What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-03-11 compared with 2021-03-09 · 93 added, 64 removed, 402 unchanged (28% of the section changed)

2 unchanged sentences

A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects.

Our business and operations are sensitive to general business and economic conditions in the United States, generally, and particularly in the states of California, Illinois, New Jersey and New York, and the Los Angeles, New York City, Chicago and Las Vegas, Nevada metropolitan areas.

Our business and operations are sensitive to general business and economic conditions in the United States, generally, and particularly in the states of California, Illinois, New Jersey, Hawaii and New York, and the Los Angeles, New York City, Chicago and Las Vegas, Nevada metropolitan areas.

Unfavorable or uncertain economic and market conditions could lead to credit quality concerns related to repayment ability and collateral protection as well as reduced demand for the products and services we offer.

28 unchanged sentences

Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.

At December 31, 2020, we had $205.7 million of commercial loans, consisting of $3.6 million of CRE loans and $202.1 million of C&I loans for which real estate is not the primary source of collateral, and $186.7 million of C&D loans.

Commercial loans represented 47.8% of our total loan portfolio at December 31, 2020.

At December 31, 2021, we had $1.8 billion of commercial loans, consisting of $1.2 billion of CRE loans and $268.7 million of C&I loans for which real estate is not the primary source of collateral, and $303.1 million of C&D loans.

C&I loans represented 9.2% of our total loan portfolio at December 31, 2021.

Commercial loans are often larger and involve greater risks than other types of lending.

28 unchanged sentences

We originated $291.3  million for the year ended December 31, 2021 and $55.7 million for the year ended December 31, 2020 of non-qualified SFR mortgage loans.

We originated qualified SFR mortgage loans of $53.8  million for the year ended December 31, 2020 of and $40.3 million for the year ended December 31, 2019.

We originated qualified SFR mortgage loans of $180.8  million for the year ended December 31, 2021 of and $53.8 million for the year ended December 31, 2020.

As of December 31, 2021, our non-qualified SFR mortgage loans had an average loan-to-value of 56.24% and an average FICO score of 760.

3 unchanged sentences

Such non-qualified loans may be considered more risky than qualified mortgage loans although we attempt to address this enhanced risk through our underwriting process, including requiring larger down payments and, in some cases, interest reserves.

We sold in the secondary market $79.0 million of our non-qualified mortgage loans for the year ended December 31, 2020, and we realized $2.7 million gains on the sale of non-qualified SFR mortgage loans for the year ended December 31, 2020. We also have a concentration in our SFR secondary sale market, as a substantial portion of our non-qualified mortgage loans have been sold to two banks;

We sold in the secondary market $63.1 million of our non-qualified mortgage loans for the year ended December 31, 2021, and we realized $1.6 million gains on the sale of non-qualified SFR mortgage loans for the year ended December 31, 2021. We also have a concentration in our SFR secondary sale market, as a substantial portion of our non-qualified mortgage loans have been sold to two banks;

however, we are currently selling SFR mortgage loans to three banks.

50 unchanged sentences

Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation.

Although we are currently unable to assess the ultimate impact of the transition from LIBOR, the failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

There are also operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry.

The implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our borrowers may incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations.

These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established or the establishment of multiple alternative reference rate(s).

These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us.

Real estate construction loans are based upon estimates of costs and values associated with the complete project.

33 unchanged sentences

Adverse economic conditions in Asia, and in China or Taiwan in particular, may also negatively impact asset values and the profitability and liquidity of our customers who operate in this region.

The Company is a California state chartered bank with operations in California, New York, New Jersey, Nevada and Chicago.

The Company is a California state chartered bank with operations in California, Hawaii, Illinois, New York, New Jersey, and Nevada.

We have no overseas operations, including in China and the Far East.

4 unchanged sentences

As a commercial bank, we provide services to a number of clients whose deposit levels vary considerably and have a significant amount of seasonality.

At December 31, 2020, 131 clients maintained balances (aggregating all related accounts, including multiple business entities and personal funds of business owners) in excess of $2.0 million. This amounted to $886.7 million or approximately 33.5% of the Bank’s total deposits as of December 31, 2020.

At December 31, 2021, 154 clients maintained balances (aggregating all related accounts, including multiple business entities and personal funds of business owners) in excess of $2.0 million. This amounted to $1.6 billion or approximately 47.3% of the Bank’s total deposits as of December 31, 2021.

In addition, our ten largest depositor relationships accounted for approximately 26.1% of our deposits at December 31, 2021.

Our largest depositor relationship accounted for approximately 14.7% of our deposits at December 31, 2021.

These deposits can and do fluctuate substantially.

The depositors are not concentrated in any industry or business.

The loss of any combination of these depositors, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’

These deposits can and do fluctuate substantially.  As of December 31, 2021, one trust company depositor is maintaining demand deposit balances in the range of $400 to $600 million with the Bank.  The loss of any combination of these depositors, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’

businesses, would adversely affect our liquidity and require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short-term basis to replace such deposits.

18 unchanged sentences

The current expected credit loss standard established by the FASB Board will require significant data requirements and changes to methodologies.

In the aftermath of the 2007-2008 financial crisis, the FASB, decided to review how banks estimate losses in the ALLL calculation, and it issued the final Current Expected Credit Loss (“CECL”), standard on June 16, 2016. Currently, the impairment model used by financial institutions is based on incurred losses, and loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms.

In the aftermath of the 2007-2008 financial crisis, the FASB decided to review how banks estimate losses in the ALLL calculation, and it issued the final CECL standard on June 16, 2016. Currently, the impairment model used by financial institutions is based on incurred losses, and loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms.

This model will be replaced by the CECL model that will become effective for the Bank on December 31, 2022 (as the implementation date was deferred by the FASB) in which financial institutions will be required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan.

2 unchanged sentences

On December 21, 2018, federal bank regulatory agencies approved a final rule, effective as of April 1, 2019, modifying their regulatory capital rules and providing an option to phase in over a three-year period the initial regulatory capital effects of the CECL methodology.

The Company is currently evaluating the magnitude of the one-time cumulative adjustment to its allowance and of the ongoing impact of the CECL model on its loan loss allowance and results of operations, together with the final rule that became effective as of April 1, 2019, to determine if the phase-in option will be elected.

The Company will adopt CECL on December 31, 2022.

Risks Related to our Acquisition Strategy

34 unchanged sentences

As of December 31, 2021, our goodwill totaled $69.3 million.

We evaluated our goodwill and intangibles in the first, second and fourth quarters of 2020 

The impairment evaluation did not identify an impairment of goodwill or the core deposit intangible in those quarters of 2020. 

However, there were write-downs of mortgage servicing rights of $50,000 in the third quarter of 2020 and $366,000 in the second quarter of 2020. There can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.  

We evaluated our goodwill and intangibles in the first, second and fourth quarters of 2020, and the fourth quarter of  2021.

The impairment evaluation did not identify an impairment of goodwill or the core deposit intangible in those quarters of 2020 and  2021. However, there were write-downs of mortgage servicing rights of $50,000 in the third quarter of 2020 and $366,000 in the second quarter of 2020.

The Company recorded an impairment writedown reversal of $416,000 on servicing assets in 2021. There can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.  

We may not be able to continue growing our business, particularly if we cannot make acquisitions or increase loans and deposits through organic growth, either because of an inability to find suitable acquisition candidates, constrained capital resources or otherwise.

17 unchanged sentences

however, one of our strategies is to expand beyond California into other domestic markets that have concentrations of Chinese-American individuals and businesses.

We also currently have operations in Las Vegas, Nevada, including operating a branch office, and are currently looking for additional branch expansion opportunities in the San Francisco Bay area and Houston and, secondarily, San Diego and Riverside counties in southern California, Hawaii and Phoenix.

We also currently have operations in Las Vegas, Nevada and Honolulu, Hawaii, including operating a branch office, and are currently looking for additional branch expansion opportunities in the San Francisco Bay area and Houston and, secondarily, San Diego and Riverside counties in southern California, and Phoenix.

In the course of this expansion, we will encounter significant risks and uncertainties that could have a material adverse effect on our operations.

32 unchanged sentences

Other Risks Related to Our Business

System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use could be vulnerable to hardware and cyber security issues.

Our operations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure or a similar catastrophic event.

We could also experience a breach by intentional or negligent conduct on the part of employees or other internal or external sources, including our third-party vendors.

Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations.

In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure utilized by us, including our internet banking activities, against damage from physical break-ins, cyber security breaches and other disruptive problems caused by the internet or other users.

Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and inhibit the use of our internet banking services by current and potential customers.

We rely heavily on communications, information systems (both internal and provided by third parties) and the internet to conduct our business.

Our business is dependent on our ability to process and monitor large numbers of daily transactions in compliance with legal, regulatory and internal standards and specifications.

In addition, a significant portion of our operations relies heavily on the secure processing, storage and transmission of personal and confidential information, such as the personal information of our customers and clients.

These risks may increase in the future as we continue to increase mobile payments and other internet-based product offerings and expand our internal usage of web-based products and applications.

In addition, U.S.

financial institutions have experienced significant distributed denial-of-service attacks, some of which involved sophisticated and targeted attacks intended to disable or degrade service, or sabotage systems.

Other potential attacks have attempted to obtain unauthorized access to confidential information or destroy data, often through the introduction of computer viruses or malware, cyber-attacks and other means.

To date, none of these type of attacks have had a material effect on our business or operations.

Such security attacks can originate from a wide variety of sources, including persons who are involved with organized crime or who may be linked to terrorist organizations or hostile foreign governments.

Those same parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or that of our customers or clients.

We are also subject to the risk that our employees may intercept and transmit unauthorized confidential or proprietary information.

An interception, misuse or mishandling of personal, confidential or proprietary information being sent to or received from a customer or third party could result in legal liability, remediation costs, regulatory action and reputational harm.

We regularly add additional security measures to our computer systems and network infrastructure to mitigate the possibility of cyber security breaches, including firewalls and penetration testing.

However, it is difficult or impossible to defend against every risk being posed by changing technologies as well as criminal intent on committing cyber-crime.

Increasing sophistication of cyber criminals and terrorists make keeping up with new threats difficult and could result in a breach.

Controls employed by our information technology department and cloud vendors could prove inadequate.

A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have an adverse effect on our business, financial condition and results of operations.

We are exposed to risks related to fraud and cyber-attacks.

The Company is continuously enhancing and expanding our digital products and services to meet client and business needs with desired outcomes.

These digital products and services often include storing, transmitting, and processing confidential client, employee, monetary, and business information.

Due to the nature of this information, and the value it has for internal and external threat actors, we, and our third-party service providers, continue to be subject to cyber-attacks and fraud activity that attempts to gain unauthorized access, misuse information and information systems, steal information, disrupt or degrade information systems, spread malicious software, and other illegal activities.

We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the probability and magnitude of a material event.

However, because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics and techniques, or to implement adequate and timely protective measures.

Cybersecurity, and the continued development and enhancement of controls, processes, and practices designed to protect client information, systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a priority for the Company.

As cybersecurity threats continue to evolve, we may be required to expend additional resources to continue to enhance, modify, and refine our protective measures against these evolving threats.

To date, we have no knowledge of a successful cyber-attack or other material information security breach affecting our systems.

However, our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the continuation of a remote work environment for our employees and service providers and our plans to continue to implement and expand digital banking services, expand operations, and use third-party information systems that includes cloud-based infrastructure, platforms, and software.

Recent instances of attacks specifically targeting financial services businesses indicate that the risk to our systems remains significant.

If we or a critical third party vendor were to experience a cyber-attack or information security breach, we could suffer damage to our reputation, productivity losses, response costs associated with investigation and resumption of services, and incur substantial additional expenses, including remediation expenses costs associated with client notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.

In addition, the Company’s clients and vendors rely on technology and systems unmanaged by the Company, such as networking devices, server infrastructure, personal computers, smartphones, tablets, and other mobile devices, to contact and conduct business with the Company.

If the devices of the Company’s clients or vendors become the target of a cyber-attack, or information security breach, it could result in unauthorized access to, misuse of, or loss of confidential client, employee, monetary, or business information.

Threat actors using improperly obtained personal or financial information of consumers can attempt to obtain loans, lines of credit, or other financial products from the Company, or attempt to fraudulently persuade the Company’s employees, clients, or other users of the Company’s systems to disclose confidential information in order to gain improper access to the Company’s information and information systems.

We also face additional costs when our customers become the victims of cyber-attacks.

For example, various retailers have reported that they have been the victims of a cyber-attack in which large amounts of their clients’

data, including debit and credit card information, is obtained.

Our clients may be the victims of phishing scams, providing cyber criminals access to their accounts, or credit or debit card information.

In these situations, we incur costs to replace compromised cards and address fraudulent transaction activity affecting our clients.

Both internal and external fraud and theft are risks.

If confidential client, employee, monetary, or business information were to be mishandled or misused, we could suffer significant regulatory consequences, reputational damage, and financial loss.

Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or if such information were to be intercepted or otherwise inappropriately taken by third parties, or if our own employees abused their access to financial systems to commit fraud against our clients and the Company.

These activities can occur in connection with the origination of loans and lines of credit, ACH transactions, wire transactions, ATM transactions, and checking transactions, and result in financial losses as well as reputational damage.

Operational errors can include information system misconfiguration, clerical or record-keeping errors, or disruptions from faulty or disabled computer or telecommunications systems.

Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified.

Because of the Company’s large transaction volume and its necessary dependence upon automated systems to record and process these transactions, there is a risk that technical flaws, tampering, or manipulation of those automated systems, arising from events wholly or partially beyond its control, may give rise to disruption of service to customers and to financial loss or liability.

We are exposed to the risk that our business continuity and data security systems prove to be inadequate.

The occurrence of any of these risks could result in a diminished ability for us to operate our business, additional costs to correct defects, potential liability to clients, reputational intervention, any of which could adversely affect our business, financial condition and results of operations.

Liabilities from environmental regulations could materially and adversely affect our business and financial condition.

6 unchanged sentences

recurring energy shortage in our geographic markets , especially in California, could harm our business.

We are based in California and at December 31, 2020, approximately 46.6% of the aggregate outstanding principal of our loans was secured by real estate located in California.

We are based in California and at December 31, 2021, approximately 44.1% of the aggregate outstanding principal of our mortgage loans was secured by real estate located in California.

In addition, the computer systems that operate our Internet websites and some of their back-up systems are located in California.

9 unchanged sentences

The occurrence of natural disasters or energy shortages in California could have a material adverse effect on our business prospects, financial condition and results of operations.

Climate change could have a material negative impact on the Company and clients.

The Company’s business, as well as the operations and activities of our clients, could be negatively impacted by climate change.

Climate change presents both immediate and long-term risks to the Company and its clients, and these risks are expected to increase over time.

Climate change presents multi-faceted risks, including:

operational risk from the physical effects of climate events on the Company and its clients’

facilities and other assets;

credit risk from borrowers with significant exposure to climate risk;

transition risks associated with the transition to a less carbon- dependent economy;

and reputational risk from stakeholder concerns about our practices related to climate change, the Company’s carbon footprint, and the Company’s business relationships with clients who operate in carbon-intensive industries.

Federal and state banking regulators and supervisory authorities, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change both directly and with respect to their clients, which may result in financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and investment activities.

Given that climate change could impose systemic risks upon the financial sector, either via disruptions in economic activity resulting from the physical impacts of climate change or changes in policies as the economy transitions to a less carbon-intensive environment, the Company may face regulatory risk of increasing focus on the Company’s resilience to climate-related risks, including in the context of stress testing for various climate stress scenarios.

Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit, and reputational risks and costs.

With the increased importance and focus on climate change, we are making efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework.

Nonetheless, the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.

We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.

We face strong competition from financial services companies and other companies that offer banking and mortgage banking services, which could harm our business.

61 unchanged sentences

We have paid quarterly dividends since our initial public offering in the third quarter of 2017.

In 2017 we paid $0.38 per share, in 2018 we paid $0.35 per share, in 2019 we paid $0.40, and in 2020 we paid $0.33.

In 2017 we paid $0.38 per share, in 2018 we paid $0.35 per share, in 2019 we paid $0.40 per share, in 2020 we paid $0.33 per share, and in 2021 we paid $0.51 per share.

We have no obligation to pay dividends and we may change our dividend policy at any time without notice to our shareholders.

9 unchanged sentences

This could cause the market price of our common stock to decline.

We have outstanding options to purchase 1,106,470 shares of our common stock as of December 31, 2020 that may be exercised and sold (assuming all vesting requirements are met), and we have the ability to issue options exercisable for up to an additional 1,182,045 shares of common stock pursuant to our 2017 Omnibus Stock Incentive Plan.

We have outstanding options to purchase 943,918 shares of our common stock as of December 31, 2021 that may be exercised and sold (assuming all vesting requirements are met), and we have the ability to issue options exercisable for up to an additional 981,853 shares of common stock pursuant to our 2017 Omnibus Stock Incentive Plan.

The sale of any of such shares could cause the market price of our stock to decline, and concerns that those sales may occur could cause the trading price of our common stock to decrease or to be lower than it might otherwise be.

20 unchanged sentences

Investors may find our common stock less attractive if we rely on the exemptions, which may result in a less active trading market and increased volatility in our stock price.

The outbreak of the COVID-19 pandemic has caused a significant global economic downturn which has adversely affected our business and results of operations, and the future impacts of the COVID-9 pandemic on the global economy and our business, results of operations, liquidity, and financial condition remain uncertain.

The COVID-19 pandemic continues to cause economic disruption both worldwide and in the markets we operate.

Given the ongoing and dynamic nature of these circumstances, it is difficult to predict the impact of the coronavirus pandemic on our business, and there is no guarantee that our efforts to address or mitigate the adverse impacts of the coronavirus will be effective.

To date, the impact has included periods of significant volatility in financial, commodities, and other markets.

This volatility, if it continues, could have an adverse impact on our customers and on our business, financial condition, and results of operations, as well as our growth strategy.

Our business is dependent upon the willingness and ability of our customers to conduct financial transactions and fulfill their obligations.

The spread of COVID-19 has caused (and could continue to cause) severe disruptions in the U.S.

economy, and has resulted (and may continue to result) in disruptions to our customers’

businesses, and a decrease in consumer confidence, and adversely affect business generally.

In addition, actions by U.S.

federal, state, and local governments to address the pandemic, including travel bans, stay-at-home orders, and school, business, and entertainment venue closures, have had (and may continue to have) a significant adverse effect on our customers and the markets in which we conduct our business.

The extent of impacts resulting from the pandemic and other events beyond our control remain dependent on future developments, including but not limited to the effectiveness and level of acceptance of vaccines, new information that may emerge concerning the severity of the pandemic, the duration of the coronavirus pandemic, any resurgence in the number of COVID-19 cases, any development and proliferation of new strains of COVID-19, actions taken to contain the coronavirus or its impact, and other similar factors;

all of which are uncertain and cannot be predicted.

Although new loan origination began to rebound during the latter part of 2020, we believe economic impacts stemming from COVID-19 will continue to influence our loan originations in the near term, both in terms of both a reduction in overall demand for new loans and our continued emphasis on prudent credit risk management, particularly within the context of the continued uncertainty surrounding the economic environment.

We are actively working to support our borrowers to mitigate the impact of the COVID-19 pandemic on them and on our loan portfolio, including through loan modifications that defer payments for those who experienced a hardship as a result of the COVID-19 pandemic.

Although recent regulatory guidance provides that such loan modifications are exempt from the calculation and reporting of troubled debt restructurings ("TDRs") and loan delinquencies, we cannot predict whether such loan modifications may ultimately have an adverse impact on our profitability in future periods.

Our inability to successfully manage the increased credit risk caused by the COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of operations.

Disruptions to our customers or business in general could result in increased risk of delinquencies, defaults, foreclosures, and losses on our loans.

The escalation of the pandemic may also negatively impact regional economic conditions for a period of time, which could result in declines in loan demand, liquidity of loan guarantors, loan collateral (particularly in real estate), loan originations, and deposit availability.

If the global response to COVID-19 escalates or is unsuccessful, we could experience a material adverse situation that could affect our business, financial condition, results of operations, and cash flows.

The continuing COVID-19 pandemic could adversely affect our business and our customers, counterparties, employees, and third-party service providers.

The spread of COVID-19 has created a global public-health crisis that has impacted household, business, economic, and market conditions.

Governments have taken unprecedented financial and monetary steps in response to the pandemic.

For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S.

economy, followed by additional COVID relief legislation of approximately $900 million in December 2020.

In March 2021, the American Rescue Plan Act (“American Rescue Plan”), also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L.

117-2, was enacted to inject an additional $1.9 trillion in financial relief and economic stimulus.

The Federal Reserve has taken decisive and sweeping actions as well.

Since March 15, 2020, their actions have included a reduction in the target range for the federal funds rate to 0 to 25 basis points, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, corporate bonds and other investments, and numerous facilities to support the flow of credit to households and businesses.

The full extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects is still uncertain, and will depend on a number of evolving factors, including:

The duration, extent, and severity of the pandemic .

COVID-19 has not yet been contained; continuing spread and rise of new variants could affect significantly more households and businesses, or cause additional limitations on commercial activity, increased unemployment, increased property vacancy rates and general economic and financial instability.

The continuation of the pandemic may also negatively impact regional economic conditions for a period of time, resulting in declines in loan demand and collateral values.

The duration and severity of the pandemic continues to be impossible to predict, as is the potential for a seasonal or other resurgence.

We also believe we will continue to see the economic effects of the pandemic even after the COVID-19 outbreak has subsided, which is expected to continue to affect our business, financial position, results of operations and prospects.

The response of governmental authorities .

To date, many of the actions of governmental authorities, including eviction forbearance, occupancy restrictions and vaccine mandates, have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal and monetary policy measures to partially mitigate the adverse effects on individual households and businesses.

The ultimate success or impact of these actions and their effect on our customers and the economy generally is still unclear.

Further, some measures, such as a suspension of mortgage and other loan payments and foreclosures, may have a negative impact on our business.

The effect on our customers, counterparties, employees, and third-party service providers .

COVID-19 and its associated consequences and uncertainties are affecting individuals, households, and businesses differently and unevenly.

Negative impacts on our customers could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.

The effect on economies and markets .

Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear.

National, regional, and local economies and markets could suffer disruptions that are lasting.

Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity and could have lasting effects on taxes and other economic factors, which could adversely affect our results of operations and financial condition.

Our participation in the SBA’s PPP Loan Program exposes us to risks.

Our participation in the SBA PPP loan program exposes us to risks related to noncompliance with the PPP, as well as litigation risk related to our administration of the PPP loan program, which could have a material adverse impact on our business, financial condition and results of operations.

As of December 31, 2021, our PPP loans were approximately $11.8 million.

The Company participated in the PPP, a loan program administered through the SBA, that was created to help eligible businesses, organizations and self-employed persons fund their operational costs during the COVID-19 pandemic.

8 unchanged sentences

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-K

Item 1A. Risk Factors