SB Financial Group, Inc.: Form 10-Q for the period ended Sep 30, 2019

Cautionary Statement Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. Examples of forward-looking statements include: (a) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (b) statements of plans and objectives of the Company or our management or Board of Directors, including those relating to products or services; (c) statements of future economic performance; (d) statements regarding future customer attraction or retention; and (e) statements of assumptions underlying such statements. Words such as “anticipates”, “believes”, “plans”, “intends”, “expects”, “projects”, “estimates”, “should”, “may”, “would be”, “will allow”, “will likely result”, “will continue”, “will remain”, or other similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying those statements. Forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, risks and uncertainties inherent in the national and regional banking industry, changes in economic conditions in the market areas in which the Company and its subsidiaries operate, changes in policies by regulatory agencies, changes in accounting standards and policies, changes in tax laws, fluctuations in interest rates, demand for loans in the market areas in which the Company and its subsidiaries operate, increases in FDIC insurance premiums, changes in the competitive environment, losses of significant customers, geopolitical events and the loss of key personnel. Additional detailed information concerning a number of important factors which could cause actual results to differ materially from the forward-looking statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations is available in the Company’s filings with the Securities and Exchange Commission, including the risks identified under the heading “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Except as may be required by law, the Company undertakes no obligation to update any forward-looking statement to reflect unanticipated events or circumstances after the date on which the statement is made.

Overview of SB Financial

SB Financial Group, Inc. (“SB Financial”) is an Ohio corporation and a financial holding company registered with the Federal Reserve Board. SB Financial’s wholly-owned subsidiary, The State Bank and Trust Company (“State Bank”), is an Ohio-chartered bank engaged in commercial banking.

Rurban Statutory Trust II (“RST II”) was established in August 2005. In September 2005, RST II completed a pooled private offering of 10,000 Trust Preferred Securities with a liquidation amount of $1,000 per security. The proceeds of the offering were loaned to SB Financial in exchange for junior subordinated debentures of SB Financial with terms substantially similar to the Trust Preferred Securities. The sole assets of RST II are the junior subordinated debentures, and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee by SB Financial of the obligations of RST II.

RFCBC, Inc. (“RFCBC”) is an Ohio corporation and wholly-owned subsidiary of SB Financial that was incorporated in August 2004. RFCBC operates as a loan subsidiary in servicing and working out problem loans.

State Bank Insurance, LLC (“SBI”) is an Ohio corporation and a wholly owned subsidiary of State Bank incorporated in June of 2010. SBI is an insurance company that engages in the sale of insurance products to retail and commercial customers of State Bank.

SBFG Title, LLC (“Title”) is an Ohio corporation that was formed in March 2019. SBFG Title engages in the sale of title insurance services.

SB Captive, Inc. (“Captive”) is a Nevada corporation that was formed in March 2019. SB Captive pools insurance risk among like sized banking institutions.

Rurbanc Data Services, Inc. dba RDSI Banking Systems (“RDSI”) was sold in January 2018 and formerly provided item processing services to community banks and businesses

Unless the context indicates otherwise, all references herein to “we”, “us”, “our”, or the “Company” refer to SB Financial and its consolidated subsidiaries.

Critical Accounting Policies

Note 1 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 describes the significant accounting policies used in the development and presentation of the Company’s financial statements. The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The Company’s financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results, and they require management to make estimates that are difficult, subjective, and/or complex.

Allowance for Loan Losses - The allowance for loan losses provides coverage for probable losses inherent in the Company’s loan portfolio. Management evaluates the adequacy of the allowance for loan losses each quarter based on changes, if any, in underwriting activities, loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic factors. This evaluation is inherently subjective, as it requires the use of significant management estimates. Many factors can affect management’s estimates of specific and expected losses, including volatility of default probabilities, rating migrations, loss severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.

The Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience. The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, fraud loss and bankruptcy experiences, and historical losses, adjusted for current trends, for each homogeneous category or group of loans. The allowance for credit losses relating to impaired loans is based on the loan’s observable market price, the collateral for certain collateral-dependent loans, or the discounted cash flows using the loan’s effective interest rate.

Regardless of the extent of the Company’s analysis of customer performance, portfolio trends or risk management processes, certain inherent but undetected losses are probable within the loan portfolio. This is due to several factors, including inherent delays in obtaining information regarding a customer’s financial condition or changes in their unique business conditions, the subjective nature of individual loan evaluations, collateral assessments and the interpretation of economic trends. Volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are also factors. The Company estimates a range of inherent losses related to the existence of these exposures. The estimates are based upon the Company’s evaluation of imprecise risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment. To the extent that actual results differ from management’s estimates, additional loan loss provisions may be required that could adversely impact earnings for future periods.

Goodwill and Other Intangibles - The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair value as required. Goodwill is subject, at a minimum, to annual tests for impairment. Other intangible assets are amortized over their estimated useful lives using straight-line or accelerated methods, and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. The initial goodwill and other intangibles recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how the acquired asset will perform in the future. Events and factors that may significantly affect the estimates include, among others, customer attrition, changes in revenue growth trends, specific industry conditions and changes in competition. A decrease in earnings resulting from these or other factors could lead to an impairment of goodwill that could adversely impact earnings for future periods.

Three Months Ended September 30, 2019 compared to Three Months Ended September 30, 2018

Net Income: Net income for the third quarter of 2019 was $3.8 million compared to net income of $3.1 million for the third quarter of 2018, an increase of 20.7 percent. Earnings per diluted share (EPS) of $0.48 were up 23.1 percent from EPS of $0.39 for the third quarter of 2018.

Provision for Loan Losses: The third quarter provision for loan losses was $0.3 million compared to $0.0 million for the year-ago quarter. Net charge-offs for the quarter were $0.11 million compared to $0.01 million for the year-ago quarter. Total delinquent loans ended the quarter at $2.0 million, or 0.24 percent of total loans, which is up $0.1 million from the prior year.

Consolidated Revenue: Total revenue, consisting of net interest income and noninterest income, was $14.4 million for the third quarter of 2019, an increase of $1.7 million, or 13.3 percent, from the $12.7 million generated during the third quarter of 2018.

Net interest income was $9.1 million, which was up $0.6 million from the prior year third quarter’s $8.5 million. The Company’s earning assets increased $62.9 million, coupled with a 24 basis point increase in the yield on earning assets. The net interest margin (FTE) for the third quarter of 2019 was 3.93 percent compared to 3.96 percent for the third quarter of 2018. Funding costs for interest bearing liabilities for the third quarter of 2019 were 1.33 percent compared to 1.00 percent for the prior year third quarter.

Noninterest income was $5.4 million for the third quarter of 2019, which was up $1.2 million from the prior year third quarter’s $4.2 million. In addition to the mortgage revenue detailed below, gains from the sale of non-mortgage loans was $0.5 million, wealth management revenue was $0.8 million and revenue from our title agency was $0.4 million. Noninterest income as a percentage of average assets for the third quarter of 2019 was 2.06 percent compared to 1.75 percent for the prior year third quarter.

The Company originated $157.9 million of mortgage loans for the third quarter of 2019, of which $125.4 million was sold with the remainder in loans held for investment. This compares to $95.3 million for the third quarter of 2018, of which $80.6 million was sold with the remainder in loans held for investment. These third quarter 2019 originations and subsequent sales resulted in $2.5 million of gains, up $0.4 million from the gains for the third quarter of 2018. Net mortgage banking revenue was $2.5 million for the third quarter of 2019 compared to $2.3 million for the third quarter of 2018.

Consolidated Noninterest Expense: Noninterest expense for the third quarter of 2019 was $9.5 million, which was up $0.7 million compared to $8.8 million in the prior-year third quarter. The third quarter of 2019 included higher commission on mortgage sales of $0.4 million and title agency expense of $0.3 million.

Income Taxes: Income taxes for the third quarter of 2019 were $0.9 million (effective rate 18.6 percent) compared to $0.8 million (effective rate 20.9 percent) for the third quarter of 2018.

Nine Months Ended September 30, 2019 compared to Nine Months Ended September 30, 2018

Net Income: Net income for the first nine months of 2019 was $8.6 million compared to net income of $8.7 million for the first nine months of 2018, a decrease of $0.1 million, or 0.7 percent. Earnings per diluted share (EPS) for the period of $1.08 were down 5.3 percent from EPS of $1.14 for the prior year nine-month period. During the first nine months of 2019, the Company booked a temporary impairment to mortgage servicing rights of $1.1 million after-tax.

Provision for Loan Losses: The provision for loan losses for the first nine months of 2019 was $0.5 million compared to $0.6 million for the prior year first nine months. Net charge offs for the period were $0.2 million compared to net charge offs of $0.04 million for the prior year nine month period.

Consolidated Revenue: Total revenue, consisting of net interest income and noninterest income, was $38.3 million for the first nine months of 2019, an increase of $1.0 million, or 2.5 percent, from the $37.3 million generated during the 2018 first nine months.

Net interest income was $26.2 million, which was up $1.6 million or 6.4 percent from net interest income of $24.6 million for the prior year first nine months. The Company’s earning assets increased $74.4 million, and had a 26 basis point increase in the yield on earning assets for the first nine months of 2019. The net interest margin (FTE) for the first nine months of 2019 was 3.87 percent compared to 3.96 percent for the first nine months of 2018. Funding cost for interest bearing liabilities for the first nine months of 2019 were 1.27 percent compared to 0.84 percent for the prior year first nine months.

Noninterest income was $12.1 million for the 2019 first nine months, which was down $0.6 million or 5.0 percent from noninterest income of $12.7 million for the prior year first nine months. In addition to the mortgage revenue detailed below, gains from the sale of non-mortgage loans was $1.0 million, compared to $0.9 million for the same period in 2018. For the first nine months, the Company had a temporary mortgage servicing rights impairment of $1.4 million.

State Bank originated $307.8 million of mortgage loans during the first nine months of 2019, of which $239.9 million of loans were sold with the remainder of loans held for investment. These levels were down 17.0 percent and 19.8 percent, respectively, as compared to the prior year first nine months.

Consolidated Noninterest Expense: Noninterest expense for the first nine months of 2019 was $27.2 million, which was up $1.2 million compared to $26.0 million in the prior year first nine months. The increase in noninterest expenses compared to the prior year was primarily due to title agency expenses of $0.6 million, and professional fees of $0.3 million.

Income Taxes: Income taxes for the first nine months of 2019 were $1.9 million (effective rate 18.4 percent) compared to $2.1 million (effective rate 19.3 percent) for the first nine months of 2018.

Changes in Financial Condition

Total assets at September 30, 2019 were $1,042.8 million, an increase of $55.9 million or 5.7 percent since 2018 year end. Total loans, net of unearned income, were $823.4 million as of September 30, 2019, up $51.5 million from year-end, an increase of 6.7 percent.

Total deposits at September 30, 2019 were $848.0 million, an increase of $45.4 million or 5.7 percent since 2018 year end. Borrowed funds (consisting of FHLB advances, and REPOs) totaled $30.7 million at September 30, 2019. This is down from year-end when borrowed funds totaled $31.2 million due to a decrease in REPOs. Total equity for the Company of $134.2 million now stands at 12.9 percent of total assets compared to the December 31, 2018 level of $130.4 million and 13.2 percent of total assets.

The allowance for loan loss of $8.5 million was up $0.3 million from the 2018 year end level. The allowance to loan loss is 1.03 percent of total loans, which is considered appropriate by management given the risk profile of the portfolio.

Capital Resources

As of September 30, 2019, based on the computations for the FFIEC 041 Consolidated Reports of Condition and Income filed by State Bank with the Federal Reserve, State Bank was classified as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, State Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since September 30, 2019 that management believes have changed State Bank’s capital classification.

State Bank’s actual capital levels and ratios as of September 30, 2019 and December 31, 2018 are presented in the following table. Capital levels are presented for State Bank only as the Company is exempt from quarterly reporting on capital levels at the holding company level:

($ in thousands)

Effective January 1, 2015, new regulatory capital requirements commonly referred to as “Basel III” were implemented and are reflected in the September 30, 2019 capital table above. Management opted out of the accumulated other comprehensive income treatment under the new requirements and as such unrealized gains and losses from available-for-sale securities will continue to be excluded from State Bank’s regulatory capital.

LIQUIDITY

Liquidity relates primarily to the Company’s ability to fund loan demand, meet deposit customers’ withdrawal requirements and provide for operating expenses. Assets used to satisfy these needs consist of cash and due from banks, federal funds sold, interest-earning deposits in other financial institutions, securities available-for-sale and loans held for sale. These assets are commonly referred to as liquid assets. Liquid assets were $140.5 million at September 30, 2019, compared to $143.8 million at December 31, 2018.

Liquidity risk arises from the possibility that the Company may not be able to meet the Company’s financial obligations and operating cash needs or may become overly reliant upon external funding sources. In order to manage this risk, the Board of Directors of the Company has established a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies minimum liquidity requirements. This policy designates the Asset/Liability Committee (“ALCO”) as the body responsible for meeting these objectives. The ALCO reviews liquidity regularly and evaluates significant changes in strategies that affect balance sheet or cash flow positions. Liquidity is centrally managed on a daily basis by the Company’s Chief Financial Officer and Asset Liability Manager.

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $615.3 million at September 30, 2019 and $579.9 million at December 31, 2018, which can and has been used to collateralize borrowings, is an additional source of liquidity. Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its liquidity needs. At September 30, 2019, all eligible commercial real estate, first mortgage residential and multi-family mortgage loans were pledged under an FHLB blanket lien.

The cash flow statements for the periods presented provide an indication of the Company’s sources and uses of cash, as well as an indication of the ability of the Company to maintain an adequate level of liquidity. A discussion of the cash flow statements for the nine months ended September 30, 2019 and 2018 follows.

The Company experienced positive cash flows from operating activities for the nine months ended September 30, 2019 and September 30, 2018. Net cash provided by operating activities was $3.7 million for the nine months ended September 30, 2019 and $6.9 million for the nine months ended September 30, 2018. Highlights for the current year include $244.7 million in proceeds from the sale of loans, which is up $44.4 million from the prior year. Originations of loans held for sale was a use of cash of $249.1 million, which is up from the prior year, by $48.7 million. For the nine months ended September 30, 2019, there was a gain on sale of loans of $6.4 million, and depreciation and amortization of $1.4 million.

The Company experienced negative cash flows from investing activities for the nine months ended September 30, 2019 and September 30, 2018. Net cash flows used in investing activities was $40.5 million for the nine months ended September 30, 2019 and $80.0 million for the nine months ended September 30, 2018. Highlights for the nine months ended September 30, 2019 include $8.8 million in purchases of available-for-sale securities, which is down $7.4 million from the prior year. These cash payments were offset by $24.6 million in proceeds from maturities and sales of securities, which is up $11.9 million from the prior nine-month period. The Company experienced a $51.2 million increase in loans, which is down $23.9 million from the prior year nine-month period.

The Company experienced positive cash flows from financing activities for the nine months ended September 30, 2019 and September 30, 2018. Net cash flow provided by financing activities was $38.3 million for the nine months ended September 30, 2019 and $92.0 million for the nine months ended September 30, 2018. Highlights for the current period include a $18.7 million increase in transaction deposits for the nine months ended September 30, 2019, which is down from the $19.6 million increase in transaction deposits for the nine months ended September 30, 2018. Certificates of deposit increased by $26.7 million in the current year compared to an increase of $21.6 million for the prior year.

ALCO uses an economic value of equity (“EVE”) analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet positions. The EVE analysis calculates the net present value of the Company’s assets and liabilities in rate shock environments that range from -400 basis points to +400 basis points. The likelihood of a significant decrease in rates as of September 30, 2019 and December 31, 2018 was considered unlikely given the current interest rate environment and therefore, only the minus 100 and 200 basis point rate change was included in this analysis. The results of this analysis are reflected in the following tables for September 30, 2019 and December 31, 2018.

Economic Value of Equity

September 30, 2019

($ in thousands)

Economic Value of Equity

December 31, 2018

($ in thousands)

Off-Balance-Sheet Borrowing Arrangements:

Significant additional off-balance-sheet liquidity is available in the form of FHLB advances and unused federal funds lines from correspondent banks. Management expects the risk of changes in off-balance-sheet arrangements to be immaterial to earnings.

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $615.3 million were pledged to meet FHLB collateralization requirements as of September 30, 2019. Based on the current collateralization requirements of the FHLB, the Company had approximately $106.6 million of additional borrowing capacity at September 30, 2019. The Company also had $17.3 million in unpledged securities to pledge for additional borrowings.

The Company’s contractual obligations as of September 30, 2019 were comprised of long-term debt obligations, other debt obligations, operating lease obligations and other long-term liabilities. Long-term debt obligations were comprised of FHLB Advances of $16.0 million and Trust Preferred Securities of $10.3 million. Total time deposits at September 30, 2019 were $268.1 million, of which $112.1 million mature beyond one year.

In addition, as of September 30, 2019, the Company had commitments to sell mortgage loans totaling $58.1 million. The Company believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments. If the Company requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.

ASSET LIABILITY MANAGEMENT

Asset liability management involves developing, executing and monitoring strategies to maintain appropriate liquidity, maximize net interest income and minimize the impact that significant fluctuations in market interest rates would have on current and future earnings. The business of the Company and the composition of its balance sheet consist of investments in interest-earning assets (primarily loans, mortgage-backed securities, and securities available for sale) which are primarily funded by interest-bearing liabilities (deposits and borrowings). With the exception of specific loans which are originated and held for sale, all of the financial instruments of the Company are for other than trading purposes. All of the Company’s transactions are denominated in U.S. dollars with no specific foreign exchange exposure. In addition, the Company has limited exposure to commodity prices related to agricultural loans. The impact of changes in foreign exchange rates and commodity prices on interest rates are assumed to be insignificant. The Company’s financial instruments have varying levels of sensitivity to changes in market interest rates resulting in market risk. Interest rate risk is the Company’s primary market risk exposure; to a lesser extent, liquidity risk also impacts market risk exposure.

Interest rate risk is the exposure of a banking institution’s financial condition to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value; however, excessive levels of interest rate risk could pose a significant threat to the Company’s earnings and capital base. Accordingly, effective risk management that maintains interest rate risks at prudent levels is essential to the Company’s safety and soundness.

Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control interest rate risk and the organization’s quantitative level of exposure. When assessing the interest rate risk management process, the Company seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain interest rate risks at prudent levels of consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires the Company to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity and asset quality (when appropriate).

The Federal Reserve Board together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Company adopted a Joint Agency Policy Statement on interest rate risk effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices for managing interest rate risk, which will form the basis for ongoing evaluation of the adequacy of interest rate risk management at supervised institutions. The policy statement also outlines fundamental elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest rate risk. Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk management process that effectively identifies, measures and controls interest rate risk.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest rate changes. For example, assume that an institution’s assets carry intermediate or long-term fixed rates and that those assets are funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will either have lower net interest income or possibly, net interest expense. Similar risks exist when assets are subject to contractual interest rate ceilings, or rate-sensitive assets are funded by longer-term, fixed-rate liabilities in a declining rate environment.

There are several ways an institution can manage interest rate risk including: 1) matching repricing periods for new assets and liabilities, for example, by shortening or lengthening terms of new loans, investments, or liabilities; 2) selling existing assets or repaying certain liabilities; and 3) hedging existing assets, liabilities, or anticipated transactions. An institution might also invest in more complex financial instruments intended to hedge or otherwise change interest rate risk. Interest rate swaps, futures contracts, options on futures contracts, and other such derivative financial instruments can be used for this purpose. Because these instruments are sensitive to interest rate changes, they require management’s expertise to be effective. The Company does not currently utilize any derivative financial instruments to manage interest rate risk. As market conditions warrant, the Company may implement various interest rate risk management strategies, including the use of derivative financial instruments.

Management believes there has been no material change in the Company’s market risk from the information contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2018.

Evaluation of Disclosure Controls and Procedures

With the participation of the President and Chief Executive Officer (the principal executive officer) and the Executive Vice President and Chief Financial Officer (the principal financial officer) of the Company, the Company’s management has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s President and Chief Executive Officer and the Company’s Executive Vice President and Chief Financial Officer have concluded that:

• information required to be disclosed by the Company in this Quarterly Report on Form 10-Q and other reports which the Company files or submits under the Exchange Act would be accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure;
• information required to be disclosed by the Company in this Quarterly Report on Form 10-Q and other reports which the Company files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
• the Company’s disclosure controls and procedures were effective as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors is included in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. There have been no material changes to the risk factors as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.