What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-08 compared with 2023-03-07 · 233 added, 106 removed, 308 unchanged (52% of the section changed)

12 unchanged sentences

• Changes in market interest rates could adversely impact the Company.

• The impact of interest rates on our mortgage banking business can have a significant impact on revenues.

• Inflationary pressures and rising prices may affect our results of operations and financial condition.

• Rising interest rates have decreased the value of our held-to-maturity securities portfolio, and we would realize losses if we were required to sell such securities to meet liquidity needs.

Operational, Strategic and Business Risk Factors

• Changes and instability in economic conditions, geopolitical matters and financial markets, including contraction of economic activity, could adversely impact our business, results of operations and financial condition.

• Current economic conditions in the State of Alaska pose challenges for us and could adversely affect our financial condition and results of operations.

1 unchanged sentence

• Our allowance for credit losses may be insufficient.

• We are subject to lending concentration risks.

• Our commercial real estate lending may expose us to increased lending risks.

• Residential mortgage lending is a market sector that experiences significant volatility and is influenced by many factors beyond our control.

4 unchanged sentences

• Our business, financial condition and results of operations are subject to risk from changes in customer behavior.

• Consumers may decide not to use banks to complete their financial transactions.

• If we do not comply with the agreements governing servicing of loans, if these agreements change materially, or if others allege non-compliance, our business and results of operations may be harmed.

• Certain hedging strategies that we use to manage interest rate risk may be ineffective to offset any adverse changes in the fair value of these assets due to changes in interest rates and market liquidity.

• We have a significant concentration in real estate lending.

A downturn in real estate within our markets would have a negative impact on our results of operations.

• Real estate values may decrease leading to additional and greater than anticipated loan charge-offs.

• We may be unable to attract and retain key employees and personnel.

• Our internal controls may be ineffective.

• Liquidity risk could impair our ability to fund operations and jeopardize our financial conditions.

• A failure of a significant number of our borrowers, guarantors and related parties to perform in accordance with the terms of their loans would have an adverse impact on our results of operations.

• The ongoing COVID-19 pandemic, or a similar health crisis, may adversely impact our business and financial results.

Regulatory, Legislative and Legal Risk Factors

• We operate in a highly regulated environment and changes of or increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.

• Changes in the FRB’s monetary or fiscal policies could adversely affect our results of operations and financial condition.

• We operate in a highly regulated environment and changes of or significant increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.

• We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

• Fiscal challenges facing U.S.

government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.

• Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Anti-Money Laundering Act of 2020, Real Estate Settlement Procedures Act, Truth-in-Lending Act or other laws and regulations could result in fines, sanctions or other adverse consequences.

• Deposit insurance premiums could increase further in the future.

• Recent volatility in the banking sector, triggered by the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, may result in legislative initiatives, agency rulemaking activities, or changes in agency policies and priorities that could subject the Company and the Bank to enhanced government regulation and supervision.

• Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.

Accounting, Tax and Financial Risk Factors

• Changes in income tax laws and interpretations, or in accounting standards, could materially affect our financial condition or results of operations.

• The replacement of the London Inter-Bank Offered Rate ("LIBOR") may adversely affect our business.

• Changes in the federal, state, or local tax laws may negatively impact our financial performance.

• Changes in our accounting policies or in accounting standards could materially affect how we report our financial results.

Stock Ownership Risk Factors

11 unchanged sentences

• Climate change, severe weather, natural disasters, and other external events could significantly impact our business.

• Increasing, complex and evolving regulatory, stakeholder, and other third party expectations on ESG matters could adversely affect our reputation, our access to capital and the market price of our securities.

We attempt to mitigate the foregoing risks.

5 unchanged sentences

Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions, inflationary trends, changes in government spending and debt issuances and policies of various governmental and regulatory agencies and, in particular, the FRB .

Changes in interest rates affect the demand for new loans, the credit profile of existing loans, the rates received on loans and securities, and rates paid on deposits and borrowings.

Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but such changes could also affect (i) our ability to originate loans and obtain deposits;

(ii) the fair value of our financial assets and liabilities;

and (iii) the average duration of our mortgage portfolio and other interest-earning assets.

In January 2022, due to elevated levels of inflation and corresponding pressure to raise interest rates, the FRB announced after several periods of historically low federal funds rates and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time.

The FOMC since has increased

the target range eleven times throughout 2022 and 2023.

As of December 31, 2023, the target range for the federal funds rate had been increased to 5.25% to 5.50%.

It remains uncertain whether the FOMC will further increase the target range for the federal funds rate to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels, begin to reduce the federal funds rate or leave the rate at its current elevated level for a lengthy period of time.

Our interest rate spread, net interest margin and net interest income increased during this period of rising interest rates as our interest earning assets generally reprice more quickly than our interest earning liabilities.

If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.

Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

These impacts may negatively impact our ability to attract deposits, make loans, and achieve satisfactory interest rate spreads, which could adversely affect our financial condition or results of operations.

In particular, increases in interest rates have in the past and will likely in the future reduce RML’s revenues by reducing the market for refinancings, as well as the demand for RML’s other residential loan products.

Additionally, increases in interest rates may impact our borrowers' ability to make loan payments, particularly in our commercial loan portfolio.

Interest rates may be affected by many factors beyond our control, including general and economic conditions and the monetary and fiscal policies of various governmental and regulatory authorities.

Beginning early in 2022, in response to growing signs of inflation, the FRB has increased interest rates rapidly.

Although it is expected that the FRB will continue to increase the target federal funds rate in 2023 to combat recent inflationary trends, if interest rates do not rise, or if the FRB were to lower the target federal funds rate to below 0%, these low rates could continue to constrain our interest rate spread and may adversely affect our business forecasts.

On the other hand, increases in interest rates, to combat inflation or otherwise, may result in a change in the mix of noninterest and interest-bearing accounts.

All else being equal, if the interest rates on the Company's interest-bearing liabilities increase at a faster pace than the interest rates on our interest-earning assets, the result would be a reduction in net interest income and with it, a reduction in net income.

In addition, anticipated changes in interest rates generally impact the mortgage rate market prior to the actual rate change.

We are unable to predict changes in interest rates, which are affected by factors beyond our control, including inflation, deflation, recession, unemployment, money supply and other changes in financial markets.

Exposure to interest rate risk is managed by monitoring the repricing frequency of our rate-sensitive assets and rate-sensitive liabilities over any given period.

Although we believe the current level of interest rate sensitivity is reasonable, significant fluctuations in interest rates could potentially have an adverse effect on our business, financial condition and results of operations.

The Company’s interest rate risk profile is such that, generally, a higher yield curve adds to income while a lower yield curve has a negative impact on earnings.

Our most significant interest rate risk may result from timing differences in the maturity and re-pricing characteristics of assets and liabilities, changes in the shape of the yield curve, and the potential exercise of explicit or embedded options.

Although management believes it has implemented effective asset and liability management strategies, including the potential use of derivatives as hedging instruments, to reduce the potential effects of changes in interest rates on our results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations, and any related economic downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.

Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet.

The impact of interest rates on our mortgage banking business can have a significant impact on revenues .

Changes in interest rates can impact RML’s revenues and net revenues associated with our mortgage activities.

A decline in mortgage rates generally increases the demand for mortgage loans as borrowers refinance, but also generally leads to accelerated payoffs.

Conversely, in a constant or increasing rate environment, we would expect fewer loans to be refinanced and a decline in payoffs.

Although we use models to assess the impact of interest rates on mortgage-related revenues, the estimates of revenues produced by these models are dependent on estimates and assumptions of future loan demand, prepayment speeds and other factors which may differ from actual subsequent experience.

Inflationary pressures and rising prices may affect our results of operations and financial condition .

Inflation has continued rising in 2023 at levels not seen for over 40 years.

Inflationary pressures are currently expected to remain elevated throughout 2022 and are likely to continue into 2023.

Inflationary pressures are currently expected to continue in 2024.

Inflation could lead to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk.

1 unchanged sentence

A deterioration in economic conditions in the United States and our regional markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.

Rising interest rates have decreased the value of our held-to-maturity securities portfolio, and we would realize losses if we were required to sell such securities to meet liquidity needs .

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.

These securities make up a majority of the securities portfolio of most banks in the U.S., including ours, resulting in unrealized losses embedded in the held-to-maturity portion of U.S.

banks’ securities portfolios.

The book value of the Company's held-to-maturity securities portfolio was $36.8 million at both December 31, 2023 and 2022.

Unrealized losses on the held-to-maturities portfolio amounted to $3.3 million and $4.1 million at December 31, 2023 and 2022, respectively.

The fair value of the Company's held-to-maturity securities portfolio was $33.4 million and $32.6 million at December 31, 2023 and 2022, respectively.

While we do not currently intend to sell these securities, if we were required to sell such securities to meet liquidity needs, we may incur losses, which could impair our capital, financial condition, and results of operations and, in the event that our other funding sources are insufficient, could require us to raise additional capital.

While we have taken actions to maximize our funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

Operational, Strategic and Business Risks

Changes and instability in economic conditions, geopolitical matters and financial markets, including a contraction of economic activity, could adversely impact our business, results of operations and financial condition.

Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.

Conditions such as changes in interest rates, money supply, levels of employment and other factors beyond our control may have a negative impact on economic activity.

Any contraction of economic activity, including an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.

In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the FRB.

Throughout 2022 and 2023, the FOMC raised the target range for the federal funds rate on eleven separate occasions, citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, continued global supply chain disruptions and imbalances, and increased inflationary pressure.

The tightening of the FRB’s monetary policies, including repeated and aggressive increases in target range for the federal funds rate as well as the conclusion of the FRB’s tapering of asset purchases, together with ongoing economic and geopolitical instability, increases the risk of an economic recession.

Although forecasts have varied, many economists are projecting that, while indicators of U.S.

economic performance, such as income growth, may be strong and levels of inflation may continue to decrease, the U.S.

economy may be flat or experience a modest decrease in gross domestic output in 2024 while inflation is expected to remain elevated relative to historic levels in the coming quarters.

Any such downturn in economic output, especially domestically and in the Alaska and other markets in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.

As a result of the economic and geopolitical factors discussed above, financial institutions also face heightened credit risk, among other forms of risk.

Of note, because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral, which, in turn, can adversely affect the value of our loan and investment portfolios.

Adverse economic developments, specifically including inflation-related impacts, may have a negative effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases.

According to the Federal Reserve's October 2023 Financial Stability Report, commercial real estate values remained elevated relative to fundamentals, even as prices continued to decline.

While commercial real estate values continue to fluctuate, some markets are showing signs of stabilizing prices.

However, the outlook for commercial real estate remains dependent on the broader economic environment and, specifically, how major subsectors respond to a rising interest rate environment and higher prices for commodities, goods and services.

In any case, credit performance over the medium- and long-term is susceptible to economic and market forces and therefore forecasts remain uncertain;

however, some degree of instability in the commercial real estate markets is expected in the coming quarters as loans are refinanced in markets with higher vacancy rates under current economic conditions.

Instability and uncertainty in the commercial and residential real estate markets, as well as in the broader commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.

Current economic conditions in the State of Alaska pose challenges for us and could adversely affect our financial condition and results of operations.

4 unchanged sentences

Continued economic uncertainty and a recessionary or stagnant economy could result in financial stress on the Bank's borrowers, which could adversely affect our business, financial condition and results of operations.

Deteriorating conditions in the regional economies of Anchorage, Matanuska-Susitna Valley, Fairbanks, and the Southeast areas of Alaska served by the Company could drive losses beyond that which is provided for in our allowance for loan losses.

We may also face the following risks in connection with events:

6 unchanged sentences

Our concentration of operations in the Anchorage, Matanuska-Susitna Valley, Fairbanks and Southeast areas of Alaska makes us more sensitive to downturns in those areas.

Substantially all of our business is derived from the Anchorage, Matanuska-Susitna Valley, Fairbanks, and Southeast areas of Alaska.

Substantially all of our business is derived from the Anchorage, Matanuska-Susitna Valley, Fairbanks, Southeast, and Kenai Peninsula areas of Alaska.

The majority of our lending has been with Alaska businesses and individuals.

At December 31, 2022, less than 1% of the Bank's loans are PPP loans which are 100% guaranteed by the SBA.

Of the remaining loan portfolio, excluding PPP loans, approximately 69% of loans are secured by real estate and 1% are unsecured.

At December 31, 2023, approximately 72% of loans are secured by real estate and 4% are unsecured.

Approximately 24% are for general commercial uses, including professional, retail, and small businesses, and are secured by non-real estate assets.

15 unchanged sentences

new information regarding existing loans, credit commitments and securities holdings;

the continuation of the COVID-19 pandemic or other global pandemics;

natural disasters and risks related

to climate change;

natural disasters and risks related to climate change;

and identification of additional problem loans, ratings down-grades and other factors, both within and outside of our control, may require an increase in the allowances for credit losses on loans, securities and off-balance sheet credit exposures.

2 unchanged sentences

Any increase in the allowance for credit losses on loans, securities and/or off-balance sheet credit exposures will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our business, financial condition and results of operations.

We are subject to concentration risks.

Approximately 72% of the Bank’s loan portfolio at December 31, 2023 consisted of loans secured by commercial and residential real estate mostly located in Alaska.

Additionally, all of the Company's loans held for sale are secured by residential real estate.

A slowdown in the residential sales cycle in our major markets and a constriction in the availability of mortgage financing, would negatively impact residential real estate sales, which would result in customers’ inability to repay loans.

This would result in an increase in our non-performing assets if more borrowers fail to perform according to loan terms and if we take possession of real estate properties.

Additionally, if real estate values decline, the value of real estate collateral securing

our loans could be significantly reduced.

If any of these effects continue or become more pronounced, loan losses will increase more than we expect and our financial condition and results of operations would be adversely impacted.

Our commercial real estate lending may expose us to increased lending risks.

Approximately 49% of the Bank’s loan portfolio at December 31, 2023 consisted of commercial real estate loans.

Commercial construction and commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers.

Consequently, an adverse development with respect to one commercial loan or one credit relationship exposes us to significantly greater risk of loss compared to an adverse development with respect to a consumer loan.

Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulation.

In recent years, commercial real estate markets have been experiencing substantial growth, and increased competitive pressures have contributed significantly to historically low capitalization rates and rising property values.

However, commercial real estate markets have been facing downward pressure since 2022 due in large part to increasing interest rates and declining property values.

Accordingly, the federal banking agencies have expressed concerns about weaknesses in the current commercial real estate market and have applied increased regulatory scrutiny to institutions with commercial real estate loan portfolios that are fast growing or large relative to the institutions' total capital.

To address supervisory expectations with respect to financial institutions' handling of commercial real estate borrowers who are experiencing financial difficulty, in June of 2023, the federal banking agencies issued an interagency policy statement addressing prudent commercial real estate loan accommodations and workouts.

Our failure to adequately implement enhanced risk management policies, procedures and controls could adversely affect our ability to increase this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio.

The credit quality of these loans may also deteriorate more than expected which may result in losses that exceed the estimates that are currently included in our allowance for loan losses, which could adversely affect our financial condition and results of operations.

Residential mortgage lending is a market sector that experiences significant volatility and is influenced by many factors beyond our control.

17 unchanged sentences

The pervasiveness of cyber security incidents in general and the risks of cyber-crime are complex and continue to evolve.

In addition, due to COVID-19, we have modified our business practices with a portion of our employees working remotely from their homes.

In addition, following COVID-19, we have modified our business practices with a portion of our employees working remotely from their homes.

The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk.

30 unchanged sentences

Further, difficult economic conditions may negatively affect consumer confidence levels.

A decrease in consumer confidence levels would likely

aggravate the adverse effects of these difficult market conditions on us, our customers and adversely affect our future loan origination volume and margins.

A decrease in consumer confidence levels would likely aggravate the adverse effects of these difficult market conditions on us, our customers and adversely affect our future loan origination volume and margins.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks.

For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards.

Consumers can also complete transactions, such as paying bills and/or transferring funds directly without the assistance of banks.

Transactions utilizing digital assets, including cryptocurrencies, stablecoins and other similar assets, have increased substantially over the course of the last several years.

Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions as illustrated by the current and ongoing market volatility.

Accordingly, digital asset service providers, which at present are not subject to the extensive regulation of banking organizations and other financial institutions, have become active competitors for our customers’ banking business.

The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.

Further, an initiative by the CFPB, as prompted by the current Presidential Administration, to promote “open and decentralized banking” through the proposal of a Personal Financial Data Rights rule designed to facilitate the transfer of customer information at the direction of the customer to other financial institutions could lead to greater competition for products and services among banks and nonbanks alike if a final rule is adopted.

The timing of and prospects for any such action are uncertain at this time.

The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

If we do not comply with the agreements governing servicing of loans, if these agreements change materially, or if others allege non-compliance, our business and results of operations may be harmed.

12 unchanged sentences

If these assumptions and projections prove to be incorrect or our hedging strategies do not adequately mitigate the impact of changes in interest rates, we may incur losses that would adversely impact our financial condition and results of operations.

We have a significant concentration in real estate lending.

A downturn in real estate within our markets would have a negative impact on our results of operations.

Approximately 69% of the Bank’s loan portfolio, excluding PPP loans, at December 31, 2022 consisted of loans secured by commercial and residential real estate located in Alaska.

Additionally, all of the Company's loans held for sale are secured by residential real estate.

This would result in an increase in our non-performing assets if more borrowers fail to perform according to loan terms and if we take possession of real estate properties.

Additionally, if real estate values decline, the value of real estate collateral securing our loans could be significantly reduced.

If any of these effects continue or become more pronounced, loan losses will increase more than we expect and our financial condition and results of operations would be adversely impacted.

Further, approximately 55% of the Bank’s loan portfolio at December 31, 2022 consisted of commercial real estate loans.

While our investments in these types of loans have not been as adversely impacted as residential construction and land development loans, there can be no assurance that the credit quality in these portfolios will remain stable.

Commercial construction and commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers.

The credit quality of these loans may deteriorate more than expected which may result in losses that exceed the estimates that are currently included in our loan loss allowance, which could adversely affect our financial condition and results of operations.

We may be unable to attract and retain key employees and personnel.

1 unchanged sentence

Schierhorn, our Chairman of the Board, President, Chief Executive Officer, and Chief Operating Officer of the Company;

Michael Huston, our President and Chief Lending Officer of Northrim Bank;

Michael Huston, our President of Northrim Bank;

Ballard, our Executive Vice President and Chief Financial Officer;

2 unchanged sentences

Schierhorn, Huston, Ballard and Ms.

Zins in the amounts of $2.4 million, $2 million, $2 million and $2 million, respectively, we may not be able to timely replace these key employees with a person of comparable ability and experience

should the need to do so arise, causing losses in excess of the insurance proceeds.

Zins in the amounts of $2.4 million, $2 million, $2 million and $2 million, respectively, we may not be able to timely replace these key employees with a person of comparable ability and experience should the need to do so arise, causing losses in excess of the insurance proceeds.

The unexpected loss of key employees could have a material adverse effect on our business and possibly result in reduced revenues and earnings.

Our internal controls may be ineffective.

Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures.

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the controls are met.

Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations, and financial condition.

Liquidity risk could impair our ability to fund operations and jeopardize our financial conditions.

8 unchanged sentences

Our ability to borrow could be impaired by factors that are not specific to us or our region, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry and unstable credit markets.

Our access to deposits may also be negatively impacted by, among other factors, continued periods of low interest rates and increased competition for deposits, including from new financial technology competitors.

Our access to deposits can be impacted by the liquidity needs of our customers as a substantial portion of our liabilities are demand while a substantial portion of our assets are loans that cannot be sold in the same timeframe.

Historically, we have been able to meet its cash flow needs as necessary.

If a sufficiently large number of depositors sought to withdraw their deposits for whatever reason, we may be unable to obtain the necessary funding at favorable term.

A failure of a significant number of our borrowers, guarantors and related parties to perform in accordance with the terms of their loans would have an adverse impact on our results of operations.

2 unchanged sentences

These policies and procedures, however, may not prevent unexpected losses that could materially affect our financial condition and results of operations.

The ongoing COVID-19 pandemic, or a similar health crisis, may adversely impact our business and financial results.

The COVID-19 pandemic has created economic and financial disruptions that may adversely affect, our business, financial condition, liquidity and results of operations.

The extent to which the COVID-19 pandemic, or a similar health crisis, will negatively affect our business, financial condition, liquidity and results of operations will depend on future developments, which are highly uncertain and cannot be predicted and many of which are outside of our control, including the scope and duration of the pandemic, the emergence of new variants, the effectiveness of our pandemic response plans, the direct and indirect impact of the pandemic on our employees, customers, clients, counterparties and service providers, as well as other market participants, and actions taken, or that may yet be taken, or inaction, by governmental authorities and other third parties in response to the pandemic.

Should the pandemic continue for a more extended period or worsen, we may face additional circumstances such as significant draws on credit lines should customers seek to increase liquidity.

Furthermore, should the pandemic continue, we may experience increased rates of employee illness or unavailability, and may experience challenges recruiting new employees.

Any disruption to our ability to deliver financial products or services to, or interact with, our clients and customers could result in losses or increased operational costs, regulatory fines, penalties and other sanctions, or harm our reputation.

We are also subject to litigation and reputational risk arising from our response to the COVID-19 pandemic.

Governments have taken unprecedented steps to partially mitigate the adverse effects of their containment measures.

For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S.

economy, followed by additional COVID relief legislation of approximately $900 million in December 2020.

In March 2021 the ARP Act was enacted to inject an additional $1.9 trillion in financial relief and economic stimulus.

Whether the economic stimulus will have a lasting positive effect or whether it will contribute to higher inflation or other economic ill effects is unknown.

To the extent the pandemic adversely affects our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this report.

Regulatory, Legislative and Legal Risks

Regulatory, Legislative, Legal and Reputational Risks

We operate in a highly regulated environment and changes of or significant increases in banking or other laws and regulations or governmental fiscal or monetary policies could adversely affect us.

13 unchanged sentences

The terms and costs of these activities could materially and adversely affect our business, financial condition, results of operations and the trading price of our common stock.

Changes in the FRB’s monetary or fiscal policies could adversely affect our results of operations and financial condition.

Our earnings will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies.

The FRB has, and is likely to continue to have, an important impact on the operating results of depository institutions through its power to implement national monetary policy, among other things, in order to curb inflation or combat a recession.

The FRB affects the levels of bank loans, investments and deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject.

The FRB raised the federal funds rate target to 4.50%-4.75% in February 2023 and also indicated that due to continuing rising inflation it expects to continue raise interest rates in the near term.

While we expect the FRB to raise short-term interest rates in the first half 2023, we cannot predict the nature or impact of future changes in monetary and fiscal policies.

We face risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies, and priorities.

Last Congress, Democrats controlled the White House and both Chambers of Congress.

As a result, Democrats were able to set the policy agenda both legislatively and in the regulatory agencies that have rulemaking and supervisory authority over the financial services industry generally and the Bank specifically.

These dynamics shifted after the 2022 midterm elections.

While Democrats retained control of the U.S.

Senate, the party has a slim majority of 51 seats.

Republicans assumed control of the U.S.

House of Representatives, with a slim majority of 222 seats.

In consideration of the divided control of Congress, the narrow majorities in each chamber, and the current political environment, the legislative process is expected to be more challenging in the current legislative session.

Although agendas are expected to vary substantially in each chamber, congressional committees with jurisdiction over the banking sector have pursued, and likely will continue to pursue, oversight in a variety of areas, including addressing climate-related risks, promoting diversity and equality within the banking industry and addressing other ESG matters, improving competition in the banking sector and enhancing oversight of bank mergers and acquisitions, and establishing a regulatory framework for digital assets and markets.

The prospects for the enactment of major banking reform legislation under the new Congress are unclear at this time.

Moreover, the turnover of the Presidential Administration in 2021 resulted in certain changes in the leadership and senior staffs of the federal banking agencies and the Treasury Department.

These changes have impacted the rulemaking, supervision, examination and enforcement priorities and policies of the agencies and likely will continue to do so over the next several years.

The potential impact of any changes in agency personnel, policies and priorities on the financial services sector, including the Bank, cannot be predicted at this time.

Fiscal challenges facing the U.S.

government could negatively impact financial markets which in turn could have an adverse effect on our financial position or results of operations.

Federal budget deficit concerns and the potential for political conflict over legislation to fund U.S.

government operations and raise the U.S.

government’s debt limit may increase the possibility of a default by the U.S.

government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.

Many of our investment securities are issued by the U.S.

government and government agencies and sponsored entities.

As a result of uncertain domestic political conditions, including potential future federal government shutdowns, the possibility of the federal government defaulting on its obligations for a period of time due to debt ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government pose liquidity risks.

In connection with prior political disputes over U.S.

fiscal and budgetary issues leading to the U.S.

government shutdown in 2011, S&P lowered its long term sovereign credit rating on the U.S.

from AAA to AA+.

In 2023, Congress narrowly averted two separate government shutdowns by passing continuing resolutions.

In part due to repeated debt-limit political standoffs and last-minute resolutions, in 2023 a rating agency downgraded the U.S.

long-term foreign-currency issuer default rating to AA+ from AAA .

A further downgrade, or a downgrade by other rating agencies, as well as sovereign debt issues facing the governments of other countries, could have a material adverse impact on financial markets and economic conditions in the U.S.

and worldwide.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, Anti-Money Laundering Act of 2020, Real Estate Settlement Procedures Act, Truth-in-Lending Act or other laws and regulations could result in fines, sanctions or other adverse consequences.

13 unchanged sentences

FDIC insurance premiums could increase in the future in response to similar declining economic conditions.

More recently, extraordinary growth in insured deposits caused the ratio of the DIF to total insured deposits to fall below the current statutory minimum of 1.35%.

More recently, extraordinary growth in insured deposits and losses occasioned by recent bank failures caused the ratio of the DIF to total insured deposits to fall below the current statutory minimum of 1.35%.

The FDIC has also established a higher reserve ratio of 2% as a long term goal and the minimum level needed to withstand future financial crises of the magnitude of past crises.

The FDIC may increase the assessment rates or impose additional special assessments in the future to restore and then steadily increase the DIF to these statutory target levels.

The FDIC may continue to increase the assessment rates or impose additional special assessments in the future to restore and then steadily increase the DIF to these statutory target levels.

Any increase in the Bank's FDIC premiums could have an adverse effect on its business, financial condition and results of operations.

Recent volatility in the banking sector, triggered by the failures of Silicon Valley Bank, Signature Bank and First Republic Bank, may result in legislative initiatives, agency rulemaking activities, or changes in agency policies and priorities that could subject the Company and the Bank to enhanced government regulation and supervision .

The recent high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.

I nvestor and customer confidence in the banking sector, particularly with regard to mid-size and larger regional banking organizations, waned in response to the failures of Silicon Valley Bank, Signature Bank and First Republic Bank.

Congress and the federal banking agencies have and continue to evaluate the events leading to the failures of Silicon Valley Bank, Signature Bank and First Republic Bank to ascertain possible explanations for these developments.

Legislators and the leadership of the federal banking agencies noted that inadequate prudential regulation of regional banking organizations

(generally, institutions with less than $250 billion in total assets), insufficient supervision of such organizations, poor management and inadequate risk management practices, specifically including interest rate and liquidity risks in consideration of each institution’s business model, and substantial uninsured deposit liabilities were causes of the failures.

Further evaluation of recent developments in the banking sector may lead to governmental initiatives intended to prevent future bank failures and stem significant deposit outflows from the banking sector, including (i) legislation aimed at preventing similar future bank runs and failures and stabilizing confidence in the banking sector over the long term, (ii) agency rulemaking to modify and enhance relevant regulatory requirements, specifically with respect to liquidity risk management, deposit concentrations, capital adequacy, stress testing and contingency planning, and safe and sound banking practices, and (iii) enhancement of the agencies’ supervision and examination policies and priorities.

In fact, in July 2023, the federal banking agencies issued a notice of proposed rulemaking that would substantially revise the regulatory capital framework for banking organizations with total assets of $100 billion or more and banking organizations with significant trading activity.

Among other things, the proposed rule would require all banking organizations with over $100 billion in assets to include unrecognized gains and losses on available for sale debt securities via the inclusion of accumulated other comprehensive income in capital.

In addition, banking organizations with over $100 billion in assets would be subject to the supplementary leverage ratio and countercyclical capital buffer.

The proposed rule, if adopted as proposed, would not apply to the Bank directly based on the Bank's current asset size.

The federal banking agencies may also re-evaluate applicable liquidity risk management standards, such as by reconsidering the mix of assets that are deemed to be "high-quality liquid assets" and/or how "high-quality liquid assets" holdings and cash inflows and outflows are tabulated and weighted for liquidity management purposes.

Although we cannot predict with certainty which initiatives may be pursued by lawmakers and agency leadership, nor can we predict the terms and scope of any such initiatives, any of the potential changes referenced above could, among other things, subject us to additional costs, limit the types of financial services and products we may offer, and limit our future growth, any of which could materially and adversely affect our business, results of operations or financial condition.

Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.

The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment.

As a result, political and social attention to the issue of climate change has increased.

In recent years, governments across the world have entered into international agreements or have otherwise acted to attempt to reduce global temperatures, in part by limiting greenhouse gas (“GHG”) emissions.

The FRB became a member of the Network of Central Banks and Supervisors for Greening the Financial System and, in its Financial Stability Report of November 2020, specifically addressed the implications of climate change for markets, financial exposures, financial institutions, and financial stability.

Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change, including mandatory substantive and/or disclosure requirements regarding climate change.

Such initiatives have been pursued with rigor under the current Presidential Administration.

The Financial Stability Oversight Council published a report in 2021 identifying climate-related financial risk as an “emerging threat” to financial stability.

The leadership of the federal banking agencies have emphasized that climate-related risks are faced by banking organizations of all types and sizes, specifically including physical and transition risks, and are in the process of enhancing supervisory expectations regarding banks' risk management practices.

To that end, on October 24, 2023, the federal banking agencies issued interagency guidance on principles for climate-related financial risk management by large financial institutions.

The guidance reiterates the agencies’ view that financial institutions are likely to be affected by both the physical risks and transition risks associated with climate change, which can manifest as traditional risks such as credit, market, liquidity, operation, and legal risks.

To address these risks, the guidance covers six areas:

policies, procedures, and limits;

strategic planning;

risk management;

data, risk management, and reporting;

and scenario analysis.

The guidance applies only to banking organizations with total consolidated assets of greater than $100 billion and therefore does not apply to the Bank directly.

Additionally, in March 2022, the SEC proposed new climate-related disclosure rules, which if finalized, would require new climate-related disclosures in SEC filings and audited financial statements, including certain climate-related metrics and direct and indirect GHG emissions data, information about climate-related targets and goals, transition plans, if any, and attestation requirements.

Disclosure requirements imposed by different regulators may not always be uniform, which may result in increased complexity, and cost, for compliance.

Additionally, many of our suppliers and business partners may be subject to similar requirements, which may augment or create additional risks, including risks that may not be known to us.

Although these new guidelines do not apply to a banking organization of our size, as the Company continues to grow and expand the scope of our operations, our regulators generally will expect us to enhance our internal control programs and processes, including with respect to risk management and stress testing under a variety of adverse scenarios and related capital planning.

In the event the federal banking agencies were to expand the scope of coverage of the new climate risk guidelines to

institutions of our size or promulgate new regulations or supervisory guidance applicable to the Company, we would expect to experience increased compliance costs and other compliance-related risks.

The above measures may also result in the imposition of taxes and fees, the required purchase of emission credits, and the implementation of significant operational changes, each of which may require the Company to expend significant capital and incur compliance, operating, maintenance and remediation costs.

Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to predict how climate change may impact our financial condition and operations;

however, as a banking organization, the physical effects of climate change may present certain unique risks to the Company.

For example, weather disasters, shifts in local climates and other disruptions related to climate change may adversely affect the value of real properties securing our loans, which could diminish the value of our loan portfolio.

Such events may also cause reductions in regional and local economic activity that may have an adverse effect on our customers, which could limit our ability to raise and invest capital in these areas and communities, each of which could have a material adverse effect on our financial condition and results of operations.

In recognition of the risks posed by climate change, as discussed above, the Company has taken a variety of actions to manage its carbon footprint and has sought to engage in sustainable lending and investment activities.

However, we cannot guarantee the success of these actions, nor can we make any assurances that our regulators, investors in our securities or other third parties, such as environmental advocacy organizations, will find our efforts to support climate-related initiatives to be sufficient.

Accounting, Tax and Financial Risks

Changes in income tax laws and interpretations, or in accounting standards, could materially affect our financial condition or results of operations.

Further changes in income tax laws could be enacted, or interpretations of existing income tax laws could change, causing an adverse effect on our financial condition or results of operations.

Similarly, our accounting policies and methods are fundamental to how we report our financial condition and results of operations.

Some of these policies require the use of estimates and assumptions that may affect the value of our assets, liabilities, and financial results.

Periodically, new accounting standards are issued or existing standards are revised, changing the methods for preparing our financial statements.

These changes are not within our control and may significantly impact our financial condition and results of operations.

The replacement of the London Inter-Bank Offered Rate ("LIBOR") may adversely affect our business.

Certain loans made by us are made at variable rates that use LIBOR as a benchmark for establishing the interest rate.

In addition, we also have investments and interest rate derivatives that reference LIBOR.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority ("FCA") announced that it intended to stop persuading or compelling banks to submit LIBOR rates after 2021.

On November 30, 2020 to facilitate an orderly LIBOR transition the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve jointly announced that entering into new contracts using LIBOR as a reference rate after December 31, 2021 would create a safety and soundness risk.

On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month U.S.

dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining U.S.

dollar LIBOR settings.

In the United States, efforts to identify a set of alternative U.S.

dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee ("ARRC") has recommended the use of a Secured Overnight Funding Rate ("SOFR").

SOFR is different from LIBOR in that it is a backward looking secured rate rather than a forward looking unsecured rate.

These differences could lead to a greater disconnect between the Bank's costs to raise funds for SOFR as compared to LIBOR.

For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward looking SOFR based on SOFR futures and may in part reduce

differences between SOFR and LIBOR.

To further reduce differences between replacement indices and substitute indices market practitioners have also gravitated towards credit sensitive rates, the leading among them being the Bloomberg Short-term Bank Yield Index (“BSBY”).

The ARRC announced on October 21, 2020 that they are not well positioned to adjudicate the development of a credit sensitive rate and will not criticize firms solely for using reference rates other than SOFR, such as BSBY.

The Company has the ability to originate new loans to customers based on SOFR, Term SOFR, BSBY, Prime and other indices but market acceptance or availability of these or other alternate reference rates remain uncertain.

The implementation of a substitute index or indices for the calculation of interest rates under our loan agreements with our borrowers may incur significant expenses in effecting the transition, may result in reduced loan balances if borrowers do not accept the substitute index or indices, and may result in disputes or litigation with customers over the appropriateness or comparability to LIBOR of the substitute index or indices, which could have an adverse effect on our results of operations.

These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established or the establishment of multiple alternative reference rate(s).

These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us .

Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation.

Changes in the federal, state, or local tax laws may negatively impact our financial performance.

We are subject to changes in tax law that could increase our effective tax rates.

These law changes may be retroactive to previous periods and as a result could negatively affect our current and future financial performance.

For example, legislation enacted in 2017 resulted in a reduction in our federal corporate tax rate from 35% in 2017 to 21% in 2018, which had a favorable impact on our earnings and capital generation abilities.

However, this legislation also enacted limitations on certain deductions, such as the deduction of FDIC deposit insurance premiums, which partially offset the anticipated increase in net earnings from the lower tax rate.

Any increase in the corporate tax rate or surcharges that may be adopted by Congress would adversely affect our results of operations in future periods.

In addition, the Bank’s customers experienced and likely will continue to experience varying effects from both the individual and business tax provisions of the Tax Act and other future changes in tax law and such effects, whether positive or negative, may have a corresponding impact on our business and the economy as a whole.

Further, on August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law.

The legislation imposed a non-deductible 1% excise tax on repurchases of stock by “covered corporations,” including the Company.

As a result, our results of operations in future periods may be impacted adversely to the extent of any significant stock repurchases by the Company.

Changes in our accounting policies or in accounting standards could materially affect how we report our financial results.

Our accounting policies are fundamental to understanding our financial results and condition.

Some of these policies require the use of estimates and assumptions that may affect the value of our assets or liabilities and financial results.

Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.

If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses.

From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our external financial statements.

These changes are beyond our control, can be hard to predict and could materially impact how we report our results of operations and financial condition.

We could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements in material amounts.

Stock Ownership Risk Factors

18 unchanged sentences

The Company continues to evaluate the potential impact that regulatory proposals may have on our liquidity and capital management strategies, including Basel III and those required under the Dodd-Frank Act.

The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, applicable SEC

rules, federal and state regulatory restrictions, and various other factors.

The actual amount and timing of future share repurchases, if any, will depend on market and economic conditions, applicable SEC rules, federal and state regulatory restrictions, and various other factors, including the recently implemented 1% excise tax on repurchases of stock.

In addition, the amount we spend and the number of shares we are able to repurchase under our stock repurchase program may further be affected by a number of other factors, including the stock price and blackout periods in which we are restricted from repurchasing shares.

4 unchanged sentences

The market price of our common stock has in the past fluctuated significantly.

We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing COVID-19 pandemic, disruption in global supply chains, uncertainty over the U.S.

We expect to see additional volatility in the financial markets due to the uncertainty caused by recent high-profile bank failures involving Silicon Valley Bank, Signature Bank and First Republic Bank, disruption in global supply chains, uncertainty over the U.S.

government debt ceiling and changing FRB policy.

2 unchanged sentences

•macro-economic and political conditions in the U.

and the financial markets generally (including the effects of the COVID-19 pandemic).

and the financial markets generally.

•variations in the operating results of the Company and our competitors.

49 unchanged sentences

Social, political, and economic instability, unrest, and other circumstances beyond our control could adversely affect our business operations.

Our business may be adversely affected by social, political, and economic instability, unrest, or disruption in a geographic region in which we operate, regardless of cause, including legal, regulatory, and policy changes by a new presidential administration in the U.S., protests, demonstrations, strikes, riots, civil disturbance, disobedience, insurrection, or social and other political unrest.

Our business may be adversely affected by social, political, and economic instability, unrest, or disruption in a geographic region in which we operate, regardless of cause, including legal, regulatory, and policy changes by the current presidential administration in the U.S., protests, demonstrations, strikes, riots, civil disturbance, disobedience, insurrection, or social and other political unrest.

Such events may result in restrictions, curfews, or other actions and give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations.

1 unchanged sentence

In addition, action resulting from such social or political unrest may pose significant risks to our personnel, facilities, and operations.

The effect and duration of demonstrations, protests, or other factors is uncertain, and we cannot ensure there will not be further political or social unrest in the future or that there will not be other events that could lead to social, political, and economic

If such events or disruptions persist for a prolonged period of time, our overall business and results of operations may be adversely affected.

2 unchanged sentences

Climate change, severe weather, natural disasters, and other external events could significantly impact our business.

Severe weather events of increasing strength and frequency due to climate change cannot be predicted and may be exacerbated by global climate change, natural disasters, including volcanic eruptions and earthquakes, and other adverse external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us.

external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us.

In addition, there is continuing uncertainty over demand for oil and gas in part due to consumer demand and regulatory changes from climate change related policies.

1 unchanged sentence

Although management has established disaster recovery policies and procedures, there can be no assurance of the effectiveness of such policies and procedures, and the occurrence of any such event could have a material adverse effect on our business, financial condition and results of operations.

UNRESOLVED STAFF COMMENTS

Increasing, complex and evolving regulatory, stakeholder, and other third party expectations on ESG matters could adversely affect our reputation, our access to capital and the market price of our securities.

The Company is subject to a variety of risks arising from ESG matters as governmental and regulatory bodies, investors, customers, employees and other stakeholders and third parties have been increasingly focused on ESG matters.

ESG matters include, among other things, climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we otherwise do business.

Risks arising from ESG matters may adversely affect, among other things, our reputation and the market price of our securities.

Further, we may be exposed to negative publicity based on the identity and activities of those to whom we lend and with which we otherwise do business and the public’s view of the approach and performance of our customers and business partners with respect to ESG matters.

Any such negative publicity could arise from adverse news coverage in traditional media and could also spread through the use of social media platforms.

The Company’s relationships and reputation with its existing and prospective customers and third parties with which we do business could be damaged if we were to become the subject of any such negative publicity.

This, in turn, could have an adverse effect on our ability to attract and retain customers and employees and could have a negative impact on the market price for securities.

Investors have begun to consider the steps taken and resources allocated by financial institutions and other commercial organizations to address ESG matters when making investment and operational decisions.

Certain investors are beginning to incorporate the business risks of climate change and the adequacy of companies’ responses to the risks posed by climate change and other ESG matters into their investment theses.

Additionally, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.

Unfavorable ratings of the Company may adversely affect investor sentiment towards the Company or the market price of our securities.

Further, as we continue to focus on developing ESG practices, and as investor and other stakeholder expectations, voluntary and regulatory ESG disclosure standards and policies continue to evolve, we have expanded and expect to further expand our public disclosures in these areas.

Such disclosures may reflect aspirational goals, targets, and other expectations and assumptions, which are necessarily uncertain and may not be realized.

Failure to realize (or timely achieve progress on) such aspirational goals and targets could adversely affect our third party ESG ratings, our reputation or otherwise adversely affect us.

Increased attention to ESG matters also has caused public officials, including certain state attorneys general, treasurers, and legislators, to take various actions to impact the extent to which ESG principles are considered by private investors.

For instance, certain states have enacted laws or issued directives designed to penalize financial institutions that the state believes are boycotting certain industries such as the fossil fuel and firearms industries.

These developments illustrate that ESG-based investing has become a divisive political issue.

Shifts in investing priorities based on ESG principles may result in adverse effects on the market price of our securities to the extent that investors that give significant weight to such principles determine that the Company has not made sufficient progress on ESG matters.

Conversely, the market price of our securities may be adversely affected if a government official or agency seeks to limit the Company’s business with a certain government entity or initiates an investigation or enforcement action because of what is perceived to be the Company’s unwarranted focus on ESG matters.

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.

What changed 10-K

Item 1A. Risk Factors