What changed in this filing

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Item 1. Business

2023-02-24 compared with 2022-02-25 · 126 added, 104 removed, 231 unchanged (50% of the section changed)

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Further, the ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

The COVID-19 pandemic is continuing to adversely affect us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects remain uncertain.

Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility.

In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways.

The COVID-19 pandemic could continue to adversely affect us, our customers, counterparties, employees, and third-party service providers, and the extent of its impact remains uncertain.

Uneven economic recovery from COVID-19 across sectors could adversely affect our business, financial position, results of operations, liquidity and prospects.

In addition, governmental action as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways.

Other factors that could cause or contribute to such differences include, but are not limited to:

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Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s analysis and expectations only as of the date of such statements.

Forward-looking statements speak only as of the date they are made, and the Company does not intend, and undertakes no obligation, to publicly revise or update forward-looking statements after the date of this report, whether as a result of new information, future events or

otherwise, except as required by federal securities law.

You should understand that it is not possible to predict or identify all risk factors.

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Our business objective is to generate attractive shareholder returns by providing comprehensive financial services primarily to privately-held businesses, their owner families, and other success-minded individuals.

To achieve these objectives we have developed a business strategy that leverages a focused and relationship-oriented distribution and sales approach, with an emphasis on niche businesses and growing fee income, while maintaining prudent credit and interest rate risk management, appropriate supporting technology, and controlled expense growth.

We believe this strategy allows us to maximize organic growth opportunities, which we supplement and enhance through disciplined strategic growth.

To achieve these objectives we have developed a business strategy that leverages a focused and relationship-oriented distribution and sales approach, with an emphasis on niche businesses, while maintaining prudent credit and interest rate risk management, opportunities for fee income, appropriate supporting technology, and controlled expenses.

We believe this strategy allows us to maximize organic growth opportunities, which we supplement and enhance through disciplined growth through acquisition.

As described in greater detail below, the Company offers a broad range of business and personal banking services, including wealth management services provided through Enterprise Trust.

Lending services include C&I, CRE, real estate construction and development, residential real estate, SBA, consumer and tax credit-related loan products.

A wide variety of deposit products and a complete suite of treasury management and international trade services, along with our tax credit brokerage activities, complement our lending capabilities.

Lending services include C&I, CRE, real estate construction and development, residential real estate, SBA, consumer and other loan products.

A wide variety of deposit products, including property management and homeowners association along with a complete suite of treasury management and international trade services for operating businesses, complement our lending capabilities.

Building long-term client relationships – Our growth strategy is first and foremost client relationship driven.

We continuously seek to add clients who fit our target market of businesses, business owners, professionals, and associated relationships.

Those relationships are maintained, cultivated, and expanded over time by trained, experienced banking officers and other professionals.

Those relationships are maintained, cultivated, and expanded over time by experienced banking officers and other trained professionals.

We fund loan growth primarily with core deposits from our business and professional clients in addition to consumers in our branch market areas.

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These specialty niche activities focus on the following areas:

• Sponsor Finance .

We support mid-market company mergers and acquisitions in many domestic markets.

We market directly to targeted private equity firms, principally SBICs, and provide primarily senior debt financing to portfolio companies.

We have a team of experienced bankers in production offices across the country that originate loans through the SBA 7(a) program.

These loans are primarily owner-occupied, commercial real estate loans secured by a first lien.

These loans predominantly have a 75% portion guaranteed by the SBA.

By focusing on this specific product type, we have developed an expertise that differentiates us based upon speed and reliability of execution.

• Life Insurance Premium Finance .

We specialize in financing whole life insurance premiums utilized in high net worth estate planning through relationships with boutique estate planners throughout the United States.

• Sponsor Finance .

We support mid-market company mergers and acquisitions in many domestic markets.

We market directly to targeted private equity firms, principally SBICs, and provide primarily senior debt financing to the portfolio companies.

In addition, the Company has both financing and depository relationships with the sponsors of the portfolio companies.

• Tax Credit Related Lending .

We are a secured lender on affordable housing projects funded through the use of federal and state low income housing tax credits.

In addition, we provide leveraged and other loans on projects funded through the U.S.

In addition, we provide leveraged and other loans on projects

funded through the U.S.

Department of the Treasury Community Development Financial Institution (“CDFI”) New Markets Tax Credit Program.

In prior years, we were selected to distribute New Markets Tax Credits, and we continue to participate in the application process, as well as serve as a secured lender to other allocatees.

the third quarter 2021, the Company received a $60.0 million allocation from the New Market Tax Credit Program.

• Tax Credit Brokerage .

We acquire 10-year streams of Missouri state tax credits from affordable housing development funds and sell the tax credits to clients and other individuals for tax planning purposes.

We also have a minority ownership in a partnership that acquires, invests and sells, state low income housing tax credits.

We lend the partnership money with 6 - 12 year terms and receive interest income and fee income when projects close and when credits are sold.

We have a team of experienced bankers in production offices across the country that originate loans through the SBA 7(a) program.

These loans are primarily owner-occupied, commercial real estate loans secured by a 1st lien.

These loans predominantly have a 75% portion guaranteed by the SBA.

By focusing on this specific product type, we have developed an expertise that allows for speed and reliability of execution.

We have a minority ownership in a partnership that acquires, invests and sells, state low income housing tax credits.

We lend the partnership money with 6 - 12 year terms and receive interest income and fee income as projects close or credits are sold.

Specialty deposits – In addition to commercial operating accounts for our C&I customers, we offer specialty deposit accounts to customers in certain industries with complex account needs.

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These accounts are primarily demand accounts and have a low overall interest cost.

Fee income business – We offer a broad range of treasury management products and services that benefit businesses ranging from large national clients to local merchants.

Fee income business – We offer a broad range of treasury management products and services that benefit businesses ranging from large national clients to local businesses.

Customized solutions and special product bundles are available to clients of all sizes.

In response to ever increasing needs for data/information security and functional efficiency, we continue to offer robust cash management systems that employ mobile technology and fraud detection/mitigation services.

In response to ever increasing needs for data/information security and functional efficiency, we continue to offer cash management systems that employ mobile technology and fraud detection/mitigation services.

Enterprise Trust offers a wide range of fiduciary, investment management, and financial advisory services to facilitate our providing these services.

We also offer international banking, card services and tax credit businesses that generate fee income.

Use of technology – Our client technology product offerings include, but are not limited to, internet banking, mobile banking, cash management products, remote deposit capture, positive pay services, fraud detection and prevention, automated payables, check image, and statement and document imaging.

We also offer customer hedging products, international banking, card services and tax credit businesses that generate fee income.

The Company also invests in certain private equity and SBIC investments that generate additional fee income.

Use of technology – Clients access our products and services both in physical branch locations as well as remotely.

We offer online, device applications, text and voice banking in addition to a variety of “on site” hardware and software solutions, such as remote deposit capture.

These portals facilitate access to the commercial and consumer products we offer such as internet banking, mobile banking, cash management products, remote deposit capture, positive pay services, fraud detection and prevention, automated payables, check image, and statement and document imaging.

Additional service offerings currently supported by the Bank include controlled disbursements, repurchase agreements, and sweep investment accounts.

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These reviews are overseen by the Bank’s credit administration department.

In addition, the loan portfolio is subject to ongoing monitoring by a loan review function that reports directly to the Credit Committee of the Bank’s Board of Directors.

Expense management – We manage expenses carefully through detailed budgeting and expense approval processes and measurement of the “efficiency ratio”.

The efficiency ratio is equal to noninterest expense divided by total revenue (net interest income plus noninterest income).

Growth through Acquisitions – Disciplined strategic acquisitions have contributed significantly to the Company’s growth and expansion.

Most recently, on July 21, 2021, the Company closed its acquisition of First Choice and its wholly-owned bank subsidiary, FCB.

In addition, the loan portfolio is subject to ongoing monitoring by a loan review function that reports directly to the Bank’s Board of Directors or its committees.

Expense management – We manage expenses carefully through detailed budgeting and expense approval processes.

Our success is gauged through the measurement of the “efficiency ratio.” The efficiency ratio is equal to noninterest expense divided by total revenue (tax equivalent net interest income plus noninterest income).

Growth through Acquisitions – Disciplined strategic acquisitions have contributed significantly to the Company’s growth and expansion over the past several years.

O n July 21, 2021, the Company closed its acquisition of First Choice and its wholly-owned bank subsidiary, FCB.

First Choice operated eight full service branches in Southern California with total assets of $2.3 billion.

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Supervision and Regulation

The Company is a financial holding company registered under the Bank Holding Company Act of 1956, as amended (“BHCA”) and is subject to regulation, supervision and examination by the Federal Reserve.

The Bank is a Missouri trust company with banking powers and is subject to supervision and regulation by the Missouri Division of Finance.

In addition, as a Federal Reserve non-member bank, the Bank is subject to supervision and regulation by the FDIC.

The Company has securities registered with the SEC under the Securities Exchange Act of 1934, as amended.

The Company’s common stock is listed on the Nasdaq Stock Market.

The Company also has depositary shares, each representing a 1/40th interest in a share of the Company’s 5%, noncumulative perpetual preferred stock (“Series A Preferred Stock”), listed on the Nasdaq Stock Market.

Accordingly, the Company is subject to both SEC and Nasdaq listing standards.

The following is a summary description of the relevant laws, rules, and regulations governing banks and financial holding companies, including the Company.

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The regulatory and supervisory structure establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of depositors, the deposit insurance funds and the banking system as a whole, rather than for the protection of shareholders or creditors.

The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies concerning the establishment of deposit insurance assessment fees, classification of assets and establishment of adequate loan loss reserves for regulatory purposes.

Various legislation is from time to time introduced in Congress and state legislatures where we operate.

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We cannot determine the ultimate effect that future legislation or implementing regulations would have upon our financial condition or upon our results of operations or the results of operations of any of our subsidiaries.

The Dodd-Frank Act, by way of example, contains a comprehensive set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets.

One of the most comprehensive legislative acts in recent years was the Dodd-Frank Act, which contains a set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets.

The Dodd-Frank Act made extensive changes in the regulation of financial institutions and their holding companies.

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On March 13, 2020, the President of the United States proclaimed COVID-19 as a national emergency, following the World Health Organization’s categorization of the outbreak as a pandemic.

Variants of COVID-19 continue to aggressively spread globally, including throughout the United States.

The pandemic and resulting travel bans, closure of non-essential businesses, social distancing measures and government responses across the country have had a profound impact on the global economy, financial markets and how business has been conducted across all industries and have affected many of the Company’s customers and clients.

To the extent the economic impacts of the pandemic continue for a prolonged period and conditions stagnate or worsen, our provision for credit losses, noninterest income, and profitability may be adversely affected.

On January 30, 2023, the President announced an intention to allow the national emergency to expire on May 11, 2023.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.

The CARES Act contains provisions to assist individuals and businesses, including the SBA’s Paycheck Protection Program.

The PPP provided $349 billion in guaranteed loans that are forgivable if certain requirements are met.

Subsequent legislation increased the overall PPP authorization to $813.7 million through the end of the program on May 31, 2021.

The CARES Act also provides certain temporary regulatory relief for financial institutions.

The act permits financial institutions to temporarily suspend any determination of a loan modified as a result of the effects of the COVID-19 pandemic as being a troubled debt restructuring (“TDR”), including impairment for accounting

We elected to apply the CARES Act relief to certain loan modifications that relate primarily to short-term payment deferrals and have not classified such modifications as TDRs through the end of 2021.

The CARES Act grants potential tax relief and liquidity to businesses, including corporate tax provisions that:

temporarily allow for the carryback of net operating losses and remove limitations on the use of loss carryforwards, increase interest expense deduction limitations, and allow accelerated depreciation deductions on certain asset improvements.

On March 11, 2021, the American Rescue Plan of 2021 (“ARA”) was signed into law.

The ARA provided additional support to the economy through direct support to individuals, families and small businesses.

The PPP provided guaranteed loans that are forgivable if certain requirements are met.

Subsequent legislation increased the overall PPP authorization through the end of the program on May 31, 2021.

The CARES Act also provided certain temporary regulatory relief for financial institutions.

The act permitted financial institutions to temporarily suspend any determination of a loan modified as a result of the effects of the COVID-19 pandemic as being a troubled debt restructuring (“TDR”), including impairment for accounting purposes, through the end of 2021.

We elected to apply the CARES Act relief to certain loan modifications that related primarily to short-term payment deferrals and did not classify such modifications as TDRs during the allowed term.

Financial Holding Company

The Company is a financial holding company registered under the Bank Holding Company Act of 1956, as amended (“BHCA”).

As a financial holding company, the Company is subject to regulation and examination by the Federal Reserve, and is required to file periodic reports of its operations and such additional information as the Federal Reserve may require.

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Subject to various exceptions, the BHCA and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank or financial holding company.

Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the Company or controls a majority of the board of directors.

In certain circumstances, control is rebuttably presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities of the Company.

Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of a company or controls a majority of the board of directors.

In certain circumstances, control is rebuttably presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities of a company.

The regulations provide a procedure for challenging rebuttable presumptions of control.

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Support of Bank Subsidiary:

Under Federal Reserve policy, the Company is expected to act as a source of financial strength for the Bank and to commit resources to support the Bank.

In addition, pursuant to the Dodd-Frank Act, this longstanding policy has been given the force of law, and additional regulations promulgated by the Federal Reserve to further implement the statute are possible;

however, the bank subsidiary support provisions of the statute are fully effective even absent implementing regulations.

As in the past, such financial support from the Company may be required at times when, without this legal requirement, the Company may not be inclined to provide it.

Under Federal Reserve policy, the Company is expected to act as a source of financial and managerial strength for the Bank and to commit resources to support the Bank.

The Dodd-Frank Act codified this longstanding policy by adopting a provision requiring, among other things, that bank holding companies serve as a source of strength for an subsidiary depository institution.

Such financial and managerial support from the

Company may be required at times when, without this legal requirement, the Company may not be inclined to provide it.

Capital Adequacy:

The Company is also subject to capital requirements applied on a consolidated basis, which are substantially similar to those required of the Bank (summarized below).

The Company is subject to capital requirements and standards established by the Federal Reserve (“Basel III Capital Rules”) that are applied on a consolidated basis.

These requirements are substantially similar to those required of the Bank (summarized below).

Under the Basel III Capital Rules, capital instruments such as trust preferred securities and cumulative preferred shares have been phased out of tier 1 capital for banking organizations that had $15 billion or more in total consolidated assets as of December 31, 2009, and have grandfathered as tier 1 capital such instruments issued by smaller entities prior to May 19, 2010 (provided they do not exceed 25% of tier 1 capital).

At December 31, 2022, the Company had $93.0 million of trust preferred securities that are grandfathered under this provision.

However, if the Company has total assets of $15 billion and acquires another bank, or if an acquisition causes the Company to exceed $15 billion in total assets, the trust preferred securities will no longer qualify as Tier 1 instruments (but may be included in tier 2 capital).

Dividend Restrictions and Stock Repurchases:

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Under Federal Reserve policies, financial holding companies may pay cash dividends on common stock only out of income available over the past year if prospective earnings retention is consistent with the organization’s expected future needs and financial condition and if the organization is not in danger of not meeting its minimum regulatory capital requirements.

Federal Reserve policy also provides that financial holding companies should not maintain a level of cash dividends that undermines the financial holding company’s ability to serve as a source of strength to its banking subsidiaries.

Dividends, repurchases and redemptions on the Company’s capital stock (common and preferred) are prohibited under the terms of the junior subordinated debenture agreements (see Note 11-Subordinated Debentures) if the Company is in continuous default on its payment obligations, has elected to defer interest payments or extends the interest payment period.

Federal Reserve policy also provides that financial holding companies should not pay a level of cash dividends that undermines the financial holding company’s ability to serve as a source of strength to its banking subsidiaries.

Dividends, repurchases and redemptions on the Company’s capital stock (common and preferred) are prohibited under the terms of the junior subordinated debenture agreements (see “Item 8.

Note 10 – Subordinated Debentures and Notes”) if the Company is in continuous default on its payment obligations, has elected to defer interest payments or extends the interest payment period.

Furthermore, unless dividends on all outstanding shares of the Series A Preferred Stock for the most recently completed dividend period have been paid or declared, dividends on, and repurchases of, common stock is prohibited.

Incentive Compensation:

Federal banking agencies have issued guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

In accordance with the Dodd-Frank Act, the federal banking agencies prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions (generally institutions, like us, that have over $1 billion in assets) and are deemed to be excessive, or that may lead to material losses.

The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

The findings of the supervisory initiatives will be included in reports of examination.

Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other

Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk- management control or governance processes, pose a risk to the organization’s safety and soundness, and the organization is not taking prompt and effective measures to correct the deficiencies.

The scope and content of the U.S.

banking regulators’ policies on executive compensation may continue to evolve in the near future.

It cannot be determined at this time whether compliance with such policies will adversely affect the Company’s ability to hire, retain, and motivate its key employees.

In October 2022, the SEC adopted rules requiring securities exchanges, including Nasdaq, to adopt listing standards that require issuers to develop and implement a policy providing, under certain circumstances, for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.

The new rules, which were mandated as part of the Dodd-Frank Act and which became effective in January 2023, will require the Company to adopt a policy implementing the rules within 60 days after the Nasdaq listing standards become effective.

Bank Subsidiary

The Bank is a Missouri trust company with banking powers and is subject to supervision and regulation by the Missouri Division of Finance.

In addition, as a Federal Reserve non-member bank, it is subject to supervision and regulation by the FDIC.

The Bank is a member of the FHLB of Des Moines.

The Bank is subject to extensive federal and state regulatory oversight.

The various regulatory authorities regulate or monitor all areas of the banking operations, including security devices and procedures, adequacy of capitalization and loss reserves, loans, investments, borrowings, deposits, mergers, issuance of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe lending and deposit gathering practices.

The various regulatory authorities regulate or monitor all areas of the banking operations, including security devices and procedures, adequacy of capitalization and loss reserves, loans, investments, borrowings, deposits, mergers, issuance of securities, payment of dividends, interest rates payable on deposits, interest rates and fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe lending and deposit gathering practices.

The Bank must maintain certain capital ratios and is subject to limitations on aggregate investments in real estate, bank premises, low-income housing projects, and furniture and fixtures.

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The FDIC has issued risk-based capital and leverage capital guidelines for measuring capital adequacy, and all applicable capital standards must be satisfied for the Bank to be considered in compliance with regulatory capital requirements.

In 2013, the Federal Reserve, FDIC and OCC approved a final rule to establish a new comprehensive regulatory capital framework for all U.S.

banking organizations.

This regulatory capital framework, commonly referred to as Basel III, implemented several changes to the U.S.

regulatory capital framework required by the Dodd-Frank Act.

The Basel III final rule established a new CET1 requirement and increased the minimum tier 1 capital requirement to 6.0%.

In addition, all banking organizations must maintain a CCB consisting of CET1 capital in an amount equal to 2.5% of risk-weighted assets in order to avoid restrictions on their ability to make capital distributions and to pay certain discretionary bonus payments to executive officers.

The CCB effectively increased the minimum CET1 capital, tier 1 capital, and total capital ratios for U.S.

banking organizations to 7.0%, 8.5%, and 10.5%, respectively.

As required by the Basel III final rule, capital instruments such as trust preferred securities and cumulative preferred shares have been phased out of tier 1 capital for banking organizations that had $15 billion or more in total consolidated assets as of December 31, 2009, and grandfathered as tier 1 capital such instruments issued by smaller entities prior to May 19, 2010 (provided they do not exceed 25% of tier 1 capital).

The Company’s trust preferred securities currently are grandfathered under this provision.

Prompt Corrective Action:

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They are not necessarily an accurate representation of a bank’s overall financial condition or prospects for other purposes.

A failure to meet the capital guidelines could subject the Bank to a variety of enforcement actions under those rules, including the issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on the taking of brokered deposits, and other restrictions on its business.

A failure to meet the capital guidelines could subject the Bank to a variety of enforcement actions under those rules, including the issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on taking brokered deposits, and other restrictions on its business.

As described below, the FDIC also can impose other substantial restrictions on banks that fail to meet applicable capital requirements.

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Critically undercapitalized Tangible equity / Total assets ≤ 2.0%

In addition to the minimum capital ratios noted in the table above, the Basel III Capital Rules require the maintenance of a CCB consisting of CET1 capital in an amount equal to 2.5% of risk weighted assets to avoid restrictions on the ability to make capital distributions and to pay certain discretionary bonus payments to executive officers.

The CCB effectively increases the minimum CET1 capital, tier 1 capital, and total capital ratios for U.S.

banking organizations to 7.0%, 8.5%, and 10.5%, respectively.

A bank that becomes “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized” is required to submit an acceptable capital restoration plan to the FDIC.

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Also, the FDIC may treat an “undercapitalized” bank as being “significantly undercapitalized” if it determines that those actions are necessary to carry out the purpose of the law.

All of the Bank’s capital ratios were at levels that qualify it to be “well-capitalized” for regulatory purposes as of December 31, 2021.

All of the Bank’s capital ratios were at levels that qualify it to be “well-capitalized” for regulatory purposes as of December 31, 2022 (see “Item 8.

Note 14 - Regulatory Capital”).

Consumer Financial Protection Bureau:

The Dodd-Frank Act centralized responsibility for consumer financial protection including implementing, examining and enforcing compliance with federal consumer financial laws with

Depository institutions with more than $10 billion in assets, such as the Bank, are subject to rules promulgated by the CFPB.

The Dodd-Frank Act centralized responsibility for consumer financial protection including implementing, examining and enforcing compliance with federal consumer financial laws with the CFPB.

Depository institutions with more than $10 billion in assets, such as the Bank, are subject to examination by the CFPB.

The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit unfair, deceptive or abusive acts and practices.

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The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice.

The FDIC has issued policy statements that provide that insured banks generally should pay dividends only from their current operating earnings.

The Bank’s payment of dividends also could be affected or limited by other factors, such as events or circumstances which lead the FDIC to require that it maintain capital in excess of regulatory guidelines.

The FDIC has issued policy statements providing that insured banks generally should pay dividends only from their current operating earnings.

The Bank’s payment of dividends also could be affected or limited by other factors, such as events or circumstances which would lead the FDIC to require that it maintain capital in excess of regulatory guidelines.

Transactions with Affiliates and Insiders:

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Regulation W places limits and conditions on the amount of loans or extensions of credit to, investments in, or certain other transactions with, affiliates and on the amount of advances to third parties collateralized by the securities or obligations of affiliates.

institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

Regulation W also prohibits, among other things, an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

Federal law also places restrictions on the Bank’s ability to extend credit to its executive officers, directors, principal shareholders and their related interests.

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The Bank has an outstanding rating under CRA.

The last significant interagency revision to the CRA regulations occurred in 1995.

In May 2022, federal bank regulatory agencies jointly issued a proposal to strengthen and modernize regulations implementing the CRA to better achieve the purposes of the law.

The comment period ended on August 5, 2022.

We will continue to monitor for the final rulemaking and evaluate the impact of any changes to the CRA regulations.

USA PATRIOT Act:

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CRE loans generally include land development, construction loans, and loans secured by multifamily property, and non-farm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property.

On December 6, 2006, the federal banking regulators issued final guidance to remind financial institutions of the risk posed by CRE lending concentrations.

The guidance prescribes the following guidelines for its examiners to help identify institutions that are potentially exposed to significant CRE risk, including concentrations in certain types of CRE that may warrant greater supervisory scrutiny:

Guidance from the federal banking regulators on the risk posed by CRE lending concentrations prescribes guidelines for its examiners to help identify institutions that are potentially exposed to significant CRE risk.

These guidelines include concentrations in certain types of CRE that may warrant greater supervisory scrutiny:

total reported loans for construction, land development, and other land represent 100% or more of the institutions total capital;

or total commercial real estate loans represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more.

Volcker Rule:

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(i) short-term proprietary trading as principal in securities and other financial instruments, and (ii) sponsoring or acquiring or retaining an ownership interest in private equity and hedge funds.

Revisions to the Volcker Rule in 2019, that become effective in 2020, simplifies and streamlines the compliance requirements for banks that do not have significant trading activities.

Revisions to the Volcker Rule in 2019, that become effective in 2020, simplified and streamlined the compliance requirements for banks that do not have significant trading activities.

In 2020, the OCC, Federal Reserve, FDIC, SEC and Commodity Futures Trading Commission finalized further amendments to the Volcker Rule.

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The amendments in the final rule, which became effective on October 1, 2020, clarify and expand permissible banking activities and relationships under the Volcker Rule.

Interchange Income:

The Durbin Amendment to the Dodd-Frank Act capped debit card interchange fees for banks with over $10 billion in assets.

Interchange fees are paid to banks by merchants for processing transactions.

The Durbin Amendment cap for a single debit card transaction is 21 cents plus 5 basis points multiplied by the amount of the transaction.

The Durbin Amendment cap became effective for the Bank on July 1, 2022 and resulted in a reduction in interchange income earned by the Bank.

Governmental Policies

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In particular, the Federal Reserve regulates monetary policy and interest rates in order to influence general economic conditions.

These policies have a significant influence on overall growth and distribution of loans, investments and deposits and affect interest rates charged on loans or paid

for deposits.

These policies have a significant influence on overall growth and distribution of loans, investments and deposits and affect interest rates charged on loans or paid for deposits.

Federal Reserve monetary policies have had a significant effect on the operating results of all financial institutions in the past and may continue to do so in the future.

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At December 31, 2022, we employed 1,074 regular full-time and 53 part-time associates.

We also employ a small number of seasonal/temporary associates and occasionally hire independent contractors for specific projects that require a highly specialized skill set or to provide additional resources during peak times, as needed.

We also employ seasonal/temporary associates and occasionally hire independent contractors for specific projects that require a highly specialized skill set or to provide additional resources during peak times, as needed.

Our performance measures and compensation determinations are designed to ensure the proper balance of risk and reward.

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Additionally, we have established succession plans to ensure continuation of critical roles and operations.

We are committed to offering a competitive total compensation package.

We are committed to offering a competitive total compensation package that is consistent with our principles and aligned with the Company’s financial performance.

We regularly compare compensation and benefits with peer companies and market data, making adjustments as needed to ensure compensation stays competitive.

In 2021, we raised our internal minimum wage to $16 per hour to maintain a competitive total rewards package that attracts and retains top talent.

This decision was made after extensive research, including reviewing the current market landscape both inside and outside of banking and financial services, and with feedback from leadership.

In addition to base salary, approximately 60% of associates are eligible to participate in the Company’s Short Term Incentive Plan (“STIP”) program.

Our STIP program is designed to align compensation with an associate’s performance in a given year.

The program sets a performance level of short-term incentive awards that an associate is eligible to earn.

The STIP target is defined as a percentage of base salary based on the associate’s grade level as determined by our Human Resources department.

In the past 18 months, we have raised our internal minimum wage twice.

As of January 1, 2023, our minimum wage is $17 per hour.

These increases were instituted to maintain a competitive total rewards package that attracts and retains top talent.

The decision to increase our minimum wage was made after extensive research, including reviewing the current market landscape both inside and outside of banking and financial services, and with feedback from leadership.

Currently, 96% of our associates earn more than the minimum wage.

We also offer a wide array of benefits for our associates and their families including 401(k), medical, dental and vision benefits as well as life insurance and short-term disability for all full-time associates.

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Annual health screenings are provided to all associates at no charge.

Soliciting Feedback .

We conduct associate surveys to ensure that we understand what is important to our associates, including their opinions on a variety of topics.

We have made changes as a result of the survey results including the adoption of a volunteer time-off policy and improvements to internal communication processes.

Associate Feedback .

We conduct associate surveys to ensure we understand what is important to our associates, including their opinions on a variety of topics.

The adoption of a volunteer time-off policy and improvements to internal communication processes are examples of changes that have been made in response to survey results.

Our efforts are being recognized.

For the past four years, the Bank has been included in the “Best Banks to Work for” by American Banker magazine for our dedication to employee satisfaction.

For the past five years, the Bank has been included in the “Best Banks to Work for” by American Banker magazine for our dedication to employee satisfaction.

In 2022, we were ranked fifth among similar financial institutions with more than $10 billion in assets.

In late 2021, we conducted a survey specifically directed at gaining a better understanding of our culture and our associates’ experiences.

We believe this is especially important to understand as we have grown into new markets and welcomed new associates.

The survey was designed to give management insight into our culture’s strengths and opportunities.

Additionally, we utilize small group setting programs, where management regularly meets with associates across the organization for informal discussion and open forum on topics that are top of mind for the attendees.

Through our continued use of surveys and other forms of collecting associate feedback, we can continue to understand, grow and enhance our culture to facilitate a ‘best place to work’ environment.

Eighty-two percent of our associates responded to the culture survey.

The survey was designed to provide management insight into our culture’s strengths and identify opportunities for improvement.

Additionally, we utilize small group setting programs across the organization, where associates have informal discussions and open forum on topics with management.

Through our continued use of surveys and other forms of collecting associate feedback, we continue to understand, grow and enhance our culture to facilitate a ‘best place to work’ environment.

Diversity, Equity & Inclusion .

We believe that diversity of thought and experiences results in better outcomes and empowers our associates to make more meaningful contributions within our company and communities.

We believe diversity of thought and experiences results in better outcomes and empowers our associates to make more meaningful contributions within our company and communities.

We continue to learn and grow, and our current initiatives reflect our ongoing efforts around a more diverse, inclusive and equitable workplace.

Our Diversity, Equity & Inclusion Leadership Council and our Black Heritage Connections Group — are tasked with making recommendations on specific steps we can take to ensure we are driving positive change in our communities.

In addition, we have several associate development programs that help to create a more inclusive environment by giving associates and other individuals of all backgrounds additional opportunities to succeed and contribute.

Our Diversity, Equity & Inclusion Council is tasked with making recommendations on specific steps we can take to ensure we are driving positive change in our communities.

In addition, we have several associate development

programs that help to create a more inclusive environment by giving associates and other individuals of all backgrounds additional opportunities to succeed and contribute.

These programs include:

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Upon successful completion of the program, participants receive a small stipend and are guaranteed an interview with one of the program sponsors.

• Empower & Enlighten - This program pairs our senior leaders with mid-level women and minority associates in order to foster an environment of mutual understanding, to remove generational boundaries and implicit biases, and to build the bridges that connect people to opportunity.

• Empower & Enlighten - This program pairs our senior leaders with mid-level women and minority associates to foster an environment of mutual understanding, to remove generational boundaries and implicit biases, and to build the bridges that connect people to opportunity.

• Business Resource Groups - These groups bring together associates with a shared identity, interest or goal to create community and opportunities for improvement and engagement.

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The HS Policy encompasses all facilities and operations and addresses on-site emergencies, injuries and illnesses, evacuation procedures, cell phone usage and general safety rules.

Our priority throughout the COVID-19 pandemic is to protect the health and safety of associates and clients while remaining operational.

We are abiding by federal, state and local governmental guidelines as we balance public health concerns with the needs of our business.

We continue to follow our Business Continuity Plan and Pandemic Plan and have been able to successfully navigate the pandemic with no significant interruptions.

Additionally, our Business Continuity Plan and Pandemic Plan are important components in helping maintain the health and safety of our associates and clients.

Available Information

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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.

What changed 10-K

Item 1. Business