What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-27 · 47 added, 22 removed, 313 unchanged (18% of the section changed)

12 unchanged sentences

If the interest rates we pay on deposits increases at a faster rate than the interest we receive on loans and other investments, then our net interest income could be adversely affected.

If the Federal Reserve further raises interest rates, we may not be able to reflect increasing interest rates in rates charged on loans or paid on deposits due to competitive pressures, which would negatively impact our mix of deposits and other funding sources, reduce demand for our products and services, or otherwise negatively impact our financial condition and results of operations.

If the Federal Reserve raises interest rates, we may not be able to reflect increasing interest rates in rates charged on loans or paid on deposits due to competitive pressures, which would negatively impact our mix of deposits and other funding sources, reduce demand for our products and services, or otherwise negatively impact our financial condition and results of operations.

Decreases in interest rates may increase prepayment speeds of certain assets, which may adversely impact our net interest income.

In addition, the impact of these changes may be magnified if we do not effectively manage the relative sensitivity of our assets and liabilities to changes in market interest rates, and our ability to manage such relative sensitivity may be adversely impacted by competitive conditions in the banking industry and in the financial markets.

5 unchanged sentences

Also, changes in our deposit mix and growth could adversely affect our profitability and the ability to expand our loan portfolio, as well as our liquidity and funding mix.

During 2022 and 2023, in response to rising market interest rates, our cost of funds increased due to customer migration from lower-cost to higher-cost deposit accounts, including interest-bearing transaction accounts and time deposits, which negatively impacted our cost of funds and net interest margin.

Our investment securities portfolio could decline in value as a result of interest rate changes and changes in issuer credit quality or the strength of the associated collateral.

If interest rates change in the future, the market value of our investment securities portfolio may decline.

Weaknesses in the credit quality of the issuers of the securities within our portfolio or in the strength of the collateral, if any, underlying those securities could also result in a decline in the value of our investment securities portfolio, which could negatively affect equity and potentially impact our earnings or the liquidity that we could generate from our investment securities portfolio.

During 2024 and previous recent years, in response to rising market interest rates, our cost of funds has increased due to customer migration from lower-cost to higher-cost deposit accounts, including interest-bearing transaction accounts and time deposits, which has negatively impacted our cost of funds and net interest margin.

Our investment securities portfolio could decline in value and we may incur losses as a result of interest rate changes and changes in issuer credit quality or the strength of the associated collateral.

As of December 31, 2024, we owned $6.17 billion of investment securities, which included $3.64 billion in held-to-maturity securities and $2.53 billion in available for sale securities.

The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio, including changes in the issuer’s credit quality.

For available-for-sale securities, the unrealized gains and losses are recorded in equity, net of tax, in accumulated other comprehensive income (“AOCI”).

On a quarterly basis, we analyze whether there has been a decline in fair value below the amortized cost basis of our available for sale investment securities to determine whether there is a credit loss associated with the decline in fair value.

We consider the nature of the collateral, potential future changes in collateral values, default rates, delinquency rates, third-party guarantees, credit ratings, interest rate changes since purchase, volatility of the security’s fair value and historical loss information for financial assets secured with similar collateral among other factors.

We use a systematic methodology to determine the allowance for credit losses (“ACL”) for investment securities held to maturity.

The ACL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected on the held-to-maturity portfolio.

We consider the effects of past events, current conditions, and reasonable and supportable forecasts on the collectability of the investment portfolio.

Our estimate of the ACL involves a high degree of judgment;

therefore, our process for determining expected credit losses may result in a range of expected credit losses.

We monitor the held-to-maturity portfolio on a quarterly basis to determine whether a valuation account needs to be recorded.

Because of changing economic and market conditions affecting issuers, we may be required to recognize expected credit losses on securities in future periods, which could have a material adverse effect on our business, financial condition or results of operations.

As a result of fluctuations in interest rates, the market value of previously issued debt securities in the held-to-maturity portion of our securities portfolio has declined significantly, resulting in unrealized losses.

If the Company were required to sell such securities, including to meet liquidity needs, the Company would realize any previously unrealized losses which could adversely impact the Company’s financial condition and results of operations.

A lack of liquidity could impair our ability to fund our business and thereby adversely affect our financial condition and results of operations.

19 unchanged sentences

Deteriorating credit quality in our credit card portfolio may adversely impact us.

We have a sizeable consumer credit card portfolio.

Although we experienced a decreased amount of net charge-offs in our credit card portfolio in recent years, the amount of net charge-offs could worsen.

We have a sizeable consumer credit card portfolio, and, among other things, the amount of net charge-offs associated with it could worsen.

While we continue to experience a better performance with respect to net charge-offs than the national average in our credit card portfolio, our net charge-offs were 2.93% and 2.20% of our average outstanding credit card balances for the years ended December 31, 2024 and 2023, respectively.

5 unchanged sentences

Our methodology for establishing the appropriateness of the allowance for credit losses inherently involves a high degree of subjectivity and judgment and requires management to make significant estimates and predictions regarding credit risks, future market conditions, and other factors, all of which are subject to material changes and may not necessarily be in our control.

Some assumptions require management to forecast how borrowers will perform in changing and unprecedented economic conditions.

If our methodology is flawed, or if we experience changes in market or economic conditions, or in conditions of our borrowers, the allowance may become inadequate, which would result in additional provisions to increase the allowance to an appropriate level.

This could negatively impact our business, including through a material decrease in our earnings.

If we fail to accurately identify the appropriate economic indicators, to accurately estimate the timing of future changes in economic conditions, or to accurately estimate the impacts of future changes in economic conditions to our borrowers, the accuracy of our loss forecasts and allowance estimates could be adversely impacted.

In addition, prudential regulators also periodically review our allowance for credit losses and have the ability, based on their perspective, which may be different from ours, to require that we make adjustments to the allowance, which could also have a negative effect on our results of operations or financial condition.

26 unchanged sentences

We, therefore, may not be able to fully recover the outstanding balance of a loan in the event of its default if the real estate serving as collateral has declined in value from its original estimate, which could have a material adverse impact on our business, financial condition or results of operations.

Nonperforming assets take significant time to resolve and may adversely affect our business, results of operations and financial condition.

Our nonperforming assets adversely affect our net income in various ways.

We do not record interest income on nonaccrual loans, which adversely affects our income and increases loan administration costs.

When we receive collateral through foreclosures and similar proceedings, we are required to mark the related loan to the then fair market value of the collateral less estimated selling costs, which may result in a loss.

An increase in the level of nonperforming assets also increases our risk profile and may affect the minimum capital levels our regulators believe are appropriate for us in light of such risks.

We use various techniques such as workouts, restructurings, and loan sales to manage problem assets.

Increases in or negative adjustments in the value of these problem assets, the underlying collateral, or in the borrowers’ performance or financial condition, could adversely affect our business, results of operations, and financial condition.

In addition, the resolution of nonperforming assets requires significant commitments of time from management and staff, which can be detrimental to the performance of their other responsibilities.

There can be no assurance that we will not experience increases in our nonperforming assets in the future, or that our nonperforming assets will not result in losses in the future.

Risks Related to Our Business, Industry, and Markets

Our business, financial condition, and results of operations could be adversely affected by developments impacting the financial services industry, such as recent bank failures or concerns involving liquidity.

Recent events in the financial services industry (including the 2023 closures of Silicon Valley Bank, Signature Bank and First Republic Bank) caused general uncertainty and concern regarding the adequacy of liquidity of the financial services industry generally.

Prior events in the financial services industry, such as the 2023 closures of Silicon Valley Bank, Signature Bank and First Republic Bank, have caused general uncertainty and concern regarding the adequacy of liquidity of the financial services industry generally.

While we rely on different sources of funding to meet potential liquidity needs, our business strategies are largely based on access to funding from customer deposits and supplemental funding provided by wholesale or other secondary liquidity sources.

2 unchanged sentences

Department of the Treasury approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank and Signature Bank in a manner that fully protected depositors by utilizing the Deposit Insurance Fund, and the Federal Reserve announced it would make available additional funding for eligible depository institutions to help assure banks have the ability to meet the needs of their depositors.

While it appears these steps by the banking regulators helped customers’ perception of the financial markets and financial services industry generally, a number of factors, including further bank closures, or deposit outflows (and particularly sudden deposit outflows) from banks, may drive additional deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our financial performance or financial condition.

While these steps by the banking regulators helped customers’ perception of the financial markets and financial services industry generally, a number of factors, including further bank closures, or deposit outflows (and particularly sudden deposit outflows) from banks, may drive additional deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our financial performance or financial condition.

Our business may be adversely affected by conditions in the financial markets and general economic conditions.

95 unchanged sentences

To assist with the management of our credit, liquidity, operations, and compliance functions and risks, we have developed, and currently use, various models and other analytical tools, including certain estimations.

The models and estimations often take into account assumptions and historical trends and are, in some case, based on subjective judgments.

The models and estimations often take into account assumptions and historical trends and are, in some cases, based on subjective judgments.

As such, the models and estimations may not be effective in identifying and managing risks, which could adversely impact our financial condition and results of operations.

Inadequate models may also result in compliance failures, which could lead to increased scrutiny by our regulators.

Our risk-management framework may not be effective in mitigating risks and/or losses.

We maintain an enterprise risk management program that is designed to identify, assess, mitigate, monitor, and report the risks that we face.

These risks include:

strategic, credit, market (including interest-rate, capital, and liquidity), operational, regulatory (compliance), legal, and technology.

While we assess and seek to improve this program on an ongoing basis, there can be no assurance that our risk management framework and related controls will effectively mitigate all risk and limit losses in our business.

If conditions or circumstances arise that expose flaws or gaps in our risk-management program, or if our controls break down, our results of operations and financial condition may be adversely affected.

We must also develop and maintain a culture of risk management among our employees, as well as manage risks associated with third parties, and we could fail to do so effectively.

If our risk management framework is not effective, we could suffer unexpected losses and become subject to litigation, negative regulatory consequences, or reputational damage among other adverse consequences, which could materially adversely affect our business, financial condition, results of operations, and prospects.

We may not be able to raise the additional capital we need to grow and, as a result, our ability to expand our operations could be materially impaired.

11 unchanged sentences

Our business is heavily reliant on information technology systems, facilities, and processes;

and a disruption in those systems, facilities, and processes, or a breach, including cyber-attacks, in the security of our systems, could have significant, negative impact on our business, result in the disclosure of confidential information, and create significant financial and legal exposure for us.

and a disruption in those systems, facilities, and processes, or a breach, including cyber-attacks, in the security of our systems, could have significant, negative impacts on our business, result in the disclosure of confidential information, and create significant financial and legal exposure for us.

Our businesses are dependent on our ability and the ability of our third-party service providers to process, record and monitor a large number of transactions.

48 unchanged sentences

The scope and impact of the regulators’ actions can significantly impact the operations of the Company and its subsidiaries and the financial services industry in general.

These laws, regulations, and changes can increase our costs of regulatory compliance.

These laws, regulations, and changes thereto can increase our costs of regulatory compliance, make our business more complicated or burdensome to conduct, and have other adverse impacts on our business generally.

They also can significantly affect the markets in which we do business, the markets for and value of our investments, and our ongoing operations, costs, and profitability.

31 unchanged sentences

Risks Related to the Company’s Securities

The holders of our subordinated notes and subordinated debentures have rights that are senior to those of our common shareholders.

If we defer payments of interest on our outstanding subordinated debentures or if certain defaults relating to those debentures occur, we will be prohibited from declaring or paying dividends or distributions on, and from making liquidation payments with respect to, our common stock.

We have subordinated debentures issued in connection with trust preferred securities.

Payments of the principal and interest on the trust preferred securities are unconditionally guaranteed by us.

The subordinated debentures are senior to our shares of common stock.

As a result, we must make payments on the subordinated debentures (and the related trust preferred securities) before any dividends can be paid on our common stock.

In addition, in the event of our bankruptcy, dissolution or liquidation, the holders of both the subordinated debentures and the subordinated notes must be satisfied before any distributions can be made to the holders of our common stock.

We have the right to defer distributions on the subordinated debentures (and the related trust preferred securities) for up to five years, during which time no dividends may be paid to holders of our capital stock.

If we elect to defer or if we default with respect to our obligations to make payments on these subordinated debentures, this would likely have a material adverse effect on the market value of our common stock.

The holders of our subordinated notes have rights that are senior to those of our common shareholders.

We have issued subordinated notes.

Among other things, in the event of our bankruptcy, dissolution or liquidation, the holders of the subordinated notes must be satisfied before any distributions can be made to the holders of our common stock.

Moreover, without notice to or consent from the holders of our common stock, we may issue additional series of subordinated debt securities in the future with terms similar to those of our existing subordinated debt securities or enter into other financing agreements that limit our ability to purchase or to pay dividends or distributions on our capital stock.

2 unchanged sentences

Our ability to pay dividends depends on the following factors, among others:

• We may not have sufficient earnings since our primary source of income, the payment of dividends to us by our subsidiary bank, is subject to federal and state laws that limit the ability of the bank to pay dividends, and recently we have had to apply for state regulatory approval for certain dividends paid by the Bank to the Company;

• FRB policy requires bank holding companies to pay cash dividends on common stock only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition;

29 unchanged sentences

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