Item 1A. Risk Factors
Item 1A. “RISK FACTORS”
in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2025,
which could materially affect our business, financial condition
or future results. The risks described in our annual report on
Form 10-K are not the only risks facing our Company.
The persistence of inflation above the Federal Reserve’s
long term
targets, and the maintenance of or further increases in, tightened
Federal Reserve monetary policy by increased target
interest rates and/or reductions in the Federal Reserve’s
securities portfolio, have affected and may continue to affect
the
levels of interest rates, mortgage originations and income, the market values of
our securities portfolio and loans and have
resulted in unrealized securities losses that have adversely affected
our stockholders’ equity.
Although inflation has
remained above the Federal Reserve’s
2% target rate, since December 2025, the Federal Reserve has
maintained its target
federal funds range from 3.50% to 3.75% and on October 29, 2025 announced
that it would end the roll-off of maturing
securities it held beginning December 1, 2025 as the Federal Reserve sought
to meet its dual mandate of maximum
employment and 2% inflation over the longer run.
Beginning December 11, 2025, the Federal Reserve began
increasing its
holdings of securities through purchases of Treasury
bills and, if needed, other Treasury securities with remaining
maturities of 3 years or less to maintain an ample level of reserves, and reinvested all principal
payments on Treasury
securities and reinvested all principal payment on agency securities into Treasury
bills.
This policy was continued at the
Federal Reserve’s April 30,
2026 meeting.
The reductions in the target federal funds rates and Federal Reserve purchases
of additional securities may be viewed as a more accommodative monetary policy,
which has affected and may continue to
affect our deposit costs and mixes, and consumer savings and payment
behaviors.
These may also affect our borrowers’
operating costs, expected returns and cash flows available to service our loans.
On July 29, 2026, the Federal Reserve
reaffirmed its commitment to price stability and its 2% inflation
target, and left the target range for the federal funds rate
unchanged at 3.50% to 3.75%.
Following this meeting, yields on longer-term U.S.
Treasury securities increased, including
the highest 30-year Treasury yields in 19 years and
higher 30-year residential mortgage rates, among increases in other
interest rates.
The timing and direction of future monetary policy actions, and the nature and
extent of the Federal
Reserve’s public communications
regarding such actions, are uncertain.
These changes and other risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business,
financial condition, and/or operating results in the future.
Military hostilities involving the United States, Israel and Iran commenced on February
28, 2026 and continue subject to
various temporary cease fire arrangements and pauses. As a result, shipments of
petroleum products through the Strait of
Hormuz have been limited, reducing the total volumes of oil in the international
markets and causing oil prices to rise
significantly.
More recently, attacks have
been made on petroleum shipments through the Red Sea by forces aligned with
Iran. Supply chains where petroleum is an input have been adversely
affected, and transportation costs, prices and inflation
in the United States and elsewhere have increased. These pressures may increase
our and our borrowers’ operating costs
and contribute to higher or more volatile interest rates, which could adversely
affect our net interest margin, the value of
our securities portfolio, and the ability of our borrowers to repay their
loans.
The duration of these hostilities and the long-
t
erm effects of the blockage of petroleum shipments and the other
costs and effects of these hostilities cannot be predicted.
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