What changed in this filing

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Item 1. Business

2023-03-01 compared with 2022-03-01 · 132 added, 127 removed, 521 unchanged (33% of the section changed)

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and not to any of our subsidiaries.

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

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

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

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It commenced banking operations on July 20, 1998.

The Bank currently operates seventeen branch offices:

The Bank currently operates sixteen branch offices:

six in Suburban Maryland;

five located in the District of Columbia;

and six in Northern Virginia.

and five in Northern Virginia.

The Bank also has five lending centers and utilizes various digital capabilities, including remote deposit services and mobile banking services.

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

Over its twenty-four year history, the Company has grown primarily through organic growth, but also has completed two whole bank acquisitions.

Over its twenty-five year history, the Company has grown primarily through organic growth, but also has completed two whole bank acquisitions.

On August 31, 2008, the Company acquired Fidelity & Trust Financial Corporation (“Fidelity”) and on October 31, 2014 acquired Virginia Heritage Bank (“Virginia Heritage”).

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Description of Services.

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

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;

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and (viii) residential mortgage loans.

The Bank recently announced that it plans to cease originating residential mortgages for sale in the first quarter of 2023 (See Note 26 of the Financial Statements for further details).

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.

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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 ("ADC") lending.

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

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

(i) home equity loans and lines of credit that are structured with an interest only draw period followed either by a balloon maturity or a fully amortized repayment schedule;

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In certain limited instances, residential mortgage first deed of trust loans are packaged along with a line of credit to the same borrower for sale in the secondary market by the Bank.

The Bank plans to cease originating residential mortgages for sale in the first quarter of 2023 (See Note 26 of the Consolidated Financial Statements for further details).

The Company believes this decision is appropriate given the challenged nature of the business and the uncertainty of maintaining or increasing the volume or percentage of revenue or net income that has previously been produced by the residential mortgage business.

The Bank has also developed significant expertise and commitment as a Small Business Administration (“SBA”) lender.

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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 ("MAP").

In 2020, in response to the coronavirus ("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 intended to provide a bridge to small and mid-size businesses until business activity could return to normal.

The Bank participated in all phases to date of the PPP.

At December 31, 2020 the PPP loan balances totaled $454.8 million, and declined to $3.3 million at December 31, 2022 as a result of the forgiveness process, and in the second quarter of 2021, the Company's sale of a portion of the PPP loan portfolio.

The Company originates multifamily Federal Housing Administration ("FHA") loans through the Department of Housing and Urban Development’s or HUD’s Multifamily Accelerated Program ("MAP").

The Company securitizes these loans through the Government National Mortgage Association ("Ginnie Mae") MBS I program and sells the resulting securities in the open market to authorized dealers in the normal course of business and periodically bundles and sells the servicing rights.

The Bank's lending activities carry the risk that the borrowers will be unable to perform on their obligations.

As such, interest rate policies of the Board of Governors of the Federal Reserve System and general economic conditions, nationally and in the Bank’s primary market area, could have a significant impact on the Bank’s and the Company’s results of operations.

As such, interest rate policies of the Board of Governors of the Federal Reserve System ("FRB") and general economic conditions, nationally and in the Bank’s primary market area, could have a significant impact on the Bank’s and the Company’s results of operations.

To the extent that economic conditions deteriorate, business and individual borrowers may be less able to meet their obligations to the Bank in full, in a timely manner, resulting in decreased earnings or losses to the Bank.

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Plans for mitigating inherent risks in managing loan assets include:

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.

carefully designing and enforcing loan policies and procedures, evaluating each borrower’s business plan during the underwriting process, 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 may be established based upon credit and/or collateral risks on an individual loan basis.

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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.

At December 31, 2021, owner occupied commercial real estate and construction – C&I (owner occupied) represent approximately 18% of the loan portfolio while non-owner occupied commercial real estate and real estate construction represented approximately 61% of the loan portfolio.

The combined owner and non-owner occupied and commercial real estate loans represent approximately 79% of the loan portfolio.

At December 31, 2022, owner occupied commercial real estate and construction – C&I (owner occupied) represented approximately 16% of the loan portfolio while non-owner occupied commercial real estate and real estate construction represented approximately 63% of the loan portfolio.

The combined owner and non-owner occupied and commercial real estate loans represented approximately 80% of the loan portfolio.

Real estate also serves as collateral for loans made for other purposes, resulting in 81% of all loans being secured or partially secured by real estate.

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

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

The Bank has historically originated residential mortgage loans primarily as a correspondent lender.

Activity in the residential mortgage loan market is highly sensitive to changes in interest rates and product availability.

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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.

As described above, the Bank plans to cease originating residential mortgages for sale in the first quarter of 2023 (See Note 26 of the Consolidated Financial Statements for further details).

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

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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 either the Board of Directors or the Credit Oversight Committee.

These policies are analyzed periodically by management, and the policies are reviewed and re-approved annually by either the Board of Directors or a designated committee thereof.

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.

Policy standards are often stated in mandatory terms, such as “shall” or “must”, but these provisions are subject to exceptions.

Loan policy standards are often stated in mandatory terms, such as “shall” or “must”, but these provisions are subject to exceptions.

Policy requires that loan value not exceed a percentage of “market value” or “fair value” based upon appraisals or evaluations obtained in the ordinary course of the Bank’s underwriting practices.

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Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer.

Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Prior to an advance, to justify the draw requisition, the Bank or its contractor inspects the project to determine that the work has been completed.

Commercial permanent loans are generally secured by improved real property, which is generating income in the normal course of operation.

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A portion of the ADC portfolio, both speculative and non-speculative, includes loan funded interest reserves at origination.

ADC loans that provide for the use of interest reserves represent approximately 64.0% of the outstanding ADC loan portfolio at December 31, 2021.

ADC loans that provide for the use of interest reserves represented approximately 56.1% of the outstanding ADC loan portfolio at December 31, 2022.

The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including:

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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.

As of December 31, 2021, 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.

The Washington, D.C.

metropolitan area real estate market has been relatively stable;

however, certain segments, including suburban offices, have exhibited higher than normal vacancy and experienced concessions in specific submarkets.

As of December 31, 2022, notwithstanding increased supply of units, multi-family commercial real estate leasing in the Bank’s market area has held up relatively well, particularly for well-located close-in projects.

Overall, commercial real estate values have generally held up well, but we continue to be cautious of the cap rates at which some assets are trading.

As part of its overall risk assessments, management carefully reviews the Bank’s loan portfolio and general economic and market conditions on a regular basis and will continue to adjust both quantitative and qualitative reserve factors as necessary.

Deposit services include business and personal checking accounts, NOW accounts, tiered savings and money market account and time deposits with varying maturity structures and customer options.

Deposit services include business and personal checking accounts, Negotiable Order of Withdrawal ("NOW") accounts, tiered savings and money market accounts and time deposits with varying maturity structures and customer options.

A complete individual retirement account program is available.

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 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 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, lockbox, remote deposit capture, account reconciliation services, merchant card services, safety deposit boxes and Automated Clearing House origination.

Other deposit services include cash management services, business sweep accounts, lockbox, remote deposit capture, account reconciliation services, merchant card services, safe 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 ("FHLB").

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

The Company’s assets also include equity investments in the form of common stock of two local banking companies.

These are categorized as Other Assets and not accounted for in the Fixed Income Securities tables.

The investment

securities portfolio provides the following objectives:

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 highly rated 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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Investment maturities are generally limited to ten to fifteen years, except as specifically approved by the Asset Liability Committee ("ALCO") and mortgage-backed pass-through securities, which may have final stated maturities of 30 years, with average lives generally not to exceed eight years.

The Company and Bank have formalized an asset and liability management process and have a standing ALCO consisting of senior management who report to the Board.

The Company and Bank have formalized an asset and liability management process and have a standing ALCO consisting of senior management overseen by the Board of Directors.

The ALCO operates under established policies and practices and a Committee Charter, which practices are updated and re-approved annually.

A typical ALCO meeting includes discussion of current economic conditions and balance sheet and other strategies, including interest rate trends and, the current balance sheet and earnings position, comparisons to budget, cash flow estimates, liquidity positions, liquidity stress tests (quarterly), and funding alternatives as necessary, interest rate risk position (monthly), including derivative positions, capital positions of the Company and Bank, reviews (including independent reviews) of the investment portfolio of the Bank and Company, and the approval of investment transactions.

A typical ALCO meeting includes discussion of current economic conditions and balance sheet and other strategies, including interest rate trends and, the current balance sheet and earnings position, comparisons to budget, cash flow estimates, liquidity positions, liquidity stress tests (monthly), and funding alternatives as necessary, interest rate risk position (monthly), including derivative positions, capital positions of the Company and Bank, reviews (including independent reviews) of the investment portfolio of the Bank and Company and the approval of investment transactions.

Additionally, monthly ALCO meetings may include reports and analysis of outside firms to enhance the Committee’s knowledge and understanding of various financial matters.

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A weekly conference call is scheduled to bring added attention primarily to shorter term cash flow estimates and interest rate matters.

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 noninterest revenue sources.

The development of the Company’s customer base has benefited from building full relationships that include 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.

Listed below are statistics on the primary geographic areas in which the Company operates published by the U.S.

Census Bureau.

Census Bureau publishes the Economic Census annually to reflect the ever-changing geographic areas.

The Census Bureau uses the economic census data to benchmark annual, quarterly, and monthly estimates.

The 2023 Economic Census ("Economic Census") for all geographic areas was published in January 2023.

The primary market area of the Bank is the Washington, D.C.

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Total employment in the region is approximately 3.3 million per the 2023 Bureau of Labor Statistics ("BLS") report.

The region has added 135,000 jobs in the year 2021, going from a 6.5% unemployment rate to a 3.7% unemployment rate from the end of 2020 to the end of 2021 due substantially to the economic recovery from COVID-19 as vaccines and treatments became widely available.

The unemployment rate has improved since 2021, going from a 3.7% unemployment rate to a 3.4% unemployment rate from the end of 2021 to the end of 2022 due substantially to the continued economic recovery from COVID-19.

The Washington D.C.

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According to the U.S.

Census, approximately 58.1% of the County’s residents in 2020 hold college or advanced degrees, placing the

population of Montgomery County among the most educated in the nation.

Economic Census, approximately 57.9% of the County’s residents in 2023 hold college or advanced degrees, placing

the population of Montgomery County among the most educated in the nation.

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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In 2023, the county supported 342,253 households with median income of $94,507.

The unemployment rate in the county was 6.0% in November of 2021 according to the BLS.

The unemployment rate in the county was 4.00% in November of 2022 according to 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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According to survey data from the latest U.S.

Census, the 2020 population of the District of Columbia is 717,189, up from 601,766 in 2010.

Economic Census, the 2023 population of the District of Columbia is 679,031, down from 717,189 in 2020.

Median household income in 2023 was $104,110, above the national median of $73,503.

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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, absent a pandemic.

Fairfax County and Fairfax City, Virginia, are just across the Potomac River and west from Washington, D.C., and are a large, affluent jurisdiction with a population of 1,181,739 as of 2020.

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

Fairfax County and Fairfax City, Virginia, are just across the Potomac River and west from Washington, D.C.

and are a large, affluent jurisdiction with a population of 1,170,569 as of 2023.

Fairfax County covers about 395 square miles.

Fairfax County and the City are one of the leading technology centers in the US, and are a thriving residential as well as business center with 427,455 households.

Fairfax County and Fairfax City are one of the leading technology centers in the US, and are a thriving residential as well as business center with 417,425 households.

The county and city are among the most affluent in the country with median annual household income of $269,257 as of 2023, placing them 4th in the nation for counties with a population over 100,000.

Unemployment was 2.3% in November of 2021 according to the BLS.

Unemployment was 2.50% in November of 2022 according to BLS.

The population is highly educated, with about 62.1% of residents over 25 years of age holding at least a bachelor’s degree as of 2023.

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.

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

Arlington County, Virginia, has a population of 236,413 as of 2023.

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 117,133 households with a median household income of $122,703 as of December 2020, placing it 7th in the nation for counties with a population over 100,000.

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

There are approximately 110,094 households with a median household income of $131,529 as of November 2022, placing it 8th in the nation for counties with a population over 100,000.

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

The unemployment rate was just 2.10% in November of 2022.

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and boasts a population of 439,045.

Median household income, according to 2020 Census Bureau data, is $144,770 which is more than twice the national median household income of $66,010 and highest of any county in the nation (regardless of population).

There are 138,819 households in the County.

Median household income, according to 2023 Economic Census Bureau data, is $166,963, which is more than twice the national median household income of $73,503 and highest of any county in the nation (regardless of population).

There are 142,692 households in Loudoun County.

The unemployment rate was 2.50% at November of 2022 according to BLS.

The population is highly educated, with about 61.4% of residents over 25 years of age holding at least a bachelor’s degree as of

The population is highly educated, with about 62.2% of residents over 25 years of age holding at least a

bachelor’s degree as of 2023.

The major private employers in the county include United Airlines, Inc., Raytheon Company, Loudoun Hospital Center and Swissport U.S.A., Inc.

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Effective July 1, 2015, the Bank entered into a multi-faceted support agreement with George Mason University (“George Mason”), the Commonwealth of Virginia’s largest public research university.

The agreement provides for significant educational support, and a strategic alliance including the Bank obtaining the naming rights to a multi-purpose sports and entertainment venue formerly known as the Patriot Center, now known as “EagleBank Arena” in Fairfax, VA for up to a 20 year term.

Under the agreement, the Bank pays George Mason an annual fee to be used for scholarships, internships, overall educational and athletic support and beautification efforts.

Effective March 12, 2018, the Bank entered into a five year sponsorship of the Major League Soccer club D.C.

EagleBank has been designated the official bank of D.C.

United and the “EagleBank Club” at Audi Field, the soccer club’s stadium in southwest Washington D.C., provides premium seating for fans and patrons of the Bank.

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

The Bank faces significant competition in originating and retaining loans and attracting deposits as the Washington, D.C.

market area has a high concentration of large and regional banks based outside the area, one large locally based bank that operates nationwide, numerous community banks and several large credit unions.

Although some consolidation has occurred in the market in the past few years, the Bank continues to compete with other community banks, savings and loan associations, credit unions, mortgage companies and finance companies, as well as other kinds of financial institutions and enterprises, such as securities firms, insurance companies, savings associations, private lenders and nontraditional competitors such as fintech companies and internet-based lenders, depositories and payment systems.

The Bank’s most direct competition for deposits comes from large and regional banks based outside the Washington D,C, market area, all of which have substantially greater financial resources than the Bank.

Although some consolidation has occurred in the market in the past few years, the Bank continues to compete with other community banks, savings and loan associations, credit unions and finance companies, as well as other kinds of financial institutions and enterprises, such as securities firms, insurance companies, savings associations, private lenders and nontraditional competitors such as fintech companies and internet-based lenders, depositories and payment systems.

The Bank’s most direct competition for deposits comes from large and regional banks based outside the Washington D.C.

market area, all of which have substantially greater financial resources than the Bank.

Among the advantages that many of these large institutions have over the Bank are their ability to finance extensive advertising campaigns, maintain extensive branch networks, make larger technology investments and to directly offer certain services, such as international banking and trust services, which are not offered directly by the Bank.

The Bank faces direct competition for loans from each of these institutions described above as well as from mortgage companies, on-line lenders and other loan origination firms.

The Bank faces direct competition for loans from each of these institutions described above as well as from on-line lenders and other loan origination firms.

Further, the greater capitalization of the larger institutions headquartered out-of-state allows for higher lending limits than the Bank, although the Bank’s current lending limit is quite favorable and able to accommodate the credit needs of most businesses in the Washington D.C.

metropolitan area, which distinguishes it from most community banks in the market area.

Some of these competitors have other advantages, such as tax exemption in the case of credit unions, and to some extent lesser regulation in the case of mortgage companies, finance companies, and many nontraditional competitors.

Some of these competitors have other advantages, such as tax exemption in the case of credit unions and, to some extent, lesser regulation in the case of finance companies and many nontraditional competitors.

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, regulation of all financial firms was heightened, although new legislation in 2018 did amend some of the prior law and eased bank regulatory pressures, prompting some de novo activity but mostly driving further consolidation.

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Talent Acquisition and Retention

As of December 31, 2021 we employed 507 full and part time employees across our 21 locations, which includes our branch offices, corporate offices, lending and other operating facilities.

As of December 31, 2022, we employed 496 full and part time employees across our 20 locations, which includes our branch offices, corporate offices and lending and other operating facilities.

During 2022, we hired 105 employees.

Our voluntary turnover rate was 16% in 2021, up from 11% in 2020, but in line with the rate in 2019.

voluntary turnover rate was 17%, 16% and 11%, respectively in 2022, 2021 and 2020.

None of our employees are represented by a union or subject to a collective bargaining agreement.

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To accomplish this, we have established a Diversity & Inclusion Advisory Council made up of 14 employee representatives.

Women represent 59% of EagleBank’s employees and racial and ethnic minorities represent 62% of EagleBank’s employees as of December 31, 2021.

Women represented 60% of EagleBank’s employees and racial and ethnic minorities represented 62% of EagleBank’s employees as of December 31, 2022.

In 2022, 77% of our hires were from diverse groups, including women, racial and ethnic minorities, veterans and people with disabilities.

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Employee Engagement

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

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

In our last employee survey, conducted in 2022, nearly 65% of employees participated.

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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 have implemented enhanced safety and health protocols and provided our employees with 40 hours of emergency sick leave for COVID related absences.

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

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This summary is not intended to be an exhaustive description of the statutes or regulations applicable to our business.

Supervision, regulation, and examination of the Company by the regulatory agencies are intended primarily for the protection of depositors and the Deposit Insurance Fund, rather than our shareholders.

Supervision, regulation, and examination of the Company by the regulatory agencies are intended primarily for the protection of depositors and the Deposit Insurance Fund ("DIF"), rather than our shareholders.

The Company .

The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended ("the Act") and is subject to regulation and supervision by the Federal Reserve Board.

The Act and other federal laws subject bank holding companies to restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and actions, including regulatory enforcement actions for violations of laws and regulations and unsafe and unsound banking practices.

As a bank holding company, the Company is required to file with the Federal Reserve Board an annual report and such other additional information as the Federal Reserve Board may require pursuant to the Act.

The Federal Reserve Board may also examine the Company and each of its subsidiaries.

The Company is subject to risk-based capital requirements adopted by the Federal Reserve Board, which are substantially identical to those applicable to the Bank, and which are described below.

The Act requires approval of the Federal Reserve Board for, among other things, a bank holding company’s direct or indirect acquisition of control of more than five percent (5%) of the voting shares, or substantially all the assets, of any bank or the merger or consolidation by a bank holding company with another bank holding company.

The Act also generally permits the acquisition by a bank holding company of control, or substantially all of the assets of, any bank located in a state other than the home state of the bank holding company, except where the bank has not been in existence for the minimum period of time required by state law;

but if the bank is at least 5 years old, the Federal Reserve Board may approve the acquisition.

The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended ("BHC Act") and is subject to regulation and supervision by the FRB.

The BHC Act and other federal laws subject bank holding companies to restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and actions, including regulatory enforcement actions for violations of laws and regulations and unsafe and

unsound banking practices.

As a bank holding company, the Company is required to file with the FRB an annual report and such other additional information as the FRB may require pursuant to the BHC Act.

The FRB may also examine the Company and each of its subsidiaries.

The Company is subject to risk-based capital requirements adopted by the FRB, which are substantially identical to those applicable to the Bank, and which are described below.

The BHC Act requires approval of the FRB for, among other things, a bank holding company’s direct or indirect acquisition of control of more than five percent (5%) of the voting shares, or substantially all the assets, of any bank or the merger or consolidation by a bank holding company with another bank holding company.

The BHC Act also generally permits the acquisition by a bank holding company of control, or substantially all of the assets, of any bank located in a state other than the home state of the bank holding company, except where the bank has not been in existence for the minimum period of time required by state law;

but if the bank is at least 5 years old, the FRB may approve the acquisition.

With certain limited exceptions, a bank holding company is prohibited from acquiring control of any voting shares of any company which is not a bank or bank holding company and from engaging directly or indirectly in any activity other than banking or managing or controlling banks or furnishing services to or performing service for its authorized subsidiaries.

A bank holding company may, however, engage in, or acquire an interest in a company that engages in, activities which the Federal Reserve Board has determined by order or regulation to be so closely related to banking or managing or controlling banks as to be properly incident thereto.

In making such a determination, the Federal Reserve Board is required to consider whether the performance of such activities can reasonably be expected to produce benefits to the public, such as convenience, increased competition or gains in efficiency, which outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.

Some of the activities that the Federal Reserve Board has determined by regulation to be closely related to banking include making or servicing loans, performing certain data processing services, acting as a fiduciary or investment or financial advisor, and making investments in corporations or projects designed primarily to promote community welfare.

The Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of it or any of its bank subsidiaries.

A bank holding company may, however, engage in, or acquire an interest in a company that engages in, activities which the FRB has determined by order or regulation to be so closely related to banking or managing or controlling banks as to be properly incident thereto.

In making such a determination, the FRB is required to consider whether the performance of such activities can reasonably be expected to produce benefits to the public, such as convenience, increased competition or gains in efficiency, which outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.

Some of the activities that the FRB has determined by regulation to be closely related to banking include making or servicing loans, performing certain data processing services, acting as a fiduciary or investment or financial advisor and making investments in corporations or projects designed primarily to promote community welfare.

The FRB may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

The Gramm Leach-Bliley Act of 1999 ("GLB Act") allows a bank holding company or other company to certify its status as a financial holding company, which would allow such company to engage in activities that are financial in nature, that are incidental to such activities or are complementary to such activities.

The GLB Act enumerates certain activities that are deemed financial in nature, such as underwriting insurance or acting as an insurance principal, agent or broker, underwriting, dealing in or making markets in securities and engaging in merchant banking under certain restrictions.

It also authorizes the Federal Reserve Board to determine by regulation what other activities are financial in nature, or incidental or complementary thereto.

It also authorizes the FRB to determine by regulation what other activities are financial in nature or incidental or complementary thereto.

The Company has not elected financial holding company status.

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

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

As a result of a bank holding company's source of strength obligation, a bank holding company may be required to provide funds to a bank subsidiary in the form of subordinated capital or other instruments which qualify as capital under bank regulatory rules.

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Share Repurchases .

A bank holding company is generally required to give the Federal Reserve prior written notice of any purchase or redemption of its own then outstanding common stock if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12

months, is equal to 10% or more of the company's consolidated net worth.

The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve order or directive, or any condition imposed by, or written agreement with, the Federal Reserve.

The Federal Reserve has adopted an exception to this approval requirement for well-capitalized bank holding companies that meet certain conditions.

A bank holding company is generally required to give the FRB prior written notice of any purchase or redemption of its own then outstanding common stock if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company's consolidated net worth.

The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice or would violate any law, regulation, FRB order or directive or any condition imposed by, or written agreement with, the FRB.

The FRB has adopted an exception to this approval requirement for well-capitalized bank holding companies that meet certain conditions.

Redemptions of equity in the form of preferred stock are generally subject to a prior approval requirement, and the capital conservation buffer requirement can also restrict the Company’s ability to engage in repurchases of its regulatory capital instruments as described below under “Capital Adequacy.”

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For example, state law restrictions include limitations and restrictions relating to indemnification of directors, distributions to shareholders, transactions involving directors, officers or interested shareholders, maintenance of books, records, minutes, borrowing and the observance of corporate formalities.

The Bank is a Maryland chartered commercial bank and a member of the Federal Reserve System, and a state member bank, whose accounts are insured by the Deposit Insurance Fund of the FDIC up to the maximum legal limits of the FDIC.

The Bank is subject to regulation, supervision and regular examination by the State of Maryland Office of Financial Regulation and the Federal Reserve Board.

The Bank is a Maryland chartered commercial bank and a member of the Federal Reserve and a state member bank, whose accounts are insured by the DIF of the FDIC up to the maximum legal limits of the FDIC.

The Bank is subject to regulation, supervision and regular examination by the State of Maryland Office of Financial Regulation and the FRB.

The regulations of these various agencies govern most aspects of the Bank’s business, including required reserves against deposits, loans, investments, mergers and acquisitions, borrowing, dividends and location and number of branch offices.

The laws and regulations governing the Bank generally have been promulgated to protect depositors and the Deposit Insurance Fund, and not for the purpose of protecting shareholders.

The laws and regulations governing the Bank generally have been promulgated to protect depositors and the DIF and not for the purpose of protecting shareholders.

Commercial banks, savings and loan associations and credit unions are generally able to engage in interstate banking or acquisition activities.

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In general, the difference between the interest paid by a bank on its deposits and its other borrowings and the interest received by a bank on loans extended to its customers and on securities held in its investment portfolio constitutes the major portion of the Bank’s earnings.

Thus, the earnings and growth of the Bank are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board, which regulates the supply of money through various means including open market dealings in United States government securities.

Thus, the earnings and growth of the Bank are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the FRB, which regulates the supply of money through various means including open market dealings in United States government securities.

The nature and timing of changes in such policies and their impact on the Bank cannot be predicted.

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Such interstate bank mergers and branch acquisitions are also subject to the nationwide and statewide insured deposit concentration limitations described in the Riegle-Neal Act.

Washington, D.C., Maryland and Virginia have each enacted laws, which permit interstate acquisitions of banks and bank branches.

Washington, D.C., Maryland and Virginia have each enacted laws that permit interstate acquisitions of banks and bank branches.

The Dodd-Frank Act authorizes national and state banks to establish de novo branches in other states to the same extent as a bank chartered by that state would be permitted to branch.

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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, 2021, brokered deposits represented approximately 26.5% of o ur total deposits.

As of December 31, 2022, brokered deposits represented approximately 26% of our 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 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.

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.

This may include increasing our reliance on FHLB borrowing, attempting to attract additional non-brokered deposits, and selling loans.

This may include increasing our reliance on FHLB borrowing, attempting to attract additional non-brokered deposits and selling loans or investment securities.

There can be no assurance that brokered deposits will be available, or if available, sufficient to support our continued growth.

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The United States has imposed economic sanctions that affect transactions with designated foreign countries, foreign nationals and others, which are administered by the U.S.

Treasury Department’s Office of Foreign Assets Control, or OFAC.

Treasury Department’s Office of Foreign Assets Control ("OFAC").

The OFAC-administered sanctions targeting countries take many different forms.

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Capital Adequacy .

The Federal Reserve Board and the other federal banking agencies have adopted risk-based and leverage capital adequacy requirements, pursuant to which they assess the adequacy of capital in examining and supervising banks and bank holding companies and in analyzing bank regulatory applications.

The FRB and the other federal banking agencies have adopted risk-based and leverage capital adequacy requirements, pursuant to which they assess the adequacy of capital in examining and supervising banks and bank holding companies and in analyzing bank regulatory applications.

Risk-based capital requirements determine the adequacy of capital based on the risk inherent in various classes of assets and off-balance sheet items.

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The federal banking agencies have adopted rules, referred to as the Basel III Rules, to implement the framework for strengthening international capital and liquidity regulation adopted by the Basel Committee on Banking Supervision, or Basel III.

The Basel III framework, among other things, (i) introduced the concept of common equity tier one capital, or CET1, (ii) required that most adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, (iii) expanded the scope of the adjustments to capital that may be made as compared to existing regulations, and (iv) specified that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements.

Under the Basel III Rules, repurchase or redemption of Additional Tier 1 and Tier 2 capital instruments requires prior approval of the appropriate federal banking agency, which in our case is the Federal Reserve for both the Company and the Bank.

The Basel III framework, among other things, (i) introduced the concept of common equity tier one capital ("CET1");

(ii) required that most adjustments to regulatory capital measures be made to CET1 and not to the other components of capital;

(iii) expanded the scope of the adjustments to capital that may be made as compared to existing regulations;

and (iv) specified that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements.

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.

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

(ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the

capital conservation buffer, or 8.5%;

(ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0% plus the capital conservation buffer or 8.5%;

(iii) a minimum ratio of Total (Tier 1 plus Tier 2) capital to risk-weighted assets of 8.0% plus the capital conservation buffer or 10.5%;

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In respect of institutions with high concentrations of loans in areas deemed to be higher risk, or during periods of significant economic stress, regulators may require an institution to maintain a higher level of capital and/or to maintain more stringent risk management measures than those required by these regulations.

In December 2017, the Basel Committee on Banking Supervision published the last version of the Basel III accord, generally referred to as “Basel IV.” The Basel Committee stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets, or RWA, which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios;

constraining the use of internally modeled approaches;

and complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor.

In December 2017, the Basel Committee on Banking Supervision published the last version of the Basel III accord, generally referred to as “Basel IV.” The Basel Committee on Banking Supervision stated that a key objective of the revisions incorporated into the framework is to reduce excessive variability of risk-weighted assets ("RWA"), which will be accomplished by enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios, constraining the use of internally modeled approaches and complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor.

Although it is uncertain at this time, it is anticipated that some, if not all, of the Basel IV revisions may be incorporated into the capital requirements framework applicable to the Company and the Bank.

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

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

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.

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An institution that fails to submit a written capital restoration plan within the requisite period, including any required performance guaranty, or fails in any material respect to implement a capital restoration plan, shall be subject to the restrictions in Section 38 of the FDIA that are applicable to significantly undercapitalized institutions.

A “critically undercapitalized institution” is required to be placed in conservatorship or receivership within 90 days, unless the FDIC formally determines that forbearance from such action would better protect the Deposit Insurance Fund.

Unless the FDIC or other appropriate federal banking agency makes specific further findings and certifies that the institution is viable and is not expected to fail, an institution that remains critically undercapitalized during the fourth calendar quarter after the date it became critically undercapitalized must be placed in receivership.

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and (v) require prior approval of certain expansion proposals.

The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the Deposit Insurance Fund, subject in certain cases to specified procedures.

The appropriate federal banking agency for an undercapitalized institution also may take any number of discretionary supervisory actions if the agency determines that any of these actions is necessary to resolve the problems of the institution at the least possible long-term cost to the DIF, subject in certain cases to specified procedures.

These discretionary supervisory actions include:

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(vii) there is any violation of law or unsafe or unsound practice or condition that is likely to cause insolvency or substantial dissipation of assets or earnings, weaken the institution’s condition or otherwise seriously prejudice the interests of depositors or the insurance fund;

(viii) an institution ceases to be

(viii) an institution ceases to be insured;

(ix) the institution is undercapitalized and has no reasonable prospect that it will become adequately capitalized, fails to become adequately capitalized when required to do so or fails to submit or materially implement a capital restoration plan;

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The following provisions are considered to be of greatest significance to the Company:

• Expanded the authority of the Federal Reserve Board to examine bank holding companies and their subsidiaries, including insured depository institutions.

• Expanded the authority of the FRB to examine bank holding companies and their subsidiaries, including insured depository institutions.

• Required a bank holding company to be well capitalized and well managed to receive approval of an interstate bank acquisition.

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• Created the Financial Stability Oversight Council with authority to identify institutions and practices that might pose a systemic risk.

• Introduced additional corporate governance and executive compensation requirements on companies subject to the Securities Exchange Act of 1934, as amended, or Exchange Act.

• Introduced additional corporate governance and executive compensation requirements on companies subject to the Securities Exchange Act of 1934, as amended ("Exchange Act").

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

• 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.

• Adopted Section 13 of the BHC Act, commonly referred to as the Volcker Rule, which restricts the ability of institutions and their holding companies and affiliates to make proprietary investments in securities, 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 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.

The "Economic Growth, Regulatory Relief, and Consumer Protection Act," or the 2018 Act includes provisions revising Dodd-Frank Act provisions, that among other things:

The Economic Growth, Regulatory Relief, and Consumer Protection Act ("2018 Act") includes provisions revising Dodd-Frank Act provisions, that among other things:

(i) exempt banks with less than $10 billion in assets from the ability-to-repay requirements for certain qualified residential mortgage loans;

(ii) exempt certain transactions valued at less than $400,000 in rural areas from appraisal requirements;

(iii) exempt banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages from the expanded data disclosures required under the Home Mortgage Disclosure Act, or HMDA;

(iii) exempt banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages from the expanded data disclosures required under the Home Mortgage Disclosure Act ("HMDA");

(iv) amend the SAFE Mortgage Licensing Act by providing registered mortgage loan originators in good standing with 120 days of transitional authority to originate loans when moving from a federal depository institution to a non-depository institution or across state lines;

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Federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied.

business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads and could expose the Company to additional costs, including increased compliance costs.

Certain aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads and could expose the Company to additional costs, including increased compliance costs.

These changes also may require significant management attention and resources to make any necessary changes to operations to comply and could have an adverse effect on our business, financial condition and results of operations.

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The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal laws and regulations.

As an institution with over $10 billion in total consolidated assets, the Bank became subject to increased regulation and supervision by the FRB and the FDIC in 2022.

As of December 31, 2022, our total assets were $11.2 billion.

As an institution with over $10 billion in total consolidated assets, the Bank will become subject to increased regulation and supervision by the Federal Reserve and the FDIC starting in 2022.

Therefore, the Bank will be subject to ongoing (rather than periodic) supervision, targeted examinations, more frequent loan portfolio reviews and other enhanced supervision.

In particular, the FRB and the FDIC will focus on the soundness of the Bank’s risk management framework and capabilities, given the greater complexity and impact of the Bank’s risks as a larger institution.

The Bank will also be required to provide information to the CFPB on a quarterly basis, and be subject to periodic examinations by the CFPB focused on compliance with consumer laws and regulations, as a banking organization over $10 billion in total assets.

Therefore, the Bank is subject to ongoing (rather than periodic) supervision, targeted examinations, more frequent loan portfolio reviews and

other enhanced supervision.

In particular, the FRB and the FDIC focus on the soundness of the Bank’s risk management framework and capabilities, given the greater complexity and impact of the Bank’s risks as a larger institution.

The Bank is also required to provide information to the CFPB on a quarterly basis, and is subject to periodic examinations by the CFPB focused on compliance with consumer laws and regulations, as a banking organization over $10 billion in total assets.

The changes resulting from the Dodd-Frank Act and CFPB rulemakings and enforcement policies may impact the profitability of our business activities, limit our ability to make, or the desirability of making, certain types of loans, including non-qualified mortgage loans, require us to change our business practices, impose upon us more stringent capital, liquidity and leverage ratio requirements or otherwise adversely affect our business or profitability.

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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.

We recently announced that we will cease originating residential mortgages for sale in the first quarter of 2023 (see Note 26 of the Consolidated Financial Statements for further details).

While we believe that this decision is appropriate given the challenged nature of the business, we cannot be certain that we will be able to maintain or increase the volume or percentage of revenue or net income previously produced by the residential mortgage business.

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.

The rule does not cover, among other things, home equity lines of credit or other open-end credit;

The rule does not cover, among other things:

home equity lines of credit or other open-end credit;

temporary or “bridge” loans with a term of 12 months or less, such as a loan to finance the initial construction of a dwelling;

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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.

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).

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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.

In September 2020, the FRB issued an advance notice of proposed rulemaking (“ANPR”) that invites public comment on an approach to modernize the FRB’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.

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or (ii) total reported commercial real estate loans, excluding loans secured by owner-occupied commercial real estate, representing 300% or more of the institution’s total risk-based capital and the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months, are identified as having potential commercial real estate concentration risk.

As of December 31, 2022, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 347.9% of consolidated risk based capital;

however, growth in that segment over the past 36 months at 1.2% did not exceed the 50% threshold laid out in the regulatory guidance.

Construction, land and land development loans represented 62% of consolidated risk based capital as of December 31, 2022.

Institutions, which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios, and may be required to hold higher levels of capital.

FDIC Insurance Premiums .

Deposits at the Bank are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC and the Bank is subject to deposit insurance assessments to maintain the DIF.

Deposits at the Bank are insured up to applicable limits by the DIF of the FDIC and the Bank is subject to deposit insurance assessments to maintain the DIF.

Deposit insurance assessments are based on average total assets minus average tangible equity.

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The Dodd-Frank Act permanently increased the maximum deposit insurance amount for banks, savings institutions and credit unions to $250 thousand per depositor.

The Dodd-Frank Act also broadened the base for calculating FDIC insurance assessments.

The Dodd-Frank Act also broadened the base for calculating FDIC insurance

Assessments are now based on a financial institution’s average consolidated total assets less tangible equity capital.

The Dodd-Frank Act required the FDIC to increase the reserve ratio of the Deposit Insurance Fund to 1.35% of insured deposits and eliminated the requirement that the FDIC pay dividends to insured depository institutions when the reserve ratio exceeds certain thresholds.

The Dodd-Frank Act required the FDIC to increase the reserve ratio of the DIF to 1.35% of insured deposits and eliminated the requirement that the FDIC pay dividends to insured depository institutions when the reserve ratio exceeds certain thresholds.

Increased Focus on Lending to Members of the Military .

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The SCRA requires a bank to cap the interest rate at 6% for any loan to a member of the military who goes on active duty after taking out the loan.

It also limits the actions the bank can take when a servicemember is in foreclosure.

It also limits the actions the bank can take when a service member is in foreclosure.

The Bank fully complies with this rule.

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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