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The COVID-19 pandemic has adversely affected, and is likely to continue to adversely affect, our customers and other businesses in our market area, as well as counterparties and third party vendors.
−Removed: The resulting adverse impacts on our business, financial condition, liquidity and results of operations will likely be significant.
+Added: The resulting adverse impacts on our business, financial condition, liquidity and results of operations have been, and may continue to be significant.
The COVID-19 pandemic and the resulting containment measures have resulted in widespread economic and financial disruptions that have adversely affected, and are likely to continue to adversely effect, our customers and other businesses in our market area, as well as counterparties and third-party vendors.
−Removed: We are starting to see the impact of the pandemic on our business, which we expect to continue and potentially worsen.
+Added: We continue to see the impact of the pandemic on our business, which we expect may potentially worsen, particularly since there remains ongoing uncertainty as to how long the COVID-19 pandemic and related containment measures will continue, both in our market area and the rest of the country..
This impact has been, in certain areas, and could continue to be significant, adverse and potentially material.
−Removed: The extent of this impact, and the resulting impact on our business, financial condition, liquidity and results of operations, is unknown at this time, and will depend on a number of evolving factors and future developments beyond our control and that we are unable to predict, including the duration, spread and severity of the pandemic;
+Added: The full extent of this
+Added: impact, and the resulting impact on our business, financial condition, liquidity and results of operations, remains inestimable at this time, and will depend on a number of evolving factors and future developments beyond our control and that we are unable to predict, including the duration, spread and severity of the pandemic;
the nature, extent and effectiveness of containment measures;
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It is also possible that any adverse impacts of the pandemic and containment measures may continue once the pandemic is controlled and the containment measures are lifted.
−Removed: Many of the risks described in the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in other periodic and current reports filed by the Company with the Securities and Exchange Commission will likely be exacerbated, and the impact of such risks will likely be magnified, as a result of the COVID-19 pandemic.
+Added: Many of the risks described in the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and in other periodic and current reports filed by the Company with the Securities and Exchange Commission will likely be exacerbated, and the impact of such risks will likely be magnified, as a result of the COVID-19 pandemic.
We expect the negative impacts of the COVID-19 pandemic on our business, financial condition, liquidity and results of operations to be the most severe in the following areas:
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The significant disruption resulting from the COVID-19 pandemic has been materially affecting the businesses of our customers and of their customers, which impacts their creditworthiness, their ability to pay amounts owed to us and our ability to collect those amounts.
−Removed: Among the industry’s most clearly impacted by the pandemic are the Accommodation and Food Service industry, exposure to which represents 10.5% of our loan portfolio as of June 30, 2020, and the Retail Trade industry, which represents 1.3% of our loan portfolio as of June 30, 2020.
−Removed: In addition, approximately 6% of our loan portfolio as of June 30, 2020 is secured by commercial real estate loans secured by restaurants, hotels or retail properties.
+Added: Among the industry’s most clearly impacted by the pandemic are the Accommodation and Food Service industry, exposure to which represents 10.2% of our loan portfolio as of September 30, 2020, and the Retail Trade industry, which represents 1.3% of our loan portfolio as of September 30, 2020.
+Added: In addition, approximately 6% of our loan portfolio as of September 30, 2020 is secured by commercial real estate loans secured by restaurants, hotels or retail properties.
These areas may have a longer recovery period than other industries.
−Removed: Deteriorating economic conditions are also likely to result in declines in real estate values and home sales volumes, and an increase in tenants failing to make or deferring rent payments.
+Added: Despite high home sales volumes and our strong performance in gains from residential mortgage loans for the quarter ended September 30, 2020, such volumes and performance are not stable and economic conditions are may likely result in future material declines in real estate values and home sales volumes, and an increase in tenants failing to make or deferring rent payments.
A large portion of our loan portfolio is related to real estate, with 73% consisting of commercial real estate and real estate construction loans, and 80% of our loans being secured by real estate.
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Our ability to accurately forecast future losses under that methodology may be impaired by the significant uncertainty surrounding the pandemic and containment measures and the lack of a comparable precedent.
−Removed: For the three and six months ended June 30, 2020, after the initial adjustment to the allowance for credit losses as of January 1, 2020, we further increased the allowance for credit losses by $19.7 million and $34.0 million, respectively, inclusive of $138 thousand of allowance for credit losses on AFS debt securities recorded in the second quarter of 2020.
+Added: For the three and nine months ended September 30, 2020, after the initial adjustment to the allowance for credit losses as of January 1, 2020 and the additional adjustments as of March 31, 2020 and June 30, 2020, we further increased the allowance for credit losses by $6.6 million and $40.7 million, respectively, inclusive of $156 thousand of allowance for credit losses on AFS debt securities recorded in the third quarter of 2020.
We may need to record additional provisions for credit losses in future, as the COVID-19 pandemic continues to evolve, and our losses on our loans and other exposures could exceed our allowance.
• Increased Demands on Capital and Liquidity .
−Removed: We have begun to experience increased volume of loan originations, particularly SBA loans pursuant to the PPP created by recent legislation.
+Added: We have experienced increased volume of loan originations, particularly SBA loans pursuant to the PPP created by recent legislation.
Certain of these SBA loans have mandated interest rates that are lower than our usual rates and may not be purchased by the SBA or other third parties within expected timeframes.
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• Interest Rate Risk .
−Removed: Our net interest income, lending activities, deposits and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from the COVID-19 pandemic.
−Removed: In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent.
+Added: Our net interest income, lending activities, deposits and profitability have been and could continue to be negatively affected by volatility in interest rates caused by uncertainties stemming from the COVID-19 pandemic.
+Added: March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent.
A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies.
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If we do not respond appropriately to the pandemic, or if customers or other stakeholders do not perceive our response to be adequate, we could suffer damage to our reputation and our brand, which could materially adversely affect our business.
−Removed: We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions, including as a result of our participation in the PPP as detailed in the Note 1 to the Consolidated Financial Statements.
+Added: We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions, as detailed in the Note 1 to the Consolidated Financial Statements.
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.