What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-03-26 compared with 2024-03-29 · 25 added, 18 removed, 179 unchanged (19% of the section changed)

28 unchanged sentences

credit losses or loan charge-offs as required by these regulatory agencies could have a material adverse effect on the results of operations and financial condition.

A new accounting standard resulted in a significant change in how the Corporation recognizes credit losses.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the Current Expected Credit Loss (“CECL”) model.

The new CECL standard became effective on January 1, 2023 and for interim periods within that year.

Under the CECL model, the Corporation is required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, as the net amount expected to be collected.

The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter.

This differs significantly from the “incurred loss” model previously required under generally accepted accounting principles (“GAAP”), which delays recognition until it is probable a loss has been incurred.

The adoption of the CECL model materially affects how the allowance for credit losses is determined and the Corporation recognized a one-time-cumulative adjustment to decrease the allowance for credit losses of $1.119 million during the first quarter of 2023.

If the Corporation is required to materially increase its allowance for credit losses for any reason, such increase could adversely affect its business, financial condition, and results of operations.

The Corporation’s communication, information and technology systems may experience an interruption or breach in security.

5 unchanged sentences

The occurrence of any failures, interruptions or security breaches of the Corporation’s information technology and communication systems could damage the Corporation’s reputation, adversely affecting customer or investor confidence, result in a loss of customer business, subject the Corporation to additional regulatory scrutiny and possible regulatory penalties, or expose the Corporation to civil litigation and possible financial liability, any of which could have a material adverse effect on the Corporation’s financial condition and results of operations.

The Corporation may use artificial intelligence (AI) in its business, and challenges with properly managing its use could result in disruption of its internal operations, reputational harm, competitive harm, legal liability and adversely affect the Corporation’s results of operations and stock price.

The Corporation may incorporate AI solutions into platforms that deliver products and services to its customers, including solutions developed by third parties whose AI is integrated into its products and services.

The Corporation's business could be harmed and it may be exposed to legal liability and reputational risk if the AI it uses is or is alleged to be deficient, inaccurate, or biased because the AI algorithms are flawed, insufficient, of poor quality, or reflect unwanted forms of bias, particularly if third party AI integrated with its platforms produces false or "hallucinatory" inferences.

Data practices by the Corporation or others that result in controversy could impair the acceptance of AI, which could undermine the decisions, predictions, or analysis that AI applications produce.

The Corporation's customers and potential customers may express adverse opinions concerning its use of AI and machine learning that could result in brand or reputational harm, competitive harm, or legal liability.

If the Corporation develops Generative AI, its content creation may require additional investment as testing for bias, accuracy and unintended, harmful impact is often complex and may be costly.

As a result, the Corporation may need to increase the cost of its products and services which may make it less competitive, particularly if its competitors incorporate AI more quickly or successfully.

Governmental bodies have implemented laws and are considering further regulation of AI (including machine learning), which could negatively impact the Corporation's ability to use and develop AI.

The Corporation is unable to predict how application of existing laws, including federal and state privacy and data protection laws, and adoption of new laws and regulations applicable to AI will affect it but it is likely that compliance with such laws and regulations will increase its compliance costs and such increase may be substantial and adversely affect its results of operations.

Furthermore, its use of Generative AI and other forms of AI may expose us to risks relating to intellectual property ownership and licensing rights, including copyright of Generative AI and other AI output as these issues have not been fully interpreted by federal courts or been fully addressed by federal or state legislation or regulations.

Severe weather, natural disasters, disease pandemics and epidemics, acts of war or terrorism and other external events could significantly impact the Corporation’s business.

1 unchanged sentence

Such events could affect the stability of the Corporation’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Corporation to incur additional expenses.

Severe weather, natural disasters, disease pandemics and epidemics, acts of war or terrorism or other adverse external events may occur in the future.

Severe weather, natural disasters, disease pandemics and epidemics, acts of

war or terrorism or other adverse external events may occur in the future.

Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on the Corporation’s business, which, in turn, could have a material adverse effect on the Corporation’s financial condition and results of operations.

26 unchanged sentences

Basel III signals a growing effort by domestic and international bank regulatory agencies to require financial institutions, including depository institutions, to maintain higher levels of capital.

Although Basel III is implemented, regulatory viewpoints could change or require additional capital to support the Corporation’s business risk profile.

Although Basel III is implemented, regulatory viewpoints could change or require additional capital to support the Corporation’s

business risk profile.

If the Corporation and the Bank are required to maintain higher levels of capital, the Corporation and the Bank may have fewer opportunities to invest capital into interest-earning assets, which could limit the profitable business operations available to the Corporation and the Bank and adversely impact its financial condition and results of operations.

If the Corporation concludes that the decline in value of any of its securities is other than temporary, the Corporation will be required to write down the credit-related portion of the impairment of that security through a charge to earnings.

Management reviews its securities portfolio at each quarter-end reporting period to determine whether the fair value is below the current carrying value.

When the fair value of any of its investment securities has declined below its carrying value, management is required to assess whether the decline is other than temporary.

If management concludes that the decline is other than temporary, management will be required to write down the credit-related portion of the impairment of that security through a charge to earnings.

If the Corporation concludes that any debt securities are carrying a potential loss, the Corporation will be required to establish an allowance for expected credit losses.

Management reviews its debt securities portfolio at each quarter-end reporting period, or more frequently when economic or market concerns warrant such evaluation, to determine if there is impairment resulting from any decline in fair value below the amortized cost basis of a debt security and to determine whether there is a credit loss associated with the decline in fair value.

Credit losses are calculated individually, using a discounted cash flow method, comparing the present value of expected cash flows with the amortized cost basis of the debt security.

Any required credit loss component would be recognized through the provision for credit losses and the creation of an allowance for credit losses related to securities.

If the Corporation concludes that any equity securities are impaired, the Corporation will be required to record a loss equivalent to the difference between the cost and fair value of the respective equity securities.

Management evaluates its equity securities for impairment at each quarter-end reporting period and more frequently when economic or market conditions warrant such an evaluation.

If an impairment loss related to an equity security is determined to exist, a loss in the amount of the difference between the cost and fair value of the security is recognized.

Due to the complexity of the calculations and assumptions used in determining whether an asset is impaired, the impairment disclosed may not accurately reflect the actual impairment in the future.

36 unchanged sentences

From time to time, customers make claims and take legal action pertaining to the Corporation’s performance of its fiduciary responsibilities.

Whether customer claims and legal action related to the Corporation’s performance of its fiduciary responsibilities are founded or unfounded, and if such claims and legal actions are not resolved in a manner favorable to the Corporation, they may result in significant financial liability and/or adversely affect the market perception of the Corporation and its products and services as well as impact customer demand for those products and services.

Any financial liability or reputation damage could have a material adverse effect on the Corporation’s financial condition and results of operations.

22 unchanged sentences

The Corporation may not be able to effectively implement every new technology-driven products and services or be successful in marketing these products and services to its customers.

Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Corporation’s business and, in turn, the Corporation’s financial condition and results of operations.

Failure to successfully keep pace with technological

change affecting the financial services industry could have a material adverse impact on the Corporation’s business and, in turn, the Corporation’s financial condition and results of operations.

The Corporation may need or be compelled to raise additional capital in the future, but that capital may not be available when it is needed and on terms favorable to current shareholders.

35 unchanged sentences

Poor economic conditions and the resulting bank failures increased the costs of the FDIC and depleted its deposit insurance fund.

Any additional bank failures may prompt the FDIC to increase its premiums or to issue special

Any additional bank failures may prompt the FDIC to increase its premiums or to issue special assessments.

The Corporation is generally unable to control the amount of premiums or special assessments that its subsidiary is required to pay for FDIC insurance.

11 unchanged sentences

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