USCB FINANCIAL HOLDINGS INC

This

section

a

description

of

the

risk

and

uncertainties

identified

by

that

could,

individually or in combination, harm our business, results of

operations, liquidity and financial condition. The risks described

below are

not all

inclusive. We

may face

other risks

not presently

known, or

that we

presently deem

immaterial,

which may also adversely

affect our business, results

of operations, liquidity and

financial condition. If any

of these known

or unknown risks

or uncertainties actually

occur,

our business, results

of operations, liquidity

and financial condition

could

be materially and adversely affected.

a number of risks that could

cause actual results to differ

materially from those indicated

by

forward-looking statements

made in this

Form 10-K

or presented

elsewhere from

time to time.

These risks

are discussed

more fully in this Item 1A and include, without limitation, the

following:

Risks Related to our Business and Operations

•

Our

and

lending

are concentrated

in

South

Florida,

and

we

are

more

sensitive

to

adverse changes in the local economy than our more geographically

diversified competitors.

•

The small- to medium-sized businesses

to which we lend may have

fewer resources to weather adverse

developments, which may impair a borrower's ability to

repay a loan.

•

Inflationary pressures and rising prices may affect

our results of operations and financial condition.

•

Financial challenges

at other

banking institutions

could lead

to depositor

concerns that

spread within

industry causing disruptive deposit outflows and other destabilizing

results.

•

Insufficient

could

impair

our

ability

to

fund

and

jeopardize

our

results

of

operations, growth and prospects.

•

U.S. trade policies

global political factors

beyond our

control, including the

imposition of tariffs,

retaliatory

tariffs,

or

other

sanctions,

may

impact

our

and

results

of

•

Our lending business is subject to credit risk, which could

lead to unexpected losses.

•

The transition from the use of LIBOR may adversely impact the interest rates paid

on certain financial instruments.

•

Natural

and

severe

weather

events

in

Florida

could

have

a

adverse

impact

on

our

•

interest rate risk and variations

in interest rates may

materially and adversely affect

our

financial performance.

•

A

failure

or

the

perceived

risk

of

a

failure

to

raise

the

statutory

debt

limit

of

the

U.S.

in

the

future

could

have

a

material adverse effect on our business, financial

•

Our allowance for credit losses may not be sufficient

to absorb potential losses in our loan portfolio.

•

Our commercial loan portfolio may expose us to increased

credit risk.

•

The imposition of further limits

by the bank regulators

on commercial real estate

lending activities could curtail our

growth and adversely affect our earnings.

•

Our SBA lending program depends on our status as a participant in the SBA's Preferred Lenders Program, and we

face specific risks associated with originating SBA loans

and selling the guaranteed portion thereof.

•

The SBA may not honor its guarantees if we do not originate

loans in compliance with SBA guidelines.

•

Global banking is an important part of our business, which creates

increased BSA/AML risk.

•

We may not recover all amounts that are contractually

owed to us by our borrowers.

•

Non-performing assets

take significant time

to resolve and

our results of

condition, and could result in further losses in the future.

•

We engage in

lending secured by

real estate and

may foreclose on

the collateral and

own the underlying

subjecting us

to the

costs and potential

risks associated with

of real

other risks, including

to

or

or

changes

in

state

or

federal

law

may

substantially raise the cost of foreclosure or prevent us

from foreclosing at all.

•

We are exposed to risk of environmental liability when

we take title to property.

•

We are subject to

certain operational risks, including, but

not limited to, customer, employee or

third-party fraud and

data processing system failures and errors.

•

We face significant

operational risks because

the nature of the

financial services business

involves a high volume

of transactions.

•

We have several large depositor

relationships, the loss of

which could force us to

fund our business through more

expensive and less stable sources.

•

Our

in

market

could

have

adverse

effects

on

our

results

of

•

We may

not effectively

execute on

our expansion

which may

our

historical growth and earnings trends.

•

New lines of business, products, product enhancements

or services may subject us to additional risk.

•

needs and

future growth

may require us

additional capital

and that

capital may

not be

on terms acceptable to us or may be dilutive to existing shareholders.

•

We may grow through mergers or

acquisitions, a strategy that may

not be successful or, if successful, may produce

risks

in

successfully

integrating

and

the

merged

or

and

may

dilute

our

•

The loss of one or more

of our key personnel, or

our failure to attract and

retain other highly qualified

personnel in

the future, could harm our business.

•

Damage to our reputation could significantly harm our

•

We face

strong competition

from financial

that offer

banking services,

which could materially and adversely affect our

•

We must respond to rapid technological changes

to remain competitive.

•

We continually

encounter technological change,

and we may

have fewer resources

than many of

our competitors

to invest in technological improvements.

•

A

failure, interruption, or breach in the

security of our systems, or those

of our contracted vendors, could disrupt

our

business, result in the disclosure of confidential information, damage our reputation, and

create significant financial

and legal exposure.

•

We rely on other companies to provide key components of our business infrastructure and our operations could be

interrupted if

our third-party

service providers

experience difficulty,

terminate their

or fail

with

banking regulations.

•

Litigation

and

could

subject

us

to

fines,

penalties, judgments

or other requirements

resulting in

increased expenses or

•

Certain of our

directors may

have conflicts of

interest in determining

whether to present

business opportunities

to

us or another entity with which they are, or may become, affiliated.

Risks Related to Our Tax, Accounting

and Regulatory Compliance

•

Our ability to

recognize the benefits

of our deferred

tax assets is

dependent on future

cash flows and

taxable income

and may be materially impaired upon significant changes

in ownership of our common stock.

•

The accuracy of

our financial statements

and related disclosures

could be affected

if the judgments,

or estimates used in our critical accounting policies are inaccurate.

•

As a new public company, we may not efficiently or effectively create an effective internal control environment,

and

any

future

failure

to

control

over

could

impair

the

of

our

which

in

turn

could

harm

our

impair

confidence

in

the

and

completeness of our financial

reports and our access

to the capital

markets, cause the price

of our Class A

common

stock to decline and subject us to regulatory penalties.

•

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.

•

We

face

a

risk

of

noncompliance

with

the

Bank

Secrecy

Act

and

other

and

regulations and corresponding enforcement proceedings.

•

We are subject to capital adequacy requirements

and may become subject to more stringent capital requirements,

which could adversely affect our financial condition

and operations.

•

We are periodically subject to examination and scrutiny by a number of

banking agencies and, depending upon the

findings and determinations of these agencies, we may

be required to make adjustments to our

business that could

adversely affect us.

•

We are

numerous laws

of certain

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.

•

Climate change

and related

legislative and

regulatory initiatives

may materially

affect our

business and

results of

•

Our ability to pay dividends is subject to restrictions.

•

The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and

substantial losses for our shareholders.

•

There are

significant restrictions

in our

Articles of

Incorporation

that restrict

to sell

our capital

stock

to

shareholders that would own 4.95% or more of our stock,

excluding our Significant Investors.

•

Because

we

are

an

growth

company

and

because

we

have

decided

to

take

of

certain

exemptions from various reporting

and other requirements applicable

to emerging growth companies,

our Class A

common stock could be less attractive to investors.

•

Because

we

have

elected

to

use

the

extended

period

for

complying

with

new

or

revised

standards for an

“emerging growth company,”

our financial statements

may not be comparable

to companies that

comply with these accounting standards as of the public

company effective dates.

•

We have existing investors that

own a significant amount of

our common stock whose individual

interests may differ

from yours.

•

Provisions in our governing documents and Florida

law may have an anti-takeover effect

and there are substantial

regulatory limitations on changes of control of the Company.

Risks Related to our Business and Operations

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.

Unlike many of

our larger competitors

that maintain significant

operations located

outside of our

market area, most

of

our customers are concentrated in South Florida. In addition, we have

a high concentration of loans secured by real estate

located in

South Florida.

Therefore, our

success depends

upon the

general economic

conditions in

which

may differ from the economic conditions in other areas

of the U.S. or the U.S. generally.

Our real estate

collateral provides

an alternate source

of repayment in

the event

of default by

the borrower;

the value of the collateral may decline during the time the credit is outstanding. The concentration of our loans in the South

Florida area subjects us to

risk that a downturn in the

local economy or recession in

this area could result in

a decrease in

loan originations and increases in delinquencies and foreclosures, which would have a greater negative effect on us than if

our lending were more geographically diversified.

Furthermore, the economic disruption spurred

by the continuing COVID-

has

particularly

real

estate

markets.

the

has

accelerated

the

adoption of

remote work options,

potentially influencing the

long-term performance of

office properties within

our commercial

real estate portfolio. If we are required

to liquidate our real estate collateral

securing a loan during a period of

reduced real

estate values

to satisfy

the debt,

our earnings

and capital

could be

adversely affected.

Moreover,

since a

large portion

of

our loan portfolio

is secured by

properties located in

South Florida, the occurrence

of a natural

disaster, such as a hurricane,

or a man-made disaster could result in a decline in loan originations,

a decline in the value or the destruction of mortgaged

properties and an increase in

the risk of delinquencies, foreclosures

or loss on loans

originated by us. We may

suffer further

losses due to the decline

in the value of the

properties underlying our mortgage loans, which would

have an adverse impact

on our results of operations and financial condition.

A downturn in the local economy generally may lead to loan losses that are not offset by operations in other markets; it

may also reduce the ability

of our customers to grow

or maintain their deposits with

us. For these reasons, any

regional or

local economic

downturn

that

affects

or existing

or prospective

borrowers

or

depositors

in

could have a material adverse effect on our business,

In addition, there are continuing concerns related

to, among other things, the increasing

level of U.S. government debt

and fiscal actions that may be taken to address that debt, price fluctuations

of key natural resources, inflation, the potential

resurgence of economic and political tensions with China,

the continuing war in Ukraine, the

conflict in Gaza and continuing

higher oil prices due to, among other things, Russian supply disruptions resulting from

the ongoing Ukrainian conflict, each

of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and

overall

uncertainty

may

result

in

changes

in

and

spending,

borrowing

and

saving

habits.

These

and/or

other

in

the

domestic

or

credit

markets

or

economies may significantly

affect the markets

do business, the

value of our

loans and investments,

and our

ongoing operations, costs and profitability.

The

small-

to

medium-sized

businesses

to

which

we

lend

may

have

fewer

to

weather

adverse

business developments, which may impair a borrower's

ability to repay a loan.

We

target

our

and

marketing

strategies

to

serve

the

banking

and

needs of SMBs and

the owners and operators of

those businesses. SMBs generally have

fewer financial resources in terms

of capital or

borrowing capacity

than larger entities,

frequently have

smaller market shares

than their competition,

may be

more

vulnerable

to

downturns,

often

need

capital

to

expand

or

compete,

and

may

experience substantial

volatility in

operating results,

any of

which, individually

or in

the aggregate,

may impair

their ability

as a borrower

to repay a loan.

In addition, the success

of SMBs often

depends on the management

skills, talents and efforts

of a

small group

of key

people, and

the death,

disability or

resignation of

one or

more of

these individuals

an

adverse impact on

the business and

its ability to

repay its loan.

If general economic

conditions negatively impact

the markets

in which we operate

or any of our

borrowers otherwise are affected by adverse

business developments, our SMB borrowers

may be disproportionately affected and their ability to

repay outstanding loans may be adversely affected, which could

have

a material adverse effect on our business, financial

The

continuing

COVID-19

has,

and

may

to,

affect

our

condition, liquidity, capital and results

The

COVID-19

has

the

global

and

national

economy

and

certain

industries

and

geographies in which

our customers operate.

Given its

ongoing and dynamic

nature, it is

difficult to

predict the full

impact

of the continuing

COVID-19 pandemic

on the business

of the Company,

its customers, employees

and third-party

service

providers.

The

extent

of

such

impact

will

depend

on

future

developments,

which

are

highly

uncertain.

the

responses of various governmental and non-governmental authorities

and consumers to the on-going pandemic may have

material long-term effects on

USCB Financial Holdings and our subsidiary

U.S. Century Bank and its customers

which are

difficult to quantify in the near-term or long-term.

Inflationary pressures and rising prices may affect

our results of operations and financial condition.

Since 2021, there have been market indicators of a pronounced rise in inflation and the Federal Reserve raised certain

benchmark interest rates 11 times in

2022 and 2023 in

an effort to combat

inflation.

Although the rate of

inflation moderated

in the fourth

quarter of 2023,

it is still

at levels not seen

for more than

40 years. As

inflation increases and

market interest

rates rise

of our

investment securities,

particularly those

with longer

maturities, decreases,

although this

effect

can be less

pronounced for floating-rate

instruments. In addition,

inflation generally increases

the cost of

goods and services

we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. Also, a

prolonged period of inflation could cause wages and other of our costs to increase, which could adversely affect our results

of operations and financial condition.

Furthermore, our customers are also

affected by inflation and the

rising costs of goods

and services

used in

their households

and businesses,

have a

negative impact

on their

repay their

loans with

us. In

addition, SMBs

may be

impacted more

during periods

of high

inflation, as

they are

not able

to leverage

economics of

scale to

cost

pressures

to larger

the

ability of

to

repay

their

loans

may

deteriorate,

and

in

some

cases

this

deterioration

may

occur

quickly,

which

would

adversely impact our results of operations and financial condition.

challenges

at

other

banking

could

lead

to

depositor

that

spread

within

the

banking industry causing disruptive deposit outflows and other

destabilizing results.

In March 2023, certain specialized banking institutions with elevated concentrations of uninsured deposits experienced

large

deposit

outflows,

in

the

being

placed

into

FDIC

receiverships.

In

the

aftermath,

there

was

market

disruption

and

indications

that

deposit

could

spread

within

the

banking

leading to

deposit outflows and other destabilizing results. While the Company does not believe that the

circumstances of these bank

failures, including, in

several cases, the

elevated concentrations of uninsured

deposits, are necessarily indicators

of broader

issues for concern

with all other

banks or with

the banking system itself,

the failures are

likely to continue

to have an

adverse

effect on customer

confidence and the

availability of funding

and liquidity,

as well as possibly

lead to increased regulatory

requirements and costs

and negative reputational

ramifications for

institutions in the

banking industry,

including, possibly,

the Company and its depository subsidiary, U.S. Century Bank.

We will continue to closely monitor the ongoing events

and

in

the

with

responsive

by

the

banking

to

or

manage

the

of

bank

FDIC

deposit

and

the

safety

and

soundness

of

banks.

U.S.

Century

Bank

a

well-diversified

deposit

base.

At

31,

2023,

our

top

depositors only

hold 20% of

our total portfolio.

45% of

our deposits

are estimated

to be FDIC-

insured. Our public funds

are 14% of total

deposits and are partially

collateralized. The estimated

average account size

of

our

deposit

is

$97.0

In

the

Bank

was

a

“well

capitalized”

as

of

December 31, 2023 and 2022.

Insufficient liquidity could

impair our ability to

fund operations and jeopardize

our financial condition,

results

of operations, growth and prospects.

Effective liquidity management is essential for the operation of our business. Although we

have implemented strategies

sufficient

and

diverse

sources of

funding

to accommodate

planned,

as well

as unanticipated,

needs

(including changes

in assets, liabilities, and

off-balance sheet commitments under various

economic conditions), an inability

to

raise

funds

through

deposits,

borrowings,

the

sale

of

and

other

sources

could

have

a

adverse effect

on our

liquidity. Our access

to funding

sources in

amounts adequate to

finance our

activities could

be impaired

by factors that affect us specifically or the financial services

industry in general. Factors that could detrimentally impact

our

access to liquidity sources include a decrease in the level of our business activity due to a market disruption, a decrease in

the borrowing capacity assigned to

our pledged assets by our

secured creditors, competition from other

financial institutions

which could drive up the

costs of deposits or adverse

regulatory action against us. Deterioration in

economic conditions and

the loss of

confidence in financial

institutions may increase

our cost of

funding and limit

our access to

some of our

customary

sources of liquidity,

including, but not

limited to, inter-bank

borrowings and borrowings

from the Federal

Home Loan Bank

of Atlanta, or

the FHLB, and

the Federal Reserve

Bank of Atlanta.

Our ability to

acquire deposits

or borrow

could also be

impaired by

factors that

are not

specific to

us, such

as a

severe disruption

of the

financial markets

or negative

views and

about the

prospects

for the

industry generally

as

a result

of conditions

faced

by banking

organizations

in

the

domestic

and

credit

markets.

Any decline

in

funding

or cost

of liquidity

could

adversely impact our ability to originate loans, invest in securities, meet our expenses

or fulfill obligations such as repaying

our borrowings or

meeting deposit withdrawal demands,

any of which

could, in turn,

have an adverse

financial condition, and results of operations.

U.S. trade

policies and

other global

political factors

beyond our

control, including

the imposition

of tariffs, retaliatory tariffs, or other sanctions, may adversely impact our business, financial condition and results

There have

been, and

may be

in the

future, changes

to U.S.

and international

trade policies,

legislation,

treaties and tariffs, embargoes, sanctions and other trade restrictions. Tariffs,

retaliatory tariffs or other trade restrictions on

and

materials

that

import

or

export,

or a

trade

war or

other

related governmental

actions

related

to

tariffs,

trade

or

or

other

trade

have

the

to

impact

our

customers' costs, demand

for our products,

or the U.S.

economy or

certain sectors thereof

and, thus, could

adversely impact

As a

Russia's invasion

of Ukraine,

the U.S.

imposed,

and is likely to continue to impose material additional, financial and economic sanctions and export controls against certain

Russian organizations and/or individuals, with similar actions either implemented or planned by the European Union ("EU")

and

the

United

Kingdom

(“UK”)

and

other

jurisdictions.

The

U.S.,

the

UK,

and

the

EU

have

each

imposed

packages

of

and

sanctions

that,

in

various

ways,

constrain

with

Russian

entities

and

individuals; transactions

in Russian

sovereign debt;

and investment,

trade, and

financing to,

from, or

in certain

regions of

Ukraine. Moreover, actions by Russia, and any

further measures taken by the

U.S. or its allies,

could have negative impacts

on regional and global

financial markets and economic

conditions. To the extent changes in the

global political environment,

including the

continuing war

in Ukraine

and the

continued heightened

tensions between

Russia and

the U.S.,

NATO,

the

EU and the

UK, as well

as the conflict

in Gaza, have

a negative impact

on us or

on the markets

operate, our

business, results of operations and financial condition could be

materially and adversely impacted.

Our lending business is subject to credit risk, which

could lead to unexpected losses.

Our

primary

making

loans

to

customers.

The

of

lending

is

inherently

risky

because

the

may not

be repaid

timely or

at all

or the

any collateral

securing the

loan may

be

insufficient to

cover our

outstanding exposure.

These risks

may be affected

by the

strength or

weakness of

the particular

borrower's business sector

and local, regional and

national market and

economic conditions. Many

of our loans are

made

to SMBs that may be

less able to withstand

competitive, economic and financial

pressures than larger borrowers.

Our risk

management practices,

such as

monitoring the

concentration of

our loans

within specific

industries in

which we

lend and

concentrations with individual borrowers

or related borrowers, and

our credit approval

practices, may not adequately

reduce

credit risk. In addition, there are risks inherent in making any loan, including

risks relating to proper loan underwriting, risks

resulting from

economic and

industry conditions,

risks inherent

in dealing

with individual

borrowers, including

the risk that a borrower may not provide

information to us about their business

in a timely manner,

may present inaccurate

or incomplete information to us, may lack a U.S. credit history,

or may leave the U.S. without fulfilling their loan obligations,

leaving us with

little recourse

to them personally,

and/or risks

relating to the

collateral. In

order to

manage credit

risk successfully,

we must,

among other

things, maintain

disciplined and

prudent underwriting

standards and

ensure that

our lenders follow those standards. The weakening of

these standards for any reason, such as an

attempt to attract higher

yielding loans,

a lack

of discipline

or diligence

by our

employees in

underwriting and

monitoring loans,

the inability

of our

employees to adequately adapt

policies and procedures to

changes in economic or

any other conditions affecting borrowers

and the quality

of our loan portfolio,

may result in loan

defaults, foreclosures and additional charge-offs and

may necessitate

that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. A failure

manage

credit risk

with

portfolio could

lead to

unexpected

losses and

have a

adverse effect on our business, financial condition

The

from

the

use

of

LIBOR

may

impact

the

rates

paid

on

certain

instruments.

LIBOR was used as a reference rate for certain of the Corporation’s adjustable-rate loans and bonds. In 2017, the U.K.

Financial Conduct

Authority,

which regulates

LIBOR,

announced that

the publication

of LIBOR

would not

be guaranteed

beyond 2021. In December 2020, the

administrator of LIBOR announced its intention to

(i) cease the publication of the

one-

week and two-month

U.S. dollar LIBOR

after December 31,

2021, and (ii)

cease the publication

of all other

tenors of U.S.

dollar LIBOR (one, three, six and 12 month LIBOR) after

June 30, 2023.

There are ongoing efforts to establish an alternative

reference rate. The Federal Reserve Board, in conjunction with

the

Alternative

Reference

Rates

a

steering

committee

comprised

of

large

U.S.

supports

replacing LIBOR with SOFR, a new index calculated

by short-term repurchase agreements backed by

Treasury securities.

The Bank adopted SOFR as its preferred benchmark as

an alternative to LIBOR for use in new contracts in 2023.

While

the

Adjustable

Rate

(LIBOR)

Act

and

implementing

will

help

to

legacy

LIBOR

contracts to a new benchmark rate, the

substitution of SOFR for LIBOR may

have potentially significant economic impacts

on parties to affected

contracts. SOFR is

different from LIBOR

in that it is

a retrospective-looking secured

rate rather than

a forward-looking

unsecured rate.

while SOFR

appears to

be the

preferred replacement

rate for

LIBOR, it

is

not

to

predict

whether

SOFR

will

ultimately

prevail

in

the

market

as

the

definitive

replacement

for

LIBOR.

Uncertainty

as

to

the

nature

of

alternative

reference

rates,

and

as

to

changes

or

other

reforms

related

to

the

transition from LIBOR, may adversely affect the val

ue of LIBOR-based financial arrangements of the Company.

Natural disasters and severe weather events in Florida

could have a material adverse impact on our

Our

and

our

base

are

located

in

South

This

region

is

vulnerable

to

natural

and

severe

weather

events

or

acts

of

God,

such

as

hurricanes

or

tropical

storms,

which

can

have

a

adverse impact

on our

our overall

condition and

operations, cause

widespread property

damage and have

the potential to

significantly depress

the local economies

operate. Future adverse

weather

events in

Florida could

potentially result

in extensive

and costly

property damage

to businesses

and residences,

depress

the value of property serving as collateral for our loans, force the relocation of residents, and

significantly disrupt economic

activity in the region.

We cannot

predict the

extent of

damage that

may result

from such

adverse weather

events, which

will depend

on a

variety of factors that are beyond our control,

including, but not limited to, the

severity and duration of the event,

the timing

of government

responsiveness, the

pace of

economic recovery

and availability

of insurance

to cover

losses. In

the

nature,

frequency

and

severity

of

these

adverse

weather

events

and

other

natural

may

be

exacerbated by climate change. If a significant adverse weather event or other natural disaster were to occur, it could have

a materially adverse impact

on our financial

condition, results of operations

and our business, as

well as potentially

our exposure to credit and liquidity risks.

interest rate risk, and variations in

interest rates may materially and adversely

affect

our financial performance.

Changes in the

interest rate environment

may reduce our

profits. It is

expected that our

primary source of

income will

continue to be from

the differential or

"spread" between the

interest earned on

loans, securities and

other interest-earning

assets, and the interest paid on

deposits, borrowings and other interest-bearing liabilities. Net

interest spreads are affected,

in part, by the

difference between the maturities and repricing characteristics of

interest-earning assets and interest-bearing

liabilities. Changes

in market

generally affect

loan volume,

loan yields,

funding sources

and funding

costs.

Our

net interest

spread

depends

on

many

factors

that

are partly

or completely

out

of our

control,

competition,

general economic

conditions, and

federal economic

monetary and

fiscal policies,

and in particular,

Reserve's

policy determinations with respect to interest rates.

During 2022

and 2023,

Open Market

Committee of

Reserve (the

“FOMC”) increased

certain

benchmark interest rates to reduce the rate of inflation to the extent

necessary to reduce inflation to the rate that the FOMC

believes is appropriate. Since March 2022, the FOMC has increased the federal funds rate by

500 basis points. All of these

increases were expressly made in response to inflationary pressures.

Recently the FOMC has paused increases in certain

benchmark interest rates and may consider decreases in such

benchmark rates at some point during 2024. However, there

can be no

assurances as to

any future FOMC

action, including whether

it decreases

the federal funds

rate or implements

further increases.

While an increase in

interest rates may increase

our weighted average

loan yield, it may

adversely affect the

ability of

certain borrowers

with variable rate

loans to pay

the contractual

interest and principal

due to us.

Following an

increase in

interest rates, our

ability to maintain

a positive net

interest spread is

dependent on our ability

to increase our

loan offering

rates, replace

loans that

mature and

repay or

that prepay

before maturity

with new

originations at

higher rates,

minimize

increases on

our deposit

rates, and maintain

an acceptable level

and composition of

funding. We cannot

provide assurances

that we will be

able to increase

our loan offering

rates and continue

to originate loans

due to the competitive

landscape in

which we operate. Additionally, we cannot provide

assurances that we can minimize

the increases in our

deposit rates while

an

acceptable

level

of

Due

to

pressures

in

2023,

we

the

rates

paid

on

our

interest-bearing deposits such that

our weighted average cost

of deposits increased from

0.62% for 2022

to 3.04% for

Finally,

we

cannot

provide

any

assurances

that

we

can

our

current

levels

of

noninterest-bearing

as

customers may seek higher-yielding products due to the

increased interest rates being paid on deposits currently.

changes

in

levels

of

rates

could

and

affect

our

net

margin,

asset

quality, loan origination

volume, average loan portfolio balance, liquidity,

and overall profitability.

A failure or the perceived

risk of a failure to raise

the statutory debt limit

of the U.S. in the future

could have a

material adverse effect on our business, financial

condition and results of operations

.

Ongoing

U.S.

debt

ceiling

and

budget

deficit

have

the

possibility

of

credit-rating

downgrades

and

slowdowns,

or

a

recession

in

the

United

States.

U.S.

lawmakers

have

passed

legislation

in the

past to

raise the

federal debt

ceiling

on multiple

occasions,

the most

recent

in June

2023, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The

impact of this or any further

downgrades to the U.S. government’s

sovereign credit rating or its

perceived creditworthiness

could adversely affect the U.S. and global financial markets and economic conditions. Absent further quantitative easing by

Reserve,

these

could

cause

and borrowing

costs

to rise,

which

may negatively

impact our

access

the debt

markets on

favorable terms.

disagreement over

budget has

caused the U.S. federal government to shut down for periods of time. Continued adverse

political and economic conditions

could have a material adverse effect on our business,

Our allowance for credit losses may not be sufficient

to absorb potential losses in our loan portfolio.

We

an

for

credit

losses

that

of

probable

losses

and

risks

inherent in our loan portfolio.

The level of the allowance

reflects management's continuing

evaluation of general economic

present

and

diversification

and

seasoning

of

the

loan

historic

loss

experience, identified credit

problems, delinquency levels

and adequacy of

collateral. Determining the

appropriate level of

our

for

credit

losses

a

degree

of

subjective

and

to

make

estimates of and assumptions regarding current credit risks

and future trends, all of which may undergo material changes.

Inaccurate

assumptions,

deterioration

of

affecting

new

loans,

of

problem

loans

or deterioration

of existing

problem

loans,

and

other

factors

review

and

analysis),

both

within

and

outside

of

our

control,

may

require

us

to

increase our allowance for

credit losses. In addition,

our regulators, as an

integral part of their

periodic examinations, review

our methodology for calculating, and

the adequacy of, our allowance

for credit losses and may

direct us to make additions

to the allowance

based on their

judgments about

information available to

them at the

time of their

examination. Further,

if

actual charge-offs in future

periods exceed the

amounts allocated to

our allowance for

credit losses, we

may need additional

provisions for credit losses to restore

the adequacy of our allowance for

credit losses. Finally, the measure of our allowance

for credit losses depends on the

adoption and interpretation of accounting

standards. The Financial Accounting

Standards

Board, or FASB, issued a new credit

impairment model, the Current Expected Credit Loss,

or CECL model, which became

to

us

on

January

1,

CECL

to

and

develop

a

for

credit

losses over the lifetime of the loan at origination, as opposed to reserving for incurred or probable

losses up to the balance

sheet date. Under the CECL

model, expected credit deterioration

will be reflected in the

income statement in the

origination or acquisition of a loan,

with changes in expected credit losses

due to further credit deterioration or

improvement

reflected in

the periods

the expectation

changes. Accordingly,

implementation of

model could

require

financial institutions, like us, to

increase our allowances for

credit losses from levels in place

prior to the implementation of

CECL. As a result of the initial implementation of CECL,

we incurred as of January 1, 2023 a $1.1

million cumulative effect

of the adoption

of CECL. Moreover,

the CECL model

may create more volatility

in our level

of allowance for

credit losses.

If we

are required

to materially

increase our

allowance for

for any

reason, such

increase could

affect our business, prospects, cash flow,

liquidity, financial

Our commercial loan portfolio may expose us to increased

credit risk.

Commercial business

and real

estate loans

generally have

a higher

risk of

loss because

loan balances

are typically

larger

than

real

estate

and

loans

and

repayment

is

usually

dependent

on

cash

flows

from

the

borrower’s business or the

property securing the loan. Our

commercial business loans are primarily made

to small business

and middle market customers. These loans typically

involve repayment that depends upon income

generated, or expected

to be generated, by the property securing the loan and/or

by the cash flow generated by the business borrower and

may be

adversely affected by changes in the economy or

local market conditions. These loans expose a

lender to the risk of having

to liquidate the collateral securing

these loans at times when

there may be significant fluctuation

of commercial real estate

values or to the

risk of inadequate cash flows to

service the commercial loans. Unexpected deterioration in

the credit quality

of our

commercial business

and/or real

estate loan

portfolio could

require us

to increase

our allowance

losses,

which would

reduce our

profitability and

financial condition,

of

Commercial construction loans generally

have a higher risk of

loss due to the assumptions

used to estimate the value

of property

at completion

and the

cost of

the project,

including interest.

It can

be difficult

to accurately

evaluate the

total

funds required

to complete

a project,

and construction

lending often

involves the

disbursement

of substantial

funds with

repayment dependent, in large part, on the success of the ultimate project rather than the ability of a borrower or guarantor

to repay the loan from sources other than the subject project. If the assumptions and estimates are inaccurate, the value of

completed property

may fall

below the

related loan

amount. If we

are forced to

foreclose on

a project

prior to

completion,

we may

be

unable

to

recover

the

entire

unpaid

portion

of the

loan,

which

would

lead

to

losses.

In

we

may

be

required to fund additional amounts to complete a project,

incur taxes, maintenance and compliance costs for

a foreclosed

may have

to hold

the property

for an

indeterminate

time, any

of which

could adversely

affect

our

business, prospects, cash flow,

liquidity, financial

The imposition of

further limits by the

bank regulators on commercial

real estate lending activities

could curtail

our growth and adversely affect our earnings.

The FDIC, the Federal Reserve

and the Office of

the Comptroller of the

Currency have promulgated joint

sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under this

guidance,

a financial

that,

like

us,

is actively

involved

in

real

estate

lending should

perform

a risk

assessment to identify

concentrations. Regulatory

guidance on concentrations

in commercial real

estate lending provides

that a bank’s commercial real estate lending exposure could

receive increased supervisory scrutiny where total commercial

loans, including

loans secured

by multi-family

properties, owner-occupied

and nonowner-occupied

investor real estate, and

construction and land loans, represent 300%

or more of an

institution’s total risk-based capital, and

the outstanding balance of the commercial real estate loan portfolio has increased by

50% or more during the preceding 36

months.

At

31,

2023,

our

total

real

estate

loans,

loans

secured

by

apartment

buildings, commercial real estate, and construction

and land loans represented 384% of the Bank’s

total risk-based capital

and the growth in the commercial real estate portfolio exceeded 50% over

the preceding 36 months. The particular focus of

the guidance is on exposure to commercial

real estate loans that are dependent

on the cash flow from the real estate

held

as collateral and that

are likely to be

at greater risk

to conditions in the

market (as opposed

to real

estate collateral held as a secondary source of repayment

or as an abundance of caution). The purpose

of the guidance is

to guide institutions in developing risk management practices and capital

levels commensurate with the level and nature of

concentrations.

Management has

established a

estate lending

to monitor

exposures and limits by

types within the commercial

real estate portfolio and

takes appropriate actions, as necessary. While

we believe

we have

implemented policies and

procedures with

respect to

our commercial

loan portfolio

consistent

with this

guidance, the

FDIC, the

Bank’s primary

federal regulator,

could require

us to

implement additional

policies and

procedures pursuant to their interpretation

of the guidance that may result

in additional costs to us. In addition,

If the FDIC

were to impose restrictions on the amount

of commercial real estate loans we can

hold in our portfolio, our earnings would

be adversely affected.

Our

SBA

lending

program

is dependent

upon

the

federal

and

our status

as

a participant

in the

SBA's Preferred

Lenders Program,

and we

face specific

risks associated

with originating

SBA loans

and selling

the guaranteed portion thereof.

We

have

been

by

the

SBA

to

participate

in

the

SBA's

Lenders

Program.

As

an

SBA

Lender,

we enable

our clients

SBA loans

without being

the potentially

lengthy SBA

approval process

for

lenders

that

are

not

SBA

Lenders.

The

SBA

reviews

the

lending

of

participating

lenders

to

assess,

among

other

things,

whether

the

lender

exhibits

prudent

risk

management.

When

weaknesses are identified, the SBA may request corrective actions

or impose enforcement actions, including revocation of

the lender's

Preferred Lender

status. If

we lose

our status

as an

SBA Preferred

Lender,

we may

lose some

or all

of our

customers to

lenders who

are SBA

Preferred Lenders,

and

We generally sell the guaranteed

portion of our SBA 7(a) loans

in the secondary market. These sales

have resulted in

both premium income for us

at the time of

sale and created a stream

of future servicing income. There

can be no assurance

that we will be able to continue originating these loans, that a secondary market for these loans will continue to exist or that

we will continue to realize

premiums upon the sale of

the guaranteed portion of

these loans. When we sell

the guaranteed

portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on

the non-guaranteed portion of a loan, we share any loss

and recovery related to the loan pro-rata with the SBA.

The laws, regulations and

standard operating procedures

that are applicable to

SBA loan products may

change in the

future. We

cannot predict

changes on

and profitability.

Because government

greatly

affects

the

and

results

of

all

banks

and

bank

holding

our

organization, changes in the laws, regulations

and procedures applicable to SBA loans

could adversely affect our ability

to

operate profitably.

In addition, the

aggregate amount of

SBA 7(a) and 504

loan guarantees by the

SBA must be approved

each fiscal year by the federal

government. We cannot predict

the amount of SBA 7(a)

loan guarantees in any given fiscal

year. If the federal government were to reduce the amount of SBA loan guarantees, such reduction

could adversely impact

our SBA lending

program, including making and

selling the guaranteed portion

of fewer SBA

7(a) and 504

loans. In addition,

any default by

the U.S. government

on its obligations

or any prolonged

government shutdown

could, among

other things,

impede our ability to originate

SBA loans or sell such loans

in the secondary market, which

could materially and adversely

affect our business, financial condition and results

The SBA may not honor its guarantees if we do not originate

loans in compliance with SBA guidelines

.

SBA lending programs

typically guarantee

75.0% of the

principal on

an underlying

loan. If the

SBA establishes

that a

loss on

an

SBA guaranteed

loan

is attributable

to significant

technical

deficiencies

in the

manner

was

originated,

funded

or serviced

by us,

the

SBA may

seek

recovery

of

the

loss

related

to

the

deficiency

from

us

notwithstanding that a portion of the loan was

guaranteed by the SBA, which could adversely

affect our business, financial

condition and results of

operations. While we

follow the SBA's underwriting

guidelines, our ability to

do so depends on the

knowledge and diligence of our employees

and the effectiveness of controls

we have established. If our employees

do not

follow

the

SBA

in

originating

loans

and

if

our

loan

review

and

audit

fail

to

and

rectify

such

failures, the

SBA may

reduce or,

in some

cases, refuse

to honor

its guarantee

obligations and

we may

incur losses

as a

result.

Global banking is an important part of our business, which

creates increased BSA/AML risk.

As our

model

to banks

in Latin

America

and the

Caribbean,

these

cross-

border

banking

pose

unique

risks

because

they

create

in

which

a

U.S.

institution will be

handling funds from

a financial institution

in Latin America

and the Caribbean

whose customers may

not

be transparent to us. Moreover, many foreign financial institutions, including

in Latin America and the Caribbean where our

correspondent banking

are located,

are not

as U.S.

banks.

these

foreign

may

pose

higher

money

risk

to

their

respective

U.S.

bank

correspondent(s). Because

of the

large amount

of funds,

multiple transactions,

and our

potential lack

of familiarity

with a

foreign correspondent financial institution's customers, these customers may

be able to more

easily conceal the source and

use of

illicit funds.

we may

have a

higher

risk

of non-compliance

BSA

and

other

AML rules

and

due

to

our

banking

with

foreign

private banking

places additional

pressure on

our policies,

procedures and

systems for

complying with

Secrecy

Act of 1970,

as amended, or BSA,

and other anti-money laundering,

or AML, statutes

and regulations as

well as the

recently

enacted Corporate

Transparency

Act. Our failure

to strictly

adhere to the

terms and requirements

of our OFAC

license or

our

failure

to

manage

our

BSA/AML

risk

in

light

of

our

banking

with

foreign financial institutions and international private banking could result

in regulatory or other actions being taken against

us, which could significantly increase our compliance costs

and materially and adversely affect our results

We may not recover all amounts that are contractually

owed to us by our borrowers.

We are

dependent on

the collection

of loan

principal, interest,

and fees

to partially

fund our

operations. A

shortfall in

collections and proceeds may impair our ability to fund

our operations or to repay our existing debt.

When

we

lend

funds,

commit

to

fund

a

loan

or

enter

into

a

letter

of

credit

or

other

credit-related

contract

with

a

counterparty, we incur credit risk. The

credit quality of our

portfolio can have a

significant impact on our

earnings. We expect

to experience charge-offs and delinquencies on our loans

in the future. Many borrowers have been negatively impacted by

the ongoing COVID-19 pandemic and

related economic consequences, and

may continue to be similarly or

more severely

affected in the future.

Our customers' actual operating

results may be worse than

our underwriting contemplated

when we

originated the loans, and in these circumstances, we could incur substantial impairment or loss of

the value on these loans.

We may fail to identify problems

because our customer did not

report them in a timely manner

or, even if the

customer did

report the problem, we may fail to address it quickly enough or at all, or some loans, due to market circumstances, may not

be able

to be

fully rehabilitated.

Even if

customers provide

us with

full and

accurate disclosure

of all

material information

concerning their businesses,

we may misinterpret

or incorrectly analyze

this information. Mistakes

may cause us

to make

loans that we otherwise

would not have made or

to fund advances that we otherwise

would not have funded, either

of which

could result in losses

on loans, or necessitate

that we significantly

increase our allowance

for loan and

lease losses. As

a

result, we could

suffer loan

losses and have

non-performing loans,

which could have

a material adverse

net

earnings and results of operations and financial condition, to the extent the losses exceed our allowance for loan and lease

losses.

Some of our

loans are secured

by a lien

on specified collateral

of the borrower

and we may

not obtain or

properly perfect

our liens or the value of the collateral securing any particular loan may not be sufficient to protect us from suffering a partial

or complete

loss

if the

non-performing

and we

proceed to

foreclose

on or

repossess

the collateral.

With

respect to loans that we originate for condominium or homeowners'

associations, these loans are primarily secured by and

rely upon the

cash flow received

by the Associations

from payments received

from their property

owners, as well

as cash

on hand.

These Associations

rely upon

payments received

from their

property owners

in order

to perform

loans

and for

the

loan collateral.

amounts

on non-performing

loans made

to Associations

is

dependent upon the

Association having sufficient cash on

hand for repayment of

the loan and/or having

the ability to impose

assessments on its property owners, some of whom may not have the ability to pay such assessments. In such events, we

could

suffer

loan

losses,

which

could

have

a

adverse

effect

on

our

net

earnings,

for

loan

and

lease

losses, financial condition, and results of operations.

Non-performing

assets

take

time

to

resolve

and

affect

our

results

of

and

financial condition, and could result in further losses in

the future.

Non-performing assets adversely

affect our net

income in

various ways. We

do not

record interest income

on nonaccrual

loans or other

owned (“OREO”),

thereby adversely

affecting our

and returns on

equity,

increasing our loan administration costs and adversely

affecting our efficiency ratio. When

we take collateral in foreclosure

and similar proceedings, we are

required to mark the collateral to

its then-fair market value, which may

result in a loss. Non-

performing loans

and OREO

also increase our

risk profile

and the level

of capital

our regulators

believe is appropriate

for

us to

maintain in

light of

such risks.

The resolution

of non-performing

assets requires

significant time

commitments from

management and can

be detrimental to

the performance

of their other

responsibilities. If

we experience increases

in non-

loans

and

non-performing

assets,

our

net

income

may

be

and

our

loan

administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such

as return on assets and equity.

We engage in

lending secured by

real estate and

may foreclose on

the collateral and

own the underlying

real

estate,

subjecting

us

to

the

costs

and

risks

with

the

of

real

property,

to

or

or

changes

in

state

or

federal

law

may

substantially raise the cost of foreclosure or prevent

us from foreclosing at all.

Since we

originate

loans secured

by real

estate, we

may have

to foreclose

on the

property

our

investment and may thereafter own and operate such property,

in which case we would be exposed to the risks inherent in

the

of

real

estate.

The

amount

that

we,

as

a

mortgagee,

may

realize

after

a

foreclosure

depends

on

factors

outside of our

control, including,

but not limited

to, general or

local economic conditions,

environmental cleanup

various assessments

relating to

of the property,

interest rates, real

estate tax rates,

operating expenses

of

the

mortgaged

our

ability

to

obtain

and

occupancy

of

the

zoning

laws,

governmental and

regulatory rules,

and natural disasters.

Our inability

the amount

of costs

or size

of the risks

associated with

of real

estate, or

write-downs in

of OREO,

our

business, financial condition, and results of operations.

consumer protection initiatives

or changes in state

or federal law may

substantially increase the time

and

expenses associated

residential foreclosure

process or

prevent us

from foreclosing

at all.

A number

of states

in

recent

years

have

either

or

adopted

foreclosure

reform

laws

that

make

it

more

and

expensive for

lenders to

foreclose on

residential properties

in default.

Furthermore, federal

regulators have

prosecuted a

mortgage servicing

companies for

alleged consumer

law violations.

If new

state or

federal laws

or regulations

are ultimately enacted

that significantly raise

the cost of residential

foreclosures or raise

outright barriers, they

an adverse effect on our business, financial condition,

We are exposed to risk of environmental liability

when we take title to property.

A

portion

of

our

loan

is

secured

by

real

estate,

and

we

could

become

subject

to

liabilities with respect

to one or

more of these

properties, or with

respect to properties that

we own in

operating our business.

During the ordinary course of business,

we may foreclose on and take title to

properties securing defaulted loans. In

doing

so, there is

a risk that

hazardous or toxic

substances could

be found on

these properties. If

hazardous conditions

or toxic

substances are found

on these properties,

we may be

liable for remediation

costs, as well

as for personal

injury and property

damage, civil

fines and

criminal penalties

regardless

of when

the hazardous

conditions or

toxic substances

first affected

any particular property.

The costs associated with investigation or

remediation activities could be substantial.

In addition, if

we are the owner or former owner

of a contaminated site, we may be

subject to common law claims by

third parties based

on damages and

costs resulting

from environmental

contamination emanating

property.

If we become

significant environmental liabilities, our business, financial condition

and results of operations could be adversely affecte

d.

We

are

subject

to

certain

risks,

but

not

limited

to,

customer,

or

fraud and data processing system failures and errors.

Employee errors and employee or

customer misconduct could subject us

to financial losses or

regulatory sanctions and

seriously harm our reputation. Misconduct by our employees could include hiding unauthorized

activities from us, improper

or unauthorized activities on behalf of our customers or improper use of confidential information. It is not

always possible to

prevent employee

errors and

misconduct, and

the precautions we

take to

prevent and

detect this

activity may

not be

in all cases. Employee errors could also subject us

to financial claims for negligence.

We have

implemented a

system of

internal controls

mitigate operational

risks, including

data processing

system failures

and errors

and customer

or employee

fraud, as

well as

protect us

from

losses

with

these

risks,

losses

from

any

interruption.

If

our

internal controls fail

to prevent or

detect an

occurrence, or if

any resulting loss

is not

insured or exceeds

applicable insurance

limits, it could adversely affect our business,

prospects, cash flow, liquidity,

We

also

rely

on

the

integrity

and

of

a

variety

of

third

party

processors,

payment,

clearing

and

settlement

systems, as well

as the various

participants involved

in these systems,

many of which

have no direct

relationship with us.

Failure

by

these

or

their

systems

to

protect

our

customers'

data

may

put

us

at

risk

for

losses due

to fraud

or operational

disruption. At

the date

of this

Form 10-K,

there is

no knowledge or

indication

that customer

sensitive information

was compromised

as a

third parties

system vulnerabilities,

but management

continues to monitor developments and vendor communications.

When we originate loans, we rely

heavily upon information supplied by third parties,

including the information contained

in credit

applications, property

appraisals, title

information, equipment

pricing and

valuation and

employment and

income

documentation, in deciding which loans we will originate, as well as the terms of those loans. If any of the information upon

which

we

rely

is

misrepresented,

either

fraudulently

or

inadvertently,

and

the

misrepresentation

is

not

detected

prior

to

funding,

of

the

loan may

be significantly

lower

than expected,

or we

may

fund a

loan that

we

would not

have

funded or

on terms

that do

not comply

with our

general underwriting

standards. Whether

a misrepresentation

is made

by

the applicant, the borrower,

one of our employees or another

third party,

we generally bear the risk of

loss associated with

the misrepresentation. A loan

subject to a material

misrepresentation is typically

unsellable or subject to

repurchase if it

is

sold prior to detection of the

misrepresentation. The sources of

the misrepresentations are often

difficult to locate, and

it is

often difficult

any

of the

resulting monetary

losses we

may suffer,

which

could

affect

We

face

risks

because

the

nature

of

the

a

high

volume of transactions

.

We

operate

in

diverse

markets

and

rely

on

the

ability

of

our

employees

and

systems

to

process

a

high

number

of

transactions. Operational

risk is

the risk of

loss resulting from

our operations,

including but not

limited to, the

risk of fraud

by employees or

persons outside

the Company,

the execution

of unauthorized

transactions by

employees, errors

to transaction

processing and technology, breaches of

control systems and

compliance requirements. Insurance

coverage may

not be available

for such

losses, or

where available, such

losses may

exceed insurance

limits. This

risk of

loss

also

legal

actions

that

could

arise

as

a

result

of

deficiencies

or

as

a

result

of

non-

compliance with applicable regulatory standards,

adverse business decisions or their

implementation, or customer attrition

due to

potential adverse publicity. In the

event of a

breakdown in our

internal control systems,

improper operation of

systems

or improper employee actions, we could suffer financial

loss, face regulatory action, and/or suffer damage to

our reputation.

We have several

large depositor relationships,

the loss of which

could force us to

fund our business

through

more expensive and less stable sources.

Withdrawals of deposits by any

one of our largest depositors

could force us to

rely more heavily on more

expensive and

less stable funding sources.

the occurrence of any

of these events could

have a material adverse

Our securities portfolio performance in difficult market conditions could have adverse effects on

our results of

.

Unrealized losses on

investment securities result from

changes in credit

spreads and liquidity

issues in the

marketplace,

along

with

changes

in

the

credit

profile

of

issuers.

Under

GAAP,

we

are

to

review

our

for

the

presence

losses

of

our securities,

taking

into consideration

current

and

future

market

the

extent

and

nature

of

changes

in

fair

value,

issuer

rating

changes

and

trends,

of

earnings, current

analysts’ evaluations,

and intent

to hold

investments until

a recovery

of fair

value, as

well as

other factors. Adverse developments with respect to one or more of

the foregoing factors may require us to deem particular

securities to be impaired, with the credit-related portion of

the reduction in the value recognized as a

charge to our earnings

through an allowance. Subsequent valuations,

in light of factors prevailing at that

time, may result in significant changes

in

the values of these securities in future periods.

Any of these factors could require us to

recognize further impairments in the

value of our securities portfolio, which may have an adverse

effect on our results of operations in future periods.

We may not

effectively execute

on our expansion

strategy, which

may adversely affect

our historical growth and earnings trends.

Our

primary

expansion

strategy

focuses

on

organic

growth,

supplemented

by

of

institutions and

banking teams;

we may

not be

able to

successfully execute

aspects of

our expansion

which

may

cause

our

future

growth

rate

to

decline

below

our

recent

levels,

or

may

prevent

us

from

growing at

all. More

specifically,

we may

not be able

to generate

sufficient new

deposits within

acceptable risk

and

expense

tolerances

or

obtain

the

or

funding

for

growth.

Various

factors,

such

as

economic conditions

and competition

with other financial

institutions, may impede

or restrict the

growth of our

Further, we may be unable to attract

and retain experienced bankers, which could

adversely affect our growth. The success

of our strategy also depends on our ability to manage our growth effectively,

which in turn depends on a number of factors,

our

ability

to

adapt

our

credit,

operational,

technology,

risk

and

infrastructure to accommodate expanded operations.

Even if we are successful in continuing our growth,

such growth may

not offer the same

levels of potential profitability,

and we may not

be successful in

controlling costs and maintaining

asset

quality in the

face of that

growth. Accordingly,

our inability

growth or

manage growth

an adverse effect on our business, financial condition

New lines of business, products, product enhancements

or services may subject us to additional risk.

From time to time, we

may implement new lines

of business or offer

new products and product

enhancements as well

as new

services within

our existing

lines of

business. There

are substantial

risks and

uncertainties associated

with these

efforts. In

developing, implementing

or marketing new

lines of business,

products, product

enhancements or

services, we

may invest significant time and

resources. We may underestimate the appropriate level

of resources or expertise

to

make

new

lines

of

or

successful

or

to

realize

their

benefits.

We

may

not

achieve

the

milestones

set

in

initial

timetables

for

the

and

introduction

of

new

lines

of

products,

product

enhancements or services, and price

and profitability targets may not

prove feasible. External factors, such

as compliance

with regulations, competitive

alternatives and shifting

market preferences, may

also impact the

ultimate implementation of

a new line of business or offerings of new products, product

enhancements or services. Any new line of business,

product,

product enhancement or service could have a significant impact on the effectiveness of our system of internal controls. We

decide to

discontinue

businesses

or products,

due to

lack

of customer

acceptance

or unprofitability.

Failure to

successfully develop and implement new lines of business or offerings of new products, product enhancements or services

could have an adverse effect on our business, financial condition and results

of operations and could subject us to new and

unanticipated operational, credit, regulatory and reputational risks,

among other risks.

needs and

future growth

may require

us to

raise additional

capital and

that capital

may not

be

available on terms acceptable to us or may be dilutive to

existing shareholders.

We believe that we

have sufficient capital

to meet our capital

needs for our current

growth plans. However,

we expect

that we

will need

additional capital,

in the

form of

debt or

equity securities,

in the

future to

have sufficient

capital

to

meet

our

longer-term

growth

plans,

and/or

if

the

quality

of

our

assets

or

were

to

deteriorate

significantly.

In addition, we

are required by federal

regulatory authorities to

maintain adequate levels

of capital to support

our operations.

Our ability

capital will

depend on,

among other

things, conditions

in the

capital markets,

which are

outside of

our control, and our financial performance. Accordingly,

we cannot provide assurance that such capital will

be available on

terms acceptable to us or at all. Any occurrence

that limits our access to capital may adversely

affect our capital costs and

our ability to raise capital. Further, if we need to raise capital in the future, we may have to do so when many other financial

institutions are also

seeking to

raise capital and

would then have

to compete with

those institutions for

investors. Any inability

to raise capital on acceptable terms when needed may cause us to

either issue additional shares of common stock or other

securities on less than

desirable terms or

reduce our rate of

growth until market conditions

become more favorable. If

any

of such

events occur, they could

have a material

adverse effect on

our business, financial

condition and results

and could be dilutive to both tangible book value and our

share price.

Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank

and to

commit

to support

such subsidiary

bank. Under

the “source

of strength”

doctrine, the

may

require

a

holding

company

to

make

capital

injections

into

a

troubled

bank

and

may

charge

the

holding

company with

engaging

in unsafe

and unsound

practices

for failure

to commit

to a

bank. A

capital

injection may be required

at times when the

holding company may

not have the resources

to provide it and

therefore may

be required to attempt to

borrow the funds or raise

capital. Thus, any borrowing that must

be done by the Company

to make

a required

capital injection becomes

more difficult and

expensive and

Moreover, it is possible that we will be

unable to borrow funds or

otherwise raise capital

at a

time when

it is

needed. In

addition, an

inability to

raise capital

when needed

may subject

us to

increased regulatory

supervision and

the

imposition of

on our

growth

and business.

These restrictions

could

affect

our

ability

to

operate

or

further

expand

our

through

loan

growth,

or

the

establishment

of

branches. These restrictions may also

result in increases in operating

expenses and reductions in revenues

that could have

a material adverse effect on our financial condition,

results of operations and our share price.

We may

grow through

mergers or

acquisitions,

a strategy

not be

successful or,

if successful,

may

produce risks in successfully integrating and managing the merged companies or acquisitions and may dilute our

As

part

of

our

growth

we

may

pursue

mergers

and

of

banks

and

non-bank

companies within or outside our principal market areas that fit within the mission-driven values of our franchise and that we

believe support our business and make financial and strategic

sense. We may have difficulty identifying suitable acquisition

candidates or executing on acquisitions that we pursue, and we may

not realize the anticipated benefits of any transactions

we complete. Additionally,

for any opportunistic

acquisition we were

to consider,

we expect to

face significant

from

other

many

of

which

will

have

greater

than

we

do.

attractive opportunistic

may

not be

us. There

can be

no assurance

that we

will

be

successful in identifying or completing any future acquisitions.

Mergers and acquisitions involve numerous risks, any

of which could harm our business, including:

•

the possibility that expected benefits

may not materialize in the

time frame expected or at

all, or may be more

costly

to achieve, or that the acquired business will not perform

to our expectations;

•

time,

expense

and

difficulties

in

integrating

the

and

services,

technologies,

existing contracts, accounting processes

and personnel of the target

and realizing the anticipated synergies

of the

combined businesses;

•

incurring the

time and

expense associated with

identifying and

evaluating potential acquisitions

and merger

partners

and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our

existing business;

•

difficulties in supporting and transitioning customers

of the target and disruption of our ongoing banking

•

the price we

pay or other

resources that we

devote may exceed

the value we

realize, or the

value we could

have

realized if we had allocated the purchase consideration

or other resources to another opportunity;

•

entering new markets or areas in which we have limited or

no experience;

•

the possibility that our culture is disrupted as a result of

an acquisition;

•

potential loss of key personnel and customers from either

our business or the target’s business;

•

assumption of unanticipated problems, claims or other liabilities

of the acquired business;

•

an inability to realize expected synergies or returns on

investment;

•

the possibility of regulatory approval for the acquisition being delayed,

impeded, restrictively conditioned, including

the requirement to divest

various activities, or denied

due to existing or

new regulatory issues surrounding

us, the

target institution or the proposed combined entity and

the possibility that any such issues associated with

the target

institution, of which

we may or

may not be

aware at the

time of the

acquisition, could adversely impact

the combined

entity after completion of the acquisition;

•

the possibility that the acquisition may not be timely completed,

if at all;

•

the need to raise capital; and

•

inability to generate sufficient revenue to offset

acquisition costs.

Any acquisition activities we engage in could require us to use a substantial amount of cash, other liquid assets, and/or

incur debt. Also, if

we finance acquisitions by issuing equity securities,

our existing shareholders’ ownership may be

diluted,

which

could

affect

the

market

price

of

our

Class

A

common

stock.

if

the

goodwill

in

connection with our potential future acquisitions were determined to be impaired, then we would be required to recognize a

charge against our earnings, which

could materially and adversely affect our

results of operations during the

period in which

the impairment was recognized. Acquisitions

may also involve the payment

of a premium over book

and market values and,

therefore, some

dilution of

our tangible

book value

and net

income per

common share

may occur

in connection

with any

future transaction.

As a result, we

may not achieve the

anticipated benefits of

any such merger or

acquisition, and we

may incur costs

in

excess

of

what

we

anticipate.

Our

failure

to

successfully

evaluate

and

execute

mergers,

or

or

otherwise adequately address and manage

the risks associated with

such transactions could have

a material adverse effect

on our business, results of operations and financial condition,

including short-term and long-term liquidity.

The loss of

one or more

of our key

personnel, or our

failure to attract

and retain other

highly qualified personnel

in the future, could harm our business.

Our future success will, to some extent, depend on the continued service of our directors, executive officers and senior

team.

The

loss

of

the

of

any

of

these

individuals

could

have

a

adverse

effect

on

our

In

particular,

we

believe

that

retaining

Luis

de

la

Aguilera,

our

President

and

Chief

Executive

Robert

Anderson, our Chief Financial

and William Turner,

our Chief Credit Officer,

is important to our continuing

success.

we

have

entered

into

employment

and

other

with

certain

members

of

our

and

senior

management team,

including Mr.

de la

Aguilera and

Mr.

Anderson, no

assurance can

be given

that these

individuals will

continue to be employed by us. The loss of any of these individuals could negatively affect our ability to achieve our growth

strategy and could have a material adverse effect

on our business and results of operations.

We also need to continue

to attract and retain other senior

management and to recruit qualified

individuals to succeed

key

to

ensure

the continued

growth

and successful

operation

of our

We

may

be unable

to

attract or

retain qualified

key

in the

future due

to the

intense competition

for qualified

among

in

the

and

related

The

loss

of

the

of any

senior management personnel, or the inability to recruit

and retain qualified personnel in the future, could

have an adverse

effect on our business, results of

operations, financial condition and prospects.

to attract and retain personnel

with appropriate skills and

knowledge to support our

business, we may offer

a variety of benefits, including

equity awards,

which may reduce our earnings or adversely affect our

business, results of operations, financial condition or prospects.

Damage to our reputation could significantly harm

our businesses.

Our ability to attract

and retain customers and

highly-skilled management and employees is impacted

by our reputation.

A negative public

opinion of us

and our business

can result from

any number of

activities, including our

lending practices,

and

compliance,

acquisitions,

complaints

and

actions

taken

by

organizations in

response to

these activities.

Furthermore, negative

publicity regarding

us as

an employer

an

adverse

impact on

our reputation,

to

matters of

diversity,

pay equity

and workplace

harassment.

Significant

harm

to

our

reputation

could

also

arise

as

a

result

of

or

governmental

and

the

activities of our customers, other

participants in the financial services

industry or our contractual counterparties, such

as our

service providers

and vendors.

The potential

harm

is heightened

given

increased attention

to how

corporations

address

environmental, social

and governance

issues. In

addition, a cybersecurity

event affecting

us or our

customers' data

could

have a negative

impact on our

reputation and

customer confidence

in us and

our cybersecurity

practices. Damage

to our

reputation could also

our credit ratings

and access to

the capital markets.

whereas negative

public opinion once was

primarily driven by adverse

news coverage in traditional

media, the widespread use

of social media

platforms by

virtually every

segment of

society facilitates

the rapid

dissemination

of information

or misinformation,

which

magnifies the potential harm to our reputation.

We

face

strong

from

and

other

that

offer

banking

services, which could materially and adversely affect

our business.

The financial

services industry has

become even

more competitive as

a result

of legislative,

regulatory and technological

changes and

continued

banking consolidation,

which

may increase

as a

current economic,

market and

conditions. We

face substantial

in all

phases

of our

from

a variety

of competitors,

including local

banks,

regional

banks,

banks

and,

more

recently,

technology,

or

"fintech"

Many

of

our

competitors offer the same banking services that

we offer and our success depends on

our ability to adapt our

to

evolving

and

requirements.

Increased

in

our

market

may

result

in

reduced new

loan and

lease production

and/or decreased

deposit balances

or less

favorable terms

on loans

and leases

and/or deposit

accounts. We also

face competition

from many

other types

institutions, including

without limitation,

non-bank

specialty

lenders,

private

funds,

banks,

and

other

intermediaries. Should competition in

the financial services industry

intensify, our ability to market our

products and services

may be adversely affected. If we are unable to attract and retain banking customers, we may be

unable to grow or maintain

the levels

of our

deposits and

our results

and financial

condition may

be adversely

affected as

a

result. Ultimately, we

may not be able to compete successfully against current

and future competitors.

We must respond to rapid technological changes

to remain competitive.

We will

have to respond

to future

technological changes,

which are occurring

at a rapid

pace in the

financial services

industry.

We

expect

that

new

technologies

and

to

the

banking

will

to

emerge, and these

new technologies and business

processes may be

better than those

we currently use. Because

the pace

of technological change

is high and our

industry is intensely

competitive, our future

success will depend,

in part, upon our

ability to address

the needs of

our customers by using

technology to provide products

and services that

will satisfy customer

demands for convenience,

as well as to

create additional efficiencies

in our operations.

We may not

be able to implement

new technology-driven products

and services effectively

or be successful

in marketing these

products and services

to our

customers. Failure to keep pace successfully with technological change affecting the financial services industry could harm

our

ability

to

compete

effectively

and

could

have

an

adverse

effect

on

our

and

results

of

operations. As

these

technologies

improve

in the

future,

we may

be required

to make

capital

expenditures

in

order to remain

competitive, which may increase

our overall expenses

and have an

adverse effect on our

We

continually

encounter

technological

change,

and

we

may

have

fewer

than

many

of

our

competitors to invest in technological improvements.

The financial

services industry is

undergoing rapid technological

changes with frequent

introductions of new

technology-

driven products and

services. The effective use

of technology increases efficiency

and enables financial institutions

to better

serve customers and to reduce

costs. Our future success

will depend, in part, upon

our ability to address the

needs of our

clients by using technology to

provide products and services

that will satisfy client demands

for convenience, as well

as to

create additional

efficiencies in our operations. Many national vendors provide turn-key services to community banks, such

as internet banking and remote deposit capture that allow smaller banks to compete

with institutions that have substantially

greater resources

to invest

in technological

improvements.

We

may

not

be

able,

new

technology-driven products and services or be successful

in marketing these products and services to our customers.

A

failure,

interruption,

or

breach

in

the

of

our

or

those

of

our

contracted

vendors,

could

disrupt

our

result

in

the

of

confidential

damage

our

reputation,

and

create

significant financial and legal exposure.

Although we

devote significant

resources to maintain

and regularly update

our systems and

processes that are

to

protect

the

of

our

computer

software,

networks

and

other

technology

assets,

as

well

as

the

confidentiality,

integrity and availability

of information belonging

to us and

our customers,

there is no

assurance that

all of

our

will

provide

absolute

security.

Many

us,

have

been

subjected

to

attempts to infiltrate the security of their websites or other systems, some involving sophisticated targeted

attacks intended

unauthorized access

to confidential

information, destroy

data, disrupt

or degrade

service, sabotage

systems or

cause other damage, including through the introduction of

computer viruses or malware, cyber-attacks and other means. At

this point,

although there

is no

knowledge or

indication that we

have experienced a

material cyber-incident or

security breach

that has been successful in compromising our

data or systems to date, we can

never be certain that all of our

systems are

entirely free from vulnerability to breaches of security or

other technological difficulties or failures.

Despite efforts to

ensure the integrity

and security of

our systems, it

is possible that

we may not

be able to

anticipate,

detect or recognize

threats to our

systems or to

implement effective

preventive measures

against all efforts

to breach our

security inside or outside our business, especially because the techniques used to attack our systems

change frequently or

are

not

until

launched,

and

because

cyber-attacks

can

originate

from

a

wide

variety

of

individuals or groups who are associated with

external service providers or who are or

may be involved in organized crime

or linked

to terrorist

organizations or

hostile foreign

governments. Those

parties may

also attempt

to fraudulently

induce

employees, customers, third-party service providers or other users of our systems to disclose sensitive information in order

to gain access

to our data or

that of our customers

or clients. Similar

to other companies,

our risks and exposures

related

to cybersecurity attacks have increased as

a result of the related increased

reliance on remote working (largely

as a result

of the COVID-19 pandemic)

and the increase in

digital operations. Such

risks and exposures

are expected to

remain high

for the foreseeable

future due

to the rapidly

evolving nature

and sophistication

threats and

the expanding

use of

technology, as our web

-based product offerings grow and we expand

internal usage of web-based applications.

A successful

penetration

or

circumvention

of the

of our

including those

of our

vendors,

could

cause

serious

consequences,

disruption

of

our

misappropriation

of

confidential information,

or damage

to computers

or systems,

and may

result in violations

of applicable

privacy and

other

laws, financial loss,

loss of confidence

in our security measures,

customer dissatisfaction, increased

insurance premiums,

significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on our business,

financial condition, results of operations, and future prospects.

We

rely

on

other

to

provide

key

components

of

our

infrastructure

and

our

could

be

interrupted

if

our

service

providers

experience

difficulty,

their

or

fail

to

comply with banking regulations.

Third parties

provide key

components of

operations such

as data

processing, recording

and monitoring

transactions,

online

banking

interfaces

and services,

Internet

connections

and

network

access.

While

we

have

selected

these third-party

vendors carefully,

performing upfront

due diligence

and ongoing

monitoring activities,

we do

not control

their actions. Any problems caused by these third parties, including those resulting from disruptions in services provided by

a

vendor

as

a

result

of

a

cyber-attack,

other

event

or

a

natural

disaster),

or

operational difficulties

for the vendor,

issues at third-party

vendors to our

vendors, failure of

a vendor to

handle current or

higher volumes, failure of a vendor to provide services for

any reason, poor performance of services, failure to comply

with

applicable laws

and regulations,

or fraud

or misconduct

on the

part of

employees of

any of

our vendors,

could adversely

affect our ability

to deliver products

and services to

our customers, our

reputation and our

ability to conduct

prospects, cash

flow,

liquidity,

In

certain

situations,

replacing

these

vendors

could

also

create

delay,

expense,

and

difficulties, which

our business.

use of

such third

parties creates

an unavoidable

and inherent

risk to

operations. Such

risk is

generally expected

to remain

elevated as

many of

our vendors

have also

been, and

may

further be,

by increased

reliance

on remote

work

environments,

market

and

other factors

that increase

their risks

of business

disruption or

otherwise affect

their ability

to perform

terms of any agreements with us or provide essential services.

Our operations could be interrupted or

materially impacted if any of our

third-party service providers fail to comply

with

banking regulations

applicable laws.

The Federal

Reserve, FDIC,

FOFR, and

other regulators

expect financial

to

be

responsible

for

all

aspects

of

their

aspects

that

they

delegate

to

third

we will

be responsible

for deficiencies

in our

oversight and

control of

our third

party relationships

and in

the

performance of the parties with which

we have these relationships. As

a result, if our regulators conclude that

we have not

exercised adequate oversight and control over our third party vendors or

other ongoing third party business relationships or

that

such

third

parties

have

not

performed

appropriately,

we

could

be

subject

to

remedial

and/or

including civil

money penalties

or other

or judicial

penalties or

fines

as well

as requirements

for customer

remediation, any of which could have a material adverse

effect our business, financial condition or results

Litigation and regulatory actions,

including possible enforcement actions, could subject

us to significant fines,

or

other

in

or

on

our

In the normal course of

business, from time to time, we

have in the past and

may in the future be

named as a defendant

in various

legal actions

arising in

connection with

our current

and/or prior

activities. Legal

actions could

include

claims for substantial compensatory and/or

punitive damages or claims for indeterminate

amounts of damages. Further,

in

the future

our

federal

and/or

state

bank

may

impose

consent

orders,

civil

money

matters

requiring

attention, or similar types of

supervisory penalties or criticism. We may also,

from time to time, be

the subject of subpoenas,

requests

for

reviews,

investigations

and

proceedings

(both

formal

and

informal)

by

governmental

regarding our

current

and/or prior

Any such

legal or

actions may

subject

us to

compensatory

or

punitive

damages,

fines,

to

change

our

practices

or

other

requirements resulting

in increased

expenses, diminished

income and

damage to

our reputation.

Our involvement

in any

such matters,

whether tangential

or otherwise

and

even if

the matters

are ultimately

in our

favor,

cause significant harm to our

reputation and divert management attention away from

the operation of our business.

any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by

may

result

in

litigation,

investigations

or

proceedings

as

other

litigants

and

begin independent

reviews of

activities. As

a result,

the outcome

of legal

and regulatory

actions could

have an

adverse effect on our business, results of operations

Certain of

our directors may

have conflicts

of interest in

determining whether to

present business

to us or another entity with which they are, or may

become, affiliated.

Certain of our

directors are or may

become subject to fiduciary

obligations in connection with

their service on the

boards

of

of

other

corporations,

A

director's

association

with

other

which give rise to

fiduciary or contractual obligations to such other

institutions, may create conflicts of interest. To the extent

that any of our directors

become aware of acquisition

opportunities that may be

suitable for entities other

than us to which

they have fiduciary or contractual obligations, or they are

presented with such opportunities in their capacities as fiduciaries

to such

entities, they

may honor

such obligations

to such

other entities.

You

should assume

that to

the extent

any of

our

directors become aware

of an opportunity

that may be

suitable both for

us and another

entity to which

such person has

a

fiduciary obligation

or contractual

to present

such

opportunity as

set forth

above,

he or

she may

first give

the

opportunity to such other entity

or entities and may give

such opportunity to us only

to the extent such other

entity or entities

reject

or

are

unable

to

pursue

such

opportunity.

In

you

should

assume

that

to

the

extent

any

of

our

become

aware

of

an

opportunity

that

does

not

fall

within

the

above

parameters,

but

that

may

be

suitable for us, he or she may not present such opportunity

to us.

Pursuant to an agreement between us and each of our Significant Investors

(as defined below), each of the Significant

Investors has the right

to nominate one

director to serve

on our Board, including

Board committees, and

to designate one

non-voting Board

observer.

The directors

and Board

observers

designated by

the Significant

Investors have

the right

to,

and have

no duty

not to,

engage in

business activities

or lines

of business

as us.

In the

event that

a

director or Board observer designated by a Significant Investor acquires knowledge of a potential transaction or matter that

may be

a corporate opportunity

for us,

such person shall

have no

duty to

communicate or

present such corporate

opportunity

to us

and shall

not be

liable to

us or

our shareholders

for breach

of any

duty by

reason of

the fact

that such

person or

a

related investment fund

thereof, directly or

indirectly, pursues or acquires such opportunity

for itself, directs

such opportunity

to another person, or does not present such opportunity

to us.

Risks Related to Our Tax,

Accounting and Regulatory Compliance

Our ability to recognize

the benefits of

our deferred tax

assets is dependent

on future cash flows

and taxable

income and may be materially impaired upon significant

changes in ownership of our common stock.

We recognize the expected future tax

benefit from deferred tax assets when

it is more likely than

not that the tax benefit

will be

realized. Otherwise,

a valuation

is applied

against our

tax assets,

reducing

of such

assets. Assessing

the recoverability

of deferred

requires management

to make significant

estimates related

to

of

future

taxable

income

from

all

reversal

of

taxable

temporary

differences,

forecasted

and

tax

planning

Estimates

of

future

taxable

income

are

based

on

forecasted

income from operations and the application of existing tax laws in each jurisdiction. The improved risk profile of the Bank is

a key

component used

in the determination

of our

realize the

expected future

benefit of

our deferred

tax assets.

To

the extent that future taxable income differs

significantly from estimates as a result

of the interest rate environment and

loan growth capabilities or other factors, our ability to realize

the net deferred tax assets could be negatively

affected.

Subject to certain exceptions, our Class A common stock is subject

to transfer restrictions as set forth in our Articles of

Incorporation that are

designed to preserve

our deferred tax

assets. Notwithstanding these

protective provisions, the

Articles

of Incorporation include

an exception that

allows our Significant

Investors the right

to effect any

transfer that would

be prohibited, which transfer could result in the loss of the deferred

tax assets.

significant future

issuances of

or common

stock equivalents,

or changes

in the

direct or

indirect ownership

of our

or common

stock equivalents,

could cause

an ownership

change and

could limit

utilize our net

operating loss carryforwards

and other tax

attributes pursuant

to Section 382

and Section 383

of the Internal Revenue Code.

Future changes in tax law or

changes in ownership structure could

limit our ability to utilize

our recorded net deferred tax assets.

The

of

our

and

related

could

be

if

the

assumptions or estimates used in our critical accounting

policies are inaccurate.

The

preparation

of

our

and

related

in

conformity

with

GAAP

us

to

make

and

that

affect

the

amounts

in

our

and

accompanying notes. In some cases, management

must select the accounting policy or method

to apply from two or more

alternatives,

any of

which

may be

under

the circumstances,

yet

which

may result

in

our

results

than

would

have

been

under

a

alternative.

Certain

are

or

significant to presenting our financial

condition and results of

operations. Our critical accounting policies, which

are included

in the section captioned "Management's Discussion and Analysis of Financial Condition and Results

of Operations" in Item

7 of this Annual Report

on Form 10-K, describe

those significant accounting

policies and methods used

in the preparation

of

our

that

we

because

they

require

and

estimates that materially affect our consolidated financial statements and related disclosures. As a result, if

future events or

regulatory views concerning such analyses differ significantly from the judgments, assumptions and estimates in

our critical

accounting policies,

those events

or assumptions

a material

impact on

our consolidated

financial statements

and

related

disclosures,

in

each

case

in

our

need

to

revise

or

restate

prior

period

cause

damage to our

reputation and

the price

of our Class

A common stock

and adversely affect

our business, prospects,

cash

flow, liquidity,

As a new public

company, we may not efficiently or effectively create an

effective internal control environment,

and any

future failure

effective internal

financial reporting

could impair

the reliability

of

statements, which

in turn could

harm our business,

impair investor

confidence in the

accuracy and

completeness of

reports and

our access

to the

capital markets,

cause the

price of

stock to decline and subject us to regulatory penalti

es.

Our management is responsible for establishing

and maintaining adequate internal control over financial

reporting and

and

on

that

system

of

control.

Our

control

over

consists

of

a

process

to

provide

the

of

and

the

preparation

of

financial statements for external purposes in accordance with GAAP.

As a public company,

we are required to comply with

SEC regulations, including

the Sarbanes-Oxley Act

and other rules

that govern public

companies that we

previously were

not required to comply with

as a private company.

In particular,

we are required to certify

our compliance with Section

of the

Sarbanes-Oxley Act, which

requires us to

annually furnish

a report by

management on the

effectiveness of our

control

over

reporting.

When

our

over

reporting,

we

may

weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance

with the requirements of Section 404 of the Sarbanes-Oxley Act. We periodically review our formal policies, processes and

practices related to financial reporting

and to the identification of

key financial reporting risks, assess

their potential impact

and the linkage of those risks to specific areas and controls

within our organization.

If we fail to achieve and maintain the adequacy of

our internal controls, as such standards are modified, supplemented,

or amended from time to

time, we may not

be able to ensure

that we will be able

to conclude on an ongoing

basis that we

have

over

in

with

Section

of

the

Sarbanes-Oxley

Act.

We

cannot be certain as to the timing of completion of our evaluation, testing,

and any remediation actions or the impact of the

same on our

operations. If

we fail to

adequately comply

with the requirements

of Section

404 of the

Sarbanes-Oxley Act,

we may be subject to adverse regulatory consequences and

there could be a negative reaction in the

financial markets due

to a loss of investor confidence in us and the

reliability of our financial statements. In addition,

we may be required to incur

costs in improving

our internal control

system and

hiring additional

personnel. Any

such action could

negatively affect

our

business, financial condition, results of operations, and the

price of our Class A common stock may decline.

While we remain an

emerging growth company or a

non-accelerated smaller reporting company, we will not be

to

include

an

attestation

report

on

control

over

issued

by

our

independent

public

accounting firm.

To

prepare for

eventual compliance

with the auditor

attestation requirement

of Section

404 of

Sarbanes-

Oxley once we no

longer qualify as an

emerging growth company

or as a non-accelerated

smaller reporting company,

we

are engaged

in a process

to document

and evaluate

financial reporting,

both costly

and

challenging. In this regard, we will need to

dedicate internal resources, potentially engage

outside consultants and adopt a

detailed

work

plan

to

assess

and

document

the

of

control

over

reporting,

steps

to

improve control

processes as appropriate,

validate through testing

that controls are

functioning as documented

and continue

to refine our

reporting and improvement

process for

internal control over

financial reporting. Despite

our efforts,

there is a

we will

not be

able to

conclude, within

the prescribed

time frame

or at

all, that

reporting is effective as

required by Section 404

of Sarbanes-Oxley. If we identify one

or more material weaknesses,

it could

result in an adverse reaction in the financial markets due to a

loss of confidence in the reliability of our financial statements.

We

operate

in

a

highly

regulated

environment,

and

the

laws

and

that

govern

our

corporate governance,

and accounting

principles, or

them, or

our failure

to

comply with them, could adversely affect us.

We operate in a

highly regulated industry and

we are subject to

examination, supervision and comprehensive

by various federal and state agencies,

including the Federal Reserve, the

FDIC and the FOFR. As

such, we are subject to

extensive regulation, supervision and

legal requirements that govern almost

all aspects of our operations.

These laws and

are

not

to

protect

our

Rather,

these

laws

and

are

to

protect

customers, depositors, the Deposit Insurance Fund,

or DIF, and the overall financial health and

stability of the United

States

banking

system.

These

laws

and

regulations,

among

other

matters,

prescribe

minimum

capital

impose

limitations on the

business activities

and investments

can engage, regulate

and restrict our

lending activities,

require us to provide certain banking services broadly within the communities in which we operate,

determine the locations

of our branch

offices and impose certain

specific accounting requirements on us

that may be more

restrictive and may result

in

greater

or

earlier

charges

to

or

reductions

in

our

capital

than

GAAP

would

require.

We

are

also

subject

to

capitalization

by

our

regulators,

which

require

us

to

capital

to

support

our

Compliance

with

laws

and

can

be

and

costly,

and

changes

to

laws

and

often

impose additional operating costs. Further, we must obtain approval from our

regulators before engaging in many activities,

and

our

have

the

ability

to

compel

us

to,

or

restrict

us

from,

taking

certain

actions

entirely.

There

can

be

no

assurance that any regulatory approvals we may require

or otherwise seek will be obtained.

Regulations affecting

banks and

other financial

institutions are

undergoing continuous

review and

frequently change,

and the ultimate effect of such changes cannot be predicted. Changes to the legal and regulatory framework governing our

operations, including

the Dodd-Frank

Wall

Street Reform

and Consumer

Protection Act,

or the

Act, and

the

Economic Growth, Regulatory Relief and Consumer

Protection Act, or the Regulatory Relief

Act, have significantly revised

the laws and regulations under which we operate. Such regulations and laws may be modified or repealed at any time, and

new legislation may be enacted that will affect us and

our subsidiaries.

Our failure to comply with these laws and regulations, even if the failure follows good faith effort

or reflects a difference

in

interpretation,

could

subject

us

to

on

our

actions

and

fines

and

other

any

of

which

could

affect

our

results

of

capital

levels

and

the

price

of

our

securities. Further, any new laws, rules and

regulations, such as were imposed

under the Dodd-Frank Act or

the Regulatory

Relief Act, could make

compliance more difficult

or expensive or otherwise

adversely affect our

business, prospects, cash

flow, liquidity,

We

face

a

risk

of

noncompliance

with

the

Bank

Secrecy

Act

and

other

and

regulations and corresponding enforcement proceedings.

The

federal

Bank

Secrecy

Act,

the

Uniting

and

Strengthening

America

by

Providing

Appropriate

Tools

Required

to

Intercept and

Obstruct Terrorism

Act of

2001, or

the USA

PATRIOT

Act, and

other laws

require financial

institutions, among

other duties,

to institute

and maintain

effective anti-money

laundering programs

and to

file suspicious

activity and

currency transaction

reports, as

appropriate. The

federal Financial

Crimes Enforcement

Network, or

FinCEN,

established by the

Department to

administer the

Bank Secrecy

Act, is authorized

to impose significant

civil

money penalties for

violations of those

requirements and has engaged

in coordinated enforcement efforts

with the individual

federal

banking

regulators,

as

well

as

the

U.S.

Department

of

Justice,

Drug

Enforcement

Administration

and

Revenue Service. Additionally,

South Florida has been designated as a “High Intensity Financial Crime Area” (“HIFCA”)

by

FinCEN and

a “High

Intensity Drug

Trafficking

Area” (“HIDTA”)

by the

Office of

National Drug

Control Policy.

The HIFCA

program is intended to concentrate law enforcement efforts

to combat money laundering efforts in higher-risk

areas. There

is also increased scrutiny of compliance with

the rules enforced by OFAC. Federal and state bank regulators have for many

years

focused

on

with

Bank

Secrecy

Act

and

regulations.

In

order

to

comply

with

regulations, guidelines and examination procedures in this area, we have

dedicated significant resources

to our anti-money

laundering program, especially

due to the regulatory

focus on financial

and other institutions

located in South

Florida. Our

supporting

our

customers,

foreign

with

respect

to

their

banking

needs

and

our policies,

and

systems

have

been

to

address

federal

and

state

compliance.

If

our

and

systems

are

deemed

deficient

or

the

and

systems of the

financial institutions that

we may acquire

are deficient, we

would be subject

to liability,

including fines, and

regulatory actions that are

deemed necessary in order

to remediate such deficiencies

and prevent the recurrence

thereof.

In recent years, sanctions that the regulators have

imposed on banks that have not complied with

all anti-money laundering

have

been

severe.

Failure

to

and

to

combat

money

laundering and

terrorist financing

have serious

reputational consequences

for us,

have a

adverse effect on our business, financial condition

We

are

subject

to

capital

and

may

become

subject

to

more

stringent

capital

requirements, which could adversely affect our

In

2013,

the

federal

banking

published

new

capital

rules

based

on

the

standards,

known as

Basel III,

that were

developed by

the Basel

Committee on

Banking Supervision.

The new

rules raised

the risk-

based capital

and revised

the

methods for

calculating

risk-weighted

assets, usually

in higher

risk

weights. The new rules now apply to us.

The Basel III rules increased

capital requirements and included

two new capital measurements,

a risk-based common

equity Tier 1 ratio

and a capital conservation buffer.

Common Equity Tier

1 (CET1) capital is a subset

of Tier 1 capital

and

is limited to common

equity (plus related surplus), retained earnings,

accumulated other comprehensive income and certain

other

items.

Other

that

have

historically

qualified

for

Tier

treatment,

noncumulative

perpetual

preferred stock,

are consigned

to a

category known

as Additional

Tier

1 capital

and must

be phased

out of

CETI over

a

nine years

beginning in

2014. In

order to

be a

“well-capitalized” depository

institution under

the new

regime, an

institution must maintain a

CET1 capital ratio of 7.0%

or more; a Tier

1 capital ratio of 8.5%

or more; a total capital

10.5% or more; and a leverage ratio of 4% or more.

Institutions must also maintain a capital conservation

buffer consisting

of common equity

Tier 1

capital. In addition

to the higher

required capital ratios

and the new

deductions and adjustments,

the final

rules increased

the risk

weights for

certain assets,

meaning that

we will

have to

hold more

capital against

these

assets. We are also be required to hold capital against

short-term commitments that are not unconditionally cancellable.

While we currently meet these new

requirements of the Basel III-based capital requirements, we

may fail to do so

in the

future. The failure

to meet applicable

regulatory capital

requirements could result

in one or

more of our

regulators placing

limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities,

and could affect customer and investor confidence, our costs of funds and level of required deposit insurance

to the FDIC,

pay dividends on

our capital stock,

make acquisitions, and

our business, results

of

operations and financial condition, generally.

in the

current economic

and regulatory

environment, including

the COVID-19

pandemic, bank

may

impose

capital

that

are

more

stringent

than

those

by

regulations.

The

application of more stringent capital requirements for

us could, among other things, result

in lower returns on equity, require

the raising of additional

capital, and result

in regulatory actions if

we were to be

unable to comply with

such requirements.

Implementation

of

changes

to

asset

risk

weightings

for

capital

calculations,

items

or

deducted

in

calculating regulatory capital or additional capital conservation buffers, could result in management modifying our business

strategy and could limit our ability to make distributions,

including paying dividends.

We are periodically subject

to examination and

scrutiny by a

number of banking agencies

and, depending upon

the findings and determinations

of these agencies, we may

be required to make adjustments

to our business that

could adversely affect us.

As part of

the bank regulatory process,

the Federal Reserve, the

FDIC and the FOFR

periodically conduct examinations

of our business,

including compliance

with applicable

laws and regulations.

If, as a

result of an

examination, one

banking

were

to

determine

that

the

capital

resources,

asset

quality,

asset

concentration,

earnings prospects, management, liquidity sensitivity

to market risk, risk

management and internal controls

or other aspects

of any of our operations has become unsatisfactory, or that we or our management are in violation of any law or regulation,

agency could

take a

different remedial

or punitive

actions as

it deems

appropriate. These

actions

include the power to prohibit the continuation

of "unsafe or unsound" practices, to require

affirmative actions to correct any

from

any

violation

or practice,

to

issue an

order

or enforcement

that

can

be judicially

enforced, to direct an increase

in our capital, to restrict our

growth, to change the asset composition

of our loan or securities

portfolios

or

balance

sheet,

to

assess

civil

monetary

against

our

or

to

remove

and

directors and, if

it is concluded

that such conditions

cannot be corrected

or there is

an imminent risk

of loss to

depositors,

to

our

deposit

and

force

us

to

our

If

we

become

subject

to

such

regulatory actions, our business, financial condition, result

s

of operations and reputation may be negatively impacted.

We

are

subject

to

laws

and

of

certain

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.

The CRA directs all insured depository institutions to help meet the credit needs of the local communities

in which they

operate

branches,

low-

and

moderate-income

neighborhoods.

Each

is

examined

by

its

primary federal

regulator,

which assesses

the institution’s

CRA performance.

The Equal

Credit Opportunity

Fair

Housing

Act

and

other

fair

lending

laws

and

impose

nondiscriminatory

lending

on

institutions. The U.S. Department of Justice, the Federal Reserve, and other federal agencies are responsible for enforcing

these laws and regulations. A successful regulatory challenge to our performance under the CRA, fair lending or consumer

lending

laws

and

could

result

in

a

wide

variety

of

sanctions,

damages

and

civil

money

injunctive

relief,

restitution,

on

mergers

and

activity,

on

expansion,

and

on

entering

new

lines.

Private

parties

may

also

have

the

ability

to

challenge

an

under

fair

lending

laws

in

private

class

action

litigation.

Such

actions

could

have

an

adverse

effect

on

our

business, financial condition and results of operations.

Climate change and related legislative and regulatory initiatives may materially affect our business and results

The effects

of climate change

continue to create

a significant level

of concern

for the state

of the global

environment.

As a result, the global business community has increased

its political and social awareness surrounding the issue,

and the

has entered

into international

agreements in

an attempt

to reduce

global temperatures,

such as

reentering

the Paris Agreement.

the U.S. Congress,

state legislatures and

federal and state

continue to

propose numerous

initiatives to

supplement the

global effort

to combat

climate change,

including provisions

contained in

the

Inflation

Reduction

Act

of

Similar

and

even

more

expansive

are

under

the

current

administration, including potentially increasing supervisory

expectations with respect to banks’ risk management practices,

accounting for

the effects of

climate change in

stress testing

scenarios and systemic

risk assessments, revising

for credit portfolio concentrations based on climate-related factors

and encouraging investment by banks in climate-related

initiatives and

lending to

communities disproportionately

impacted by

of climate

change. The

lack of

empirical

data surrounding the

credit and other

financial risks posed

by climate change

render it difficult, or

even impossible, to

predict

how climate change

may impact our

and results of

operations; however,

the physical

effects of

climate

change may also directly impact us. Specifically, unpredictable and more frequent weather disasters may adversely impact

the real property, and/or the

value of the

real property, securing the loans

in our portfolios.

Additionally, if insurance obtained

by

our

borrowers

is

insufficient

to

cover

any

losses

sustained

to

the

collateral,

or

if

is

unavailable

to

our

the

securing

our

loans

may

be

by

climate

change,

natural

disasters and

related events,

impact our

of

climate change may negatively impact

regional and local economic activity, which could adversely affect our

customers and

the communities in which

we operate. Overall,

climate change, its

effects and the

resulting, unknown impact

could have a

material adverse effect on our financial condition

Our ability to pay dividends is subject to restrictions.

Holders of our Class A common stock

are only entitled to receive cash dividends when, as

and if declared by our Board

out of funds

legally available

for dividends.

is a bank

that conducts

substantially all

of its

operations through the Bank,

which is a legal entity

separate and distinct from

the Company.

As a result, our ability

to pay

on

our

common

stock

will substantially

depend

upon

the

receipt

of

and

other

from

the

Bank,

the

profitability

of

which

is

subject

to

the

fluctuating

cost

and

availability

of

money,

changes

in

rates

and

economic conditions in general. There

are numerous laws and banking

regulations and guidance that limit

the Bank's ability

to pay dividends to us and our ability to pay dividends on our

The market price and trading volume of our Class A

common stock may be volatile, which could result in rapid

and substantial losses for our shareholders.

The market

price

of

our

Class

stock

may

be highly

volatile

and

could

be

subject

to

wide

fluctuations.

In

addition, the trading volume on

our Class A common stock may

fluctuate and cause significant price variations to

occur. We

cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future.

Some, but

certainly not

all, of

the factors

that could

negatively affect

the price

of our

Class A

common stock,

or result

in

fluctuations in the price or trading volume of our Class

A common stock, include but not limited to:

•

general market conditions;

•

domestic and international economic factors unrelated

to our performance;

•

variations in our quarterly operating results or failure to

meet the market’s earnings expectations;

•

publication of research reports about us or the financial services

industry in general;

•

the determination of securities analysts to not cover our

Class A common stock;

•

the opinion of securities analysts about our stock as an investment;

•

•

future sales of our Class A common stock;

•

adverse market reactions to any indebtedness we may

incur or securities we may issue in the future;

•

actions by our shareholders;

•

the operating and securities price performance of companies

that investors consider to be comparable to us;

•

changes or proposed changes in laws or regulations affecting

our business; and

•

actual or potential litigation and governmental investigations.

In

if

the

market

for

stocks

in

our

or

the

stock

market

in

general,

experiences

a

loss

of

confidence, the

trading price

of the

Class A

could decline

for reasons

unrelated to

condition or results of operations.

If any of the foregoing occurs,

it could cause our Class A common

stock price to fall and

may expose us to lawsuits that, even if unsuccessful, could

be costly to defend and a distraction to management.

There are significant restrictions in our Articles of Incorporation that restrict the

ability to sell our capital stock

to shareholders that would own 4.95% or more of our stock,

excluding our Significant Investors.

Because the

continued availability

of our

"deferred tax

assets" depends,

in part,

on the

our stock

owned by

shareholders owning

5% or more

of our stock,

our Articles of

Incorporation, except

as otherwise may

be approved by

the

Board

or

except

for

transfers

by

our

Significant

Investors,

prohibits

any

direct

or

indirect

of

stock

or

options

to

acquire stock to any

person who, as a

result of the transfer, would own 4.95%

or more of our

stock, as long as the

Company

continues to have "deferred tax assets." Such restrictions may

limit the ability to transfer our stock.

Because

we

are

an

growth

company

and

because

we

have

decided

to

take

of

certain

exemptions from

various reporting

requirements applicable

to emerging

growth companies,

A common stock could be less attractive to investors.

We are

an “emerging

growth company,”

as defined

in the

JOBS Act.

For as

long as

we remain

an emerging

growth

we will

have the

option to take

advantage of

certain exemptions

from various

reporting and

other requirements

that are applicable to other public companies that are not

emerging growth companies, including:

•

we

may

present

only

two

years

of

audited

and

only

two

years

of

related

discussion and analysis of financial condition and results

•

we

are

exempt

from

the

to

obtain

an

attestation

and

report

from

our

auditors

on

assessment of our internal control over financial reporting

under the Sarbanes-Oxley Act;

•

we are permitted to have less extensive disclosure about our

executive compensation arrangements; and

•

we

are

not

to

give

our

non-binding

advisory

votes

on

or

golden

parachute arrangements.

We may

continue to

take advantage

of some

or all

of the

reduced regulatory

and reporting

requirements that

will be

us as

long as

we continue

to

qualify

as an

growth

We

will remain

an emerging

growth

company until the

earliest to occur

of (i) the

last day of

the first fiscal

year in which

our annual gross

revenues exceed $1.235

billion, (ii) the date that the market value of our Class A common

stock that is held by non-affiliates exceeds $700 million as

of the last business day

in June of that year,

(iii) the date on which

we have, during the

previous three-year period, issued

more than $1 billion in non-convertible debt,

or (iv) the end of fiscal year following the fifth

anniversary of the completion of

our IPO (which will be December 31, 2026).

It is possible

that some

investors may

find our Class

A common stock

less attractive

since we chose

to rely

exemptions. If some investors find our Class A common

stock less attractive, there may be a less

active trading market for

our Class A common stock and our stock price may be

more volatile.

Because we have elected

to use the extended

transition period for complying

with new or revised

standards for an “emerging growth company,” our financial statements may not be comparable to companies that

comply with these accounting standards as of the

public company effective dates.

As an emerging

growth company,

we elected to

use the extended

transition period

for complying

with new

or revised

accounting standards under Section 7(a)(2)(B) of the Securities Act. This election allows us to delay the adoption of new or

revised accounting standards

that have different

effective dates for

public and private

companies until those

standards apply

to private companies. As a

result of this election, our

financial statements may not be

comparable to companies that comply

with these

accounting standards

as of

the public

company effective

dates. Because

may not

be

to

that

comply

with

public

company

dates,

may

have

difficulty

or

comparing our

business, performance

or prospects

in comparison to

other public

companies, which

may have a

impact on the value and liquidity of our Class A common stock. We cannot predict if investors will find our Class A common

stock

less

attractive

because

we

have

relied

on

this

exemption.

If

some

find

our

Class

A

common

stock

less

attractive as a result, there

may be a less active trading

market for our Class A common

stock and our stock price

may be

more volatile.

We have existing investors that own

a significant amount of our

common stock whose individual interests may

differ from yours.

A significant percentage of our Class A common stock is currently held by a few institutional investors, including Patriot

Financial Partners II,

L.P.

and Patriot Financial

Partners Parallel II, L.P.

(collectively,

"Patriot"), and Priam

Capital Fund II,

LP

("Priam,"

and

with

Patriot,

the

"Significant

Investors").

As

of

February

29,

Patriot

and

Priam

own

approximately 22.82% and 22.83%,

respectively,

of our outstanding Class A

common stock. In addition,

Patriot and Priam

are each entitled to nominate a director to our Board and have certain subscription rights to purchase new equity securities

that we issue

in the future,

in each case

as long as

certain equity ownership

criteria are met.

Patriot and Priam

also have

certain

registration

rights,

demand

registration

rights,

and

rights.

Patriot

and

Priam

are

independent of each other, these institutional investors will continue to have a significant level of influence over us

because

of their level of

stock ownership and

their right to representation

on our Board. For

example, Patriot and

Priam will have a greater ability than our other shareholders to influence the election of directors and the potential outcome

of other matters submitted

to a vote of

our shareholders, including mergers and

other acquisition transactions, amendments

to our

amended Articles

of Incorporation

and Amended

and Restated

Bylaws, and

other extraordinary

corporate matters.

The interests of these investors

could conflict with the interests of our

other shareholders, and any future transfer

by these

investors of their shares

of Class A

common stock to other

investors who have different

business objectives could adversely

affect our business, results of operations, financial condition,

prospects or the market value of our Class A common

stock.

Provisions

in

our

governing

documents

and

Florida

law

may

have

an

anti-takeover

effect

and

there

are

substantial regulatory limitations on changes of control

Our corporate organizational documents and provisions of federal

and state law to which we

are subject contain certain

provisions that could

have an anti-takeover

effect and

may delay,

make more difficult

or prevent an

attempted acquisition

that you may favor or an attempted replacement of our

Board or management.

Our governing documents include provisions that:

•

empower our Board, without shareholder approval, to issue shares of preferred stock, the terms of

which, including

voting power, are set by our

Board;

•

provide that directors may be removed from office only for cause and only upon a majority vote

of the shares of our

Company with voting power;

•

prohibit holders of our Class A common stock to take action

by written consent in lieu of a shareholder meeting;

•

require holders of at least 10% of our Class A common

stock to call a special meeting;

•

do not provide for cumulative voting in elections of our

directors;

•

provide that

our Board

has the

authority to amend

our Amended

and Restated Bylaws

without shareholder approval;

•

require shareholders that wish to bring business before annual or special meetings of shareholders, or to nominate

candidates for election as directors at our annual meeting of shareholders, to provide

timely notice of their intent in

writing and satisfy disclosure requirements; and

•

enable our Board to increase, between

annual meetings, the number of

persons serving as directors and

to fill the

vacancies created

as a

the increase until

the next

meeting of

shareholders by a

majority vote

of the

present at a meeting of directors.

certain provisions

of Florida

law may

delay,

discourage, or

prevent an

attempted acquisition

or change

in

control. Furthermore,

banking laws

impose notice,

approval, and

ongoing regulatory

requirements on

any shareholder

or

other party that seeks to acquire direct or indirect "control" of a

bank holding company,

which includes the Change in Bank

Control Act

and the

Company Act.

These laws

could delay

or prevent

an acquisition.

Also, for

preservation

and continued

availability of

our "deferred

tax assets,"

our Articles of

Incorporation prohibits

any direct or

indirect transfer

of stock or options

to acquire stock

to any person

who, as a

result of the

transfer,

would own 4.95%

or more of

our stock,

as long as we continue

to have "deferred tax

assets," subject to limited

exceptions as provided in

our amended Articles

of

Incorporation.

Because

of

the

to

overcome

this

restriction,

this

of

the

amended

Articles

of

Incorporation could

have an

anti-takeover effect

and

may delay,

make more

or prevent

an attempted

that you may favor.