Pathward Financial (CASH) risk factors, FY2024 10-K

Risks Related to Our Industry and Business

1. 01Our framework for managing risk, including our underwriting practices, may not prevent future losses
2. 02We are subject to credit risk in connection with our lending and leasing activities, and our financial condition and results of operations may be negatively impacted by factors that adversely affect our borrowers
3. 03If our actual credit losses exceed our allowance for credit losses, our net income will decrease
4. 04Our earnings are significantly affected by general business, political and economic conditions
5. 05Adverse developments or concerns affecting the financial services industry or specific financial institutions could adversely affect our financial condition and results of operations
6. 06Ineffective liquidity management could adversely affect our financial condition and results of operation
7. 07Our investments in certain tax-advantaged projects may not generate anticipated returns, causing an adverse impact on our results of operations
8. 08The residual value of leased equipment at the time of its disposition may be less than forecasted at the time we entered into the lease
9. 09Changes in interest rates could adversely affect our results of operations and financial condition
10. 10We operate in an extremely competitive market, and our business will suffer if we are unable to compete effectively
11. 11Our business could suffer if consumer behaviors, or other factors, in connection with the use of prepaid cards change, or there are adverse developments with respect to the prepaid financial services industry in general
12. 12Our operations depend upon third-party relationships; our ability to maintain such relationships and such third parties' performances could adversely affect our business
13. 13We derive a significant percentage of our deposits, total assets and income from deposit accounts that we generate through Payments' customer relationships, of which a limited number of program manager relationships are particularly significant to our operations
14. 14We are exposed to fraud losses from customer accounts
15. 15We are exposed to settlement and other losses from payments customers
16. 16Our business strategy includes plans for organic growth, and our financial condition and results of operation could be adversely affected if we fail to grow or fail to manage our growth effectively
17. 17Acquisitions and other strategic transactions, or the failure to consummate such transactions, could disrupt our business and harm our financial condition and may not yield the intended benefits
18. 18New lines of business or new products and services may subject us to additional risks
19. 19An impairment charge of goodwill or other intangibles could have a material adverse impact on our financial condition and results of operations
20. 20We may incur losses due to fraudulent and negligent acts, as well as errors, by third parties or our employees
21. 21Security breaches involving us, the Bank or any third parties with which we do business could expose us to liability and litigation, adversely affecting our reputation and operating revenues
22. 22Failure to comply satisfactorily with certain privacy and data protection laws, regulations, and standards to which we are subject could adversely affect our reputation and operating revenues
23. 23Our reputation and financial condition may be harmed by system failures, computer viruses and other technological interruptions to our operations
24. 24Agency, technological, or human error could lead to tax refund processing delays, which could adversely affect our reputation and operating revenues
25. 25The Commercial Finance business line generates government-backed loans funded by the Bank, any of which could be negatively impacted by a variety of factors
26. 26Agreements between the Bank and third parties to market and service Bank-originated consumer loans may subject the Bank to credit, fraud and other risks, as well as claims from regulatory agencies and third parties that, if successful, could negatively impact the Bank's current and future business
27. 27The OCC's grant of bank charters to fintech companies and special purpose fintech charter could present a market risk to us generally and the Partner Solutions business line specifically
28. 28The loss or transition of key members of our senior management team or key employees in the Bank's divisions, or our inability to attract and retain qualified personnel, could adversely affect our business
29. 29We regularly assess our investments in technology, and changes in technology could be costly
30. 30Our ability to receive dividends from the Bank could affect our liquidity and ability to pay dividends on our common stock, interest on our trust preferred securities and principal on our debt
31. 31Unclaimed funds represented by unused value on the cards presents compliance and other risks

Risks Related to Regulation of the Company and the Bank

1. 32We operate in a highly regulated environment, and our failure to comply with laws and regulations, or changes in laws and regulations to which we are subject, may adversely affect our business, prospects, results of operations and financial condition
2. 33or other creditors and are subject to regular modification and change. A considerable amount of management time and resources are devoted to oversight of, and development, implementation and execution of controls and procedures relating to, compliance with these laws, regulations and policies
3. 34The Bureau's rulemaking and enforcement of prohibitions against unfair, deceptive or abusive practices have directly impacted, and may continue to impact, the Bank's consumer financial products and service offerings
4. 35Regulatory scrutiny of bank provision of partner solutions and related technology considerations has increased
5. 36Increased scrutiny and evolving expectations from stakeholders with respect to ESG practices may impose additional costs on us or expose us to new or additional risks
6. 37We will be subject to heightened regulatory requirements if our total assets exceed $10 billion as of December 31 of any calendar year
7. 38We will become subject to reduced interchange income and could face related adverse business consequences if our total assets exceed $10 billion as of December 31 of any calendar year
8. 39Any change in the Bank's ability to gather brokered deposits may adversely impact the Bank
9. 40As a BHC, we are required to serve as a "source of strength" for the Bank
10. 41If we fail to maintain sufficient capital, our financial condition, liquidity, results of operations, and compliance with regulatory requirements would be adversely affected
11. 42Changes in federal, state, and local tax laws, interpretations of existing tax laws, or adverse determinations by tax authorities, could increase our tax burden or otherwise have a material adverse effect on our business, financial condition, and results of operations
12. 43The price of our common stock may be volatile, which may result in losses for investors
13. 44An investment in our common stock is not an insured deposit
14. 45Future sales or additional issuances of our capital stock may depress prices of shares of our common stock or otherwise dilute the book value of shares then outstanding
15. 46Changes in accounting policies or accounting standards, or changes in how accounting standards are interpreted or applied, could materially affect how we report our financial results and condition
16. 47If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and our reputation
17. 48Federal regulations and our organizational documents may inhibit a takeover, prevent a transaction you favor or limit our growth opportunities, causing the market price of our common stock to decline
18. 49We may not be able to pay dividends in the future in accordance with past practice
19. 50Catastrophic events could negatively impact our operations, the operations of third parties with which we do business, and the communities in which we do business
20. 51Legal challenges to and regulatory investigations of our, or the Bank's, operations could have a significant material adverse effect on us
21. 52Our reputation and business could be damaged by negative publicity
22. 53Existing insurance policies may not adequately protect us and our subsidiaries