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Consequently, our business, financial condition and results of operations have been and could be further significantly and adversely affected.
−Removed: See also “ The COVID-19 pandemic is expected to continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
−Removed: Deterioration in the markets for residential real estate, including secondary residential mortgage loan markets, could reduce our net income and profitability.
−Removed: During the severe recession that lasted from 2007 to 2009, softened residential housing markets, increased delinquency and default rates, and volatile and constrained secondary credit markets negatively impacted the mortgage industry.
−Removed: Our financial results were adversely affected by these effects including changes in real estate values, primarily in Wisconsin and Minnesota, and our net income declined as a result.
−Removed: Decreases in real estate values adversely affected the value of property used as collateral for loans as well as investments in our portfolio.
−Removed: Continued slow growth in the economy since 2009 resulted in increased competition and lower rates, which has negatively impacted our net income and profits.
−Removed: The foregoing changes could affect our ability to originate loans and deposits, the fair value of our financial assets and liabilities and the average maturity of our securities portfolio.
−Removed: An increase in the level of interest rates may also adversely affect the ability of certain of our borrowers to repay their obligations.
−Removed: If interest rates paid on deposits or other borrowings were to increase at a faster rate than the interest rates earned on loans and investments, our net income would be adversely affected.
−Removed: The COVID-19 pandemic is expected to continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
+Added: See also “ The COVID-19 pandemic may continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
+Added: The COVID-19 pandemic may continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
We are closely monitoring developments related to the COVID-19 pandemic to assess its impact on our business.
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and around the world, and has fueled concerns that it may lead to a global recession.
−Removed: These conditions are expected to continue and worsen in the near term.
−Removed: At this time, it is not possible to estimate how long it will take to halt the spread of the virus or the long term
−Removed: effects that the COVID-19 pandemic could have on our business.
+Added: These conditions may continue and worsen in the near term.
+Added: At this time, it is not possible to estimate how long it will take to halt the spread of the virus or the long term effects that the COVID-19 pandemic could have on our business.
The extent to which the COVID-19 pandemic impacts our business, results of operations, financial condition, liquidity or prospects will depend on future developments which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions taken to contain or address its impact.
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Acts or threats of terrorism and political actions taken by the United States or other governments in response to terrorism, or similar activity, could adversely affect general or industry conditions and, as a result, our consolidated financial condition and results of operations.
+Added: Deterioration in the markets for residential real estate, including secondary residential mortgage loan markets, could reduce our net income and profitability.
+Added: During the severe recession that lasted from 2007 to 2009, softened residential housing markets, increased delinquency and default rates, and volatile and constrained secondary credit markets negatively impacted the mortgage industry.
+Added: Our financial results were adversely affected by these effects including changes in real estate values, primarily in Wisconsin and Minnesota, and our net income declined as a result.
+Added: Decreases in real estate values adversely affected the value of property used as collateral for loans as well as investments in our portfolio.
+Added: Continued slow growth in the economy since 2009 resulted in increased competition and lower rates, which has negatively impacted our net income and profits.
+Added: The foregoing changes could affect our ability to originate loans and deposits, the fair value of our financial assets and liabilities and the average maturity of our securities portfolio.
+Added: An increase in the level of interest rates may also adversely affect the ability of certain of our borrowers to repay their obligations.
+Added: If interest rates paid on deposits or other borrowings were to increase at a faster rate than the interest rates earned on loans and investments, our net income would be adversely affected.
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
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The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time.
−Removed: Market interest rates change over time due to many factors that are beyond our control, including but not limited to:
+Added: Market interest rates change over
+Added: time due to many factors that are beyond our control, including but not limited to:
general economic conditions and government policy decisions, especially policies of the Federal Reserve Bank.
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In particular, reduced interest rates negatively impact our results of operations.
−Removed: See also “ The COVID-19 pandemic is expected to continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
+Added: See also “ The COVID-19 pandemic may continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
We are subject to lending risk.
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These risks include the impact of changes in interest rates and changes in the economic conditions in the markets we serve, as well as those across the United States.
+Added: Our exposure to lending risk is managed through the use of consistent underwriting standards, and we avoid highly leveraged transactions as well as excessive industry and other concentrations, but there can be no assurance that our risk mitigation measures will be effective in avoiding undue credit risk.
An increase in interest rates or weakening economic conditions (such as high levels of unemployment), including weakening economic conditions as a result of the COVID-19 pandemic, has and could further adversely impact the ability of borrowers to repay outstanding loans, or could substantially weaken the value of collateral securing those loans.
−Removed: As of December 31, 2020, the Bank had $61.0 million of loan modifications remaining due to pandemic-related borrower requests.
+Added: As of December 31, 2021, the Bank had $6.6 million of COVID-19 related modifications under Section 4013 of the CARES Act remaining.
See “Allowance for Loan Losses” for discussion of COVID-19 qualitative factors, and related provision for loan losses.
Downward pressure on real estate values could increase the potential for problem loans and thus have a direct impact on our consolidated results of operations.
−Removed: See also “ The COVID-19 pandemic pandemic is expected to continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
+Added: In addition, we may purchase real estate, or we may foreclose on and take title to real estate.
+Added: Although we exercise prudent due diligence when making loans, we could be subject to environmental liabilities with respect to these properties.
+Added: See also “ The COVID-19 pandemic may continue to cause adverse economic conditions and could have an adverse impact on our financial condition and our results of operations and other aspects of our business.
We are subject to higher lending risks with respect to our commercial and agricultural banking activities which could adversely affect our financial condition and results of operations.
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The estimated fair value of our available for sale securities portfolio may increase or decrease depending on market conditions.
−Removed: Our available for sale securities portfolio is comprised of fixed-rate, and to a lesser extent, floating rate securities.
+Added: Our available for sale securities portfolio is comprised of fixed-rate, and
+Added: to a lesser extent, floating rate securities.
We increase or decrease stockholders’ equity by the amount of the change in unrealized gain or loss (the difference between the estimated fair value and amortized cost) of our available for sale securities portfolio, net of the related tax benefit or provision, under the category of accumulated other comprehensive income/loss.
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Competition may affect our results.
+Added: Competition in the banking and financial services industry is intense.
+Added: Our profitability depends upon our continued ability to compete in our primary market area.
We face strong competition in originating loans, in seeking deposits and in offering other banking services.
We compete with commercial banks, trust companies, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms.
−Removed: Our market area is also served by commercial banks and savings associations that are substantially larger than us in terms of deposits and loans and have greater human and financial resources.
+Added: Our market area is also served by commercial banks and savings associations that are substantially larger than us in terms of deposits and loans, have greater human and financial resources, and may offer certain services that we do not or cannot provide.
This competitive climate can make it difficult to establish, maintain and retain relationships with new and existing customers and can lower the rate we are able to charge on loans, increase the rates we must offer on deposits, and affect our charges for other services.
Those factors can, in turn, adversely affect our results of operations and profitability.
+Added: Customers may decide not to use banks to complete their financial transactions, which could result in a loss of income to us.
+Added: Technology and other changes are allowing customers to complete financial transactions that historically have involved banks at one or both ends of the transaction.
+Added: For example, customers can now pay bills and transfer funds directly without going through a bank.
+Added: The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits.
We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.
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If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.
−Removed: We may not have sufficient pre-tax net income in future periods to fully realize the benefits of our net deferred tax assets.
−Removed: Assessing the need for, or the sufficiency of, a valuation allowance requires management to evaluate all available evidence.
−Removed: Based on future pre-tax net income projections and the planned execution of existing tax planning strategies, we believe that it is more likely than not that we will fully realize the benefits of our net deferred tax assets.
−Removed: However, our current assessment is based on assumptions and judgments that may or may not reflect actual future results.
−Removed: If a valuation allowance becomes necessary, it could have a material adverse effect on our consolidated results of operations and financial condition.
Maintaining or increasing our market share may depend on lowering prices and market acceptance of new products and services.
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Also, these and other capital investments in our business may not produce expected growth in earnings anticipated at the time of the expenditure.
−Removed: We may not be successful in introducing new products and services, achieving market acceptance of our products and services, or developing and maintaining loyal customers, which in turn, could adversely affect our results of operations and profitability.
−Removed: Customers may decide not to use banks to complete their financial transactions, which could result in a loss of income to us.
−Removed: Technology and other changes are allowing customers to complete financial transactions that historically have involved banks at one or both ends of the transaction.
−Removed: For example, customers can now pay bills and transfer funds directly without going through a bank.
−Removed: The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits.
+Added: We may not be successful in introducing new products and
+Added: services, achieving market acceptance of our products and services, or developing and maintaining loyal customers, which in turn, could adversely affect our results of operations and profitability.
+Added: We may not have sufficient pre-tax net income in future periods to fully realize the benefits of our net deferred tax assets.
+Added: Assessing the need for, or the sufficiency of, a valuation allowance requires management to evaluate all available evidence.
+Added: Based on future pre-tax net income projections and the planned execution of existing tax planning strategies, we believe that it is more likely than not that we will fully realize the benefits of our net deferred tax assets.
+Added: However, our current assessment is based on assumptions and judgments that may or may not reflect actual future results.
+Added: If a valuation allowance becomes necessary, it could have a material adverse effect on our consolidated results of operations and financial condition.
We could experience an unexpected inability to obtain needed liquidity.
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Moreover, it could limit our ability to take advantage of what we believe to be good market opportunities for expanding our loan portfolio.
−Removed: Our growth strategy includes selectively acquiring businesses through acquisitions of other banks, and our ability to consummate these acquisitions on economically advantageous terms acceptable to us in the future is unknown.
−Removed: Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable, including our recent acquisitions of Community Bank of Northern Wisconsin (“CBN”), WFC, United Bank and F&M.
−Removed: The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy.
−Removed: This competition could increase prices for potential acquisitions that we believe are attractive.
−Removed: Any such acquisitions could be funded through cash from operations, the issuance of equity and/or the incurrence of additional
−Removed: indebtedness, which amount may be material, or a combination thereof.
−Removed: Any acquisition could be dilutive to our earnings and stockholders’ equity per share of our common stock.
−Removed: Also, acquisitions are subject to various regulatory approvals.
−Removed: If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests.
−Removed: Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals.
−Removed: To the extent that we are unable to find suitable acquisition candidates, an important component of our growth strategy may be lost.
−Removed: Acquisition and expansion activities may disrupt our business, dilute existing stockholders and adversely affect our operating results.
−Removed: We acquired F&M in July 2019, United Bank in October 2018, WFC in August 2017 and CBN in May 2016.
−Removed: We intend to continue to evaluate potential acquisitions and expansion opportunities in the normal course of our business.
−Removed: Although the integration of F&M, United Bank, WFC and CBN have been successfully completed, we cannot assure you that we will be able to adequately or profitably manage the ongoing integration of any such future acquisitions.
−Removed: Acquiring other banks or financial service companies, as well as other geographic and product expansion activities, involve various risks including:
−Removed: • risks of unknown or contingent liabilities;
−Removed: • unanticipated costs and delays;
−Removed: • risks that acquired new businesses do not perform consistent with our growth and profitability expectations;
−Removed: • risks of entering new markets or product areas where we have limited experience;
−Removed: • risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures;
−Removed: • exposure to potential asset quality issues with acquired institutions;
−Removed: • difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up delays and costs of other expansion activities;
−Removed: • potential disruptions to our business;
−Removed: • possible loss of key employees and customers of acquired institutions;
−Removed: • potential short-term decreases in profitability;
−Removed: • diversion of our management’s time and attention from our existing operations and business.
−Removed: Our failure to execute our acquisition strategy could adversely affect our business, results of operations, financial condition and future prospects.
Future growth, operating results or regulatory requirements may require us to raise additional capital but that capital may not be available.
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These actions could negatively impact our ability to operate or further expand our operations and may result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our consolidated financial condition and results of operations.
−Removed: Our internal controls and procedures may fail or be circumvented.
−Removed: Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures.
−Removed: Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable assurances that the objectives of the system are met.
−Removed: Any (a) failure or circumvention of our controls and procedures, (b) failure to adequately address any internal control deficiencies, or (c) failure to comply with regulations related to controls and procedures could have a material effect on our business, consolidated financial condition and results of operations.
−Removed: See Item 9A “Controls and Procedures” for further discussion of our internal controls.
We may not be able to attract or retain key people.
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Competition for the best people in most activities engaged in by us can be intense, and we may not be able to hire people or retain them.
−Removed: Bianchi and Mr.
−Removed: Broucek are under employment agreements expiring in 2022, unexpected loss of services of one or more of our key personnel could have a
−Removed: material adverse impact on our business because of their skills, knowledge of our local markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.
+Added: The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of our local markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.
We continually encounter technological change.
5 unchanged sentences
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.
+Added: Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
+Added: As a bank, we are susceptible to fraudulent activity that may be committed against us or our customers which may result in financial losses or increased costs to us or our customers, disclosure or misuse of our information or our customers' information, misappropriation of assets, privacy breaches against our customers, litigation or damage to our reputation.
+Added: Such fraudulent activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts.
+Added: Consistent with industry trends, we have also experienced an increase in attempted electronic fraudulent activity in recent periods.
+Added: Given such increase in electronic fraudulent activity and the growing level of use of electronic, internet-based and networked systems to conduct business directly or indirectly with our clients, certain fraud losses may not be avoidable regardless of the preventative and detection systems in place.
+Added: Nationally, reported incidents of fraud and other financial crimes have increased.
+Added: While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.
We rely on network and information systems and other technologies, and, as a result, we are subject to various Cybersecurity risks.
−Removed: Cybersecurity refers to the combination of technologies, processes and procedures established to protect information technology systems and data from unauthorized access, attack, or damage.
+Added: Cybersecurity refers to the combination of technologies, processes and procedures established to protect
+Added: information technology systems and data from unauthorized access, attack, or damage.
Our business involves the storage and transmission of customers’ personal information.
While we have internal policies and procedures designed to prevent or limit the effect of a failure, interruption or security breach of our information systems, as well as contracts and service agreements with applicable outside vendors, we cannot be assured that any such failures, interruptions or security breaches will not occur or, if they do, that they will be addressed adequately.
+Added: Any failure or interruption of these systems could result in failures or disruptions in our loan, deposit, general ledger and other systems.
+Added: We rely on the secure processing, storage and transmission of confidential and other information on our computer systems and networks.
Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business.
Although we have implemented measures to prevent security breaches, cyber incidents and other security threats, our facilities and systems, and those of third party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human error, or other similar events that could have a material adverse effect on our business.
+Added: Although, to date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.
+Added: Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the outsourcing of some of our business operations and the continued uncertain global economic environment.
+Added: As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
Furthermore, the storage and transmission of such data is regulated at the federal and state level.
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If we fail to comply with applicable laws and regulations or experience a data security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or our vendors, our reputation could be damaged, possibly resulting in lost future business, and we could be subject to fines, penalties, administrative orders and other legal risks as a result of a breach or non-compliance.
+Added: Our internal controls and procedures may fail or be circumvented.
+Added: Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures.
+Added: Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable assurances that the objectives of the system are met.
+Added: Any (a) failure or circumvention of our controls and procedures, (b) failure to adequately address any internal control deficiencies, or (c) failure to comply with regulations related to controls and procedures could have a material effect on our business, consolidated financial condition and results of operations.
+Added: See Item 9A “Controls and Procedures” for further discussion of our internal controls.
+Added: Our growth strategy includes selectively acquiring businesses through acquisitions of other banks, and our ability to consummate these acquisitions on economically advantageous terms acceptable to us in the future is unknown.
+Added: Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable, including our recent acquisitions of Community Bank of Northern Wisconsin (“CBN”), WFC, United Bank and F&M.
+Added: The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy.
+Added: This competition could increase prices for potential acquisitions that we believe are attractive.
+Added: Any such acquisitions could be funded through cash from operations, the issuance of equity and/or the incurrence of additional indebtedness, which amount may be material, or a combination thereof.
+Added: Any acquisition could be dilutive to our earnings and stockholders’ equity per share of our common stock.
+Added: Also, acquisitions are subject to various regulatory approvals.
+Added: If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests.
+Added: Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals.
+Added: To the extent that we are unable to find suitable acquisition candidates, an important component of our growth strategy may be lost.
+Added: Acquisition and expansion activities may disrupt our business, dilute existing stockholders and adversely affect our operating results.
+Added: We acquired F&M in July 2019, United Bank in October 2018, WFC in August 2017 and CBN in May 2016.
+Added: We intend to continue to evaluate potential acquisitions and expansion opportunities in the normal course of our business.
+Added: Although the integration of F&M, United Bank, WFC and CBN have been successfully completed, we cannot assure you that we will be able to adequately or profitably manage the ongoing integration of any such future acquisitions.
+Added: Acquiring other banks or financial service companies, as well as other geographic and product expansion activities, involve various risks including:
+Added: • risks of unknown or contingent liabilities;
+Added: • unanticipated costs and delays;
+Added: • risks that acquired new businesses do not perform consistent with our growth and profitability expectations;
+Added: • risks of entering new markets or product areas where we have limited experience;
+Added: • risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures;
+Added: • exposure to potential asset quality issues with acquired institutions;
+Added: • difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up delays and costs of other expansion activities;
+Added: • potential disruptions to our business;
+Added: • possible loss of key employees and customers of acquired institutions;
+Added: • potential short-term decreases in profitability;
+Added: • diversion of our management’s time and attention from our existing operations and business.
+Added: Our failure to execute our acquisition strategy could adversely affect our business, results of operations, financial condition and future prospects.
Our ability to pay dividends depends primarily on dividends from our banking subsidiary, the Bank, which is subject to regulatory and other limitations.
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We believe there are 9,957,783 shares of our common stock held by nonaffiliates as of March 2, 2022.
−Removed: Thus, our common stock will be less liquid than the stock of
−Removed: companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile.
+Added: Thus, our common stock will be less liquid than the stock of companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile, which may make it difficult for investors to resell shares at the volume, prices and times desired.
Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.
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The FASB extended the effective date of CECL from January 2021 to January 2023 for smaller reporting companies such as the Company.
−Removed: Once effective, this will change the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and to greatly increase the types of data we will need to collect and review to determine the appropriate level of the allowance for loan losses.Banking regulators expect the new accounting standard will increase the allowance for loan losses.
+Added: Once effective, this will change the current method of providing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and to greatly increase the types of data we will need to collect and review to determine the appropriate level of the allowance for loan losses.
+Added: Banking regulators expect the new accounting standard will increase the allowance for loan losses.
Any change in the allowance for loan losses at the time of adoption will be an adjustment to retained earnings and would change the Bank’s capital levels.
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Our compliance with these regulations, including compliance with regulatory commitments, is costly.
−Removed: Regulation includes, among other things, capital and reserve requirements, permissible investments and lines of business, mergers and acquisitions, restrictions on transactions with insiders and affiliates, anti-money laundering regulations, dividend limitations, community reinvestment requirements, limitations on products and services offered, loan limits, geographical limits, and consumer credit regulations.
+Added: Regulation includes, among other things, capital and reserve requirements, the level of deposit insurance premiums assessed, permissible investments and lines of business, mergers and acquisitions, restrictions on transactions with insiders and affiliates, anti-money laundering regulations, dividend limitations, community reinvestment requirements, limitations on products and services offered, loan limits, geographical limits, and consumer credit regulations.
The system of supervision and regulation applicable to us establishes a comprehensive framework for our operations and is intended primarily for the protection of the Deposit Insurance Fund, our depositors and the public, rather than our stockholders.
+Added: Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation, or additional deposit insurance premiums could have a material impact on our operations.
Failure to comply with applicable laws, regulations or policies could result in sanction by regulatory agencies, civil monetary penalties, and/or damage to our reputation, which could have a material adverse effect on our business, consolidated financial condition and results of operations.
−Removed: In addition, any change in government regulation could have a material adverse effect on our business.
+Added: In addition, any change in government regulation could have a material adverse effect on our business or our ability to pay dividends.
Federal law restricts the amount of voting stock of a bank holding company or a bank, that a person or group may acquire, without the prior approval of banking regulators.
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Investors should be aware of these requirements when acquiring shares of our stock.
−Removed: We have become subject to more stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.
−Removed: The Basel III Rules, which became effective for us on January 1, 2015, included new minimum risk-based capital and leverage ratios and refined the definition of what constitutes “capital” for calculating these ratios.
−Removed: The new minimum capital requirements are:
−Removed: (i) a new common equity Tier 1 capital ratio of 4.5%;
−Removed: (ii) a Tier 1 to risk-based assets capital ratio of 6% (increased from 4%);
−Removed: (iii) a total capital ratio of 8% (unchanged from prior rules);
−Removed: and (iv) a Tier 1 leverage ratio of 4%.
−Removed: Basel III Rules also established a “capital conservation buffer” of 2.5%.
−Removed: The 2.5% capital conservation buffer was phased in incrementally over time, and became effective for us on January 1, 2019, resulting in the following minimum capital plus capital conservation buffer ratios:
−Removed: (i) a common equity Tier 1 capital ratio of 7.0%;
−Removed: (ii) a Tier 1 to risk-based assets capital ratio of 8.5%;
−Removed: and (iii) a total capital ratio of 10.5%.
−Removed: An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the buffer amount.
−Removed: The application of more stringent capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements.
−Removed: Furthermore, the imposition of liquidity requirements in connection with the implementation of the Basel III Rules could result in our having to lengthen the term of our funding sources, change our business models or increase our holdings of liquid assets.
−Removed: Specifically, the Bank’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may further limit the Company’s ability to pay dividends to stockholders.
−Removed: We are subject to increases in FDIC insurance premiums and special assessments by the FDIC, which will adversely affect our earnings.
−Removed: We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.
−Removed: For example, during 2008 and 2009, higher levels of bank failures dramatically increased resolution costs of the FDIC and depleted the Deposit Insurance Fund.
−Removed: The Dodd-Frank Wall Street Reform and Consumer Protection Act, in part, permanently raised the current standard maximum deposit insurance amount to $250,000 per customer (up from $100,000).
−Removed: These programs placed additional stress on the Deposit Insurance Fund.
−Removed: In order to maintain a strong funding position and restore reserve ratios of the Deposit Insurance Fund, the FDIC increased assessment rates of the insured institutions.
−Removed: If additional bank or financial institution failures increase, or if the cost of resolving prior failures exceeds expectations, we may be required to pay even higher FDIC premiums than the current levels.
−Removed: Any future increases or required prepayments of FDIC insurance premiums may adversely impact our earnings and financial condition.
Our reporting obligations as a public company are costly.
2 unchanged sentences
We will remain a smaller reporting company for so long as the market value of the Company’s common stock held by non-affiliates as of the end of its most recently completed second fiscal quarter is less than $250 million, or as of the same period the Company’s annual revenues are less than $100 million and its public float is less than $700 million.
−Removed: Historically, we have been categorized as a smaller reporting company and an “accelerated filer” and, thus, subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that an independent registered public accounting firm provide an attestation report on the effectiveness of internal control over financial reporting.
−Removed: On March 12, 2020, the SEC adopted amendments to the accelerated filer definitions in Rule 12b-2 under the Securities Exchange Act of 1934.
−Removed: Under the new definitions, a smaller reporting company with less than $100 million in revenue that previously met the definition of an accelerated filer, like the Company, will now be considered a “non-accelerated” filer and will not be required to obtain an attestation of their internal control over financial reporting as required under Section 404(b) of the Sarbanes-Oxley Act and will not be required to comply with the shorter SEC filing deadlines that apply to accelerated filers.
−Removed: As such, the Company is not subject to Section 404(b) of the Sarbanes-Oxley Act.
−Removed: However, if the Company’s revenues increase above $100 million, we would again become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act, making the public reporting process more costly.
+Added: In addition, the Company is currently considered a “non-accelerated filer” and will maintain that status for so long as the Company’s annual revenues are less than $100 million, and its public float is more than $75 million but less than $700 million.
+Added: If the Company were to be classified as an “accelerated filer” rather than a “non-accelerated filer,” then we would become subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act.
+Added: Section 404(b) requires that an independent registered public accounting firm provide an attestation report on the Company’s internal control over financial reporting and the operating effectiveness of these controls, making the public reporting process more costly.
Changes in federal or state tax laws could adversely affect our business, financial condition and results of operations.
Our business, financial condition and results of operations are impacted by tax policy implemented at the federal and state level.
−Removed: The Tax Act was enacted in December 2017.
−Removed: Among other things, the Tax Act reduces the corporate federal income tax rate for the Company from 34 percent to 24.5 percent for 2018, and 21 percent for 2019 and 2020, which would result in changes in the valuation of deferred tax asset and liabilities, and includes a number of provisions that will have an impact on the banking industry, borrowers and the market for single-family residential real estate.
−Removed: We revalued our net deferred tax assets to account for the future impact of the lower corporate tax rates.
−Removed: The recent changes in the tax laws may have an adverse effect on the market for, and valuation of, residential properties, and on the demand for such loans in the future, and could make it harder for borrowers to make their loan payments.
−Removed: In addition, these recent changes may also have a disproportionate effect on taxpayers in states with high residential home prices and high state and local taxes.
−Removed: If home ownership becomes less attractive, demand for mortgage loans could decrease.
−Removed: The value of the properties securing loans in our loan portfolio may be adversely impacted as a result of the changing economics of home ownership, which could reduce our profitability and materially adversely affect our business, financial condition and results of operations.
We cannot predict whether any other tax legislation will be enacted in the future or whether any such changes to existing federal or state tax law would have a material adverse effect on our business, financial condition and results of operations.
−Removed: We continue to evaluate the impact the Tax Act and other enacted tax reform may have on our business, financial conduction and results of operations.
We are subject to changes in accounting principles, policies or guidelines.
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Some of these policies require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results.
−Removed: Some of our accounting policies are critical because they require
−Removed: management to make subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
+Added: Some of our accounting policies are critical because they require management to make subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses.
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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.