What changed in this filing

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Item 1A. Risk Factors

2025-03-06 compared with 2024-03-07 · 60 added, 23 removed, 231 unchanged (26% of the section changed)

6 unchanged sentences

The Corporation’s financial condition and results of operations are impacted by global markets and economic conditions over which the Corporation has no control.

Inflation has significantly increased since the start of 2021 and continues to remain at elevated levels compared to recent years prior to 2021, which has led to increased costs for businesses and consumers.

Periods of high inflation since the start of 2021 have led to increased costs for businesses and consumers.

In addition, international trade disputes, including threatened or implemented tariffs imposed by the U.S.

and threatened or implemented tariffs imposed by foreign countries in retaliation, could result in further inflationary pressures that impact costs.

An economic downturn or recession, including deterioration in the economic conditions in the U.S., or a slowing or stalled recovery therefrom, may have a material adverse effect on our business, financial condition or results of operations.

49 unchanged sentences

Significant fluctuations in interest rates could have a material adverse impact on the Corporation’s business, financial condition, results of operations, or liquidity.

In response to high inflation, the Federal Reserve significantly increased the benchmark federal funds rate since early 2022.

These actions have significantly increased interest rates.

Interest rates remain elevated compared to recent years and may increase.

As interest rates rise, we experience competitive pressures to increase the rates we pay on deposits, which may decrease our net interest income.

Furthermore, these increases in interest rates increase our cost of new debt or preferred capital.

Furthermore, elevated interest rates increase our cost of new debt or preferred capital.

The Bank’s interest rate risk measurement and management techniques incorporate the re-pricing and cash flow attributes of its balance sheet and off-balance sheet instruments as they relate to current and potential changes in interest rates.

25 unchanged sentences

Losses arising from environmental liabilities could have a material adverse impact on the Corporation’s business, financial condition, results of operations, or liquidity.

Replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.

In March 2021, the United Kingdom’s Financing Conduct Authority and the Intercontinental Exchange Benchmark Administration, the administrator for the London Interbank Offered Rate (“LIBOR”), concurrently announced that certain settings of LIBOR would no longer be published on a representative basis after December 31, 2021, and the most commonly used U.S.

dollar LIBOR settings would no longer be published on a representative basis after June 30, 2023.

The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to LIBOR in derivatives and other financial contracts.

We have a number of loans, derivative contracts, borrowings, and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR.

With the transition from LIBOR to SOFR as the preferred alternative to LIBOR, we have transitioned and amended our contracts and financial instruments to reference the SOFR rate where required.

Since proposed alternative rates (including SOFR) are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR.

The future performance of SOFR, including how changes in SOFR rates may differ from other rates during different economic conditions, cannot be predicted based on the limited historical performance.

Further, we cannot predict how SOFR will perform in comparison to LIBOR in changing market conditions, what the effect of such rate’s implementation may be on the markets for floating-rate financial instruments or whether such rates will be vulnerable to manipulation.

The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design, and hedging strategies.

Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation and could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to an Investment in the Corporation’s Securities

31 unchanged sentences

The Corporation cannot assure you that the Bank will be able to pay dividends to the Corporation in the future.

If the Corporation were unable to receive dividends from the Bank, it would materially and adversely affects the Corporation’s liquidity and its ability to service its debt, pay its other obligations, or pay cash dividends on its common stock.

If the Corporation were unable to receive dividends from the Bank, it would materially and adversely affect the Corporation’s liquidity and its ability to service its debt, pay its other obligations, or pay cash dividends on its common stock.

The Corporation may decide to limit the payment of dividends to its stockholders even when the Corporation has the legal ability to pay them in order to retain earnings for use in the Corporation’s business.

33 unchanged sentences

Competition from nationwide banks, as well as local institutions, is strong in the Corporation’s markets.

The financial services industry is undergoing rapid technological change and technological advances are likely to intensify competition.

The financial services industry is undergoing rapid technological change, and technological advances, including those related to artificial intelligence, are likely to intensify competition.

In addition to improving customer services, effective use of technology increases efficiency and enables financial institutions to reduce costs.

24 unchanged sentences

If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewal loans, gather deposits and provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customer business and subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

A failure in or breach of the Corporation’s or any of its subsidiaries’ information technology network and systems, or those of third party vendors and other service providers, including as a result of cyber attacks, could disrupt the Corporation’s or any of its subsidiaries’ businesses, result in the unauthorized disclosure or misuse of confidential or proprietary information, damage its reputation, increase its costs, or cause losses.

The Corporation, primarily through the Bank, depends on its information technology networks and systems to continuously process, record and monitor a large number of customer transactions and to process, transmit and store proprietary and confidential information, including personal information of employees and customers.

2 unchanged sentences

Although the Corporation has business continuity plans and other safeguards in place, any such cybersecurity incident, including those impacting personal information, could result in customer attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect the Corporation’s results of operations or financial condition.

Furthermore, increased regulation of data collection, use and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm the Corporation.

Further, new technologies such as artificial intelligence may be more capable at evading these safeguard measures.

In addition, significant disruptions of our third party vendors’ and/or service providers’ security systems or infrastructure, or other similar data security incidents, could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, regulated personal or confidential information, which could harm our business.

While we may be entitled to damages if our third-party service providers fail to satisfy their security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

Although to date the Corporation has not experienced any material losses relating to cyber attacks or cybersecurity incidents, there can be no assurance that it or its subsidiaries will not suffer such losses in the future and our information systems remain a target of cyber attacks.

As of December 31, 2024, the Corporation has not experienced any material risks from cybersecurity threats, including as a result of any previous cybersecurity incidents or threats, that have materially affected the business strategy, results of operations or financial condition of the Corporation.

However, there can be no assurance that the Corporation or its subsidiaries will remain unaffected in the future.

Given the evolving nature of security threats and evolving safeguards, there can be no assurance that any preventive, protective, or remedial data security measures that we or our third-party service providers implement are or will be adequate to detect or prevent all cybersecurity incidents.

Additionally, while we have implemented security measures that we believe are appropriate, a regulator could deem our security measures not to be appropriate given the lack of prescriptive measures in certain data protection laws.

The Corporation continues to enhance its data security systems, technology platforms, employee education and risk management processes, in an effort to underpin its business strategy as well as in response to the evolving threat landscape and any incidents we experience.

4 unchanged sentences

As cyber threats continue to evolve, the Corporation may be required to expend further significant resources to continue to modify or enhance its protective measures or to investigate and remediate future information security vulnerabilities.

While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses.

3 unchanged sentences

A pandemic and measures intended to prevent its spread, could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

A pandemic, such as the COVID-19 pandemic, and emergence of new variants could negatively impact the global economy, disrupt financial markets and international trade, and result in varying unemployment levels, all of which could negatively impact our business, results of operations, cash flows, and financial condition.

Pandemic outbreaks could lead (and the outbreak of COVID-19 led) governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as issuing guidelines, travel bans, border closings, business closures and quarantine orders.

A pandemic could negatively impact the global economy, disrupt financial markets and international trade, and result in varying unemployment levels, all of which could negatively impact our business, results of operations, cash flows, and financial condition.

In response to pandemic outbreaks, governments and other authorities around the world, including federal, state and local authorities in the United States, have imposed, and may in the future impose measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as issuing guidelines, travel bans, border closings, business closures and quarantine orders.

Our business and financial performance could be adversely affected, directly or indirectly, by terrorist activities, international hostilities or domestic civil unrest.

5 unchanged sentences

They could also cause a reduction in demand for lending or other services that we provide.

Our use of artificial intelligence could expose us to various risks.

We have begun to utilize artificial intelligence technologies in various aspects of our business, including internal training material creation.

Artificial intelligence technologies are susceptible to errors and other malfunctions which could lead to operational challenges and reputational risks.

In addition, we may be subject to increasing regulations related to our use of artificial intelligence, including regulations related to privacy, data security, and intellectual property rights, which could expose us to legal risks.

Risks Related to Legal and Compliance Matters

4 unchanged sentences

Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.

Furthermore, political and policy goals of elected officials may change over time, which could impact the rulemaking, supervision, examination and enforcement priorities of federal banking agencies.

Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect the Corporation in substantial and unpredictable ways.

18 unchanged sentences

If conditions or circumstances arise that expose flaws or gaps in the Corporation's risk-management program, or if its controls break down, the Corporation's results of operations and financial condition may be adversely affected.

Risks Related to the Merger with ESSA

The market price of the Corporation’s common stock may decline as a result of the Merger and the market price of the Corporation’s common stock after the consummation of the Merger may be affected by factors different from those affecting the price of the Corporation’s common stock before the Merger.

The market price of the Corporation’s common stock may decline as a result of the Merger if the Corporation does not achieve the perceived benefits of the Merger or the effect of the Merger on the Corporation’s financial results is not consistent with the expectations of financial or industry analysts.

In addition, the consummation of the Merger will result in the combination of two companies that currently operate as independent companies.

The business of the Corporation and the business of ESSA differ.

As a result, while the Corporation expects to benefit from certain synergies following the Merger, the Corporation may also encounter new risks and liabilities associated with these differences.

Following the Merger, shareholders of the Corporation and ESSA will own interests in a combined company operating an expanded business and may not wish to continue to invest in the Corporation, or for other reasons may wish to dispose of some or all of their shares of the Corporation’s common stock.

If, following the effective time of the Merger, large amounts of the Corporation’s common stock are sold, the price of the Corporation’s common stock could decline.

Further, the results of operations of the Corporation and the market price of the Corporation’s common stock after the Merger may be affected by factors different from those currently affecting the independent results of operations of each of the Corporation and ESSA and the market price of the Corporation’s common stock.

Accordingly, the Corporation’s historical market prices and financial results may not be indicative of these matters for the Corporation after the Merger.

The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.

The Corporation and ESSA can mutually agree to terminate the Merger Agreement at any time before the Merger has been completed, and either company can terminate the Merger Agreement if:

• any regulatory approval required for consummation of the Merger and the other transactions contemplated by the Merger Agreement has been denied by final, nonappealable action of any regulatory authority, or an application for regulatory approval has been permanently withdrawn at the request of a governmental authority;

• the required approval of the issuance of common stock of the Corporation in connection with the Merger by the Corporation’s shareholders or the required approval of the Merger Agreement by the ESSA shareholders are not obtained;

• the other party materially breaches any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the Merger Agreement), which breach is not cured within 30 days of written notice of the breach, or by its nature cannot be cured prior to the closing of the Merger, and such breach would entitle the non-breaching party not to consummate the Merger;

• the Merger is not consummated by January 9, 2026, unless the failure to consummate the Merger by such date is due to a material breach of the Merger Agreement by the terminating party.

In addition, the Corporation may terminate the Merger Agreement if:

• ESSA breaches the non-solicitation provisions in the Merger Agreement;

• the ESSA Board of Directors:

◦ fails to recommend approval of the Merger Agreement, or withdraws, modifies or changes such recommendation in a manner adverse to the Corporation’s interests;

◦ recommends, proposes or publicly announces its intention to recommend or propose to engage in an acquisition transaction with any person other than the Corporation or any of its subsidiaries;

• ESSA fails to call, give notice of, convene and hold its special meeting.

ESSA may terminate the Merger Agreement, subject to its compliance with the Merger Agreement, if ESSA has received an acquisition proposal, and the ESSA Board of Directors has made a determination that such proposal is a superior proposal and has determined to accept such proposal.

Failure to complete the Merger could negatively impact the stock price of the Corporation and its future business and financial results.

Completion of the Merger is subject to the satisfaction or waiver of a number of conditions, including approval by ESSA shareholders of the Merger.

The Corporation cannot guarantee when or if these conditions will be satisfied or that the Merger will be successfully completed.

The consummation of the Merger may be delayed, the Merger may be consummated on terms different than those contemplated by the Merger Agreement, or the Merger may not be consummated at all.

If the Merger is not completed, the ongoing business of the Corporation may be adversely affected, and the Corporation will be subject to several risks, including the following:

• the Corporation could incur substantial costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees;

• the Corporation’s management and employees’ attention may be diverted from their day-to-day business and operational matters as a result of efforts relating to the attempt to consummate the Merger.

In addition, if the Merger is not completed, the Corporation may experience negative reactions from the financial markets and from its customers and employees.

The Corporation also could be subject to litigation related to any failure to complete the Merger or to enforcement proceedings commenced against the Corporation to perform its obligations under the Merger Agreement.

If the Merger is not completed, the Corporation cannot assure its stockholders that the risks described above will not materialize and will not materially affect the Corporation’s business and financial results or the stock price of the Corporation.

The integration of the Corporation and ESSA will present significant challenges and expenses that may result in the combined business not operating as effectively as expected, or in the failure to achieve some or all of the anticipated benefits of the transaction.

The benefits and synergies expected to result from the proposed Merger will depend in part on whether the operations of ESSA can be integrated in a timely and efficient manner with those of the Corporation.

The Corporation will face challenges and costs in consolidating its functions with those of ESSA, and integrating the organizations, procedures and operations of the two businesses.

The integration of the Corporation and ESSA will be complex and time-consuming, and the management of both companies will have to dedicate substantial time and resources to it.

These efforts could divert management’s focus and resources from serving existing customers or other strategic opportunities and from day-to-day operational matters during the integration process.

Failure to successfully integrate the operations of the Corporation and ESSA could result in the failure to achieve some of the anticipated benefits from the transaction, including cost savings and other operating efficiencies, and the Corporation may not be able to capitalize on the existing relationships of ESSA to the extent anticipated, or it may take longer, or be more difficult or expensive than expected to achieve these goals.

This could have an adverse effect on the business, results of operations, financial condition or prospects of the Corporation and/or the Bank after the transaction.

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