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Moreover, we cannot give any assurance we will benefit from any market growth or favorable economic conditions in our primary market areas even if they do occur.
−Removed: We face potential risk from changes in governmental monetary policies.
+Added: We face potential risk from changes in governmental monetary and fiscal policies.
Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the U.S.
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government securities, its regulation of the discount rate applicable to member banks, and its influence over reserve requirements to which member banks are subject.
+Added: Trade policy, including tariffs and potential trade wars, may affect our clients and the communities in which we operate in unpredictable ways, which could negatively affect our result of operations or cash flows.
We cannot predict the nature or impact of future changes in monetary and fiscal policies.
Adverse developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system and could have a material effect on our operations and/or stock price.
−Removed: In the first quarter of 2023, high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
+Added: The high-profile bank failures in the first quarter of 2023 generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
In assessing the failures in 2023, the banking regulators noted that each of the failed banks had a high proportion of deposits that exceeded FDIC deposit insurance limits.
−Removed: These market developments have negatively impacted customer confidence in the safety and soundness of regional banks.
−Removed: As a result, some chose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which impacted our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations.
−Removed: In connection with the high-profile bank failures of early 2023, uncertainty and concern has been, and may be in the future, compounded by advances in technology that increase the speed at which deposits can be moved, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns.
−Removed: While the Department of the Treasury, the Federal Reserve, and the FDIC ensured that depositors of Silicon Valley Bank, Signature Bank and First Republic Bank had access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will continue to be successful in restoring customer confidence in regional banks and the banking system more broadly.
+Added: The industry has stabilized since these failures and the customer confidence in the safety and soundness of smaller regional banks has improved considerably.
+Added: Nevertheless, risks remain that customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which impacted our liquidity, cost of funding, loan funding capacity, net interest margin, capital and results of operations.
+Added: The high-profile bank failures of early 2023 highlighted the uncertainty and concern around advances in technology that increase the speed at which deposits can be moved, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns.
+Added: While the Department of the Treasury, the Federal Reserve, and the FDIC historically have ensured that depositors of failed banks had access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will continue to be successful in restoring customer confidence in regional banks and the banking system more broadly.
In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could adversely impact the trading prices of our common stock and potentially our results of operations.
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federal government.
−Removed: As an approved participant in the SBA Preferred Lender’s Program (a “Preferred Lender”), we enable our clients to obtain SBA loans without being
−Removed: subject to the potentially lengthy SBA approval process necessary for lenders that are not Preferred Lenders.
+Added: As an approved participant in the SBA Preferred Lender’s Program (a “Preferred Lender”), we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not Preferred Lenders.
The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management.
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Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, rather than shareholders.
−Removed: Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change and could result in an adverse impact on our results of operations.
+Added: Because our business is highly regulated, the laws, rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change, including as a result of changes in U.S.
+Added: presidential administrations that have different regulatory agendas, and could result in an adverse impact on our results of operations.
We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
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We are also subject to compliance with the rules enforced by the Office of Foreign Assets Control of the Department of the Treasury regarding, among other things, the prohibition of transacting business with, and the need to freeze assets of, certain persons and organizations identified as a threat to the national security, foreign policy or economy of the United States.
−Removed: If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including any acquisition plans.
−Removed: Failure to maintain and implement adequate programs to combat money laundering
−Removed: and terrorist financing could also have serious reputational consequences for us.
+Added: If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to
+Added: pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including any acquisition plans.
+Added: Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.
Any of these results could have a material adverse effect on our business, financial condition, results of operations and future prospects.
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In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments that can differ somewhat from those of our own management.
−Removed: In addition, if charge-offs in future periods exceed the allowance for loan losses (i.e., if the loan allowance is inadequate), we may need additional credit loss provisions to increase the allowance for loan losses.
+Added: In addition, if charge-offs in future periods exceed the allowance for credit losses (i.e., if the allowance for credit losses is inadequate), we may need additional credit loss provisions to increase the allowance for loan losses.
Additional provisions to increase the allowance for credit losses, should they become necessary, would result in a decrease in net income and a reduction in capital, and may have a material adverse effect on our financial condition and results of operations.
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Any of these factors, among others, could cause realized or unrealized losses in future periods and declines in other comprehensive income (loss), which could have a material adverse effect on our business, results of operations, financial condition and future prospects.
−Removed: The process for determining whether impairment of a security is other-than-temporary often requires complex, subjective judgments about whether there has been significant deterioration in the financial condition of the issuer, whether management has the intent or ability to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value, the future financial performance and liquidity of the issuer and any collateral underlying the security and other relevant factors.
+Added: The process for determining the impairment of a security often requires complex, subjective judgments about whether there has been significant deterioration in the financial condition of the issuer, whether management has the intent or ability to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value, the future financial performance and liquidity of the issuer and any collateral underlying the security and other relevant factors.
We invest in mortgage-backed obligations and such obligations have been, and are likely to continue to be, impacted by market dislocations, declining home values and prepayment risk, which may lead to volatility in cash flow and market risk and declines in the value of our investment portfolio.
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Louis, Kansas City, Phoenix, Los Alamos, Albuquerque, Santa Fe, Los Angeles, San Diego, Dallas, and Las Vegas metropolitan areas.
−Removed: These loans are funded by deposits in the same metropolitan areas.
−Removed: The regional economic conditions in areas where we conduct our business have an impact on the demand for our products and services as well as the ability of our clients to repay
−Removed: loans, the value of the collateral securing loans, and the stability of our deposit funding sources.
+Added: These loans are funded by deposits in the same metropolitan areas, in addition to our national deposit verticals.
+Added: The regional economic
+Added: conditions in areas where we conduct our business have an impact on the demand for our products and services as well as the ability of our clients to repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources.
Consequently, a decline in local economic conditions may adversely affect our earnings.
+Added: The proportion of our deposit account balances that exceed FDIC insurance limits may also expose the Company to enhanced liquidity risk in times of financial distress.
There are material risks involved in commercial lending that could adversely affect our business.
Our business plan calls for continued efforts to increase our assets invested in commercial loans.
−Removed: Our commercial loans include loans secured by real estate (commercial property, construction and land, 1-4 family residential property, and multi-family residential property).
+Added: Our commercial loans include loans secured by real estate (commercial property, construction and land and multi-family residential property).
Commercial loans generally involve a higher degree of credit risk than residential mortgage loans due, in part, to their larger average size and less marketable collateral.
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As a result, an increase in market interest rates may increase the risk of loan default.
−Removed: An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan and covered loan losses, and an increase in loan charge-offs, all of these factors could impact allowance, earnings and/or capital levels.
+Added: An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for credit losses, and an increase in loan charge-offs, all of these factors could impact allowance, earnings and/or capital levels.
Our loan portfolio includes loans secured by real estate, which could result in increased credit risk.
A portion of our portfolio is secured by real estate, and thus we face a high degree of risk from a downturn in our real estate markets.
−Removed: If real estate values would decline in our markets, our ability to recover on defaulted loans for which the primary reliance for repayment is on the real estate collateral by foreclosing and selling that real estate would then be diminished, and we would be more likely to suffer losses on defaulted loans.
+Added: If real estate values decline in our markets, our ability to recover on defaulted loans for which the primary reliance for repayment is on the real estate collateral by foreclosing and selling that real estate would then be diminished, and we would be more likely to suffer losses on defaulted loans.
Additionally, the state-specific foreclosure laws of the jurisdictions in which our real estate collateral is located may hinder our ability to timely or fully recover on defaulted loans secured by property in certain states.
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In some cases, these loans may have more leverage than traditional bank debt.
−Removed: In the case of our senior cash flow loans, we generally take a lien on substantially all of a client’s assets, but the value of those assets is typically substantially less than the amount of money we advance to the client under a cash flow transaction.
+Added: In the case of our senior cash flow loans, we generally take a lien on substantially all of a client’s assets, but the value of those assets is typically substantially less than the
+Added: amount of money we advance to the client under a cash flow transaction.
In addition, some of our cash flow loans may be viewed as stretch loans, meaning they may be at leverage multiples that exceed traditional accepted bank lending standards for senior cash flow loans.
−Removed: Thus, if a cash flow transaction becomes non-performing, our primary
−Removed: recourse to recover some or all of the principal of our loan or other debt product would be to force the sale of all or part of the company as a going concern.
+Added: Thus, if a cash flow transaction becomes non-performing, our primary recourse to recover some or all of the principal of our loan or other debt product would be to force the sale of all or part of the company as a going concern.
Additionally, we may obtain equity ownership in a borrower as a means to recover some or all of the principal of our loan.
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If we are forced to foreclose on a project prior to or at completion due to a default, there can be no assurance we will be able to recover all of the unpaid balance of, and accrued interest on, the loan or the related foreclosure, sale and holding costs.
−Removed: In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time.
+Added: In addition, we may be required to fund additional amounts to complete
+Added: the project and may have to hold the property for an unspecified period of time.
If any of these events occur, our financial condition, results of operations and cash flows could be materially and adversely affected.
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However, after the exhaustion of all cure periods and remedies, the entire credit is subject to recapture if the certified community development entity fails to maintain its certified status, or if substantially all of the equity investment proceeds associated with the tax credits we allocate are no longer continuously invested in a qualified business that meets the New Markets Tax Credit Program criteria, or if the equity investment is redeemed prior to the end of the minimum seven-year term.
−Removed: As part of these financing transactions, we as the parent to Enterprise Financial CDE, LLC (“CDE”), provide customary indemnities to the tax credit investors, which require us to indemnify and hold harmless the investors in the event a credit recapture event occurs, unless the recapture is a result of action or inaction of the investor.
+Added: As part of these financing transactions, we as the parent to Enterprise Financial CDE, LLC, provide customary indemnities to the tax credit investors, which require us to indemnify and hold harmless the investors in the event a credit recapture event occurs, unless the recapture is a result of action or inaction of the investor.
No assurance can be given that these counterparties will not call upon us to discharge these obligations in the circumstances under which they are owed.
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If we were to default under the New Markets Tax Credit Program, we could suffer negative publicity in the communities in which we operate, and we could face greater scrutiny from federal and state bank regulators, especially with regard to our compliance with the CRA.
−Removed: These developments could have a material adverse impact on our reputation, business, financial condition, results of operations and liquidity.
+Added: These developments could have a material adverse impact on our reputation, business, and financial condition.
Liquidity risk could impair our ability to fund operations and meet debt coverage obligations, and jeopardize our financial condition.
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Further, paying higher interest rates to maintain or replace these deposits could adversely affect our net interest margin and results of operations.
+Added: In 2024, the FDIC issued a proposed rule that would revise the FDIC’s regulations governing the classification and treatment of brokered deposits.
+Added: If the proposed rule is finalized as proposed, the Company may be required to classify certain deposits as brokered deposits.
+Added: Among other changes, this may increase deposit insurance assessments and impact liquidity metrics.
By engaging in derivative transactions, we are exposed to additional credit and market risk in our banking business.
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Failure to perform in any of these areas could significantly weaken our competitive position, and could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our financial condition and results of operations.
−Removed: Technology is continually changing and we must effectively implement new innovations in providing services to our customers.
−Removed: The financial services industry is undergoing rapid technological changes with frequent innovations in technology-driven products and services.
−Removed: In addition to better serving customers, the effective use of technology increases our efficiency and enables us to reduce costs.
−Removed: Our future success will depend, in part, upon our ability to address the needs of our customers using innovative methods, processes and technology to provide products and services that will satisfy customer demands for convenience as well as to add efficiencies in our operations as we continue to grow and expand our market areas.
+Added: Technology is continually changing and we must effectively implement new innovations in providing services to our clients.
+Added: The financial services sector is rapidly evolving due to technological innovations, with breakthroughs in areas like artificial intelligence, cloud computing, and other emerging technologies continuously producing new products and services to better serve their clients.
+Added: In addition to better serving clients, the effective use of technology increases our efficiency and enables us to reduce costs.
+Added: Our future success will depend, in part, upon our ability to address the needs of our clients using innovative methods, processes and technology to provide products and services that will satisfy client demands for convenience as well as to add efficiencies in our operations as we continue to grow and expand our market areas.
Many national vendors provide turn-key services to community banks, such as Internet banking and remote deposit capture, that allow smaller banks to compete with institutions that have substantially greater resources to invest in technological improvements.
−Removed: We may not be able, however, to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
+Added: We may not be able, however, to effectively implement new technology-driven products and services or be successful in marketing these products and services to our clients.
Costs and levels of deposits are affected by competition that could increase our funding costs or liquidity risk.
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Recent highly publicized material events have highlighted the importance of cybersecurity, including cyberattacks against other financial institutions, governmental agencies, and other organizations that resulted in the compromise of personal and/or confidential information, the theft or destruction of corporate information, and demands for ransom payments to release corporate information encrypted by “ransomware.” A successful cyberattack could materially and adversely affect the Bank’s reputation and/or impair its ability to provide services to its clients.
−Removed: We have expended, and may in the future expend, significant resources to implement technologies and various response and recovery plans and procedures as part of our information security program.
+Added: As risks associated with cybersecurity threats have and continue to evolve and become more sophisticated, including as a result of artificial intelligence, we have expended, and may in the future expend, significant resources to implement technologies and various response and recovery plans and procedures as part of our information security program.
Additionally, we face the risk of operational disruption, failure, termination or capacity constraints of any of the third parties that facilitate our business activities, including exchanges, clearing agents, clearing houses or other financial intermediaries.
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Our core operating system conversion may result in business interruptions or other adverse developments.
−Removed: We plan to replace our core operating systems, including those for loans, deposits, financials and other ancillary systems (collectively referred to as “core system”).
−Removed: The conversion to the new core system is expected to be completed in 2024.
+Added: On October 11, 2024, we replaced our core operating systems, including those for loans, deposits, financials and other ancillary systems (collectively referred to as “core system”).
We use the core system to track client relationships and accounts and report financial information.
The core system is integrated with various other applications that are used to service client requests by Bank personnel or directly by clients (such as online and mobile banking).
−Removed: Changing the core system will subject us to operational risks during and after the conversion, including disruptions to its technology systems, which may adversely impact our clients.
−Removed: We have documented plans, policies and procedures designed to prevent or limit the risks of a failure during or after the conversion of our core system.
+Added: Changing the core system subjects us to operational risks, including disruptions to technology systems, which may adversely impact our clients.
+Added: We have documented plans, policies and procedures designed to prevent or limit the risks of a failure during and after the conversion of our core system.
However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be timely and adequately remediated.
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Climate change may materially adversely affect our business and results of operations.
−Removed: Political and social attention to the issue of climate change has continued.
−Removed: Federal and state legislatures and regulatory agencies continue to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.
−Removed: As a financial institution, it is unclear how future government regulations and shifts in business trends resulting from increased concern about climate change will affect our operations;
−Removed: however, natural or man-made disasters and severe weather events may cause operational disruptions and damage to both our properties and properties securing our loans.
+Added: Severe weather events may cause operational disruptions and damage to both our properties and properties securing our loans.
Losses resulting from these disasters and severe weather events may make it more difficult for borrowers to timely repay their loans.
If these events occur, we may experience a decrease in the value of our loan portfolio and our revenue, and may incur additional operational expenses, each of which could have a material adverse effect on our financial condition and results of operations.
−Removed: With the increased importance and focus on climate change, we are making efforts to enhance our governance of climate change-related risks and integrate climate considerations into our risk governance framework.
−Removed: the risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.
−Removed: We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
+Added: The risks associated with climate change, and the legislative and regulatory responses, are evolving, making them difficult to assess due to limited data and other uncertainties.
+Added: We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change and our climate change strategy, which, in turn, could have a material negative impact on our business, results of operations, and financial condition.
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.