What changed in this filing

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Item 1. Business

2022-03-04 compared with 2021-03-11 · 28 added, 15 removed, 709 unchanged (6% of the section changed)

2 unchanged sentences

Annandale, Virginia;

Atlanta, Georgia;

Chicago, Illinois;

20 unchanged sentences

SBA PPP Loans

As a part of the Company’s efforts to assist its customers during the COVID-19 pandemic, the Company maintained 1,585 SBA PPP loans of $135.7 million as of December 31, 2020.

SBA launched the PPP to provide a direct incentive for small businesses to keep their workers on the payroll in response to the COVID-19 pandemic.

The SBA guarantees 100% of the PPP loans made to eligible borrowers, and the loans are eligible to be forgiven if certain conditions are met, at which point the SBA will make payments to the Bank for the forgiven amounts.

These loans are included in the Company’s commercial and industrial (“C&I”) portfolio and have an interest rate of 1%.

The substantial majority of the PPP loans in our portfolio have a maturity of two years.

These loans are included in the C&I portfolio and have an interest rate of 1%.

The substantial majority of the PPP loans funded during the year ended December 31, 2020 in the Company’s portfolio have a maturity of two years.

On January 13, 2021, the SBA began accepting applications for second draw PPP loans.

SBA PPP loans funded during the year ended December 31, 2021 have a maturity of five years.

As of December 31, 2021, the Company had 354 SBA PPP loans totaling $65.3 million, net of unamortized deferred fees and costs and recognized $182.7 million in forgiveness.

For additional information on loans, see “Loans Held-For-Investment and Allowance for Loan Losses” included in Item 7 and Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

2 unchanged sentences

generally accepted accounting principles (“GAAP”) requirements and regulatory determinations for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a TDR from March 1, 2020, through the earlier of 60 days after the date of the COVID-19 National Emergency comes to an end or December 31, 2020.

On April 7, 2020, the federal banking regulators also issued the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customer Affected by the Coronavirus (Revised)” (the “Interagency Statement”) to encourage banks to work prudently with borrowers and describe the banking regulators’ interpretation of how accounting rules for TDR apply to certain modifications related to the COVID-19 pandemic.

On April 7, 2020, the federal banking regulators also issued the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)” (the “Interagency Statement”) to encourage banks to work prudently with borrowers and describe the banking regulators’ interpretation of how accounting rules for TDR apply to certain modifications related to the COVID-19 pandemic.

On December 27, 2020, the Economic Aid Act was signed into law, which extended the applicable period of the temporary relief from TDRs under the CARES Act to the earlier of 60 days after the date of the COVID-19 National Emergency comes to an end or January 1, 2022.

As of December 31, 2020, the Company’s loans under modified terms related to the COVID-19 pandemic, including payment deferments and interest only payments, totaled $36.1 million.

As of December 31, 2021 and 2020, total loans under modified terms related to the COVID-19 pandemic, including payment deferments and interest only payments, were none and $36.1 million, respectively.

All of these loans under modified terms related to the COVID-19 pandemic were accounted for under section 4013 of the CARES Act and not considered TDRs.

All types of modifications have initial modification terms of 6-months or less.

All types of modifications have initial modification terms of 6-months or less and loans that were granted modifications related to the COVID-19 pandemic in excess of 6 months, on a cumulative basis, were classified as special mention or substandard.

In addition, all loans under modified terms related to the COVID-19 pandemic were current and accrual status as of December 31, 2020;

however, all of these loans were monitored on an ongoing basis in accordance with each loan’s covenants and conditions for potential downgrade or change in accrual status.

2 unchanged sentences

As of December 31, 2021, the Company maintained $203.3 million, or 9.5% of total assets, of cash and cash equivalents and $610.4 million, or 28.4% of total assets, of available borrowing capacity.

All regulatory capital ratios were also well above the regulatory well capitalized requirements as of December 31, 2020, while establishing additional provision for loan losses of $13.2 million for the year ended December 31, 2020.

All regulatory capital ratios were also well above the regulatory well capitalized requirements as of December 31, 2021.

At this time, the Company cannot estimate the long-term impact of the COVID-19 pandemic, but these conditions impacted and are expected to impact its business, results of operations, and financial condition negatively.

60 unchanged sentences

◦ Residential property - loans secured by single family residential (“SFR”) real estate;

◦ SBA property - SBA guaranteed loans secured by CRE;

◦ SBA property - SBA loans secured by CRE;

◦ Construction.

30 unchanged sentences

Real Estate Loans.

Real estate loans consist of commercial property loans, which are secured by CRE (e.g., retail shopping centers, industrial/manufacturing properties, multifamily apartment properties, office buildings etc.), SFR real estate loans, SBA property loans, and construction loans.

Real estate loans consist of commercial property loans, which are secured by CRE (e.g., retail shopping centers, industrial/manufacturing properties, multifamily residential properties, office buildings etc.), SFR real estate loans, SBA property loans, and construction loans.

A majority of real estate lending activities originate from businesses and individuals within the Company’s primary lending areas.

33 unchanged sentences

Commercial term loans (usually five to seven years) normally provide for monthly payments of both principal and interest.

Commercial lines of credit (payable within one year) typically provide for periodic interest payments, with principal payable at maturity.

Commercial lines of credit (generally payable within one year) typically provide for periodic interest payments, with principal payable at maturity.

SBA commercial term loans usually have a longer maturity (seven to ten years).

94 unchanged sentences

Annandale, Virginia;

Atlanta, Georgia;

Chicago, Illinois;

18 unchanged sentences

Furthering the Company’s philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include:

equity-based compensation plan, health/dental/vision insurances, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid vacation and sick days, holiday pay, training/education, leave for bereavement, wedding and jury duty.

equity-based compensation plan, health/dental/vision insurances, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid time off, holiday pay, training/education, leave for bereavement, wedding and jury duty.

The Company invests in its employees’ future by sponsoring and prioritizing continued education throughout its employee ranks.

8 unchanged sentences

Never has this been more necessary than during the COVID-19 pandemic.

In response to the COVID-19 pandemic, the Company has taken significant steps to protect the health and well-being of its employees and customers, including implementing a work-from-home policy for over 60% of employees, limiting lobby hours throughout branch offices, and prioritizing drive-thru and appointment banking.

In response to the COVID-19 pandemic, the Company has taken significant steps to protect the health and well-being of its employees and customers, including implementing a work-from-home policy, and providing automated thermometers and sanitization stations in branches and departments.

Supervision and Regulation

226 unchanged sentences

The assessment rate determined by considering such information is then applied to the amount of the institution’s average assets minus average tangible equity to determine the institution’s insurance premium.

The Dodd-Frank Act requires the FDIC to ensure that the DIF reserve ratio, which is the amount in the DIF as a percentage of all DIF-insured deposits, reaches 1.35% by September 3, 2020.

The Dodd-Frank Act required the FDIC to ensure that the DIF reserve ratio, which is the amount in the DIF as a percentage of all DIF-insured deposits, reached 1.35% by September 3, 2020.

The Dodd-Frank Act also altered the minimum designated reserve ratio for the DIF, increasing the minimum from 1.15% to 1.35%, and eliminated the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds.

53 unchanged sentences

and comprehensive internal controls.

On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident.” Generally, a notification incident occurs when a banking organization has suffered a computer-security incident that has a reasonable likelihood of materially disrupting or degrading the banking organization or its operations.

The rule requires an affected banking organization to notify its primary Federal regulator as soon as possible and no later than 36 hours after the banking organization has determined that a notification incident has occurred.

The rule also requires bank service providers to notify each affected banking organization if that bank service provider experiences a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.

The rule becomes effective on April 1, 2022, with a compliance date of May 1, 2022.

Branching Authority

10 unchanged sentences

An unsatisfactory CRA record could substantially delay approval or result in denial of an application.

The Bank received a “satisfactory” rating on its most recent CRA performance evaluation, dated April 23, 2018.

The Bank received a “satisfactory” rating on its most recent CRA performance evaluation, dated July 6, 2021.

On December 12, 2019, the FDIC and the OCC announced a proposal to modernize the agencies’ regulations under the CRA that have not been substantively updated for nearly 25 years.

1 unchanged sentence

The agencies will also create an additional definition of “assessment areas” tied to where deposits are located, in part to address changes that have occurred due to the rise in digital banking, ensuring that banks continue to provide loans and other services to low- and moderate-income persons in those areas.

Although the proposed rule was never finalized by the FDIC, it is expected that there will be inter-agency efforts to update and finalize a rule soon.

Anti-Money Laundering and Office of Foreign Assets Control Regulation

64 unchanged sentences

The final rule also provided that certain mortgages that satisfy the general product feature requirements for qualified mortgages and that also satisfy the underwriting requirements of Fannie Mae and Freddie Mac (while they operate under federal conservatorship or receivership), HUD, the Department of Veterans Affairs, the Department of Agriculture or the Rural Housing Service are also considered to be qualified mortgages.

This second category of qualified mortgages will phase out as the aforementioned federal agencies issue their own rules regarding qualified mortgages and the conservatorship of Fannie Mae and Freddie Mac ends, and, in any event, will sunset in January 2021.

This second category of qualified mortgages phased out and was eliminated in 2021 through an additional final rule described below.

As set forth in the Dodd-Frank Act, subprime (or higher-priced) mortgage loans are subject to the ability-to-repay requirement, and the final rule provided for a rebuttable presumption of lender compliance for those loans.

1 unchanged sentence

Additionally, the final rule generally prohibits prepayment penalties (subject to certain exceptions) and sets forth a 3-year record retention period with respect to documenting and demonstrating the ability-to-repay requirement and other provisions.

In 2021, the CFPB issued another final rule that amended the definition of a qualified mortgage by, among other things, eliminating the debt-to-income ratio requirement and replacing it with a price-based limitation for the interest rate charged such that the loan's annual percentage rate cannot exceed the average prime offer rate for a comparable transaction by 2.25 percentage points or more as of the date the interest rate is set.

Mortgage Loan Originator Compensation

50 unchanged sentences

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