FS Bancorp (FSBW) risk factors, FY2024 10-K

Risks Related to Macroeconomic Conditions

1. 01Our business may be adversely affected by downturns in the national economy and in the economies in our market areas
2. 02Reduction in our low-cost or noninterest-bearing deposits
3. 03Monetary policy, inflation, deflation, and other external economic factors could adversely impact our financial performance and operations

Risks Related to our Lending Activities

1. 04Our loan portfolio possesses increased risk due to a large percentage of consumer loans
2. 05Our business could suffer if we are unsuccessful in making, continuing, and growing relationships with home improvement contractors and dealers
3. 06A significant portion of our business involves commercial real estate lending which is subject to various risks that could adversely impact our results of operations and financial condition
4. 07Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value
5. 08Our residential construction lending is subject to various risks that could adversely impact our results of operations and financial condition
6. 09Our residential mortgage warehouse lending program is subject to various risks that could adversely impact our results of operations and financial condition
7. 10If our ACL on loans is not sufficient to cover actual loan losses, our earnings could be reduced
8. 11Our business may be adversely affected by credit risk associated with residential property
9. 12Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition and could result in losses in the future

Risk Related to Changes in Market Interest Rates

1. 13Changes in interest rates may reduce our net interest income and may result in higher defaults in a rising rate environment
2. 14We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. If we are unable to manage this risk effectively, our business, financial condition, and results of operations could be materially affected
3. 15Revenue from mortgage banking operations is sensitive to changes in economic conditions, decreased economic activity, a slowdown in the housing market, higher interest rates or new legislation and may adversely impact our financial condition and results of operations
4. 16Our securities portfolio may be negatively impacted by fluctuations in market value and interest rates
5. 17If our hedging against interest rate exposure is ineffective, it could result in volatility in our operating results, including potential losses, which could have a material adverse effect on our results of operations and cash flows
6. 18Mark-to-market losses could reduce our stockholders’ equity

Risks related to the counterparty’s inability to fulfill obligations

1. 19Losses on interest rate hedging derivatives could adversely affect our business, financial condition and prospects, leading to decreased net income

Risks Related to Accounting Matters

1. 20We may experience future goodwill impairment, which could reduce our earnings
2. 21Our reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates, which, if incorrect, could cause unexpected losses in the future

Risk Related to Regulatory and Compliance Matters

1. 22We may become subject to supervisory actions and enhanced regulation that could have a material adverse effect on our business, reputation, operating flexibility and financial condition
2. 23Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and results of operations
3. 24Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions

Risks Related to Cybersecurity, Data, Fraud, Third Parties and Technology

1. 25We rely on other companies to provide key components of our business infrastructure
2. 26We are subject to certain risks in connection with our use of technology
3. 27Our current and future uses of Artificial Intelligence (AI) and other emerging technologies may create additional risks
4. 28We are subject to certain risks in connection with our data management or aggregation
5. 29Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes

Risks Related to Our Business and Industry Generally

1. 30Ineffective liquidity management could adversely affect our financial results and condition
2. 31Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed or the cost of that capital may be exceedingly high
3. 32The Company’s ability to pay dividends and make subordinated debt payments is subject to the ability of the Bank to make capital distributions to the Company
4. 33The markets in which the Company operates are subject to the risk of flooding, mudslides, and other natural disasters