Item 1A. Risk Factors
Item 1A – Risk Factors
Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as well as cautionary statements contained in this Form 10-Q, including those under the caption “Forward-Looking Statements” set forth in the forepart of this Form 10-Q, risks and matters described elsewhere in this Form 10-Q and in our other filings with the SEC. There are no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, except as follows:
On October 15, 2021, we completed the previously announced acquisition of Select Bancorp, Inc ("Select"), which had $1.8 billion in total assets as of the acquisition date. Due to Select's size, combined with the high deposit growth that we have continued to experience since the onset of the pandemic, the total assets of our Company were approximately $10.3 billion upon the acquisition of Select. If our level of total assets exceeds $10 billion as of December 31, 2021, it will subject us to additional federal regulations and could materially and adversely affect our business.
Pursuant to Section 165 of the Dodd-Frank Act, banks with greater than $10 billion in total consolidated assets are subject to certain additional regulatory requirements, including limits on the debit card interchange fees that such banks may collect, changes in the manner in which assessments for FDIC deposit insurance are calculated, and providing the authority to the Consumer Financial Protection Bureau (“CFPB”) to supervise and examine such banks. Assuming that our total assets exceed $10 billion as of December 31, 2021 and that the limitation on debit card interchange income thus applies, we currently expect the negative impact on our debit card interchange fees to be approximately $10 million beginning July 1, 2022, the impact of which we expect will be partially offset by our planned elimination of rewards paid to customers on debit card transactions amounting to $1-$1.5 million.
Compliance with the Dodd-Frank Act’s requirements may also necessitate that we hire or contract with additional compliance or other personnel, design and implement additional internal controls, or incur other significant expenses, any of which could have a material adverse effect on our business, financial condition or results of operations.
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Additionally, the dividend rate on shares of Federal Reserve Bank stock for financial institutions with total assets of more than $10 billion changes from a 6% rate to the lesser of 6% or the most recent 10-year Treasury rate. We currently own $17.8 million in Federal Reserve Bank stock.
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