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Financial report summary
?Risks
- Risks Related to the Economy, Financial Markets
- Risks Related to Interest Rates and Liquidity
- Financial Statement Risks
- Regulatory and Government Risks
- The global COVID-19 pandemic has led to significant economic uncertainty and if prolonged could adversely harm our customers and our future results of operations.
- We may experience losses, additional expense and reputational harm arising out of the origination of PPP loans.
- Our business operations and lending activities are concentrated in South Florida, and we are more sensitive to adverse changes in the local economy than our more geographically diversified competitors.
- Our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.
- Our allowance for loan losses may not be sufficient to absorb potential losses in our loan portfolio.
- We may not be able to manage our credit risk adequately, which could lead to unexpected losses.
- Our commercial real estate and real estate construction loan portfolio exposes us to credit risks that may be greater than the risks related to other types of loans.
- A portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could expose us to credit losses.
- Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property may not accurately reflect the net value of the collateral.
- We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
- Our financial condition, earnings and asset quality could be adversely affected if we are required to repurchase loans originated for sale.
- We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio.
- We may incur losses if we are unable to successfully manage interest rate risk.
- We could recognize losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
- Changes to and replacement of the LIBOR Benchmark Interest Rate may adversely affect our business, financial condition, and results of operations.
- A lack of liquidity could impair our ability to fund operations and adversely impact our business, financial condition, and results of operations.
- We have several large depositor relationships, the loss of which could force us to fund our business through more expensive and less stable sources.
- Natural disasters and severe weather events in Florida, including hurricanes, can have an adverse impact on our business, financial condition, and operations.
- We face strong competition from financial services companies and other companies that offer banking services.
- We may be unable to attract and retain highly qualified personnel, which could adversely and materially affect our competitive position.
- We rely heavily on our executive management team and other key employees, and we could be adversely affected by the unexpected loss of their services.
- Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.
- System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses.
- We have a continuing need for technological change, and we may not have the resources to implement new technology effectively, or we may experience operational challenges when implementing new technology or technology needed to compete effectively with larger institutions may not be available to us on a cost-effective basis.
- We are subject to certain operational risks, including, but not limited to, client, employee or third-party fraud and data processing system failures and errors.
- We are subject to claims and litigation pertaining to intellectual property.
- We may not effectively execute on our expansion strategy, which may adversely affect our ability to maintain our historical growth and earnings trends.
- We may grow through mergers or acquisitions, a strategy which may not be successful or, if successful, may produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our shareholders.
- We may engage in future acquisitions involving significant expenditures of cash, the occurrence of debt or the issuance of stock, all of which could have a materially adverse effect on our operating results.
- Our continued pace of growth may require us to raise additional capital in the future to fund such growth, and the unavailability of additional capital on terms acceptable to us could adversely affect us or our growth.
- As a relatively new public company, we may not efficiently or effectively create an effective internal control environment, and any future failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets and cause the price of our Class A Common Stock to decline and subject us to regulatory penalties.
- The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
- If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results or prevent fraud, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
- Our management team depends on data and modeling in their decision-making and inaccurate data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.
- We operate in a highly regulated environment, and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us.
- 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.
- Federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations could adversely affect us.
- Financial institutions, such as the Bank, face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
- We are subject to numerous laws and regulations of certain regulatory agencies, such as the CFPB, designed to protect consumers, including the Community Reinvestment Act, or CRA, and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
- Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.
- The Federal Reserve may require us to commit capital resources to support the Bank.
- We could be adversely affected by the soundness of other financial institutions.
- Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
- Our future ability to pay dividends is subject to restrictions.
- We are dependent upon the Bank for cash flow, and the Bank’s ability to make cash distributions is restricted.
- The market price of our Class A Common Stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices, and times desired.
- Levels or types of insurance coverage may not adequately cover claims.
- We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our Class A Common Stock less attractive to investors.
Management Discussion
- •Net income increased by $2.2 million, or 34.7%, to $8.5 million compared to $6.3 million during the three months ended September 30, 2021, due to an increase in net interest income of $5.7 million, partially offset by an increase in provision expense of $0.3 million, a decrease in noninterest income of $0.3 million, an increase in noninterest expense of $2.2 million, and an increase in income tax provision of $0.7 million.
- •Net interest income increased by $5.7 million, or 29.8%, to $24.8 million compared to $19.1 million during the three months ended September 30, 2021, due to the impact of the Federal Reserve’s target Federal Funds Rate increases during the third quarter and new loan production in a higher rate environment on the Company’s asset sensitive balance sheet.
- •Provision for loan losses increased $0.3 million, or 26.7%, to $1.3 million compared to $1.1 million during the three months ended September 30, 2021, primarily due to loan growth. There were no net charge-offs for the three months ended September 30, 2022 and 2021.