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| PART I · |
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| Item 1. | Business | 1 |
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| Item 1A. | Risk Factors | 31 |
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| Item 1B. | Unresolved Staff Comments | 42 |
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| Item 1C. | Cybersecurity | 42 |
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| Item 2. | Properties | 45 |
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| Item 3. | Legal Proceedings | 45 |
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| Item 4. | Mine Safety Disclosures | 45 |
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| PART II | | |
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| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 46 |
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| Item 6. | [Reserved] | 46 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 47 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 62 |
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| Item 8. | Financial Statements and Supplementary Data | 62 |
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 62 |
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| Item 9A. | Controls and Procedures | 62 |
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| Item 9B. | Other Information | 63 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 63 |
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| PART III | | |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 64 |
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| Item 11. | Executive Compensation | 64 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 64 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 64 |
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| Item 14. | Principal Accounting Fees and Services | 64 |
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| PART IV | | |
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| Item 15. | Exhibits and Financial Statement Schedules | 65 |
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| Signatures |
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FORWARD LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,”"intend," “predict,” “forecast,” “improve,” “continue,” "will," "would," "should," "could," "may" and words of similar meaning. These forward-looking statements include, but are not limited to:
| ● | statements of our goals, intentions and expectations; |
● statements regarding our business plans, prospects, growth and operating strategies, and financial condition and results of operation;
● statements regarding the quality of our loan and investment portfolios; and
● estimates of our risks and future costs and benefits.
These forward-looking statements are based on our current beliefs and expectations and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Forward looking statements, by their nature, are subject to risks and uncertainties.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
| ● | general economic conditions, either nationally or in our market area, including potential recessionary conditions or slowed economic growth caused by supply chain disruption or otherwise; |
| ● | changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; |
| ● | changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of and methodology for calculating the allowance for credit losses; |
| ● | our ability to access cost-effective funding; |
| ● | fluctuations in real estate values and both residential and commercial real estate market conditions; |
| ● | demand for loans and deposits in our market area; |
| ● | our ability to implement our business strategies; |
| ● | the effect of our rating under the Community Reinvestment Act; |
| ● | our ability to achieve the expected results of the balance sheet restructuring; |
| ● | our ability to manage or reduce expenses; |
| ● | competition among depository and other financial institutions; |
| ● | inflation and changes in market interest rates that affect our margins and yields, the fair value of financial instruments or reduce our volume of loan originations, the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary market; |
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| ● | adverse changes in the securities markets; |
| ● | changes in the determination of goodwill impairment; |
| ● | changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, Federal Deposit Insurance Corporation assessments and capital requirements, and changes in the monetary and fiscal policies of the Board of Governors of the Federal Reserve System; |
| ● | the imposition of tariffs or other domestic or international governmental policies; |
| ● | negative financial impact from unfavorable regulatory penalties and/or settlements; |
| ● | our ability to manage market risk, credit risk and operational risk; |
| ● | our ability to enter new markets successfully and capitalize on growth opportunities; |
| ● | our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; |
| ● | the current or anticipated impact of military conflict, terrorism or other geopolitical events; |
| ● | a failure in or breach of our operational or security systems or infrastructure, including cyberattacks; |
| ● | system failures or cybersecurity threats against our informational technology and those of our third-party providers and vendors; |
| ● | the failure to maintain current technologies and to successfully implement future information technology enhancements; |
| ● | changes in consumer spending, borrowing and savings habits; |
| ● | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| ● | our ability to attract or retain key employees; |
| ● | our compensation expense associated with equity allocated or awarded to our employees; |
| ● | changes in the financial condition, results of operations or future prospects of issuers of securities that we own; and |
| ● | conditions relating to the Coronavirus pandemic, or other public health emergencies. |
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please also see “Item 1A. Risk Factors.”
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PART I
