Item 1A. Risk Factors
Item 1A – Risk Factors
The Company's Form 10-K for the year ended December 31, 2020 provides information on risk factors at that time and mentions the potential economic consequences associated with the COVID-19 outbreak. Since the 10-K was published, the COVID-19 outbreak continues to be a worldwide pandemic with a myriad of adverse impacts upon society as a whole. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability. In response to the COVID-19 pandemic, Federal, State and Local governments have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forgo their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. The initial restrictions and other consequences of the pandemic resulted in significant adverse effects for many different types of businesses, including, among others, those in the retail sales, travel, hospitality and food and beverage industries, and resulted in a significant number of layoffs and furloughs of employees nationwide and in the markets in which we operate. Restrictions have been mostly lifted nationally and within the Company's operating footprint with some level of economic recovery resulting. An increase in virus spread or infection rates could result in restrictions being re-implemented with further negative impact to economic activity.
The ultimate effects of COVID-19 on the broader economy and the markets that we serve are not known nor is the ultimate length of the restrictions described above and any accompanying effects. Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which may negatively affect our interest income and, therefore, earnings, financial condition and results of operations. Additional impacts of COVID-19 on our business could be widespread and material, and may include, or exacerbate, among other consequences, the following:
• employees contracting COVID-19
• unavailability of key personnel necessary to conduct our business activities
• disruption resulting from having a significant percentage of employees work remotely
• repeated or sustained closures of our branch lobbies
• declines in demand for loans and other banking services
• reduced consumer spending due to job losses or other impacts of the virus
• adverse conditions in financial markets may have a negative impact on our investment portfolio
• adverse economic conditions result in a slowdown in municipal tax collections potentially impacting municipal loans, investments, and deposit balances
• decline in credit quality of our loan portfolio leading to increased provisions for loan losses
• declines in the value of loan collateral, including residential and commercial real estate
• decline in the liquidity of borrowers and guarantors impairing their ability to honor financial commitments
• actions of governmental entities to limit business activities
The significant contribution of tourism to the State of Maine's overall economy, and the Company's primary market areas in particular, may result in a disproportionate effect relative to other regions. These factors, together or in combination with other events or occurrences that may not yet be known or anticipated, may materially and adversely affect our business, financial condition and results of operations.
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