What changed in this filing

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Item 1A. Risk Factors

2020-08-07 compared with 2020-05-08 · 53 added, 29 removed, 1 unchanged (99% of the section changed)

In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents a material update and addition to the risk factors previously disclosed in our Annual Report on Form 10- K for the fiscal year ended December 31, 2019 as filed with the Securities and Exchange Commission.

In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factors relating to the Company’s proposed merger (“Merger”) with Dime Community Bancshares, Inc.

(“Dime”) represent a material update and addition to the risk factors previously disclosed in our Annual Report on Form 10- K for the fiscal year ended December 31, 2019, as filed with the Securities and Exchange Commission, as updated by our Quarterly Reports on Form 10-Q.

To the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

The economic impact of the COVID-19 outbreak may have an adverse impact on our business and results of operations.

In December 2019, a novel coronavirus was reported in China, and, in March 2020, the World Health Organization declared COVID-19 a pandemic.

On March 12, 2020 the President of the United States declared the COVID-19 outbreak in the United States a national emergency.

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including New York, have ordered non-essential businesses to close and residents to shelter in place at home.

This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment.

Since the COVID-19 outbreak, more than 30 million people nationwide have filed claims for unemployment, and stock markets have declined in value and in particular bank stocks have significantly declined in value.

In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows.

Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees).

The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak.

Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry.

Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences.

We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business.

The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we may be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

demand for our products and services may decline, making it difficult to grow assets and income;

if the economy is unable to substantially reopen, and high levels of unemployment continue, for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our allowance for credit losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;

our cyber security risks are increased as the result of an increase in the number of employees working remotely;

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years.

The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy.

We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

There is no assurance when or even if the Merger will be completed.

Completion of the Merger is subject to satisfaction or waiver of a number of conditions.

There can be no assurance that the Company and Dime will be able to satisfy the closing conditions or that closing conditions beyond their control will be satisfied or waived.

Additionally, the Company and/or Dime can terminate the merger agreement under specified circumstances, even if their respective shareholders have already voted to approve the merger agreement and the Merger.

Moreover, the Company could face stockholder litigation relating to the Merger, which could prevent or delay the consummation of the Merger.

Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Merger.

Before the Merger may be completed, the Company and Dime must obtain approvals (or waivers) from the Federal Reserve and the New York Department of Financial Services.

Other approvals, waivers or consents from regulators may also be required.

In determining whether to grant these approvals the regulators consider a variety of factors, including the regulatory standing of each party.

An adverse development in either party’s regulatory standing or other factors could result in an inability to obtain approval or delay their receipt.

These regulators may impose conditions on the completion of the Merger or require changes to the terms of the Merger.

Such conditions or changes could have the effect of delaying or preventing completion of the Merger or imposing additional costs on or limiting the revenues of the combined company following the Merger, any of which might have an adverse effect on the combined company following the Merger.

Failure to complete the Merger could negatively impact the Company’s stock price, business and financial results.

If the Merger is not completed, the ongoing business of the Company may be adversely affected and the Company may be subject to a number of risks, including the following:

● the Company will be required to pay certain costs relating to the Merger, whether or not the Merger is completed, such as legal, accounting, financial advisor, proxy solicitation and printing fees;

● under the Merger agreement, the Company is subject to certain restrictions on the conduct of its business before completing the Merger, which may adversely affect its ability to execute certain of its business strategies if the Merger is terminated;

● matters relating to the Merger may require substantial commitments of time and resources by the Company’s management, which could otherwise have been devoted to other opportunities that may have been beneficial to the Company as an independent company.

In addition, if the Merger is not completed, the Company may experience negative reactions from the financial markets and from its customers and employees.

The Company could be subject to litigation related to any failure to complete the Merger, or to proceedings commenced by Dime seeking damages or to compel the Company to perform its obligations under the merger agreement.

These factors and similar risks could have an adverse effect on the Company’s results of operation, business and stock price.

Combining the Company and Dime may be more difficult, costly or time consuming than expected and the Company and Dime may fail to realize the anticipated benefits of the Merger.

The success of the Merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of the Company and Dime.

To realize the anticipated benefits and cost savings from the Merger, the Company and Dime must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized.

If the Company and Dime are not able to successfully achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

In addition, the actual cost savings and anticipated benefits of the Merger could be less than anticipated, and integration may result in additional unforeseen expenses.

The Company and Dime have operated and, until the completion of the Merger, must continue to operate, independently.

It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the Merger.

Integration efforts between the two companies may also divert management attention and resources.

These integration matters could have an adverse effect on the Company during this transition period and for an undetermined period after completion of the Merger on the combined company.

The Company’s shareholders will have a reduced ownership and voting interest after the Merger and will exercise less influence over management of the combined organization.

The Company’s shareholders currently have the right to vote in the election of the Company’s board of directors and on various other matters affecting the Company.

Upon the completion of the Merger, Dime’s shareholders will become shareholders of the Company with ownership of approximately 52% of the combined company and the Company shareholders will own approximately 48% of the combined company.

Therefore, the Company’s shareholders will have a reduced ownership and voting interest after the Merger.

The combined company may be unable to retain the Company’s or Dime’s personnel successfully after the Merger is completed.

The success of the Merger will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by the Company and Dime.

It is possible that these employees may decide not to remain with the Company or Dime, as applicable, while the Merger is pending or with the combined company after the Merger is consummated.

If the Company and Dime are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs.

In addition, if key employees terminate their employment, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating the Company and Dime to hiring suitable replacements, all of which may cause the combined company’s business to suffer.

In addition, the Company and Dime may not be able to locate or retain suitable replacements for any key employees who leave either company.

In connection with the Merger, the Company will assume certain of Dime’s outstanding debt obligations and preferred stock, and the combined company’s level of indebtedness following the completion of the Merger could adversely affect the combined company’s ability to raise additional capital and to meet its obligations under its existing indebtedness.

In connection with the Merger, the Company will assume certain of Dime’s outstanding indebtedness and Dime’s obligations related to its outstanding preferred stock.

The Company’s existing debt, together with any future incurrence of additional indebtedness, and the assumption of the Company’s outstanding preferred stock, could have important consequences for the combined company’s creditors and the combined company’s shareholders.

For example, it could:

● limit the combined company’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;

● restrict the combined company from making strategic acquisitions or cause the combined company to make non-strategic divestitures;

● restrict the combined company from paying dividends to its shareholders;

● increase the combined company’s vulnerability to general economic and industry conditions;

● require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the combined company’s indebtedness and dividends on the preferred stock, thereby reducing the combined company’s ability to use cash flows to fund its operations, capital expenditures and future business opportunities.

Following completion of the Merger, holders of the Company’s common stock will be subject to the prior dividend and liquidation rights of the holders of the preferred stock that the Company will issue upon completion of the Merger.

The holders of shares of the Dime’s outstanding preferred stock, which will be converted into shares of the Company’s preferred stock, as well as the holders of any shares of preferred stock that the Company may issue in the future, would receive, upon the combined company’s voluntary or involuntary liquidation, dissolution or winding up, before any payment is made to holders of the Company common stock, their liquidation preferences as well as any declared and unpaid distributions.

These payments would reduce the remaining amount of the combined company’s assets, if any, available for distribution to holders of its common stock.

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-Q

Item 1A. Risk Factors