2020 Annual Report

testing on our goodwill and other intangible assets that could result in an impairment charge being recorded for that period, and adversely impact our results of operations and the ability of the Bank to pay dividends to us; • the negative effect on earnings resulting from the Bank modifying loans and agreeing to loan payment deferrals due to the COVID-19 crisis; • increased demand on our liquidity as we meet borrowers’ needs and cover expenses related to our business continuity plan; • the potential for reduced liquidity and its negative effect on our capital and leverage ratios; • the modification of our business practices, including with respect to branch operations, employee travel, employee work locations, participation in meetings, events and conferences, and related changes for our vendors and other business partners; • increases in federal and state taxes as a result of the effects of the pandemic and stimulus programs on governmental budgets; • an increase in FDIC premiums if the agency experiences additional resolution costs relating to bank failures; • increased cyber and payment fraud risk due to increased online and remote activity; and • other operational failures due to changes in our normal business practices because of the pandemic and governmental actions to contain it. Overall, we believe that the economic impact from COVID-19 will be severe and could have a material and adverse impact on our business and result in significant losses in our loan portfolio, all of which would adversely and materially impact our earnings and capital. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business as a result of the global economic impact of the COVID-19 pandemic, including the availability of credit, adverse impacts on liquidity and any recession that has occurred or may occur in the future. There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the pandemic is highly uncertain and subject to change. The U.S. government and banking regulators, including the Federal Reserve, have taken a number of unprecedented actions in response to the COVID-19 pandemic, which could ultimately have a material adverse effect on our business and results of operations. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, which established a $2.0 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits and a $349.0 billion loan program administered through the SBA, referred to as the PPP. In addition, on December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021, a $900.0 billion COVID-19 relief package that includes an additional $284.0 billion in PPP funding. In addition to implementing the programs contemplated by these acts, the federal bank regulatory agencies have issued a steady stream of guidance in response to the COVID-19 pandemic and have taken a number of unprecedented steps to help banks navigate the pandemic and mitigate its impact. These include, without limitation: • requiring banks to focus on business continuity and pandemic planning; • adding pandemic scenarios to stress testing; • encouraging bank use of capital buffers and reserves in lending programs; • permitting certain regulatory reporting extensions; • reducing margin requirements on swaps; • permitting certain otherwise prohibited investments in investment funds; • issuing guidance to encourage banks to work with customers affected by the pandemic and encourage loan workouts; and • providing credit under the CRA for certain pandemic-related loans, investments and public service.

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