5 unchanged sentences
Operational Risks
+Added: Fluctuating interest rates could adversely affect our business.
+Added: 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.
+Added: Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve Bank has increased interest rates rapidly and the federal funds rate currently sits at a 22-year high.
+Added: Although the FRB left its benchmark rates steady in September and November of 2023, the FRB suggested that additional rate increases in the future may be necessary to mitigate inflationary pressures.
+Added: 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.
+Added: The increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations.
+Added: 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.
+Added: The level of net interest income is a function of the average balances of interest-earning assets and interest-bearing liabilities and the spread between the amounts of the yield on such assets and the cost of such liabilities.
+Added: These factors are influenced by both the pricing and the mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”) and market interest rates.
+Added: Furthermore, movements in interest rates, the pace at which such movements occur and the volume and mix of our interest-bearing assets and liabilities influence the level of net interest income.
+Added: The cost of customer deposits is largely based on short-term interest rates, the level of which is driven by the FOMC.
+Added: 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.
+Added: Further, recent changes in the Federal Reserve Bank'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 additional increases in such rates are creating additional uncertainty and making it more difficult for us to balance our loan and deposit portfolios.
+Added: As a result of the high interest rates, our interest expense on both deposits and borrowings has increased significantly.
+Added: 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.
+Added: Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.
+Added: 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.
+Added: The same could be true if interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities.
+Added: Net interest income and earnings would be similarly impacted were the interest rates on interest-earning assets to decline more quickly than the interest rates on interest-bearing liabilities.
+Added: In addition, changes in interest rates could affect the Bank's ability to originate loans and attract and retain deposits;
+Added: the fair values of its securities and other financial assets;
+Added: the fair values of its liabilities;
+Added: and the average lives of its loan and securities portfolios.
+Added: Additionally, decreases in interest rates could lead to increased loan refinancing activity, which, in turn, would alter the balance of our interest-earning assets and impact net interest income.
+Added: Increases in interest rates could reduce loan refinancing activity, which could result in compression of the spread between loan yields and more quickly rising funding rates.
+Added: We may also be exposed to movements in market rates to a degree not experienced by other financial institutions, as a result of our significant portfolio of fixed-rate single-family home loans, which are longer-term in nature than the customer accounts and borrowed money that constitute our liabilities.
+Added: We are currently anticipating that there will be further increases in the target federal funds rate in 2024 to combat recent inflationary trends;
+Added: however, if interest rates do not rise, or if the Federal Reserve were to rapidly lower the target federal funds rate, the reduction in rates could continue to constrain our interest rate spread and may adversely affect our business forecasts.
+Added: 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.
+Added: All else being equal, if the interest rates on the Company's interest-bearing liabilities
+Added: 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.
+Added: 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.
+Added: Inflationary pressures and rising prices may affect our results of operations and financial condition.
+Added: Inflation rates remained elevated in 2023 however we did see a decrease from the highs seen in 2022.
+Added: Inflation pressures are currently expected to remain elevated throughout 2023 and are likely to continue into 2024 as the inflation rate remains above the Federal Reserve Bank’s target rate of 2%.
+Added: Inflation has led to increased costs to our customers, making it more difficult for them to repay their loans or other obligations increasing our credit risk.
+Added: 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.
+Added: A deterioration in economic conditions in the United States and our markets could result in a further 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.
+Added: The Company’s pending merger with Luther Burbank Corporation may expose the Company to certain risks.
+Added: On November 13, 2022, the Company announced that it had entered into a definitive merger agreement pursuant to which it intends to acquire Luther Burbank Corporation (“Luther Burbank”) and its wholly-owned subsidiary, Luther Burbank Savings, in an all-stock transaction valued at approximately $654 million based upon the closing price of the Company’s Common Stock on November 11, 2022.
+Added: As part of the merger agreement, shares of common stock of Luther Burbank will be converted into, and canceled in exchange for, the right to receive 0.3353 shares of the Company’s Common Stock, with Luther Burbank shareholders receiving cash in lieu of fractional shares of Company Common Stock.
+Added: On May 4, 2023, the Company's shareholders approved the issuance of shares of Company Common Stock to the shareholders of Luther Burbank in connection with the merger, and the Luther Burbank shareholders approved the proposed merger agreement and merger with the Company and a proposal to approve on a non-binding basis the compensation that certain named executives of Luther Burbank may receive that is based on or otherwise relates to the merger.
+Added: The Company has submitted an application for approval of the Merger to the Washington State Department of Financial Institutions (“WDFI”), the Federal Deposit Insurance Corporation (“FDIC”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”).
+Added: On October 13, 2023, the WDFI approved the Merger, subject to approval by the Federal Reserve and the FDIC.
+Added: The Company continues to work with the Federal Reserve and the FDIC, and the merger remains subject to their approval.
+Added: If approved, the Merger will result in the Bank’s footprint expanding to include the state of California.
+Added: Because regulatory approval has not yet been achieved, it is possible the transaction may not be consummated as planned or at all, and may expose the Company to certain risks, prior to or after completion, including but not limited to:
+Added: • Regulatory approvals may not be received, may take longer than expected, or may impose conditions not presently anticipated or that could have an adverse effect on the combined company following the merger.
+Added: • The Company and Luther Burbank will be subject to business uncertainties and contractual restrictions on their respective operations while the merger is pending and the announcement and pendency of the merger could cause disruptions in the businesses of the Company and Luther Burbank, which could have an adverse effect on their respective business and financial results, and consequently on the combined company if the merger is consummated.
+Added: • Litigation from shareholders of either Luther Burbank or the Company could attempt to prevent or delay the consummation of the merger and result in additional unanticipated costs.
+Added: • Denial or delay of approval as a result of the February 3, 2023 comment letter to the FDIC from the California Reinvestment Coalition co-signed by other community groups and organizations.
+Added: This letter requested that the FDIC hold public hearings on the bank merger application, and urged the FDIC to deny the bank merger application.
+Added: • Termination of the merger agreement or failure to complete the merger for whatever reason could adversely impact the Company.
+Added: • The value of the merger consideration to be issued by the Company is uncertain because the market price of the Company’s Common Stock will fluctuate.
+Added: • The market price of the Company’s stock after the merger may be affected by factors different from those that currently affect the shares of the Company.
+Added: • Changes in the operations and prospects of the Company or Luther Burbank, general market and economic conditions and other factors that may be beyond the control of the Company and Luther Burbank may alter the value of WaFd or Luther Burbank or the market price for shares of Company Common Stock or Luther Burbank common stock by the time the merger is completed.
+Added: • Combining Luther Burbank with the Company may prove more difficult, costly or time consuming than expected, and the anticipated benefits and cost savings of the merger may not be realized.
+Added: • The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the price of the Company’s Common Stock to decline.
+Added: • The growth opportunities and cost savings from the merger may not be fully realized or may take longer to realize than expected.
+Added: • Operating costs, customer losses and business disruption following the merger, including adverse effects of relationships with employees, may be greater than expected.
+Added: • The interest rate environment has changed, causing margins to compress and adversely affecting net interest income.
+Added: • The fair value of the Luther Burbank assets to be acquired in the merger are sensitive to the interest rate environment and may fluctuate as a result of changes in interest rates, which could reduce or eliminate the anticipated benefits of the merger for the Company.
+Added: • The combined company may be unable to retain Company and/or Luther Burbank personnel.
+Added: • The Company may incur substantial costs associated with the merger and the integration of Luther Burbank.
+Added: • Issuance of shares of Company Common Stock in connection with the merger may adversely affect the market price of Company Common Stock.
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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: The pandemic caused a global economic slowdown, and while we have seen some economic recovery, continuing supply chain issues, labor shortages and inflation risks continue to affect the economic recovery.
+Added: debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States.
+Added: There remain increased risks of a government shutdown if the spending bills necessary to fund the government through the fiscal year that ends September 30, 2024 are not passed by Congress.
+Added: Future deterioration in the U.S.
+Added: credit and financial markets could result in losses or significant deterioration in the fair value of our U.S.
+Added: government issued, sponsored or guaranteed investments.
+Added: At September 30, 2023, we had $1.6 billion invested in U.S.
+Added: government and agency obligations, and further downgrades could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities.
+Added: While a government-wide shutdown can reduce GDP growth, the additional economic uncertainty, or 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.
+Added: 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, in excess of the reasonable and supportable forecasts used to estimate credit losses, 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:
8 unchanged sentences
If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition.
−Removed: Fluctuating interest rates could adversely affect our business.
−Removed: 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.
−Removed: Beginning early in 2022, in response to growing signs of inflation, the Federal Reserve has increased interest rates rapidly.
−Removed: Further, the Federal Reserve has increased the benchmark rapidly and has announced an intention to take further actions to mitigate inflationary pressures.
−Removed: 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.
−Removed: Conversely, decreases in interest rates could result in an acceleration of loan prepayments.
−Removed: The increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations.
−Removed: If this occurred, it could cause an increase in nonperforming assets and charge offs, which could adversely affect our business.
−Removed: 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.
−Removed: 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.
−Removed: Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.
−Removed: Although it is expected that the Federal Reserve will continue to
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Inflationary pressures and rising prices may affect our results of operations and financial condition.
−Removed: Inflation has continued rising in 2022 at levels not seen for over 40 years.
−Removed: Inflationary pressures are currently expected to remain elevated throughout 2022 and are likely to continue into 2023.
−Removed: 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.
−Removed: 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.
−Removed: 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.
3 unchanged sentences
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.
−Removed: 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.
+Added: The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, and the evolving conflict in Israel and Gaza.
+Added: These events have increased and are expected to continue to increase volatility in commodity and energy prices, including oil, and continuing hostilities raise the possibility of supply disruptions.
+Added: Rising tensions and global instability have the potential to affect consumer confidence in the U.S.
+Added: and abroad, therefore having a broader effect on 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.
−Removed: 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.
−Removed: 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.
1 unchanged sentence
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.
−Removed: 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.
+Added: We maintain an ACL to provide for loan defaults and non-performance, however, 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.
−Removed: Our ACL is based on these judgments, as well as historical loss experience and an evaluation of the other risks associated with our loan portfolio, including but not limited to, economic trends and conditions, changes in underwriting standards, management, competition, and trends in delinquencies, non-accrual and adversely classified loans.
−Removed: the size and composition of the loan portfolio, current economic conditions and geographic concentrations within the portfolio.
+Added: Our ACL is based on these judgments, as well as historical loss experience and an evaluation of the other risks associated with our loan portfolio, including but not limited to, economic trends and conditions, changes in underwriting standards, management, competition, and trends in delinquencies, non-accrual and adversely classified loans, the size and composition of the loan portfolio, current economic conditions and geographic concentrations within the portfolio.
Federal regulatory agencies, as part of their examination process, review our loans and ACL.
−Removed: If our assumptions and judgments used to determine the ACL
−Removed: 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.
+Added: 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 our 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.
14 unchanged sentences
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.
−Removed: We have recently changed our consumer online and mobile banking platforms to provide more flexibility and customizable feature sets to improve customer experience.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We immediately suspended services with the vendor.
−Removed: 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.
−Removed: After an investigation into the extent of the data that was compromised we notified all customers impacted by this breach.
−Removed: There was no breach of our own systems due to this incident.
−Removed: After receiving assurances that this third-party is operating in a safe and secure manner, we have resumed operations with it.
−Removed: We are not aware of any continuing cybersecurity threats or breaches involving this vendor or our systems generally.
−Removed: 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.
−Removed: To date, we have no knowledge of a successful cyber-attack or other material information security breach affecting the systems we operate and control.
+Added: However, if we are unable to maintain them, we may fall victim to a material adverse cybersecurity event.
+Added: 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.
+Added: We are subject to additional risk with respect to third-party vendors that process or handle personal and financial data of our customers, partners, suppliers or employees.
+Added: These third-party vendors may themselves use other vendors to store or process our data, which further elevates our risk exposure.
+Added: Our third-party vendors have been, and may in the future be, subject to security incidents, including those caused by computer viruses, malware, ransomware, phishing attempts, social engineering, hacking or other means of unauthorized access.
+Added: Control failures of security measures managed by our 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.
+Added: To date, we have no knowledge of a material cyber-attack or other material information security incident 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.
1 unchanged sentence
We, and our third-party providers, are regularly the subject of attempted attacks and the ability of the attackers continues to grow in sophistication.
−Removed: 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.
−Removed: 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.
+Added: 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 Distributed Denial of Service ("DDoS") attacks, computer viruses, hacking, malware, ransomware, credential stuffing, phishing, and other forms of social engineering.
+Added: Such cyber-attacks and other security incidents are designed to lead to various harmful outcomes, such as unauthorized transactions against our customers’ accounts, unauthorized or unintended access to confidential information, or the 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.
−Removed: 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.
−Removed: 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.
+Added: 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
+Added: 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 with 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.
9 unchanged sentences
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.
−Removed: 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.
−Removed: and regulatory intervention, any of which could adversely affect our business, financial condition and results of operations.
−Removed: 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.
+Added: 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.
+Added: A resurgence of the 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.
−Removed: 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.
+Added: Throughout the pandemic our operations were 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.
−Removed: 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.
+Added: A resurgence 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.
−Removed: Negative impacts on our customers caused by COVID-19 could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
−Removed: The duration and severity of the pandemic continues to be impossible to predict, as is the potential for a seasonal or other resurgence.
−Removed: 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, operations and prospects.
−Removed: • Additional actions of governmental authorities .
−Removed: 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.
−Removed: The ultimate success or impact of these actions and their effect on our customers and the economy generally is still unclear.
−Removed: Further, some measures, such as a suspension of mortgage and other loan payments and foreclosures, may have a negative impact on our business.
−Removed: • The effect on our customers, counterparties, employees, and third-party service providers .
−Removed: COVID-19 and its associated consequences and uncertainties are affecting individuals, households, and businesses differently and unevenly.
−Removed: Negative impacts on our customers could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
−Removed: • The effect on economies and markets .
−Removed: Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear.
−Removed: National, regional, and local economies and markets could suffer disruptions that are lasting.
−Removed: 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.
−Removed: Governments have taken unprecedented steps to partially mitigate the adverse effects of their containment measures.
−Removed: For example, in late March 2020, the CARES Act was enacted to inject more than $2 trillion of financial assistance into the U.S.
−Removed: economy, followed by additional COVID relief legislation of approximately $900 million in December 2020.
−Removed: In March 2021 the American Rescue Plan Act, also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L.
−Removed: 117-2, was enacted to inject an additional $1.9 trillion in financial relief and economic stimulus.
−Removed: 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.
−Removed: 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.
−Removed: On March 27, 2020, President Trump signed the CARES Act, which included a loan program administered through the SBA referred to as the PPP.
−Removed: 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.
−Removed: We participated as a lender in the PPP, and ultimately assisted approximately 9,000 businesses with approximately $1,085,000,000 in PPP loans.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, several larger banks were subject to litigation regarding their processing of PPP loan applications.
−Removed: We could be exposed to the risk of similar litigation, from both customers and non-customers that approached us seeking PPP loans.
−Removed: 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.
−Removed: If any such litigation is filed against us, it may result in significant financial or reputational harm to us.
+Added: Negative impacts on our customers caused by COVID-19 or other pathogens could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
+Added: Future actions of governmental authorities taken in response to a pandemic or similar crisis, such as eviction forbearance, occupancy restrictions, vaccine mandates, or suspension of mortgage foreclosures, could have a negative impact on our business.
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.
−Removed: 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.
−Removed: 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.
+Added: Unanticipated departures might require us to divert resources from other areas of our operations, which could create additional stress for other employees, including those in key positions.
+Added: 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.
−Removed: 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.
+Added: Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risks 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.
10 unchanged sentences
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.
−Removed: Furthermore, the long-term impacts of climate change will have a negative impact our customers and their business.
−Removed: 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.
+Added: Furthermore, the long-term impacts of climate change will have a negative impact on our customers and their business.
+Added: Physical risks include extreme storms or wildfires 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.
6 unchanged sentences
The consent order will be in effect for 10 years.
−Removed: We had previously entered in a consent order with the CFPB in 2013, also relating to HMDA reporting deficiencies, resulting in a
−Removed: $34,000 civil money penalty.
+Added: We had previously entered into 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.
3 unchanged sentences
Non-Compliance with the USA PATRIOT Act, Bank Secrecy Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Community Reinvestment Act, Fair Lending Laws, Flood Insurance Reform Act or other laws and regulations could result in fines or sanctions, and curtail our expansion opportunities.
−Removed: Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act ("BSA") to develop programs to prevent financial institutions from being used for money-laundering ("AML") and terrorist activities.
+Added: Financial institutions are required under the USA PATRIOT Act of 2001 (the “Patriot Act”) and Bank Secrecy Act ("BSA") to develop programs to prevent financial institutions from being used for money-laundering and terrorist activities.
Financial institutions are also obligated to file suspicious activity reports with the U.S.
1 unchanged sentence
These rules also require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts.
−Removed: 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.
−Removed: 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.
+Added: Our failure or our inability to comply with the
+Added: 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.
+Added: 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 Anti Money Laundering/Combating the Financing of Terrorism Program, (“AML/CFT Program”) (formerly known as 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.
−Removed: 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”).
−Removed: 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.
+Added: The Bank was previously subject to a Consent Order from the Office of the Comptroller of the Currency (“OCC”) for its BSA program that was issued in February 2018 (the “BSA Consent Order”).
+Added: The BSA Consent Order resulted in the Bank incurring significant expenses to implement an effective AML/CFT Program, 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.
−Removed: Failure to maintain an effective BSA program could have serious business, financial and reputational consequences for the Bank.
+Added: Failure to maintain an effective AML/CFT 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.
1 unchanged sentence
We are subject to extensive supervision, regulation and examination by the WDFI, CFPB and the FDIC.
−Removed: In addition, the Federal Reserve is responsible for regulating the holding company.
+Added: In addition, the FRB is responsible for regulating the holding company.
This regulatory structure is designed primarily for the protection of the deposit insurance funds and consumers and not to benefit our shareholders.
3 unchanged sentences
This supervisory framework could materially impact the conduct, growth and profitability of our operations.
+Added: In particular, the FDIC has specific authority to take “prompt corrective action,” if the Bank’s capital falls below its current “well capitalized” level, including limiting the Bank’s ability to take brokered deposits, requiring the Bank to raise additional capital and subject it to progressively more severe restrictions on its operations, management and capital distributions, and replacement of senior executive officers and directors.
+Added: If the Bank ever became “critically undercapitalized,” it would also be subject to the appointment of a conservator or receiver.
Failure to comply with applicable laws and regulations can result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders;
−Removed: identified deficiencies in our HMDA reporting and BSA/AML programs have resulted in Consent Orders from the CFPB and OCC, required us to incur significant expenses and compliance costs and subjected us to civil penalties.
+Added: identified deficiencies in our HMDA reporting and AML/CFT programs have resulted in Consent Orders from the CFPB and OCC, required us to incur significant expenses and compliance costs and subjected us to civil penalties.
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.
−Removed: In addition, the FDIC has specific authority to take “prompt corrective action,” depending on the Bank's capital level.
−Removed: Currently, the Bank is considered “well-capitalized” for prompt corrective action purposes.
−Removed: If the Bank were designated as “adequately capitalized,” its ability to take brokered deposits would become limited.
−Removed: 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
−Removed: and capital distributions, and replacement of senior executive officers and directors.
−Removed: If the Bank became “critically undercapitalized,” it would also be subject to the appointment of a conservator or receiver.
Recent national and state legislation and regulatory initiatives to support the financial services industry have been coupled with numerous restrictions and requirements that could detrimentally affect our business.
4 unchanged sentences
We expect the way we conduct business to continue to be affected by these regulatory requirements, including through limitations on our ability to pursue certain lines of business, capital requirements, enhanced reporting obligations, and increased costs.
+Added: The recent failures of Silicon Valley Bank and Signature Bank are expected to result in modifications to or additional laws and regulations governing banks and bank holding companies, including increasing capital requirements, modifications to regulatory requirements with respect to liquidity risk management, deposit concentrations, capital adequacy, stress testing and contingency planning, and safe and sound banking practices, or enhanced supervisory or enforcement activities.
Other legislative initiatives could detrimentally impact our operations in the future.
−Removed: The extent of the impact of any such legislation will be dependent on the specific details of the final legislation passed, if any.
+Added: Regulatory bodies may enact new laws or
+Added: promulgate new regulations or view matters or interpret laws and regulations differently than they have in the past, or commence investigations or inquiries into our business practices.
+Added: For example, the Biden Administration announced a government-wide effort to eliminate “junk fees” which could subject our business practices to even further scrutiny.
+Added: The CFPB’s action on junk fees thus far has largely focused on fees associated with deposit products, such as “surprise” overdraft fees and non-sufficient funds fees.
+Added: However, what constitutes a “junk fee” remains undefined.
+Added: The CFPB is actively soliciting consumer input on fee practices associated with other consumer financial products or services, signaling that the “junk fee” initiative is likely to continue to broaden in scope.
+Added: As a result of this regulatory focus, we have changed how we assess overdraft and non-sufficient funds fees and we may be required to implement additional changes based on regulatory directives or guidance.
+Added: Such changes have led to and may continue to cause a reduction in our non-interest income thus impacting our overall net income.
+Added: The extent of the impact of any future legislation will be dependent on the specific details of the final legislation passed, if any, but the potential changes outlined above could, among other things, increase our costs, limit our ability to pursue business opportunities and the types of financial services and products we may offer, and impact future growth, any of which could materially and adversely affect our business, results of operations or financial condition.
Deposit insurance premiums could increase further in the future.
1 unchanged sentence
The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund ("DIF") at a specific level.
−Removed: Historically, unfavorable economic conditions increased bank failures and these additional failures decreased the DIF.
−Removed: In order to restore the DIF to its statutorily mandated minimums the FDIC significantly increased deposit insurance premium rates, including the Bank's.
−Removed: FDIC insurance premiums could increase in the future in response to similar declining economic conditions.
−Removed: 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%.
−Removed: 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.
−Removed: 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.
+Added: Historically, unfavorable economic conditions increased bank failures and these additional bank failures decreased the DIF.
+Added: Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the ratio of the DIF to total insured deposits to fall below the current statutory minimum of 1.35%.
+Added: In order to restore the DIF to its statutorily mandated minimums, the FDIC significantly increased deposit insurance premium rates, including the Bank's, resulting in increased expenses.
+Added: The revised assessment rate schedules became effective January 1, 2023, and are applicable to the first quarterly assessment period of 2023 (i.e., January 1 through March 31, 2023, with an invoice payment date of June 30, 2023).
+Added: The FDIC may further 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.
+Added: FDIC insurance premiums could increase in the future in response to similar declining economic conditions.
We are subject to various claims and litigation, which could result in significant expenses, losses and damage to our reputation.
4 unchanged sentences
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.
−Removed: Banking institutions are also increasingly the target of class action lawsuits.
−Removed: 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.
−Removed: 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.
−Removed: In May 2022, the Bank settled this lawsuit for a payment of $495,000 plus claims administrative expenses.
−Removed: In June 2022, the court granted preliminary approval of the settlement, and the claims administration process is ongoing.
−Removed: 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.
+Added: Banking institutions are also increasingly the target of class action lawsuits, including claims alleging deceptive practices or violations of account terms in connection with non-sufficient funds or overdraft charges and violations of the Fair Labor Standards Act (“FLSA”).
+Added: In 2022, the Bank paid $495,000 plus claims administrative expenses to settle a class action lawsuit related to allegations of improper assessments of overdraft and insufficient funds fees.
+Added: In April 2023, we received a letter from an attorney alleging violations of the FLSA and seeking to recover damages for allegedly unpaid wages and overtime for certain of our non-exempt employees.
+Added: We do not believe these allegations have merit and will oppose any lawsuit if one is filed.
+Added: If this, or 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.
1 unchanged sentence
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.
−Removed: 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.
−Removed: The costs associated with investigation or remediation activities could be
−Removed: substantial and could substantially exceed the value of the real property.
+Added: 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
+Added: substances or chemical releases at such properties.
+Added: 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.
3 unchanged sentences
Market and Industry Risks
−Removed: Our operations are focused in the western United States, subjecting us to the risks of general economic conditions in these market areas.
−Removed: Substantially all of the Bank's loans are to individuals, businesses and real estate developers in the Pacific Northwest, Arizona, Utah, Texas, New Mexico and Nevada.
−Removed: As a result, our business depends significantly on general economic conditions in these market areas.
−Removed: A substantial increase in unemployment rates, or severe declines in housing prices and property values in these primary market areas could have a material adverse effect on our business due to a number of factors, including:
−Removed: • Loan delinquencies may increase.
−Removed: • Problem assets and foreclosures may increase.
−Removed: • Demand for the Bank's products and services may decline.
−Removed: • Collateral for loans made by the Bank, especially real estate, may decline in value, in turn reducing a customer's borrowing power and reducing the value of assets and collateral associated with the loans.
−Removed: • Natural disasters and catastrophic events such as wildfires, floods and earthquakes may damage or destroy collateral for loans made by the Bank and negatively impact the collateral’s value and a customer’s ability to repay loans.
+Added: Recent negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.
+Added: The recent high-profile bank failures have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks like the Company.
+Added: These market developments have negatively impacted customer confidence in the safety and soundness of regional banks.
+Added: While the Department of the Treasury, the FRB, and the FDIC have taken steps to ensure that depositors of these recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.
+Added: If other banks and financial institutions enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, it could cause further disruption to the financial services industry and customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.
+Added: Reflecting concerns about liquidity and the uncertain economic environment, many lenders have reduced funding to borrowers.
+Added: This tightening of credit has also contributed to a lack of consumer confidence and increased market volatility.
+Added: A worsening of any of the foregoing conditions would likely exacerbate the adverse effects of these challenging market conditions on us and others in the banking industry.
+Added: In particular, we may face increased regulation of our industry, including increased compliance costs and limitations on our ability to pursue business opportunities;
+Added: significantly higher Federal Deposit Insurance Corporation premiums;
+Added: adverse impacts on our stock price and volatility of our Common Stock;
+Added: and increased competition for deposits due to a lack of consumer confidence in regional banks.
+Added: If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our financial condition.
A downturn in the real estate market would hurt our business.
11 unchanged sentences
Advances in technology such as e-commerce, telephone, internet and mobile banking, and in-branch self-service technologies including automatic teller machines and other equipment, as well as changing customer preferences for these other methods of accessing our products and services, could decrease the value of our branch network or other retail distribution assets and may cause us to change our retail distribution strategy, close and/or sell certain branches or parcels of land held for development and restructure or reduce our remaining branches and work force.
−Removed: 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.
−Removed: 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.
+Added: As a result of the current market environment and customer behavior, we have undertaken a branch optimization strategy that has led to the closure, consolidation or sale of certain branches in our network.
+Added: 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 further reform our retail distribution channel.
+Added: 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.
We may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices.
9 unchanged sentences
We are also exposed to the risk of improper documentation of foreclosure proceedings that would also increase the cost of collection.
−Removed: Our business is subject to interest rate risk, and changes in market interest rates may negatively affect our business, financial condition and results of operations.
−Removed: Our primary source of income is net interest income, which is the difference between the interest income generated by interest-earning assets and the interest expense generated by interest-bearing liabilities.
−Removed: The level of net interest income is a function of the average balances of interest-earning assets and interest-bearing liabilities and the spread between the amounts of the yield on such assets and the cost of such liabilities.
−Removed: These factors are influenced by both the pricing and the mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by such external factors as the local economy, competition for loans and deposits, the monetary policy of the Federal Open Market Committee of the Federal Reserve Board of Governors (the “FOMC”) and market interest rates.
−Removed: Management is unable to predict these external factors, including the fluctuations of market interest rates, which are affected by many drivers, including inflation, recession, unemployment, monetary policy, domestic and international disorder, instability in domestic and foreign financial markets and investor and consumer demand.
−Removed: Furthermore, movements in interest rates, the pace at which such movements occur and the volume and mix of our interest-bearing assets and liabilities influence the level of net interest income.
−Removed: The cost of customer deposits is largely based on short-term interest rates, the level of which is driven by the FOMC.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The same could be true if interest rates on interest-earning assets decline faster than the rates on interest-bearing liabilities.
−Removed: Net interest income and earnings would be similarly impacted were the interest rates on interest-earning assets to decline more quickly than the interest rates on interest-bearing liabilities.
−Removed: In addition, changes in interest rates could affect the Bank's ability to originate loans and attract and retain deposits;
−Removed: the fair values of its securities and other financial assets;
−Removed: the fair values of its liabilities;
−Removed: and the average lives of its loan and securities portfolios.
−Removed: Additionally, decreases in interest rates could lead to increased loan refinancing activity, which, in turn, would alter the balance of our interest-earning assets and impact net interest income.
−Removed: Increases in interest rates could reduce loan refinancing activity, which could result in compression of the spread between loan yields and more quickly rising funding rates.
−Removed: We may also be exposed to movements in market rates to a degree not experienced by other financial institutions, as a result of our significant portfolio of fixed-rate single-family home loans, which are longer-term in nature than the customer accounts and borrowed money that constitute our liabilities.
+Added: Our operations are focused in the western United States, subjecting us to the risks of general economic conditions in these market areas.
+Added: Substantially all of the Bank's loans are to individuals, businesses and real estate developers in the Pacific Northwest, Arizona, Utah, Texas, New Mexico and Nevada.
+Added: As a result, our business depends significantly on general economic conditions in these market areas.
+Added: A substantial increase in unemployment rates, or severe declines in housing prices and property values in these primary market areas could have a material adverse effect on our business due to a number of factors, including:
+Added: • Loan delinquencies may increase.
+Added: • Problem assets and foreclosures may increase.
+Added: • Demand for the Bank's products and services may decline.
+Added: • Collateral for loans made by the Bank, especially real estate, may decline in value, in turn reducing a customer's borrowing power and reducing the value of assets and collateral associated with the loans.
+Added: • Natural disasters and catastrophic events such as wildfires, floods and earthquakes may damage or destroy collateral for loans made by the Bank and negatively impact the collateral’s value and a customer’s ability to repay loans.
Our liquidity may be adversely impacted by issues arising from certain industry deficiencies in foreclosure practices, including delays and challenges in the foreclosure process.
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.
−Removed: 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.
−Removed: 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
−Removed: foreclosure process and voluntary or mandatory programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure.
−Removed: 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.
+Added: During 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.
+Added: 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.
+Added: Should these stays or rights to forbearance be enacted again, or if new legislation is passed regarding residential foreclosures, 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.
−Removed: The replacement of the LIBOR benchmark interest rate may have an impact on our business, financial condition or results of operations.
−Removed: Certain loans made by us are made at variable rates that use LIBOR as a benchmark for establishing the interest rate.
−Removed: In addition, we also have investments and interest rate derivatives that reference LIBOR.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining U.S.
−Removed: dollar LIBOR settings.
−Removed: In the United States, efforts to identify a set of alternative U.S.
−Removed: dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee ("ARRC") has recommended the use of a Secured Overnight Funding Rate ("SOFR").
−Removed: SOFR is different from LIBOR in that it is a backward looking secured rate rather than a forward looking unsecured rate.
−Removed: These differences could lead to a greater disconnect between the Bank's costs to raise funds for SOFR as compared to LIBOR.
−Removed: For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.
−Removed: To further reduce differences between replacement indices and substitute indices market practitioners have also gravitated towards credit sensitive rates, the leading among them being the Bloomberg Short-term Bank Yield Index (“BSBY”).
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established or the establishment of multiple alternative reference rate(s).
−Removed: These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us.
+Added: Impairment of goodwill may adversely impact future results of operations.
+Added: Accounting standards require that we account for acquisitions using a method that could result in goodwill.
+Added: If the purchase price of the acquired company exceeds the fair value of the acquired net assets, the excess will be included in the Company's Statement of Financial Condition as goodwill.
+Added: The Company has a significant goodwill balance and, in accordance
+Added: with GAAP, we evaluate it for impairment at least annually and more often if events or circumstances indicate the possibility of impairment.
+Added: Evaluations may be based on many factors, some of which are the price of our Common Stock, discounted cash flow projections and data from comparable market acquisitions.
+Added: A significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate or slower growth rates could result in impairment of our goodwill.
+Added: Future evaluations of goodwill may result in the impairment and write-down of our goodwill balance which could have a material adverse impact on our earnings and adversely affect our operating results.
Competitive Risks
−Removed: Our ability to originate mortgage loans has been adversely affected by the increased competition resulting from the involvement of the U.S.
−Removed: Government, the Federal Reserve and Government-Sponsored Enterprises (“GSEs”) in the residential mortgage market.
−Removed: Over the past few years, we have faced increased competition for mortgage loans due to the increased involvement of the GSEs in the mortgage market, which has caused interest rates for thirty year fixed-rate mortgage loans that conform to GSE guidelines to remain artificially low.
−Removed: Mortgage loan repayments on one-to-four family residential properties have been elevated, and it is possible that these mortgage loan repayments will outpace our loan production as a result of this competition, making it difficult for us to grow our mortgage loan portfolio and balance sheet, and having an adverse effect on our business.
The Bank faces strong competition from other financial institutions and new market participants, offering services similar to those offered by the Bank.
10 unchanged sentences
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.
+Added: The Company’s entry into California may present increased risk that may adversely impact our business, prospects and financial condition.
+Added: The merger will result in WaFd significantly expanding our operations into the state of California where we have limited operating experience.
+Added: The banking and financial services business in California is highly competitive.
+Added: Our entry into California will present us with different competitive conditions and we will be required to compete for loans, deposits and customers for financial services with many new competitors in California.
+Added: Many of these competitors are much larger in total assets and capitalization, have greater access to capital markets and offer a broader array of financial services than we do.
+Added: As a result, there can be no assurance that we will be able to compete effectively in California, and the results of our operations could be materially and adversely affected if we are unable to compete effectively.
Security Ownership Risks
1 unchanged sentence
The Company is a separate legal entity from the bank subsidiary and does not have significant operations of its own.
−Removed: The availability of dividends from the Bank is limited by the Bank's earnings and capital, as well as various statutes and regulations.
+Added: The availability of dividends from the Bank is limited by the Bank's earnings and capital, as well as various federal and state 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.
−Removed: 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.
−Removed: 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.
8 unchanged sentences
The market price of our Common Stock has in the past fluctuated significantly.
−Removed: We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing COVID-19 pandemic, disruption in global supply chains, uncertainty over the U.S.
−Removed: government debt ceiling and changing Federal Reserve policy.
+Added: We expect to see additional volatility in the financial markets due to the uncertainty caused by the continuing global conflicts, commodity shortages and price fluctuations, recent bank failures, uncertainty over the U.S.
+Added: government debt ceiling, risks of government shutdowns and changing Federal Reserve policy.
Some additional factors that may cause the price of our Common Stock to fluctuate include:
1 unchanged sentence
• macro-economic and political conditions in the U.
−Removed: and the financial markets generally (including the effects of the COVID-19 pandemic).
+Added: and the financial markets generally.
• variations in the operating results of the Company and our competitors.
1 unchanged sentence
• changes in securities analysts' estimates of our future performance and the future performance of our competitors.
−Removed: • announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships.
+Added: • announcements by the Company or our competitors of mergers, acquisitions and strategic partnerships, including the pending merger with Luther Burbank.
• additions or departure of key personnel.
4 unchanged sentences
These broad market fluctuations are expected to continue for the near future, and may adversely affect the trading price of our Common Stock.
+Added: If the merger with Luther Burbank is approved, the Company’s shareholders will have less influence as a shareholder of the combined company than as a shareholder of Company.
+Added: The Company’s shareholders currently have the right to vote in the election of the Board of Directors and on other matters affecting the Company.
+Added: Based on WaFd’s stock price as of November 1, 2023, following completion of the merger, the shareholders of Luther Burbank as a group are expected to hold a maximum ownership interest of approximately 21% of the Company.
+Added: As a result, after the merger, a current Company's shareholders’ percentage ownership of the combined company will be smaller than such shareholder’s current percentage ownership of the Company’s Common Stock.
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.
−Removed: We are not restricted from issuing additional shares of common stock, preferred stock, or securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock or preferred stock.
−Removed: Our Board of Directors is authorized to cause Washington Federal to issue one or more classes or series of preferred stock junior to our Series A Preferred Stock from time to time without any action on the part of our shareholders, and our Board of Directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over the Common Stock with respect to dividends or upon our dissolution, winding up and liquidation and other terms.
−Removed: Although the approval of holders of depositary shares representing interests in the Series A Preferred Stock will be needed to issue any equity security ranking above the Series A Preferred Stock, if we were to issue preferred stock in the future that has preference over the Series A Preferred Stock with respect to the payment of dividends or upon liquidation, or if we were to issue preferred stock with voting rights that dilute the voting power of the Series A Preferred Stock or depositary shares, the rights of holders of the depositary shares or the market price of the depositary shares could be adversely affected.
+Added: Our Board of Directors is authorized to cause the Company to issue one or more classes or series of preferred stock junior to our Series A Preferred Stock from time to time without any action on the part of our shareholders, and our Board of Directors also has the power, without shareholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights, and preferences over the Common Stock with respect to dividends or upon our dissolution, winding up and liquidation and other terms.
The issuance of any additional shares of common or of preferred stock or convertible securities or the exercise of such securities could be substantially dilutive to existing shareholders.
−Removed: For instance, exercise of the warrant issued to the U.S.
−Removed: Treasury in connection with our participation in the Capital Purchase Program diluted the value of our Common Stock.
−Removed: We may also elect to use Common Stock to fund new acquisitions, which will dilute existing shareholders.
−Removed: Holders of our Common Stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
+Added: We may also elect to use Common Stock to fund new acquisitions, which will further dilute existing shareholders.
+Added: Holders of our Common Stock have no preemptive rights that
+Added: entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
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.
2 unchanged sentences
however, we may not be able to replace such funds at any given point in time if our financial condition or market conditions change or if the cost of doing so might adversely affect our business, financial condition and results of operations.
−Removed: Although we consider current sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long-term business objectives.
+Added: If we need additional funds for our liquidity needs, we may seek additional debt to achieve our long-term business objectives.
Such borrowings, if sought, may not be available to us or, if available, may not be on favorable terms.
3 unchanged sentences
Some provisions of Washington state law could interfere with or restrict takeover bids or other change-in-control events affecting us.
−Removed: For example, Chapter 23B.19 of the Washington Business Corporation Act, with limited exceptions, prohibits a “target corporation” from engaging in specified “significant business transactions” for a period of five years after the share acquisition by an acquiring person, unless:
−Removed: • 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;
−Removed: • 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
−Removed: person's shares) at or subsequent to the acquiring person's share acquisition.
−Removed: 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.
+Added: For example, Chapter 23B.19 of the Washington Business Corporation Act, with limited exceptions, prohibits a “target corporation” from engaging in specified “significant business transactions” for a period of five years after the share acquisition by an acquiring person, without complying with certain shareholder approval requirements.
+Added: An acquiring person is defined as a person or group of persons that beneficially own 10% or more of our voting securities.
Such prohibited transactions include, among other things:
13 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.