44 unchanged sentences
In addition, media and market coverage of the Bay Area economy and local financial institutions, have generated significant market volatility among publicly traded bank holding companies and, in particular, regional and community banks like the Company.
−Removed: These market developments have negatively impacted customer confidence in the safety and soundness of regional and community banks.
+Added: These market developments have negatively impacted customer confidence in the safety and soundness of regional and community banks and may impact our financial results in future periods.
As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
3 unchanged sentences
Although we maintain strong liquidity for the normal operations of the Bank, model various stress scenarios, and maintain significant contingent liquidity sources, general depositor concerns given the recent high profile bank closures could lead to deposit outflows from our Bank.
−Removed: Our funding costs increased significantly in 2023 and may continue to increase if our deposits decline and we replace them with more expensive sources of funding, such as FHLB and FRB borrowings, and/or brokered deposits, if customers shift their deposits into higher cost products, or if we raise interest rates to avoid losing deposits.
+Added: Our funding costs increased significantly in 2023 and could increase again if our deposits decline and we replace them with more expensive sources of funding, such as FHLB and FRB borrowings, and/or brokered deposits, if customers shift their deposits into higher cost products, or if we raise interest rates to avoid losing deposits.
In addition, adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources, constraining our financial flexibility, and ability to originate loans, invest in securities, and distribute dividends to our shareholders.
41 unchanged sentences
Changes in monetary policy, including changes in interest rates, can influence not only the interest we receive on loans and securities and interest we pay on deposits and borrowings, but can also affect (i) our ability to originate loans and obtain deposits, (ii) the duration of our securities and loan portfolios, and (iii) the fair value of our financial assets and liabilities.
−Removed: In fact, the FOMC’s aggressive interest rate increases, discussed more fully below, negatively affected each of these areas of our business recently.
+Added: In fact, the FOMC’s aggressive interest rate increases, discussed more fully below, negatively affected each of these areas of our business in recent years.
Our portfolio of loans and securities will generally decline in value if market interest rates increase, and increase in value if market interest rates decline.
4 unchanged sentences
Beginning in March 2022, the FOMC began successive increases to the federal funds rate due to the evolving inflation risks, complicated by international political unrest and supply chain disruptions.
−Removed: As a result of seven rate adjustments during 2022, the federal funds target rate increased to a range of 4.25% to 4.50% at year-end 2022 and our net interest margin increased gradually over the course of the year.
−Removed: In 2023, on each of February 1 st , March 22 nd , May 3 rd , and July 26 th the FOMC increased the target rate by 25 basis points to a range of 5.25% to 5.50%.
+Added: The FOMC began increasing rates in March 2022, totaling seven rate increases in 2022 and four additional rate increases in 2023, and ended the year of 2023 at a federal funds target rate range between 5.25% and 5.50%.
Rising interest rates and first quarter 2023 disruptions in the banking industry resulted in rapid increases in the cost of funds through rising deposit costs and increased borrowings, putting pressure on net interest margin starting in the second quarter of 2023.
−Removed: Additional rate increases are not widely anticipated in 2024, as Federal Reserve policymakers continue to monitor inflation and economic developments .
+Added: Primarily due to declining inflation, the Federal Reserve lowered the target for the federal funds rate by 100 basis points, to a range of 4.25% to 4.50% in the later months of 2024.
See the Net Interest Income section of Management's Discussion and Analysis of Financial Condition and Results of O perations in ITEM 7 and Quantitative and Qualitative Disclosures about Market Risk in ITEM 7A of this report for further discussion related to interest rate sensitivity and our management of interest rate risk.
2 unchanged sentences
These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the held-to-maturity portion of U.S.
−Removed: banks’ securities portfolios and unrealized losses on available-for-sale securities reflected in the Company’s accumulated other comprehensive
−Removed: income (loss).
−Removed: We maintain an investment securities portfolio to provide liquidity and to generate earnings on funds that have not been loaned to customers while managing our liquidity and interest rate position, seeking a reasonable yield balanced with risk exposure.
−Removed: While it is neither our intention to sell securities at a net loss in the normal course of business, nor were we required to, we did so for strategic purposes in the third and fourth quarters of 2023 as a source of liquidity and to reposition the balance sheet to bolster net interest margin.
+Added: banks’ securities portfolios and unrealized losses on available-for-sale securities reflected in the Company’s accumulated other comprehensive income (loss).
+Added: We maintain an investment securities portfolio to provide liquidity and to generate earnings on funds
+Added: that have not been loaned to customers while managing our liquidity and interest rate position, seeking a reasonable yield balanced with risk exposure.
+Added: While it is neither our intention to sell securities at a net loss in the normal course of business, nor were we required to, we strategically sold securities in the third and fourth quarters of 2023 and the second quarter of 2024, to reposition the balance sheet to bolster net interest margin.
If the Company were to sell additional securities in an unrealized loss position, it may incur losses that could impair the Company’s capital, financial condition, and results of operations and may require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability and potentially causing shareholder dilution.
1 unchanged sentence
Loans originated at higher interest rates may be paid off and replaced by new loans with lower interest rates, causing downward pressure on our net interest margin.
−Removed: In addition, our top ten depositor relationships accounted for approximately 8% of total deposit balances at both December 31, 2023 and 2022.
+Added: In addition, our top ten depositor relationships accounted for approximately 9% and 8% of total deposit balances at December 31, 2024 and 2023, respectively.
The business models and cash cycles of some of our large commercial depositors may also cause short-term volatility in their deposit balances held with us.
3 unchanged sentences
Unexpected Early Termination of Interest Rate Swap Agreements May Affect Earnings
−Removed: We have entered into interest-rate swap agreements, primarily as an asset/liability risk management tool, in order to mitigate the interest rate risk that causes fluctuations in the fair value of specified long-term fixed-rate loans and securities or firm commitments to originate long-term fixed rate loans.
+Added: We have entered into interest-rate swap agreements, primarily as an asset/liability risk management tool, in order to mitigate the interest rate risk that causes fluctuations in the fair value of specified long-term fixed-rate loans or firm commitments to originate long-term fixed rate loans.
In the event of default by the borrowers on our hedged loans, we may have to terminate these designated interest-rate swap agreements early, resulting in market value losses that could negatively affect our earnings.
37 unchanged sentences
The CRE Concentration Guidance does not limit banks’ levels of commercial real estate lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their commercial real estate concentrations.
−Removed: As of December 31, 2023 and 2022, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represented 300% and 307%, respectively, of our total risk-based capital.
+Added: As of December 31, 2024 and 2023, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represente d 389% and 371%, respectively, of our total risk-based capital.
We manage our CRE concentrations and
69 unchanged sentences
For further information on supervision and regulation, see the section captioned “SUPERVISION AND REGULATION” in ITEM 1 of this report.
+Added: Significant changes or developments in U.S.
+Added: laws or policies, and the reactions of the national and global economy to such changes, may have a material adverse effect on our business.
+Added: There are uncertainties around the legal and regulatory approach that will be taken under the Trump administration, and we cannot predict the likelihood, nature or extent of changes in law or government regulations that may arise from future legislation or administrative or executive action, either in the United States or abroad.
+Added: The current administration’s rapidly evolving policy pronouncements and executive orders create an unpredictable regulatory landscape.
+Added: This unpredictability can result in sudden changes to the legal and regulatory framework governing our operations, making it challenging to plan and execute our business strategies effectively.
+Added: Additionally, the potential for abrupt policy shifts may cause fluctuations in market conditions, impacting our investment portfolio, lending activities, and overall financial performance.
+Added: The general uncertainty associated with the administration’s policy approach may also lead to increased market volatility and disruptions that could affect the availability and cost of capital, the valuation of our assets, the stability of our funding sources, and the financial health and operations of our borrowers.
+Added: In turn, this may impact our ability to meet regulatory capital requirements, manage liquidity, and maintain profitability.
+Added: The administration’s efforts to roll back financial regulations, which may include those established under the Bank Secrecy Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and others could lead to changes in the regulatory environment in which we operate.
+Added: While deregulation may reduce compliance costs and regulatory burdens, it may also increase competition and risk-taking in the financial services sector, potentially leading to greater market volatility and financial instability.
+Added: We cannot, however, accurately predict the full effects of recent or future legislation or the various other governmental, regulatory, monetary, and fiscal initiatives which have been and may be enacted on the financial markets, the Company, and the Bank.
+Added: We continue to monitor regulatory developments and adjust our strategies accordingly.
+Added: However, the inherent unpredictability of the current regulatory environment poses a risk to our business that could have material adverse effects on our financial condition and results of operations.
Any Regulatory Examination Scrutiny or New Regulatory Requirements Arising From the Recent Events in the Banking Industry Could Increase the Company’s Expenses and Affect the Company’s Operations
−Removed: The Company anticipates increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.
+Added: The Company could be subject to increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank, designed to address the recent
+Added: negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.