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We are starting to see the impact of the pandemic on our business, which we expect to continue and potentially worsen.
−Removed: This impact could be significant, adverse and potentially material.
+Added: This impact has been, in certain areas, and could continue to be significant, adverse and potentially material.
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;
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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 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 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.
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 9.7% of our loan portfolio as of March 31, 2020, and the Retail Trade industry, which represents 1.1% of our loan portfolio as of March 31, 2020.
−Removed: In addition, approximately 6% of our loan portfolio as of March 31, 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 10.5% 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.
+Added: 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.
These areas may have a longer recovery period than other industries.
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As discussed in the Management’s Discussion and Analysis, we began using a new credit reserving methodology known as the CECL methodology effective January 1, 2020.
−Removed: 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 comparable precedent.
−Removed: For the three months ended March 31, 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 $14.3 million.
−Removed: The portion of the provision related to COVID-19 matters was about two thirds of the quarter’s reserve build.
−Removed: We could 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.
+Added: 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.
+Added: 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: 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 .
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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.
−Removed: In response to COVID-19, we have modified our business practices with a portion of our employees working remotely from their homes to have our operations uninterrupted as much as possible.
−Removed: These actions will likely result in increased spending on our business continuity efforts, such as technology and readiness efforts for returning to our offices.
+Added: In response to COVID-19, we have modified our business practices by directing a portion of our employees to work remotely from their homes to minimize interruptions to our operations.
+Added: These actions will likely result in increased spending on our business continuity efforts, such as technology and readiness procedures for returning to our offices.
We could also experience an increased strain on our risk management policies, including, but not limited to, the effectiveness and accuracy of our models, given the lack of data inputs and comparable precedent.
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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.