What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-02-26 · 66 added, 81 removed, 273 unchanged (35% of the section changed)

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GABC) financial holding company based in Jasper, Indiana.

German American, through its banking subsidiary German American Bank, operates 73 banking offices in 20 contiguous southern Indiana counties and eight counties in Kentucky.

German American, through its banking subsidiary German American Bank, operates 77 banking offices in 19 contiguous southern Indiana counties and 14 counties in Kentucky.

The Company also owns an investment brokerage subsidiary (German American Investment Services, Inc.) and a full line property and casualty insurance agency (German American Insurance, Inc.).

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Retail Brokerage Jasper, IN

Effective April 1, 2018, the legal name of German American Bank was changed from German American Bancorp to its current name.

The new name corresponds with the trade name already being used by the banking subsidiary and promotes further distinction in nomenclature between the banking subsidiary and the bank holding company, German American Bancorp, Inc.

Business Developments

On January 1, 2022, the Company completed the acquisition of Citizens Union Bancorp of Shelbyville, Inc.

(“CUB”) through the merger of CUB with and into the Company.

Immediately following completion of the CUB holding company merger, CUB’s subsidiary bank, Citizen Union Bank of Shelbyville, Inc., was merged with and into the Company’s subsidiary bank, German American Bank.

CUB, headquartered in Shelbyville, Kentucky, operated 15 retail banking offices located in Shelby, Jefferson, Spencer, Bullitt, Oldham, Owen, Gallatin and Hardin counties in Kentucky through Citizens Union Bank of Shelbyville, Inc.

As of the closing of the transaction, CUB had total assets of approximately $1.109 billion, total loans of approximately $683.8 million, and total deposits of approximately $930.5 million.

The Company issued approximately 2.9 million shares of its common stock, and paid approximately $50.8 million in cash, in exchange for all of the issued and outstanding shares of common stock of CUB.

For further information regarding this merger and acquisition transaction, see Note 20 (Subsequent Events) in the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 20 is incorporated into this Item 1 by reference.

During 2021, the Company commenced an operating optimization plan, pursuant to which its banking subsidiary, German American Bank, would consolidate seven branch offices and implement various staff reductions during 2021.

In making its decision to consolidate these branches, which were generally integrated with other nearby bank branches, the Company considered, among other factors, the operating costs of the branches, certain physical limitations impacting the bank facilities, and their proximity to other branch locations.

In addition, the Company’s evaluation of the branch consolidations and the reductions in staff also took into consideration the numbers and types of transactions being conducted by its customers and the increased usage of online and mobile banking.

Also as part of the operating optimization plan, in September 2021, German American Bank sold its two branches located in Lexington, Kentucky to The Home Savings and Loan Company of Kenton, Ohio (“HSLC”).

HSLC assumed approximately $17.6 million in total deposits and purchased approximately $17.8 million in total loans as part of the sale.

On July 1, 2019, the Company completed the acquisition of Citizens First Corporation (“Citizens First”) through the merger of Citizens First with and into the Company.

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in Barren, Hart, Simpson and Warren Counties in Kentucky.

As of the closing of the transaction, Citizens First had total assets of approximately $456.0 million, total loans of approximately $364.6 million, and total deposits

of approximately $370.8 million.

As of the closing of the transaction, Citizens First had total assets of approximately $456.0 million, total loans of approximately $364.6 million, and total deposits of approximately $370.8 million.

The Company issued approximately 1.7 million shares of its common stock, and paid approximately $15.5 million in cash, in exchange for all of the issued and outstanding shares of common stock of Citizens First.

On October 15, 2018, the Company completed the acquisition of First Security, Inc.

("First Security") through the merger of First Security with and into the Company.

Immediately following completion of the First Security holding company merger, First Security’s subsidiary bank, First Security Bank, Inc., was merged with and into the Company’s subsidiary bank, German American Bank.

First Security, based in Owensboro, Kentucky, operated 11 retail banking offices, through First Security Bank, Inc., in Owensboro, Bowling Green, Franklin and Lexington, Kentucky and in Evansville and Newburgh, Indiana.

As of the closing of the transaction, First Security had total assets of approximately $553.2 million, total loans of approximately $390.1 million, and total deposits of approximately $424.4 million.

The Company issued approximately 2.0 million shares of its common stock, and paid approximately $31.2 million in cash, in exchange for all of the issued and outstanding shares of common stock of First Security and in cancellation of all outstanding options to acquire First Security common stock.

On May 18, 2018, German American Bank completed the acquisition of five branch locations of First Financial Bancorp (formerly branch locations of Mainsource Financial Group, Inc.

prior to its merger with First Financial Bancorp on April 1, 2018) and certain related assets, and the assumption by German American Bank of certain related liabilities.

Four of the branches are located in Columbus, Indiana, and one in Greensburg, Indiana.

German American Bank acquired approximately $175.7 million in deposits and approximately $116.3 million in loans associated with the five bank branches.

The premium paid on deposits by German American Bank was approximately $7.4 million.

The premium was subject to adjustment to reflect increases or decreases in the deposit balances during the six month period following the closing date.

In January 2019, an adjustment of approximately $0.1 million in additional premium was paid by German American Bank as a result of the change in deposits during the six month measurement period.

German American Bank also had the ability, under certain circumstances, to put loans back to First Financial Bancorp’s bank subsidiary during such six month period.

During the fourth quarter of 2018, approximately $1.3 million of loans were put back by German American Bank.

For further information regarding these merger and acquisition transactions, see Note 18 (Business Combinations) in the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 18 is incorporated into this Item 1 by reference.

For further information regarding this merger and acquisition transaction, see Note 18 (Business Combinations) in the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 18 is incorporated into this Item 1 by reference.

The Company expects to continue to evaluate opportunities to expand its business through opening of new banking, insurance or trust, brokerage and financial planning offices, and through acquisitions of other banks, bank branches, portfolios of loans or other assets, and other financial-service-related businesses and assets in the future.

Office Locations

The map below illustrates the locations of the Company’s 74 retail and commercial banking, insurance and investment offices as of February 15, 2021.

The map below illustrates the locations of the Company’s 78 retail and commercial banking, insurance and investment offices.

The industries in which the Company operates are highly competitive.

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There are numerous alternative providers (including national providers that advertise extensively and provide their services via e-mail, direct mail, telephone and the Internet) for the insurance products and services offered by German American Insurance, Inc., trust and financial planning services offered by the Bank and the brokerage products and financial planning services offered by German American Investment Services, Inc.

In addition, financial technology, or “FinTech,” companies are emerging in key areas of banking.

In addition, financial technology, or “FinTech,” companies continue to emerge in key areas of banking.

Many of these competitors have substantially greater resources than the Company.

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We have long been committed to comprehensive and competitive compensation and benefits programs as we recognize that we operate in an intensely competitive environment for employees.

Retention of skilled and highly trained employees is critical to our strategy of being a trusted resource to our communities and strengthening relationships with our customers through our employees.

Retention of skilled and highly trained employees is critical to our strategy of being a trusted resource to our communities and customers.

Furthering our philosophy to attract and retain talented and motivated employees who will continue to advance our purpose and contribute to our overall success, our compensation and benefits programs include:

medical, dental and vision plans;

a 401(k) deferred compensation and profit sharing plan, with matching contribution, which covers substantially all employees;

flexible spending and health savings accounts, life insurance and a robust employee assistance program that covers an array of work-life benefits that supports employee well-being.

a 401(k) deferred compensation plan, with matching contribution, which covers substantially all employees;

flexible spending and health savings accounts, competitive paid time off (PTO) programs, life insurance and a robust employee assistance program that covers an array of work-life benefits that supports employee well-being.

In addition, we offer supplemental benefits such as accident, critical illness and hospital indemnity policies, quarterly performance incentives, discounted bank services and an Employee Stock Purchase Plan.

We also invest in our employees’ future by sponsoring and prioritizing continued education throughout the Company’s employee ranks.

Full-time and part-time employees are eligible for tuition reimbursement for work-related courses taken through a community college or university.

Full-time and part-time employees are eligible for our education assistance program which covers tuition and textbooks for work-related courses taken through a community college or university.

Employees are also able to participate in on-the-job learning, classroom learning, mentoring and other internal and external career development programs.

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The health and well-being of our employees and customers will always be our top priority.

This, of course, came to the forefront as COVID-19 began to spread exponentially in early 2020.

In response, we took swift steps by implementing a work-from-home policy for over 40% of our employees, prioritizing drive-thru and appointment banking, and educating our customers on a multitude of electronic delivery options, such as mobile banking, online banking, bill pay, and treasury management.

This, of course, came to the forefront as COVID-19 began to spread exponentially in early 2020 and continued throughout 2021.

In response, we have continued to adapt and adjust our Pandemic Response Plans within the Company to protect the health of our employees, customers and communities.

Those plans included business continuity remote work options, support of vaccination through different vaccination incentive programs, paid leave, and more.

Regulation and Supervision

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Although banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the conservation buffer will technically comply with minimum capital requirements under the new rules, such institutions will face limitations on the payment of dividends, common stock repurchases and discretionary cash payments to executive officers based on the amount of the shortfall.

On December 21, 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to, among other things:

In December 2018, federal banking agencies issued a joint final rule to revise their regulatory capital rules to, among other things:

(i) address implementation of the “current expected credit losses” (“CECL”) accounting standard under GAAP;

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The Company adopted the CECL standard on January 1, 2020.

In an action related to the CARES Act (see “- COVID-19, The CARES Act and Related Legislative and Regulatory Actions” below), federal banking regulators issued, on March 27, 2020, an interim final rule that allows banking organizations to mitigate the estimated cumulative regulatory capital effects of CECL for up to two years.

In an action related to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), in September 2020, federal banking regulators adopted a final rule that allowed banking organizations to mitigate the estimated cumulative regulatory capital effects of CECL for up to two years.

This two-year delay is in addition to the three-year phase-in period discussed above.

The Company has elected to adopt the option provided by the interim final rule,

which will largely delay the effects of CECL on its regulatory capital through December 31, 2021.

Beginning on January 1, 2022, we will be required to phase in 25% of the previously deferred estimated capital impact of CECL, with an additional 25% to be phased in at the beginning of each subsequent year until fully phased in by January 1, 2025.

Under the interim final rule, the amount of adjustments to regulatory capital that can be deferred until the phase-in period includes both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ended December 31, 2021.

By adopting this option, the Company was able to largely delay the effects of CECL on its regulatory capital through

December 31, 2021.

Beginning on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital.

An additional 25% is to be phased in at the beginning of each subsequent year until fully phased in by January 1, 2025.

Under this 2020 rule, the amount of adjustments to regulatory capital that could be deferred until the phase-in period included both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ended December 31, 2021.

For information about the one-time cumulative adjustment to our allowance for credit losses and changes in the allowance during 2020, please see Note 1 (Summary of Significant Accounting Policies) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report.

On April 9, 2020, federal banking regulators issued an interim final rule to modify the Basel III regulatory capital rules applicable to banking organizations to allow those organizations participating in the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to neutralize the regulatory capital effects of participating in the program.

Specifically, the agencies have clarified that banking organizations, including the Company and the Bank, are permitted to assign a zero percent risk weight to PPP loans for purposes of determining risk-weighted assets and risk-based capital ratios.

Additionally, in order to facilitate use of the Paycheck Protection Program Liquidity Facility, which provides Federal Reserve Bank loans to eligible financial institutions such as the Bank to fund PPP loans (the “PPPL Facility”), in order to facilitate use of the PPPL Facility, the agencies further clarified that, for purposes of determining leverage ratios, a banking organization is permitted to exclude from total average assets PPP loans that have been pledged as collateral for a PPPL Facility.

See “- COVID-19, The CARES Act and Related Regulatory Actions” below for additional information.

In April 2020, federal banking regulators modified the Basel III regulatory capital rules applicable to banking organizations to allow those organizations participating in the Paycheck Protection Program (“PPP”) established under the CARES Act to neutralize the regulatory capital effects of participating in the program by allowing PPP loans to receive a zero percent risk weight for purposes of determining risk-weighted assets and the CET1, Tier 1 and Total Risk-Based capital ratios.

At December 31, 2021, risk-weighted assets included $19.5 million of PPP loans (net of deferred fees) at a zero risk weight.

See “- COVID-19 and Related Legislative and Regulatory Actions” below for additional information on the PPP.

Prompt Corrective Action Classifications

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Since the Bank was well-capitalized throughout 2021, the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits.

The Bank had $1.7 million of such brokered deposits at December 31, 2020.

The Bank had no brokered deposits at December 31, 2021.

Further, a depository institution or its holding company that is not well-capitalized will generally not be successful in seeking regulatory approvals that may be necessary in connection with any plan or agreement to expand its business, such as through the acquisition (by merger or consolidation, purchase or otherwise) of the stock, business or properties of other banks or other companies.

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As of December 31, 2021, the Bank exceeded the requirements contained in the applicable regulations, policies and directives pertaining to capital adequacy to be classified as “well-capitalized”, and is unaware of any material violation or alleged violation of these regulations, policies or directives.

tabular presentation of our regulatory capital ratios and those of the Bank as of December 31, 2020, see Note 8 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 8 is incorporated herein by reference.

On October 29, 2019, the FRB, the FDIC and the Office of the Comptroller of the Currency (the “OCC”) adopted a final rule to simplify the regulatory capital requirements for eligible community banks and holding companies that opt-in to the community bank leverage ratio framework (“CBLR framework”), as required by Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018 (the “Economic Growth Act”).

For a tabular presentation of our regulatory capital ratios and those of the Bank as of December 31, 2021, see Note 8 (Shareholders’ Equity) of the Notes to the Consolidated Financial Statements included in Item 8 of this Report, which Note 8 is incorporated herein by reference.

In October 2019, the FRB, the FDIC and the Office of the Comptroller of the Currency (the “OCC”) adopted a final rule to simplify the regulatory capital requirements for eligible community banks and holding companies that opt-in to the community bank leverage ratio framework (“CBLR framework”), as required by Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018 (the “Economic Growth Act”).

Under the final rule, which became effective as of January 1, 2020, community banks and holding companies (which would include the Bank and the Company) that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, would be eligible to opt-in to the CBLR framework.

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If this election is made, the Company and the Bank would satisfy their regulatory capital standards by calculating and reporting the community bank leverage ratio instead of the risk-weighted capital ratios and minimum leverage ratio currently required and would be deemed “well-capitalized” under the FRB’s and FDIC’s Prompt Corrective Action rules so long as they continue to satisfy the qualifying criteria of the CBLR framework.

Pursuant to the CARES Act, federal banking regulators issued interim final rules in April 2020 lowering the community bank leverage ratio threshold to 8% beginning in the second quarter and for the remainder of calendar year 2020, and to 8.5% for calendar year 2021, until it returns to 9% thereafter.

The interim final rules, which were adopted as final, without any changes, on October 9, 2020, also established a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 100 basis points below the applicable community bank leverage ratio.

Notwithstanding these changes, the Company intends to continue with the existing layered ratio structure.

Despite this option, the Company intends to continue with its use of the existing layered ratio structure.

Under either framework, the Company and the Bank would be considered well-capitalized under the applicable guidelines.

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Accordingly, if the Bank were to experience financial difficulties, it is possible that the applicable regulatory authority could determine that the Bank would be engaged in an unsafe or unsound practice if the Bank were to pay dividends and could prohibit the Bank from doing so, even if availability existed for dividends under the statutory formula.

Further, the Bank is subject to affiliate transaction restrictions under federal laws, which limit certain transactions generally involving the transfer of funds by a subsidiary bank or its subsidiaries to its parent corporation or any nonbank subsidiary of its parent corporation, whether in the form of loans, extensions of credit, investments, or asset purchases, or otherwise undertaking

certain obligations on behalf of such affiliates.

Furthermore, covered transactions that are loans and extensions of credit must be secured within specified amounts.

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The Dodd-Frank Act (in addition to the regulatory changes discussed elsewhere in this “Regulation and Supervision” discussion and below under “Federal Deposit Insurance Premiums and Assessments”) made a variety of changes that affect the business and affairs of the Company and the Bank in other ways.

For instance, the Dodd-Frank Act (or agency regulations adopted and implemented (or to be adopted and implemented) under the Dodd-Frank Act) altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions;

For instance, the Dodd-Frank Act (or agency regulations adopted and

implemented (or to be adopted and implemented) under the Dodd-Frank Act) altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions;

restricted certain proprietary trading and hedge fund and private equity activities of banks and their affiliates;

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During its last examination, a rating of “satisfactory” was received by the Bank.

In accordance with the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers

to nonaffiliated third parties.

These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party.

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The Bank Secrecy Act (the “BSA”) requires financial institutions to develop policies, procedures, and practices to prevent and deter money laundering, and mandates that every bank have a written, board-approved program that is reasonably designed to assure and monitor compliance with the BSA.

In addition, banks are required to adopt a customer identification program as part of its BSA compliance program, and are required to file Suspicious Activity Reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

In addition, banks are required to adopt a customer identification program as part of its

BSA compliance program, and are required to file Suspicious Activity Reports when they detect certain known or suspected violations of federal law or suspicious transactions related to a money laundering activity or a violation of the BSA.

The Bank is also required to (1) identify and verify, subject to certain exceptions, the identity of the beneficial owners of all legal entity customers at the time a new account is opened, and (2) include, in its anti-money laundering program, risk-based procedures for conducting ongoing customer due diligence, which must include procedures that:

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The FDIC assigns a banking institution to one of two categories based on asset size.

As an institution with under $10 billion in

assets, the Bank falls into the “Established Small Institution” category.

As an institution with under $10 billion in assets, the Bank falls into the “Established Small Institution” category.

This category has three sub-categories based on supervisory ratings designed to measure risk (the FDIC’s “CAMELS Composite” ratings).

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In addition, each FDIC insured institution has been required to pay to the FDIC an assessment on the institution’s total assets less tangible capital in order to fund interest payments on bonds issued by the Financing Corporation, an agency of the federal government established to recapitalize the predecessor to the Savings Association Insurance Fund.

With the Financing Corporation having made its final bond payment in September 2019, the Bank made its last assessment payment, which was equal to a per annum rate of 0.12 basis points, in March 2019.

COVID-19, The CARES Act and Related Legislative and Regulatory Actions

With the Financing

Corporation having made its final bond payment in September 2019, the Bank made its last assessment payment, which was equal to a per annum rate of 0.12 basis points, in March 2019.

COVID-19 and Related Legislative and Regulatory Actions

On January 30, 2020, the World Health Organization (“WHO”) announced that the outbreak of the novel coronavirus disease 2019 (COVID-19) constituted a public health emergency of international concern.

On March 11, 2020, WHO declared COVID-19 to be a global pandemic and, on March 13, 2020, the President of the United States declared the COVID-19 outbreak a national emergency.

The health concerns relating to the COVID-19 outbreak and related governmental actions taken to reduce the spread of the virus have significantly impacted the global economy (including the states and local economies in which we operate), disrupted supply chains, lowered equity market valuations, and created significant volatility and disruption in financial markets.

The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns.

Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending.

While quarantine and lock-down orders have been lifted and vaccination efforts are underway, COVID-19 has not yet been contained and commercial activity has not yet returned to the levels existing prior to the pandemic outbreak.

As a result, the demand for the Company’s products and services has been, and will continue to be, significantly impacted.

The CARES Act and the Paycheck Protection Program .

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law, providing an approximately $2 trillion stimulus package that included direct payments to individual taxpayers, economic stimulus to significantly impacted industry sectors, emergency funding for hospitals and providers, small business loans, increased unemployment benefits, and a variety of tax incentives.

For small businesses, eligible nonprofits and certain others, the CARES Act established a Paycheck Protection Program (“PPP”), which is administered by the Small Business Administration (“SBA”).

On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act was enacted.

Among other things, this legislation amends the initial CARES Act program by raising the appropriation level for PPP loans from $349 billion to $670 billion.

The PPP was further modified on June 5, 2020 with the adoption of the Paycheck Protection Program Flexibility Act (the “Flexibility Act”), which extended the maturity date for PPP loans from two years to five years for loans disbursed on or after the date of enactment of the Flexibility Act.

For PPP loans disbursed prior to such enactment, the Flexibility Act permits the borrower and lender to mutually agree to extend the term of the loan to five years.

The vast majority of the Company’s PPP loans have two-year maturities.

PPP loans earn interest at a fixed rate of 1% and are fully guaranteed by the U.S.

The Company anticipates that the majority of the PPP loans will ultimately be forgiven by the SBA in accordance with the terms of the program.

As discussed below under “The 2021 Consolidated Appropriations Act,” an additional $284 billion in funding has been made available under the PPP, with authority to make loans under the program being extended through March 31, 2021.

During 2021, the Bank plans to offer additional PPP loans as authorized under the CAA.

In the two years since then, the pandemic has dramatically impacted global health and the economy, including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor shortfalls, supply chain challenges, regulatory challenges, and market volatility.

In response, the U.S.

Congress, through the enactment of the CARES Act in March 2020, and the federal banking agencies, though rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide emergency economic relief measures including, among others, the following:

Paycheck Protection Program .

The CARES Act established the PPP, which is administered by the Small Business Administration (“SBA”), to fund payroll and operational costs of eligible businesses, organizations and self-employed persons during the pandemic.

The Company actively participated in assisting its customers with PPP funding during all phases of the program.

The vast majority of the Company’s PPP loans made in 2020 have two-year maturities, while the loans made in 2021 have five-year maturities.

Loans under the program earn interest at a fixed rate of 1 percent.

As of December 31, 2021, the Company had $19.5 million of PPP loans outstanding compared to the December 31, 2020 balance of $182.0 million.

The Company will continue to monitor legislative, regulatory, and supervisory developments related to the PPP.

However, it anticipates that the majority of the Company's remaining PPP loans will be forgiven by the SBA in accordance with the terms of the program.

Loan Modifications and Troubled Debt Restructures .

On April 7, 2020, the FRB, the Office of the Comptroller of the Currency (the “OCC”), and the Federal Deposit Insurance Corporation (the “FDIC” and, together with the FRB and OCC, the “federal banking regulators”) issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutions generally do not need to categorize COVID-19-related modifications as troubled debt restructurings and that the agencies will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings.

Similarly, under the CARES Act, provisions were included that allow for loan modifications to not be classified as TDRs if certain criteria are met.

This TDR exemption, which was set to expire on December 31, 2020, was extended under the CAA to the earlier of (i) 60 days after the national emergency concerning the COVID-19 outbreak terminates, and (ii) January 1, 2022.

The CARES Act, as amended by the 2021 Consolidated Appropriations Act, which was signed into law on December 27, 2020 (the “CAA”), allowed banks to suspend requirements under GAAP, through January 1, 2022, for certain loan modifications related to the COVID-19 pandemic.

The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 or offer other borrower friendly options.

In accordance with such guidance, the Company made various short-term modifications to borrowers who were current and otherwise not past due.

These included short-term, 180 days or less, modifications in the form of payment deferrals.

Regulatory Capital .

The CARES Act, the CAA and certain actions by federal banking regulators have resulted in modifications to, or delays in implementation of, various regulatory capital rules applicable to banking organizations.

The CARES Act, the CAA, and certain actions by federal banking regulators resulted in modifications to, or delays in implementation of, various regulatory capital rules applicable to banking organizations.

See “Capital Requirements” above for additional information.

The 2021 Consolidated Appropriations Act .

On December 27, 2020, a $900 billion COVID-19 relief package, as passed by the U.S.

Congress, was signed into law as part of the 2021 Consolidated Appropriations Act (“CAA”).

In addition to providing direct stimulus payments to certain individuals, an increase in unemployment insurance benefits, an extension of the eviction moratorium, relief to the healthcare industry, and additional aid to various other businesses, the COVID-19-related provisions of the CAA also (i) established an additional $284 billion in funding for the PPP through March 31, 2021, and (ii) further suspended the exception for loan modifications to not be classified as TDRs if certain criteria are met.

Internet Address;

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Other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement include but not limited to :

• the impact on our business, operations, financial condition, liquidity and results of operations arising out of the COVID-19 pandemic;

• the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates;

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• potential deterioration in general economic conditions, either nationally or locally, resulting in, among other things, credit quality deterioration;

• the severity and duration of the COVID-19 pandemic and its impact on general economic and financial market conditions and our business, results of operations and financial condition;

• capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities;

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• the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends;

• with respect to the merger with CUB, the possibility that the anticipated benefits of the transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies, unexpected credit quality problems of the acquired loans or other assets, or unexpected attrition of the customer base of the acquired institution or branches.

Such statements reflect our views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy and liquidity of the Company.

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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