CASH 2018 Annual Report

56 Economic and market conditions could adversely affect our industry and regulatory costs. Our success depends, to a certain extent, upon local economic and political conditions as well as governmental monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may adversely affect asset quality, deposit levels, products, and loan and lease demand and, therefore, our earnings. Flat or declining national economic growth and reduced availability of commercial credit could negatively impact the credit performance of commercial and consumer credit in general. Under such conditions, the broader U.S. economy could experience increased commercial and consumer credit contraction, a lack of customer confidence, increased market volatility, and widespread reduction in general business activity. Such adverse changes in the economy may also have a negative effect on the ability of our commercial and consumer borrowers to make timely repayments of their loans and leases, which would have an adverse impact to our earnings. The resulting economic pressure from any or all of these events on consumers and businesses and the lack of confidence in the financial markets could adversely affect our business, financial condition, results of operations, and stock price. A worsening of these economic conditions would likely exacerbate the adverse effects of difficult market conditions on us and others in the financial institutions industry. In particular, as a result of credit and liquidity challenges faced by the broader economy, our industry and business lines could come under new or increased supervision regulation. Although the November 2016 federal election has, to some degree, curtailed an expansion of our regulatory obligations (see "--We operate in a highly regulated environment, and changes in laws and regulations to which we are subject may adversely affect our results of operations." below), compliance with existing and additional regulations in a distressed market would likely increase our costs, limit our ability to pursue new business opportunities, and curtail the businesses in which we operate. Because we have a significant amount of real estate loans, declines in real estate values could adversely affect the value of property used as collateral. Customer demand for loans secured by real estate may also decrease due to weaker economic conditions, an increase in unemployment, a decrease in real estate values, or an increase in interest rates. In addition, the demand for commercial lending and other forms of commercial financing could weaken due to national economic conditions that cause business growth and credit needs to retract, which could diminish or delay our realization of the anticipated benefits of the Crestmark Acquisition since the Crestmark division is focused on commercial lending and financing. Further, weakened demand could adversely affect the specialty lending operations of our Crestmark division that are focused on certain industries or its factoring services because, if Crestmark is unable to collect on loans, leases or purchased receivables, Crestmark and the Bank will sustain losses, which could be material. See also “-Our loan portfolio includes loans with a higher risk of loss.” The process we use to estimate losses inherent in our credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions, and determinations as to whether economic conditions might impair the ability of our borrowers to repay their loans and leases. The level of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates which may, in turn, impact the reliability of our underwriting processes. See also “--If the Company’s actual loan and leases losses exceed the Company’s allowance for loan and lease losses, the Company’s net income will decrease.” The value of the portfolio of investment securities that we hold, which portfolio constitutes a large percentage of our assets, may also be adversely affected by adverse market conditions. If we experience financial setbacks or regulatory action in the future, we may be required to pay significantly higher FDIC insurance premiums than we currently pay due, in part, to our significant level of brokered deposits or we could be curtailed or prohibited from accepting some or all such brokered deposits. See Part I, Item 1 “Business - Regulation.”