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New words:
cease, Charleston, denominator, drop, explain, FICA, furnish, immaterial, Joint, jurisdiction, multifamily, numerator, page, parcel, paydown, payoff, Piedmont, program, proportional, recourse, redistributed, refund, regularly, sector, smaller, title, truck, twelve, upgrade
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Accepted, advertising, amendment, ASC, CDA, collateralized, comparability, comparing, conform, consistency, continuation, discount, evaluate, excluding, expedient, foreclosure, LIBOR, performing, permanent, practical, premium, prepayment, principally, reclassified, reduction, remain, securing, September, TDR, troubled, underwriting, vintage, volatility
Financial report summary
?Risks
- Recent events in the financial services industry may have a material adverse effect on us.
- Adverse economic conditions in the market areas we serve could adversely impact our earnings and could increase the credit risk associated with our loan portfolio.
- A continued weak economic recovery or recessionary conditions could increase our level of nonperforming assets, lower real estate values in our primary market areas and reduce demand for loans, which would result in increased loan losses and lower earnings.
- Inflationary pressures and rising prices may adversely affect our results of operations and financial condition.
- The economic impact of the COVID-19 pandemic could continue to adversely affect us.
- Severe weather and other natural disasters, acts of war or terrorism, new public health issues, or other adverse external events could harm our business.
- Our business may be adversely affected by credit risk associated with residential property.
- High loan-to-value ratios on a portion of our residential mortgage loan portfolio expose us to greater risk of loss.
- Our non-owner occupied real estate loans may expose us to increased credit risk.
- Our construction and land development loans have a higher risk of loss than residential or commercial real estate loans.
- Our commercial real estate loans involve higher principal amounts than other loans and repayment of these loans may be dependent on factors outside our control or the control of our borrowers.
- The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.
- Our equipment finance and auto finance lending increases our exposure to lending risks.
- Repayment of our municipal leases is dependent on fire departments receiving tax revenues from counties/municipalities.
- Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.
- If our nonperforming assets increase, our earnings will be adversely affected.
- If our REO is not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced.
- Fluctuating interest rates can adversely affect our profitability.
- We may incur losses on our securities portfolio due to factors beyond our control, including changes in interest rates.
- Changes in the programs offered by GSEs, our ability to qualify for such programs, and changes in interest rates may affect our gains on sale of loans held for sale, which could negatively impact our noninterest income.
- Our strategy of pursuing acquisitions exposes us to financial, execution, and operational risks that could adversely affect us.
- The required accounting treatment of loans we acquire through acquisitions, including purchased financial assets with credit deterioration, could result in higher net interest margins and interest income in current periods and lower net interest margins and interest income in future periods.
- We may experience future goodwill impairment, which could reduce our earnings.
- We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations.
- Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions and limit our ability to get regulatory approval of acquisitions.
- We are subject to certain risks in connection with our use of technology.
- The replacement of LIBOR as a benchmark interest rate may adversely impact us.
- Ineffective liquidity management could adversely affect our financial results and condition.
- Competition with other financial institutions could adversely affect our profitability.
- Our ability to retain and recruit key management personnel and bankers is critical to the success of our business strategy and any failure to do so could impair our customer relationships and adversely affect our business and results of operations.
- The financial services market is undergoing rapid technological changes, and if we are unable to stay current with those changes, we will not be able to effectively compete.
- We rely on other companies to provide key components of our business infrastructure.
- Managing reputational risk is important to attracting and maintaining customers, investors and employees.
- Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be very high.
- We rely on dividends from the Bank for substantially all of our revenue at the holding company level.
Management Discussion
- On February 12, 2023, the Company merged with Quantum which operated two locations in the Atlanta metro area. The addition of Quantum contributed total assets of $656.7 million, including loans of $561.9 million, and $570.6 million of deposits, all reflecting the impact of purchase accounting adjustments. Merger-related expenses of $5.5 million were recognized during the year ended June 30, 2023, while a $5.3 million provision for credit losses was recognized during the fiscal year to establish ACLs on both Quantum's loan portfolio and off-balance-sheet credit exposure. The aggregate amount of consideration paid per the purchase agreement of approximately $70.8 million, inclusive of consideration of common stock, other cash consideration, and cash in lieu of fractional shares, included $15.9 million of cash consideration already paid by Quantum to its stockholders in advance of the closing date as is further described in "Note 3 – Merger with Quantum" of the Notes to the Consolidated Financial Statements in Item 8 of this report on Form 10-K. These distributions reduced Quantum's stockholders' equity by an equal amount prior to the transaction closing date.