This annual report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “potential,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:
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statements of our goals, intentions and expectations; |
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statements regarding our business plans, prospects, growth and operating strategies; |
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statements regarding the quality of our loan and investment portfolios; and |
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estimates of our risks and future costs and benefits. |
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Accordingly, you should not place undue reliance on such statements. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this annual report.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
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conditions relating to the COVID-19 pandemic, including the severity and duration of the associated economic slowdown either nationally or in our market areas, that are worse than expected; |
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general economic conditions, either nationally or in our market areas, that are worse than expected; |
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changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; |
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our ability to access cost-effective funding; |
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fluctuations in real estate values and both residential and commercial real estate market conditions; |
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demand for loans and deposits in our market area; |
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our ability to implement and change our business strategies; |
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competition among depository and other financial institutions; |
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inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; |
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adverse changes in the securities or secondary mortgage markets; |
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changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; |
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changes in tax laws; |
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the effects of any Federal government shutdown; |
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changes in the quality or composition of our loan or investment portfolios; |
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technological changes that may be more difficult or expensive than expected; |
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failure or breaches of information technology security systems; |
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the inability of third-party providers to perform as expected; |
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a failure or breach of our operational or security systems or infrastructure, including cyberattacks; |
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our ability to manage market risk, credit risk and operational risk in the current economic environment; |
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our ability to introduce new products and services, enter new markets successfully and capitalize on growth opportunities; |
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our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we have acquired or may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto; |
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changes in consumer spending, borrowing and savings habits; |
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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
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our ability to retain key employees; |
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our compensation expense associated with equity allocated or awarded to our employees; |
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changes in the financial condition, results of operations or future prospects of issuers of securities that we own; and |
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the effects of any pandemic disease, natural disaster, war, act of terrorism, accident, or similar action or event. |
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the novel coronavirus can be fully controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:
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demand for products and services may decline, making it difficult to grow assets and income; |
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if the economy is unable to substantially and successfully reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; |
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collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; |
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the allowance for loan losses has been and may have to be increased if borrowers experience financial difficulties, which will adversely affect our net income; |
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we may experience losses on our PPP loans due to fraud or failures with respect to SBA guarantees; |
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the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; |
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as the result of the decline in the Federal Reserve Board’s target federal funds rate, the yield on assets may decline to a greater extent than the decline in the cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income; |
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cyber-security risks are increased as the result of an increase in the number of employees working remotely; |
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we have been subject to litigation, and we face increased regulatory enforcement risk and reputation risk regarding our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guarantees; |