Seacoast Reports Fourth Quarter and Full Year 2020 Results

Record Net Income of $29.3 million Increasing 30% Quarter-over-Quarter

STUART, Fla., Jan. 28, 2021 (GLOBE NEWSWIRE) -- Seacoast Banking Corporation of Florida ("Seacoast" or the "Company") (NASDAQ: SBCF) today reported net income in the fourth quarter of 2020 of $29.3 million, or $0.53 per diluted share, an increase of 30% compared to the third quarter of 2020. Adjusted net income1 for the fourth quarter of 2020 was $30.7 million, or $0.55 per diluted share, an increase of 12% compared to the third quarter of 2020. The ratio of tangible common equity to tangible assets was 11.01%, tangible book value per share increased to $16.16 and Tier 1 capital increased to 17.4%. For the full year 2020, net income was $77.8 million, or $1.44 per diluted share, compared to $98.7 million, or $1.90 per diluted share, in 2019. For the full year 2020, adjusted net income1 was $89.0 million, or $1.65 per diluted share, compared to $104.6 million, or $2.01 per diluted share, in 2019.

For the fourth quarter of 2020, return on average tangible assets was 1.49%, return on average tangible shareholders' equity was 13.87%, and the efficiency ratio was 48.23%, compared to 1.20%, 11.35%, and 61.65%, respectively, in the prior quarter. For the year ended December 31, 2020, return on average tangible assets was 1.08%, return on average tangible shareholder's equity was 10.10% and the efficiency ratio was 54.84% compared to 1.56%, 14.72% and 51.71%, respectively, for the year ended December 31, 2019.

Adjusted return on average tangible assets1 in the fourth quarter of 2020 was 1.50%, adjusted return on average tangible shareholders' equity1 was 14.00%, and the adjusted efficiency ratio1 was 48.75%, compared to 1.38%, 13.06%, and 54.82%, respectively, in the prior quarter. For the year ended December 31, 2020, adjusted return on average tangible assets1 was 1.17%, adjusted return on average tangible shareholder's equity1 was 10.93% and the adjusted efficiency ratio1 was 51.63% compared to 1.58%, 14.93% and 50.90%, respectively, for the year ended December 31, 2019.

Dennis S. Hudson, Seacoast's Executive Chairman, said, "We wrapped up an unprecedented year with strong performance in the fourth quarter. We continued to generate disciplined growth and delivered continued improvements in operating leverage. I am extremely proud of our team's performance this year as they successfully navigated the effects of the pandemic and continued to produce excellent results, ending 2020 with fourth quarter earnings exceeding the same quarter in the prior year, including achieving an efficiency ratio below 50%. Looking back over my time as CEO here at Seacoast, I am reminded of the many occasions our team has risen to the challenges of the day, which helped create an organization and culture that continues to grow stronger and more resilient. This team and our fortress balance sheet will continue to support the successful execution of our strategic priorities in 2021 and beyond under Chuck's capable leadership."

Charles M. Shaffer, Seacoast's President and CEO, said, "We continue to steadily build shareholder value through consistent growth in our tangible book value per share, which ended the period at $16.16, an increase of 15% during the quarter on an annualized basis. The tangible common equity ratio of 11% supports our ability to deploy capital for organic growth and opportunistic acquisitions. Seacoast is committed to maintaining its fortress balance sheet, built around strong capital and strict credit underwriting. Our goal remains to continue increasing market share in a disciplined manner by cultivating value-creating relationships, improving digital customer experiences, and driving greater productivity across the franchise by delivering products and services to our markets more efficiently than our competitors."

1Non-GAAP measure, see "Explanation of Certain Unaudited Non-GAAP Financial Measures" for more information and for a reconciliation to GAAP.

Financial Results

Income Statement

• Net income was $29.3 million, or $0.53 per diluted share for the fourth quarter of 2020, compared to $22.6 million, or $0.42, for the prior quarter. For the year ended December 31, 2020, net income was $77.8 million, or $1.44 per diluted share, compared to $98.7 million, or $1.90, for the year ended December 31, 2019. Adjusted net income1 was $30.7 million, or $0.55 per diluted share for the fourth quarter of 2020, compared to $27.3 million, or $0.50, for the prior quarter. For the year ended December 31, 2020, adjusted net income1 was $89.0 million, or $1.65 per diluted share, compared to $104.6 million, or $2.01, for the year ended December 31, 2019.
• Net revenues were $83.7 million in the fourth quarter of 2020, an increase of $3.3 million, or 4%, compared to the prior quarter. For the year ended December 31, 2020, net revenues were $324.3 million, an increase of $24.0 million, or 8%, compared to the year ended December 31, 2019. Adjusted revenues1 were $83.7 million in the fourth quarter of 2020, an increase of $3.3 million, or 4%, from the prior quarter. For the year ended December 31, 2020, adjusted revenues1 were $323.1 million, an increase of $24.9 million, or 8%, compared to the year ended December 31, 2019.
• Net interest income totaled $68.8 million in the fourth quarter of 2020, an increase of $5.3 million, or 8%, from the prior quarter. For the year ended December 31, 2020, net interest income was $262.7 million, an increase of $19.1 million, or 8%, compared to the year ended December 31, 2019. During the fourth quarter of 2020, net interest income included $5.2 million in interest and fees earned on Paycheck Protection Program ("PPP") loans compared to $1.7 million in the third quarter of 2020. Lower PPP loan fees in the third quarter resulted from a calculation change to align fee recognition with the contractual maturity of the loans. Loan forgiveness began in the fourth quarter of 2020, resulting in accelerated recognition of $1.5 million in PPP loan fees. The remaining $9.5 million in deferred PPP loan fees will be recognized over the loans' remaining contractual maturity or, if sooner, as loans are forgiven.
• Net interest margin was 3.59% in the fourth quarter of 2020, compared to 3.40% in the third quarter of 2020. PPP loans negatively affected the net interest margin by one basis point in the fourth quarter of 2020. In the third quarter of 2020, which was impacted by a change in the fee recognition schedule, PPP loans negatively affected net interest margin by 19 basis points. Accretion of purchase discounts on acquired loans increased net interest margin by 23 basis points in the fourth quarter of 2020, compared to 17 basis points in the third quarter. Excluding these items, net interest margin declined five basis points to 3.37%. The yield on loans, excluding PPP and accretion of purchase discount, increased one basis point. The yield on securities declined 39 basis points, reflecting continued interest rate resets, elevated prepayments and additional deployment of excess liquidity into securities in the fourth quarter. The cost of deposits decreased five basis points, from 24 basis points in the third quarter to 19 basis points in the fourth quarter, reflecting our continued repricing down of interest-bearing deposits and time deposits.
• Noninterest income totaled $14.9 million in the fourth quarter of 2020, a decrease of $2.0 million, or 12%, compared to the prior quarter. For the year ended December 31, 2020, noninterest income was $61.6 million, an increase of $4.8 million, or 9%, compared to the year ended December 31, 2019. Results for the fourth quarter of 2020 included the following:
  • Mortgage banking fees were $3.6 million, compared to a record $5.3 million in the prior quarter. Low interest rates continued to fuel refinance demand in the fourth quarter, though at lower levels than in the prior quarter, while the Florida housing market remains strong and continues to benefit from the inflow of new residents and businesses.
  • Interchange revenue was $3.6 million, compared to a record $3.7 million in the third quarter of 2020. In 2020, Seacoast customers used their debit cards at an accelerated pace, driving record interchange results for the year that exceeded pre-pandemic levels.
  • Service charges on deposits increased $0.2 million compared to the third quarter of 2020. Service charges remain lower than pre-pandemic levels, the result of higher average deposit balances for both business and consumer customers.
  • Wealth management income was $1.9 million compared to a record $2.0 million in the third quarter of 2020. A determined and consistent focus on building new relationships and providing exceptional service continues to generate growth in assets under management, with a 33% increase from prior year to $870 million at December 31, 2020. Most of the fourth quarter new production came late in the quarter, so the benefit will be reflected fully in our 2021 financial results.
• Seacoast recorded a provision for credit losses of $1.9 million in the fourth quarter of 2020, compared to a $0.8 million reversal in the prior quarter. The ratio of allowance for credit losses to total loans was 1.62% at December 31, 2020, compared to 1.60% at September 30, 2020. Excluding PPP loans, the ratio was 1.79% at December 31, 2020, compared to 1.80% at September 30, 2020.
• Noninterest expense was $43.7 million in the fourth quarter of 2020, a decrease of $8.0 million, or 15%, compared to the prior quarter. For the year ended December 31, 2020, noninterest expense was $185.6 million, an increase of $24.8 million, or 15%, compared to the year ended December 31, 2019. Changes from the third quarter of 2020 consisted of the following:
  • Salaries and wages decreased by $1.6 million, or 7%. In the fourth quarter, accelerated commercial loan production resulted in higher deferrals of related salary costs, in accordance with ASC 310-20. This was partially offset by $0.3 million in severance related to a targeted staff reduction. The third quarter included $0.6 million in expenses associated with the acquisition of Freedom Bank.
  • Data processing costs decreased by $1.9 million, or 31%, the result of Freedom Bank merger-related costs incurred in the third quarter.
  • Lower occupancy expenses reflect charges in the third quarter of 2020 associated with the consolidation of one branch location. Three additional branch consolidations are expected in the first quarter of 2021.
  • Furniture and equipment decreased by $0.3 million, or 16%, reflecting the impact of equipment disposals associated with the Freedom Bank acquisition completed during the third quarter.
  • Marketing expense decreased by $0.5 million, or 31%, the result of higher expenses in the third quarter associated with a marketing campaign.
  • Legal and professional fees decreased by $2.5 million, or 83% from the third quarter. Third quarter 2020 results include $1.3 million in merger-related costs. The remainder of the decrease in the fourth quarter relates to the one-time recovery of certain legal expenses incurred during 2020.
  • Foreclosed property expense increased in the fourth quarter of 2020 by $1.3 million, largely the result of write-downs on two properties upon receipt of updated valuations.
  • A release of reserves for unfunded commitments resulted in a benefit of $0.8 million in the fourth quarter and reflects the impact of an improved economic outlook in specific loan segments associated with the reserve. Since the outbreak of COVID-19, the Company has not experienced any material increases in line utilization by its customers.
  • Other expenses decreased by $0.6 million, or 14%, with comparably higher mortgage loan production-related expenses and higher executive recruiting fees in the third quarter.
• Seacoast recorded $8.8 million of income tax expense in the fourth quarter of 2020, compared to $7.0 million in the prior quarter. Tax impacts related to stock-based compensation were nominal each period.
• Adjusted revenues1 in the fourth quarter of 2020 increased 4% compared to the prior quarter while adjusted noninterest expense1 decreased 8%, generating 12% operating leverage.
• The ratio of net adjusted noninterest expense1 to average tangible assets was 2.00% in the fourth quarter of 2020, compared to 2.24% in the prior quarter. Net adjusted noninterest expense1 in the fourth quarter of 2020 reflects the impact of increased commercial loan production, resulting in higher deferrals of related origination expenses.
• The efficiency ratio was 48.2% compared to 61.6% in the prior quarter. The adjusted efficiency ratio1 was 48.8% compared to 54.8% in the prior quarter, reflecting the benefit of higher PPP fee accretion, a continued focus on disciplined expense control, and strong commercial loan production, resulting in higher deferrals of loan production related salary expenses.

Balance Sheet

• At December 31, 2020, the Company had total assets of $8.3 billion and total shareholders' equity of $1.1 billion. Book value per share was $20.46, and tangible book value per share was $16.16, compared to $19.91 and $15.57, respectively, on September 30, 2020. This reflects annualized growth in tangible book value per share of 15%.
• Debt securities totaled $1.6 billion on December 31, 2020, an increase of $88.4 million compared to September 30, 2020. Purchases during the quarter were primarily in government-sponsored mortgage-backed securities with an average yield of 1.43%.
• Loans totaled $5.7 billion on December 31, 2020, a decrease of $122.7 million, or 2%, compared to September 30, 2020. The decrease includes $71.8 million in PPP loan forgiveness in the fourth quarter of 2020. Seacoast continues to maintain strict underwriting and an overall conservative credit posture.
• Loan originations were $541.0 million in the fourth quarter of 2020, compared to $346.7 million in the third quarter of 2020, an increase of 56%.  •  Commercial originations during the fourth quarter of 2020 were $277.4 million, compared to $88.2 million in the third quarter of 2020. Seacoast continues to maintain conservative underwriting guidelines in the current economic environment, while extending credit to well-qualified customers.  •  Residential loans originated for sale in the secondary market were $161.6 million in the fourth quarter of 2020, compared to $162.5 million in the third quarter of 2020. The residential lending team's continued focus on high-quality service levels to homebuyers, refinance customers, and local real estate professionals has allowed them to capitalize on a strong Florida housing market throughout the year.  •  Closed residential loans retained in the portfolio totaled $54.5 million in the fourth quarter of 2020, compared to $25.4 million in the third quarter of 2020.  •  Consumer originations in the fourth quarter of 2020 were $47.5 million, compared to $62.3 million in the third quarter of 2020.• Since the beginning of the pandemic, Seacoast has supported financially impacted borrowers by providing loan accommodations including the ability to defer payments. As of December 31, 2020, loans with payment accommodations totaled $74.1 million, or 1% of total loans excluding PPP, compared to $702.7 million, or 13%, at September 30, 2020.

• Pipelines (loans in underwriting and approval or approved and not yet closed) totaled $302.0 million on December 31, 2020, a decrease of 34% from the third quarter of 2020.
  • Commercial pipelines were $166.7 million as of December 31, 2020, compared to $256.2 million as of the prior quarter end, in line with a seasonal trend of slower volumes in the first quarter.
  • Residential saleable pipelines were $92.0 million as of December 31, 2020, compared to $149.9 million as of the prior quarter end. Retained residential pipelines were $25.1 million as of December 31, 2020, compared to $33.4 million as of the prior quarter end. The declines quarter-over-quarter reflect a slowing refinance market.
  • Consumer pipelines were $18.2 million as of December 31, 2020, compared to $17.1 million as of the prior quarter-end.
• Total deposits were $6.9 billion as of December 31, 2020, an increase of $17.7 million, compared to September 30, 2020.
  • The overall cost of deposits declined to 19 basis points in the fourth quarter of 2020 from 24 basis points in the prior quarter.
  • Total transaction account balances increased 39% year-over-year and, as a percentage of overall deposit funding, remained at 56%.
  • Interest-bearing deposits (interest-bearing demand, savings, and money market deposits) increased $314.0 million, or 9%, quarter-over-quarter to $3.8 billion, noninterest-bearing demand deposits decreased $111.0 million, or 5%, to $2.3 billion, and CDs (excluding brokered) decreased $38.1 million, or 6%, to $597.3 million.
  • As of December 31, 2020, deposits per banking center were $136 million, compared to $116 million on December 31, 2019.

Asset Quality

• Nonperforming loans decreased by $0.8 million to $36.1 million at December 31, 2020. Nonperforming loans to total loans outstanding were 0.63% at December 31, 2020, 0.63% at September 30, 2020, and 0.52% at December 31, 2019.
• Nonperforming assets to total assets decreased by five basis points to 0.59% at December 31, 2020, compared to 0.64% at September 30, 2020 and 0.55% at December 31, 2019.
• The ratio of allowance for credit losses to total loans was 1.62% at December 31, 2020, 1.60% at September 30, 2020, and 0.68% at December 31, 2019. The Company has assigned no allowance for credit losses to PPP loans, as the United States government contractually guarantees repayment for such loans. Excluding PPP loans, the ratio of allowance for credit losses to total loans at December 31, 2020, was 1.79%, compared to 1.80% at September 30, 2020.
• Net charge-offs were $3.1 million, or 0.21% of average loans for the fourth quarter of 2020 compared to $1.7 million, or 0.12% of average loans in the third quarter of 2020 and $3.2 million, or 0.25% of average loans in the fourth quarter of 2019. Charge-offs in the fourth quarter of 2020 were primarily from a small number of commercial loans, none of which individually exceeded $0.6 million. Net charge-offs for the four most recent quarters averaged 0.13%.
• Portfolio diversification, in terms of asset mix, industry, and loan type, has been a critical element of the Company's lending strategy. Exposure across industries and collateral types is broadly distributed. Excluding PPP loans, Seacoast's average commercial loan size is $399,000, reflecting an ability to maintain granularity within the overall loan portfolio.
• The Company does not have any purchased loan syndications, shared national credits, or mezzanine finance.
• Since the outbreak of COVID-19, the Company has not experienced any material increase in consumer or commercial line utilization.
• Construction and land development and commercial real estate loans remain well below regulatory guidance at 26% and 169% of total bank-level risk based capital, respectively, compared to 30% and 176% respectively, in the third quarter of 2020. On a consolidated basis, construction and land development and commercial real estate loans represent 24% and 157%, respectively, of total consolidated risk-based capital.
• As the trajectory of the economic recovery remains unclear as the negative impact of COVID-19 continues and further fiscal stimulus is uncertain, Seacoast will remain vigilant in maintaining its conservative credit posture in 2021.

Capital and Liquidity

• The tier 1 capital ratio increased to 17.4% from 16.8% at September 30, 2020, and 15.0% December 31, 2019. The total capital ratio was 18.5% and the tier 1 leverage ratio was 11.9% at December 31, 2020.
• Tangible common equity to tangible assets was 11.01% at December 31, 2020, compared to 10.67% at September 30, 2020 and 11.05% at December 31, 2019.
• Cash and cash equivalents at December 31, 2020 totaled $404.1 million, an increase of $279.6 million from December 31, 2019, as Seacoast maintained a prudent liquidity position.
• At December 31, 2020, the Company had available unsecured lines of credit of $135.0 million and lines of credit under lendable collateral value of $1.8 billion. $1.2 billion of debt securities and $733.3 million in residential and commercial real estate loans are available as collateral for potential borrowings.

Fourth Quarter Strategic Highlights

• For the third consecutive year, Seacoast has been recognized as one of Fortune Magazine's 100 Fastest-Growing Companies. As the only financial institution headquartered in Florida to earn a spot on the prestigious list, this distinction is a direct reflection of the remarkable job the Seacoast team has done serving customers, implementing technological improvements, and executing our balanced growth strategy.
• Seacoast's successful combination of organic growth with value-creating acquisitions continued to benefit shareholders and associates in 2020 with the acquisitions of First Bank of Palm Beaches and Freedom Bank. Both acquisitions added experienced bankers while expanding our presence in attractive growth markets, further supporting sustainable, profitable growth.

• Capitalizing on Seacoast's Early Commitment to Digital Transformation

• Digital adoption and usage remain strong. Registered mobile devices have increased 16% in 2020, and online users have increased 13%. Growth is coming from both consumer and business customers utilizing the convenience of mobile and online channels.
• Approximately 51% of all deposit transactions were completed outside of the branch network during 2020, an increase of 11% compared to 2019. Routine transactions continue to migrate from the branch network to lower cost channels.
• Seacoast and its customers are benefiting from our automated PPP forgiveness solution that streamlines the process for clients while integrating with Seacoast's existing technology infrastructure. In the fourth quarter of 2020, $71.8 million in loan forgiveness was processed. In January 2021, the Company began accepting applications for the re-opening of the PPP lending program on our fully digital origination platform. As of January 27, the Company had received approximately 1,500 applications for $170 million under the latest round of PPP.
• As customer preferences change, Seacoast continues to evolve its branch footprint by redirecting capacity into attractive growth markets. In alignment with this strategy, we expect to consolidate three additional branch locations in the first quarter of 2021.

Scaling and Evolving Our Culture

• Seacoast’s "Manager Excellence" training program was recently recognized by American Banker, which named Seacoast one of 2020's Best Banks to Work For. Providing first-time managers and emerging leaders with skill development and ongoing support creates an environment for our associates to recognize and pursue rewarding career opportunities.
• The Company continues to recruit and acquire strong commercial banking talent. During the fourth quarter of 2020, Seacoast welcomed a team of commercial bankers and credit talent from Wells Fargo in Central Florida. Additionally, in early January 2021, the Company hired Ron York as Treasury Management Executive, formerly with First Horizon Bank.

OTHER INFORMATION

Conference Call InformationSeacoast will host a conference call on January 29, 2021 at 10:00 a.m. (Eastern Time) to discuss the fourth quarter and year end 2020 earnings results and business trends. Investors may call in (toll-free) by dialing (800) 774-6070 (passcode 5585 590#; host Chuck Shaffer). Charts will be used during the conference call and may be accessed at Seacoast's website at www.SeacoastBanking.com by selecting "Presentations" under the heading "News/Events." A replay of the call will be available for one month, beginning late afternoon of January 29, 2021, by clicking here and using passcode 50062311.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Seacoast's website at www.SeacoastBanking.com. The link is located in the subsection "Presentations" under the heading "Corporate Information." Beginning the afternoon of January 29, 2021, an archived version of the webcast can be accessed from this same subsection of the website. The archived webcast will be available for one year.

About Seacoast Banking Corporation of Florida (NASDAQ: SBCF)Seacoast Banking Corporation of Florida is one of the largest community banks headquartered in Florida with approximately $8.3 billion in assets and $6.9 billion in deposits as of December 31, 2020. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, and 51 traditional branches of its locally-branded, wholly-owned subsidiary bank, Seacoast Bank. Offices stretch from Fort Lauderdale, Boca Raton and West Palm Beach north through the Daytona Beach area, into Orlando and Central Florida and the adjacent Tampa market, and west to Okeechobee and surrounding counties. More information about the Company is available at www.SeacoastBanking.com.

Cautionary Notice Regarding Forward-Looking Statements This press release contains "forward-looking statements" within the meaning, and protections, of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements about future financial and operating results, cost savings, enhanced revenues, economic and seasonal conditions in our markets, and improvements to reported earnings that may be realized from cost controls, tax law changes, new initiatives and for integration of banks that we have acquired, as well as statements with respect to Seacoast's objectives, strategic plans, expectations and intentions and other statements that are not historical facts, any of which may be impacted by the COVID-19 pandemic and related effects on the U.S. economy. Actual results may differ from those set forth in the forward-looking statements.

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates and intentions about future performance and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance or achievements of Seacoast to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements.

All statements other than statements of historical fact could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may", "will", "anticipate", "assume", "should", "support", "indicate", "would", "believe", "contemplate", "expect", "estimate", "continue", "further", "plan", "point to", "project", "could", "intend", "target" or other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation: the effects of future economic and market conditions, including seasonality and the adverse impact of COVID-19 (economic and otherwise); governmental monetary and fiscal policies, including interest rate policies of the Board of Governors of the Federal Reserve, as well as legislative, tax and regulatory changes; changes in accounting policies, rules and practices, including the impact of the adoption of CECL; our participation in the Paycheck Protection Program ("PPP"); the risks of changes in interest rates on the level and composition of deposits, loan demand, liquidity and the values of loan collateral, securities, and interest sensitive assets and liabilities; interest rate risks, sensitivities and the shape of the yield curve; uncertainty related to the impact of LIBOR calculations on securities and loans; changes in borrower credit risks and payment behaviors; changing retail distribution strategies, customer preferences and behavior; changes in the availability and cost of credit and capital in the financial markets; changes in the prices, values and sales volumes of residential and commercial real estate; our ability to comply with any regulatory requirements; the effects of problems encountered by other financial institutions that adversely affect us or the banking industry; our concentration in commercial real estate loans; inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions; the impact on the valuation of our investments due to market volatility or counterparty payment risk; statutory and regulatory dividend restrictions; increases in regulatory capital requirements for banking organizations generally; the risks of mergers, acquisitions and divestitures, including our ability to continue to identify acquisition targets and successfully acquire desirable financial institutions; changes in technology or products that may be more difficult, costly, or less effective than anticipated; our ability to identify and address increased cybersecurity risks; inability of our risk management framework to manage risks associated with our business; dependence on key suppliers or vendors to obtain equipment or services for our business on acceptable terms; reduction in or the termination of our ability to use the mobile-based platform that is critical to our business growth strategy; the effects of war or other conflicts, acts of terrorism, natural disasters, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions; unexpected outcomes of and the costs associated with, existing or new litigation involving us; our ability to maintain adequate internal controls over financial reporting; potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; the risks that our deferred tax assets could be reduced if estimates of future taxable income from our operations and tax planning strategies are less than currently estimated and sales of our capital stock could trigger a reduction in the amount of net operating loss carryforwards that we may be able to utilize for income tax purposes; the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market areas and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; and the failure of assumptions underlying the establishment of reserves for possible loan losses.

Given the many unknowns and risks being heavily weighted to the downside, our forward-looking statements are subject to the risk that conditions will be substantially different than we are currently expecting. If efforts to contain COVID-19 are unsuccessful and restrictions on movement last into 2021 and beyond, the recession would be much longer and much more severe. Ineffective fiscal stimulus, or an extended delay in implementing it, are also major downside risks. The deeper the recession is, and the longer it lasts, the more it will damage consumer fundamentals and sentiment. This could both prolong the recession, and/or make any recovery weaker. Similarly, the recession could damage business fundamentals. And an extended global recession due to COVID-19 would weaken the U.S. recovery. As a result, the outbreak and its consequences, including responsive measures to manage it, have had and are likely to continue to have an adverse effect, possibly materially, on our business and financial performance by adversely affecting, possibly materially, the demand and profitability of our products and services, the valuation of assets and our ability to meet the needs of our customers.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2019, and our quarterly reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 under "Special Cautionary Notice Regarding Forward-looking Statements" and "Risk Factors", and otherwise in our SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at www.sec.gov

Explanation of Certain Unaudited Non-GAAP Financial Measures

This presentation contains financial information determined by methods other than Generally Accepted Accounting Principles ("GAAP"). Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance. The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance and if not provided would be requested by the investor community. These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might define or calculate these measures differently. The Company provides reconciliations between GAAP and these non-GAAP measures. These disclosures should not be considered an alternative to GAAP.