Risk Factors Update Summary

• Cybersecurity risks have evolved with increased cyberattacks, including distributed denial of service attacks.
• The Bank distributed a dividend of $90.0 million to fund the redemption of 7% Fixed to Floating Subordinated Notes.
• Liquidity risk increased as 21% of total deposits are not FDIC insured, rising to 22%.
• Added risks related to macroeconomic and geopolitical challenges globally affecting stability and changes in economic and political relations between the U.S. and other nations.
• Implementation of new strategic plan requiring capital infusion for new banking products. This may result in significant costs and impact loan production.
• Increased scrutiny on commercial real estate loans due to market pressures and potential impact on financial institutions.
• Closure of Silicon Valley Bank, Signature Bank, and First Republic Bank leading to increased government regulation and supervision.
• Discontinuation of residential loan origination function and termination of Advantage Loan Program. This affects loan originations and balance sheet size.
• The Bank discontinued all residential lending, impacting future growth potential and financial condition.
• Added risks related to the Advantage Loan Program, including compliance with the Plea Agreement, costs of legal proceedings, and potential claims for advancement and indemnification.
• Disqualification from safe harbor exemptions may limit capital raising, impacting strategic growth plans.
• Credit risk disclosure now includes potential insufficiency of allowance for credit losses to cover current expected credit losses in the loan portfolio.
• There has been an observed increase in the number of distributed denial of service attacks.
• Enhanced disclosure on risks related to the highly regulated industry, including laws affecting financial services, Dodd-Frank, and fair lending laws.
• Increased legal fees and indemnification costs may impact financial condition and results of operations.
• Changes in interest rates from 0.00% to 5.25% - 5.50% may impact net interest income and balance sheet mix.
• Increased focus on economic indicators predicting a potential recession in 2024, impacting interest rates and financial markets.
• The Bank reduced excess capital through distributions, affecting future growth opportunities.
• Adoption of the current expected credit loss model for loan accounting may result in increased credit losses and impact financial results.
• Financial institutions face an increase in software supply chain attacks, impacting critical infrastructure sectors.
• Interest rate risk section now includes negative impacts of future changes in interest rates.
• Changes in the human capital section, focusing on employee engagement, learning, and development initiatives.
• Liquidity risk section now emphasizes the need to ensure adequate liquidity and obtain external financing on favorable terms.
• Reduced ability to compete effectively due to suspended residential loan originations, affecting growth.
• Climate change initiatives and regulatory actions may impact financial institutions and their operations.
• Regulatory changes may increase compliance costs and restrict business activities, impacting financials.
• The Financial Stability Oversight Council recommended accelerated risk management actions for financial stability.
• Enhanced regulatory scrutiny on bank mergers may limit strategic alternatives and market share growth.
• Regulators are encouraging larger banking organizations to address climate-related risks and compliance costs.
• Changes in fair value due to market fluctuations could impact the company's results of operations.
• Increased competition from digital asset service providers may impact fee income and customer deposits.