What changed in this filing

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Item 1A. Risk Factors

2022-11-18 compared with 2021-11-19 · 187 added, 139 removed, 240 unchanged (58% of the section changed)

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Operational Risks

Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and results of operations.

We are operating in an uncertain economic environment.

The pandemic caused a global economic slowdown, and while we have seen economic recovery, continuing supply chain issues, labor shortages and inflation risk are affecting the continued recovery.

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.

We decreased the expense for credit losses over fiscal year 2021 and 2022 as the economy began to recover, however, deteriorating conditions in the regional economies we serve, or in certain sectors of those economies, could drive losses beyond that which is provided for in our allowance for loan losses.

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

• Market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit facilities.

• The processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable.

Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting.

• Our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select, manage, and underwrite loans become less predictive of future charge-offs.

• Regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or fines.

• Ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that would have a materially adverse impact on our profitability and overall financial condition.

• Further erosion in the fiscal condition of the U.S.

Treasury could lead to new taxes that would limit our ability to pursue growth and return profits to shareholders.

If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition.

Fluctuating interest rates could adversely affect our business.

Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely affect both our ability to originate new loans and our ability to grow.

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

Further, the Federal Reserve has increased the benchmark rapidly and has announced an intention to take further actions to mitigate inflationary pressures.

Rapid changes in interest rates make it difficult for the Bank to balance its loan and deposit portfolios, which may adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.

Conversely, decreases in interest rates could result in an acceleration of loan prepayments.

The increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations.

If this occurred, it could cause an increase in nonperforming assets and charge offs, which could adversely affect our business.

Further, our profitability is dependent to a large extent upon net interest income, which is the difference (or “spread”) between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits, borrowings, and other interest-bearing liabilities.

Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities.

Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.

Although it is expected that the Federal Reserve 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 Federal Reserve 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 earnings.

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.

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

Inflation has continued rising in 2022 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.

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.

Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.

A deterioration in economic conditions in the United States and our 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.

Changes to monetary policy by the Federal Reserve could adversely impact our results of operations.

The Federal Reserve is responsible for regulating the supply of money in the United States, including open market operations used to stabilize prices in times of economic stress, as well as setting monetary policies.

These activities strongly influence our rate of return on certain investments, our hedge effectiveness for mortgage servicing and our mortgage origination pipeline, as well as our costs of funds for lending and investing, all of which may adversely impact our liquidity, results of operations, financial condition and capital position.

Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations.

The global credit and financial markets have from time to time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and uncertainty about economic stability.

The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between Russia and Ukraine, which is increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets.

Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.

The specific consequences of the conflict in Ukraine on our business is difficult to predict at this time, but in addition to inflationary pressures affecting our operations and those of our customers and borrowers, we may also experience an increase in cyberattacks against us, our customers and borrowers, service providers and other third parties.

There can be no assurance that further deterioration in markets and confidence in economic conditions will not occur.

Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or continued unpredictable and unstable market conditions.

Our allowance for credit losses ("ACL") may not be adequate to cover future loan losses, which could adversely affect our financial condition and results of operations.

Due to the declining economic conditions, our customers may not be able to repay their loans according to the original terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance.

While we maintain, and have increased, our ACL to provide for loan defaults and non-performance, losses may exceed the value of the collateral securing the loans and the allowance may not fully cover any excess loss.

While we maintain our ACL to provide for loan defaults and non-performance, losses may exceed the value of the collateral securing the loans and the allowance may not fully cover any excess loss.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.

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the size and composition of the loan portfolio, current economic conditions and geographic concentrations within the portfolio.

We have also included assumptions about the severity and duration of the effects of the COVID-19 pandemic on our borrowers, their industry, and on economic conditions in general, all of which are highly uncertain and for which we have no historical experience to draw upon.

Federal regulatory agencies, as part of their examination process, review our loans and ACL.

If our assumptions and judgments used to determine the ACL prove to be incorrect, if the value of the collateral securing the loans decreases substantially or if regulators disagree with its judgments, we may need to increase the ACL in amounts that exceed our expectations.

If our assumptions and judgments used to determine the ACL

prove to be incorrect, if the value of the collateral securing the loans decreases substantially or if regulators disagree with its judgments, we may need to increase the ACL in amounts that exceed our expectations.

Material additions to the ACL would adversely affect our results of operations and financial condition.

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We are exposed to risks related to fraud and cyber-attacks.

The Company is continuously enhancing and expanding our digital products and services to meet customer and business needs with desired outcomes.

These digital products and services often include storing, transmitting, and processing confidential customer, employee, monetary, and business information.

Cybersecurity, and the continued development and enhancement of controls, processes, and practices designed to protect customer information, systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a priority for the Company.

As cybersecurity threats continue to evolve, we may be required to expend additional resources to continue to enhance, modify, and refine our protective measures against these evolving threats.

We are continuously enhancing and expanding our digital products and services to meet customer and business needs with desired outcomes.

These digital products and services often include storing, transmitting, and processing confidential customer, employee, financial, and business information.

Due to the nature of this information, and the value it has for internal and external threat actors, we, and our third-party service providers, continue to be subject to cyber-attacks and fraud activity that attempts to gain unauthorized access, misuse information and information systems, steal information, disrupt or degrade information systems, spread malicious software, and other illegal activities.

The Company has recently changed our consumer online and mobile banking platforms to provide more flexibility and customizable feature sets to improve customer experience.

This change provides the Company more opportunity to differentiate

ourselves in the market, but also increases our direct responsibility for managing cybersecurity risk associated with digital banking, when historically, the responsibility for providing adequate safeguards and security controls was managed by third party vendors.

We have recently changed our consumer online and mobile banking platforms to provide more flexibility and customizable feature sets to improve customer experience.

This change provides the Company more opportunity to differentiate ourselves in the market, but also increases our direct responsibility for managing cybersecurity risk associated with digital banking, when historically, the responsibility for providing adequate safeguards and security controls was managed by third party vendors.

We believe we have robust preventive, detective, and administrative safeguards and security controls to minimize the probability and magnitude of a material event.

However, because the tactics and techniques used by threat actors to bypass safeguards and security controls change frequently, and often are not recognized until after an event has occurred, we may be unable to anticipate future tactics and techniques, or to implement adequate and timely protective measures.

As cybersecurity threats continue to evolve, we may be required to expend additional resources to continue to enhance, modify, and refine our protective measures against these evolving threats.

To date, we have no knowledge of a successful cyber-attack or other material information security breach affecting our systems.

However, our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the continuation of a remote work environment for our employees and service providers and our plans to continue to implement and expand digital banking services, expand operations, and use third-party information systems that includes cloud-based infrastructure, platforms, and software.

Recent instances of attacks specifically targeting financial services businesses indicate that the risk to our systems remains significant.

If we or a critical third party vendor were to experience a cyber-attack or information security breach, we could suffer damage to our reputation, productivity losses, response costs associated with investigation and resumption of services, and incur substantial additional expenses, including remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.

In addition, the Company’s customers and vendors rely on technology and systems unmanaged by the Company, such as networking devices, server infrastructure, personal computers, smartphones, tablets, and other mobile devices, to contact and conduct business with the Company.

If the devices of the Company’s customers or vendors become the target of a cyber-attack, or information security breach, it could result in unauthorized access to, misuse of, or loss of confidential customer, employee, monetary, or business information.

Threat actors using improperly obtained personal or financial information of consumers can attempt to obtain loans, lines of credit, or other financial products from the Company, or attempt to fraudulently persuade the Company’s employees, customers, or other users of the Company’s systems to disclose confidential information in order to gain improper access to the Company’s information and information systems.

In June 2022, we were notified by a third-party vendor that it experienced a network security incident involving unauthorized access to certain personal and financial data of some of our customers.

We immediately suspended services with the vendor.

After the incident was detected, this third-party vendor engaged a third-party security firm to investigate the incident, provide support to remove the unauthorized access, enhance its security controls, and help the third-party vendor safely resume operations.

After an investigation into the extent of the data that was compromised we notified all customers impacted by this breach.

There was no breach of our own systems due to this incident.

After receiving assurances that this third-party is operating in a safe and secure manner, we have resumed operations with it.

We are not aware of any continuing cybersecurity threats or breaches involving this vendor or our systems generally.

Future incidents involving this vendor or other third-party service providers could cause us to suffer damage to our reputation and could require us to incur substantial expenses, which could have a materially adverse effect on our business, financial condition, and results of operations.

To date, we have no knowledge of a successful cyber-attack or other material information security breach affecting the systems we operate and control.

However, our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the continuation of a remote or hybrid work environment for our employees and service providers, and our plans to continue to implement and expand digital banking services, expand operations, and use third-party information systems that includes cloud-based infrastructure, platforms, and software.

Recent instances of attacks specifically targeting banks and financial services businesses indicate that the risk to our systems remains significant.

We, and our third-party providers, are regularly the subject of attempted attacks and the ability of the attackers continues to grow in sophistication.

Potential threats to our technologies, systems, networks, and other devices, as well as those of our employees, third party vendors, and other third parties with whom we interact, include DDoS attacks, computer viruses, hacking, malware, ransomware, credential stuffing, or phishing or other forms of social engineering.

Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized transactions our customers’ accounts, unauthorized or unintended access to or release, gathering, monitoring, disclosure, loss, destruction, corruption, disablement, encryption, misuse, modification or other processing of confidential or sensitive information (including personal information), intellectual property, software, methodologies or business secrets, disruption, sabotage or degradation of service, systems or networks, or other damage.

These threats may derive from, among other things, error, fraud or malice on the part of our employees, insiders, or third parties or may result from accidental technological failure.

Any of these parties may also attempt to fraudulently induce employees, service providers, customers, partners or other third-party users of our systems or networks to disclose confidential or sensitive information (including personal information) in order to gain access to our systems, networks or data or that of our customers, partners, or third parties with whom we interact, or to unlawfully obtain monetary benefit through misdirected or otherwise improper payment.

For example, any party that obtains our confidential or sensitive information (including personal information) through a cyber-attack or other security incident may use this information for ransom, to be paid by us or a third party, as part of a fraudulent activity that is part of a broader criminal activity, or for other illicit purposes.

A cyber-attack or other security incident on the systems we operate and control could cause us to suffer damage to our reputation, result in productivity losses, require us to incur substantial expenses, including response costs associated with investigation and resumption of services, remediation expenses costs associated with customer notification and credit monitoring services, increased insurance premiums, regulatory penalties and fines, and costs associated civil litigation, any of which could have a materially adverse effect on our business, financial condition, and results of operations.

We also face additional costs when our customers become the victims of cyber-attacks.

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Our customers may be the victims of phishing scams, providing cyber criminals access to their accounts, or credit or debit card information.

In these situations, we incur costs to replace compromised cards and address fraudulent transaction activity affecting our customers.

In these situations, we incur costs to replace compromised cards and address fraudulent transaction activity affecting our customers, as well as potential increases to insurance premiums for policies we may maintain to cover these losses.

Both internal and external fraud and theft are risks.

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Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or if such information were to be intercepted or otherwise inappropriately taken by third parties, or if our own employees abused their access to financial systems to commit fraud against our customers and the Company.

These activities can occur in connection with the origination of loans and lines of credit, ACH transactions, wire transactions, ATM transactions, and checking transactions, and result in financial losses as well as reputational damage.

These activities can occur in connection with activities such as the origination of loans and lines of credit, ACH transactions, wire transactions, ATM transactions, and checking transactions, and result in financial losses as well as reputational damage.

Operational errors can include information system misconfiguration, clerical or record-keeping errors, or disruptions from faulty or disabled computer or telecommunications systems.

Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified.

Because the nature of the financial services business involves a high volume of transactions, certain errors, which may be automated or manual, may be repeated or compounded before they are discovered and successfully rectified.

Because of the Company’s large transaction volume and its necessary dependence upon automated systems to record and process these transactions, there is a risk that technical flaws, tampering, or manipulation of those automated systems, arising from events wholly or partially beyond its control, may give rise to disruption of service to customers and to financial loss or liability.

We are exposed to the risk that our business continuity and data security systems prove to be inadequate.

The occurrence of any of these risks could result in a diminished ability for us to operate our business, additional costs to correct defects, potential liability to clients, reputational damage.

and regulatory intervention, any of which could adversely affect our business, financial condition and results of operations.

The ongoing COVID-19 pandemic is increasing cyber-security risks.

The ongoing COVID-19 pandemic has introduced additional risk to our information systems and security procedures, controls and policies as a result of employees, contractors and other corporate partners working remotely.

As a result of the increased remote workforce, we must increasingly rely on information technology systems that are outside our direct control,

and these systems are also vulnerable to cyber-based attacks and security breaches.

In addition, since the beginning of pandemic, there has been an increase in attacks by cyber criminals on businesses and individuals, utilizing interest in pandemic-related information and the fear and uncertainty caused by the pandemic to increase phishing, malware, and other cybersecurity attacks designed to trick victims into transferring sensitive data or funds, steal credentials or deploy malware that compromises information systems.

If one of our employees were to fall victim to one of these attacks, or our information technology systems are compromised, our operations could be disrupted, or we may suffer financial loss, reputational loss, loss of customer business or other critical assets, or become exposed to regulatory fines and intervention or civil litigation.

Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and results of operations.

We are operating in an uncertain economic environment.

The pandemic caused a global economic slowdown, and while we have seen some economic recovery, raw material shortages, supply chain issues and labor shortages risk slowing or reversing the continued recovery.

We decreased the expense for credit losses over fiscal year 2021 as the economy began to recover, however, deteriorating conditions in the regional economy served by our Company, or in certain sectors of the economy, could drive losses beyond that which is provided for in our allowance for loan losses.

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

• The processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable.

Such estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be rendered inaccurate and/or no longer subject to accurate forecasting.

• Further erosion in the fiscal condition of the U.S.

Treasury could lead to new taxes that would limit our ability to pursue growth and return profits to shareholders.

If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition.

The continuing COVID-19 pandemic could adversely affect our business and our customers, counterparties, employees, and third-party service providers.

The spread of COVID-19 has created a global public-health crisis that has impacted household, business, economic, and market conditions, including in the western United States where we conduct nearly all of our business.

During 2021, we saw an improvement in macroeconomic variables used in the forecast component of the reserve partially offset by provisioning for new loan originations.

Our provision expense was $500,000 in 2021, as compared to a $21,750,000 provision expense for the year ended September 30, 2020.

As of September 30, 2021, our allowance for credit losses increased to $198,800,000.

Additionally, throughout the pandemic our operations have been impacted by the need to close certain offices and limit how customers conduct business through our branch network.

The ongoing COVID-19 pandemic, or a similar health crisis, may adversely affect our business and our customers, counterparties, employees, and third-party service providers in the future.

The spread of COVID-19 created a global public-health crisis that resulted in significant economic uncertainty, and has impacted household, business, economic, and market conditions, including in the western United States where we conduct nearly all of our business.

Throughout the pandemic our operations have been impacted by the need to close certain offices and limit how customers conduct business through our branch network.

Many of our employees continue to work remotely, which exposes us to increased cybersecurity risks such as phishing, malware, and other cybersecurity attacks, all of which could expose us to liability and could seriously disrupt our business operations.

Governments have taken unprecedented financial and monetary steps in response to the pandemic.

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 American Rescue Plan Act, also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L.

117-2, was enacted to inject an additional $1.9 trillion in financial relief and economic stimulus.

The Federal Reserve Bank has taken decisive and sweeping actions as well.

Since March 15, 2020, their actions have included a reduction in the target range for the federal funds rate to 0 to 25 basis points, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, corporate bonds and other investments, and numerous facilities to support the flow of credit to households and

The federal funds rate remains at historic lows.

The possibility of negative interest rates on U.S.

Treasury or other market instruments could adversely affect our results of operations by, for example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.

The full extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects is still uncertain, and will depend on a number of evolving factors, including:

• The duration, extent, and severity of the pandemic .

COVID-19 has not yet been contained;

continuing spread and rise of new variants could affect significantly more households and businesses, or cause additional limitations on commercial activity, increased unemployment, increased property vacancy rates and general economic and financial instability.

The continuation of the pandemic may also negatively impact regional economic conditions for a period of time, resulting in declines in loan demand and collateral values.

Continuation of the COVID-19 pandemic, or a similar crisis, could negatively impact our capital, liquidity, and other financial positions and our business, results of operations, and prospects.

A resurgence in spread, caused by the rise of new variants, could affect significantly more households and businesses, or cause additional limitations on commercial activity, increased unemployment, increased property vacancy rates and general economic and financial instability.

A slow-down or reversal in the economic recovery of the regions in which we conduct our business could result in declines in loan demand and collateral values.

Negative impacts on our customers caused by COVID-19 could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.

The duration and severity of the pandemic continues to be impossible to predict, as is the potential for a seasonal or other resurgence.

We also believe we will continue to see the economic effects of the pandemic even after the COVID-19 outbreak has subsided, which is expected to continue to affect our business, financial position, results of operations and prospects.

• The response of governmental authorities .

• Additional actions of governmental authorities .

To date, many of the actions of governmental authorities, including eviction forbearance, occupancy restrictions and vaccine mandates, have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal and monetary policy measures to partially mitigate the adverse effects on individual households and businesses.

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Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity and could have lasting effects on taxes and other economic factors, which could adversely affect our results of operations and financial condition.

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 American Rescue Plan Act, also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L.

117-2, 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.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), we are subject to additional risks of litigation from our customers or other parties regarding our processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

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Under the PPP (and its expansion in 2021), small businesses and other entities and individuals were eligible to apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.

We have participated as a lender in the PPP, and through September 30, 2021, assisted approximately 9,000 businesses with $1,100,000 in PPP loans.

The PPP opened on April 3, 2020;

however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes us to potential risks relating to noncompliance with the PPP, and risks related to fair lending, violation of BSA/AML requirements and reputational risk.

Since the opening of the PPP, several other banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP and claims related to agent fees.

We may be exposed to the risk of similar litigation, from both customers and non-customers that approached us regarding PPP loans, regarding our process and procedures used in processing applications or forgiveness requests for the PPP, or litigation from agents with respect to agent fees.

If any such litigation is filed against us and is not resolved in a favorable manner, it may result in significant financial liability or adversely affect the Company’s reputation.

In addition, litigation can be costly, regardless of outcome.

Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial condition and results of operations.

We also have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP.

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 us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the

deficiency from us.

As of September 30, 2021, approximately 7,000 PPP loans totaling $773,000,000 have been forgiven by the SBA, and we continued to hold PPP loans receivable of $305,162,000.

We participated as a lender in the PPP, and ultimately assisted approximately 9,000 businesses with approximately $1,085,000,000 in PPP loans.

As of September 30, 2022, approximately 8,800 PPP loans totaling approximately $1,075,000,000 have been forgiven by the SBA, and we continued to hold PPP loans receivable of $10,141,000.

We have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by us, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP.

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 us, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us.

In addition, several larger banks were subject to litigation regarding their processing of PPP loan applications.

We could be exposed to the risk of similar litigation, from both customers and non-customers that approached us seeking PPP loans.

We and other PPP lenders 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.

If any such litigation is filed against us, it may result in significant financial or reputational harm to us.

If we are not able to retain or attract key employees, or if we were to suffer the loss of a significant number of employees, we could experience a disruption in our business.

If a key employee or a substantial number of employees depart or become unable to perform their duties, it may negatively impact our ability to conduct business as usual.

We might then have to divert resources from other areas of our operations, which could create additional stress for other employees, including those in key positions.

The loss of qualified and key personnel, or an inability to continue to attract, retain and motivate key personnel could adversely affect our business and consequently impact our financial condition and results of operations.

Our risk management framework may not be effective in mitigating risks and losses to us.

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance.

Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment.

Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk of loss to us.

If our framework is not effective, we could suffer unexpected losses and our financial condition, operations or business prospects could be materially and adversely affected.

We may also be subject to potentially adverse regulatory consequences.

Climate change could adversely affect our business, affect client activity levels and damage our reputation.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts.

Consumers and businesses are also changing their behavior and business preferences as a result of these concerns.

New governmental regulations or guidance relating to climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, may affect whether and on what terms and conditions we will engage in certain activities or offer certain products or services.

The governmental and supervisory focus on climate change could also result in our becoming subject to new or heightened regulatory requirements, such as requirements relating to operational resiliency or stress testing for various climate stress scenarios.

Any such new or heightened requirements could result in increased regulatory, compliance or other costs or higher capital requirements.

In connection with the transition to a low carbon economy, legislative or public policy changes and changes in consumer sentiment could negatively impact the businesses and financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients.

Our business, reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.

Furthermore, the long-term impacts of climate change will have a negative impact our customers and their business.

Physical risks include extreme storms that damage or destroy property and inventory securing loans we make, or may interrupt our customer’s business operations , putting them in financial difficulty, and increasing the risk of default.

Our customers are also facing changes in energy and commodity prices driven by climate change, as well as new regulatory requirements resulting in increased operational costs.

Regulatory and Litigation Risks

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The consent order will be in effect for 10 years.

We had previously entered in a consent order with the CFPB in 2013, also relating to HMDA reporting deficiencies, resulting in a $34,000 civil money penalty.

We had previously entered in a consent order with the CFPB in 2013, also relating to HMDA reporting deficiencies, resulting in a

$34,000 civil money penalty.

The 2013 HMDA Consent Order remains in effect.

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Failure or the inability to comply with the Patriot Act and BSA statutes and regulations could result in fines or penalties, curtailment of expansion opportunities, enforcement actions, intervention or sanctions by regulators and costly litigation or expensive additional controls and systems.

During the last few years, several banking institutions have received large fines for non-compliance with these laws and regulations, and we are subject to a Consent Order and have paid a civil money penalty with respect to our BSA Program, as described below.

During the last few years, several banking institutions have received large fines for non-compliance with these laws and regulations, and we were subject to a Consent Order and have paid a civil money penalty with respect to our BSA Program, as described below.

In addition, the U.S.

Government imposed and is expected to continue to expand laws and regulations relating to residential and consumer lending activities that could create significant new compliance burdens and financial costs.

We remain subject to a Consent Order with the Office of the Comptroller of the Currency with respect to our BSA compliance, requiring the Company to implement additional controls and systems and curtail expansion plans.

We have paid a $2,500,000 civil money penalty and the Consent Order remains in effect.

Any failure to comply with the Consent Order could result in additional regulatory enforcement action, including additional fines or sanctions.

The Bank Secrecy Act, the Patriot Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.

On February 28, 2018, pursuant to a Stipulation and Consent to the Issuance of a Consent Order (the “Stipulation”), the OCC issued a Consent Order relating to the Bank, the terms of which are intended to further enhance its BSA program.

Copies of the Stipulation and the Consent Order were filed with the SEC on March 1, 2018 as exhibits to our Current Report on Form 8-K.

Since the issuance of the Consent Order, the Bank has incurred significant expenses as it worked to strengthen its BSA/AML program and implemented additional policies and procedures associated with complying with the Consent Order.

The Bank cannot pursue acquisitions or branch expansion while the Consent Order is in place.

On September 30, 2021, the Bank announced that it had entered into an agreement with the OCC to pay a $2,500,000 civil money penalty associated with the deficiencies identified in the Stipulation and Consent Order.

The payment of the civil penalty is an important milestone towards the Bank’s resolution of the Consent Order, however, the Consent Order remains in place, and the OCC may take further government action with respect to the Bank’s BSA program, including the imposition of additional fines, sanctions, additional expenses and compliance costs, and/or restrictions on the activities of the Bank.

In addition, failure to comply with the Consent Order could subject us to additional expense and further regulatory enforcement action, including the imposition of material restrictions on the activities of the Bank or the assessment of fines or penalties, which could prevent the Bank from executing its business strategy and negatively impact its business.

Moreover, failure to maintain and implement an effective BSA program could also have serious reputational consequences for the Bank.

The Bank was previously subject to a Consent Order from the OCC for its BSA program that was issued in February 2018 (the “BSA Consent Order”).

The BSA Consent Order resulted in the Bank incurring significant expenses to comply with it, including payment of a $2,500,000 civil money penalty.

The OCC terminated the BSA Consent Order in December 2021.

However, the Bank remains subject to the BSA, the Patriot Act, and other laws and regulations requiring financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.

Failure to maintain an effective BSA program could have serious business, financial and reputational consequences for the Bank.

Any of these results could have a material adverse effect on our business, financial condition and results of operations.

We operate in a highly regulated industry, which limits the manner and scope of our business activities.

We are subject to extensive supervision, regulation and examination by the OCC, CFPB and the FDIC.

We are subject to extensive supervision, regulation and examination by the WDFI, CFPB and the FDIC.

In addition, the Federal Reserve is responsible for regulating the holding company.

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As part of this regulatory structure, we are subject to policies and other guidance developed by the regulatory agencies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

Under this structure the OCC, the FDIC, the CFPB and the Federal Reserve have broad discretion to impose restrictions and limitations on our operations if they determine, among other things, that our operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.

Under this structure the WDFI, the FDIC, the CFPB and the Federal Reserve have broad discretion to impose restrictions and limitations on our operations if they determine, among other things, that our operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.

This supervisory framework could materially impact the conduct, growth and profitability of our operations.

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Failure to meet regulatory requirements could require the Bank to incur additional significant costs in order to bring our programs and operations into compliance, negatively impact our reputation, and have a material adverse effect on our business, financial condition and results of operations.

In addition, the OCC has specific authority to take “prompt corrective action,” depending on the Bank's capital level.

In addition, the FDIC has specific authority to take “prompt corrective action,” depending on the Bank's capital level.

Currently, the Bank is considered “well-capitalized” for prompt corrective action purposes.

If the Bank were designated by the OCC as “adequately capitalized,” its ability to take brokered deposits would become limited.

If the Bank were to be designated by the OCC in one of the lower capital levels “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” it would be required to raise additional capital and would be subject to progressively more severe restrictions on its operations, management and capital distributions, and replacement of senior executive officers and directors.

If the Bank were designated as “adequately capitalized,” its ability to take brokered deposits would become limited.

If the Bank were to be designated in one of the lower capital levels “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” it would be required to raise additional capital and would be subject to progressively more severe restrictions on its operations, management

and capital distributions, and replacement of senior executive officers and directors.

If the Bank became “critically undercapitalized,” it would also be subject to the appointment of a conservator or receiver.

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The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund ("DIF") at a specific level.

The Bank's FDIC insurance premiums increased substantially beginning in 2009, and could increase significantly in the future.

Unfavorable economic conditions, increased bank failures and additional failures decreased the DIF.

In order to restore the DIF to its statutorily mandated minimum of 1.35% of total deposits, the FDIC may need to increase deposit insurance premium rates.

Insured institutions with assets of $10 billion or more are responsible for funding this increase.

The FDIC has issued regulations to implement these provisions of the Dodd-Frank Act.

Historically, unfavorable economic conditions increased bank failures and these additional failures decreased the DIF.

In order to restore the DIF to its statutorily mandated minimums the FDIC significantly increased deposit insurance premium rates, including the Bank's.

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%.

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 keep the DIF at the statutory target level.

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.

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

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We may also face class action lawsuits for alleged violations of employment, state wage and hour and consumer protection laws.

These claims could involve large monetary demands, including civil money penalties or fines imposed by government authorities, and

significant defense costs.

These claims could involve large monetary demands, including civil money penalties or fines imposed by government authorities, and significant defense costs.

If such claims and legal actions are brought, and are not resolved in a manner favorable to the Company, they could result in financial liability and/or reputational harm, which could have a material adverse effect on our financial condition and results of operations.

Banking institutions are also increasingly the target of class action lawsuits, most recently claiming deceptive practices or violations of account terms in connection with non-sufficient funds or overdraft charges.

Banking institutions are also increasingly the target of class action lawsuits.

Most recently there has been an increase in claims filed claiming deceptive practices or violations of account terms in connection with non-sufficient funds or overdraft charges.

In September 2020, we received notice a similar class action had been filed against the Bank, alleging that we have been improperly charging our customers overdraft fees on items re-presented for payment.

A lawsuit against the Bank for non-sufficient funds and overdraft charges for re-presented items is pending.

We do not believe the claims have merit, and are opposing the lawsuit and the certification of the class.

However, the results of litigation are inherently unpredictable, and defending against these claims is expected to be time consuming and costly, and could require significant amounts of management time and divert significant resources.

If this or another class action lawsuit is determined adversely to us, or we were to enter into a settlement agreement in connection with such a matter, we could be exposed to monetary damages, reputational harm, or subject to limits on our ability to operate our business, which could have an adverse effect on our financial condition, and operating results.

In May 2022, the Bank settled this lawsuit for a payment of $495,000 plus claims administrative expenses.

In June 2022, the court granted preliminary approval of the settlement, and the claims administration process is ongoing.

If the settlement is not approved by the court, or if another class action lawsuit is filed or determined adversely to us, or we were to enter into a settlement agreement in connection with such a matter, we could be exposed to monetary damages, reputational harm, or subject to limits on our ability to operate our business, which could have an adverse effect on our financial condition, and operating results.

Our real estate lending also exposes us to the risk of environmental liabilities.

In the course of our business, it is necessary to foreclose and take title to real estate, which could subject us to environmental liabilities with respect to these properties.

Hazardous substances or waste, contaminants, pollutants or sources thereof may be discovered on properties during our ownership or after a sale to a third party.

We could be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances or chemical releases at such properties.

The costs associated with investigation or remediation activities could be

substantial and could substantially exceed the value of the real property.

In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.

We may be unable to recover costs from any third party.

These occurrences may materially reduce the value of the affected property, and we may find it difficult or impossible to use or sell the property prior to or following any environmental remediation.

If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected.

Market and Industry Risks

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A downturn in the real estate market would hurt our business.

The Bank’s business activities and credit exposure are concentrated in real estate lending.

The Bank’s business activities and credit exposure are concentrated in real estate lending, in particular commercial real estate loans which are generally viewed as having more risk of default than residential real estate loans or certain other types of loans or investments.

The market for real estate is cyclical and the outlook for this sector is uncertain.

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As a result, our ability to recover the principal amount due on defaulted loans by selling the underlying real estate will be diminished, and we will be more likely to suffer losses on defaulted loans.

Because our loan portfolio contains commercial real estate loans with relatively large balances, the deterioration of these loans may cause a significant increase in our nonperforming loans which could result in a loss of earnings from these loans, an increase in the provision for loan losses, or an increase in loan charge-offs, any of which would have an adverse impact, which could be material, on our business, financial condition, and results of operations.

We own real estate as a result of foreclosures resulting from non-performing loans.

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These actions could lead to losses on these assets or could adversely impact the carrying value of other long-lived assets and may lead to increased expenditures to renovate and reconfigure remaining branches or to otherwise reform our retail distribution channel.

In addition, any changes in our branch network strategy could adversely impact our business, financial condition or operations if it results in the loss of customers or deposits which we rely on as a low cost and stable source of funds for our loans and operations.

any changes in our branch network strategy could adversely impact our business, financial condition or operations if it results in the loss of customers or deposits which we rely on as a low cost and stable source of funds for our loans and operations.

We may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices.

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However, the yields generated by long-term loans, such as single-family residential and multifamily mortgage loans, and securities are typically driven by longer-term (10 year) interest rates, which are set by the market and vary from day to day.

During the last few years, the Federal Reserve's unprecedented involvement in the purchase of assets, commonly known as "quantitative easing," has caused interest rates to be lower than they would have been without such involvement.

The COVID-19 pandemic has led the Federal Reserve to reverse its unwinding of quantitative easing and instead dramatically increase their non-traditional activities.

These activities suppress long-term interest rates and could lead to unforeseen consequences.

If the interest rates on interest-bearing liabilities increase at a faster pace than the interest rates on interest-earning assets, the result could be a reduction in our net interest income and with it, a reduction in earnings.

Further, recent changes in the Federal Reserve's purchase of assets, commonly known as "quantitative easing," have created significant volatility in market interest rates and recent, rapid increases in federal benchmark rates and likely additional increases in such rates are creating additional uncertainty and making it more difficult for us to balance our loan and deposit portfolios.

For example, if the interest rates on interest-bearing liabilities increase at a faster pace than the interest rates on interest-earning assets, the result could be a reduction in our net interest income and with it, a reduction in earnings.

The same could be true if interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities.

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Foreclosure process issues and the potential legal and regulatory responses to them could negatively impact the process and timing to completion of foreclosures for residential mortgage lenders, including the Bank.

Due to the COVID-19 emergency, certain states in which we do business have enacted temporary stays on evictions and foreclosures, or instituted a right to forbearance for homeowners experiencing financial hardship.

Foreclosure timelines have increased in recent years due to, among other reasons, delays associated with the significant increase in the number of foreclosure cases as a result of economic downturns, additional consumer protection initiatives related to the foreclosure process and voluntary or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure.

Should these stays or rights to forbearance continue, we may be limited in our inability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses.

Due to the COVID-19 emergency, certain states in which we do business enacted temporary stays on evictions and foreclosures, or instituted a right to forbearance for homeowners experiencing financial hardship.

Even before the adoption of these emergency policies, foreclosure timelines have increased in recent years due to, among other reasons, delays associated with the significant increase in the number of foreclosure cases as a result of economic downturns, additional consumer protection initiatives related to the

foreclosure process and voluntary or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure.

Should these stays or rights to forbearance continue, we may be limited in our ability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses.

Increases in the foreclosure timeline may also have an adverse effect on collateral values and the our ability to minimize our losses.

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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 intends 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 contacts using LIBOR as a reference rate after December 31, 2021 would create a safety and soundness risk.

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.

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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 prepared to originate new loans to customers based on SOFR, Term SOFR and BSBY.

There are also operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry.

The Company has prepared 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.

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Many competitors, including fintech companies, offer the same types of loan and deposit services that the Company offers.

These competitors include other national banks, savings associations, community banks, credit unions and other financial intermediaries.

These competitors include national and multinational banks, other regional banks, savings associations, community banks, credit unions and other financial intermediaries.

In particular, our competitors include national banks and major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.

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Ultimately, competition from current and future competitors may affect our business materially and adversely.

We may not be able to continue to grow organically or through acquisitions.

Historically, we have expanded through a combination of organic growth and acquisitions.

If market and regulatory conditions change, we may be unable to grow organically or successfully compete for, complete, and integrate potential future acquisitions at the same pace as we have achieved in recent years, or at all.

We have historically used our strong stock currency and capital resources to complete acquisitions.

Downturns in the stock market and the market price of our stock, changes in our capital position, and changes in our regulatory standing could each have a negative impact on our ability to complete future acquisitions.

Security Ownership Risks

Our ability to pay dividends is subject to limitations that may affect our ability to continue to pay dividends to shareholders.

We are a separate legal entity from our bank subsidiary and do not have significant operations of our own.

The Company is a separate legal entity from the bank subsidiary and does not have significant operations of its own.

The availability of dividends from the Bank is limited by the Bank's earnings and capital, as well as various statutes and regulations.

It is possible, depending upon the financial condition of the Bank and other factors, that the Bank may not be able to pay dividends to the Company.

If the Bank is unable to pay dividends to the Company, then we may not be able to pay dividends on

our preferred or common stock to our shareholders.

There are various federal law limitations on the extent to which the Bank can finance or otherwise supply funds to Washington Federal through dividends and loans.

These limitations include capital adequacy regulations and policies of its regulators generally and specifically the Office of the Comptroller of the Currency, Prompt Corrective Action regulations, federal banking law requirements concerning the payment of dividends out of net profits or surplus, Sections 23A and 23B of the Federal Reserve Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal regulatory oversight to prevent unsafe or unsound practices.

If the Bank is unable to pay dividends to the Company, then we may not be able to pay dividends on our preferred or common stock to our shareholders.

There are various federal law limitations on the extent to which the Bank can finance or otherwise supply funds to the Company through dividends and loans.

These limitations include capital adequacy regulations and policies of its regulators generally and specifically the FDIC’s Prompt Corrective Action regulations, federal banking law requirements concerning the payment of dividends out of net profits or surplus, Sections 23A and 23B of the Federal Reserve Act and Regulation W governing transactions between an insured depository institution and its affiliates, as well as general federal regulatory oversight to prevent unsafe or unsound practices.

If the Bank earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, then our liquidity may be affected and our stock price may be negatively affected by our inability to pay dividends, which will have an adverse impact on both the Company and our shareholders.

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These broad market fluctuations are expected to continue for the near future, and may adversely affect the trading price of our Common Stock.

General market conditions and unpredictable factors could adversely affect market prices for the depositary shares.

Our outstanding depositary shares, each representing a 1/40th Interest in a share of our 4.875% Fixed Rate Series A Non-Cumulative Perpetual Preferred Stock, are traded on the Nasdaq Stock Market, and are subject to the same volatility risks that affect our common stock, as described above.

In addition, trading prices of the depositary shares will depend on many factors, including:

• whether we declare or fail to declare dividends on the Series A Preferred Stock from time to time;

• our creditworthiness;

• the ratings given to our securities by credit-rating agencies, including the ratings given to the Series A Preferred Stock or depositary shares;

• prevailing interest rates;

• the market for similar securities.

Accordingly, the depositary shares may trade at a discount to the price per share paid for such shares, even if a secondary market for the depositary shares develops.

There may be future sales or other dilution of the Company's equity, which may adversely affect the market price of our common stock or depositary shares.

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We rely, in part, on external financing to fund our operations and the unavailability of such funding in the future could adversely impact our growth and prospects.

We rely on customer deposits, advances from the FHLB of Des Moines and other borrowings to fund our operations.

We rely on customer deposits, advances from the FHLB and other borrowings to fund our operations.

Management has historically been able to replace maturing deposits, if desired;

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• the prohibited transaction or the acquiring person's purchase of shares was approved by a majority of the members of the target corporation's board of directors prior to the acquiring person's share acquisition;

▪ the prohibited transaction was both approved by the majority of the members of the target corporation's board and authorized at a shareholder meeting by at least two-thirds of the outstanding voting shares (excluding the acquiring person's shares) at or subsequent to the acquiring person's share acquisition.

• the prohibited transaction was both approved by the majority of the members of the target corporation's board and authorized at a shareholder meeting by at least two-thirds of the outstanding voting shares (excluding the acquiring

person's shares) at or subsequent to the acquiring person's share acquisition.

An acquiring person is defined as a person or group of persons that beneficially own 10% or more of the voting securities of the target corporation.

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As a Washington corporation, the Company is not permitted to “opt out” of this statute.

The Company’s business or the value of its common shares could be negatively affected as a result of actions by activist shareholders.

The Company values constructive input from shareholders, and our Board of Directors and management team are committed to acting in the best interests of all of the Company’s shareholders.

Activist shareholders who disagree with the composition of the Board of Directors, the Company’s strategic direction, or the way the Company is managed may seek to effect change through various strategies that range from private engagement to public filings, proxy contests, efforts to force transactions not supported by the Board of Directors, and litigation.

Responding to some of these actions can be costly and time-consuming, may disrupt the Company’s operations and divert the attention of the Board of Directors and management.

Such activities could interfere with the Company’s ability to execute its strategic plan and to attract and retain qualified executive leadership.

The perceived uncertainty as to the Company’s future direction resulting from activist strategies could also affect the market price and volatility of the Company’s common shares.

Unresolved Staff Comments

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