Taylor Capital Group Reports Fourth Quarter 2011 Income Before Income Taxes of $9.0 Million, Improved Credit Quality and Enhanced Capital Ratios
CHICAGO, Jan. 24, 2012 /PRNewswire/ -- Taylor Capital Group, Inc. (the "Company") (NASDAQ: TAYC), the parent company of Cole Taylor Bank (the "Bank"), today reported earnings for the fourth quarter of 2011 and for the full year 2011. (Logo: http://photos.prnewswire.com/prnh/20060605/CGM055LOGO) FULL YEAR 2011 AND FOURTH QUARTER 2011 HIGHLIGHTS In commenting on the results, Mark A. Hoppe, President and Chief Executive Officer of Taylor Capital Group said, "The fourth quarter of 2011 was a landmark quarter for Taylor Capital. Our fix and grow strategy, initiated in 2008, has driven significant improvements in the profile of Cole Taylor Bank. Today, the Company's commercial lending backbone is strong and growing, and our earnings have been diversified and reinforced by the addition of two national business lines: Cole Taylor Business Capital and Cole Taylor Mortgage. Further, our progress on improving credit quality has resulted in a drop in nonperforming loans to approximately $100 million, with an allowance coverage ratio over 100%." Mr. Hoppe continued, "We achieved a substantial increase in profitability for 2011 as a result of the progress we have made in fixing asset quality and growing the business. Income before income taxes was $18.0 million for 2011, compared to a loss before income taxes of $52.6 million in 2010. As a result of the Company's significantly improved profitability, which we believe to be sustainable, we reversed the valuation allowance on our net deferred tax asset. This action represented $2.58 per share of the total $6.87 per share increase in tangible book value from year end 2010 to year end 2011. We are excited to begin 2012 with a strengthened balance sheet and considerable momentum." NET INCOME AND NET INCOME AVAILABLE TO COMMON STOCKHOLDERS Net income for the fourth quarter of 2011 was $82.3 million, compared to net income of $9.8 million for the third quarter of 2011. Net income applicable to common stockholders was $70.1 million, or $3.20 per diluted share, for the fourth quarter of 2011(3), compared to net income applicable to common stockholders of $7.3 million, or $0.35 per diluted share, for the third quarter of 2011. Net income for the full year 2011 was $91.1 million, compared to a net loss of $53.8 million for 2010. Net income applicable to common stockholders was $71.5 million, or $3.45 per diluted share, for 2011(3), compared to a net loss applicable to common stockholders of $79.3 million, or $5.27 per diluted share, for 2010(4). FOURTH QUARTER 2011 AND FULL YEAR 2011 PERFORMANCE OVERVIEW Results of Operations – Fourth Quarter 2011 Income before income taxes was $9.0 million for the fourth quarter of 2011, compared to income before income taxes of $9.8 million in the third quarter of 2011. This decline was largely due to a $3.3 million increase in nonperforming asset expense and a $2.0 million decrease in pre-tax, pre-provision operating earnings, partially offset by a $5.3 million reduction in the provision for loan losses as asset quality continues to improve. Pre-tax, Pre-provision Operating Earnings Pre-tax, pre-provision operating earnings totaled $21.8 million for the fourth quarter of 2011, compared to $23.8 million for the third quarter of 2011. This decrease was partially due to an increase of $3.9 million in noninterest expense, which was primarily the result of higher compensation expense. Offsetting the higher expenses were an increase in noninterest income of $1.3 million, largely from higher mortgage banking revenue, and an increase in net interest income of $548,000, due to the impact of lower funding costs. Revenue Revenue(1) was $52.0 million for the fourth quarter of 2011, compared to $50.1 million for the third quarter of 2011, or an increase of 3.8%. Net interest income was $35.3 million for the fourth quarter of 2011, up from $34.7 million for the third quarter of 2011, as loan volume increased quarter-over-quarter, partially offset by lower volumes of investment securities. As expected, the net interest margin, however, remained flat at 3.25% for the fourth quarter of 2011. This was largely due to lower funding rates, the result of deposit repricing and changes made to the funding mix over the last few quarters, offset by lower yields on earning assets. Noninterest income was $16.7 million for the fourth quarter of 2011, excluding gains or losses on investment securities and derivative termination expense, up from $15.4 million for the third quarter of 2011. This increase was primarily due to higher mortgage banking revenue. Mortgage banking revenue increased to $9.1 million in the fourth quarter of 2011 from $7.6 million in the third quarter of 2011. The growth was due to a rise in loan fundings at Cole Taylor Mortgage, which increased to $782.1 million in the fourth quarter of 2011, up from $521.5 million in the third quarter of 2011. The increased volume was the result of sustained low mortgage interest rates in the fourth quarter and the continued expansion of the unit's national platform. Also contributing to the increase in mortgage banking revenue was significant growth in mortgage servicing activities, including retained servicing and purchased mortgage servicing rights. Other derivative fee income was up at $3.3 million in the fourth quarter of 2011, compared to $2.7 million in the third quarter of 2011, including a loss on the termination of certain derivative contracts of $896,000. The fourth quarter represented the second consecutive quarter of higher volumes on interest rate swap agreements entered into by commercial clients of Cole Taylor Commercial Banking and Cole Taylor Commercial Real Estate Banking, two of the Bank's commercial lending units. Noninterest Expense Noninterest expense was $30.2 million for the fourth quarter of 2011, compared to $26.4 million in the third quarter of 2011, excluding nonperforming asset expense and early extinguishment of debt expense. The increase was primarily the result of increased mortgage and other corporate incentive compensation. Nonperforming asset expense was $1.6 million for the fourth quarter of 2011, compared to a nonperforming asset expense credit of $1.6 million in the third quarter of 2011. The credit in the third quarter was principally the result of reversals of reserves for unfunded commitments associated with nonperforming loans that were resolved during the third quarter of 2011. Nonperforming asset expense in the fourth quarter of 2011 was driven by other real estate and repossessed assets ("OREO") write downs, partially offset by a reversal of real estate tax expense accruals. Income Tax Expense Income tax benefit was $73.3 million for the fourth quarter of 2011, up from $42,000 in the third quarter of 2011, largely due to the one-time income tax benefit that resulted from the reversal of the $73.2 million valuation allowance on the Company's net deferred tax asset. The valuation allowance was first established in 2008 based on management's analysis of the continued losses incurred by the Company and the likelihood of recovery of those assets. As the Company returned to profitability in 2011, improved asset quality significantly and bolstered its capital ratios, management has concluded that those assets are more likely than not to be recovered and thus maintaining a valuation allowance for deferred tax assets was no longer necessary. Results of Operations – Full Year 2011 Income before income taxes was $18.0 million for 2011, compared to a loss before income taxes of $52.6 million in 2010. The improvement between 2010 and 2011 was largely the result of a $108.4 million, or 66.5%, reduction in credit costs. Total credit costs declined from $162.9 million in 2010 to $54.5 million in 2011, as commercial criticized and classified loans continued to decline and asset quality improved. Further improving income before income taxes was an increase of $3.2 million in pre-tax, pre-provision operating earnings from 2010 to 2011. Partially offsetting these improvements were a $36.4 million decline in gains and losses on investment securities, a $3.1 million increase in early extinguishment of debt expense and $896,000 in derivative termination fees that did not occur in 2010. Pre-tax, Pre-provision Operating Earnings Pre-tax, pre-provision operating earnings were $72.5 million for 2011, up from $69.3 million for 2010. The year-over-year increase was primarily due to higher noninterest income from mortgage banking revenue and other derivative income, partially offset by higher noninterest expense. Revenue For 2011, revenue was $180.2 million, up from $167.4 million for 2010. Net interest income was $134.4 million for 2011, compared to $136.1 million for 2010. Net interest margin was 3.16% for 2011, compared to 3.17% for 2010. The reduction in both net interest income and net interest margin was the result of lower yields on all earning assets, as well as lower loan volumes during 2011, which were mostly offset by lower funding costs driven by deposit repricing and deliberate changes made to the funding mix. Noninterest income was $45.8 million for 2011, compared to $31.7 million for 2010, excluding gains and losses on investment securities and derivative termination expense. The increase from 2010 to 2011 was due primarily to higher mortgage banking revenue generated by Cole Taylor Mortgage, and higher other derivative income from customer swap agreements generated by Cole Taylor's Commercial Banking and Commercial Real Estate Banking. Noninterest Expense Noninterest expense was $107.7 million in 2011, up from $98.1 million for 2010, excluding nonperforming asset expense and early extinguishment of debt expense. This was primarily the result of higher compensation expense, including salaries and incentives, largely due to the growth of Cole Taylor Mortgage and Cole Taylor Business Capital. Income Tax Expense Income tax benefit was $73.1 million for 2011, up from income tax expense of $1.2 million in 2010, largely due to the one-time income tax benefit that resulted from the reversal of the $73.2 million valuation allowance on the Company's net deferred tax asset. Credit Quality – Fourth Quarter 2011 Asset quality improved markedly during the fourth quarter of 2011. Nonperforming loans decreased by 15.2% to $103.1 million at December 31, 2011, from $121.5 million at September 30, 2011. Commercial criticized and classified loans decreased for the sixth consecutive quarter to $182.6 million at December 31, 2011, from $221.1 million at September 30, 2011, a 17.4% decline. The coverage ratio of the allowance for loan losses to nonperforming loans topped one hundred percent at 100.66% at December 31, 2011, compared to 87.06% at September 30, 2011. Loan Portfolio Performance and Credit Quality Nonperforming assets were $138.7 million at December 31, 2011, compared to $150.8 million at September 30, 2011. Nonperforming assets to total assets declined to 2.96% at December 31, 2011, compared to 3.35% at September 30, 2011. Nonaccrual loans decreased to $103.1 million at December 31, 2011, compared to $121.5 million at September 30, 2011, due to pay downs and charge-offs. The total decline of $18.4 million largely consisted of reductions of $12.1 million in commercial and industrial nonaccrual loans and $4.1 million in commercial real estate secured nonaccrual loans. OREO increased to $35.6 million at December 31, 2011 from $29.2 million at September 30, 2011. This was due to several new properties being transferred to OREO, as foreclosures were completed in the fourth quarter of 2011. The increase was partially offset by OREO sales during the quarter. Commercial criticized and classified loans were $182.6 million at December 31, 2011, compared to $221.1 million at September 30, 2011. This decrease was largely the result of pay downs and charge-offs during the fourth quarter of 2011, partially offset by new loans being placed on criticized and classified status. Allowance and Provision for Loan Losses The allowance for loan losses was $103.7 million at December 31, 2011, down from $105.8 million at September 30, 2011, as credit quality trends continued to improve, nonperforming loans dropped and commercial criticized and classified loans declined. This decline resulted from net charge-offs exceeding the provision for loan losses during the fourth quarter of 2011 by $2.1 million. The coverage ratio of the allowance for loan losses to nonperforming loans was 100.66% at December 31, 2011, up from 87.06% at September 30, 2011. For the fourth quarter of 2011, the provision for loan losses was $11.0 million, down from $16.2 million for the third quarter of 2011. Credit Quality – Full Year 2011 Significant asset quality improvement was achieved during 2011. Nonperforming loans declined by $56.6 million, or 35.4%, from $159.7 million at year end 2010 to $103.1 million at year end 2011. Moreover, commercial criticized and classified loans decreased $121.3 million, or 39.9%, from $303.9 million at December 31, 2010 to $182.6 million at December 31, 2011. These improvements are the result of significant nonperforming asset resolutions, combined with a slowdown in both migrations to nonperforming status and inflows to criticized and classified status. As a result, credit costs have declined by 66.5%, from $162.9 million for the full year 2010 to $54.5 million for the full year 2011. Loan Portfolio Performance and Credit Quality Nonperforming assets were $138.7 million at December 31, 2011, compared to $191.2 million at December 31, 2010. Nonperforming assets to total assets were 2.96% at December 31, 2011, compared to 4.26% at December 31, 2010. Nonaccrual loans totaled $103.1 million at December 31, 2011, compared to $159.7 million at December 31, 2010, a decrease of $56.6 million. The two largest reductions were a $28.5 million decrease in commercial and industrial nonaccrual loans and a $12.9 million decline in residential construction and land nonaccrual loans. The reduction in commercial and industrial nonaccrual loans was principally due to lower nonaccrual loans in the portfolio of loans to banks and bank holding companies, partially offset by migrations of other commercial and industrial loan types. The portfolio of loans to banks and bank holding companies has declined to $57.8 million at December 31, 2011, from $92.9 million at December 31, 2010. The reduction in residential construction and land nonaccrual loans is the results of the Company's focus on reducing the overall exposure to these types of loans. OREO was $35.6 million at December 31, 2011, compared to $31.5 million at December 31, 2010. Despite active resolution of nonperforming assets, the balance of OREO increased as of year end 2011. Commercial criticized and classified loans were $182.6 million at December 31, 2011, down 39.9% from $303.9 million at December 31, 2010, and down 55.1% from $406.3 million a year earlier at December 31, 2009. Allowance and Provision for Loan Losses The allowance for loan losses declined to $103.7 million at December 31, 2011, from $124.6 million at December 31, 2010, as charge offs during 2011 exceeded the provision for loan losses. Despite this decline, the allowance for loan losses as a percent of nonperforming loans was 100.66% at December 31, 2011, up from 77.98% at December 31, 2010. For 2011, the provision for loan losses was $49.3 million, compared to $143.1 million for 2010. Credit Quality Performance Summary (in thousands) 12/31/2011 9/30/2011 Change 12/31/2010 Change Nonperforming loans $103,061 $121,534 ($18,473) $159,740 ($56,679) Nonperforming assets $138,683 $150,771 ($12,088) $191,230 ($52,547) Nonperforming loans to total loans 3.31% 4.02% -0.71% 5.16% -1.85% Allowance to nonperforming loans 100.66% 87.06% 13.60% 77.98% 22.68% Commercial criticized and classified loans $182,570 $221,122 ($38,552) $303,923 ($121,353) Balance Sheet – Fourth Quarter 2011 Assets Total assets at December 31, 2011 were $4.69 billion, compared to $4.50 billion at September 30, 2011. Investment securities were $1.28 billion at December 31, 2011, compared to $1.31 billion at September 30, 2011. Loans held for sale were $186.0 million at December 31, 2011, compared to $148.7 million at September 30, 2011, a result of continued growth in mortgage origination volumes at Cole Taylor Mortgage in the fourth quarter of 2011. Loans, net of allowance for loan losses, were $2.82 billion at December 31, 2011, compared to $2.77 billion at September 30, 2011, an increase of $57.0 million. Commercial and industrial loans, including commercial owner-occupied real estate loans, were $1.87 billion at December 31, 2011, up from $1.82 billion at September 30, 2011. Consumer-oriented loans were $300.3 million at December 31, 2011, up from $266.8 million at September 30, 2011, primarily the result of certain mortgages originated by Cole Taylor Mortgage being held in the loan portfolio rather than sold in the secondary market. Offsetting these increases was a decrease in real estate related loans, excluding commercial owner-occupied real estate loans, to $755.6 million at December 31, 2011, from $789.5 million at September 30, 2011. This decline was due to pay downs and nonperforming loan resolutions during the fourth quarter of 2011. Other assets increased to $167.1 million at December 31, 2011, from $92.1 million at September 30, 2011. The increase of $75.0 million was largely the result of the Company reversing the valuation allowance on its net deferred tax asset. Liabilities and Stockholders' Equity Total liabilities at December 31, 2011, were $4.28 billion, compared to $4.21 billion at September 30, 2011. Total deposits were $3.12 billion at December 31, 2011, compared to $2.93 billion at September 30, 2011, an increase of $196.9 million. The rise in deposits during the fourth quarter of 2011 was largely due to growth in core deposits, including increases in noninterest-bearing deposits of $144.4 million, NOW accounts of $51.0 million, and money market accounts of $52.2 million. The increase in deposits was partially offset by a reduction in notes payable and other advances to $747.5 million at December 31, 2011, from $872.5 million at September 30, 2011, as a result of lower Federal Home Loan Bank advances. Other borrowings also declined to $168.1 million at December 31, 2011 from $180.8 million at September 30, 2011, largely due to a decline in Federal Funds borrowing. Total stockholders' equity increased to $409.5 million at December 31, 2011, from $288.9 million at September 30, 2011. The increase was largely due to net income available to common stockholders in the fourth quarter of 2011, which was the result of strong earnings from the business, which enabled the reversal of the valuation allowance on the Company's net deferred tax asset. In addition, the $35 million rights offering completed during the fourth quarter of 2011 further bolstered stockholders' equity. During the fourth quarter of 2011, the Company completed the previously disclosed conversion of its 8% Non-Cumulative Convertible Perpetual Preferred Stock, Series C ("Series C Preferred") and 8% Non-Cumulative Convertible Perpetual Preferred Stock, Series E ("Series E Preferred"), totaling $37.5 million in preferred stock, into shares of common stock, or in the case of some shareholders Nonvoting Non-Cumulative Convertible Perpetual Preferred Stock, Series G ("Series G Preferred"). This transaction strengthened the common equity component of stockholders' equity by replacing an outstanding preferred stock with common equity. Balance Sheet – Full Year 2011 Assets Total assets at December 31, 2011, were $4.69 billion, compared to $4.48 billion at December 31, 2010. Investment securities were $1.28 billion at December 31, 2011, compared to $1.25 billion at December 31, 2010. Loans held for sale were $186.0 million at December 31, 2011, compared to $259.0 million at December 31, 2010. This decline was due to improved efficiencies in the secondary marketing processes in 2011, and therefore faster turnover of mortgage loans held for sale. Loans, net of allowance for loan losses, at December 31, 2011, were $2.82 billion, compared to $2.71 billion at December 31, 2010. Commercial and industrial loans, including commercial owner-occupied real estate loans, were $1.87 billion at December 31, 2011, up from $1.76 billion at December 31, 2010. Consumer-oriented loans were $300.3 million at December 31, 2011, up from $152.7 million at December 31, 2010, primarily the result of certain mortgages originated by Cole Taylor Mortgage being held in the loan portfolio, rather than being sold in the secondary market. Offsetting these increases was a decrease in real estate related loans, excluding commercial owner-occupied real estate loans, to $755.6 million at December 31, 2011, from $919.3 million at December 31, 2010. This decline was due to pay downs and nonperforming loan resolutions during 2011. Liabilities and Stockholders' Equity Total liabilities at December 31, 2011, were unchanged from December 31, 2010 at $4.28 billion. Total deposits were $3.12 billion at December 31, 2011, compared to $3.03 billion at December 31, 2010. The largest movements in deposits during 2011 were in core funding categories, including increases in noninterest bearing deposits of $169.2 million, NOW accounts of $76.2 million and money market accounts of $74.1 million. Out-of-local-market certificates of deposit also increased $36.5 million. Partially offsetting these increases were declines during 2011 in customer certificates of deposit of $156.2 million, in-market CDARS time deposits of $60.7 million and brokered certificates of deposit of $42.8 million. The declines were due to planned runoff in higher priced sources of funding. Other borrowings were down to $168.1 million at December 31, 2011, from $511.0 million at December 31, 2010, primarily due to a reduction in repurchase agreements. The decrease in other borrowings was in part offset by an increase in notes payable and other advances to $747.5 million at December 31, 2011, from $505.0 million at December 31, 2010, due to an increase in Federal Home Loan Bank advances. These actions were taken together to shift the funding mix to lower the overall cost of funds. Total stockholders' equity almost doubled to $409.5 million at December 31, 2011, from $208.8 million at December 31, 2010. The increase was due to net income available to common stockholders during 2011, which was principally due to the reversal of the valuation allowance on the net deferred tax asset, as well as significantly increased income before income taxes in 2011 compared to a loss in 2010. In addition, during 2011, the Company completed two previously disclosed capital raises totaling $60 million, further bolstering stockholders' equity. A shift in the capital mix also took place as a result of the Company's conversion of its Series C Preferred and Series E Preferred to common stock or Series G Preferred, a common stock equivalent, in the fourth quarter of 2011. Capital At December 31, 2011, the Company's Tier I Risk Based Capital ratio was 11.22%, while its Total Risk Based Capital ratio was 14.72% and its Tier I Capital to Average Assets leverage ratio was 8.84%. All the Company's regulatory capital ratios exceeded the regulatory requirements for well-capitalized bank holding companies of 6.00% for Tier I Risk Based Capital, 10.00% for Total Risk Based Capital and 5.00% for Tier I Capital to Average Assets. Conference Call and Slide Presentation The Company will host a webcast and conference call on Wednesday, January 25, 2012, at 9:00 am Central Time (10:00 am Eastern Time) to discuss fourth quarter 2011 and full year 2011 earnings and other matters. To access the call, please dial (866) 450-8367 (toll-free) or (412) 317-5427, and enter the code 4306742. Participants are encouraged to dial into the call approximately 10 minutes prior to the start time. To access streaming audio, please go to www.taylorcapitalgroup.com. The Company will also provide a slide presentation, which management will speak to during the discussion. A copy of the presentation will be available for download prior to the start of the call at www.taylorcapitalgroup.com. The presentation will not be webcast live. If you have any trouble obtaining a copy of the presentation, please call Investor Relations at (847) 653-7166. A replay of the conference call will be made available after approximately 12:00 p.m. Central Time (1:00 p.m. Eastern Time), and the instructions for accessing the replay will be available on the Company's website at that time. Accompanying Financial Statements and Tables This press release is accompanied by the following unaudited financial information: About Taylor Capital Group, Inc. (NASDAQ: TAYC) Taylor Capital Group, Inc. is a $4.7 billion bank holding company for Cole Taylor Bank, a commercial bank headquartered in Chicago. Cole Taylor specializes in serving the banking needs of closely held businesses and the people who own and manage them. Through its divisions Cole Taylor Business Capital and Cole Taylor Mortgage, the Bank also provides asset based lending and residential mortgage loan products through a growing network of offices throughout the United States. Cole Taylor is a member of the FDIC and is an Equal Housing Lender. Endnotes: (1) Schedules reconciling earnings in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") to the non-GAAP measurement of pre-tax, pre-provision operating earnings and revenue are provided in the attached tables. (2) Commercial criticized and classified loans (special mention, substandard, and nonaccrual loans) in commercial & industrial, commercial real estate, residential construction and land, and commercial construction and land loans. Excludes consumer loans. (3) Net income applicable to common stockholders for the fourth quarter of 2011 and for the full year 2011 includes a non-cash, non-capital impacting implied dividend of $10.5 million in the fourth quarter of 2011, representing an inducement to the holders of the Company's Series C Preferred and Series E Preferred to participate in the conversion of such stock into common stock, or in the case of some stockholders, Series G Preferred, a common stock equivalent, in the fourth quarter of 2011. (4) Net loss applicable to common stockholders for 2010 includes a non-cash, non-capital impacting implied dividend of $15.8 million in the second quarter of 2010, representing an inducement to the holders of the Company's Series A Preferred to participate in the conversion of such stock into common stock in the second quarter of 2010. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This press release includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "might," "contemplate," "plan," "prudent," "potential," "should," "will," "expect," "anticipate," "believe," "intend," "could" and "estimate" and similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2012 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation: the risk that our regulators could require us to maintain regulatory capital in excess of the levels needed to be considered well-capitalized; the risk that our allowance for loan losses may prove insufficient to absorb probable losses in our loan portfolio; possible volatility in loan charge-offs and recoveries between periods; negative developments and further disruption in the credit and lending markets impacting our business and the businesses of our customers, as well as other banks and lending institutions with which we have commercial relationships; the continued decline in residential real estate sales volume and the likely potential for continuing illiquidity in the real estate market, including within the Chicago metropolitan area; the risks associated with the high volume of loans secured by commercial real estate in our portfolio; the uncertainties in estimating the fair value of developed real estate and undeveloped land in light of declining demand for such assets and continuing illiquidity in the real estate market; the risks associated with the current and planned growth of our new mortgage unit, including the expansion into new geographic markets and regulatory changes; lending concentration risks; the risks associated with attracting and retaining experienced and qualified personnel, including our senior management and other key personnel in our core business lines; uncertainty in estimating the fair value of loans held for sale and the possibility that we will not be able to dispose of these assets on terms acceptable to us; security risks relating to our internet banking activities that could damage our reputation and our business; the potential impact of certain operational risks, including, but not limited to, data processing system failures and errors and customer or employee fraud; the risks associated with implementing our business strategy and managing our growth effectively, including our ability to preserve and access sufficient capital to execute on our strategy; the effect on our profitability if interest rates fluctuate, as well as the effect of our customers' changing use of our deposit products; the ability to use net operating loss carryforwards to reduce future tax payments if an ownership change of the Company is deemed to have occurred for tax purposes; the possibility that our wholesale funding sources may prove insufficient to replace deposits at maturity and support our growth; continuation of volatility in the capital markets; the effectiveness of our hedging transactions and their impact on our future results of operations; the conditions of the local economy in which we operate and continued weakness in the local economy; changes in general economic and capital market conditions, interest rates, our debt credit ratings, deposit flows, loan demand, loan syndication opportunities and competition; regulatory restrictions and liquidity constraints at the holding company level that could impair our ability to pay dividends or interest on our outstanding securities; significant restrictions on our operations as a result of our participation in the TARP Capital Purchase Program; the impact of changes in legislation, including the Dodd-Frank Act and the regulations promulgated thereunder, or regulatory and accounting principles, policies or guidelines affecting our business, including those relating to capital requirements; and other economic, competitive, governmental, regulatory and technological factors impacting our operations. For further information about these and other risks, uncertainties and factors, please review the disclosure included in the section captioned "Risk Factors" in our December 31, 2010 Annual Report on Form 10-K filed with the SEC on March 22, 2011. You should not place undue reliance on any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.
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