What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-03-01 · 121 added, 57 removed, 384 unchanged (32% of the section changed)

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our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations.

In addition to the effects of the COVID-19 pandemic and resulting disruptions on our business and operations discussed in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the risk factors below, additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of the risks discussed below.

Results of Operations,” and in the risk factors below, additional or unforeseen effects from the COVID-19 pandemic and the global economic climate may give rise to or amplify many of the risks discussed below.

Risks Related to Our Business and Industry

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Businesses nationwide and in the regions and communities in which we operate have laid off and furloughed significant numbers of employees, leading to record levels of unemployment.

These conditions have significantly adversely affected our customers, including many small and mid-sized businesses, particularly those in the gas station, retail, hotel, hospitality and food, beverage, and elective healthcare industries, among many others.

The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the pandemic, including the passage of the Coronavirus Relief and Economic Security Act (“CARES Act”) and subsequent legislation, but there can be no assurance that such steps or others will be effective or achieve their desired results in a timely fashion.

As a result of the scale of the ongoing pandemic, our revenue growth rate and expense as a percentage of our revenues in future periods may differ significantly from our historical rate, and our future operating results may fall below expectations.

These conditions have significantly and adversely affected our customers, including many small and mid-sized businesses, particularly those in the gas station, retail, hotel, hospitality and food, beverage, and elective healthcare industries, among many others.

The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the pandemic, including the passage of the CARES Act and subsequent legislation, but there can be no assurance that such steps or others will be effective or achieve their desired results in a timely fashion.

As a result of the scale of the ongoing pandemic, our revenue growth rate and expenses as a percentage of our revenues in future periods may differ significantly from our historical rate, and our future operating results may deteriorate.

The future impacts of the ongoing pandemic on our business, operations and future financial performance could include, but are not limited to:

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• reduced workforce numbers or capacity which may be caused by, but not limited to, illness, quarantine, stay at home or other government mandates, or difficulties transitioning back to an in-office environment;

• continued high levels of unemployment due to decreased operations or closures of businesses could have a negative impact on our customer’s ability to repay their loans as well as a decrease in the customer deposit base as they use their savings to pay current expenses;

• continued high levels of unemployment in certain business sectors due to decreased operations or closures of businesses could have a negative impact on our customer’s ability to repay their loans as well as a decrease in the customer deposit base as they use their savings to pay current expenses;

• laws related to benefits and the treatment of employees, for example, mandating coverage of certain COVID-19 related testing and treatment, mandating additional paid or unpaid leave or expanding workers compensation coverage;

• unresolved supply chain issues remaining for longer than anticipated and decreased consumer and business confidence and economic activity, leading to certain lower loan demand and an increased risk of loan delinquencies, defaults, and foreclosures;

• volatile market prices of investment securities, including the valuation of our common stock;

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There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities.

The extent to which the coronavirus outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

The extent to which the coronavirus outbreak continues to impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak, its severity, the emergence of new variants, the actions to contain the virus or treat its impact, the effectiveness of our business continuity and pandemic plans, and how quickly and to what extent historical economic and operating conditions can resume, if ever.

The longer the public health crisis lasts, and the greater its severity, the greater the likely material adverse impact on the economy, our customers and our business and financial performance.

Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s economic impact and any recession that has occurred or may occur in the future.

Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s economic impact that has occurred or may occur in the future.

The prolonged and broad-based shift to a remote working environment continues to create inherent productivity, connectivity, and oversight challenges and could affect our ability to enhance, develop and support existing products and services, conduct marketing events, and generate new customers, among others.

In addition, the changed environment under which we are operating could have an effect on our internal controls over financial reporting as well as our ability to meet a number of our compliance requirements in a timely or quality manner.

We believe the effects of the pandemic will have (at least in the short term) a material impact on our results of operations and heighten many of our known risks described in the “Risk Factors” section of this Annual Report on Form 10-K.

To the extent the pandemic continues to adversely affect the Company’s business, financial condition, liquidity, capital, loans, asset quality, or results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section of the Form 10-K.

Our participation in the Paycheck Protection Program (“PPP”) could expose us to additional risks.

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On April 16, 2020, the original $349.0 billion of funding under the PPP was exhausted, and on April 24, 2020, the Federal Government allocated an additional $310.0 billion to the program.

Our Bank participated as a lender in both the initial and second rounds of the PPP, which was designed to help small businesses maintain their workforce during the COVID-19 pandemic.

Effective January 19, 2021 the new round of PPP loans became available pursuant to the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, making an additional $284.5 billion available to qualified borrowers.

The Bank is participating in the newest round.

Effective January 19, 2021 a new round of PPP loans became available pursuant to the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, making an additional $284.5 billion available to qualified borrowers.

Our Bank participated as a lender in each of the PPP rounds, which were designed to help small businesses maintain their workforce during the COVID-19 pandemic.

PPP loans are fully guaranteed by the SBA and we believe a significant majority of these loans will be forgiven under the terms of the PPP program.

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Either of these occurrences could have a material adverse effect on our business, financial condition and results of operations.

Our business may be adversely affected by business conditions in northern and central California.

We conduct most of our business in northern and central California.

Our business may be adversely affected by business conditions in California.

We conduct most of our business in California.

As a result of this geographic concentration, our financial results may be impacted by economic conditions in California.

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• collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans.

In view of the concentration of our operations and the collateral securing our loan portfolio in both northern and central California, we may be particularly susceptible to the adverse effects of any of these consequences, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In view of the concentration of our operations and the collateral securing our loan portfolio in California, we may be particularly susceptible to the adverse effects of any of these consequences, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Severe weather, natural disasters and other external events could adversely affect our business.

Our operations and our customer base are primarily located in northern and central California where natural and other disasters may occur.

These regions are known for being vulnerable to natural disasters and other risks, such as earthquakes, fires, droughts and floods, the nature and severity of which may be impacted by climate change.

Our operations and our customer base are primarily located in California where natural and other disasters may occur.

California is known for being vulnerable to natural disasters and other risks, such as earthquakes, fires, droughts and floods, the nature and severity of which may be impacted by climate change.

These types of natural catastrophic events have at times disrupted the local economies, our business and customers in these regions.

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A downturn in real estate values in the markets which we conduct our business in California could hurt our business because most of our loans are secured by real estate.

Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations

in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies.

Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies.

Real estate values could also be affected by, among other things, earthquakes, drought and national disasters.

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In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties.

We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property.

We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs

incurred by these parties in connection with environmental contamination, or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property.

The costs associated with investigation or remediation activities could be substantial.

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If we become subject to significant environmental liabilities or if our contingency reserve estimates are incorrect, our business, financial condition, results of operations and cash flows could be materially adversely affected.

We face strong competition from financial services companies and other companies that offer banking services, which could materially and adversely affect our business.

We face strong competition from financial services companies and other companies that offer similar services, which could materially and adversely affect our business.

Competition in the banking and financial services industry is intense.

Our profitability depends upon our continued ability to successfully compete.

We primarily compete in northern and central California for loans, deposits and customers with commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage firms and Internet-based marketplace lending platforms.

We primarily compete in California for loans, deposits and customers with commercial banks, savings and loan associations, credit unions, finance companies, mutual funds, insurance companies, brokerage firms and Internet-based marketplace lending platforms.

In particular, our competitors include major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous locations and mount extensive promotional and advertising campaigns.

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government open and funded,

• the introduction of tariffs and other protectionist trade policies, or

• the introduction of tariffs, sanctions and other protectionist trade policies, or

• the possible withdrawal or reduction of government support for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (together, the “GSEs”).

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Risks Related to Interest Rates

Historically low interest rates may make it difficult for us to improve or maintain our current interest income spread and could result in reduced earnings.

Our earnings are largely derived from net interest income, which is interest income earned on loans and investments, less interest paid on deposits and other borrowings.

Interest rates are highly sensitive to many factors that are beyond the control of our management, including general economic conditions and the policies of various governmental and regulatory authorities.

The actions of the Federal Reserve influence the rates of interest that we charge on loans and that we pay on borrowings and interest-bearing deposits.

The Federal Reserve lowered the primary credit rate by 50 and 100 basis points on March 3 and March 15, 2020, respectively, for a total of 150 basis points to 0.25% to mitigate the effects of the COVID-19 pandemic and to support the liquidity and stability of banking institutions as they serve the increased demand for credit.

We cannot predict the nature or timing of future changes in monetary, tax and other policies or the effects that they may have on our activities and financial results.

Historically low rates for an extended period of time could result in reduced returns from our investment and loan portfolio.

If short-term interest rates remain at their historically low levels for a prolonged period and assuming longer-term interest rates fall further, we could experience further net interest margin compression as our interest earning assets would continue to reprice downward while our interest-bearing liability rates could fail to decline in tandem.

Such an occurrence would have an adverse effect on our net interest income and could have an adverse effect on our business, financial condition and results of operations.

We expect a long duration of reduced interest rates to negatively impact our net interest income, margin, cost of borrowing and future profitability and continue to have a material adverse effect on our financial results for at least through 2021.

Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

Historically low interest rates or an interest rate curve that lacks sufficient positive slope as duration extends may make it difficult for us to improve or maintain our current interest income spread and could result in reduced earnings and negatively impact our financial performance.

Like other financial institutions, we are subject to risks resulting from changes in interest rates.

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Changes in levels of market interest rates could have a material adverse effect on our net interest spread, asset quality, origination volume, the value of our loans and investment securities and overall profitability.

Market interest rates are beyond our control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve Board.

The actions of the Federal Reserve influence the rates of interest that we charge on loans and that we pay on borrowings and interest-bearing deposits.

Changes in monetary policy, including changes in interest rates, may negatively affect our ability to originate loans and leases, the value of our assets and our ability to realize gains from the sale of our assets, all of which ultimately could affect our earnings.

We cannot predict the nature or timing of future changes in monetary, tax and other policies or the effects that they may have on our activities and financial results.

Historically low rates for an extended period of time could result in reduced returns from our investment and loan portfolio.

Such an occurrence would have an adverse effect on our net interest income and could have an adverse effect on our business, financial condition and results of operations.

We expect a long duration of reduced or flat interest rates to negatively impact our net interest income, margin, cost of borrowing and future profitability and continue to have a material adverse effect on our financial results for at least through 2022.

While interest rates remain low, the FRB is expected to begin raising interest rates during 2022.

We cannot predict the nature or timing of future changes in monetary policies or the precise effects that they may have on the Company’s activities and financial results.

Elevated inflation and expectations for elevated future inflation can adversely impact economic growth, consumer and business confidence, and the Company’s financial condition and results.

In addition, elevated inflation may cause unexpected changes in monetary policies and actions which may adversely affect confidence, the economy, and the Company’s financial condition and results.

Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

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Furthermore, if short-term market rates rise, in order to retain existing deposit customers and attract new deposit customers we may need to increase rates we pay on deposit accounts.

Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, loan origination volume, business, financial condition, results of operations and cash flows.

Higher inflation could have a negative impact on our financial results and operations.

Inflation can negatively impact the Company by increasing our labor costs, through higher wages and higher interest rates, which may negatively affect the market value of securities on our balance sheet, higher interest expenses on our deposits, especially CDs, and a higher cost of our borrowings.

Additionally, higher inflation levels could lead to higher oil and gas prices, which may negatively impact the net operating income on the properties which we lend on and could impair a borrower's ability to repay their mortgage.

Recent supply chain constraints have led to higher inflation, which if sustained could have a negative impact on the Company's asset values and on loan demand.

Longer-lasting supply chain constraints in various products and labor markets could potentially exacerbate inflation and sustain it at elevated levels, even as growth slows.

The risk of sustained high inflation would likely be accompanied by monetary policy tightening with potential negative effects on various elevated asset classes.

Reduction in the value, or impairment of our investment securities, can impact our earnings and common shareholders’ equity.

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In assessing whether the impairment of investment securities is other-than-temporary, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability to retain our investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value in the near term.

Changes to LIBOR may adversely affect the value of, and the return on, our financial instruments that are indexed to LIBOR.

Changes to LIBOR or SOFR may adversely affect the value of, and the return on, our financial instruments that are indexed to LIBOR or SOFR.

In July 2017, the U.K.

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Notwithstanding the publication of this consultation, there is no assurance of how long LIBOR of any currency or tenor will continue to be published.

It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published before December 31, 2021 or June 30, 2023, as applicable, or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published before June 30, 2023, or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

Although the Alternative Reference Rates Committee has announced Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR, SOFR may not gain market acceptance or be widely used as a benchmark.

Uncertainty as to the nature of such potential changes, alternative reference rates, the elimination or replacement of LIBOR, or other reforms may adversely affect the value of, and the return on our financial instruments.

The market transition away from LIBOR to alternative reference rates is complex and could have a range of adverse effects on the Company’s business, financial condition, and results of operations.

In particular, any such transition could:

• adversely affect the interest rates received or paid on the revenue and expenses associated with or the value of the Company’s LIBOR-based assets and liabilities;

• adversely affect the interest rates received or paid on the revenue and expenses associated with or the value of other securities or financial arrangements, given LIBOR's role in determining market interest rates globally;

• prompt inquiries or other actions from regulators in respect of the Company’s preparation and readiness for the replacement of LIBOR with an alternative reference rate;

• result in disputes, litigation, or other actions with borrowers or counterparties about the interpretation and enforceability of certain fallback language in LIBOR-based contracts and securities.

Risks Related to Regulatory and Legal Matters

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Goodwill resulting from acquisitions may adversely affect our results of operations.

Our goodwill and other intangible assets have increased substantially as a result of our acquisitions of FNB Bancorp in 2018 and North Valley Bancorp in 2014.

Our goodwill and other intangible assets have increased substantially as a result of our acquisitions of FNB Bancorp in 2018 and North Valley Bancorp in 2014 and will increase again if we complete the acquisition of VRB.

Potential impairment of goodwill and amortization of other intangible assets could adversely affect our financial condition and results of operations.

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Our assessment of goodwill, other intangible assets, or long-lived assets could indicate that an impairment of the carrying value of such assets may have occurred that could result in a material, non-cash write-down of such assets, which could have a material adverse effect on our results of operations and future earnings.

If we cannot attract deposits, our growth may be inhibited.

We plan to increase the level of our assets, including our loan portfolio.

Our ability to increase our assets depends in large part on our ability to attract additional deposits at favorable rates.

We intend to seek additional deposits by offering deposit products that are competitive with those offered by other financial institutions in our markets and by establishing personal relationships with our customers.

We cannot assure that these efforts will be successful.

Our inability to attract additional deposits at competitive rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Potential acquisitions create risks and may disrupt our business and dilute shareholder value.

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• the acquired business not performing in accordance with our expectations,

• difficulties and expenses arising in connection with the integration of the operations of the acquired business with our operations,

• difficulties and expenses arising in connection with the integration of the operations or systems conversion of the acquired business with our operations,

• difficulty in estimating the value of the target company,

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• an acquisition may dilute our earnings per share, in both the short and long term, or it may reduce our tangible capital ratios

Acquisitions may be delayed, impeded, or prohibited due to regulatory issues.

Acquisitions by financial institutions, including us, are subject to approval by a variety of federal and state regulatory agencies (collectively, “regulatory approvals”).

The process for obtaining these required regulatory approvals has become substantially more difficult since the global financial crisis and more recently due to political actions.

Furthermore, our ability to engage in certain merger or acquisition transactions depends on the bank regulators' views at the time as to our capital levels, quality of management, and overall condition, in addition to their assessment of a variety of other factors, including our compliance with laws and regulations.

Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we have, or may have, with regulatory agencies, including, without limitation, issues related to BSA compliance, CRA compliance, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations and other laws and regulations.

We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all.

Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations.

If we cannot attract deposits, our growth may be inhibited.

We plan to increase the level of our assets, including our loan portfolio.

Our ability to increase our assets depends in large part on our ability to attract additional deposits at favorable rates.

We cannot assure that these efforts will be successful.

Our inability to attract additional deposits at competitive rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our growth and expansion may strain our ability to manage our operations and our financial resources.

Our financial performance and profitability depend on our ability to execute our corporate growth strategy.

In addition to seeking deposit and loan and lease growth in our existing markets, we may pursue expansion opportunities in new markets.

In addition to seeking deposit and loan and lease growth in our existing markets, we may pursue expansion opportunities in new markets, enter into new lines of business or market areas or offer new products or services.

Continued growth, however, may present operating and other problems that could adversely affect our business, financial condition, results of operations and cash flows.

Furthermore, any new line of business or market areas and/or new products or services could have a significant impact on the effectiveness of our system of internal controls.

Accordingly, there can be no assurance that we will be able to execute our growth strategy or maintain the level of profitability that we have recently experienced.

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We cannot assure you that we will be successful in attracting, integrating and retaining such personnel.

We will become subject to increased regulation when we have more than $10 billion in total consolidated assets.

An insured depository institution with $10 billion or more in total assets is subject to supervision, examination, and enforcement with respect to consumer protection laws by the CFPB rather than its primary federal banking regulator.

Under its current policies, the CFPB will assert jurisdiction in the first quarter after an insured depository institution’s call reports show total consolidated assets of $10 billion or more for four consecutive quarters.

We expect that the Bank’s total consolidated assets will exceeded this amount when we complete our acquisition of VRB and Valley Republic Bank, so the CFPB, instead of the FDIC, may soon have primary examination and enforcement authority over the Bank.

As an independent bureau within the Federal Reserve Board focused solely on consumer financial protection, the CFPB may impose requirements more strictly or severely than the FDIC.

Additionally, other regulatory requirements apply to insured depository institution holding companies and insured depository institutions with $10 billion or more in total consolidated assets, including a cap on interchange transaction fees for debit cards, as required by Federal Reserve regulations, which would reduce our interchange revenue, and restrictions on proprietary trading and investment and sponsorship in hedge funds and private equity funds known as the Volcker Rule.

See also Item 1 - Regulation and Supervision - Interchange Fees in this report.

Further, deposit insurance assessment rates are calculated differently, and may be higher, for insured depository institutions with $10 billion or more in total consolidated assets.

Risks Relating to Ownership of Our Common Stock

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Further, the accompanying junior subordinated debentures we issued to the trusts are senior to our shares of common stock.

As a result, we must make payments on the junior subordinated

debentures before we can pay any dividends on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must be satisfied before any distributions can be made on our common stock.

As a result, we must make payments on the junior subordinated debentures before we can pay any dividends on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must be satisfied before any distributions can be made on our common stock.

We may issue additional common stock or other equity securities in the future which could dilute the ownership interest of existing shareholders.

In order to maintain our capital at desired or regulatory-required levels, or to fund future growth, our board of directors may decide from time to time to issue additional shares of common stock, or securities convertible into, exchangeable for or representing rights to acquire shares of our common stock.

The sale of these shares may significantly dilute your ownership interest as a shareholder.

New investors in the future may also have rights, preferences and privileges senior to our current shareholders which may adversely impact our current shareholders.

Difficult or changes in market conditions could adversely affect the financial services industry.

The financial markets have experienced volatility over the past several years.

In some cases, the financial markets have produced downward pressure on stock prices and credit availability for certain companies without regard to those companies’ underlying financial strength.

If financial market volatility worsens, or there are disruptions in these financial markets, including disruptions to the United States banking systems, there can be no assurance that we will not experience an adverse effect on our ability to access capital and our business, financial condition and result of operations could be adversely impacted.

The Company’s stock price can be volatile.

Stock price volatility may make it more difficult for our shareholders to resell their common stock when they want and at prices they find attractive.

The Company’s stock price can fluctuate significantly in response to a variety of factors including, among other things:

• actual or anticipated variations in quarterly results of operations;

• recommendations by securities analysts;

• operating and stock price performance of other companies that investors deem comparable to the Company;

• new reports relating to trends, concerns and other issues in the financial services industry or California economy;

• perceptions in the marketplace regarding the Company and/or its competitors;

• new technology used, or services offered, by competitors;

• significant acquisitions or business combinations involving the Company or its competitors;

• changes in government regulations, including tax laws.

General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends could also cause the Company’s stock price to decrease regardless of operational results.

Risks Relating to Operations, Technology Systems, Accounting and Internal Controls

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On our behalf, third-parties may transmit confidential, propriety information.

Although we require third-party providers to maintain certain levels of information security, such providers may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious attacks that could ultimately compromise sensitive information.

Although we require third-party providers to maintain certain levels of information security,

such providers may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious attacks that could ultimately compromise sensitive information.

While we may contractually limit our liability in connection with attacks against third-party providers, we remain exposed to the risk of loss associated with such vendors.

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We may not be able to effectively implement new technology-driven products and services or successfully market such products and services to our customers.

In addition, advances in technology such as digital, mobile, telephone, text, and on-line banking;

and self-service automatic teller machines and other equipment, as well as changing customer preferences to access our products and services through digital channels, could decrease the value of our store network and other assets.

In addition, advances in technology such as digital, mobile, telephone, text, and online banking;

We may close or sell certain branches and restructure or reduce our remaining branches and work force.

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Our business, financial condition or results of operations could be materially adversely affected by the loss of any of our key employees, or our inability to attract and retain skilled employees.

Our business could suffer if we fail to attract and retain skilled people.

Our success depends, in large part, on our ability to attract and retain key people.

Competition for the best people in many activities engaged in by us is intense including with respect to compensation and emerging workplace practices, accommodations and remote work options, and we may not be able to hire people or to retain them.

In addition, the transition to increased work-from-home arrangements, which is likely to survive the COVID-19 pandemic for many companies, may exacerbate the challenges of attracting and retaining talented and diverse employees as job markets may be less constrained by physical geography.

Our current or future approach to in-office and work-from-home arrangements may not meet the needs or expectations of our current or prospective employees or may not be perceived as favorable as compared to the arrangements offered by competitors, which could adversely affect our ability to attract and retain employees.

Our previous results may not be indicative of our future results.

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We are committed to maintaining high standards of corporate governance and public disclosure.

As a result, our efforts to comply with evolving laws, regulations and standards

have resulted in, and are likely to continue to result in, increased expenses and a diversion of management time and attention.

As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased expenses and a diversion of management time and attention.

In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding management’s required assessment of its internal control over financial reporting and our external auditors’ audit of our internal control over financial reporting requires, and will continue to require, the commitment of significant financial and managerial resources.

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In addition, it is possible that a resolution of one or more such proceedings, including as a result of a settlement, could involve licenses, sanctions, consent decrees, or orders requiring us to make substantial future payments, preventing us from offering certain products or services, requiring us to change our business practices in a manner materially adverse to our business, requiring development of non-infringing or otherwise altered products or technologies, damaging our reputation, or otherwise having a material effect on our operations.

We may issue additional common stock or other equity securities in the future which could dilute the ownership interest of existing shareholders.

The sale of these shares may significantly dilute your ownership interest as a shareholder.

New investors in the future may also have rights, preferences and privileges senior to our current shareholders which may adversely impact our current shareholders.

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.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors