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New words:
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accommodation, additive, antidilutive, commonly, consuming, consummation, Controller, convertible, copy, Crowe, deciding, deem, define, delisting, dilute, diminishing, disability, disruptive, diverted, encountered, false, forecast, fourteenth, frame, franchise, harmed, indefinitely, interchange, issuing, listed, LLP, measuring, midsized, misleading, negotiating, opportunistic, overcome, overcoming, people, point, preliminary, pursue, pursuing, recognize, responding, reviewing, schedule, Subtopic, suspension, unsuccessful, vulnerable
Financial report summary
?Risks
- The outbreak of COVID-19 and related developments have led to an economic recession, increased inflation, disruptions in labor markets and had other severe effects on the U.S. economy. The pandemic has also adversely impacted certain industries in which our clients operate and impaired their ability to fulfill their financial obligations to us. The ultimate impact of the COVID-19 pandemic on our business remains uncertain but may have a material and adverse effect on our business, financial condition, results of operations and growth prospects.
- A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects.
- If we do not effectively manage our credit risk, we may experience increased levels of delinquencies, nonaccrual loans and charge-offs, which could require increases in our provision for loan losses.
- Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio.
- Because a significant portion of our loan portfolio is comprised of real estate loans, a decline in real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
- Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.
- The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.
- Our high concentration of large loans to certain borrowers may increase our credit risk.
- Construction loans are based upon estimates of costs and values associated with the complete project. These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects.
- Our business may be adversely affected by credit risk associated with residential property.
- The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
- We depend on information technology and telecommunications systems of third parties, and any systems failures, interruptions or data breaches involving these systems could adversely affect our operations and financial condition.
- We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.
- Our branch network expansion strategy may negatively affect our financial performance.
- We are highly dependent on our management team, and the loss of our senior executive officers or other key employees could harm our ability to implement our strategic plan, impair our relationships with customers and adversely affect our business, results of operations and growth prospects.
- Our mortgage banking profitability could significantly decline if we are not able to originate and resell a high volume of mortgage loans.
- Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our business and the value of our stock.
- We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.
- Our real estate lending exposes us to the risk of environmental liabilities.
- We face strong competition from financial services companies and other companies that offer banking, mortgage, and leasing services and providers of SBA loans, which could harm our business.
- The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a preferred lender under the SBA loan programs and our ability to comply with applicable SBA lending requirements.
- We may be adversely affected by the soundness of other financial institutions.
- We provide financial services to money services businesses and other cash-intensive businesses, which include, but are not limited to, check cashers, issuers/sellers of traveler’s checks, money orders and stored value cards, and money transmitters. Providing banking services to such businesses exposes us to enhanced risks from noncompliance with a variety of laws and regulations.
- If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.
- Changes in accounting standards could materially impact our financial statements.
- The Company and the Bank are subject to stringent capital and liquidity requirements.
- Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.
- Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.
- We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
- We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
- The Federal Reserve may require us to commit capital resources to support the Bank.
- Fluctuations in interest rates or an increase in inflation could negatively impact our financial condition and results of operations.
- Our securities portfolio has and may continue to be negatively impacted by fluctuations in market value and interest rates.
- Downgrades in the credit rating of one or more insurers that provide credit enhancement for our state and municipal securities portfolio may have an adverse impact on the market for and valuation of these types of securities.
- Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
- Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.
- We depend on non-core funding sources, which causes our cost of our funds to be higher when compared to other financial institutions.
- Municipal deposits are one important source of funds for us, and a reduced level of such deposits may hurt our profits.
- Our liquidity is dependent on dividends from the Bank.
- We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
Management Discussion
- We had net income of $32.5 million, or $3.95 per diluted common share, for the year ended December 31, 2021, compared to $20.4Â million, or $2.57 per diluted common share, for the year ended December 31, 2020. The increase of $12.1 million in net income primarily reflected an increase of $11.8 million in net interest income, primarily due to higher interest income on loans due, in part, to the recognition of fees on PPP loans as they are forgiven. In addition, there was higher interest income on securities due to increased volumes of investment securities and lower interest expense on deposits, borrowed funds, and subordinated notes. The increase in net income also reflected a decrease of $12.6 million in provision for loan loss, primarily due to a decrease in general reserves resulting from an increase in the economic qualitative factors in the year ended December 31, 2020 and a reduction in qualitative factors in the third quarter of 2021. These were partially offset by a $7.3 million decrease in noninterest income primarily due to lower mortgage banking activities and net gain on sales of securities partially offset by an increase in service charges on deposits. In addition, there were increases of $3.4 million of income tax provision primarily due to higher income before taxes and $1.6 million of noninterest expense primarily due to higher salary and employee benefits, other expense, data processing expense, and professional services fees partially offset by lower acquisition and due diligence fees.