What changed in this filing

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Item 1. Business

2023-03-31 compared with 2022-03-31 · 123 added, 246 removed, 481 unchanged (43% of the section changed)

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Our business is conducted primarily through New Peoples Bank, Inc., a Virginia banking corporation (the “Bank”).

a division doing business as New Peoples Financial Services which offers investment services through its broker-dealer relationship with

Infinex Investments, Inc.

The Bank has a division doing business as New Peoples Financial Services which offers investment services through its broker-dealer relationship

with Infinex Investments, Inc.

NPB Insurance Services, Inc.

(NPB Insurance) is a subsidiary of the Bank and generates revenue through the

referral of insurance services.

(“NPB Insurance”) is a subsidiary of the Bank and generates revenue

through the referral of insurance services.

Bank, headquartered in Honaker, Virginia, offers a range of banking and related financial services focused primarily on serving individuals,

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establish a niche in the financial services marketplace where we do business.

provide professionals and small and medium size businesses in our market area with responsive and technologically enabled banking services.

provide professionals and small to medium size businesses in our market area with responsive and technologically enabled banking services.

These services include loans that are priced on a deposit relationship basis, easy access to our decision makers, and quick and innovative

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Another member of the agency is a related party to the Company.

addition to our headquarters in Honaker, Virginia we have 19 full-service branches located in three states:

Virginia - Abingdon, Big

Stone Gap, Bluefield, Bristol (2), Castlewood, Chilhowie, Clintwood, Gate City, Grundy, Haysi, Lebanon, Pounding Mill, Tazewell and Wise;

have 17 full-service branches located in three states:

Virginia - Abingdon, Bluefield, Bristol (2), Castlewood, Clintwood, Gate City,

Grundy, Haysi, Honaker, Lebanon, Pounding Mill, Tazewell and Wise;

West Virginia - Princeton (2);

and Tennessee – Kingsport.

Additionally, we have a loan production office in Boone, North Carolina;

and a former loan production office in Jonesborough, Tennessee which is currently being used as a hub to meet prospective loan customers.

Renovations to a building we purchased in Bristol, Virginia

in 2019, were suspended in 2020 due to impacts of the COVID-19 pandemic.

We resumed these renovations in January 2021 and opened this

new office in the fourth quarter of 2021.

We believe this expansion fits our stated objective of expanding our presence in the Tri-Cities

The Bristol location is within the business district and is allowing us to provide retail consumer, commercial banking

and financial services within Bristol and the surrounding area.

Additionally,

we have a loan production office in Boone, North Carolina.

primary market area consists of southwestern Virginia, southern West Virginia, northeastern Tennessee, and western North Carolina.

Specifically,

we operate in the southwestern Virginia counties of Russell, Scott, Washington, Tazewell, Buchanan, Dickenson, Wise, and Smyth;

southern West Virginia county of Mercer and the northeastern Tennessee county of Sullivan (collectively, the “Tri-State Area”).

In North Carolina, our loan production office is in the county of Watauga.

we operate in the southwestern Virginia counties of Russell, Scott, Washington, Tazewell, Buchanan, Dickenson, and Wise;

in the southern

West Virginia county of Mercer and the northeastern Tennessee county of Sullivan (collectively, the “Tri-State Area”).

North Carolina, our loan production office is in the county of Watauga.

The close proximity and mobile nature of individuals and businesses

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Customers with

internet access can apply for loans, open deposit accounts online, access account balances, make transfers between accounts, enter stop

payment orders, order checks, and use an optional bill paying service.

internet access can apply for loans and credit cards, open deposit accounts online, access account balances, make transfers between accounts,

enter stop payment orders, order checks, and use an optional bill paying service.

file annual, quarterly, and current reports, proxy statements and other information with the Securities and Exchange Commission (the

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and the Bank is not a part of, and is not incorporated into, this report or any other filings the Company makes with the SEC.

outbreak of the novel coronavirus (COVID-19) has adversely impacted and continues to impact certain industries in which the Company's

customers operate and may have impaired their ability to fulfill their outstanding obligations due to continued financial distress.

spread of COVID-19 has caused unprecedented uncertainty, volatility and disruption in the U.S.

and global economy at large.

The Company’s

business is dependent upon the willingness and ability of our employees and customers to conduct banking and other financial transactions.

With the easing of restrictions during the latter part of 2020 and into 2021, and the availability and distribution of vaccines, the

economy has begun to improve as consumer and business spending has rebounded in recent months.

However, the lasting effects are

uncertain as government aid programs and stimulus packages taper, and the ultimate long-term impact of the business shutdowns that occurred

as a result of COVID-19 remains uncertain in many sectors of the economy, such as the travel, hospitality and entertainment industries.

This may cause business sectors that have had better recoveries not to be able to maintain those recoveries in the long term.

the Company has business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will continue

to be effective

help address the impact of the pandemic the Bord of Governors of the Federal Reserve System (Federal Reserve) lowered the federal funds

target rate to a range of between zero and 0.25% during the first quarter of 2020.

Throughout 2021, the Federal Reserve maintained the

targeted federal funds rate at these in response to the pandemic related risks to the economy.

The Company’s earnings and related

cash flows are largely dependent upon net interest income, representing the difference between interest income received on interest-earnings

assets, primarily loans and securities, and the interest paid on interest-bearing liabilities, primarily customer deposits and borrowed

As a result of the significant decline in interest rates and prepayments on higher yielding existing loans, the yield on the total

loan portfolio has decreased.

Additionally, with significant cash inflows realized from a growth in deposits and the forgiveness of Paycheck

Protection Program (PPP) loans, the current yields on funds reinvested into the purchase of securities are lower than existing portfolio

However, the fees arising from the PPP loan program have mitigated some of this decline during 2020 and 2021.

As economic conditions

have started to improve, the Federal Reserve has begun to shift its focus to limiting the inflationary and other potentially adverse

effects of the expiration of government aid programs and stimulus packages.

Since the Company's balance sheet is asset sensitive and

rate sensitive assets reprice more quickly than rate sensitive liabilities, margin compression may be somewhat mitigated during 2022

in the event that the Federal Reserve begins to raise rates.

government also enacted certain fiscal stimulus measures in several phases to assist in counteracting the economic disruptions caused

by the pandemic.

On March 6, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act was enacted to authorize

funding for research and development of vaccines and to allocate money to state and local governments for response and containment measures.

On March 18, 2020, the Families First Coronavirus Response Act was put in place to provide for paid sick/medical leave, no-cost coverage

for testing, expanded unemployment benefits and additional funding to states for the ongoing economic consequences of the pandemic.

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

Among other measures, the CARES

Act provided $349 billion for the PPP administered by the U.S.

Small Business Administration (SBA) to assist qualified small businesses

with certain operational expenses, certain credits for individuals and their dependents against their 2020 personal income tax and expanded

eligibility for unemployment benefits.

This legislation was later amended on April 24, 2020, by the PPP and Healthcare Enhancement Act

which provided an additional $310 billion of funding for PPP loans.

provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by the pandemic.

Under these provisions, loan modifications deemed to be COVID-19 related would not be considered a troubled debt restructuring (TDR)

if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier

of 60 days after the date of the termination of the COVID-19 national emergency or December 31, 2020.

This provision was extended, and

expired on January 1, 2022 under the Consolidated Appropriations Act, 2021.

The banking regulators issued a similar guidance, which also

clarified that a COVID-19 related modification should not be considered a TDR if the borrower was current on payments at the time the

underlying loan modification program was implemented and if the modification is considered to be short-term.

The Company implemented

a short-term modification program to provide relief to consumer and commercial customers following the guidelines of these provisions.

Most modifications fall into the 90 to 180-day range with deferred principal and interest due and payable on the maturity date of the

existing loans.

Specific detail describing these modifications made in relation to the CARES Act can be found in the Loans and Troubled

Debt Restructurings discussions in Notes 6 and 8 to the Consolidated Financial Statements contained in Item 8 of this Form 10-K.

the enactment of these provisions, in December 2020, the Consolidated Appropriations Act, 2021 was enacted to provide additional economic

stimulus to individuals and businesses in response to the extended economic distress caused by the pandemic.

This included additional

stimulus payments to individuals and their dependents, and extension of enhanced unemployment benefits, $284 billion of additional funds

for a second round of PPP loans and a new simplified forgiveness procedure for PPP loans of $150,000 or less.

The Bank was a lender for

the initial SBA program and closed 665 PPP loans totaling $44.5 million.

During the second round of PPP funding, the Bank closed an additional

568 loans, totaling $25.3 million.

the pandemic entered its second year, the Company continued practices implemented at the outset of the pandemic to support the safety

and well-being of the employees, customers and shareholders including the following measures:

pandemic response team continued to meet regularly to address the various aspects of the

pandemic and formulate the Bank’s response to pandemic-related issues that impact customers,

employees and the communities we serve.

2021 annual shareholder meeting was held virtually, as will the 2022 meeting.

· Non-essential

travel and large external gatherings continued to be restricted and mandatory quarantine

periods and testing remained in place for anyone that had known exposure to COVID-19.

· Remote-access

availability continued to enable, where possible, work at home or alternate locations, in

order to segregate employees in operational areas to mitigate possible spread of illness

to an entire department.

services, along with the use of ITMs, internet banking and mobile banking services were encouraged,

during periods where lobby services were temporarily discontinued.

Full lobby services were

reinstituted in late 2021.

the COVID-19 virus mutated, waves of new global infections impacted our local communities, with hospitalizations and deaths reaching

and exceeding levels experienced during the initial spread of the virus.

As with much of the country, a sharp decrease in infections

and hospitalizations has been experienced since the beginning of March, 2022.

While we cannot rule out another wave of infections from

a new variant of the virus, it does appear that there is a sense of normalcy returning to the country that should allow for a return

to a more business as usual function of our operations.

We accept deposits, make consumer and commercial loans, issue drafts, and provide other services customarily offered by a commercial

bank, such as business and personal checking and savings accounts, walk-up tellers, drive-in windows, and 24-hour interactive teller

The Bank is a member of the Federal Reserve System and its deposits are insured under the Federal Deposit Insurance Act (the

FDIA) to the maximum limit.

Generally, we offer a full range of short-to-medium term commercial, 1-4 family residential mortgages and personal loans.

loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including

acquisition of real estate and improvements) and purchase of equipment and machinery.

Consumer loans may include secured and unsecured

loans for financing automobiles, home improvements, education, personal investments and other purposes.

bank, such as business and personal checking and savings accounts, walk-up tellers, drive-in windows, and 24-hour ITMs.

The Bank is a

member of the Federal Reserve System and its deposits are insured under the Federal Deposit Insurance Act (the FDIA) to the maximum limit.

Generally, we offer a full range of short-, medium- and longer-term commercial, 1-4 family residential mortgages and personal loans.

Commercial loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion

(including acquisition of real estate and improvements) and purchase of equipment and machinery.

Consumer loans may include secured and

unsecured loans for financing automobiles, home improvements, education, personal investments and other purposes.

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

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The Bank voluntarily may choose to impose a policy limit on loans to a single borrower that is less than the legal lending limit.

obtain short-to-medium term commercial and personal loans through direct solicitation of business owners and continued business from

existing customers.

obtain short-, medium- and longer-term commercial and personal loans through direct solicitation of business owners and continued business

from existing customers.

Completed loan applications are reviewed by our loan officers.

As part of the application process, information is

obtained concerning the income, financial condition, employment and credit history of the applicant.

If commercial real estate is involved,

information is also obtained concerning cash flow after debt service.

Loan quality is analyzed based on the Bank’s experience and

its credit underwriting guidelines.

As part of the application process, information

is obtained concerning the income, financial condition, employment and credit history of the applicant.

If commercial real estate is

involved, information is also obtained concerning cash flow after debt service.

Loan quality is analyzed based on the Bank’s experience

and its credit underwriting guidelines.

We make commercial loans to qualified businesses in our market area.

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dependent on the success of the business itself.

2020 and 2021, commercial loans also include PPP loans that were made to assist small businesses and non-profit organizations during

the pandemic to cover payroll costs and other permitted expenses.

These loans are fully guaranteed by the SBA.

the collateral for commercial business loans may depreciate over time and cannot be appraised with as much precision as residential real

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processing and wire transfers.

We do not presently anticipate obtaining trust powers, but

we are able to provide similar services through our affiliation with Infinex Investments, Inc.

Additionally, we have initiated programs

of differentiator presentations focusing on such issues as financial literacy and elder abuse.

We believe that these types of programs

assist our local communities and highlight the skills of our financial service providers.

do not presently anticipate obtaining trust powers, but we are able to provide similar services through our affiliation with Infinex

Investments, Inc.

Additionally, we have initiated programs of differentiator presentations focusing on such issues as financial literacy

and elder abuse.

We believe that these types of programs assist our local communities and highlight the skills of our financial service

financial services business is highly competitive.

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Moreover, larger institutions operating in the market area have access to borrowed funds at lower costs than are available to us.

to the pandemic, deposit competition among institutions in our market area also was strong, resulting in the possibility of our paying

above-market rates to attract or retain deposits.

As the pandemic wanes, and funds received into our customers’ deposit accounts

from PPP loans and stimulus payments are drawn down, we anticipate more intense deposit competition to return.

competition among institutions in our market area is strong, resulting in the possibility of our paying above-market rates to attract

or retain deposits.

As the pandemic waned, funds received into our customers’ deposit accounts from PPP loans and stimulus payments

were drawn down.

This decreased customer liquidity, combined with increased interest rates, has resulted in increased competition for

pricing is important, our principal method of countering the competition is service.

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serve the banking needs of our customers while developing personal, hometown relationships with them.

Additionally, we worked to implement

and enhance digital banking services prior to the onset of the pandemic.

As a result, we provide a significant amount of service and

a range of products through multiple channels at reasonable fees.

to a market share report prepared by the Federal Deposit Insurance Corporation (the FDIC), as of June 30, 2021, the most recent date

for which market share information is available, the Bank’s deposits as a percentage of total deposits in its major market areas

were as follows:

Additionally, we continue to add

and enhance digital banking services.

As a result, we provide a significant amount of service and a range of products through multiple

channels at reasonable fees.

to a market share report prepared by the Federal Deposit Insurance Corporation (the “FDIC”), as of June 30, 2022, the most

recent date for which market share information is available, the Bank’s deposits as a percentage of total deposits in its major

market areas were as follows:

of Bristol, VA

of Kingsport, TN

of December 31, 2021, we had 205 total employees, of which 198 were full-time employees.

None of our employees is covered by a collective

bargaining agreement, and we consider relations with employees to be excellent.

- In August 2022, we closed our branch operation in Smyth County, Virginia, and transferred those deposits to our office in Washington

County, Virginia

of December 31, 2022, we had 194 full-time equivalent employees.

None of our employees is covered by a collective bargaining agreement,

and we consider relations with employees to be excellent.

and Regulation

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As a state-chartered commercial bank, the Bank is subject to regulation, supervision and examination by the Virginia

State Corporation Commission’s Bureau of

Financial Institutions (BFI).

As a member of the Federal Reserve System, the Bank is also subject to regulation, supervision and examination

by the Federal Reserve.

Other federal and state laws, including various consumer protection and compliance laws, also govern the activities

State Corporation Commission’s Bureau of Financial Institutions (BFI).

As a member of the Federal Reserve System, the Bank is also

subject to regulation, supervision and examination by the Federal Reserve.

Other federal and state laws, including various consumer protection

and compliance laws, also govern the activities of the Bank.

following description summarizes the most significant federal and state laws applicable to New Peoples and its subsidiaries.

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substantially all the assets of any bank;

direct or indirect ownership or control of any voting shares

any bank if after such acquisition it would own or control more than 5%

the voting shares of such bank (unless it already owns or controls the

of such shares);

direct or indirect ownership or control of any voting shares of any bank if after such acquisition it would own or control more than

5% of the voting shares of such bank (unless it already owns or controls the majority of such shares);

or consolidating with another bank holding company.

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not qualified as FHCs.

Bureau of Financial Institutions (BFI).

As a bank holding

company registered with the Commonwealth of Virginia State Corporation Commission’s BFI, we must provide the BFI with information

concerning our financial condition, operations and management, among other reports required by the BFI.

New Peoples is also examined by

the BFI in addition to its Federal Reserve examinations.

Similar to the BHCA, the Code of Virginia requires that the BFI approve the acquisition

of direct or indirect ownership or control of more than 5% of the voting shares of any Virginia bank or bank holding company like us.

of Financial Institutions.

As a bank holding company registered with BFI, we must provide the BFI with information concerning our

financial condition, operations and management, among other reports required by the BFI.

New Peoples is also examined by the BFI in addition

to its Federal Reserve examinations.

Similar to the BHCA, the Code of Virginia requires that the BFI approve the acquisition of direct

or indirect ownership or control of more than 5% of the voting shares of any Virginia bank or bank holding company like us.

of Dividends.

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With respect to the

Bank, the “prompt corrective action” regulations pursuant to Section 38 of the Federal Deposit Insurance Act (FDIA)

are set forth in the following table:

Bank, the “prompt corrective action” regulations pursuant to Section 38 of the FDIA are set forth in the following table:

Undercapitalized

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a “capital conservation buffer” designed to absorb losses during periods of economic stress.

The phase-in of the

capital conservation buffer requirement began on January 1, 2016, at 0.625% of risk-weighted assets, increasing by the same amount

each year until it was fully implemented at 2.5% on January 1, 2019.

The final provisions for banks with $250 billion or less in

total assets, such as the Bank, are set forth in the following table:

The final provisions for banks

with $250 billion or less in total assets, such as the Bank, are set forth in the following table:

Leverage Ratio

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Conservation Buffer (1)

Tier CET1 Risk Based Capital Ratio with Capital Conservation Buffer

CET1 Risk Based Capital Ratio with Capital Conservation Buffer

Tier 1 Risk Based Capital Ratio

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under the “prompt corrective action” framework.

The CARES Act directed federal banking agencies to adopt interim final rules

to lower the threshold under the CBLR from 9% to 8% and to provide a reasonable grace period for a community bank that falls below the

threshold to regain compliance, in each case until the earlier of the termination date of the national emergency or December 31, 2020.

In April 2020, the federal bank regulatory agencies issued two interim final rules implementing this directive.

One interim final rule

provided that, as of the second quarter 2020, banking organizations with leverage ratios of 8% or greater (and that meet the other existing

qualifying criteria) could elect to use the CBLR framework.

It also established a two-quarter grace period for qualifying community banking

organizations whose leverage ratios fall below the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio

of 7% or greater.

The second interim final rule provided a transition from the temporary 8% CBLR requirement to a 9% CBLR requirement.

It established a minimum CBLR of 8% for the second through fourth quarters of 2020, 8.5% for 2021, and 9% thereafter, and maintained

a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below

the applicable CBLR requirement.

We have not adopted the CBLR framework.

further detail on capital and capital ratios, see discussion contained in Item 7, “Management’s Discussion and Analysis of

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they otherwise might.

Interstate Banking and Branching.

Banks in Virginia may

branch without geographic restriction.

Current federal law authorizes interstate acquisitions of banks and bank holding companies without

geographic limitation.

Bank holding companies may acquire banks in any state without regard to state law except for state laws requiring

a minimum time a bank must be in existence to be acquired.

The Code of Virginia generally permits out of state bank holding companies

or banks to acquire Virginia banks or bank holding companies subject to regulatory approval.

These laws have the effect of increasing

competition in banking markets.

Banking and Branching.

Banks in Virginia may branch without geographic restriction.

Current federal law authorizes interstate acquisitions

of banks and bank holding companies without geographic limitation.

Bank holding companies may acquire banks in any state without regard

to state law except for state laws requiring a minimum time a bank must be in existence to be acquired.

The Code of Virginia generally

permits out of state bank holding companies or banks to acquire Virginia banks or bank holding companies subject to regulatory approval.

These laws have the effect of increasing competition in banking markets.

The commercial banking business is affected not only by general economic conditions but also by the monetary policies of

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The Bank received a rating of “Satisfactory” at its last Community

Reinvestment Act performance evaluation, as of July 22, 2019.

Reinvestment Act performance evaluation, as of August 1, 2022.

May 2022, the federal bank regulatory agencies jointly issued a proposed rule intended to strengthen and modernize the CRA regulatory

If implemented, the rule would, among other things, (i) expand access to credit, investment and basic banking services in

low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide

greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account

for differences in bank size, business model, and local conditions.

Gramm-Leach-Bliley

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to the use of customer information.

To date, Virginia has not done so.

These privacy laws create compliance obligations and potential

liability for the Bank.

The Virginia Consumer Data Protection Act, passed in 2021, became effective January 1, 2023 These

privacy laws create compliance obligations and potential liability for the Bank.

Banking Regulation .

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are intended to allow shareholders to monitor the performance of companies and their directors more easily and effectively.

Sarbanes-Oxley Act generally applies to all domestic companies, such as New Peoples, that file periodic reports with the Securities and

Exchange Commission (SEC) under the Securities Exchange Act of 1934, as amended.

The Sarbanes-Oxley Act includes significant additional

disclosure requirements and expanded corporate governance rules and the SEC has adopted extensive additional disclosures, corporate governance

provisions and other related rules pursuant to it.

New Peoples has expended, and will continue to expend, considerable time and money

in complying with the Sarbanes-Oxley Act.

Sarbanes-Oxley Act generally applies to all domestic companies, such as New Peoples, that file periodic reports with the SEC under the

Securities Exchange Act of 1934, as amended.

The Sarbanes-Oxley Act includes significant additional disclosure requirements and expanded

corporate governance rules and the SEC has adopted extensive additional disclosures, corporate governance provisions and other related

rules pursuant to it.

New Peoples has expended, and will continue to expend, considerable time and money in complying with the Sarbanes-Oxley

Deposit Insurance Corporation.

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to ensure fair access to credit.

For smaller financial institutions, such as the Company and the Bank, the CFPB coordinates its examination

activities through their primary regulators.

Smaller financial institutions, such as the Company and the Bank, continued to be examined primarily

by their primary regulators.

Dodd-Frank Act contains provisions designed to reform mortgage lending, which includes the requirement of additional disclosures for

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The EGRRCPA required the regulators to promulgate rules establishing the new CBLR, as described above.

The Act increased

The EGRRCPA increased

the asset threshold from $1 billion to $3 billion for financial institutions to qualify for a less burdensome 18-month on-site examination

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If the Company fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

bank regulators recently issued a joint rule establishing computer-security incident notification requirements for banking organizations

and their bank service providers, which takes effect on April 1, 2022, with full compliance extended to May 1, 2022.

The rule requires

a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and

no later than 36 hours after the banking organization determines that a cyber incident has occurred.

In addition, the final rule requires

a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has

experienced a computer-security incident that has materially affected or is reasonably likely to materially affect banking organization

customers for four or more hours.

The rule defines computer-security incident as an occurrence that results in actual harm to the confidentiality,

integrity, or availability of an information system or the information that the system processes, stores, or transmits.

bank regulators issued a joint rule, effective in 2022, establishing computer-security incident notification requirements for banking

organizations and their bank service providers.

The rule requires a banking organization to notify its primary federal regulator of any

significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that

a cyber incident has occurred.

In addition, the final rule requires a bank service provider to notify affected banking organization customers

as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or

is reasonably likely to materially affect banking organization customers for four or more hours.

The rule defines computer-security incident

as an occurrence that results in actual harm to the confidentiality, integrity, or availability of an information system or the information

that the system processes, stores, or transmits.

on Incentive Compensation .

The federal bank regulatory agencies have issued comprehensive final guidance on incentive compensation policies

intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness of such

institutions by encouraging excessive risk-taking.

The Interagency Guidance on Sound Incentive Compensation Policies, which covers all

employees that have the ability to materially affect the risk profile of financial institutions, either individually or as part of a

group, is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide incentives

that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be compatible

with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective

oversight by the financial institution’s board of directors.

The federal bank regulatory agencies have issued comprehensive final guidance on incentive compensation

policies intended to ensure that the incentive compensation policies of financial institutions do not undermine the safety and soundness

of such institutions by encouraging excessive risk-taking.

The Interagency Guidance on Sound Incentive Compensation Policies, which covers

all employees that have the ability to materially affect the risk profile of financial institutions, either individually or as part of

a group, is based upon the key principles that a financial institution’s incentive compensation arrangements should (i) provide

incentives that do not encourage risk-taking beyond the institution’s ability to effectively identify and manage risks, (ii) be

compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active

and effective oversight by the financial institution’s board of directors.

Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of financial

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Enforcement actions may be taken against a financial institution if its incentive compensation arrangements or

related risk-management control or

governance processes pose a risk to the institution’s safety and soundness, and the financial institution is not taking prompt

and effective measures to correct the deficiencies.

At December 31, 2021, the Company and the Bank have not been made aware of any instances

of noncompliance with this guidance.

related risk-management control or governance processes pose a risk to the institution’s safety and soundness, and the financial

institution is not taking prompt and effective measures to correct the deficiencies.

As of December 31, 2022, the Company and the Bank

have not been made aware of any instances of noncompliance with this guidance.

Banks and other depository institutions also are subject to other numerous consumer-oriented laws and regulations.

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that has been recently adopted.

Unresolved Staff Comments

Staff Comments

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