Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws.
−Removed: The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”) and it’s subsidiaries, two special purpose entities organized to facilitate repossessed assets.
+Added: The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”).
The Company has been the Bank’s sole shareholder since August 2001.
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Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017.
−Removed: Our recent business activity included the establishment of an agricultural loan production office in April 2022.
+Added: An agricultural loan production office was opened in 2022.
The Bank now maintains administrative offices, loan production offices, and 35 full-service branches in the following California locations:
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Three Rivers:
−Removed: Agricultural Credit Center
+Added: Commercial Credit Center
613 South Main Street
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40884 Sierra Drive
+Added: Templeton Regional Office
+Added: 624 South Main Street
Tulare Office
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Valencia Boulevard
−Removed: Complementing the Bank’s stand-alone offices are specialized lending units which include our Agricultural, SBA and Mortgage Warehouse lending divisions.
+Added: Complementing the Bank’s stand-alone offices are specialized lending units which include our Commercial and Industrial, Mortgage Warehouse, and Real Estate lending divisions.
+Added: Our Commercial team focuses on a variety of commercial lending including agricultural loans.
We also have ATMs at all but one of our branch locations and nine non-branch locations.
Furthermore, the Bank is a member of the Allpoint network, which provides our deposit customers with surcharge-free access to over 55,000 ATMs across the United States, Puerto Rico, Mexico, Canada, Australia and the United Kingdom, and customers have access to electronic point-of-sale payment alternatives nationwide via the Pulse network.
−Removed: To ensure that account access preferences are addressed for all customers, we provide the following options:
−Removed: an internet branch which provides the ability to open deposit accounts online;
−Removed: an online banking option with bill-pay and mobile banking capabilities, including mobile check deposit;
+Added: We provide multiple account access options to meet both new and existing customer needs:
+Added: an online account opening platform;
+Added: online banking with bill-pay and mobile banking capabilities, including mobile check deposit;
online lending solutions for consumers and small businesses;
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The bulk of our real estate loans are secured by commercial real estate, which includes both owner-occupied and non-owner occupied properties including office, retail, and hotel/motels, but we also offer commercial construction loans, multifamily and agricultural credit facilities among other types of real estate loans.
−Removed: As noted above, gross loans totaled $2.1 billion at December 31, 2022, and the percentage of our total loan and lease portfolio for each of the principal types of credit we extend was as follows:
+Added: As noted above, gross loans totaled $2.1 billion at December 31, 2023 and the percentage of our total loan portfolio for each of the principal types of credit we extend was as follows:
(i) loans secured by real estate (86.7%);
−Removed: (ii) agricultural production loans (1.4%);
−Removed: (iii) commercial and industrial loans and leases, including SBA loans and Paycheck Protection Program (PPP) loans (3.8%);
−Removed: (iv) mortgage warehouse loans (3.2%);
−Removed: and (v) consumer loans (0.2%).
+Added: (ii)other commercial loans, including agricultural production and SBA loans (7.5%);
+Added: (iii) mortgage warehouse loans (5.6%);
+Added: and (iv) consumer loans (0.2%).
Interest, fees, and other income on real-estate secured loans, which is by far the largest segment of our portfolio, totaled $82.2 million, or 59% of net interest plus other income in 2023, and $77.7 million, or 60% of net interest plus other income in 2022.
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The Bank’s deposit accounts are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to maximum insurable amounts.
−Removed: We attract deposits throughout our market area via referrals from existing customers, direct-mail campaigns, a customer-oriented product mix, and competitive pricing, and by offering convenient locations, drive-through banking, and various other delivery channels.
+Added: We attract deposits throughout our market area via referrals from existing customers and, direct-mail campaigns by offering a customer-oriented product mix, competitive pricing, convenient locations, drive-through banking, and multiple delivery channels.
We strive to retain our deposit customers by providing a consistently high level of service.
−Removed: At December 31, 2022, the Company had 122,596 deposit accounts down slightly from 123,176 at December 31, 2021.
−Removed: Total deposits however remained unchanged at $2.8 billion at December 31, 2022, and December 31, 2021, respectively.
+Added: At December 31, 2023, the Company had 120,701 deposit accounts down from 122,596 at December 31, 2022.
+Added: Total deposits of $2.8 billion at December 31, 2023 remained unchanged from December 31, 2022.
Our officers and employees are continually searching for ways to increase public convenience, enhance customer access to payment systems, and enable us to improve our competitive position with the development of new products and services.
The cost to the Bank for these development, operations, and marketing activities cannot be calculated with any degree of certainty.
−Removed: We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or concessions.
+Added: We hold no patents or licenses (other than licenses required by bank regulatory agencies), franchises, or
We are not dependent on a single customer or group of related customers for a material portion of our core deposits.
−Removed: Furthermore, loan categories that could be considered to be concentrations include commercial real estate loans (59.2%);
+Added: Loan categories that could be considered to be concentrations include commercial real estate loans (63.4%);
with the most concentrated segments in retail (15.0%), office space (9.6%) and loans in the hotel industry (8.3%).
−Removed: Our efforts to comply with government and regulatory mandates on consumer protection and privacy, anti-terrorism, and other initiatives have resulted in significant ongoing expense to the Bank, including compliance staffing costs and other expenses associated with compliance-related software.
+Added: Our efforts to comply with government and regulatory mandates on consumer protection and privacy, anti-money laundering, and other initiatives have resulted in significant ongoing expense to the Bank, including compliance staffing costs and other expenses associated with compliance-related software.
However, as far as can be determined there has been no material effect upon our capital expenditures, earnings, or competitive position as a result of environmental regulation at the federal, state, or local level.
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Information on recent accounting pronouncements is contained in Note 2 to the consolidated financial statements.
−Removed: The banking business in California is generally highly competitive, including in our market areas.
−Removed: Continued consolidation within the banking industry has heightened competition in recent periods, including many bank transactions within our market in 2022.
−Removed: There are also a number of unregulated companies competing for business in our markets, with financial products targeted at profitable customer segments.
+Added: The banking business in California is generally highly competitive.
+Added: Continued consolidation within the banking industry, including many bank transactions within our market in 2023, has heightened competition in recent periods.
+Added: There are also a number of unregulated companies targeted at profitable customer segments competing for business in our markets.
Many of those companies are able to compete across geographic boundaries and provide meaningful alternatives to banking products and services.
These competitive trends are likely to continue.
−Removed: With respect to commercial bank competitors, our business is dominated by a relatively small number of major banks that operate a large number of offices within our geographic footprint.
−Removed: Based on June 30, 2022, FDIC combined market share data for the 29 cities within which the Company currently maintains branches, the largest portion of deposits belongs to Wells Fargo Bank with (21.6%) of total combined deposits, followed by Bank of America (16.9%), JPMorgan Chase (13.8%), and Union Bank (6.8%).
−Removed: Bank of the Sierra ranks fifth on the 2022 market share list with 4.6% of total deposits.
−Removed: In Tulare County, however, where the Bank was originally formed, we rank second for deposit market share with 18.8% of total deposits at June 30, 2022 and had the largest number of branch locations (13), including our online branch).
+Added: With respect to commercial bank competitors, our business is dominated by a relatively small number of major banks operating a large number of offices within our geographic footprint.
+Added: Based on June 30, 2023, FDIC combined market share data for the 27 cities within which the Company currently maintains branches, the largest portion of deposits belongs to Wells Fargo Bank with (20.6%) of total combined deposits, followed by Bank of America (17.4%), JPMorgan Chase (15.4%), and U.S.
+Added: Bank of the Sierra ranked fifth on the 2023 market share list with 5.1% of total deposits.
+Added: In Tulare County, however, where the Bank was originally formed, we ranked first for deposit market share with 21.6% of total deposits at June 30, 2023 and had the largest number of branch locations (13), including our online branch.
The larger banks noted above have, among other advantages, the ability to finance wide-ranging advertising campaigns and allocate their resources to regions of highest yield and demand.
−Removed: They can also offer certain services that we do not provide directly but may offer indirectly through correspondent institutions, and by virtue of their greater capitalization those banks have legal lending limits that are substantially higher than ours.
+Added: They can also offer certain services we do not provide directly, although wet may offer these indirectly through correspondent institutions, and by virtue of their greater capitalization those banks have legal lending limits substantially higher than ours.
For loan customers whose needs exceed our legal lending limits, we may arrange for the sale, or participation, of some of the balances to financial institutions that are not within our geographic footprint.
In addition to other banks our competitors include savings institutions, credit unions, and numerous non-banking institutions such as finance companies, leasing companies, insurance companies, brokerage firms, asset management groups, mortgage banking firms and internet companies.
−Removed: Innovative technologies have lowered traditional barriers of entry and enabled many of these companies to offer services that were previously considered traditional banking products, and we have witnessed increased competition from companies that circumvent the banking system by facilitating payments via the internet, mobile devices, prepaid cards, and other means.
−Removed: Strong competition for deposits and loans among financial institutions and non-banks alike affects interest rates and terms on which financial products are offered to customers.
−Removed: Mergers between financial institutions have created additional
−Removed: pressures within the financial services industry to streamline operations, reduce expenses, and increase revenues in order to remain competitive.
+Added: Innovative technologies have lowered traditional barriers of entry and enabled many of these companies to offer products and services previously considered traditional banking offerings, and we have witnessed increased competition from companies that circumvent the banking system by facilitating payments via the internet, mobile devices, prepaid cards, and other means.
+Added: Strong competition for deposits and loans among financial institutions and non-banks including financial technology firms, affects financial product interest rates and terms offered to customers.
+Added: Mergers between financial institutions have created additional pressures within the financial services industry to streamline operations, reduce expenses, and increase revenues to remain competitive.
Competition is also impacted by federal and state interstate banking laws which permit banking organizations to expand into other states.
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We also offer our customers community-oriented, personalized service, and rely on local promotional activity and personal contact by our employees.
−Removed: As noted above, layered onto our traditional personal-contact banking philosophy are technology-driven initiatives that improve customer access and convenience.
+Added: As noted above, layered onto our traditional personal-contact banking philosophy are technology-driven initiatives to improve customer access and convenience.
Human Capital
As of December 31, 2023, the Company had 491 full-time and 41 part-time employees.
−Removed: On a full-time equivalent (“FTE”) basis staffing stood at 491 at December 31, 2022, up from 480 FTE employees at December 31, 2021.
+Added: On a full-time equivalent (“FTE”) basis staffing stood at 485 at December 31, 2023, down from 491 at December 31, 2022.
At December 31, 2023, the population of our workforce was as follows:
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Two or more races
−Removed: The Company recognizes that a diverse workforce brings fresh perspectives that can help strengthen and improve how we serve our communities.
−Removed: In response to the COVID-19 pandemic, in 2020 the Company established remote work arrangements with staff in an effort to consider the health and safety of its employees.
−Removed: In 2022, noting efficiencies gained from these working arrangements, the Company created permanent remote and hybrid work arrangements where it was mutually feasible and presented efficiencies for the Company.
−Removed: At December 31, 2022, the Company had 47 employees working remotely and 157 employees working in hybrid arrangements.
−Removed: The Company has long been committed to comprehensive and competitive compensation and benefits programs as the Company recognizes that it operates in intensely competitive environments for talent.
+Added: The Company recognizes a diverse workforce brings fresh perspectives that help strengthen and improve how we serve our communities.
+Added: In addition, flexible working arrangements have been found to create efficiencies while promoting employee health and safety.
+Added: At December 31, 2023 the Company had 46 employees working remotely and 157 working in hybrid arrangements.
+Added: The Company has long been committed to comprehensive and competitive compensation and benefits programs as we recognizes we operate in intensely competitive environments for talent.
On January 1, 2022, the Company increased its minimum wage to $20 per hour in an effort to attract and retain skilled and highly trained employees.
Community banking is often considered a relationship banking model rather than a purely transactional banking model.
−Removed: The Company’s employees are critical to the Company’s ability to develop and grow relationships with its clients.
+Added: Therefore, our employees are critical to the Company’s ability to develop and grow relationships with its clients.
Recruiting talent within the Company’s footprint has always been a fundamental strategy whenever possible and is facilitated by actively participating in and holding community job fairs.
−Removed: Furthering the Company’s philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include:
−Removed: an equity-based compensation plan, health/dental/vision insurances, supplemental insurance, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid vacation and sick days, holiday pay, training/education, leave for bereavement, military service and jury duty.
+Added: Furthering our philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include:
+Added: an equity-based compensation plan, health/dental/vision insurances, supplemental insurance, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid vacation and sick days, holiday pay, training/education, and leave for bereavement, military service and jury duty.
The Company invests in its employees’ future by sponsoring and prioritizing continued education throughout its employee ranks.
−Removed: The Company requires certain of its employees and directors to participate in educational activities and training
−Removed: curriculum, which stay abreast of current compliance, human resource and enterprise risk, including cyber risk, issues.
−Removed: In addition, the Company provides opportunities to its employees to improve or maintain their skills in their current position as well as to enhance future opportunities at the Company.
+Added: The Company requires certain of its employees and directors to participate in educational activities and training curriculum to stay current on industry-related topics, including compliance, human resource, cyber and other enterprise risks.
+Added: In addition, we provide opportunities for employees to improve or maintain their skills in their current position as well as to enhance skills for future opportunities.
The Company's employees are notified periodically of available internal course offerings and educational seminars run by outside parties, including but not limited to the American Bankers Association and Bankers Compliance Group.
Employees are also encouraged to continue their higher education at accredited colleges and universities and may receive assistance from the Company for their participation.
−Removed: In order to develop a workforce that aligns with the Company’s corporate values, it regularly sponsors local community events so that its employees can better integrate themselves in communities.
−Removed: The Company believes that employees’ well-being and personal and professional development is fostered by outreach to the communities it serves.
−Removed: The Company’s employees’ desire for active community involvement enables the Company to sponsor a number of local community events and initiatives, including holiday toy and food drives, and planting trees in fire damaged areas of the National Forest, in partnership with One Tree Planted and the Sequoia conservancy in Sequoia National Park.
+Added: In order to develop a workforce that aligns with the Company’s corporate values, we regularly sponsors local community events so our employees can better integrate themselves in our communities.
+Added: Through community outreach activities, the
+Added: Company seeks to foster employee well-being and personal and professional development.
+Added: The Company’s employees’ desire for active community involvement enables the Company to sponsor a number of local community events and initiatives, including holiday toy and food drives, and tree plantings in fire damaged areas of the National Forest in partnership with One Tree Planted and the Sequoia conservancy in Sequoia National Park.
Website Access
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The Company and the Bank are deemed to be “affiliates” of each other and thus are subject to Sections 23A and 23B of the Federal Reserve Act as well as related Federal Reserve Regulation W which impose both quantitative and qualitative restrictions and limitations on transactions between affiliates.
−Removed: The Bank is also subject to laws and regulations requiring that all extensions of credit to our executive officers, directors, principal shareholders and related parties must, among other things, be made on substantially the same terms and follow credit underwriting procedures no less stringent than those prevailing at the time for comparable transactions with persons not related to the Bank.
+Added: The Bank is also subject to laws and regulations requiring that all extensions of credit to our executive officers, directors, principal shareholders and related parties must, among
+Added: other things, be made on substantially the same terms and follow credit underwriting procedures no less stringent than those prevailing at the time for comparable transactions with persons not related to the Bank.
Under certain conditions, the Federal Reserve has the authority to restrict the payment of cash dividends by a bank holding company as an unsafe and unsound banking practice and may require a bank holding company to obtain the approval of the Federal Reserve prior to purchasing or redeeming its own equity securities.
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The federal banking agencies published a final rule on November 13, 2019, that provided a simplified measure of capital adequacy for qualifying community banking organizations.
−Removed: A qualifying community banking organization that opts into the community bank leverage ratio framework and maintains a leverage ratio greater than 9 percent will be considered to have met the minimum capital requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject (see below for further discussion of the requirements for well capitalized and the Prompt Corrective Action framework).
−Removed: A qualifying community banking organization with a leverage ratio of greater than 9 percent may opt into the community bank leverage ratio framework if it has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures, which are not unconditionally cancelable, of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of 5 percent or less of total consolidated assets.
+Added: A qualifying community banking organization that opts into the community bank leverage ratio framework and maintains a leverage ratio greater than nine percent will be considered to have met the minimum capital requirements for the well capitalized category under the Prompt Corrective Action framework, and any other capital or leverage requirements to which the qualifying banking organization is subject (see below for further discussion of the requirements for well capitalized and the Prompt Corrective Action framework).
+Added: A qualifying community banking organization with a leverage ratio of greater than nine percent may opt into the community bank leverage ratio framework if it has average consolidated total assets of less than $10 billion, has off-balance-sheet exposures, which are not unconditionally cancelable, of 25% or less of total consolidated assets, and has total trading assets and trading liabilities of five percent or less of total consolidated assets.
Further, the bank must not be an advance approaches banking organization.
−Removed: The final rule became effective January 1, 2020 and banks that meet the qualifying criteria can elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.
+Added: The final rule became effective January 1, 2020 and banks meeting the qualifying criteria could elect to use the community bank leverage framework starting with the quarter ended March 31, 2020.
The Company and the Bank met the criteria outlined in the final rule and opted into the community bank leverage ratio framework in the first quarter 2020.
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The Company and the Bank are subject to the regulations of the Federal Reserve Board and the FDIC, respectively, governing capital adequacy.
−Removed: These agencies have adopted risk-based capital guidelines to provide a systematic analytical framework that imposes regulatory capital requirements based on differences in risk profiles among banking organizations, considers off-balance sheet exposures in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-
+Added: These agencies have adopted risk-based capital guidelines to provide a systematic analytical framework that imposes regulatory capital requirements based on differences in risk profiles among banking organizations, considers off-balance sheet exposures in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-risk assets.
Capital levels, as measured by these standards, are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.
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The Company has elected to exclude accumulated other comprehensive income (“AOCI”) from regulatory capital.
−Removed: In addition, all of the Company’s trust preferred securities qualify for treatment as Tier 1 Capital, subject to a limit of 25% of Tier 1 capital.
+Added: In addition, all the Company’s trust preferred securities qualify for treatment as Tier 1 Capital, subject to a limit of 25% of Tier 1 capital.
Tier 1 capital is generally defined as the sum of core capital elements, less the following:
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(i) common shareholders’ equity;
−Removed: (ii) qualifying non-cumulative perpetual preferred stock and related surplus (and, in the case of holding companies, senior perpetual preferred stock issued to the U.S.
+Added: (ii) qualifying non-cumulative
+Added: perpetual preferred stock and related surplus (and, in the case of holding companies, senior perpetual preferred stock issued to the U.S.
Treasury Department pursuant to the Troubled Asset Relief Program and the Emergency Capital Investment Program);
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Tier 2 capital includes the following supplemental capital elements:
−Removed: (i) allowance for credit losses on loans and leases (but not more than 1.25% of an institution’s risk-weighted assets);
+Added: (i) allowance for credit losses on loans (but not more than 1.25% of an institution’s risk-weighted assets);
(ii) perpetual preferred stock and related surplus not qualifying as core capital;
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and “critically undercapitalized” (tangible equity to total assets less than or equal to 2%).
−Removed: A bank may be treated as though it were in the next lower capital category if, after notice and the opportunity for a hearing, the appropriate federal agency finds an unsafe or unsound condition or practice merits a downgrade, but no bank may be treated as “critically undercapitalized” unless its actual tangible equity to assets ratio
−Removed: warrants such treatment.
+Added: A bank may be treated as though it were in the next lower capital category if, after notice and the opportunity for a hearing, the appropriate federal agency finds an unsafe or unsound condition or practice merits a downgrade, but no bank may be treated as “critically undercapitalized” unless its actual tangible equity to assets ratio warrants such treatment.
+Added: The community bank leverage ratio removes the requirement for qualifying banking organizations to calculate and report risk-based capital but rather only requires a Tier 1 to average assets (leverage) ratio.
+Added: Qualifying banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than required minimums will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the well capitalized ratio requirements for purposes of section 38 of the Federal Deposit Insurance Act.
+Added: Under the interim final rules the community bank leverage ratio minimum requirement is 8% as of December 31, 2020, 8.5% for calendar year 2021, and 9% for calendar year 2022 and beyond.
+Added: The interim rule allows for a two-quarter grace period to correct a ratio that falls below the required amount, provided that the bank maintains a leverage ratio of 7% as of December 31, 2020, 7.5% for
+Added: calendar year 2021, and 8% for calendar year 2022 and beyond.
+Added: Under the final rule, an eligible banking organization can opt out of the CBLR framework and revert back to the risk-weighting framework without restriction.
As of December 31, 2023 and 2022, both the Company and the Bank qualified as well capitalized for regulatory capital purposes, utilizing the Capital Simplification for Qualifying Community Bank Organization.
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economic downturn and financial industry instability continue to impact most institutions in the banking sector.
−Removed: Most provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which was enacted in 2010, are now effective and have been fully implemented.
+Added: Most provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), enacted in 2010, are now effective and have been fully implemented.
+Added: In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed the Bureau to adopt regulations governing the collection of small business lending data.
+Added: Section 1071 of the Dodd-Frank Act amended the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and submit to the Bureau certain data on applications for credit for women-owned, minority-owned, and small businesses.
+Added: Congress enacted section 1071 for the purpose of facilitating enforcement of fair lending laws and enabling communities, governmental entities, and creditors to identify business and community development needs and opportunities for women-owned, minority-owned, and small businesses.
+Added: Consistent with section 1071, covered financial institutions are required to collect and report to the CFPB data on applications for credit for small businesses, including those that are owned by women or minorities.
+Added: The rule also addresses an approach to privacy interests and the publication of section 1071 data;
+Added: shielding certain demographic data from underwriters and other persons.
Some aspects of Dodd-Frank are still subject to rulemaking, making it difficult to anticipate the ultimate financial impact on the Company, its customers or the financial services industry more generally.
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The Bank’s deposits are insured up to maximum applicable limits under the Federal Deposit Insurance Act (generally $250,000 per depositor), and the Bank is subject to deposit insurance assessments to maintain the FDIC’s Deposit Insurance Fund (the “DIF”).
−Removed: In October 2010, the FDIC adopted a revised restoration plan to ensure that the DIF’s
−Removed: designated reserve ratio (“DRR”) reaches 1.35% of insured deposits by September 30, 2020, the deadline mandated by the Dodd-Frank Act.
+Added: In October 2010, the FDIC adopted a revised restoration plan to ensure that the DIF’s designated reserve ratio (“DRR”) reached 1.35% of insured deposits by September 30, 2020, the deadline mandated by the Dodd-Frank Act.
In August 2016 the FDIC announced that the DIF reserve ratio had surpassed 1.15% as of June 30, 2016 and assessment rates for most institutions were adjusted downward, but institutions with $10 billion or more in assets were assessed a quarterly surcharge which will continue until the reserve ratio reaches the statutory minimum of 1.35%.
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The increase in assessment rate is intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35% by the statutory deadline of September 30, 2028.
−Removed: We are generally unable to control the amount of premiums that we are required to pay for FDIC deposit insurance.
+Added: We are generally unable to control the amount of premiums we are required to pay for FDIC deposit insurance.
If there are additional bank or financial institution failures or if the FDIC otherwise determines, we may be required to pay higher FDIC premiums, which could have a material adverse effect on our earnings and/or on the value of, or market for, our common stock.
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The Bank is subject to certain requirements and reporting obligations involving Community Reinvestment Act (“CRA”) activities.
−Removed: The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low and moderate income neighborhoods.
+Added: The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low-and moderate-income (“LMI”) neighborhoods.
The CRA further requires the agencies to consider a financial institution’s efforts in meeting its community credit needs when evaluating applications for, among other things, domestic branches, mergers or acquisitions, or the formation of holding companies.
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In connection with its assessment of CRA performance, the FDIC assigns a rating of “outstanding,” “satisfactory,” “needs to improve” or “substantial noncompliance.” The Bank most recently received a “satisfactory” CRA assessment rating in August 2022.
−Removed: On May 5, 2022, the Federal Reserve Board along with the FDIC and OCC issued a notice of proposed rulemaking on updating the three-decade-old CRA regulations.
−Removed: The objectives of the new rules include strengthening the achievement of the core purpose of the statute, adapting to changes in the banking industry, including mobile and online banking, providing greater clarity and consistency in the application of the regulations, tailoring performance standards to account for differences in bank size, business model, and local conditions, tailoring data collection and reporting requirements and use of existing data whenever possible, promoting transparency and public engagement, ensuring that CRA and fair lending are mutually reinforcing, and creating a consistent regulatory approach among all three banking agencies.
−Removed: The deadline for submitting comments on the NPR was August 5, 2022.
−Removed: The interagency rule has not been finalized, however the Company is monitoring this proposed rule so that our CRA efforts are in compliance with any changes to the current rules once implemented.
+Added: On October 24, 2023, the Federal Reserve Board along with the FDIC and OCC issued a final rule amending the three-decade-old CRA regulations.
+Added: The final rule updates the CRA regulations to achieve the following goals:
+Added: encourage banks to expand access to credit, investment, and banking services in LMI communities;
+Added: adapt to changes in the banking industry, including internet and mobile banking;
+Added: provide greater clarity and consistency in the application of the CRA regulations;
+Added: and tailor CRA evaluations and data collection to bank size and type.
+Added: The final rule’s effective date is April 1, 2024, except for amendment nos.
+Added: 26, 49 and 71, which are effective on various dates from April 1, 2024, through January 1, 2031.
+Added: The Company is continuing to monitor challenges to the CRA regulations by various trade groups and other interested parties.
Privacy and Data Security
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The Financial Modernization Act generally prohibits disclosure of consumer information to non-affiliated third parties unless the consumer has been given the opportunity to object and has not objected to such disclosure.
−Removed: The statute also
−Removed: directed federal regulators, including the Federal Reserve and the FDIC, to establish standards for the security of consumer information, and requires financial institutions to disclose their privacy policies to consumers annually.
+Added: The statute also directed federal regulators, including the Federal Reserve and the FDIC, to establish standards for the security of consumer information, and requires financial institutions to disclose their privacy policies to consumers annually.
In June 2018, the California Consumer Privacy Act (“CCPA”) was signed into law, creating new privacy rights for Californians and significant new data protection obligations for businesses.
−Removed: The CCPA went into effect Jan.
+Added: The CCPA went into effect January 1, 2020.
California’s Office of the Attorney General has enforcement authority.
−Removed: The CCPAadded required notices about personal information we collect, use, share, and disclose for business purposes.
+Added: The CCPA added required notices about personal information we collect, use, share, and disclose for business purposes.
The CCPA provides California residents rights regarding their personal information specifically related to exercising access, data portability and deletion rights.
There are also California breach notification and disclosure requirements.
−Removed: In November 2020, the California Privacy Rights Act (CPRA) a ballot initiative, amending the CCPA which includes additional privacy protections for consumers, was passed.
−Removed: The majority of the CPRA’s provisions will be in force January 1, 2023, with a look-back to January 2022.
+Added: In November 2020, the California Privacy Rights Act (CPRA) ballot initiative, amending the CCPA which includes additional privacy protections for consumers, was passed.
+Added: The majority of the CPRA’s provisions were in force January 1, 2023, with a look-back to January 2022.
On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident.” Generally, a notification incident occurs when a banking organization has suffered a computer-security incident that has a reasonable likelihood of materially disrupting or degrading the banking organization or its operations.
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Presently, we do not engage in any crypto-asset related activities.
+Added: On July 26, 2023, the Securities and Exchange Commission (SEC) approved the new cybersecurity disclosure rules for public companies.
+Added: The new rule requires disclosure of a material cybersecurity event on Form 8-K within four days of such materiality determination, which must be made “without unreasonable delay”, although it provides a limited exception for delay if the U.S.
+Added: Attorney General determines that immediate disclosure would pose a substantial risk to national security or public safety.
The Electronic Funds Transfer Act, as implemented by the Federal Reserve’s Regulation E, governs transfers initiated through automated teller machines (“ATMs”), point-of-sale terminals, and other electronic banking services.
1 unchanged sentence
The opt-in provision establishes requirements for clear disclosure of fees and terms of overdraft services for ATM and one-time debit card transactions.
−Removed: The rule does not apply to other types of transactions, such as check automated clearinghouse (“ACH”) and recurring debit card transactions.
+Added: The rule does not apply to other types of transactions, such as check automated clearinghouse (“ACH”)
+Added: and recurring debit card transactions.
In November 2010 the FDIC issued its Overdraft Payment Supervisory Guidance on automated overdraft payment programs, to ensure that a bank mitigates the risks associated with offering automated overdraft payment programs and complies with all consumer protection laws and regulations.
2 unchanged sentences
In 2022, the Company proactively issued $0.7 million in restitution payments to customers charged nonsufficient fund fees in the past five years for representments.
−Removed: As of the third quarter of 2022, the Company is no longer charging customers for nonsufficient fund (NSF) fees.
−Removed: The Company also increased the discretionary overdraft privilege amount for both commercial and consumer customers, but is limiting the number of daily overdraft fees to four per day (previously five per day) and is no longer charging a fee for continuous overdrafts (previously a $35 charge after the 10 th consecutive day an account is in an overdraft position).
−Removed: These changes to our NSF fees, overdraft fees and discretionary overdraft privilege program are not expected to have a material impact on deposit fee income.
−Removed: The Company continuously evaluates its overdraft practices and monitors potential legislative and regulatory changes, as well as other regulatory guidance related to overdrafts.
+Added: As of the third quarter of 2022, the Company no longer charged customers for nonsufficient fund (NSF) fees.
+Added: The Company also increased the discretionary overdraft privilege amount for both commercial and consumer customers, but limited the number of daily overdraft fees to four per day (previously five per day) and no longer charged a fee for continuous overdrafts (previously a $35 charge after the 10 th consecutive day an account is in an overdraft position).
+Added: These changes to our NSF fees, overdraft fees and discretionary overdraft privilege program did not expected have a material impact on deposit fee income.
+Added: The Company continuously evaluates its overdraft practices and monitors potential and final legislative and regulatory changes, as well as regulatory guidance related to overdrafts.
Consumer Financial Protection and Financial Privacy
7 unchanged sentences
The Bank continues to be subject to numerous other federal and state consumer protection laws that extensively govern its relationship with its customers.
−Removed: Those laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Service Members Civil Relief Act, the Americans With Disabilities Act, and respective state-law counterparts to these laws, as well as state usury laws and laws regarding unfair and deceptive acts and practices.
+Added: Those laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Servicemembers Civil Relief Act, the Americans with Disabilities Act, and respective state-law counterparts to these laws, as well as state usury laws and laws regarding unfair and deceptive acts and practices.
These and other laws require disclosures including the cost of credit and terms of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, prohibit unfair, deceptive and abusive practices, restrict the Company’s ability to raise interest rates and otherwise subject the Company to substantial regulatory oversight.
−Removed: On June 9, 2022, the DFPI’s proposed commercial financing disclosure regulations were approved, which became effective on December 9, 2022.
+Added: On June 9, 2022, the DFPI’s proposed commercial financing disclosure regulations were approved and became effective on December 9, 2022.
The regulations require commercial financing providers to disclose certain information to assist small businesses in making more informed decisions, including the amount of funding the small business will receive, the Annual Percentage Rate calculated for the transaction, the term, details related to prepayment policies and an average monthly cost.
2 unchanged sentences
(i) provide notice to customers regarding privacy policies and practices;
−Removed: (ii) inform customers regarding the conditions under which their non-public personal information may be disclosed to non-affiliated third parties;
+Added: (ii) inform customers regarding the conditions under which their non-public
+Added: personal information may be disclosed to non-affiliated third parties;
and (iii) give customers an option to prevent disclosure of such information to non-affiliated third parties.
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and (iv) ensure the program is updated periodically, to reflect changes in risks to customers or to the safety and soundness of the financial institution or creditor from identity theft.
−Removed: The Bank maintains a program to meet the requirements of the FACT Act and the Bank believes it is currently in compliance with these requirements.
+Added: The Bank maintains a program to meet FACT Act requirements.
Interstate Banking and Branching
6 unchanged sentences
USA Patriot Act of 2001
−Removed: The impact of the USA Patriot Act of 2001 (the “Patriot Act”) on financial institutions of all kinds has been significant and wide ranging.
+Added: The impact of the USA Patriot Act of 2001 (the “Patriot Act”) on financial institutions has been significant and wide ranging.
The Patriot Act substantially enhanced anti-money laundering and financial transparency laws, and required certain regulatory authorities to adopt rules that promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering.
−Removed: Under the Patriot Act, financial institutions are subject to prohibitions regarding specified financial transactions and account relationships, as well as enhanced due diligence and “know your customer” standards in their dealings with foreign financial institutions and foreign customers.
−Removed: The Patriot Act also requires all financial institutions to establish anti-money laundering programs.
−Removed: The Bank expanded its Bank Secrecy Act compliance staff and intensified due diligence procedures concerning the opening of new accounts to fulfill the anti-money laundering requirements of the Patriot Act, and also implemented systems and procedures to identify suspicious banking activity and report any such activity to the Financial Crimes Enforcement Network.
+Added: Under the Patriot Act, financial institutions are subject to prohibitions regarding specified financial transactions and account relationships, as well as enhanced due diligence and “know your customer” standards in their dealings with higher risk, including foreign individuals and entities.
+Added: The Patriot Act also requires all financial institutions to establish an anti-money laundering programs.
+Added: The Bank is committed to maintaining adequate Bank Secrecy Act compliance staff and system resources to conduct the appropriate level of account due diligence, suspicious activity-monitoring, and reporting to fulfill the anti-money laundering requirements of the Patriot Act, as well as regulatory rules guidance issued by Financial Crimes Enforcement Network and federal and state banking regulators.
Incentive Compensation
−Removed: In June 2010, the FRB and the FDIC issued comprehensive final guidance on incentive compensation policies intended to help ensure that banking organizations do not undermine their own safety and soundness by encouraging excessive risk-taking.
+Added: In June 2010, the FRB and the FDIC issued comprehensive final guidance on incentive compensation policies intended to help ensure banking organizations do not undermine their own safety and soundness by encouraging excessive risk-taking.
The guidance, which covers all employees who have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.
−Removed: The regulatory agencies will review, as part of their regular risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” Where appropriate, the regulatory agencies will take supervisory or enforcement action to address perceived deficiencies in an institution’s incentive compensation arrangements or related risk-management, control, and governance processes.
+Added: The regulatory agencies will review, as part of their regular risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” Where appropriate, the regulatory agencies will take supervisory or enforcement action to address perceived deficiencies in an institution’s
+Added: incentive compensation arrangements or related risk-management, control, and governance processes.
The Company believes that it is in full compliance with the regulatory guidance on incentive compensation policies.
+Added: In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the Nasdaq, to implement listing standards that require public companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error was either corrected or left uncorrected in the current period.
+Added: The final rule required us to adopt a clawback policy within 60 days after such listing standard became effective and file the policy as an exhibit in our Annual Report on Form 10-K.
+Added: Please see exhibit 97.1 for a copy of our policy.
Sarbanes-Oxley Act of 2002
6 unchanged sentences
These guidelines were issued in response to the agencies’ concerns that rising CRE concentrations might expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the commercial real estate market.
−Removed: The guidelines identify certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis with regard to the institution’s CRE concentration risk.
+Added: The guidelines identify certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis of the institution’s CRE concentration risk.
The guidelines, as amended, are designed to promote appropriate levels of capital and sound loan and risk management practices for institutions with a concentration of CRE loans.
In general, the guidelines, as amended, establish the following supervisory criteria as preliminary indications of possible CRE concentration risk:
−Removed: (1) the institution’s total construction, land development and other land loans represent 100% or more of Tier 1 risk-based capital plus allowance for credit losses on loans and leases;
−Removed: or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans and leases, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.
−Removed: At December 31, 2022, the Bank’s total construction, land development and other land loans represented 5% of Tier 1 risk-based capital plus allowance for credit losses on loans and leases.
−Removed: At December 31, 2022, the Bank’s total CRE loans as defined in the regulatory guidelines represented 246% of Tier 1 risk-based capital plus allowance for credit losses on loans and leases, and the Bank’s CRE loan portfolio has increased by more than 50% during the prior 36 month period.
+Added: (1) the institution’s total construction, land development and other land loans represent 100% or more of Tier 1 risk-based capital plus allowance for credit losses on loans;
+Added: or (2) total CRE loans as defined in the regulatory guidelines represent 300% or more of Tier 1 risk-based capital plus allowance for credit losses on loans, and the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 month period.
+Added: At December 31, 2023, the Bank’s total construction, land development and other land loans represented 1% of Tier 1 risk-based capital plus allowance for credit losses on loans.
+Added: At December 31, 2023, the Bank’s total CRE loans as defined in the regulatory guidelines represented 243% of Tier 1 risk-based capital plus allowance for credit losses on loans.
The Bank and its board of directors have discussed the guidelines and believe that the Bank’s underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are sufficient to address the risk management of CRE under the guidelines.
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Future economic conditions cannot be predicted, and recurrent deterioration in the economies of the nation as a whole or in the Company’s markets could have an adverse effect, which could be material, on our business, financial condition, results of operations and future prospects, and could cause the market price of the Company’s stock to decline.
−Removed: Economic conditions are currently stressed given higher rates and persistent inflation, although appear relatively stable in most of our local markets.
−Removed: Adverse developments, such as, among other things, continued inflation, health epidemics or pandemics (or expectations about them) like interest rate volatility, international trade disputes, oil price volatility, the level of U.S.
−Removed: debt, including the debt ceiling, and global economic conditions, could depress business and/or consumer confidence levels, negatively impact real estate values, and otherwise lead to economic weakness which could have one or more of the following undesirable effects on our business:
−Removed: ● a decrease in low-cost or noninterest bearing deposits;
+Added: Economic conditions are currently stressed given higher interest rates and persistent inflation, although conditions appear relatively stable in most of our local markets.
+Added: Adverse developments, such as, continued inflation, health epidemics or pandemics (or expectations about them) interest rate volatility, international trade disputes, oil price volatility, the level of U.S.
+Added: debt, including the debt ceiling (and the potential inability to raise the debt ceiling), and global economic conditions, could depress business and/or consumer confidence levels, negatively impact real estate values, and otherwise lead to economic weakness which could have one or more of the following undesirable effects on our business:
+Added: ● a rapid decrease in low-cost or noninterest bearing deposits;
● a lack of demand for loans or other products and services offered by us;
2 unchanged sentences
● a decline in the value of our loans or other assets secured by real estate;
+Added: ● a decline in the value of fixed-rate investment securities which could lead to a reduction in capital due to declines in other comprehensive income/(loss);
+Added: ● an increase in the reliance on wholesale funding;
● a credit impairment of our investment securities;
5 unchanged sentences
In addition, different parts of the yield curve could change by different amounts causing the yield curve to steepen, flatten, or invert.
−Removed: The flattening or inversion of the yield curve, similar to what occurred in 2022, could have a particularly negative impact on the Company’s earnings over time.
−Removed: Changes in market interest rates could have a material adverse effect on the Company’s asset quality, loan origination volume, financial condition, results of operations, and cash flows.
+Added: The continued inversion of the yield curve could further negative impact the Company’s earnings over time.
+Added: Changes in market interest rates could have a material adverse effect on the Company’s asset quality based on borrowers’ ability to repay at higher rates, loan origination volume, financial condition, results of operations, and cash flows.
This interest rate risk can arise from Federal Reserve Board monetary policies, as well as other economic, regulatory and competitive factors that are beyond our control.
−Removed: Challenges in the agricultural industry could have an adverse effect on our customers and their ability to make payments to us, particularly in view of drought conditions in California and disruptions involving international trade.
+Added: Rising interest rates have decreased the value of the Company’s held-to-maturity and available for sale securities portfolio, and certain fixed-rate loans and the Company would realize losses if it were required to sell such securities or loans to meet liquidity needs.
+Added: As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the trading value of previously issued government and other fixed income securities has declined significantly, as well as the value of certain fixed-rate loans.
+Added: 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.
+Added: Unaccreted unrealized losses that existed at the time securities were transferred to held-to maturity and unrealized losses on available-for-sale securities are reflected in the Company’s accumulated other comprehensive income/(loss).
+Added: Changes to unrealized losses after securities were transferred to held-to-maturity and unrealized losses on loans are not reflected in accumulated other comprehensive income/(loss).
+Added: Challenges in the agricultural industry could have an adverse effect on our customers and their ability to make payments to us, particularly in view of severe weather events in California and disruptions involving international trade.
Difficulties experienced by the agricultural industry have led to relatively high levels of nonperforming assets in previous economic cycles.
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In recent years, the state of California experienced the worst drought in its recorded history, and it is difficult to predict if the drought will resume and how long it might last.
−Removed: looming issue that could have a major impact on the agricultural industry involves water availability and distribution rights.
−Removed: If the amount of water available to agriculture becomes increasingly scarce as a result of diversion to other uses, farmers may not be able to continue to produce agricultural products at a reasonable profit, which has the potential to force many out of business.
+Added: Another looming issue that could have a major impact on the agricultural industry involves water availability and distribution rights.
+Added: If the amount of water available to agriculture becomes increasingly scarce as a result of diversion to other uses or limitations on agricultural use, farmers may not be able to continue to produce agricultural products at a reasonable profit, which has the potential to force many out of business.
Such conditions have affected and may continue to adversely affect our borrowers and, by extension, our business, and if general agricultural conditions decline our level of nonperforming assets could increase.
4 unchanged sentences
Furthermore, economic multipliers to a contracting oil industry include the prospects of a depressed residential housing market and a drop in commercial real estate values.
+Added: Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer and investor confidence in the banking system .
+Added: The recent high-profile bank failures involving Silicon Valley Bank, Signature Bank, and sale of First Republic Bank have generated significant market volatility among publicly traded bank holding companies and, in particular, regional and community banks like the Company.
+Added: These market developments have
+Added: negatively impacted customer confidence in the safety and soundness of regional and community banks.
+Added: 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.
+Added: Additionally, these recent events have, and could continue to, adversely impact the market price and volatility of the Company’s common stock independent from the Company’s actual underlying financial performance.
We may not be able to continue to attract and retain banking customers, and our efforts to compete may reduce our profitability.
3 unchanged sentences
We also compete with numerous financial and quasi-financial institutions for deposits and loans, including providers of financial services via the internet.
+Added: Due to deposit declines from a higher rate environment, competition for deposits has become more fierce and new deposits generally have a higher cost.
Recent advances in technology and other changes have allowed parties to effectuate financial transactions that previously required the involvement of banks.
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Customers may withdraw deposits in an effort to ensure that the amount they have on deposit with their bank is fully insured.
+Added: The bank offers accounts to customers that provide multi-million-dollar FDIC insurance using the IntraFi network of banks to offer reciprocal fully FDIC insured accounts through the Insured Cash Sweep (“ICS”) or Certificate of Deposit Account Registry System (“CDARS”).
At December 31, 2023, the Bank estimates it had uninsured deposits of $816 million.
1 unchanged sentence
Ultimately, competition can and does increase our cost of funds, reduce loan yields and drive down our net interest margin, thereby reducing profitability.
−Removed: It can also make it more difficult for us to continue to increase the size of our loan portfolio and deposit base, and could cause us to rely more heavily on wholesale borrowings which are generally more expensive than retail deposits.
+Added: Competition can also make it more difficult for us to continue increasing the size of our loan portfolio and deposit base and could cause us to rely more heavily on wholesale borrowings which are generally more expensive than retail deposits.
We may not be able to continue to attract and retain employees, and our efforts to compete for talent may reduce our profitability.
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Recruiting talent within the Company’s footprint has always been a fundamental strategy whenever possible but has been recently complemented with offering existing and new employee’s opportunities for remote and/or hybrid work arrangements if possible.
−Removed: However, it is recognized that competition for talent by both banks and non-banks is fierce and that overall expenses may be negatively affected by higher per employee costs or could result in lower staffing levels which would result in a reduced ability to serve our customers, could result in gaps of experience in certain areas, or cause the Company to engage higher cost temporary staff or consultants.
+Added: However, we recognize that competition for talent by both banks and non-banks is fierce and that our overall expenses may be negatively affected by higher per employee costs or by higher-cost temporary staff or consultants.
+Added: The competitive market for talent could also result in gaps of experience in certain areas or lower staffing levels which could result in a reduced ability to serve our customers.
The value of the securities in our investment portfolio may be negatively affected by market disruptions, adverse credit events or fluctuations in interest rates, which could have a material adverse impact on capital levels.
1 unchanged sentence
Under current accounting rules we directly increase or decrease accumulated other comprehensive income in shareholders’ equity by the amount of the change in fair value, net of the tax effect.
−Removed: Because of the size of our fixed income bond portfolio relative to total assets, a relatively large increase in market interest rates, in particular, could result in a material drop in fair values and, by extension, our capital.
−Removed: At December 31, 2022, we had total other comprehensive losses of $67.7 million primarily as a result of unrealized losses in our securities portfolio.
+Added: Because of the size of our
+Added: fixed income bond portfolio relative to total assets, a relatively large increase in market interest rates, in particular, could result in a material drop in fair values and, by extension, our capital.
+Added: For the year ended December 31, 2023, we had total other comprehensive gains of $20.6 million, net of tax, primarily as a result of a decline in unrealized losses in our securities portfolio.
The Company has a significant amount of Collateralized Loan Obligations;
14 unchanged sentences
Loans on commercial buildings represented approximately 63.4% of all real estate loans, while construction/development and land loans were 0.3%, loans secured by residential properties accounted for 19.8%, and loans secured by farmland were 3.2% of real estate loans.
−Removed: The Company’s $19.6 million balance of nonperforming assets at December 31, 2022, is mostly comprised of nonperforming real estate loans .
−Removed: In past recessionary periods, the residential real estate market experienced significant deflation in property values and foreclosures occurred at relatively high rates during and after the recession.
+Added: The Company’s $8.0 million balance of nonperforming assets at December 31, 2023, is mostly comprised of nonperforming secured real estate loans .
+Added: In past recessionary periods, the residential real estate market experienced significant deflation in property values and foreclosures occurred at relatively high rates.
While residential real estate values in our market areas appear to have stabilized, if they were to slide again, or if commercial real estate values were to decline materially, the Company could experience additional migration into nonperforming assets.
3 unchanged sentences
Our concentration of commercial real estate, construction and land development, and commercial and industrial loans exposes us to increased lending risks.
−Removed: Commercial and agricultural real estate, commercial construction and land development, and commercial and industrial loans and leases (including agricultural production loans but excluding mortgage warehouse loans), which comprised approximately 70.8% of our total loan portfolio as of December 31, 2022,
−Removed: expose the Company to a greater risk of loss than residential real estate and consumer loans, which were a smaller percentage of the total loan portfolio.
−Removed: Commercial real estate and land development loans typically involve relatively large balances to a borrower or a group of related borrowers, and an adverse development with respect to a larger commercial loan relationship would expose us to greater risk of loss than would issues involving a smaller residential mortgage loan or consumer loan.
−Removed: Moreover, banking regulators give commercial real estate loans extremely close scrutiny due to risks relating to the cyclical nature of the real estate market and risks for lenders with high concentrations of such loans.
+Added: Commercial and agricultural real estate, commercial construction and land development, and commercial and industrial loans (including agricultural production loans but excluding mortgage warehouse loans), which comprised approximately 66.9% of our total loan portfolio as of December 31, 2023, expose the Company to a greater risk of loss than residential real estate and consumer loans, which were a smaller percentage of the total loan portfolio.
+Added: Further office properties within commercial real estate have been stressed by the surge in interest rates and exacerbated by the increase in vacancies.
+Added: In the next three years, $63.5 million or 25.1% of our office real estate loans have the ability to reprice.
+Added: The potential inability of our borrowers to service debt at higher rates expose us to greater risk of loss than we have seen in the past several years.
+Added: Commercial real estate and land development loans typically involve relatively large balances to a borrower or a group of related borrowers, and an adverse development with respect to a larger
+Added: commercial loan relationship would expose us to greater risk of loss than would issues involving a smaller residential mortgage loan or consumer loan.
+Added: Moreover, banking regulators closely scrutinize commercial real estate (“CRE”) loans due to risks relating to the cyclical nature of the real estate market and risks for lenders with high concentrations of such loans.
The regulators require banks with relatively high levels of CRE loans to implement enhanced underwriting standards, internal controls, risk management policies and portfolio stress testing.
−Removed: If the CRE concentration risk is not properly managed, it could result in higher allowances for possible loan and lease losses.
+Added: If the CRE concentration risk is not properly managed, it could result in higher allowances for possible loan losses.
Expectations for higher capital levels have also emerged.
−Removed: Any required increase in our allowance for credit losses on loans and leases could adversely affect our net income, and any requirement that we maintain higher capital levels could adversely impact financial performance measures including earnings per share and return on equity.
+Added: Any required increase in our allowance for credit losses on loans could adversely affect our net income, and any requirement that we maintain higher capital levels could adversely impact financial performance measures including earnings per share and return on equity.
If the Company grows commercial real estate loans, it could be limited based on levels of regulatory capital.
1 unchanged sentence
Repayment of our commercial loans is often dependent on the cash flows of the borrowers, which may be unpredictable, and the collateral securing these loans may fluctuate in value.
−Removed: At December 31, 2022, we had $105.9 million, or 5.2% of total loans, in commercial loans and leases (including SBA PPP loans, agricultural production loans but excluding mortgage warehouse loans).
+Added: At December 31, 2023, we had $157.8 million, or 7.5% of total loans, in commercial loans (including SBA loans and agricultural production loans but excluding mortgage warehouse loans).
Commercial lending involves risks that are different from those associated with real estate lending.
2 unchanged sentences
A borrower’s cash flows may be unpredictable, and collateral securing those loans may fluctuate in value.
−Removed: Although commercial loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of such collateral in the event of default is often an insufficient source of repayment for a number of reasons, including uncollectible accounts receivable and obsolete or special-purpose inventories, among others.
+Added: Although commercial loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of such collateral in the event of default is often an insufficient source of repayment for multiple reasons, including uncollectible accounts receivable and obsolete or special-purpose inventories, among others.
Nonperforming assets adversely affect our results of operations and financial condition and can take significant time to resolve.
1 unchanged sentence
We do not record interest income on non-accrual loans, thereby adversely affecting income levels.
−Removed: Furthermore, when we receive collateral through foreclosures and similar proceedings, we are required to record the collateral at its fair market value less estimated selling costs, which may result in charges against our allowance for credit losses on loans and leases if that value is less than the book value of the related loan.
+Added: Furthermore, when we receive collateral through foreclosures and similar proceedings, we are required to record the collateral at its fair market value less estimated selling costs, which may result in charges against our allowance for credit losses on loans if that value is less than the book value of the related loan.
Additionally, our noninterest expense has risen materially in adverse economic cycles due to the costs of reappraising adversely classified assets, write-downs on foreclosed assets resulting from declining property values, operating costs related to foreclosed assets, legal and other costs associated with loan collections, and various other expenses that would not typically be incurred in a normal operating environment.
2 unchanged sentences
Deterioration in the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect our business, results of operations and financial condition.
−Removed: In addition, the resolution of nonperforming assets requires a significant commitment of time from Management and Staff, which can be detrimental to their performance of other responsibilities.
+Added: In addition, the resolution of nonperforming assets requires a significant commitment of time from Bank staff, which can be detrimental to their performance of other responsibilities.
There can be no assurance that we will avoid increases in nonperforming loans in the future.
2 unchanged sentences
nevertheless, losses can and do occur.
−Removed: At December 31, 2022, we established an allowance for estimated credit losses on loans and leases in our accounting records based on:
−Removed: ● historical experience with our loans;
−Removed: ● our evaluation of economic conditions;
−Removed: ● regular reviews of the quality, mix and size of the overall loan portfolio;
−Removed: ● a detailed cash flow analysis for nonperforming loans;
−Removed: ● regular reviews of delinquencies;
−Removed: ● the quality of the collateral underlying our loans.
−Removed: As of January 1, 2022, we adopted the provisions of ASU 2016-13 (commonly referred to as “CECL”) with an adjustment to equity, net of taxes for the difference between the allowance for loan and lease losses and the allowance for credit losses.
+Added: At December 31, 2023, we established an allowance for estimated credit losses on loans in our accounting records based on:
+Added: ● historical experience with our loans and those of peer banks;
+Added: ● our evaluation of reasonable and supportable economic forecasts;
+Added: ● consideration of the composition, including quality, mix and size of the overall loan portfolio;
+Added: ● review of nonperforming loans and related reserve requirements
+Added: ● expected timeline for repayment of existing loans, considering expected contractual cash flows in addition to expectations around prepayments;
+Added: ● evaluation of qualitative factors not given adequate consideration in the computation of quantitative reserves
+Added: As of January 1, 2022, we adopted the provisions of ASU 2016-13 (commonly referred to as “CECL”) with an adjustment to equity, net of taxes for the difference between the allowance for loan losses and the allowance for credit losses.
Therefore, on January 1, 2022, the Company recorded a $10.4 million increase in the allowance for credit losses, which includes a $0.9 million reserve for unfunded commitments as an adjustment to equity, net of deferred taxes.
−Removed: See Note 2 to the consolidated financial statements under “Recent Accounting Pronouncements” for additional details on ASU 2016-13 and its expected impact on the Company.
+Added: See Note 2 to the consolidated financial statements under “Recent Accounting Pronouncements” for additional details on ASU 2016-13 and its impact on the Company.
The allowance for credit losses can be affected by changes in economic forecasts, especially national employment rates;
changes in actual loan prepayment speeds, actual levels of charge-offs, changes to the level of nonaccrual loans, and changes to management’s estimate of items not otherwise considered as part of the quantitative calculation of the allowance.
−Removed: At any given date, we maintain an allowance for credit losses on loans and leases that we believe is adequate to absorb specifically identified probable losses as well as any other losses inherent in our loan portfolio as of that date.
+Added: At any given date, we maintain an allowance for credit losses on loans that we believe is adequate to absorb specifically identified expected losses as well as any other losses of principal which is not expected to be collected over the contractual life of the loans, adjusted for expected prepayments.
While we strive to carefully monitor credit quality and to identify loans that may become nonperforming, at any given time there may be loans in our portfolio that could result in losses but have not been identified as nonperforming or potential problem loans.
We cannot be sure that we will identify deteriorating loans before they become nonperforming assets, or that we will be able to limit losses on loans that have been so identified.
−Removed: In addition, the FDIC and the DFPI, as part of their supervisory functions, periodically review our allowance for credit losses on loans and leases.
+Added: In addition, the FDIC and the DFPI, as part of their supervisory functions, periodically review our allowance for credit losses on loans.
Such agencies may identify additional considerations for us to address with respect to our allowance for credit losses which may cause us to increase our allowance for credit losses.
32 unchanged sentences
Model inputs can also include information provided by third parties, such as economic forecasts or macroeconomic variables upon which we rely.
−Removed: Our reliance on models continues to increase as rules, guidance and expectations change including the additional model used in the determination of our allowance for credit losses, which we adopted on January 1, 2022.
+Added: Our reliance on models continues to increase as rules, guidance and expectations change including the additional model used in the determination of our allowance for credit losses, which we implemented when we adopted ASU 2016-13 on January 1, 2022.
Section 1.05 Risks Related to our Growth Strategy
4 unchanged sentences
To the extent we issue capital stock in connection with additional transactions, if any, these transactions and related stock issuances may have a dilutive effect on earnings per share and share ownership.
−Removed: If the subsidiary’s CRA rating is downgraded to less than satisfactory in the future, it could negatively affect the Company’s acquisition strategy as the CRA requires the banking agencies to consider a financial institution’s efforts in meeting its community credit needs when
−Removed: evaluating applications for, among other things, domestic branches, mergers or acquisitions, or the formation of holding companies.
+Added: If the subsidiary’s CRA rating is downgraded to less than satisfactory in the future, it could negatively affect the Company’s acquisition strategy as the CRA requires the banking agencies to consider a financial institution’s efforts in meeting its community credit needs when evaluating applications for, among other things, domestic branches, mergers or acquisitions, or the formation of holding companies.
Our earnings, financial condition, and prospects after a merger or acquisition depend in part on our ability to successfully integrate the operations of the acquired company.
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Any cost savings which are realized may be offset by losses in revenues or other charges to earnings.
−Removed: There also may be business disruptions that cause us to lose customers or cause customers to remove their accounts from us and move their business to competing financial institutions.
+Added: There also may be business disruptions that cause us to lose customers or cause customers to remove their accounts from
+Added: us and move their business to competing financial institutions.
In addition, our ability to grow may be limited if we cannot make acquisitions.
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These bank regulators possess broad authority to prevent or remedy unsafe or unsound practices or violations of law.
−Removed: The laws and regulations applicable to the banking industry, or the regulatory enforcement of new and existing laws could change at any time and we cannot predict the effects of these changes on our business, profitability or growth strategy.
−Removed: Increased regulation could increase our cost of compliance and adversely affect profitability.
Moreover, certain of these regulations contain significant punitive sanctions for violations, including monetary penalties, as well as imposing limitations on a bank’s ability to implement components of its business plan, such as expansion through mergers and acquisitions or the opening of new branch offices.
1 unchanged sentence
Furthermore, government policy and regulation, particularly as implemented through the Federal Reserve, significantly affect credit conditions.
−Removed: Negative developments in the financial industry and the impact of new legislation and regulation in response to those developments could negatively impact our business operations and adversely impact our financial performance.
+Added: 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.
+Added: The Company also 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: As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.
Our expenses could increase as a result of increases in FDIC insurance premiums or other regulatory assessments.
1 unchanged sentence
In the event that deteriorating economic conditions increase bank failures, the FDIC ensures payments of deposits up to insured limits from the DIF.
−Removed: In 2022, the FDIC announced an increase in rates in 2023, Therefore, the Bank’s FDIC insurance assessments are expected to increase as a result of this recent change.
−Removed: There can be no assurance that the FDIC will not further increase assessment rates in the future or that the Bank will not be subject to higher assessment rates as a result of a change in its risk category, either of which could have an adverse effect on the Bank’s earnings.
+Added: In 2022, the FDIC announced an increase in rates in 2023, resulting in an increase in the Bank’s FDIC insurance assessments.
+Added: There can be no assurance that the FDIC will not further increase assessment rates in the future or that the Bank will not be subject to higher assessment rates due to a change in its risk category, either of which could have an adverse effect on the Bank’s earnings.
Previously enacted and potential future regulations could have a significant impact on our business, financial condition and results of operations.
1 unchanged sentence
Many of the requirements called for in Dodd-Frank will be implemented over time, and most will be facilitated by the enactment of regulations over the course of several years.
−Removed: Given the uncertainty associated with the manner in which the provisions of Dodd-Frank will be implemented, the full extent to which they will impact our operations is unclear.
−Removed: The changes resulting from Dodd-Frank may impact the profitability of business activities, require changes to certain business practices, impose more stringent
−Removed: capital, liquidity and leverage requirements or otherwise adversely affect our business.
+Added: Given the uncertainty associated with the implementation of Dodd-Frank provisions, the full extent to which they will impact our operations is unclear.
+Added: The changes resulting from Dodd-Frank may impact the profitability of business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business.
In particular, the potential impact of Dodd-Frank on our operations and activities, both currently and prospectively, include, among others:
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Such actions could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
−Removed: In addition, federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable
−Removed: expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property.
+Added: In addition, federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property.
It is our policy not to make predatory loans, but these laws create the potential for liability with respect to our lending and loan investment activities.
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We derive fee income from charging customers for fees that could be subject to increased scrutiny by the regulators.
−Removed: There has been increased scrutiny of certain fees charged to consumers, including overdrafts in recent years.
−Removed: Changes to the Company’s overdraft practices as a result of changes in regulations or rules impact the collection of overdraft or insufficient fund fees could negatively impact the Company’s earnings.
+Added: There has been increased scrutiny of certain fees, including overdrafts, charged to consumers in recent years.
+Added: Changes to the Company’s overdraft practices due to changes in regulations or rules impact the collection of overdraft or insufficient fund fees could negatively impact the Company’s earnings.
In 2023, the Company recognized $5.3 million of income from overdraft fees which could be impacted due to changes in the way overdraft fees are charged.
In addition, the Company has a significant level of income from money service businesses.
−Removed: In 2022, the Company recognized approximately $2.0 million in service charges and fees related to money service businesses, excluding $1.9 million in analysis fees.
−Removed: Changes in regulatory oversight of money service businesses could negatively impact the Company’s number of money service businesses it serves and the related income from such customers.
+Added: In 2023, the Company recognized approximately $1.9 million in service charges and fees related to money service businesses, in addition to analysis fees
+Added: Changes in regulatory oversight of money service businesses could negatively impact the number of money service businesses we serve and the related income from such customers.
Section 1.07 Risks Related to our Common Stock
8 unchanged sentences
● failure to meet analysts’ revenue or earnings estimates;
−Removed: ● speculation in the press or investment community;
+Added: ● speculation in the press and social media, or investment community;
● strategic actions by us or our competitors, such as acquisitions or restructurings;
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● domestic and international economic factors unrelated to our performance.
−Removed: The stock market and, more specifically, the market for financial institution stocks, has experienced significant volatility in the past including 2021 and 2022.
+Added: The stock market and, more specifically, the market for financial institution stocks, has experienced significant volatility over the past several years.
As a result, the market price of our common stock has at times been unpredictable and could be in the future, as well.
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In some cases, the markets have produced downward pressure on stock prices and adversely impacted credit availability for certain issuers without regard to the issuers’ underlying financial strength.
−Removed: We could pursue additional capital in the future, which may or may not be available on acceptable terms, could dilute the holders of our outstanding common stock, and may adversely affect the market price of our common stock.
−Removed: Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at the time, which are outside of our control, and our financial performance.
−Removed: Furthermore, any capital raising activity could dilute the holders of our outstanding common stock, and may adversely affect the market price of our common stock and performance measures such as return on equity and earnings per share.
Future acquisitions may dilute shareholder ownership and value, especially tangible book value per share.
−Removed: We periodically evaluate opportunities to acquire other financial institutions and/or bank branches, and could incorporate such acquisitions as part of our future growth strategy.
+Added: We periodically evaluate opportunities to acquire other financial institutions and/or bank branches and could incorporate such
+Added: acquisitions as part of our future growth strategy.
Such acquisitions may involve cash, debt, and/or equity securities.
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As of December 31, 2023, there were outstanding options to purchase an aggregate of 343,449 shares of our common stock with an average exercise price of $25.02 per share.
−Removed: There were also 175,619 shares of restricted stock units outstanding which vest over periods ranging from 1 year to 5 years from initial issuance.
−Removed: At the same date there were an additional 382,006 shares available to grant under our 2017 Stock Incentive Plan.
+Added: There were also 238,179 shares of restricted stock units outstanding which vest over periods ranging from one year to five years from initial issuance.
+Added: At the same date there were an additional 292,581 shares available to grant under our 2023 Stock Incentive Plan, which replaced the Company’s 2017 Stock Incentive Plan.
The holders of our debentures have rights that are senior to those of our shareholders.
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In addition, we have the right to defer interest payments on the junior subordinated debt securities for up to five years, during which time no dividends may be paid to holders of our common stock.
−Removed: In the event that the Bank is unable to pay dividends to us, we may be unable to pay the amounts due to the holders of the junior subordinated debt securities and thus would be unable to declare and pay any dividends on our common stock.
+Added: In the event the Bank is unable to pay dividends to us, we may be unable to pay the amounts due to the holders of the junior subordinated debt securities and thus would be unable to declare and pay any dividends on our common stock.
Provisions in our articles of incorporation could delay or prevent changes in control of our corporation or our management.
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and the requirement that our board of directors consider the potential social and economic effects on our employees, depositors, customers and the communities we serve as well as certain other factors, when evaluating a possible tender offer, merger or other acquisition of the Company.
−Removed: These provisions make it more difficult for another company to acquire us, which could cause our shareholders to lose an opportunity to be paid a premium for their shares in an acquisition transaction and reduce the current and future market price of our common stock.
+Added: provisions make it more difficult for another company to acquire us, which could cause our shareholders to lose an opportunity to be paid a premium for their shares in an acquisition transaction and reduce the current and future market price of our common stock.
Shares of any preferred stock issued in the future could have dilutive and other effects on our common stock.
17 unchanged sentences
Some financial institutions have reported breaches of their websites and systems which have involved sophisticated and targeted attacks intended to misappropriate sensitive or confidential information, destroy or corrupt data, disable or degrade service, disrupt operations and/or sabotage systems.
−Removed: These breaches can remain undetected for an extended period of time.
−Removed: Furthermore, our customers and employees have been, and will continue to be, targeted by parties
−Removed: using fraudulent e-mails and other communications that may appear to be legitimate messages sent by the Bank, in attempts to misappropriate passwords, card numbers, bank account information or other personal information or to introduce viruses or malware to personal computers.
+Added: These breaches can remain undetected for an extended period.
+Added: Furthermore, our customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications that may appear to be legitimate messages sent by the Bank, in attempts to misappropriate passwords, card numbers, bank account information or other personal information or to introduce viruses or malware to personal computers.
Information security risks for financial institutions have increased in part because of new technologies, mobile services and other web-based products used to conduct financial and other business transactions, as well as the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
3 unchanged sentences
We also face risks related to cyber-attacks and other security breaches in connection with debit card transactions, which typically involve the transmission of sensitive information regarding our customers through various third parties.
−Removed: Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments that we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.
−Removed: We also rely on third party service providers to conduct certain other aspects of our business operations, and face similar risks relating to them.
+Added: Some of these parties have in the past been the target of security breaches and cyber-attacks, and because the transactions involve third parties and environments we do not control or secure, future security breaches or cyber-attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them.
+Added: We also rely on third party service providers to conduct certain other aspects of our
+Added: business operations, and face similar risks relating to them.
While we require regular security assessments from those third parties, we cannot be sure that their information security protocols are sufficient to withstand a cyber-attack or security breach.
Any cyber-attack or other security breach involving the misappropriation or loss of Company assets or those of its customers, or unauthorized disclosure of confidential customer information, could severely damage our reputation, erode confidence in the security of our systems, products and services, expose us to the risk of litigation and liability, disrupt our operations, and have a material adverse effect on our business.
+Added: We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations.
+Added: These third-party vendors are sources of operational and informational security risk to us, including risks associated with cyber-attacks.
+Added: If these vendors encounter a cyber-attack, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
If our information systems were to experience a system failure, our business and reputation could suffer.
1 unchanged sentence
The computer systems and network infrastructure we use could be vulnerable to unforeseen problems.
−Removed: Our operations are dependent upon our ability to minimize service disruptions by protecting our computer equipment, systems, and network infrastructure from physical damage due to fire, power loss, telecommunications failure or a similar catastrophic event.
+Added: Our operations are dependent upon our ability to minimize service disruptions by protecting our computer equipment, systems, third-party relationships, and network infrastructure from physical damage due to fire, power loss, telecommunications failure or a similar catastrophic event.
We have protective measures in place to prevent or limit the effect of the failure or interruption of our information systems and will continue to upgrade our security technology and update procedures to help prevent such events.
6 unchanged sentences
We also may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (for example, computer viruses or electrical or telecommunications outages, or natural disasters, disease pandemics or other damage to property or physical assets) which may give rise to disruption of service to customers and to financial loss or liability.
−Removed: We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations
−Removed: (or will be subject to the same risk of fraud or operational errors by their employees) and to the risk that our (or our vendors’) business continuity and data security efforts might prove to be inadequate.
+Added: We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their employees) and to the risk that our (or our vendors’) business continuity and data security efforts might prove to be inadequate.
In addition, the Company is named as a defendant in lawsuits from time-to-time.
13 unchanged sentences
Any such losses could adversely affect our business, financial condition or results of operations.
−Removed: UNRESOLVED STAFF COMMENTS
−Removed: Not applicable.
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.