1319327--3/14/2008--Encore_Bancshares

related topics

{loan, real, estate}

{stock, price, share}

{personnel, key, retain}

{condition, economic, financial}

{loss, insurance, financial}

{tax, income, asset}

{system, service, information}

{stock, price, operating}

{customer, product, revenue}

{competitive, industry, competition}

{control, financial, internal}

{provision, law, control}

{regulation, government, change}

Risks Associated With Our Business If we are unable to continue to transform our balance sheet by originating loans and growing core deposits and if our strategic decision to open a number of new private client offices and offer wealth management services and insurance products does not continue to generate new business, our business and earnings may be negatively affected. Our dependence on loans secured by real estate subjects us to risks relating to fluctuations in the real estate market and related interest rates and legislation that could result in significant additional costs and capital requirements that could adversely affect our financial condition and results of operations. If we are unable to continue to originate residential real estate loans, our earnings could decline. As a consequence of our efforts to transform our balance sheet over the last five years by originating new loans, in certain circumstances there is limited repayment history against which we can fully assess the adequacy of our allowance for loan losses. If our allowance for loan losses is not adequate to cover actual loan losses, our earnings will decrease. Our profitability depends significantly on local economic conditions in the areas where our operations and loans are concentrated. The properties that we own and our foreclosed real estate assets could subject us to environmental risks and associated costs. The small to medium-sized businesses we lend to may have fewer resources to weather a downturn in the economy, which may impair a borrower s ability to repay a loan to us, and such impairment could materially harm our operating results. Our banking business is subject to interest rate risk and fluctuations in interest rates may adversely affect our results of operations and financial condition. The wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings. Linscomb Williams investment advisory contracts are subject to termination on short notice, and termination of a significant number of investment advisory contracts could have a material adverse impact on our revenues. Our insurance agency s commission revenues are based on premiums set by insurers and any decreases in these premium rates could adversely affect our operations and revenues. Our business would be harmed if we lost the services of any of our senior management team and senior relationship bankers and are unable to recruit or retain suitable replacements. Our growth could be hindered unless we are able to recruit and retain qualified employees. We operate in a highly regulated environment and, as a result, are subject to extensive regulation and supervision and changes in federal and local laws and regulations that could adversely affect our financial performance. We face strong competition with other financial institutions and financial service companies, which could adversely affect our results of operations and financial condition. An interruption in or breach in security of our information systems may result in a loss of client business and have an adverse effect on our results of operations and financial condition. If we are unable to accurately and favorably assess the effectiveness of our internal controls over financial reporting, or if our independent auditors are unable to provide an unqualified attestation report in our assessment, our stock price could be adversely affected. Risks Associated With an Investment in Our Common Stock Our directors and executive officers own a significant number of shares of our common stock, allowing management further control over our corporate affairs. Our corporate organizational documents and the provisions of Texas law to which we are subject may delay or prevent a change in control of our company that you may favor. We currently do not intend to pay dividends on our common stock. In addition, our future ability to pay dividends is subject to restrictions. The holders of our junior subordinated debentures have rights that are senior to those of our shareholders.

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1319327--3/14/2008--Encore_Bancshares_Inc