What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-02 compared with 2022-03-01 · 46 added, 77 removed, 570 unchanged (18% of the section changed)

6 unchanged sentences

Our businesses and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States.

The current economic environment is characterized by historically low interest rates, which impacts our ability to attract deposits and to generate attractive earnings through our loan and investment portfolio.

Uncertainty about federal fiscal monetary and related policies, the medium and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers, and investors in the United States.

Changes in any of policies are influenced by macroeconomic conditions and other factors that are beyond our control.

Changes in any of the policies are influenced by macroeconomic conditions and other factors that are beyond our control.

In addition, economic conditions in foreign countries, including global political hostilities or public health outbreaks and uncertainty over the stability of foreign currencies, could affect the stability of global financial markets, which could hinder domestic economic growth.

1 unchanged sentence

All of these factors could be detrimental to our business, and the interplay between these factors can be complex and unpredictable.

The geographic concentration of our business in the state of Louisiana, in the Dallas/Fort Worth metroplex and, upon completion of the TCBI merger on March 1, 2022, Houston, imposes risks and may magnify the consequences of any regional or local economic downturn affecting our markets, including any downturn in the real estate sector.

We conduct our operations exclusively in the state of Louisiana, in the Dallas/Fort Worth metroplex and, upon completion of the TCBI merger on March 1, 2022, Houston.

The geographic concentration of our business in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston, imposes risks and may magnify the consequences of any regional or local economic downturn affecting our markets, including any downturn in the real estate sector.

We conduct our operations exclusively in the state of Louisiana, in the Dallas/Fort Worth metroplex and Houston.

As of December 31, 2022, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in our markets and the substantial majority of our secured loans were secured by collateral located in our markets.

72 unchanged sentences

The market value of real estate can fluctuate significantly in a short period of time.

As of December 31, 2021, approximately $2.3 billion, or 73.5%, of our total loans was comprised of loans with real estate as a primary or secondary component of collateral.

As of December 31, 2022, approximately $3.4 billion, or 73.8%, of our total loans were comprised of loans with real estate as a primary or secondary component of collateral.

Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect our business, financial condition, and results of operations.

2 unchanged sentences

Such declines and losses could have adverse effect on our business, financial condition and results of operations.

If real estate values decline, it is also more likely that we would be required to increase our allowance for loan losses, which could have an adverse effect on our business, financial condition and results of operations.

If real estate values decline, it is also more likely that we would be required to increase our allowance for credit losses, which could have an adverse effect on our business, financial condition and results of operations.

We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of the real property.

4 unchanged sentences

A large portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could expose us to credit losses and could adversely affect our business, financial condition and results of operations.

As of December 31, 2021, approximately $721.4 million, or 22.6%, of our total loans were commercial loans to businesses.

As of December 31, 2022, approximately $1.1 billion, or 23.7%, of our total loans were commercial loans to businesses.

In general, these loans are collateralized by general business assets, including, among other things, accounts receivable, inventory and equipment and most are backed by a personal guaranty of the borrower or principal.

20 unchanged sentences

Finally, the measure of our allowance for loan losses is dependent on the adoption and interpretation of accounting standards.

The Financial Accounting Standards Board (“FASB”) recently issued a new credit impairment model, the Current Expected Credit Loss (“CECL”) model, which will become applicable to us on January 1, 2023, unless adopted earlier.

CECL will require financial institutions to estimate and develop a provision for credit losses at origination for the lifetime of the loan, as opposed to reserving for incurred or probable losses up to the balance sheet date.

The Financial Accounting Standards Board (“FASB”) recently issued a new credit impairment model, the Current Expected Credit Loss (“CECL”) model, which became applicable to us on January 1, 2023.

CECL requires financial institutions to estimate and develop a provision for credit losses at origination for the lifetime of the loan, as opposed to reserving for incurred or probable losses up to the balance sheet date.

Upon adoption of the guidance on January 1, 2023, we recognized an $827,000 reduction to retained earnings, after recording the relating deferred tax asset adjustment at our adjusted tax rate.

Under the CECL model, credit deterioration would be reflected in the income statement in the period of origination or acquisition of the loan, with changes in expected credit losses due to further credit deterioration or improvement reflected in the periods in which the expectation changes.

Accordingly, the CECL model could require financial institutions like the Bank to increase their allowances for loan losses.

Moreover, the CECL model likely would create more volatility in our level of allowance for loan losses.

If we are required to materially increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition, results of operations, and capital.

Accordingly, the CECL model could require financial institutions like the Bank to increase their allowances for credit losses.

Moreover, the CECL model likely would create more volatility in our level of allowance for credit losses.

If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition, results of operations, and capital.

The small-to-midsized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower ’

s ability to repay a loan, and such impairment could have a material adverse effect on our business, financial condition and results of operations.

We focus our business development and marketing strategy primarily on small-to-midsized businesses.

Small-to-midsized businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.

We focus our business development and marketing strategy primarily on small-to-midsized businesses who frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.

In addition, the success of a small-to-midsized business often depends on the management skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have an adverse impact on the business and its ability to repay its loan.

61 unchanged sentences

Failure to successfully integrate the entities we acquire into our existing operations in a timely manner may increase our operating costs significantly and could have an adverse effect on our business, financial condition and results of operations.

Further, acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of our tangible book value and net income per share may occur in connection with any future acquisition, and the carrying amount of any goodwill that we currently maintain or may acquire may be subject to impairment in future periods.

Further, acquisitions typically 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 acquisition, and the carrying amount of any goodwill that we currently maintain or may acquire may be subject to impairment in future periods.

Interest rate shifts could have an adverse effect on our business, financial condition, results of operations and growth prospects.

7 unchanged sentences

however, customer and market responses to a changing interest rate environment are highly uncertain and there is no guarantee that our net interest income would increase if interest rates rise.

Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans and decrease loan repayment rates.

A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio and increased competition for deposits.

Interest rates increased rapidly during 2022 to levels that we have not experienced in recent history.

Interest rates may increase further, or they may remain at current levels for some time.

This new interest rate environment could have a number of effects on our business, which may include reduced loan demand, increased delinquencies and increased loan paydowns and payoffs.

Conversely, a decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio and increased competition for deposits.

Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination volume, loan portfolio and our overall results.

40 unchanged sentences

Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in our primary market area or by one or more adverse regulatory actions against us.

Recent increases in interest rates have resulted in large unrealized losses in our investment securities portfolio.

Selling securities with an unrealized loss would result in the realization of such losses, which would negatively impact regulatory capital, among other effects.

Accordingly, investment securities with unrealized losses may have diminished utility as a source of liquidity prior to maturity.

Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on our liquidity and could, in turn, have an adverse effect on our business, financial condition and results of operations.

19 unchanged sentences

Along with its core deposits, the Bank utilizes alternative funding methods, including brokered and wholesale time deposits, short- and long-term borrowings through a correspondent bank, FHLB advances, securities sold under agreements to repurchase and Federal Funds Purchased borrowings.

As of December 31, 2021, brokered and wholesale deposits comprised 8.8% of our total deposits, and our borrowings comprised 43.3% of our total shareholders’

As of December 31, 2022, brokered and wholesale deposits, including reciprocal deposits, comprised 13.1% of our total deposits, and our borrowings comprised 96.5% of our total shareholders’

As a result of the rise in interest rates during 2022, these funding sources have become significantly more expensive than in past years.

If we continue to use these alternative funding methods, our interest expense will decline.

If these funding sources become more expensive or difficult to access, our net interest income may decline, our liquidity and ability to make new loans may be impaired, or we may fail to meet regulatory capital requirements, any of which could have an adverse effect on our business, financial condition and results of operations.

The fair value of our investment securities can fluctuate due to factors outside of our control.

As of December 31, 2021, the fair value of our investment securities portfolio was approximately $1.0 billion, which included a net unrealized loss of approximately $1.4 million.

As of December 31, 2022, the fair value of our investment securities portfolio was approximately $890.8 million, which included a net unrealized loss of approximately $94.8 million.

Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.

For example, fixed-rate securities are generally subject to decreases in market value when interest rates rise.

The Federal Open Market Committee is expected to raise the target federal funds rate several times in 2022.

In addition to market interest rates, other factors that could cause adverse changes to the fair value of our securities include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and continued instability in the capital markets.

The Federal Open Market Committee raised the target federal funds rate several times in 2022 and is expected to continue raising the rates in 2023.

In addition to market interest rates, other factors that could cause adverse changes to the fair value of our securities include, but are not limited to, rating agency actions with respect to the securities, defaults by the issuer or with respect to the underlying securities, and continued instability in the capital markets.

Any of these factors, among others, could cause other-than-temporary impairments and realized or unrealized losses in future periods and declines in other comprehensive income, which could have an adverse effect on our business, results of operations, financial condition and future prospects.

12 unchanged sentences

They require management to make subjective or complex judgments, estimates or assumptions, and changes in those estimates or assumptions could have a significant impact on our consolidated financial statements.

These critical accounting policies and estimates include acquired loans and allowance for loan losses and purchase accounting adjustments (other than loans). 

Because of the uncertainty of estimates involved in these matters, we may be required to significantly increase our allowance for loan losses or sustain loan losses that are significantly higher than the reserve provided, or otherwise incur charges that could have a material adverse effect on our business, financial condition and results of operations.

These critical accounting policies and estimates include acquired loans and allowance for loan losses and purchase accounting adjustments (other than loans).

Because of the uncertainty of estimates involved in these matters, we may be required to significantly increase our allowance for credit losses or sustain loan losses that are significantly higher than the reserve provided, or otherwise incur charges that could have a material adverse effect on our business, financial condition and results of operations.

From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of such standards that govern the preparation of our consolidated financial statements which could affect our critical accounting policies and critical accounting estimates and assumptions made by management.

57 unchanged sentences

We review goodwill for impairment at least annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired.

Our goodwill impairment test is a one-step process.

We estimate the fair value of the reporting unit is compared to its carrying value including goodwill.

Our goodwill impairment test is performed annually and was completed as of October 1, 2022.

The annual test did not indicate any impairment as of the testing date.

We estimate the fair value of the reporting unit compared to its carrying value including goodwill.

If the carrying amount of the reporting unit goodwill exceeds the fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

Any such adjustments are reflected in our results of operations in the periods in which they become known.

Following the testing date, management determined no triggering event had occurred through December 31, 2022.

As of December 31, 2022, our goodwill totaled $88.5 million.

107 unchanged sentences

Any future special assessments, increases in assessment rates or premiums, or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could materially and adversely affect our business, financial condition, and results of operations.

We are expecting an increase in FDIC insurance premiums in 2023 due to increased regulatory rates.

The Federal Reserve may require us to commit capital resources to support the Bank.

9 unchanged sentences

This guidance suggests that institutions whose commercial real estate loans exceed certain percentages of capital should implement heightened risk management practices appropriate to their concentration risk and may be required to maintain higher capital ratios than institutions with lower concentrations in commercial real estate lending.

As of December 31, 2021, we were within the 300.0% regulatory guideline for commercial real estate, but outside the 100.0% regulatory guideline for construction, land development, and other land loans due to the timing of draws on several larger construction and development projects.

As of December 31, 2022, we were outside the 300.0% regulatory guideline for commercial real estate, and the 100.0% regulatory guideline for construction, land development, and other land loans due to the timing of draws on several larger construction and development projects.

We have documented procedures and systems in place to manage and monitor our commercial real estate exposures in excess of regulatory guidelines. 

19 unchanged sentences

Risks Associated with our Common Stock

The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired.

Assuming the presence of a public market for our common stock, the market price of our common stock may be highly volatile, which may make it difficult for you to resell your shares at the volume, prices and times desired.

The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your common shares at the volume, prices and times desired.

Assuming the presence of a public market for our common stock, the market price of our common stock may be highly volatile, which may make it difficult for you to resell your common shares at the volume, prices and times desired.

There are many factors that may impact the market price and trading volume of our common stock, including, without limitation:

19 unchanged sentences

In addition, significant fluctuations in the trading volume in our common stock may cause significant price variations to occur.

Increased market volatility could have an adverse effect on the market price of our common stock, which could make it difficult to sell your shares at the volume, prices and times desired.

Increased market volatility could have an adverse effect on the market price of our common stock, which could make it difficult to sell your common shares at the volume, prices and times desired.

Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future sales of equity securities.

Our articles of incorporation authorize us to issue up to 50,000,000 shares of common stock.

As of February 21, 2022, there are 20,400,349 shares of our common stock issued and outstanding.

As of February 22, 2023, there are 25,110,313 shares of our common stock issued and outstanding.

We may issue shares of our common stock or other securities from time to time for any number of reasons, including as consideration for future acquisitions and investments and under compensation and incentive plans.

3 unchanged sentences

Sales of substantial amounts of our common stock (including shares of our common stock issued in connection with an acquisition or under a compensation or incentive plan), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital through future sales of our securities.

The rights of our common shareholders are subordinate to the rights of our outstanding subordinated notes and may be subordinate to the rights of the holders of any senior indebtedness or preferred stock that we may issue in the future.

The rights of our common shareholders are subordinate to the rights of our outstanding subordinated notes and our outstanding preferred stock and may be subordinate to the rights of the holders of any senior indebtedness or preferred stock that we may issue in the future.

Shares of our common stock are equity interests and do not constitute indebtedness.

As such, shares of our common stock rank junior to all of our outstanding indebtedness, including our outstanding subordinated notes in the amount of $110.7 million, our trust preferred securities of $5.0 million, and to other non-equity claims against us and our assets available to satisfy claims against us, including in our liquidation.

Our board of directors also has the authority to issue in the aggregate up to 5,000,000 shares of preferred stock, and to determine the terms of each issue of preferred stock and any indebtedness, without shareholder approval.

Our common stock also ranks junior to the $72.0 million of Series A preferred stock that we issued during 2022.

Our board of directors also has the authority to issue in the aggregate up to 4,928,000 shares of additional preferred stock, and to determine the terms of each issue of preferred stock and any indebtedness, without shareholder approval.

Accordingly, you should assume that any shares of preferred stock and any indebtedness that we may issue in the future will also be senior to our common stock.

3 unchanged sentences

Although we have declared a quarterly cash dividend on our common stock since the second quarter of 2016, we have no obligation to continue paying dividends, and we may change our dividend policy at any time without notice to our shareholders.

Our ability to pay dividends may also be limited on account of any outstanding indebtedness or preferred stock we may issue in the future, as we generally be required to make payments on any outstanding indebtedness and outstanding preferred stock before any dividends can be paid on our common stock.

We may not pay any dividends on our common stock if we have not paid the full dividends on our outstanding Series A preferred stock for the most recent quarterly dividend period.

Our ability to pay dividends may also be limited on account of any outstanding indebtedness or preferred stock we may issue in the future, as we generally are required to make payments on any outstanding indebtedness and outstanding preferred stock before any dividends can be paid on our common stock.

Finally, because our primary asset is our investment in the stock of the Bank, we are dependent upon dividends from the Bank to pay our operating expenses, satisfy our obligations and to pay dividends on our common stock, and the Bank’s ability to pay dividends on its common stock will substantially depend upon its earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate and other factors deemed relevant by its board of directors.

24 unchanged sentences

Your investment is subject to investment risk, and you must be capable of affording the loss of your entire investment.

The COVID-19 pandemic, including the measures taken by governmental authorities, businesses and individuals in response, are adversely affecting our business, financial condition, and results of operations, and the ultimate impact will depend on future developments which are uncertain and cannot be predicted, including the scope and duration of the pandemic and the response to the pandemic.

Beginning in the first quarter of 2020, the COVID-19 pandemic has caused extensive disruptions to the global, national and regional economy.

Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus, a low interest rate environment, and legislation designed to deliver monetary aid and other relief.

While the long-term effects of COVID-19 are still evolving and not fully known, the pandemic and related efforts to contain it have disrupted economic activity, adversely affected the functioning of financial markets, prompted decreases in interest rates, increased economic and market uncertainty, and disrupted trade and supply chains.

If these implications continue, or if the pandemic worsens as a result of a new variant, many of the risk factors identified in this report could be exacerbated and such effects could have a material adverse effect on us in a number of ways related to credit, collateral, interest rate risk, profitability, operations, liquidity, and capital as described in more detail below.

Credit and Collateral Risk .

Our business depends on our ability to successfully measure and manage credit risk.

As a lender, we are exposed to the risk that our borrowers will be unable to repay their loans according to their terms, and the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment.

In addition, there are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers.

The creditworthiness of a borrower is affected by many factors including local market conditions and general economic conditions.

These risks are particularly heightened as a result of the COVID-19 pandemic.

Concern about the spread of COVID-19 has caused and is expected to continue to cause business shutdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions, increased unemployment and commercial property vacancy rates, reduced profitability and ability for property owners to make mortgage payments, and overall economic and financial market instability.

All of these factors cause our customers to be unable to make scheduled loan payments.

If the effects of COVID-19 result in widespread and sustained repayment shortfalls on loans in our portfolio, we could incur significant delinquencies, foreclosures, and credit losses, particularly if the available collateral is insufficient to cover our exposure.

The future effects of COVID-19 on economic activity could also negatively affect collateral values associated with our existing loans and our ability to liquidate such collateral.

Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making business decisions or may result in a delay in our taking certain remedial actions, such as foreclosure.

All of these factors could cause the level of our nonperforming loans, charge-offs, and delinquencies to increase, potentially requiring significant additional provisions for credit losses.

Interest Rate and Profitability Risk .

Our net interest income, lending activities, deposits, and profitability could be negatively affected by volatility in interest rates and other factors resulting from uncertainties stemming from COVID-19.

In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range of 0 to 0.25 percent, citing concerns about the impact of COVID-19 on markets and stress in the energy sector.

Operational Risk .

Our social-distancing measures, increased employee absences due to illness and quarantine, and current and future restrictions on our workforce’s access to our facilities could limit our ability to meet customer servicing expectations and have a material adverse effect on our operations.

We rely on business processes and branch activity that largely depend on people and technology, including access to information technology systems as well as information, applications, payment systems and other services provided by third parties.

Technology in employees’

homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices.

The continuation of these work-from-home measures and increased electronic interaction with our customers also introduce additional operational risk, including increased cybersecurity risk.

These cyber risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability, and could seriously disrupt our operations and the operations of any effected customers.

Capital Risk .

Adequate levels of capital enhance our ability to withstand periods of financial stress such as during the ongoing COVID-19 pandemic.

For this reason, we are subject to significant regulatory capital requirements, and we currently satisfy all of those requirements.

However, the ultimate impact of the pandemic is unknown.

Prolonged pressures could deplete our reserves, requiring us to raise additional capital to provide sufficient resources and liquidity to meet applicable regulatory requirements, as well as to satisfy our commitments and business needs.

Our ability to raise additional capital depends on a number of factors, including without limitation our financial condition and performance, conditions in the capital markets, economic conditions, investor perceptions regarding the banking industry, and governmental activities.

Many of these factors are beyond our control, and uncertainty relating to all of these factors has been significantly enhanced by the COVID-19 pandemic.

The pandemic substantially increased economic and demand uncertainty and has led to disruption and volatility in capital markets.

Government responses designed to curtail the spread of the virus continue to evolve and affect various aspects of the economy.

If we need to raise additional capital in the current market environment, there is no assurance we will be successful, or that we will be able to raise capital on terms acceptable to us or without significant dilution to our existing shareholders.

If we fail to maintain capital sufficient to meet regulatory requirements, we could be subject to enforcement actions or other regulatory consequences.

Because there have been no recent global pandemics of comparable global impact, we do not yet know the full extent of COVID-19’s effects on our business, operations, or the global economy as a whole.

Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the effectiveness of our social-distancing accommodation arrangements, third party providers’

ability to support our operations, and any actions taken by governmental authorities and other third parties in response to the pandemic.

The uncertain future development of this crisis and the pandemic’s enhancement of the various risks described above could have a material adverse effect on our business, financial condition, and results of operations.

As a participating lender in the SBA PPP and Federal Reserve MSLP, we are subject to additional risks of litigation from our customers or other parties and regulatory enforcement regarding our processing of these loans, as well as risks that the SBA may not fund some or all PPP loan guaranties.

1 unchanged sentence

Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.

We participated as a lender in the PPP during 2020 and continue to participate in 2021.

We participated as a lender in the PPP during 2020 and continued to participate in 2021.

Under current law, no loans may be originated under PPP after March 31, 2021.

19 unchanged sentences

We may experience an increase in nonperforming loans in the portion of our loan portfolio subject to modification under our COVID-19 Deferral Assistance Program.

As of December 31, 2021, loans with aggregate outstanding principal of approximately $522.0 million, or approximately 16.4% of our loans held for investment, have been modified under the terms of our COVID-19 Deferral Assistance Program.

As of December 31, 2022, loans with aggregate outstanding principal of approximately $425.2 million, or approximately 9.2% of our loans held for investment, have been modified under the terms of our COVID-19 Deferral Assistance Program, but are no longer in their deferral periods.

These modifications primarily included 90-day deferrals of principal payments or 90-day deferrals of principal and interest payments.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors