver for an insured bank under limited circumstances.
−Removed: The FDIC is required, with certain exceptions, to appoint a receiver or conservator for an insured state non-
−Removed: member bank if that bank was “critically under-capitalized” on average during the calendar quarter beginning 270 days after the date on which the institution became “critically under-capitalized.” The FDIC may also appoint itself as conservator or receiver for an insured state non-member institution under specific circumstances on the basis of the institution’s financial condition or upon the occurrence of other events, including:
+Added: The FDIC is required, with certain exceptions, to appoint a receiver or conservator for an insured state non-member bank if that bank was “critically under-capitalized” on average during the calendar quarter beginning 270 days after the date on which the institution became “critically under-capitalized.” The FDIC may also appoint itself as conservator or receiver for an insured state non-member institution under specific circumstances on the basis of the institution’s financial condition or upon the occurrence of other events, including:
(1) insolvency;
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Subject to certain adjustments, the range of assessment rates is now between 1.5 to 30 ba sis points of the assessment base.
−Removed: The Dodd-Frank Act increased the minimum Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits.
−Removed: Currently, the fund ratio stands at a point where it exceeds that minimum threshold.
−Removed: There is no maximum cap on the fund ratio and the FDIC has been given the discretion to establish, on an annual basis, a long-range target ratio for the fund, to better ensure that the fund is not significantly stressed by future economic downturns.
−Removed: For both 2020 and 2021, the FDIC has exercised that discretion by establishing a 2% fund reserve ratio as a long-range minimum target for setting assessment rates.
−Removed: Effective June 26, 2020, the FDIC adopted a rule to mitigate the effects on deposit insurance assessments resulting from a bank’s participation in the PPP and certain other relief programs administered by the Federal Reserve Board.
+Added: The Dodd-Frank Act set the required minimum reserve ratio to 1.35 percent.
+Added: If the reserve ratio falls below 1.35 percent or is expected to so fall within 6 months, the FDIC generally must adopt a restoration plan to restore the Deposit Insurance Fund reserve ratio to at least 1.35 percent within 8 years.
+Added: For both 2023 and 2022, the FDIC has exercised that discretion by establishing a 2% designated fund reserve ratio as a long-range minimum target for setting assessment rates.
A material increase in FDIC insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.
3 unchanged sentences
Deposit Operations.
−Removed: In addition to the regulations above, the Bank’s deposit operations are subject to other federal laws applicable to depository accounts, such as the:
+Added: In addition to the regulations discussed above, the Bank’s deposit operations are subject to other federal laws applicable to depository accounts, such as the:
• Truth-In-Savings Act, requiring certain disclosures for consumer deposit accounts;
3 unchanged sentences
Federal Reserve System.
−Removed: The Federal Reserve Board regulations require depository institutions to maintain noninterest earning reserves against their transaction accounts (primarily NOW and regular checking accounts).
−Removed: The Federal Reserve Board regulations are adjusted annually and generally provide that reserves be maintained against aggregate transaction accounts.
−Removed: However, effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent, in light of the shift to an ample reserves regime.
−Removed: This action eliminates the need for thousands of depository institutions to maintain balances in accounts at Reserve Banks to satisfy reserve requirements, thereby freeing up liquidity in the banking system to support lending to households and businesses.
−Removed: The Bank is in compliance with reserve requirements.
+Added: The FRB regulations require depository institutions to maintain noninterest earning reserves against their transaction accounts (primarily NOW and regular checking accounts).
+Added: The FRB regulations are adjusted annually and generally provide that reserves be maintained against aggregate transaction accounts.
+Added: However, effective March 26, 2020, the FRB eliminated its reserve requirement ratio, in light of the shift to an ample reserves regime.
Federal Home Loan Bank of Boston (FHLB).
3 unchanged sentences
Community Reinvestment Act (CRA).
−Removed: Under the CRA, as implemented by FDIC regulations, a bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community,
−Removed: including low and moderate income neighborhoods.
+Added: Under the CRA, as implemented by FDIC regulations, a bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate income neighborhoods.
The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community.
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The Connecticut version of CRA is generally similar to the federal version, but utilizes a five-tiered descriptive rating system.
−Removed: Connecticut law requires the Connecticut Department of Banking to consider, but not be limited to, a bank’s record of performance under the Connecticut CRA in considering any application by the Bank to establish a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution.
+Added: Connecticut law requires the
+Added: Connecticut Department of Banking to consider, but not be limited to, a bank’s record of performance under the Connecticut CRA in considering any application by the Bank to establish a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution.
In our most recent evaluation, the Bank received a CRA rating of “satisfactory”.
+Added: On October 24, 2023, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation released the final rule to strengthen and modernize their regulations implementing the CRA.
+Added: The final rule revises the CRA regulations to better achieve the CRA’s core purpose of encouraging banks to help meet the credit needs of their local communities.
+Added: It also adapts to changes in the banking industry, including the expanded role of mobile and online banking;
+Added: provides greater clarity and consistency in the application of CRA regulations;
+Added: tailors performance standards, data collection, and reporting requirements to account for differences in bank size, business model, and local conditions;
+Added: promotes transparency and public engagement;
+Added: confirms that CRA and fair lending responsibilities are mutually reinforcing;
+Added: and promotes a consistent regulatory approach that applies to banks regulated by all three agencies.
+Added: The final rule takes effect on April 1, 2024, with staggered compliance dates of January 1, 2026, and January 1, 2027.
Consumer Protection and Fair Lending Regulations.
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The incentive compensation guidance sets expectations for financial institutions concerning their incentive compensation arrangements and related risk management, control and governance processes.
−Removed: All employees that have the ability to materially affect the risk profile of a financial institution, either individually or as part of a group, are covered by the guidance.
+Added: All employees that have the ability to materially affect the risk profile of a financial
+Added: institution, either individually or as part of a group, are covered by the guidance.
The guidance is based upon three core concepts:
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and merchant banking activities.
−Removed: The GLBA also permits the Federal Reserve Board and the Treasury Department to authorize additional activities for financial holding companies if they are “financial in nature” or “incidental” to financial activities.
+Added: The GLBA also permits the FRB and the Treasury Department to authorize additional activities for financial holding companies if they are “financial in nature” or “incidental” to financial activities.
A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized, well managed, and has at least a “satisfactory” CRA rating.
−Removed: A financial holding company must provide notice to the Federal Reserve Board within 30 days after commencing activities previously determined by statute or by the Federal Reserve Board and Department of the Treasury to be permissible.
−Removed: We have not submitted notice to the Federal Reserve Board of intent to be deemed a financial holding company.
+Added: A financial holding company must provide notice to the FRB within 30 days after commencing activities previously determined by statute or by the FRB and Department of the Treasury to be permissible.
+Added: We have not submitted notice to the FRB of intent to be deemed a financial holding company.
However, we are not precluded from submitting a notice in the future should we wish to engage in activities only permitted to financial holding companies.
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(2) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering;
−Removed: (3) reports filed with the Treasury Department’s Financial Crimes Enforcement Network of transactions exceeding $10,000 in currency;
+Added: (3) reports filed with the Treasury Department’s Financial Crimes Enforcement Network ("FinCEN") of transactions exceeding $10,000 in currency;
(4) filing suspicious activities reports by financial institutions regarding suspected client money laundering, terrorism financing, or other violations of U.S.
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Among other things, the USA PATRIOT Act requires all financial institutions, including us, to institute and maintain a risk-based anti-money laundering compliance program that includes a client identification program, provides for information sharing with law enforcement and between certain financial institutions by means of an exemption from the privacy provisions of the GLBA, prohibits U.S.
−Removed: banks and broker-dealers from maintaining accounts with foreign “shell” banks, establishes due diligence and enhanced due diligence requirements for certain foreign correspondent banking and foreign private banking accounts and imposes additional record keeping requirements for certain
−Removed: correspondent banking arrangements.
+Added: banks and broker-dealers from maintaining accounts with foreign “shell” banks, establishes due diligence and enhanced due diligence requirements for certain foreign correspondent banking and foreign private banking accounts and imposes additional record keeping requirements for certain correspondent banking arrangements.
The USA PATRIOT Act also grants broad authority to the Secretary of the Treasury to take actions to combat money laundering, and federal bank regulators are required to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve any application submitted by a financial institution.
+Added: On January 1, 2021, Congress passed the Corporate Transparency Act (the “CTA”) as part of the National Defense Authorization Act, which enacted the most significant overhaul of the anti-money laundering laws since the USA PATRIOT Act.
+Added: The CTA aims to eliminate the use of shell companies that facilitate the laundering of criminal proceeds and, for that
+Added: purpose, directs FinCEN to establish and maintain a national registry of beneficial ownership information for corporate entities (generally, subject to certain exemptions, any corporation, limited liability company, or other similar entity with 20 or fewer employees and annual gross income of $5 million or less).
+Added: Reporting companies subject to the CTA are required to provide specific information with respect to beneficial owner(s) - defined as an individual who, directly or indirectly, exercises substantial control over the entity or owns or controls not less than 25% of the ownership interests of the entity - at the time of formation (or by December 31, 2024 for existing entities) and upon a change in ownership.
+Added: Non-compliance with FinCEN regulations promulgated under the CTA may result in civil fines as well as criminal penalties.
+Added: On March 1, 2024, an Alabama federal court ruled, in a lawsuit brought by the National Small Business Association, that the CTA was unconstitutional because it exceeds the Constitution’s limits on Congress’ power and enjoined the government from enforcing the CTA against the named plaintiffs.
+Added: The Department of Justice is expected to appeal the decision.
+Added: On September 29, 2022, FinCEN finalized the first of three proposed rules to implement changes to the beneficial ownership requirements and related amendments set forth in the CTA (the “BOI Reporting Rule”).
+Added: The BOI Reporting Rule, which became effective on January 1, 2024, prescribes which corporate entities created in or registered to do business in the U.S.
+Added: will be required to report beneficial ownership information (“BOI”) directly to FinCEN.
+Added: On December 21, 2023, FinCEN issued a final rule, effective on February 20, 2024, (the “Access Rule”), which prescribes the circumstances under which BOI reported to the FinCEN registry may be disclosed to various government agencies and to financial institutions using BOI to facilitate compliance with regulatory customer due diligence requirements and how BOI must be protected.
+Added: Under the Access Rule, FinCEN may disclose BOI to a financial institution to facilitate compliance with customer due diligence requirements under applicable law, provided the relevant reporting company has consented to such disclosure.
+Added: The Access Rule requires financial institutions that obtain BOI from FinCEN to develop and implement administrative, technical, and physical safeguards reasonably designed to protect the information, but provides that such institutions will be able to satisfy this requirement by apply to BOI the same security and information handling procedures the use to protect customer’s nonpublic personal information in compliance with the GBLA.
+Added: On December 21, 2023, federal and state bank regulators issued an Interagency Statement that states that the Access does not create a new regulatory requirement for banks to access BOI from the CTA registry, create a supervisory expectation that they do so or necessitate changes to BSA/AML compliance programs designed to comply with the existing Customer Due Diligence rule (the “current CDD Rule”) and other existing BSA requirements, such as customer identification program requirements and suspicious activity reporting.
+Added: FinCEN plans to issue a third rule, which has not yet been proposed, that is expected to revise the current CDD Rule to bring it into conformity with the CTA as well as reduce any burdens on financial institutions and legal entity customers that are, in light of the CTA, unnecessary or duplicative.
The Office of Foreign Assets Control, or OFAC, which is a division of the Treasury Department, is responsible for helping to ensure that U.S.
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government and its agencies.
−Removed: The Federal Reserve Board’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession.
−Removed: The monetary policies of the Federal Reserve Board affect the levels of bank loans, investments and deposits through its control over the issuance of U.S.
+Added: The FRB’s monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession.
+Added: The monetary policies of the FRB affect the levels of bank loans, investments and deposits through its control over the issuance of U.S.
government securities, its regulation of the discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject.
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Net Operating Loss Carryovers:
−Removed: For the years ended 2017 and prior a corporation may carry back net operating losses generated in such years to the preceding two taxable years and forward to the succeeding 20 taxable years.
+Added: For the years ended 2017 and prior, a corporation may carryback net operating losses generated in such years to the preceding two taxable years and forward to the succeeding 20 taxable years.
Under the Tax Cuts and Jobs Act enacted in December 2017, a corporation may not carryback net operating losses arising in tax years after 2017, but may carryforward such losses indefinitely;
however, the net operating loss deduction in a given year is limited to 80% of taxable income.
−Removed: The CARES Act temporarily - and retroactively - modified the net operating loss rules to permit carryback of net operating losses generated in 2018, 2019 and 2020 for five years.
+Added: The Coronavirus Aid, Relief, and Economic Security Act ("CARES") temporarily - and retroactively - modified the net operating loss rules to permit carryback of net operating losses generated in 2018, 2019 and 2020 for five years.
A corporation may elect to waive the carryback period and only carry these net operating losses forward to future years.
The five-year carryback provision of the CARES Act is not available for losses generated in 2021 and subsequent years.
−Removed: At December 31, 2022, we had $1.8 million of net operating loss carryforwards for federal income tax purposes.
+Added: At December 31, 2023, w e had $1.6 million of net operating loss carryforwards for federal income tax purposes.
The carryovers were transferred to the Company upon the merger with The Wilton Bank in 2014.
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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.