What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-01 compared with 2020-03-02 · 164 added, 109 removed, 555 unchanged (33% of the section changed)

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References to “EagleBank” or “Bank” refer to EagleBank, which is our principal subsidiary.

This report contains additional trade names and trademarks of other companies.

We do not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Eagle Bancorp, Inc.

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Landroval Municipal Finance, Inc.

focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.The Bank operates as a community bank alternative to the super-regional financial institutions, which dominate its primary market area.

focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.

The Bank operates as a community bank alternative to the super-regional financial institutions, which dominate its primary market area.

The cornerstone of the Bank’s philosophy is to provide superior, personalized service to its clients.

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These themes of convenience and proactive personal service form the basis for the Bank’s business development strategies.

The Company has grown primarily through organic growth over its twenty one year history.

The Company has grown primarily through organic growth over its twenty two year history.

Two acquisitions have been completed (one in 2008 and one in 2014).

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The Bank offers a broad range of commercial banking services to its business and professional clients, as well as full service consumer banking services to individuals living and/or working primarily in the Bank’s market area.

The Bank emphasizes providing commercial banking services to sole proprietors, small and medium-sized businesses, partnerships, corporations, non-profit organizations and associations, and investors living and working in and near the Bank’s primary service area.

A full range of retail banking services are offered to accommodate the individual needs of both corporate customers as well as the community the Bank serves.

The Bank also offers online banking, mobile banking and a remote deposit service, which allows clients to facilitate and expedite deposit transactions through the use of electronic devices.

A suite of Treasury Management services is also offered to business clients.

The Bank’s deposits are insured by the Federal Deposit insurance Corporation, or FDIC, to the fullest extent provided by law.

The Bank provides a variety of commercial and consumer lending products to small, medium and large-sized businesses and to individuals for various business and personal purposes, including (i) commercial loans for a variety of business purposes such as for working capital, equipment purchases, real estate lines of credit, and government contract financing;

These services include (i) commercial loans for a variety of business purposes such as for working capital, equipment purchases, real estate lines of credit, and government contract financing;

(ii) asset based lending and accounts receivable financing (on a limited basis);

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and (viii) residential mortgage loans.

A full range of retail banking services are offered to accommodate the individual needs of both corporate customers as well as the community the Bank serves.

The Bank also offers online banking, mobile banking and a remote deposit service, which allows clients to facilitate and expedite deposit transactions through the use of electronic devices.

A suite of Treasury Management services is also offered to business clients.

The Bank’s deposits are insured by the Federal Deposit insurance Corporation, or FDIC, to the fullest extent provided by law.

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The Bank’s loan portfolio consists primarily of traditional business and real estate secured loans.

Commercial and industrial loans are made, with a substantial portion having variable and adjustable rates, and where the cash flow of the borrower/borrower’s operating business is the principal source of debt service with a secondary emphasis on collateral.

Commercial and industrial loans are made, with a substantial portion having variable and adjustable rates, and where the cash flow of the borrower(s) operating business is the principal source of debt service with a secondary emphasis on collateral.

Real estate loans are made generally for commercial purposes and are structured using both variable and fixed rates and renegotiable rates which adjust in three to five years, with maturities of generally five to ten years.

Commercial real estate loans, which comprise the largest portion of the loan portfolio, are secured by both owner occupied and non-owner occupied real property and include a significant component of acquisition, development and construction, or ADC lending.

Commercial real estate loans, which comprise the largest portion of the loan portfolio, are secured by both owner occupied and non-owner occupied real property and include a component of acquisition, development and construction, or ADC lending.

The Bank’s consumer loan portfolio is a smaller portion of the loan portfolio and is comprised generally of two loan types:

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From time to time, this dependence on legislative funding causes limitations and uncertainties with regard to the continued funding of such programs, which could potentially have an adverse financial impact on our business.

In 2020, in response to the COVID-19 pandemic, the federal government (in the CARES Act passed in March 2020) provided a lending program which was distributed through the banking system called The Paycheck Protection Program ("PPP").

The program was administered through the SBA.

The purpose of this new lending facility was to provide needed support to small and mid size businesses at low rates of interest (statutory rate of 1% plus fees) and to establish a loan forgiveness feature in cases where loan proceeds could be proven to be used by the small and mid sized business to support payroll costs, lease obligations and certain other specified uses.

The program was intended to provide a bridge until business activity could return to normal.

The Bank participated in all phases to date of the PPP, which is further described in the Notes to Financial Statements and Managements’ Discussion and Analysis which follows.

The Company originates multifamily FHA loans through the Department of Housing and Urban Development’s, or HUD’s, Multifamily Accelerated Program, or MAP.

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Plans for mitigating inherent risks in managing loan assets include:

carefully enforcing loan policies and procedures, evaluating each borrower’s business plan during the underwriting process and throughout the loan term, identifying and monitoring primary and alternative sources for loan repayment, and obtaining collateral to mitigate economic loss in the event of liquidation.

carefully designing and enforcing loan policies and procedures, evaluating each borrower’s business plan during the underwriting process and throughout the loan term, identifying and monitoring primary and alternative sources for loan repayment, and obtaining collateral to mitigate economic loss in the event of liquidation.

Specific loan reserves are established based upon credit and/or collateral risks on an individual loan basis.

A risk rating system is employed to proactively estimate loss exposure and provide a measuring system for setting general and specific reserve allocations.

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The composition of the Company’s loan portfolio is heavily weighted toward commercial real estate, both owner occupied and income producing real estate.

At December 31, 2019, owner occupied commercial real estate and construction - C&I (owner occupied) represent approximately 14% of the loan portfolio.

At December 31, 2020, owner occupied commercial real estate and construction - Commercial and Industry ("C&I") (owner occupied) represent approximately 15% of the loan portfolio.

At December 31, 2020, non-owner occupied commercial real estate and real estate construction represented approximately 58% of the loan portfolio.

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Personal guarantees are generally required, but may be limited.

SBA loans represent approximately 1% of the commercial loan category.

SBA loans represent approximately 1.2% of the commercial loan category at December 31, 2020.

In originating SBA loans, the Company assumes the risk of non-payment on the unguaranteed portion of the credit.

The Company generally sells the guaranteed portion of the loan generating noninterest income from the gains on sale, as well as servicing income on the portion participated.

SBA loans are subject to the same cash flow analyses as other commercial loans.

SBA loans other than PPP loans are subject to the same cash flow analyses as other commercial loans.

SBA loans are subject to a maximum loan size established by the SBA as well as internal loan size guidelines.

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These credits, while making up a small portion of the loan portfolio, demand the same emphasis on underwriting and credit evaluation as other types of loans advanced by the Bank.

Approximately 1% of the loan portfolio consists of residential mortgage loans.

Approximately 1% of the loan portfolio consists of residential mortgage loans at December 31, 2020.

At December 31, 2020, the repricing duration of these loans was 18 months.

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While the Bank’s general practice is to originate and sell (servicing released) loans made by its Residential Lending department, from time to time certain loan characteristics do not meet the requirements of third party investors and these loans are instead maintained in the Bank’s portfolio until they are resold to another investor at a later date or mature.

Our lending activities are subject to a variety of lending limits imposed by state and federal law.

Approximately 6% of the loan portfolio at December 31, 2020 consists of Payroll Protection Plan (PPP) loans, authorized under the Cares Act in 2020 in response to the COVID-19 pandemic.

These credits have a term of two or five years, and a stated interest rate of 1% plus an origination fee based on the loan amount.

The loans may in whole or part be forgivable (i.e.

repaid from U.S.

Treasury funds) based on the documented use of the loan proceeds.

The program is administered under rules established by the SBA.

Our lending activities are subject to a variety of borrower lending limits imposed by state and federal law.

These limits will increase or decrease in response to increases or decreases in the Bank’s level of capital.

At January 31, 2020, the Bank had a legal lending limit of $196 million.

At December 31, 2020, the Bank had a legal lending limit of $200 million.

At December 31, 2020, the average loan size outstanding for Commercial Real Estate, or CRE, and Commercial and Industrial, or C&I, loans was $5.3 million and $612 thousand, respectively.

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however, there can be no assurance that such procedures can significantly reduce such lending risks.

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The Bank originates residential mortgage loans primarily as a correspondent lender.

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In certain instances, the Bank may provide equity loans (second position financing) in combination with residential first mortgage lending for purchase money and refinancing purposes.

The Bank enters into commitments to originate residential mortgage loans whereby the interest rate on the loan is determined prior to funding (i.e.

rate lock commitments).

The Bank maintains a reserve for residential real estate loans recourse obligations in Other liabilities on the Consolidated Balance Sheet.

The Bank enters into commitments to originate residential mortgage loans whereby the interest rate on the loan is determined prior to funding (i.e., rate lock commitments).

Such rate lock commitments on mortgage loans to be sold in the secondary market are considered to be derivatives.

To protect against the price risk inherent in residential mortgage loan commitments, the Bank utilizes both “best efforts” and “mandatory delivery” forward loan sale commitments to mitigate the risk of potential decrease in the values of loans that would result from the exercise of the derivative loan commitments.

The Bank manages the interest rate risk on rate lock commitments by entering into forward sale contracts of mortgage backed securities, whereby the Bank obtains the right to deliver securities to investors in the future at a specified price.

Such contracts are accounted for as derivatives and are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in other income.

To protect against the price risk inherent in residential mortgage loan commitments, the Bank utilizes a combination of either or both “best efforts” and “mandatory delivery” forward loan sale commitments to mitigate the risk of potential decrease in the values of loans that would result from the exercise of the derivative loan commitments.

Under a “best efforts” contract, the Bank commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor and the investor commits to a price that it will purchase the loan from the Bank if the loan to the underlying borrower closes.

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The market values of rate lock commitments and best efforts contracts are not readily ascertainable with precision because rate lock commitments and best efforts contracts are not actively traded.

Because of the high correlation between rate lock commitments and best efforts contracts, no gain or loss should occur on the rate lock commitments.

The Bank determines the fair value of interest rate lock commitments and the associated gain by measuring the fair value of the underlying asset, which is impacted by current interest rates, taking into consideration the probability that the interest rate lock commitments will close or will be funded..

Under a “mandatory delivery” contract, the Bank commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date.

If the Bank fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay the investor a “pair-off” fee, based on then-current market prices, to compensate the investor for the shortfall.

The rate lock commitments on mortgage loans to be sold in the secondary market are considered to be derivatives.

Such contracts are accounted for as derivatives and are recorded at fair value in derivative assets or liabilities, with changes in fair value recorded in other income.

The period of time between issuance of a loan commitment to the customer and closing and sale of the loan to an investor generally ranges from 30 to 90 days under current market conditions.

Loans are secured primarily by duly recorded first deeds of trust or mortgages.

All loans are secured primarily by duly recorded first deeds of trust or mortgages.

In some cases, the Bank may accept a recorded junior trust position.

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The general terms and underwriting standards for each type of commercial real estate and construction loan are incorporated into the Bank’s lending policies.

These policies are analyzed periodically by management, and the policies are reviewed and re-approved annually by the Board.

These policies are analyzed periodically by management, and the policies are reviewed and re-approved annually by either the Board of Directors or the Directors Loan Committee.

The Bank’s loan policies and practices described in this report are subject to periodic change, and each guideline or standard is subject to waiver or exception in the case of any particular loan, by the appropriate officer or committee, in accordance with the Bank’s loan policies.

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Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

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Loans intended for residential land acquisition, lot development and construction are made on the premise that the land:

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Updated appraisals for real estate secured loans are obtained as necessary and appropriate to borrower financial condition, project status, loan terms, and market conditions.

The Company’s loan portfolio includes loans made for real estate ADC purposes, including both income producing and owner occupied projects.

The Company’s loan portfolio includes loans made for real estate acquisition, development, and construction ("ADC") purposes, including both income producing and owner occupied projects.

ADC loans amounted to $1.4 billion at December 31, 2020.

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If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.

The Company has not experienced any significant issues with increased vacancy rates or lower rents for income producing properties financed.

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As of December 31, 2020, the Company has not experienced any significant issues with increased vacancy rates or lower rents for income producing properties financed.

The construction loan portfolio has remained solid, particularly in areas of well-located residential and multifamily projects, as the housing market has continued to improve and stabilize.

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A complete individual retirement account program is available.

The Bank also participates in the Promontory Interfinancial Network, LLC (“Promontory”) Certificate of Deposit Account Registry Service (“CDARS”) and its Insured Cash Sweep (“ICS”) program, both of which networks function to assure full FDIC insurance for participating Bank customers.

The Bank also participates in the IntraFi Network, LLC (“IntraFi”) Certificate of Deposit Account Registry Service (“CDARS”) and its Insured Cash Sweep (“ICS”) program, both of which networks function to assure full FDIC insurance for participating Bank customers.

In cooperation with Goldman Sachs Asset Management, the Bank offers a Goldman Sachs Investment Sweep Account, a check writing cash management account that sweeps funds to one of several non-FDIC insured off-balance sheet investment accounts managed by Goldman Sachs.

The Bank offers a full range of on-line banking services for both personal and business accounts and has a Mobile Banking application for both businesses and individuals.

Other services include cash management services, business sweep accounts, lock box, remote deposit capture, account reconciliation services, merchant card services, safety deposit boxes and Automated Clearing House origination.

The Bank also utilizes brokered deposit funds in its overall asset/liability management program.

The Bank offers a full range of online banking services for both personal and business accounts and has a Mobile Banking application.

Other deposit services include cash management services, business sweep accounts, lock box, remote deposit capture, account reconciliation services, merchant card services, safety deposit boxes and Automated Clearing House origination.

After-hours depositories and ATM service are also available.

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agency bonds and government sponsored enterprise mortgage backed securities, municipal bonds, and corporate bonds.

The Bank also owns equity investments related to membership in the Federal Reserve System and the Federal Home Loan Bank of Atlanta, or the FHLB.

The Company’s securities portfolio also consists of equity investments in the form of common stock of two local banking companies.

These portfolios provide the following objectives:

The Bank also owns equity investments related to membership in the Federal Reserve System and the Federal Home Loan Bank of Atlanta (FHLB).

The Company’s securities portfolio includes equity investments in the form of common stock of two local banking companies.

The investment securities portfolio provides the following objectives:

capital preservation, liquidity management, additional income to the Company and Bank in the form of interest and gain on sale opportunities, collateral to facilitate borrowing arrangements and assistance with meeting interest rate risk management objectives.

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Treasury securities, U.S.

agency securities and high grade municipal and corporate securities, including subordinated debentures of U.S.

agency securities and high grade municipal and corporate securities, including highly rated subordinated debentures of U.S.

regulated banks.

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The development of the Company’s customer base has benefited from the extensive business and personal contacts of its directors and executive officers.

Full relationships have been fostered including deposit balances, loan balances and non interest revenue sources.

Full relationships have been fostered including deposit balances, loan balances and noninterest revenue sources.

The Bank has placed enhanced reliance on proactively designed officer calling programs and lender teams, active participation in business organizations, and enhanced referral programs.

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Further, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

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MARKET AREA AND COMPETITION

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metropolitan area.

With a population of nearly 6.2 million, the region is the 6 th largest metropolitan area in the US (US Census Bureau 2018).

Total employment in the region is approximately 3,353,400 per the October 2018 Bureau of Labor Statistics (BLS) report.

The region has the 7 th highest rate of job creation records of any market in the country with reported new job creation of 60,700 new jobs created in 2018.

With a population of nearly 6.3 million and projected growth rate of 4%, the region is the 6th largest metropolitan area in the U.S.

Census Bureau 2019).

Total employment in the region is approximately 3.2 million per the 2020 Bureau of Labor Statistics (BLS) report.

The region has lost 178,000 jobs in the year 2020, going from a 2.6% unemployment rate to a 5.8% unemployment rate from the end of 2019 to the end of 2020 due substantially to the COVID-19 pandemic.

The Washington D.C.

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The Gross Regional Product (“GRP”) for the metropolitan area in 2019 was reported at $560 billion.

Of this amount, approximately 30% is associated with spending by the government.

Other significant sectors include professional and business services, education, health, leisure, and hospitality.

This figure can be heavily attributed to the federal government, but other significant sectors include professional and business services, education, healthcare, leisure, and hospitality.

The region also has a very active non-profit sector including trade associations, colleges, universities, and major hospitals.

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economy at large, and the economy in and around Montgomery County is among the best in Maryland.

The number of jobs in Montgomery County has been relatively stable in the recent past with the public sector contributing about 20% of the employment.

The unemployment rate in Montgomery County is among the lowest in the state at 2.6% in December of 2018, based on Bureau of Labor Statistics’, or BLS, Local Area Unemployment preliminary dataset.

The number of jobs in Montgomery County has been relatively stable in the recent past.

The unemployment rate in Montgomery County is among the lowest in the state at 6.5% in November of 2020, based on Bureau of Labor Statistics’, or BLS, data.

A highly educated population has contributed to favorable median household income of $108,820 with the number of households totaling 370,950.

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census update, approximately 59% of the County’s residents in 2019 hold college or advanced degrees, placing the population of Montgomery County among the most educated in the nation.

The area boasts a diverse business climate of over 27,000 businesses with over 424,372 private and public sector jobs.

The area boasts a diverse business climate of over 118,965 businesses.

Major areas of employment include a substantial technology sector, biotechnology, software development, a housing construction and renovation sector, and legal, financial services, health care, and professional services sectors.

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The county supports 313,343 households as of 2019 with median incomes of $84,920.

The unemployment rate in the county was 3.7% in December of 2018 according BLS.

The unemployment rate in the county was 9.0% in November of 2020 according to the BLS.

Prince George’s County continues to promote a business friendly environment and is home to major employers such as the University of Maryland, Joint Base Andrews Naval Air Facility Washington, U.S.

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These include law and accounting firms, trade and professional associations, information technology companies, international financial institutions, health and education organizations and research and management companies.

Unemployment was 4.8% at December 2018 according to BLS.

Unemployment was 7.3% at November 2020 according to BLS.

The disparity between the higher level of unemployment among District of Columbia residents and the strong employment trends reflects the high level of jobs in the District held by residents of the surrounding suburban jurisdictions.

The District of Columbia has a well-educated and highly paid work force.

The federal government accounts for approximately 27% of the employment and private firms provide an additional 68% with local government making up the other 5%.

Other large employers include the many local universities and hospitals.

Large employers include the federal government, many local universities, and hospitals.

Another significant factor in the economy is the leisure and hospitality industry, as Washington, D.C.

remains a popular tourist destination for both national and international travelers.

remains a popular tourist destination for both national and international travelers, absent a pandemic.

Fairfax County, Virginia, which is just across the Potomac River and west from Washington, D.C., is a large, affluent jurisdiction with an estimated population of 1,145,862 as of 2019 including Fairfax City.

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Fairfax County is one of the leading technology centers in the US.

Eight Fortune 500 companies are headquartered in the county and 31 of the largest 100 technology federal contractors in the Washington D.C.

metropolitan area are located in Fairfax County.

The county has over 116.4 million square feet of office space and is one of the largest suburban office markets in the US.

It is a thriving residential as well as business center with 396,501 households.

The county is among the most affluent in the country with average annual household income of $124,831 as of 2019.

Unemployment was 2.1% in December of 2018 according to BLS.

Major companies headquartered in the county, which are also major employers, include Capital One Financial, CSC, Gannett, General Dynamics, Hilton Hotels, Leidos, Sallie Mae, and Inova Health Systems.

In 2018, global construction firm Bechtel moved their corporate headquarters from San Francisco to Fairfax County.

Unemployment was 4.4% in November of 2020 according to the BLS.

Major companies headquartered in the county, which are also major employers, include Capital One Financial, DXC Technology, Gannett, General Dynamics, Hilton Hotels, Leidos, Sallie Mae, and Inova Health Systems.

The county is also home to several federal entities including the CIA, Fort Belvoir and a major facility of the Smithsonian Institution.

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Arlington County, Virginia, has an estimated population of 233,464.

The county is made up of 26 square miles and is situated just west of Washington, D.C., directly across the Potomac River.

There are approximately 102,310 households with a median household income of $112,138 as of July 2017.

There are approximately 107,032 households with a median household income of $120,071 as of December 2019.

Significant private sector employers include Deloitte, Lockheed Martin, Virginia Hospital Center and Marriott International, Inc.

The unemployment rate was just 1.7% at the end of 2018.

This is the lowest unemployment rate in the state of Virginia and compares very favorably to the U.S.

The unemployment rate was just 3.8% in November of 2020.

This is one of the lowest unemployment rates in the state of Virginia and compares very favorably to the U.S.

rate of 11.2%.

The population is highly educated, with about 75% of residents over 25 years of age holding at least a bachelor’s degree as of 2019.

In 2017, Nestle moved their US headquarters to the County.

In 2018, Amazon announced that they would be establishing a major corporate presence in Arlington as well.

Alexandria, Virginia is a city with an estimated population of 157,613 as of 2019.

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There are approximately 70,598 households with a median household income of $100,939 as of 2019.

Alexandria has 4,711 employer establishments, located in the more than 22 million square feet of office space existing in the city as of December 2018.

The unemployment rate was just 1.9% at the end of 2018 according to BLS.

Alexandria has 17,540 employer establishments.

The unemployment rate was 4.9% at November of 2020 according to BLS.

The population is highly educated, with over 63.1% of residents over 25 years of age holding at least a bachelor’s degree as of 2019.

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Median household income, according to 2019 Census Bureau data, is $142,299 which is more than twice the national median household income of $62,843.

The unemployment rate was 3.8% at November of 2020 according to BLS.

The Virginia Employment Commission expects to see employment growth of 1.2% annually through 2024.

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The stadium opened in the summer of 2018 and hosts cultural and community events and concerts as well as Major League Soccer games.

At December 31, 2019 the Bank employed 492 persons on a full time basis (five of whom are executive officers of the Bank), which compares to 470 employees at December 31, 2018.

None of the Bank’s employees are represented by any collective bargaining group and the Bank believes that its employee relations are good.

At December 31, 2019, the Bank provided a benefit program, which included health and dental insurance, a 401(k) plan, life and short and long-term disability insurance, and company paid fitness facilities in various locations.

Additionally, the Company maintains an employee stock purchase plan and a stock-based compensation plan for employees of the Bank who meet certain eligibility requirements.

A performance-based stock compensation plan is also maintained for executive officers meeting certain requirements.

All employees benefit from robust training programs and a tuition assistance program.

Additionally, leadership development programs are offered to employees who meet certain eligibility requirements.

HUMAN CAPITAL RESOURCES AND MANAGEMENT

Human Capital

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At EagleBank, our culture is defined by our Relationships F.I.R.S.T corporate values:

flexible, involved, responsive, strong, and trusted.

We value our employees by investing in a healthy work-life balance, competitive compensation and benefit packages and a vibrant, team-oriented environment centered on professional service and open communication amongst employees.

We strive to build and maintain a high-performing culture and be an “employer of choice” by creating a work environment that attracts and retains outstanding, engaged employees who embody our company mantra of “Relationships FIRST”.

Talent Acquisition and Retention

As of December 31, 2020 we employed 515 full and part time employees across our 30 offices, which includes our branch offices, corporate offices and other operating facilities.

During 2020 we hired 110 employees.

Our voluntary turnover rate was 11% in 2020 and has declined for the past two years.

Diversity and Inclusion

We strive toward having a powerful and diverse team of employees, knowing we are better together with our combined wisdom and intellect.

With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting, and valuing the differences among people.

To accomplish this, we have established a Diversity & Inclusion Advisory Council made up of 16 employee representatives.

Women represent 59% of EagleBank’s employees and racial and ethnic minorities represent 61% of EagleBank’s employees as of December 31, 2020.

In 2020, 53% of our hires were from diverse groups, including women, racial and ethnic minorities, veterans and people with disabilities.

Compensation and Benefits

We provide a competitive compensation and benefits program to help meet the needs of our employees.

In addition to salaries, these programs include annual bonuses, stock awards, a 401(k) Plan with an employer matching contribution, healthcare and insurance benefits, health savings accounts, flexible spending accounts, vacation and sick leave, family leave and an employee assistance program.

We provide pay levels and pay opportunities that are internally fair, externally competitive and cost-effective.

To determine competitive market compensation levels, we use market surveys that report salary data of companies with similar positions, asset size and geographical location.

To further align base pay with experience and individual performance, we annually review our salary structure and ranges to keep pace with changes in the marketplace.

With the support of independent third-party experts in this field, we review the compensation of employees to ensure consistent pay practices by conducting a pay equity analysis.

Our employees are not represented by any collective bargaining group.

Employee Engagement

We regularly collect feedback to better understand and improve the employee experience and identify opportunities to continually strengthen our culture.

In 2020, 66% of employees participated in our annual employee survey.

We host periodic all-employee conference calls to disseminate information and to respond to employee questions.

Learning and Development

We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues.

Our employees receive continuing education courses that are relevant to the banking industry and their job function.

We also offer leadership and customer service training.

These resources provide employees with the skills they need to achieve their career goals, build management skills and become leaders within our Company.

Employees have access to more than 5,000 on-demand learning solutions to help them learn new skills and advance in their career as well as certificate programs built around specific job roles.

We also provide tuition reimbursement to help employees develop their skills and enhance their performance.

Since the onset of the COVID-19 pandemic, we have taken an integrated approach to helping our employees manage their work and personal responsibilities, with a strong focus on employee well-being, health and safety.

Our top priority during the COVID-19 pandemic is to protect the health and safety of our employees and their families, customers and the communities we serve.

We continue to maintain workplace flexibility such as working remotely and providing flexible work schedules to reduce the number of employees on-site each day.

We have implemented enhanced safety and health protocols—including extra cleanings throughout the day, social distancing, installing plexi-glass barriers in high contact areas and providing our employees with personal protective equipment.

We also provided our employees with 40 hours of emergency sick leave for COVID related absences.

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Our business and operations are subject to extensive federal and state governmental regulation and supervision.

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The Company has not elected financial holding company status.

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The Act and the Federal Deposit Insurance Act, or FDIA, require a bank holding company to serve as a source of financial and managerial strength to its bank subsidiaries.

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or (iii) the customer not obtain some other credit, property or service from competitors, except for reasonable requirements to assure the soundness of credit extended.

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Branching and Interstate Banking .

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Brokered Deposits.

A "brokered deposit"

is any deposit that is obtained from or through the mediation or assistance of a deposit broker.

A "brokered deposit" is any deposit that is obtained from or through the mediation or assistance of a deposit broker.

Deposit brokers may attract deposits from individuals and companies throughout the United States and internationally whose deposit decisions are based primarily on obtaining the highest interest rates.

Certain reciprocal deposits of up to the lesser of $5 billion or 20% of an institution’s deposits are excluded from the definition of brokered deposits, where the institution is "well-capitalized"

and has a composite rating of 1 or 2.

Certain reciprocal deposits of up to the lesser of $5 billion or 20% of an institution’s deposits are excluded from the definition of brokered deposits, where the institution is "well-capitalized" and has a composite rating of 1 or 2.

We have used brokered deposits in the past, and we intend to continue to use brokered deposits as one of our funding sources to support future growth.

As of December 31, 2019, brokered deposits represented approximately 25% of our total deposits.

As of December 31, 2020, brokered deposits represented approximately 26.2 % of o ur total deposits.

There are risks associated with using brokered deposits.

In order to continue to maintain our level of brokered deposits, we may be forced to pay higher interest rates than those contemplated by our asset-liability pricing strategy.

In addition, banks that become less than "well-capitalized"

under applicable regulatory capital requirements may be restricted in their ability to accept or renew, or prohibited from accepting or renewing, brokered deposits.

In addition, banks that become less than "well-capitalized" under applicable regulatory capital requirements may be restricted in their ability to accept or renew, or prohibited from accepting or renewing, brokered deposits.

If this funding source becomes more difficult to access, we will have to seek alternative funding sources in order to continue to fund our growth.

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The unavailability of a sufficient volume of brokered deposits could have a material adverse effect on our business, financial condition and results of operations.

In December 2019, the FDIC issued a proposed rule intended to update and modernize the FDIC’s brokered deposit regulations.

The proposed rule, among other things, would revise the definition of “deposit broker” and the accompanying exceptions.

We are evaluating the proposed rule and its potential impact on our operations and results.

In December 2020, the FDIC issued a final rule (effective April 1, 2021) that revises the FDIC’s brokered deposit regulations.

The final rule, among other things, revises the definition of “deposit broker” and the accompanying exceptions.

We are evaluating the final rule and its impact on our operations and results .

Bank Secrecy Act .

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Failure to comply with these sanctions could have serious legal and reputational consequences.

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Capital Adequacy .

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Prior approval to repurchase or redeem CET1 instruments is only required under the Basel III Rules to the extent that a separate legal or regulatory requirement for prior approval applies, such as the restrictions described under “Share Repurchases” above.

The Basel III Rules require institutions requires banks to maintain:

The Basel III Rules require institutions to maintain:

(i) a minimum ratio of CET1 to risk-weighted assets of 4.5%, plus a “capital conservation buffer” of 2.5%, or 7.0%;

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In July 2019, the Federal Reserve and the other federal banking regulators issued a final rule to simplify the regulatory capital treatment of mortgage-servicing assets, certain deferred tax assets arising from temporary differences and investments in the capital of unconsolidated financial institutions.

This final rule, which becomes effective April 1, 2020 (although companies may choose to apply the simplifications as early as January 1, 2020), will result in (i) a change to the individual CET1 deduction threshold for these assets from 10% to 25%, (ii) elimination of the aggregate deduction threshold of 15% for these assets, (iii) assignment of a 250% risk weight for any mortgage-servicing assets or deferred tax assets not deducted from CET1 capital and (iv) assignment of an exposure category risk weight for investments in the capital of unconsolidated financial institutions not deducted from CET1 capital.

This final rule revises the individual CET1 deduction threshold for these assets from 10% to 25%, eliminates the aggregate deduction threshold of 15% for these assets, and assigns a 250% risk weight for any mortgage-servicing assets or deferred tax assets not deducted from CET1 capital .

The Basel III Rules also include, as part of the definition of CET1, a requirement that banking institutions include the amount of additional other comprehensive income, or AOCI, which primarily consists of unrealized gains and losses on available-for-sale securities, which are not required to be treated as other-than-temporary impairment, net of tax) in calculating regulatory capital, unless the institution makes a one-time opt-out election from this provision in connection with the filing of its first regulatory reports after applicability of the Basel III Rules to that institution.

The Company opted out of this requirement and, as such, does not include AOCI in its regulatory capital calculation.

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The Basel III Rules provide for the manner of calculating risk-weighted assets, including the recognition of credit risk mitigation, such as financial collateral and a range of eligible guarantors.

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The 2018 Act also directed the federal banking agencies to develop a “Community Bank Leverage Ratio,” calculated by dividing tangible equity capital by average consolidated total assets.

In October 2019, the federal banking agencies adopted a Community Bank Leverage Ratio of 9%.

In October 2019, the federal banking agencies adopted a Community Bank Leverage Ratio of 9%, which was temporarily lowered to 8% as a result of the COVID-19 pandemic.

If a “qualified community bank,” generally a depository institution or depository institution holding company with consolidated assets of less than $10 billion, has a leverage ratio which exceeds the Community Bank Leverage Ratio, then such institution is considered to have met all generally applicable leverage and risk based capital requirements;

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Although it is uncertain at this time, it is anticipated that some, if not all, of the Basel IV accord may be incorporated into the capital requirements framework applicable to the Bank effective January 1, 2023.

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In 2016, FASB issued the current and expected credit losses model (“CECL”), which became applicable to us on January 1, 2020.

CECL requires financial institutions to estimate and establish a provision for credit losses over the lifetime of the asset, at the origination or the date of acquisition of the asset, as opposed to reserving for incurred or probable losses through the balance sheet date.

Upon implementation, an institution recognizes a one-time cumulative effect adjustment to the allowance for credit losses.

The Federal Reserve and FDIC have adopted a rule providing for an optional three-year phase-in period for the day-one adverse regulatory capital effects upon adopting the standard.

CECL required financial institutions to estimate and establish a provision for expected credit losses over the lifetime of the asset, at the origination or the date of acquisition of the asset, as opposed to reserving for incurred or probable losses through the balance sheet date.

Upon implementation, an institution recognized a one-time cumulative effect adjustment to the ACL.

The federal banking regulators have adopted a rule providing for an optional three-year phase-in period for the day-one adverse regulatory capital effects upon adopting CECL.

In response to the COVID-19 pandemic, the federal banking regulators issued a final rule in March 2020 that provided banking organizations with an alternative option to temporarily delay for two years the estimated impact of the adoption of the CECL methodology on regulatory capital, followed by the three-year phase-in period.

The cumulative amount that is not recognized in regulatory capital will be phased in at 25% per year beginning January 1, 2022.

We have elected to adopt the March 2020 interim final rule.

Prompt Corrective Action .

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The following capital requirements currently apply to the Bank for purposes of Section 38.

Total Risk-Based

Tier 1 Risk-Based

Common Equity

Tangible Equity

Capital Category

Capital Ratio

Tier 1 Capital Ratio

Leverage Ratio

Well Capitalized

10% or greater

8% or greater

6.5% or greater

5% or greater

Adequately Capitalized

8% or greater

6% or greater

4.5% or greater

4% or greater

Undercapitalized

Less than 4.5%

Significantly Undercapitalized

Critically Undercapitalized

Capital Category Total Risk-Based

Capital Ratio Tier 1 Risk-Based

Capital Ratio Common Equity

Tier 1 Capital Ratio Leverage Ratio Tangible Equity

Well Capitalized 10% or greater 8% or greater 6.5% or greater 5% or greater n/a

Adequately Capitalized 8% or greater 6% or greater 4.5% or greater 4% or greater n/a

Undercapitalized Less than 8% Less than 6% Less than 4.5% Less than 4% n/a

Significantly Undercapitalized Less than 6% Less than 4% Less than 3% Less than 3% n/a

Critically Undercapitalized n/a n/a n/a n/a Less than 2%

An institution generally must file a written capital restoration plan which meets specified requirements with the appropriate federal banking agency within 45 days of the date the institution receives notice or is deemed to have notice that it is undercapitalized, significantly undercapitalized or critically undercapitalized.

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In general, good cause requires that adequate capital has been raised and is imminently available for infusion into the institution, except for certain technical requirements, which may delay the infusion for a period of time beyond the 90 day time period.

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Immediately upon becoming undercapitalized, an institution shall become subject to the provisions of Section 38 of the FDIA, which (i) restrict payment of capital distributions and management fees;

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• Permitted FDIC-insured banks to pay interest on business demand deposits.

● Adopted Section 13 of the Act, commonly referred to ask the Volcker Rule, which restricts the ability of institutions and their holding companies to and affiliates to make proprietary investments in securities and to invest in certain covered nonpublic investment vehicles, and to extend credit to such vehicles.

• Adopted Section 13 of the Act, commonly referred to as the Volcker Rule, which restricts the ability of institutions and their holding companies to and affiliates to make proprietary investments in securities and to invest in certain covered nonpublic investment vehicles, and to extend credit to such vehicles.

• Codified the requirement that holding companies and other companies that directly or indirectly control an insured depository institution to serve as a source of financial strength.

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• Permitted national and state banks to establish interstate branches to the same extent as the branch host state allows establishment of in-state branches.

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The 2018 Act includes provisions revising Dodd-Frank Act provisions, including provisions that, among other things:

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These rules include significant regulatory and compliance changes and are expected to have a broad impact on the financial services industry.

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The rule implementing the Dodd-Frank Act requirement that lenders determine whether a consumer has the ability to repay a mortgage loan, established certain minimum requirements for creditors when making ability to pay determinations, and established certain protections from liability for mortgages meeting the definition of “qualified mortgages.” Generally, the rule applies to all consumer-purpose, closed-end loans secured by a dwelling including home-purchase loans, refinances and home equity loans – whether a first or subordinate lien.

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Our business strategy, product offerings, and profitability may change as the rule is interpreted by the regulators and courts.

In December 2020, the CFPB issued a final rule to create a new category of seasoned qualified mortgages (“Seasoned QMs”), which are presumed to meet the ability-to-pay requirements established by the Dodd-Frank Act.

To be considered a Seasoned QM, loans would have to be first-lien, fixed-rate mortgages that have met certain performance requirements over a 36-month seasoning period.

Covered transactions would also have to be held on the creditor’s portfolio during the seasoning period, comply with general restrictions on product features and points and fees and meet certain underwriting requirements (including verification of the consumer’s debt-to-income ratio or residual income at origination).

The rule took effect on February 27, 2021, but compliance is not mandatory until July 1, 2021.

We are continuing to evaluate the impact of the final rule on our operations.

Fair and Responsible Banking.

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Additionally, we must publicly disclose the terms of certain CRA-related agreements.

In September 2020, the Federal Reserve issued an advance notice of proposed rulemaking (“ANPR”) that invites public comment on an approach to modernize the Federal Reserve’s regulations that implement the CRA.

The ANPR seeks feedback on ways to evaluate how banks meet the needs of low- and moderate-income communities and address inequities in credit access.

The comment period for the ANPR ended on February 16, 2021.

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Concentration and Risk Guidance.

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Institutions with over $10.0 billion in total consolidated assets are required to pay a surcharge of 4.5 basis points on their assessment basis, subject to certain adjustments.

This surcharge is expected to apply to the Bank after December 31, 2021.

The FDIC may also impose special assessments from time to time.

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The Bank fully complies with this rule.

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Affiliate Transactions .

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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