Item 1A Risk Factors
−Removed: In light of recent developments relating to COVID-19, the Company is supplementing its risk factors contained in Item 1A of its 2019 Form 10-K.
+Added: In light of recent developments relating to the COVID-19 pandemic, the Company is supplementing its risk factors contained in Item 1A of its 2019 Form 10-K.
The following risk factor should be read in conjunction with the risk factors described in the 2019 Form 10-K.
−Removed: The COVID-19 pandemic has adversely impacted our ability to conduct business and is expected to adversely impact our financial results and those of our customers.
+Added: The COVID-19 pandemic has impacted the way we conduct business which may adversely impact our financial results and those of our customers.
The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.
−Removed: The COVID-19 pandemic has significantly adversely affected our operations and the way we provide banking services to businesses and individuals, most of whom are currently under government issued stay-at-home orders.
−Removed: As an essential business, we continue to provide banking and financial services to our customers with branches remaining open with reduced lobby hours and social distancing queues in place and extended drive-thru hours In addition, we continue to provide access to banking and financial services through online banking, ATMs, ITMs and by telephone.
−Removed: If the COVID-19 pandemic worsens it could limit or disrupt our ability to provide banking and financial services to our customers.
−Removed: In response to the stay-at-home orders, the majority of our employees currently are working remotely to enable us to continue to provide banking services to our customers.
+Added: Although the stay-at-home orders in Washington State have been lifted and phased re-opening of businesses has commenced, the majority of our employees with the ability to work remotely have been encouraged to continue doing so, while continuing to provide banking services to our customers.
Heightened cybersecurity, information security and operational risks may result from these remote work-from-home arrangements.
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The COVID-19 pandemic may result in declines in loan demand and loan originations, other than through government sponsored programs such as the Payroll Protection Program, deposit availability, market interest rates and negatively impacted many of our business and consumer borrower’s ability to make their loan payments.
−Removed: Because the length of the pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including recent reductions in the targeted federal funds rate, until the pandemic subsides, we expect our net interest income and net interest margin will be adversely affected in the near term, if not longer.
+Added: Because the length of the pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including a continued low targeted federal funds rate, until the pandemic subsides, we expect our net interest income and net interest margin will be adversely affected in the near term, if not longer.
Many of our borrowers have become unemployed or may face unemployment, and certain businesses are at risk of insolvency as their revenues decline precipitously, especially in businesses related to travel, hospitality, leisure and physical personal services.
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Any increases in the allowance for credit losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.
−Removed: The PPP loans made by the Bank are guaranteed by the SBA and, if used by the borrower for authorized purposes, may be fully forgiven.
−Removed: However, in the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded or serviced by the Bank, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if it has already made payment under the guaranty, seek recovery of any loss related to the deficiency from the Bank.
−Removed: In addition, since the commencement of the PPP, several larger banks have been subject to litigation regarding their processing of PPP loan applications.
+Added: As of June 30, 2020, we held and serviced a portfolio of 782 PPP loans totaling $73.1 million.
+Added: PPP loans are subject to the provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies.
+Added: We expect that the vast majority of our PPP borrowers will seek full or partial forgiveness of their PPP loan obligations.
+Added: We could face additional risks in our administrative capabilities to service our PPP loans and with respect to the determination of loan forgiveness depending on the final procedures for determining loan forgiveness.
+Added: Further, since the commencement of the PPP, several larger banks have been subject to litigation regarding their processing of PPP loan applications.
The Bank may be exposed to the risk of similar litigation, from both customers and non-customers that approached the Bank seeking PPP loans.
−Removed: PPP lenders, including the Bank, may also be subject to the risk of litigation in connection with other aspects of the PPP, including but not limited to borrowers seeking forgiveness of their loans.
−Removed: If any such litigation is filed against the Bank, it may result in significant financial or reputational harm to us.
+Added: PPP lenders, including the Bank, may also be subject to the risk of litigation in connection with other aspects of the PPP, including but not limited to borrowers seeking forgiveness of their loans and PPP agents seeking fees from PPP lenders for assisting borrowers in securing PPP loans.
+Added: In June 2020, the Bank, along with ten other financial institutions, was sued by an agent on behalf of borrowers in connection with SBA loans under the PPP for fees payable out of the PPP loan processing fees lenders receive from the SBA.
+Added: If the plaintiff in this litigation or any future litigation filed against the Bank is successful, it may result in significant financial or reputational harm to us.
+Added: See, “Item 5.
+Added: Other Information” in Part II of this report for additional information.
Even after the COVID-19 pandemic subsides, the U.S.
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As a result, we anticipate our business may be materially and adversely affected during this recovery.
−Removed: To the extent the effects of the COVID-19 pandemic adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled "Risk Factors" in our 2019 Form 10-K and any subsequent Quarterly Reports on Form 10-Q.
+Added: To the extent the effects of the COVID-19 pandemic adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled "Risk Factors" in our 2019 Form 10-K.
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.