What changed in this filing

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Item 1A. Risk Factors

2026-02-27 compared with 2025-03-17 · 158 added, 123 removed, 493 unchanged (36% of the section changed)

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The principal risks and uncertainties affecting our business include the following:

• Our business and operations are concentrated in the Puget Sound region and we are sensitive to adverse changes in the local economy.

• If our allowance for credit losses is insufficient to absorb actual credit losses, our results of operations would be negatively affected.

• We operate in a highly competitive market and face increasing competition from traditional and new financial services providers.

• We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate and compliance risks, which may have an adverse effect on our business, financial condition and results of operations if we are unable to manage such risks.

• We may be unable to effectively manage our growth, which could have an adverse effect on our business, financial condition and results of operations.

• The success of our relationship with broker dealers, digital financial service providers and other partners to provide BaaS is subject to risks associated with managing such relationships.

• We operate in a highly regulated industry, and the current regulatory framework and any future legislative and regulatory changes, may have an adverse effect on our business, financial condition and results of operations.

• We are subject to regulatory requirements, including stringent capital requirements, consumer protection laws, and anti-money laundering laws, and failure to comply with these requirements could have an adverse effect on our business, financial condition and results of operations.

• We are subject to laws regarding privacy, information security and protection of personal information and any violation of these laws or incidents involving personal, confidential or proprietary information of individuals, including, among others, system failures or cybersecurity breaches of our network security, could damage our reputation and otherwise adversely affect our business, financial condition and results of operation.

• Our charter documents contain certain provisions, including anti-takeover provision, that limit the ability of our shareholders to take certain actions and could delay or discourage takeover attempts that shareholders may consider favorable.

• The current economic condition in the market areas we serve may adversely impact our earnings and could increase the credit risk associated with our loan portfolio.

• We are subject to interest rate risk, and fluctuations in interest rates may adversely affect our earnings.

• Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.

• We originate and purchase loans through our CCBX partners, which exposes us to increased lending and compliance risks.

• We derive a percentage of our deposits, total assets and income from deposit accounts generated through our BaaS relationships.

• Ineffective liquidity management could adversely affect our business, financial condition and results of operations.

• Strong competition within our market area could hurt our profits and slow growth.

• Our banking-as-a-service (“BaaS”) strategy faces increasing competition, including from institutions and partners that may no longer require a third-party bank.

• We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.

• Our business strategy includes growth, and our business, financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

• Our agreements with BaaS partners may produce limited revenue and may expose us to liability for compliance violations by BaaS partners.

• Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations.

• Financial institutions, such as the Bank, face a risk of noncompliance with and enforcement action under the Bank Secrecy Act and other anti-money laundering statutes and regulations.

• We are subject to numerous laws designed to promote community reinvestment or protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.

• We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition and results of operations.

• We are dependent on our information technology and telecommunications systems and third-party service providers;

systems failures, interruptions, security breaches and cybersecurity threats could have an adverse effect on our business, financial condition and results of operations.

• Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks.

• We previously identified material weaknesses in our internal control over financial reporting, and any failure to maintain effective internal controls in the future could adversely affect our business, financial condition and results of operations.

• National and global economic and other conditions could adversely affect our future results of operations or market price of our stock.

• Changes in U.S.

trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.

• Anti-takeover provisions in our corporate organizational documents and provisions of federal and state law may make an attempted acquisition or replacement of our board of directors or management more difficult.

Risks Related to Credit Matters

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Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply and international economic weakness and disorder and instability in domestic and foreign financial markets.

Our interest rate sensitivity profile was modestly liability sensitive as of December 31, 2024, meaning that we estimate our net interest income would increase more from falling interest rates than from rising interest rates.

Loans and deposits in our CCBX segment are more sensitive to interest rate changes than our community bank segment.

Over time we anticipate that this will increase sensitivity to both increasing and decreasing interest rates.

Interest rates remain significantly higher following the historically low levels during the COVID-19 pandemic.

While rates have decreased some in 2024, competitive pressures on the deposit cost of funds remains.

This has been exacerbated by the bank failures due to liquidity in the first half of 2023 and the resulting heightened competition for deposits, which has also affected the interest we pay on deposits.

We expect our funding costs will continue to increase if interest rates continue to remain high, or if we are required to maintain or increase higher cost deposit products as depositors seek such higher rate products.

It is not possible to predict the pace and magnitude of changes in interest rates, or the impact rate changes will have on our results of operations.

The Federal Open Market Committee (the “FOMC”) began reducing the federal funds rate in September 2024, and most recently decreased the federal funds rate to 4.50% as of December 31, 2024.

Inflation has eased over the past year but remains elevated.

The economic outlook is uncertain, and

the FOMC remains highly attentive to inflation risks.

In support of its goals, the FOMC decided to maintain the current target range for the federal funds rate at its most recent meeting.

Interest rates remain elevated relative to the historically low levels experienced during the COVID-19 pandemic.

Although short-term interest rates declined during portions of 2024 and 2025, funding costs have remained under pressure due to competitive dynamics in the banking sector, including heightened competition for deposits.

If interest rates remain elevated, increase again, or if competitive pressures require us to offer or maintain higher-cost deposit products, our cost of funds may increase more rapidly than yields on our interest-earning assets, which could compress our net interest margin.

The timing, magnitude and direction of future changes in interest rates remain uncertain and depend on a variety of factors, including inflation trends, economic growth, labor market conditions, fiscal and monetary policy, and domestic and international financial market developments.

While inflation has moderated from recent peaks, it remains above historical norms, and the Federal Open Market Committee (“FOMC”) continues to assess inflationary and economic risks in setting monetary policy.

Future changes in interest rates or the shape of the yield curve could have adverse effects on our earnings.

The FOMC began reducing the federal funds rate in September 2024, and most recently decreased the federal funds rate to 3.75% as of December 31, 2025.

Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default and could result in a decrease in the demand for loans.

At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates.

At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from elevated interest rates.

In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates.

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To the extent that borrowers have more than one commercial real estate loan outstanding, an adverse development with respect to one loan or one credit relationship could expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential real estate loan.

Moreover, if loans that are collateralized by commercial real estate become troubled and the value of the real estate has been significantly impaired, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for credit losses and would adversely affect our business, financial condition and results of operations.

principal and interest that we anticipated at the time we originated the loan, which could cause us to increase our provision for credit losses and would adversely affect our business, financial condition and results of operations.

Furthermore, should the fundamentals of the commercial real estate market deteriorate due to macroeconomic and other factors, our business, financial condition and results of operations could be adversely affected.

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These home equity lines of credit are secured by residential real estate and are accessed by using a credit card.

As of December 31, 2024, $202.1 million of our residential mortgage loans were made through the community bank, and 79.0% are secured by property in Washington State, and a significant majority of that is located in the Puget Sound region.

As of December 31, 2025, $202.3 million of our residential mortgage loans were made through the community bank, and 83.3% are secured by property in Washington State, and a significant majority of that is located in the Puget

Sound region.

A decline in residential real estate values as a result of a downturn in the Puget Sound housing market could reduce the value of the real estate collateral securing these types of loans.

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Small- to medium-sized businesses frequently have smaller market shares than larger firms, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.

In addition, the success of a small and medium-sized business often depends on the management skills, talents and efforts of a small group of people, and the death, disability or resignation of one or more of these people could have an adverse effect on the business and its ability to

repay its loan.

If our borrowers are unable to repay their loans, our business, financial condition and earnings could be adversely affected.

If our borrowers are unable to repay their loans, our business, financial condition and results of operations could be adversely affected.

We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.

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Our CCBX partners service $1.60 billion of these loans.

Our partners provide fraud and credit enhancements on many of our CCBX loans, but if they are unable to fulfill their contracted obligations then the Bank would be exposed to writing off all or a part of the credit enhancement asset and to additional credit losses as a result of this counterparty risk.

Our partners provide fraud and credit enhancements on many of our CCBX loans, but if they are unable to fulfill their contracted obligations, the Bank could be exposed to writing off all or a portion of the related credit enhancement asset and to additional credit losses as a result of this counterparty risk.

In certain partner arrangements, the partner is required to maintain reserve, escrow or similar funding mechanisms (including replenishment obligations) intended to support servicing duties, representations and warranties, fraud losses and other credit-related obligations.

These reserve or funding positions may decline below required levels or become negative due to loss activity, timing differences or other factors, and partners may be required to replenish such amounts.

If a partner is unable or unwilling to fund or replenish required amounts on a timely basis, we could be exposed to higher credit losses, incur additional servicing or operational costs, accelerate loss recognition or write off all or a portion of the related credit enhancement asset.

We evaluate partner funding capacity and reserve adequacy on an ongoing basis as part of our risk

management framework and may exercise contractual remedies, which may include adjusting reserve requirements, suspending originations or purchases, or transferring servicing responsibilities, if warranted.

We are subject to compliance and regulatory risk if partners do not follow our servicing policies, lending laws and regulations.

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Many of the agreements with our CCBX partners provide for a credit enhancement which helps protect the Bank by absorbing incurred losses.

CCBX credit enhancements are free-standing and are accounted separately from the allowance for credit loss.

CCBX credit enhancements are free-standing and are accounted for separately from the allowance for credit losses.

In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans, without regard to the credit enhancement.

If a CCBX lending partner is unable to fulfill its contractual obligations with the Bank, then the Bank would be exposed to additional credit losses as a result of this counterparty risk and would have to absorb any credit losses associated with any CCBX partner that cannot fulfill its contractual obligations.

If a CCBX lending partner is unable to fulfill its

contractual obligations with the Bank, then the Bank would be exposed to additional credit losses as a result of this counterparty risk and would have to absorb any credit losses associated with any CCBX partner that cannot fulfill its contractual obligations.

Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for credit losses.

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While we believe that our allowance for credit losses was adequate at December 31, 2025, there is no assurance that it will be sufficient to cover future credit losses, especially if there is a significant deterioration in economic conditions.

The FASB recently adopted an accounting standard referred to as CECL which requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses.

We adopted this accounting pronouncement effective for our fiscal year beginning January 1, 2023.

The current economic condition in the market areas we serve may adversely impact our earnings and could increase the credit risk associated with our loan portfolio.

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federal government, and we face specific risks associated with originating SBA loans.

As of December 31, 2024, the balance of owned SBA loans and SBA loans net of the sold portion was $22.8 million, which includes $2.3 million in PPP loans that are 100% guaranteed, and an additional $1.5 million in non-PPP SBA loans which are also guaranteed.

As of December 31, 2024, the balance of SBA loans sold and serviced was $4.1 million, resulting in $104,000 in servicing income for the year ended December 31, 2024.

As of December 31, 2025, the balance of owned SBA loans and SBA loans net of the sold portion was $5.2 million, which are guaranteed.

As of December 31, 2025, the balance of SBA loans sold and serviced was $2.5 million,

resulting in $17,000 in servicing income for the year ended December 31, 2025.

Our SBA lending program is dependent upon the U.S.

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In addition, any default by the U.S.

Government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could adversely affect our business, financial condition and results of operations.

Included in this category are PPP loans, which have a contractual rate of 1.0%, with maturity terms of two to five years, are unsecured, 100% guaranteed and the loan proceeds of which may be forgiven by the U.S.

Government / SBA if used for certain purposes.

Outside of the PPP, the SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes.

Government on its obligations could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could adversely affect our business, financial condition and results of operations.

The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes.

Generally, we sell the guaranteed portion of our non-PPP SBA 7(a) loans in the secondary market.

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Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors.

When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a

customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA.

When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA.

If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us.

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Further, declines in real estate values and sales volumes and elevated unemployment levels may result in higher loan delinquencies, increases in our nonperforming and classified assets and a decline in demand for our products and services.

These events may cause us to incur losses and may adversely affect our financial condition and earnings.

These events may cause us to incur losses and may adversely affect our financial condition and results of operations.

Reduction in problem assets can be slow, and the process can be exacerbated by the condition of the properties securing nonperforming loans and the lengthy foreclosure process in Washington.

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An increase in our level of nonperforming assets increases our risk profile and may impact the capital levels regulators believe are appropriate in light of the ensuing risk profile.

While we seek to reduce problem assets through loan workouts, restructurings and otherwise, decreases in the value of the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, financial condition and results of operations.

While we seek to reduce problem assets through loan workouts,

restructurings and otherwise, decreases in the value of the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, financial condition and results of operations.

In addition, the resolution of nonperforming assets requires significant commitments of time from management, which may adversely impact their ability to perform their other responsibilities.

We may not experience future increases in the value of nonperforming assets.

Risks Related to Artificial Intelligence and Emerging Technologies

Our use of artificial intelligence and automated technologies may expose us to operational, compliance and governance risks.

We currently use, and may in the future evaluate or implement, artificial intelligence (“AI”), automation, and similar technologies to support certain internal processes or business functions.

The use of these technologies involves inherent risks, including the risk of errors, model limitations, data quality issues, system failures, or unintended outcomes.

If AI-enabled tools do not operate as intended or are not properly governed, our operations, risk management processes, or compliance with applicable laws and regulations could be adversely affected.

The regulatory and supervisory framework applicable to AI continues to evolve and may limit our ability to deploy or expand AI-enabled tools.

Banking regulators have emphasized that the use of AI and automated decision-making technologies remains subject to existing legal and regulatory requirements, including those related to consumer protection, fair lending, data privacy, and model risk management.

Regulatory expectations with respect to governance, transparency, documentation, and oversight of AI models are continuing to develop.

As a result, we may be required to modify, delay, or limit our use of AI technologies, or incur additional compliance, governance, or operational costs.

AI models may produce outcomes that are difficult to explain, validate or monitor.

Certain AI techniques may rely on complex or opaque algorithms that can make it challenging to fully explain model outputs or identify the underlying drivers of specific results.

Limitations in explainability or validation may increase model risk and complicate compliance with supervisory expectations, including those related to model risk management, internal controls, and auditability.

Failure to appropriately manage these risks could result in restrictions or other actions by regulatory agencies on the use of such technologies.

Our use of third-party vendors for technology solutions, including those incorporating AI, may increase operational and data risks.

We rely on third-party service providers for certain technology platforms and services, some of which may incorporate AI or automated functionality.

Our ability to manage the risks associated with these technologies depends, in part, on the controls and practices of such vendors.

Deficiencies in vendor risk management, data security, or regulatory compliance could disrupt our operations, compromise sensitive information, or result in regulatory or contractual exposure.

Increased public and regulatory scrutiny of AI could give rise to reputational risk.

The use of AI in financial services has been subject to heightened public and regulatory attention.

Concerns regarding transparency, fairness, privacy, or data use, whether or not well founded, could adversely affect customer confidence or result in increased regulatory scrutiny.

Any perceived misuse or failure of AI-enabled tools could harm our reputation and negatively affect our customer relationships.

Risks Related to Compliance and Operational Matters

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In 2006, the federal banking regulators issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices” (“CRE Guidance”).

Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.

investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.

Our total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, totaled $1.13 billion and represented 170.9% and 184.2% of its capital, at December 31, 2025 and 2024, respectively.

The outstanding balance of the Bank’s regulatory CRE portfolio has increased by 5.1%, 16.8%, and 30.9%, for the years ended December 31, 2024, 2023, and 2022 respectively.

In December 2015, the federal banking regulators released a new statement on prudent risk management for commercial real estate lending, referred to herein as the 2015 Statement.

The outstanding balance of the Bank’s regulatory CRE portfolio has decreased by 0.4%, and increased by 5.1%, and 16.8%, for the years ended December 31, 2025, 2024, and 2023 respectively.

In December 2015, the federal banking regulators released a statement on prudent risk management for commercial real estate lending, referred to herein as the 2015 Statement.

In the 2015 Statement, the federal banking regulators, among other things, indicate their intent to “continue to pay special attention” to commercial real estate lending activities and concentrations going forward.

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Because we serve individuals and businesses in the Northwest, a natural disaster, epidemic illness, significant effect of climate change or other major catastrophe in the Northwest likely would have a greater impact on our business, financial condition and results of operation than if our business were more geographically diverse.

The occurrence of any of these natural disasters.

epidemic illnesses, effects of climate change or other major catastrophes could negatively impact our performance by disrupting our operations or the operations of our customers, which could adversely affect our business, financial condition, results of operations.

The occurrence of any of these natural disasters, epidemic illnesses, effects of climate change or other major catastrophes could negatively impact our performance by disrupting our operations or the operations of our customers, which could adversely affect our business, financial condition and results of operations.

Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, OREO and repossessed personal property may not accurately reflect the net value of the asset.

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We may also be required to sell securities or other assets to meet funding needs which would reduce revenues or potentially generate losses.

Our strategy of partnering with broker dealers and digital financial service providers to offer BaaS has been adopted by other institutions with which we compete.

Several online banking operations as well as the online banking programs of conventional banks have instituted BaaS strategies similar to ours.

As a consequence, we have encountered competition in this area and anticipate that we will continue to do so in the future.

This competition may increase our costs, reduce our revenues or revenue growth or, because we are a relatively small banking operation without the name recognition of other, more established banking operations, make it difficult for us to compete effectively in obtaining these relationships.

Our banking-as-a-service (“BaaS”) strategy faces increasing competition, including from institutions and partners that may no longer require a third-party bank.

Our strategy of partnering with digital financial service providers to offer BaaS has been adopted by a growing number of financial institutions with which we compete.

Several technology-enabled banking platforms, as well as conventional banks with digital banking programs, have implemented BaaS strategies similar to ours.

As a result, we face increased competition in attracting and retaining BaaS partners, and we expect competitive pressures in this area to continue.

In addition, certain current or prospective partners may seek to reduce their reliance on third-party banking relationships by obtaining their own bank charters or other regulatory approvals that would allow them to offer banking products directly.

If such efforts are successful, demand for our BaaS services could decline, existing partner relationships could be reduced or terminated, and our ability to grow or maintain deposits, fee income, or other revenues associated with these relationships could be adversely affected.

Competition in the BaaS market may also increase our operating and compliance costs, reduce pricing flexibility, or limit revenue growth.

Any inability to compete effectively in this market could have an adverse effect on our business, financial condition, and results of operations.

Our agreements with BaaS partners may produce limited revenue and may expose us to liability for compliance violations by BaaS partners.

We have entered into agreements with BaaS partners, which includes broker dealers and digital financial service providers, pursuant to which we will provide certain banking services for the BaaS partner customers, including serving as the issuing bank for debit cards issued to their customers and establishing one or more settlement accounts for the purpose of settling customer transactions in the cash management account program.

We have entered into agreements with BaaS partners, which includes digital financial service providers, pursuant to which we will provide certain banking services for the BaaS partner customers, including serving as the issuing bank for debit cards issued to their customers and establishing one or more settlement accounts for the purpose of settling customer transactions in the cash management account program.

The agreements have varying terms and may be terminated by the parties under certain circumstances.

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Additionally, financial weaknesses at our BaaS partners could cause us to record greater expenses or losses or suffer reputational harm.

Significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.

The new administration has begun to implement significant changes to the size and scope of the federal government to achieve stated goals including reducing the federal budget deficit and national debt, improving the efficiency of government operations, and promoting innovation and economic growth.

To date, these efforts have been carried out through a mix of executive actions aimed at eliminating or modifying federal agency and federal program funding, reducing the size of the federal workforce, reducing or altering the scope of activities conducted by, and possibly eliminating, various federal agencies and bureaus, and encouraging the use of artificial intelligence and other advanced technologies within the public and private sectors.

If implemented, these changes may have varied effects on the economy that are difficult to predict.

For instance, the delivery of government services and the distribution of federal program funds and benefits may be disrupted or, in some cases, eliminated as a result of funding cuts or recasting of federal agency mandates.

Further, a substantial reduction of the federal workforce could adversely affect regional and local economies, both directly and indirectly, in geographies with significant concentrations of federal employees and contractors.

It is possible that the velocity of such comprehensive changes to the federal government may be materially adverse to the market area where we conduct business and to our customers, which, in turn, could be materially adverse to our business, financial condition and results of operations.

Significant changes in federal government policies, priorities, and operations could cause economic disruption and adversely affect our business, results of operation, and financial condition.

In recent years, the size, structure, priorities, and operations of the federal government have continued to evolve.

Federal actions have included changes to agency priorities, budgetary constraints, modifications to federal programs, workforce adjustments, and an increased emphasis on efficiency initiatives and the use of advanced technologies, including AI, across both the public and private sectors.

These developments, whether implemented through legislation, regulation, executive action, or administrative practice, may have economic effects that are difficult to predict.

Changes in federal funding levels, program administration, or agency mandates could disrupt the delivery of government services or the distribution of federal funds and benefits.

In addition, reductions or realignments in the federal workforce or government contracting activity could adversely affect regional and local economies, particularly in areas with meaningful concentrations of federal employees or contractors.

Such effects could, in turn, negatively impact our customers’ financial condition, borrowing capacity, or demand for banking services.

The pace and scope of ongoing changes to federal government operations and policies may contribute to broader economic uncertainty or volatility.

Any resulting adverse economic conditions in the markets we serve could have a negative effect on our business, financial condition, results of operations, and cash flows.

We may be adversely affected by changes in U.S.

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trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition and results of operations.

The new administration has signaled it will impose certain tariffs against U.S.

trading partners.

On February 1, 2025, an Executive Order was issued imposing tariffs at various levels on imports from Canada, Mexico, and China.

The newly imposed tariffs have resulted in immediate threats of retaliatory tariffs against U.S.

goods and resulted in discussions with the countries which have delayed many of the U.S.

imposed tariffs while discussions with each trading partner continue.

The above and other potential tariffs and trade restrictions may cause the prices of our customers’ products to increase, which could reduce demand for such products, or reduce our customers’ margins, and adversely impact their revenues, financial results, and ability to service debt.

This in turn could adversely affect our financial condition and results of operations.

In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate our business, our results of operations and financial condition could be materially and adversely impacted in the future.

At this time, it remains unclear what the U.S.

government or trading partners will or will not do with respect to additional tariffs that may be imposed or international trade agreements and policies.

trade policy continues to evolve and has included the imposition, modification, suspension, and proposed expansion of tariffs and other trade restrictions affecting imports from, and exports to, various trading partners, including Canada, Mexico, and China.

Certain tariffs have been implemented, delayed, or adjusted as trade negotiations and diplomatic discussions continue, and additional changes to tariff levels or trade restrictions may occur in the future.

The timing, scope, and duration of such measures remain uncertain.

Tariffs and other trade restrictions may increase costs for our customers, disrupt supply chains, reduce demand for their products, or compress operating margins.

These effects could adversely impact our customers’ financial performance and liquidity, increase credit risk, and reduce demand for loans and other banking services.

In addition, heightened trade tensions or uncertainty regarding trade policy could contribute to broader economic volatility, reduced business confidence, or slower economic growth in the markets we serve.

Further changes in trade policies, retaliatory actions by foreign governments, or modifications to international trade agreements could have adverse effects on economic conditions, financial markets, and our customers’ businesses.

Any resulting deterioration in economic conditions or increase in credit or market risks could materially and adversely affect our business, financial condition, results of operations and cash flows.

Because the nature of the financial services business involves a high volume of transactions, we face significant operational risks, including, but not limited to, customer, employee or third-party fraud and data processing system failures and errors.

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• increased operational costs to remediate the consequences of the external party’s security breach,

• negative impact on future revenues;

• negative impact on future revenues, and

• harm to reputation arising from the perception that our systems may not be secure.

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As the speed, frequency, volume, interconnectivity and complexity of transactions within our CCBX segment continues to increase, it becomes more challenging to effectively maintain systems and mitigate risks such as:

• errors made by us or external parties doing business with the community bank and CCBX, whether inadvertent or malicious;

• errors made by us or external parties doing business with the community bank and CCBX, whether inadvertent or malicious, and

• isolated or seemingly insignificant errors or losses, which migrate to other systems or grow in number, to become larger issues or losses.

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Furthermore, there can be considerable costs involved in expanding deposit and lending capacity that generally require a period of time to generate the necessary revenues to offset these costs, especially in areas in which we do not have an established presence and that require alternative delivery methods.

Accordingly, any such business expansion can be expected to negatively impact our earnings for some period of time until certain economies of scale are

Accordingly, any such business expansion can be expected to negatively impact our earnings for some period of time until certain economies of scale are reached.

Our expenses could be further increased if we encounter delays in modernizing existing facilities, opening new branches or deploying new services.

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These laws could delay or prevent an acquisition.

We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition and earnings.

Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services to customers and partners.

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Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase our costs.

While we have implemented a vendor management program with the third-party service providers, to help ensure third party relationships are effectively managed by providing risk-focused controls and processes that are designed to monitor our vendors’ compliance with relevant laws, regulations, and industry standards, we may not be able to ensure that all of our clients, suppliers, counterparties, broker dealers and financial providers in CCBX, and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means.

If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under personal information laws

and regulations.

While we have implemented a vendor management program with the third-party service providers, to help ensure third party relationships are effectively managed by providing risk-focused controls and processes that are designed to monitor our vendors’ compliance with relevant laws, regulations, and industry standards, we may not be able to ensure that all of our clients, suppliers, counterparties and financial providers in CCBX, and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means.

Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers for our products and services and thereby reduce our revenues.

Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, financial condition and earnings.

We are dependent on our information technology and telecommunications systems and third-party service providers;

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The secure processing, maintenance and transmission of this information is critical to our operations and business strategy.

We, our customers, and other financial institutions with which we interact, are subject to increasingly frequent, continuous attempts, including ransomware and malware attacks, to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations.

Our systems and our third-party service providers’ systems have been, and will likely continue to be, subject to advanced computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, social engineering, hacking and other cyber-attacks.

We, our customers, and other financial institutions with which we interact, are subject to increasingly frequent and continuous attempts, including ransomware and malware attacks, to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored

organizations, all of which are heightened as a result of advances in AI.

We have an Information Security Program that includes internal/external penetration testing, regular vulnerability assessments, detailed vulnerability management, data loss prevention controls, file access and integrity monitoring and reporting and threat intelligence.

While we have established policies and procedures to prevent or limit the impact of cyber-attacks, there can be no assurance that such events will not occur or will be adequately addressed if they do.

While we have established policies and procedures to prevent or limit the impact of cyberattacks, there can be no assurance that such events will not occur or will be adequately addressed if they do.

In addition, we also outsource certain cybersecurity functions, such as penetration testing, to third-party service providers, and the failure of these service providers to adequately perform such functions could increase our exposure to security breaches and cybersecurity threats.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other malicious code and cyber-attacks that could have an impact on information security.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other malicious code and cyberattacks that could have an impact on information security.

Any such breach or attacks could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

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Failure to comply with these requirements in the event of such an incident could result in sanctions by regulatory agencies, civil money penalties, and/or damage to our reputation, all of which could have an adverse effect on our business, financial condition and results of operations.

Additionally, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity

risk management, strategy and governance.

If we fail to comply with these new requirements we could incur regulatory fines in addition to other adverse consequences to our reputation, business, financial condition and results of operations.

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We may need to raise additional capital, in the form of additional debt or equity, in the future to have sufficient capital resources and liquidity to meet our commitments and fund our business needs and future growth, particularly if the quality of our assets or earnings were to deteriorate significantly.

Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial condition.

Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our

financial condition.

Economic conditions and a loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital or make such capital only available on unfavorable terms, including interbank borrowings, repurchase agreements and borrowings from the discount window of the Federal Reserve.

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Risks Related to Our Industry

Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations, including as a result of the new administration.

Regulation of the financial services industry is intense, and we may be adversely affected by changes in laws and regulations, including as a result of the current administration.

We are subject to extensive government regulation, supervision and examination at both the federal and state level.

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The Dodd-Frank Act, which imposed significant regulatory and compliance changes on financial institutions, is an example of this type of federal law.

Any future legislative changes, including as a result of the new administration, could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans.

Any future legislative changes, including as a result of the current administration, could have a material impact on our profitability, the value of assets held for investment or the value of collateral for loans.

Future legislative changes could also require changes to business practices and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.

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Generally, we must receive federal and state regulatory approval before we can acquire a depository institution or related business insured by the FDIC or before we open a de novo branch.

In determining whether to approve a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the

acquisition on competition, our financial condition, our future prospects, and the impact of the proposal on U.S.

In determining whether to approve a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, our financial condition, our future prospects, and the impact of the proposal on U.S.

financial stability.

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The CRA requires the Federal Reserve to assess the Bank’s performance in meeting the credit needs of the communities it serves, including low- and moderate-income neighborhoods, and if the Bank performs unsatisfactorily, various adverse regulatory consequences may ensue, including an inability to secure regulatory approval of expansionary transactions or new branches.

Additionally, on October 24, 2023, the FDIC, the Federal Reserve and the OCC released a final rule revising the framework that they use to evaluate banks’ records of community reinvestment under the CRA that may make it more challenging and/or costly for insured depository institutions to achieve an “Outstanding” or “Satisfactory” CRA rating, which could negatively impact our ability to obtain regulatory approval for an acquisition.

The regulatory framework governing CRA evaluations has been the subject of recent legal and regulatory developments.

Although the federal banking agencies adopted a final CRA rule in October 2023, implementation of that rule was subsequently enjoined by a federal court and did not take effect.

The agencies have since proposed to rescind the 2023 rule and continue to supervise institutions under the prior CRA regulations while further rulemaking is considered.

Future changes to CRA regulations, supervisory expectations, or examination practices could increase compliance costs or make it more difficult to achieve or maintain favorable CRA ratings.

In addition, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions.

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The broad rulemaking powers of the CFPB have potential to have a significant impact on the operations of financial institutions offering consumer financial products or services.

A successful regulatory challenge to an institution’s performance under fair lending laws or regulations, or other consumer lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on

entering new business lines.

Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.

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Loan servicing is subject to extensive regulation by federal, state and local governmental authorities, as well as various laws and judicial and administrative decisions imposing requirements and restrictions on those activities.

The volume of new or modified laws and regulations has increased in recent years and, in addition, some individual municipalities have begun to enact laws that restrict loan servicing activities, including delaying or temporarily preventing foreclosures or forcing the modification of certain mortgages.

The volume of new or modified laws and regulations has increased in recent years and, in addition, some individual

municipalities have begun to enact laws that restrict loan servicing activities, including delaying or temporarily preventing foreclosures or forcing the modification of certain mortgages.

If regulators impose new or more restrictive requirements, we may incur additional significant costs to comply with such requirements, which may further adversely affect us.

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General Risk Factors

We have identified material weaknesses in our internal control over financial reporting.

Such material weaknesses could adversely affect our results of operations and financial condition.

In the future, we may identify additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material errors in our financial statements or cause us to fail to meet our period reporting obligations.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, evaluating the effectiveness of our internal controls and disclosing any changes or material weaknesses identified through such evaluation.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

In March 2025, we determined that certain interest income, non-interest income, BaaS loan expense, and non-interest expense amounts in our financial statements were not recognized in accordance with GAAP.

As a result, we determined that there were material errors in the financial statements that required a restatement of our financial statements for the year ended December 31, 2023 and for the quarterly periods ended March 31, June 30, and September 30, 2023 and 2024.

Those restatements are included in this Annual Report on Form 10-K.

In addition, management determined that material weaknesses existed, and, as a result, that our internal control over financial reporting was not effective as of December 31, 2023 or December 31, 2024 due to control, design and implementation deficiencies with respect to third-party reports.

Management is implementing enhanced internal controls to remediate the material weaknesses that were identified.

Specifically, we are in the process of implementing controls to enhance our risk assessment, control and evaluation procedures over third-party reports to ensure compliance with the Company’s accounting policies.

The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have their intended effects.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.

If we are not able to comply with the requirements of the Sarbanes-Oxley Act or if we are unable to maintain effective internal control over financial reporting, we may not be able to produce timely and accurate financial

statements or guarantee that information required to be disclosed by us in the reports that we file with the SEC, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

Any failure of our internal control over financial reporting or disclosure controls and procedures could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our results of operations.

We previously identified material weaknesses in our internal control over financial reporting, and any failure to maintain effective internal controls in the future could adversely affect our business, financial condition, and results of operations.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and disclosure controls and procedures, evaluating their effectiveness, and disclosing any material weaknesses identified.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

As previously disclosed, in March 2025 we identified material errors in certain interest income, noninterest income, BaaS loan expense, and noninterest expense amounts, which resulted in the restatement of our financial statements for the year ended December 31, 2023 and for certain interim periods in 2023 and 2024.

In connection with these matters, management identified material weaknesses in internal control over financial reporting related to deficiencies in the control environment and risk assessment and control activities associated with accounting and financial reporting for information provided by BaaS partners.

During 2025, management, under the oversight of the Audit Committee, implemented a comprehensive remediation plan designed to address the previously identified material weaknesses.

As of December 31, 2025, management concluded that these material weaknesses had been remediated and that our internal control over financial reporting and disclosure controls and procedures were effective.

However, the effectiveness of internal controls can provide only reasonable assurance, and controls may be subject to breakdowns due to changes in conditions, human error, system limitations, or the circumvention or override of controls.

We cannot provide assurance that we will not identify additional control deficiencies or material weaknesses in the future, particularly as our business evolves, including through changes in our BaaS activities, third-party relationships, systems, or regulatory requirements.

Any failure to maintain effective internal control over financial reporting or disclosure controls and procedures could result in material misstatements in our financial statements, delays in our periodic reporting obligations, loss of investor confidence, regulatory scrutiny or enforcement actions, or adverse effects on the market price of our common stock, any of which could have a material adverse effect on our business, financial condition and results of operations.

National and global economic and other conditions could adversely affect our future results of operations or market price of our stock.

Our business is directly impacted by factors such as economic, political and market conditions, broad trends in industry and finance, changes in government monetary and fiscal policies and inflation, foreign policy, and financial market volatility, all of which are beyond our control.

Global economies continue to face significant challenges to achieving normalized economic growth rates and there are continuing concerns related to the level of U.S.

government debt and fiscal actions that may be taken to address that debt.

There can be no assurance that economic conditions will continue to improve, and these conditions could worsen.

Any deterioration in the economies of the nation as a whole or in our markets would have an adverse effect, which could be material, on our business, financial condition, results of operations and could also cause the market price of our stock to decline.

While it is impossible to predict how long challenging economic conditions may exist, a slow or fragile recovery could continue to present risks into the future for the industry and our company.

In addition, concerns about the performance of international economies, especially in Europe and emerging markets, economic conditions in Asia, particularly the economies of China, South Korea and Japan, GDP, inflation, higher interest rates, unemployment, global unrest, the Russian invasion of Ukraine, conflicts in the Middle East, the political environment, trade issues and resulting economic impact, can impact the economy and financial markets here in the United States.

If the national, regional and local economies experience worsening economic conditions, including high levels of unemployment, our growth and profitability could be constrained.

Weak economic conditions are characterized by, among other indicators, deflation, elevated levels of unemployment, fluctuations in debt and equity capital markets, increased delinquencies on mortgage, commercial and consumer loans, residential and commercial real estate price declines, and lower home sales and commercial activity.

Further, our business could be adversely affected by the effects of a widespread outbreak of epidemic illness in the human population.

All of these factors are generally detrimental to our business.

Our business is significantly affected by monetary and other regulatory policies of the U.S.

Our business and results of operations are influenced by a wide range of economic, political, and market factors that are beyond our control, including national and global economic conditions, monetary and fiscal policies, inflation, interest rates, government debt levels, geopolitical developments, trade policies, and financial market volatility.

These factors affect consumer and business confidence, borrowing and spending behavior, asset values, credit quality, and liquidity conditions, all of which can impact our performance.

The global economic environment continues to be characterized by heightened uncertainty.

Although economic conditions in the United States and other major economies have shown periods of stabilization, growth has remained uneven, inflationary pressures persist in certain sectors, interest rates remain elevated relative to historical norms, and fiscal and monetary policy paths remain uncertain.

Concerns regarding U.S.

government debt levels, budgetary actions, and broader fiscal policy could contribute to market volatility or adverse economic conditions.

Geopolitical developments, including the ongoing conflict between Russia and Ukraine, conflicts in the Middle East, heightened geopolitical tensions, and evolving trade relationships, have contributed to uncertainty in global financial markets, supply chains, and energy and commodity prices.

Economic conditions in international markets, including Europe and Asia, may also affect U.S.

economic performance and financial market stability.

Any escalation of geopolitical tensions, expansion of conflicts, or adverse developments in global trade or capital markets could negatively affect economic activity and investor sentiment.

Adverse economic conditions at the national, regional, or local level could reduce demand for loans and other financial products, increase credit losses, negatively affect collateral values, and constrain our growth and profitability.

Periods of economic stress are often associated with higher levels of unemployment, increased delinquencies and defaults

on consumer and commercial loans, declines in residential and commercial real estate values, reduced transaction activity, and volatility in debt and equity markets.

In addition, future public health events, epidemics, or pandemics could disrupt economic activity, labor markets, and financial markets, and could adversely affect our customers and operations.

Our business is also significantly affected by monetary, regulatory, and other policy actions of the U.S.

federal government, its agencies, and government-sponsored entities.

Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control, are difficult to predict and could have an adverse effect on our business, financial condition and results of operations.

Changes in these policies, which are influenced by evolving macroeconomic conditions and other factors outside our control, are difficult to predict and could have a material adverse effect on our business, financial condition, results of operations, and the market price of our common stock.

We are subject to certain risks in connection with growing through mergers and acquisitions.

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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.

What changed 10-K

Item 1A. Risk Factors