National Bank Holdings Corp (NBHC) Risk Factors
This page reproduces the company's own Item 1A Risk Factors text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Informational only - not investment advice. See Disclaimer.
Item 1A. RISK FACTORS.
Risks Relating to General Economic and Market Conditions
Changes in general business and economic conditions as well as external events such as natural disasters, pandemics, cyberattacks, political instability, international trade policies, tariffs, severe weather or acts of war could materially and adversely affect us.
Our business and operations are sensitive to general business and economic conditions in the United States and in our core markets of Colorado, Kansas, Missouri, Texas, Utah, Wyoming, New Mexico, and Idaho. If the economies in our core markets, or the U.S. economy more generally, experience worsening economic conditions, including industry-specific conditions, we could be materially and adversely affected. Weak economic conditions may be characterized by inflation, fluctuations in debt and equity capital markets, including a lack of liquidity and/or depressed prices in the secondary market for mortgage loans, increased delinquencies on loans, residential and commercial real estate price declines, lower home sales and commercial activity, further or prolonged pressure on energy prices, and high unemployment. The U.S. and our core markets may experience these weak or worsening economic conditions due to the adverse economic effects of natural disasters, severe weather conditions, health emergencies or pandemics, cyberattacks, changes in international trade policies, tariffs, outbreaks of hostilities, terrorism or other geopolitical instabilities. All of these factors would be detrimental to our business. Our business is significantly affected by monetary and related policies of the U.S. federal government, its agencies and GSEs. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control and could have a material adverse effect on our financial condition and results of operations.
Interest Rate and Credit Risks
Our business is highly susceptible to credit risk and fluctuations in the value of real estate and other collateral securing such credit.
We are focused on growing our loan portfolio while adhering to our established underwriting standards and self-imposed concentration limits. However, as a lender, we are exposed to the risk that our clients will be unable to repay their loans according to their terms and that the collateral securing the payment of their loans (if any) may not be sufficient to assure repayment. In addition to the risk of borrowers being unable to pay their loans, other risks inherent in making any loan include, if applicable, the period of time over which the loan is repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. Similarly, we have credit risk embedded in our securities portfolio. Our credit standards, procedures and policies may not prevent us from incurring substantial credit losses.
A significant portion of our loan portfolio is secured by real estate and any deterioration in real estate values or credit quality or elevated levels of non-performing assets would ultimately have a negative impact on the quality of our loan portfolio. Although we require an appraisal of the property whenever we consider making a loan secured by real property, an appraisal is only an estimate of the value of the property at the time the appraisal is made and requires the exercise of a considerable degree of judgment. Subsequently, there is always a risk that the appraisal, due to unforeseen events, may not accurately reflect the amount that may be obtained upon sale or foreclosure of the property. A decline in residential real estate market prices and reduced levels of home sales could adversely affect the value of collateral securing mortgage loans resulting in greater charge-offs in future periods, as well as adversely impact mortgage loan originations and gains on sale of mortgage loans. In addition, a decline in commercial real estate values would likewise adversely affect the value of collateral securing certain commercial loans and result in greater charge-offs in future periods. Financial stress on borrowers as a result of job losses or other factors could have further adverse effects on borrowers that result in higher delinquencies and greater charge-offs in future periods, which could materially and adversely affect us. In addition, with heightened interest rates and inflationary pressures, our clients could be impacted by the rising costs of goods and services in their households and businesses, which may have a negative impact on their ability to repay their loans with us.
From time to time, we may hold a varying amount of OREO as a result of the foreclosure process where we take title to the real estate serving as collateral for our loans. While our OREO portfolio is smaller than it has been in recent years, our OREO
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balance is subject to change, which could negatively affect our earnings as a result of various expenses associated with OREO, including personnel costs, insurance and taxes, completion and repair costs, valuation adjustments and other expenses or potential environmental liabilities associated with property ownership, as well as funding costs associated with OREO assets.
Like other financial services institutions, our asset and liability structures are monetary in nature. Such structures are affected by a variety of factors, including changes in interest rates, which can impact our earnings, cash flows, and the value of financial instruments held by us and our mortgage business.
Like other financial services institutions, we have asset and liability structures that are monetary in nature and are directly affected by many factors, including domestic and international economic and political conditions, broad trends in business and finance, legislation and regulation affecting the national and international business and financial communities, monetary and fiscal policies, inflation, currency values, market conditions, the availability and terms (including cost) of short-term or long-term funding and capital, the credit capacity or perceived creditworthiness of clients and counterparties and the level and volatility of trading markets. Such factors can impact clients and counterparties of a financial services institution and may impact the value of financial instruments held by a financial services institution.
Our earnings and cash flows largely depend upon the level of our net interest income, which is the difference between the interest income we earn on loans, investments and other interest earning assets, and the interest we pay on interest bearing liabilities, such as deposits and borrowings. Because different types of assets and liabilities may react differently and at different times to market interest rate changes, changes in interest rates can increase or decrease our net interest income. When interest-bearing liabilities increase at a pace exceeding interest earning assets, an increase in interest rates would reduce net interest income. Also, when interest-bearing liabilities mature or reprice more quickly than interest earning assets in a period, an increase in interest rates would reduce net interest income. Similarly, when interest earning assets mature or reprice more quickly, and because the magnitude of repricing of interest earning assets is often greater than interest bearing liabilities, falling interest rates would reduce net interest income.
Accordingly, changes in the level of market interest rates affect our net yield on interest earning assets and liabilities, loan and investment securities portfolios, the value of our servicing rights and our overall results. Interest rates, including mortgage interest rates, are highly sensitive to many factors beyond our control, including general economic conditions, inflation and policies of various governmental and regulatory agencies, particularly the Federal Reserve. Changes in interest rates may also have a significant impact on any future loan origination revenues. Historically, there has been an inverse correlation between the demand for loans and interest rates. Loan origination volume and revenues usually decline during periods of rising or high interest rates and increase during periods of declining or low interest rates. Changes in interest rates also have a significant impact on the carrying value of a significant percentage of the assets, both loans and investment securities, on our balance sheet. We may incur debt in the future and that debt may also be sensitive to interest rates and any increase in interest rates could materially and adversely affect our earnings and financial condition.
Increases in prevailing interest rates have caused and may continue to cause declines in mortgage originations including declines in mortgage refinance activity, which have impacted and may continue to negatively impact our earnings. A prolonged period of elevated or rising interest rates may result in changes in consumer spending, borrowing and savings habits. Such conditions could have adverse effects on our ability to originate mortgage loans due to reduced consumer demand, increased pressure from competing lenders and increased costs, which could impact earnings in the form of reduced interest from fewer mortgages, reduced fees from loan sales and tighter net interest margins.
The value of our mortgage and SBA servicing rights can decline during periods of falling interest rates, and we may be required to take a charge against earnings for the decreased value.
An MSR is the right to service a mortgage loan for a fee. Similarly, an SBA servicing right is the right to service SBA loans sold for a fee. We capitalize servicing rights when we originate mortgage or SBA loans and retain the servicing rights after we sell the loans. We carry servicing rights at the lower of amortized cost or estimated fair value. Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers. Changes in interest rates can affect prepayment assumptions. When interest rates fall, borrowers are more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of
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prepayment increases, the fair value of our servicing rights can decrease. Each quarter we evaluate our servicing rights for impairment based on the difference between the carrying amount and fair value, and, if a temporary impairment exists, we establish a valuation allowance through a charge that negatively affects our earnings.
Liquidity and Capital Risks
We may not be able to meet the cash flow requirements of deposit withdrawals and other business needs unless we maintain sufficient liquidity.
We require liquidity to make loans and to repay deposit and other liabilities as they become due or are demanded by clients. We principally depend on checking, savings and money market deposit account balances and other forms of client deposits as our primary source of funding for our lending activities. If a substantial number of our clients withdraw their bank deposits as a result of a decline in overall depositor confidence, an increase in interest rates paid by competitors, general interest rate levels, higher returns being available to clients on alternative investments or general economic conditions, and our deposit levels decrease substantially, our cash on hand may not be able to cover such withdrawals or our other business needs, including amounts necessary to operate and grow our business. Furthermore, advancements in technology allow clients to withdraw or otherwise access funds very quickly, which could create additional demand for liquidity. This could require us to seek third-party funding or other sources of liquidity, such as asset sales. Our access to third-party funding sources, including our ability to raise funds through the issuance of additional shares of our common stock or other equity or equity-related securities, incurrence of debt, or federal funds purchased, may be impacted by our financial strength, performance and prospects and may also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry, all of which may make potential funding sources more difficult to access, less reliable and more expensive. We may not have access to third-party funding in sufficient amounts on favorable terms, or the ability to undertake asset sales or access other sources of liquidity, when needed or at all, which could materially and adversely affect us. While Cambr provides additional liquidity, as well as diversification of our sources of liquidity, increased concentration from program deposits or reliance on the Cambr program could have a material adverse effect on us.
We may want to raise additional capital in the future to support strategic growth initiatives, and such capital may not be available when desired or at all.
As a publicly traded company, a likely source of additional funds, should we desire for growth initiatives or otherwise, is the capital markets, accomplished generally through the issuance of equity, both common and preferred stock, and the issuance of debt. Our ability to raise additional capital, if desired, will depend on, among other things, obtaining and maintaining a favorable rating, conditions in the capital markets at that time, which are outside of our control, and our financial performance.
We cannot provide any assurance that access to such capital will be available to us on acceptable terms or at all. Any occurrence that may limit our access to the capital markets, such as a decline in the confidence of debt purchasers or counterparties participating in the capital markets, may materially and adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. If we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. The inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our business, financial condition or results of operations.
Risks from Accounting and Other Estimates
The fair value of our investment securities can fluctuate due to market conditions outside of our control.
We have historically taken a conservative investment strategy with our securities portfolio, with concentrations of securities that are primarily backed by GSEs. A portion of our other securities portfolio is comprised of non-liquid fund investments and direct investments in our fintech partners. Other securities also include direct investments in convertible preferred stock, which is carried at cost. We periodically evaluate our other securities investments for impairment. The results of testing our investments for potential impairment may be adversely affected by a variety of factors, including market conditions,
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regulatory expectations, general economic conditions and unfavorable changes in the businesses underlying the investments, which may lead to a partial or full impairment of our fintech investments. Impairments or write-downs of these assets may result in charges that adversely affect our results of operations.
We may seek to increase yields through different strategies, which may include a greater percentage of corporate securities and structured credit products. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and instability in the capital markets or an inability of our partners to successfully execute on their strategies. These factors, among others, could cause impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could have a material adverse effect on our results of operations. The process for determining whether a security is impaired usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.
Our investments in 2UniFi and other fintechs and initiatives subject us to material financial, reputational and strategic risks.
Our investments in various financial technology companies, both directly through our development of 2UniFi (which is included within premises and equipment, net on our balance sheet) and indirectly through passive investments (which are included within other securities on our balance sheet), may have a significant impact on our results of operations or financial condition.
The vision for 2UniFi is an integrated and seamless financial marketplace that will increase access to financial services while reducing the cost of banking services. After several years of development, 2UniFi had its initial launch in 2025 with two essential capabilities for small business owners. Development of further capabilities is needed for the platform to reach its full potential and may require additional investment or a strategic partner.
Additionally, the financial technology companies in which we invest are often early stage companies and have the need for substantial additional capital to support expansion or to achieve or maintain a competitive position. Less established companies tend to have lower capitalization and fewer resources and, therefore, are often more vulnerable to financial failure. These companies may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team. The failure of this one product, service or distribution channel, or the loss or ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies, which in turn could adversely impact our investment in 2UniFi or these other passive investments.
The possibility that 2UniFi or the other companies in which we invest will not be able to commercialize their technology or product concept presents a risk that our investment may become impaired. Additionally, although 2UniFi and some of these companies may have a commercially successful product or product line, technology products and services often have a more limited market or life span than products in other industries. Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets. 2UniFi, as well as most of the companies in which we invest, will require additional capital to satisfy their continuing growth and working capital requirements. With respect to 2UniFi, the Company is continuing to evaluate the allocation of additional capital or other alternative paths, including potential strategic partnerships. With respect to the Company’s passive investments, each round of venture financing is typically intended to provide a company with enough capital to reach the next stage of development. The circumstances or market conditions under which such companies will seek additional capital are unpredictable. It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable.
Additionally, with respect to our passive investments, where we have the ability to exercise significant influence but not control over the operating and financial policies of the investee, such investments are accounted for using the equity method of accounting. Although we are unable to control such companies, where these investments are accounted for under the equity method, we increase or decrease our investment by our proportionate share of the investee’s net income or loss.
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Our allowance for credit losses and fair value adjustments may prove to be insufficient to absorb losses inherent in our loan portfolio.
The Company measures its ACL using ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The CECL impairment model requires an estimate of expected credit losses for financial assets measured over the contractual life of an instrument based on historical experience, current conditions and reasonable and supportable forecasts. The standard provides significant flexibility and requires a high degree of judgment in order to develop an estimate of expected lifetime losses. Providing for lifetime losses for our loan portfolio is a change to the previous method of providing allowances for loan losses that are probable and incurred. It may also result in even small changes to future forecasts having a significant impact on the allowance, which could make the allowance more volatile, and regulators may impose additional capital buffers to absorb this volatility.
The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding our loans, identification of additional problem loans by us and other factors, both within and outside of our control, may require an increase in the ACL. If the real estate markets deteriorate, we expect that we will experience increased delinquencies and credit losses, particularly with respect to construction, land development and land loans. In addition, our regulators periodically review our ACL and may require an increase in the allowance for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the ACL, we will need additional provisions to increase the allowance for credit losses. Any increases in the ACL will result in a decrease in net income and capital and may have a material adverse effect on our financial condition.
Changes in the assumptions underlying our acquisition method of accounting, including methodology regarding the recording of goodwill as a result of acquisitions, or other significant accounting estimates could affect our financial information and have a material adverse effect on our financial results.
A material portion of our financial results is based on, and subject to, significant assumptions and subjective judgments. As a result of our acquisitions, our financial information is influenced by the application of the acquisition method of accounting, which requires us to make complex assumptions, and these assumptions materially affect our financial results. As such, any financial information generated through the use of the acquisition method of accounting is subject to modification or change. If our assumptions are incorrect and we change or modify our assumptions, it could have a material adverse effect on our profitability or our previously reported financial results. Additionally, a change in our accounting estimates, such as our ability to realize deferred tax assets or the need for a valuation allowance could have a material adverse effect on our financial results.
In addition, we have recognized goodwill as an intangible asset on the balance sheet in connection with several acquisitions. Under current accounting standards, goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying value. We evaluate goodwill using a combined qualitative and quantitative impairment approach. A significant and sustained decline in the Company’s stock price and market capitalization, a significant decline in the Company’s expected future cash flows, a significant adverse change in the business climate, slower growth rates or other factors could result in a finding of impairment of goodwill or other intangible assets. If we were to conclude that a future write-down of goodwill or other intangible assets is necessary, then the Company would record the appropriate charge to earnings, which could have material adverse effect on our results of operations or financial condition.
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Risks Related to our Operations
A failure in or breach of our security systems or infrastructure, or those of our third-party providers, could result in financial losses to us or in the disclosure or misuse of confidential or proprietary information, including client information, or could trigger further regulatory and financial penalties if we are determined to be non-compliant with evolving privacy and data protection laws. These events could also adversely impact our reputation and have a material adverse effect on our results of operations or financial condition.
We provide our clients with the ability to bank remotely. The secure transmission of confidential information over the internet and other remote channels is a critical element of remote banking.
Our systems and network are subject to ongoing cyber incidents such as unauthorized access, loss or destruction of data, account takeovers, denial of services attacks or general unavailability of service, computer viruses or other malicious code, phishing schemes, ransomware and other similar events. Third parties with whom we do business are also sources of cybersecurity risks. We have spent and may be required to spend additional significant capital and other resources to protect against the threat of security incidents or breaches, or to alleviate problems caused by potential security breaches or viruses. Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified.
To the extent that our activities or the activities of our clients involve the storage and transmission of confidential information, security breaches and viruses could cause serious negative consequences, including reputational damage, litigation exposure and regulatory scrutiny, and could result in a violation of applicable privacy and data protection laws or other breach reporting obligations. Any inability to prevent security breaches or computer viruses could also cause prospective and existing clients to lose confidence in our systems and could materially and adversely affect us. Our risk and exposure to these matters remain heightened because of the evolving nature and complexity of the threats from organized cybercriminals and hackers, and our plans to continue to provide digital banking products and services to our clients.
Information security risks for financial institutions like us have increased recently in part because of new technologies such as artificial intelligence, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. In addition to cyberattacks or other security breaches involving the theft of sensitive and confidential information, hackers have engaged in attacks against large financial institutions, particularly denial of service or ransomware attacks are designed to disrupt key business services, such as client-facing web sites. We are not able to anticipate or implement preventive measures against all security breaches of these types, especially because the techniques used change frequently and can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection.
We also face risks related to cyberattacks and other security breaches in connection with credit or debit card, including ATM-related, transactions that typically involve the transmission of sensitive information regarding our clients through various third parties, including merchant acquiring banks, payment processors, payment card networks (e.g., Visa, MasterCard) and our third-party processors. Some of these parties have in the past been the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. We also rely significantly on numerous other third-party service providers to conduct other aspects of our business operations and face similar risks relating to them. While many of our agreements with third parties contain indemnification provisions and insurance requirements, we may not be able to recover sufficiently, or at all, under the provisions to offset any losses we may incur from third-party cyber incidents.
We are highly dependent on the internet, cloud technologies and third-party providers. Systems failures or interruptions could have a material adverse effect on our results of operations or financial condition.
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Our business is highly dependent on the increasing use of the internet, mobile devices and cloud technologies. Further, we have and will continue to be subject to an increasing risk of operational disruption and information security incidents as a result. These events can arise from a variety of sources, many of which are not under our control because of our reliance on third-party vendors and technology systems and outsourcing services for key processes including data processing, loan servicing and deposit processing; and for key services including internet, and mobile technology. Potential causes for incidents may include human error, electrical or telecommunication outages, software and hardware failures, and malicious activity. Any of these events could cause interruption to the Company’s operations, as well as the operations of our clients. If significant, sustained or repeated, these events could compromise our ability to operate effectively, damage our reputation, result in a loss of client business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our results of operations or financial condition.
Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
As a financial institution, we may be the target of fraudulent activity that may result in financial losses to us, our associates or our clients, privacy breaches against our clients or damage to our reputation and regulatory relationships. Such fraudulent activity may take many forms, including account takeovers, check fraud, electronic fraud such as phishing, wire fraud, unauthorized intrusion into or use of our systems, ATM skimming or jackpotting, and other dishonest acts. Nationally, reported incidents of fraud and other financial crimes have increased. In addition, the widespread use of artificial intelligence also has increased potential for fraud and misuse. While we have also experienced losses due to apparent fraud or other crimes, we continue to implement and maintain robust policies, procedures, fraud detection tools, and trainings to prevent such losses. Accordingly, we have had limited losses due to fraud; however, such measures may not be able to prevent significant financial losses as a result of fraudulent activity in the future.
We face significant competition from other financial institutions and financial services providers, both traditional and otherwise, which may materially and adversely affect us.
Consumer and commercial banking is highly competitive. Our markets contain a large number of community and regional banks as well as a significant presence of the country’s largest commercial banks. We compete with other state and national financial institutions, including savings and loan associations, savings banks and credit unions, for deposits and loans. In addition, we compete with financial intermediaries, such as consumer finance companies, mortgage banking companies, securities firms, trust companies, mutual funds and several government agencies, as well as major retailers, in providing various types of loans and other financial services. Furthermore, the industry may become increasingly competitive due to the increasing participation of fintechs in traditional banking activities – or even securing their own bank charters – as well as disruption to the banking industry due to the GENIUS Act. Some of these competitors have a long history of successful operations in our markets, greater ties to local businesses and more expansive banking relationships, as well as better established depositor bases. Some of our competitors also have greater resources and access to capital and possess an advantage by being capable of maintaining numerous banking locations in more convenient sites, operating more ATMs and conducting extensive promotional and advertising campaigns, operating a more developed online banking platform, or otherwise having more expertise with new fintech operations or systems. Competitors may also exhibit a greater tolerance for risk and behave more aggressively with respect to pricing in order to increase their market share. In addition, the effects of disintermediation can also impact the banking business because of the fast-growing body of fintechs that use software to deliver mortgage lending, payment services and other financial services. We expect competition to intensify due to financial institution consolidation, technological and regulatory changes, the emergence of alternative banking services and service providers, and new participants in the industry.
Our ability to compete successfully depends on a number of factors, including, among others:
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| · | | the ability to develop, maintain and build upon long-term client relationships based on quality service, effective and efficient products and services, high ethical standards and safe and sound assets; |
| · | | the scope, relevance and pricing of products and services offered to meet client needs and demands and changes in regulations that impact our products or services; |
| · | | the rate at which we introduce new products and services, including internet-based or other digital services, relative to our competitors; |
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| · | | the ability to attract and retain highly qualified associates to operate our business; |
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| · | | the ability to expand our market position; |
| · | | client satisfaction with our level of service; |
| · | | the ability to invest in or leverage new technologies such as artificial intelligence and those relative to our digital banking platform; |
| · | | the ability to operate our business effectively and efficiently; and |
| · | | industry and general economic trends. |
An important and growing portion of our business is dependent upon U.S. federal government programs, and we face specific risks associated with originating loans under these programs, such as changes in the requirements to participate in these programs, the impact of budget appropriations and prolonged government shutdowns.
We originate loans under programs administered by U.S. federal agencies, including the SBA and the HUD through FHA insurance programs. Our SBA lending program is an important and growing part of our business and depends on our continued participation in the SBA Preferred Lender Program, which enables our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not otherwise SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. If deficiencies are identified, the SBA may require corrective actions or impose sanctions, including revocation of our SBA Preferred Lender status, which could adversely affect our ability to originate SBA loans.
Similarly, our FHA origination and services business requires compliance with applicable HUD and FHA requirements and guidelines. If we were to violate these requirements and guidelines, or other applicable laws, or if the FHA loans we originate show a high frequency of loan defaults, we could be subject to monetary penalties, indemnification claims, or loss of eligibility to participate in FHA programs. Any inability to engage in our commercial FHA or SBA origination and servicing business would lead to a decrease in our net income.
In addition, both SBA and FHA programs are subject to budget appropriations. Disagreement over the U.S. federal budget has caused the U.S. federal government to shut down for periods of time in recent years. Prolonged government shutdowns or funding delays could materially disrupt our ability to originate and service loans under these programs or negatively impact the financial performance of certain clients and their access to certain loan and guaranty programs, which could have a material adverse effect on our business, financial condition and results of operations.
The expanding body of federal, state and local regulation of loan servicing, collections or other aspects of our business may increase the cost of compliance and the risks of noncompliance.
We service the loans held on our balance sheet, and loan servicing is subject to extensive regulation by federal, state and local governmental authorities as well as to various laws and judicial and administrative decisions imposing requirements and restrictions on those activities. The volume of new or modified laws and regulations has increased in recent years and, in addition, some individual municipalities have begun to enact laws that restrict loan servicing activities such as delaying or temporarily preventing foreclosures or forcing the modification of certain mortgages.
Furthermore, various consumer lending laws have been adopted to prohibit or restrict certain practices such as steering borrowers away from more affordable products, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. Despite our efforts to comply with such laws, we may still face liability with respect to our lending and loan investment activities.
These laws increase our cost of doing business, and if regulators impose new or more restrictive requirements, we may incur significant additional costs to comply with such requirements or such requirements may negatively impact our revenues, which may further adversely affect us. Our failure to comply with these laws and regulations could possibly lead to: civil and criminal liability; damage to our reputation in the industry; fines and penalties and litigation, including class action lawsuits; and administrative or regulatory enforcement actions. Any of these outcomes could materially and adversely affect us. There is also uncertainty regarding what legislative or regulatory changes may occur as a result of changes in government
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leadership resulting from elections, or, if changes occur, the ultimate effect they would have upon our financial condition or results of operations.
We may be required to repurchase mortgage loans or reimburse investors and others as a result of breaches in contractual representations and warranties.
We sell residential mortgage loans to various parties, including GSEs and other financial institutions that purchase mortgage loans for investment or private label securitization. The agreements under which we sell mortgage loans and the insurance or guaranty agreements with the FHA and U.S. Department of Veterans Affairs contain various representations and warranties regarding the origination and characteristics of the mortgage loans, including ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, fraudulent documentation and compliance with applicable origination laws. If any of these items prove defective or insufficient, we may be required to repurchase mortgage loans, indemnify the investor or insurer, or reimburse the investor or insurer for credit losses incurred on loans in the event of a breach of contractual representations or warranties that is not remedied within a period (usually 90 days or less) after we receive notice of the breach. Contracts for mortgage loan sales to the GSEs include various types of specific remedies and penalties that could be applied to inadequate responses to repurchase requests. Similarly, the agreements under which we sell mortgage loans require us to deliver various documents to the investor, and we may be obligated to repurchase any mortgage loan as to which the required documents are not delivered or are defective. We also may see increased rates of repurchase or indemnification demands or indemnification as a result of self-reporting of identified errors in our mortgage loan portfolio. For instance, in 2022, as part of our normal review process, we discovered irregularities in mortgage loan applications in one of our offices that prompted an internal investigation. While we do not expect the matter to materially or adversely affect our business or financial condition or results, certain loan files may still be under review by outside stakeholders.
We establish a mortgage repurchase liability related to the various representations and warranties that reflect management's estimate of losses for loans which we have a repurchase obligation. Our mortgage repurchase liability represents management’s best estimate of the probable loss that we may expect to incur for the representations and warranties in the contractual provisions of our sales of mortgage loans. Because the level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of the liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment. If economic conditions and the housing market deteriorate or future investor repurchase demand and our success at appealing repurchase requests differ from past experience, we could experience increased repurchase obligations and increased loss severity on repurchases, requiring additions to the repurchase liability. Furthermore, such breaches in contractual representations and warranties could adversely affect our reputation.
We face risks due to our mortgage banking activities that could negatively impact net income and profitability.
We sell a majority of the mortgage loans that we originate. The sale of these loans generates non-interest income and can be a source of liquidity for the Banks. Diminished demand in the secondary market for the purchase of residential mortgage loans as well as declines in real estate values could result in various issues including:
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| · | | our inability to sell mortgage loans on the secondary market, which could negatively impact our liquidity position; |
| · | | declines in real estate values could decrease the potential of mortgage originations, which could negatively impact our earnings; |
| · | | if it is determined that loans were made in breach of our representations and warranties to the secondary market, we could incur losses associated with the loans; |
| · | | increased compliance requirements could result in higher compliance costs, higher foreclosure proceedings or lower loan origination volume, all which could negatively impact future earnings. |
We may face increased risk of claims and litigation relating to our fiduciary responsibilities in connection with our trust and wealth management business.
Services we provide in connection with our trust and wealth management business may require us to act as fiduciaries for our clients and others. Third parties or government agencies may assert claims and take legal action against us pertaining to the
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performance of our fiduciary responsibilities. If these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability or our reputation could be damaged. Either of these results may adversely impact demand for our products and services or otherwise have an adverse effect on our business, financial condition, results of operations and growth prospects.
Risks Relating to our Growth Strategy
We may not be able to effectively manage our strategic growth or other expansionary activity.
Our expansionary activity, whether through de novo branching, acquisitions (including Vista), organic growth or the implementation of our digital banking strategy, including through the launch of 2UniFi, has placed, and may continue to place, significant demands on our operations and management. The success of our expansionary activity is dependent upon our ability to:
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| · | | continue to implement and improve our operational, credit, financial, legal, management, compliance and other internal risk controls and processes and our reporting systems and procedures in order to manage a growing number of client relationships; |
| · | | implement and scale our 2UniFi platform, Cambr deposit gathering platform and other new technologies; |
| · | | integrate our acquisitions and develop consistent policies throughout the various lines of businesses; |
| · | | attract and retain the client base; and |
| · | | attract and retain management talent. |
| Column 1 | Column 2 | Column 3 |
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We may not successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in loan volume in various markets and the infrastructure that comes with new banking centers, banks and growth of our client base through our digital banking strategy and our trust and wealth management business. Thus, our growth strategy may divert management from our existing franchises and may require us to incur additional expenditures to expand our administrative and operational infrastructure and, if we are unable to effectively manage and grow our financial services franchise, we could be materially and adversely affected. In addition, if we are unable to manage future expansion in our operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth, any one of which could materially and adversely affect us.
Failure to keep pace with technological change could adversely affect our business, and our digital growth strategy may subject us to additional operational, strategic, reputational or regulatory risks.
The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. Our future success will depend, in part, upon our ability to continue to address the needs of our clients by using innovative technologies to provide products and services that will satisfy client demands for convenience and security, as well as to create additional efficiencies in our operations. The implementation of such new technologies may expose us to additional operational, financial, operational, strategic, reputational and regulatory compliance risks.
New technology-driven products and services are rapidly being introduced throughout the financial services industry, often through fintechs. We have made and will continue to make investments in and also partner with third-party fintechs in connection with our digital growth strategy and the digital solution, 2UniFi. Our investments may include companies that may be unseasoned, unprofitable or have no established operating histories or earnings and may lack technical, marketing, financial and other resources and are therefore more vulnerable to financial failure. The innovations these companies develop for utilization by 2UniFi may prove more difficult to successfully integrate into our existing operations. We may be required to employ and maintain qualified personnel as our business expands into new and expanding markets, and we may be required to install additional operational and control systems to manage fraud, operational, legal and regulatory compliance risks. Any failure to successfully manage this integration may adversely affect our timeline for our digital strategy, future financial condition and results of operations. Additionally, new or evolving regulations impacting the companies and technologies we have invested in may impact our digital growth and our ability to satisfy our clients’ demands for digital offerings in the 2UniFi ecosystem.
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Integrating Vista may be more difficult, costly or time consuming than expected, and we may fail to realize the anticipated benefits and cost savings of the acquisition.
On January 7, 2026, the Company acquired Vista. The success of the acquisition will depend, in part, on the ability to realize the anticipated cost savings from combining our business with Vista’s business. To realize the anticipated benefits and cost savings from the acquisition, we must successfully integrate and combine our businesses in a manner that permits those cost savings to be realized. If we are not able to successfully achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the acquisition could be less than anticipated, and integration may result in additional unforeseen expenses.
It is possible that the integration process could result in the loss of key associates, the disruption of our ongoing business, operational failures, inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, depositors or associates or the inability to achieve the anticipated benefits and cost savings of the acquisition. Integration efforts between the two companies may also divert management attention and resources. These integration matters could have an adverse effect on us for an undetermined period after completion of the acquisition.
Our acquisitions generally will require regulatory approvals and failure to obtain such approvals would restrict our growth plans.
We intend to continue to complement and expand our business by pursuing strategic acquisitions of financial services franchises. Generally, any acquisition of target financial institutions, banking centers or other banking assets by us will require approval by, and cooperation from, a number of governmental regulatory agencies, including the Federal Reserve, the Colorado Division of Banking and the Wyoming Division of Banking. In acting on applications, our banking regulators consider, among other factors:
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|---|---|---|
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| · | | the effect of the acquisition on competition; |
| · | | the financial condition, liquidity, results of operations, capital levels and future prospects of the applicant and the bank(s) involved; |
| · | | the quantity and complexity of previously consummated acquisitions; |
| · | | the managerial resources of the applicant and the bank(s) involved; |
| · | | the convenience and needs of the community, including the record of performance under the CRA; and |
| · | | the effectiveness of the applicant in combating money laundering activities. |
Such regulators could deny our application based on the above criteria or other considerations, which would restrict our growth, or the regulatory approvals may not be granted on terms that are acceptable to us. For example, we could be required to sell banking centers as a condition to receiving regulatory approvals, and such a condition may not be acceptable to us or may reduce the benefit of any acquisition. In addition, prior to the submission of an application our regulators could discourage us from pursuing strategic acquisitions or indicate that regulatory approvals may not be granted on terms that would be acceptable to us, which could have the same effect of restricting our growth or reducing the benefit of any acquisitions.
If we are unable to identify and consummate attractive acquisitions, or continue to increase loans through organic loan growth, we may be unable to successfully implement our growth strategy, and our results of operations and financial condition could be materially and adversely affected.
We intend to continue to grow our business through organic loan growth and strategic acquisitions of financial services franchises. Previous availability of attractive acquisition targets may not be indicative of future acquisition opportunities, and we may be unable to identify any acquisition targets that meet our investment objectives. As our acquired loan portfolio is paid down, we expect downward pressure on our income to the extent that the runoff is not replaced with other organically originated loans. As a result of the foregoing, if we are unable to replace loans in our existing portfolio with comparable
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loans, our results of operations could be materially and adversely affected. Our financial condition could also be materially and adversely affected if we choose to pursue riskier higher-yielding loans that fail to perform.
Projected operating results for businesses acquired by us, inclusive of Vista, may be inaccurate and may vary significantly from actual results. To the extent that we make future acquisitions, we may not be able to realize the value we predict from these assets or make sufficient provision for future losses in the value of, or accurately estimate the future write-downs to be taken in respect of, these assets.
We will generally establish the pricing of transactions and the capital structure of financial services franchises to be acquired by us on the basis of financial projections for such financial services franchises. In general, projected operating results will be based on the judgment of our management team. In all cases, projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed and the projected results may vary significantly from actual results. General economic, political and market conditions can have a material adverse impact on the reliability of such projections. In the event that the projections made in connection with our acquisitions, or future projections with respect to new acquisitions, are not accurate, such inaccuracies could materially and adversely affect us.
Delinquencies and losses in the loan portfolios and other assets we acquire may exceed our initial forecasts developed during our due diligence investigation prior to acquisition and, thus, produce lower returns than we believed our purchase price supported. Furthermore, our due diligence investigation may not reveal all material issues. If, during the diligence process, we fail to identify all relevant issues related to an acquisition, we may be forced to later write down or write off assets, restructure our operations, or incur impairment or other charges that could result in significant losses. Any of these events could materially and adversely affect us. Economic conditions may create an uncertain environment with respect to asset valuations and there is no certainty that we will be able to sell assets or institutions after we acquire them if we determine it would be in our best interests to do so. In addition, there may be limited liquidity for certain asset classes we hold, including commercial real estate and construction and development loans. Any of the foregoing matters could materially and adversely affect us.
Risks Relating to the Regulation of Our Industry
We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could materially and adversely affect us.
We are subject to extensive regulation, supervision, executive orders and legislation by federal and state regulators and bodies, that govern almost all aspects of our operations. Intended to protect clients, depositors and the DIF, these laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on the business activities in which we can engage (including foreclosure and collection practices), limit the dividends or distributions that we can pay, restrict the ability of institutions to guarantee our debt, and impose certain specific accounting requirements on us that may be more restrictive and may result in greater or earlier charges to earnings or reductions in our capital than GAAP. Compliance with laws and regulations, including the effects of the Dodd-Frank Act, can be difficult and costly, and changes to laws and regulations often impose additional compliance costs.
We may face various risks related to the extensive government regulation and supervision of our business, including by our current federal and state regulators, as well as other government entities that may become our regulators in the future. These risks include pending and future laws, executive orders and regulations that may adversely impact our business, as well as supervisory and other actions that may be taken against us by our regulators. The legislative, regulatory and supervisory environment is beyond our control, may change rapidly and unpredictably, and may negatively influence our revenue, costs, earnings, growth, liquidity and capital levels. Our failure to comply with these laws and regulations, or effectively navigate this complex regulatory or supervisory landscape, even if the failure follows good faith effort or reflects a difference in interpretation, could negatively impact our revenues or subject us to restrictions on our business activities, fines and other penalties, or damage to our regulatory ratings, or client perception , any of which could materially and adversely affect us.
We will be subject to increased regulation and regulatory scrutiny now that our total consolidated assets exceed $10 billion, which could impede or delay our ability to execute on our business plans.
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Federal law imposes heightened requirements on bank holding companies and depository institutions that exceed $10 billion in total consolidated assets. In addition to its prudential regulator, 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. Additionally, other regulatory requirements apply to insured depository institution holding companies and insured depository institutions with $10 billion or more in total consolidated assets, please refer to Part I, Item 1-Supervision and Regulation. 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.
Debit card interchange fee restrictions set forth in section 1075 of the Dodd-Frank Act, known as the Durbin Amendment, as implemented by regulations of the Federal Reserve, cap the maximum debit interchange fee that an issuer may receive per transaction. Debit card issuers with less than $10 billion in total consolidated assets are exempt from these interchange fee restrictions. The exemption for small issuers ceases to apply as of July 1 of the year following the calendar year in which the issuer’s total consolidated assets exceed $10 billion.
As of December 31, 2025, we had total assets of approximately $9.9 billion; however, with the closing of the acquisition, our assets now exceed $10 billion and will continue to exceed this threshold in 2026. When our assets remain above this threshold for the statutorily required time period, we may – notwithstanding recent actions taken regarding the CFPB – become subject to heightened regulatory and financial impacts as a result of CFPB oversight. We have incurred and will continue to incur additional costs to implement processes, procedures, and monitoring of compliance with these increased regulatory requirements and may lose revenue due to no longer qualifying for the foregoing exemption with respect to debit interchange fees. The effect of any presently contemplated or future changes in the laws or regulations or their interpretations is uncertain, especially with respect to the current administration’s regulatory position. The results or implementation of these changes could be materially adverse to the Company’s investors and its results of operations.
The Federal Reserve may require us to commit capital resources to support our subsidiary banks.
As a matter of policy, the Federal Reserve, which examines us and our subsidiaries, expects a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under this requirement, we could be required to provide financial assistance to our subsidiary banks should our subsidiary banks experience financial distress.
A capital injection may be required at times when we do not have the resources to provide it and, therefore, we may be required to borrow the funds or raise additional equity capital from third parties. Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of the subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its indebtedness. Any financing that must be done by the holding company in order to make the required capital injection may be difficult and expensive and may not be available on attractive terms, or at all, which likely would have a material adverse effect on our financial condition, our stock price and our ability to pay dividends to our shareholders.
Our ability to execute our capital allocation strategy, including paying dividends or repurchasing shares, is subject to regulatory limitations.
Our ability to declare and pay dividends depends both on the ability of our bank subsidiary to pay dividends to us and on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends. Because we are a separate legal entity from our bank subsidiary and we do not have significant operations of our own, any dividends paid by us to our shareholders would have to be paid from funds at the holding company level that are
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legally available therefor. However, as a bank holding company, we are subject to general regulatory restrictions on the payment of cash dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends or the repurchase of shares. Additionally, various federal and state statutory provisions limit the amount of dividends that our bank subsidiary can pay to us as its holding company without regulatory approval.
We have pursued a strategy of capital management under which we have sought to deploy capital through stock repurchases and dividends on our common stock, in a manner that is beneficial to our stockholders. Our stockholders are only entitled to receive such dividends as our board of directors may declare in its unilateral discretion. We are not required to pay dividends on, or effect repurchases of, our common stock and may reduce or eliminate our common stock dividend and/or share repurchases after considering, among other things, our historical and projected financial condition, liquidity and results of operations, capital levels, tax considerations, statutory and regulatory prohibitions and other limitations, general economic conditions and other factors deemed relevant by our board of directors. Accordingly, we may not continue paying dividends on, or repurchase shares of, our common stock at current levels or at all. A reduction or discontinuance of dividends on our common stock or our shares repurchases could have a material adverse effect on the market price of our common stock.
The FDIC’s restoration plan for the DIF and any related increased assessment rates could materially and adversely affect us.
The FDIC insures deposits at FDIC-insured depository institutions, such as our subsidiary bank, up to applicable limits. The amount of a particular institution’s deposit insurance assessment is based on that institution’s risk classification under an FDIC risk-based assessment system. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to its regulators. If current assessments imposed by the FDIC are insufficient for the DIF to meet its funding requirements, there may need to be further special assessments or increases in deposit insurance premiums. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially and adversely affect us, including by reducing our profitability or limiting our ability to pursue certain business opportunities.
Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us.
Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, a federal or state banking agency were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we or our management was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order or other regulatory enforcement action that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess criminal or civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance. If we become subject to such regulatory actions, we could be materially and adversely affected.
We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The DOJ and other federal agencies are responsible for enforcing these laws and regulations. A successful challenge to our performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, and restrictions on expansion activity. In such instance, private parties may also have the ability to challenge our performance under fair lending laws in private class action litigation. Any of these actions could have a material and adverse impact on our business, financial condition and results of operations.
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We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The federal Bank Secrecy Act, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The Federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements, and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the DOJ, Drug Enforcement Administration, and Internal Revenue Service. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actions (such as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans), which could materially and adversely affect us. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.
General Risk Factors
We depend on our executive officers and key personnel to implement our strategy and the loss of their services could have a material adverse effect on our ability to conduct our business operations.
The execution of our strategy depends in large part on the skills of our executive management team and our ability to motivate and retain these and other key personnel, including key personnel added through mergers and acquisitions. Accordingly, the loss of service of one or more of our executive officers or key personnel could reduce our ability to successfully implement our growth strategy and materially and adversely affect us. Our success also depends on the experience of our banking center managers and relationship managers and on their relationships with the clients and communities they serve. The loss of these key personnel could negatively impact our banking operations.
Tax legislation initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition.
We operate in multiple jurisdictions, and we are subject to tax laws and regulations of the U.S. federal, state and local governments. From time to time, legislative initiatives may be adopted, which may impact our effective tax rate and could adversely affect our deferred tax assets, tax positions and/or our tax liabilities. In addition, U.S. federal, state and local tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that our historical tax positions will not be challenged by relevant tax authorities or that we would be successful in defending our positions in connection with any such challenge.
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