What changed in this filing

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Item 1A. Risk Factors

2025-03-17 compared with 2024-03-14 · 164 added, 160 removed, 484 unchanged (40% of the section changed)

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ongoing economic and geopolitical instability, increases the risk of an economic recession.

Although forecasts have varied, many economists are projecting that, while indicators of U.S.

economic performance, such as income growth, may be strong

and levels of inflation may continue to decrease, the U.S.

economy may be flat or experience a modest decrease in gross domestic output in 2024 while inflation is expected to remain elevated relative to historic levels in the coming quarters.

economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained and our asset quality, deposit levels, loan demand and results of operations may be adversely affected.

economic conditions in foreign countries could affect the stability of global financial markets, which could hinder U.S.

The prolonged inverted yield curve and the actions by the Treasury Department in recent years such as financing more of the U.S.

debt with short-term

instruments resulted in higher short-term borrowing costs.

Despite rate cuts by the Federal Reserve between September and December 2024, the Federal Reserve has signaled caution in easing monetary policy citing strong economic performance, robust

GDP growth, and persistent inflation as reasons to move slowly with any further rate cuts.

economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained and our asset quality,

deposit levels, loan demand and results of operations may be adversely affected.

In addition, economic conditions in foreign countries could affect the stability of global financial markets, which could hinder U.S.

economic growth.

Our business is also significantly affected by monetary and related policies of the U.S.

federal government

and its agencies.

is also significantly affected by monetary and related policies of the U.S.

federal government and its agencies.

Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control.

Adverse economic conditions and government policy responses to such conditions could have a material

adverse effect on our financial condition and operations.

Our clients businesses are also impacted by the strong US dollar and the related impact to commodity prices and exports.

economic conditions and government policy responses to such conditions could have a material adverse effect on our financial condition and operations.

Our clients businesses are also impacted by the strong US dollar which impacts commodity prices

and hurts U.S.

A large portion of our loan portfolio is tied to the real estate market where we operate and we may be negatively impacted by downturns in that market.

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undertake other remedial actions.

We could suffer material credit losses if we do not appropriately manage our credit risk.

There are risks inherent in making any loan, including risks

in dealing with individual clients, risks of non-payment, risks resulting from uncertainties as to the future value of collateral and risks resulting from changes in economic and industry conditions.

Changes in the economy may cause the

assumptions that we made at origination to change and may cause clients to be unable to make payments on their loans.

There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate to address the

inherent risks associated with lending.

We could suffer material credit losses if the overall economy and/or a particular industry suffers an economic recession and we do not appropriately manage our

There are risks inherent in making any loan, including risks in dealing with individual clients, risks of non-payment, risks resulting from uncertainties as to the future value of collateral and risks resulting from

changes in economic and industry conditions.

Changes in the economy may cause the assumptions that we made at origination to change and may cause clients to be unable to make payments on their loans.

There is no assurance that our credit risk

monitoring and loan approval procedures are or will be adequate to address the inherent risks associated with lending.

Any failure to manage such risks may materially adversely affect our financial condition and results of operations.

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in operating results, any of which may impair a client’s ability to repay a loan.

During recessions, demand for goods and services slows down which may negatively affect business sales, levels of profits, and asset values, particularly real

estate which may decrease in value.

During recent years, the strong U.S.

dollar, high inflation rates and the inverted yield curve have had a negative impact on many of our borrowers, particularly in agri-business.

In February 2025, the new Trump Administration announced that it would be imposing increases in tariffs on goods imported to the U.S.

from Canada, Mexico, and China and has also indicated that tariffs may be

imposed at increased levels on imports to the U.S.

from other countries.

If other countries, in retaliation to the U.S.’s tariff measures, were to impose increased levels of tariffs on goods exported to such countries by companies in the U.S.

such tariff increases may negatively impact companies in the U.S.

whose business involves exports to other countries.

This could be of particular concern to U.S.

companies operating in the agricultural sector who export to other countries.

Company’s customers included a number of agricultural business, which could be negatively affected.

Preliminary indications have been that the new Trump Administration tariff increases to Canada and Mexico may be delayed or decreased if such

countries adopt various policies urged by the U.S., such as enhanced border security and control measures.

The outcome of this process cannot be predicted with any certainty at this time.

The success of a small to medium-sized business often depends on the management skills, talents and efforts of one or a small number of people, and the death, disability or resignation of one or more of these

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This may lead to an increase in our non-performing assets, a decrease in loan originations, or a reduction in the value of and income from our loans, any of which could have a material and negative effect on our operations.

Fluctuations in market

rates and other market disruptions are neither predictable nor controllable and may adversely affect our financial condition and earnings.

Asset liability

mismatches caused by normal fluctuations in market interest rates could also materially and adversely impact profitability.

Fluctuations in market rates and other market disruptions are neither predictable nor controllable and may adversely

affect our financial condition and earnings.

Since 2022, inflationary pressures have affected many aspects of the U.S.

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and yields on Treasury notes that it would be slowing the pace of its bond purchasing and increasing the target range for the federal funds rate over time.

The FOMC since has increased the target range 11 times or 525 basis points from March 2022

to July 2023.

As of December 31, 2023, the target range for the federal funds rate had been increased to 5.25% to 5.50%.

It remains uncertain whether the FOMC will further increase the target range for the federal funds rate to attain a monetary

policy sufficiently restrictive to return inflation to more normalized levels, begin to reduce the federal funds rate or leave the rate at its current elevated level for a lengthy period of time.

The impact of these developments on the business

of our clients and on our business cannot be predicted with certainty but could present challenges in 2024 and beyond.

The FOMC increased the target range 11 times or 525 basis points from March 2022 to July

The target range remained unchanged through much of 2024 until the FOMC decreased the rate 100 basis points during the last four months of the year.

As of December 31, 2024, the federal funds rate decreased to 4.50%.

It remains uncertain

whether the FOMC will further decrease the target range for the federal funds rate to attain a monetary policy sufficiently restrictive to return inflation to more normalized levels, begin to increase the federal funds rate or leave the rate at

its current elevated level for a lengthy period of time.

As noted previously, the new Trump Administration has taken steps to increase tariffs on goods imported to the U.S.

from certain countries.

Retaliation by such countries through the

imposition of higher tariffs on exports from the U.S.

appears to be a possibility.

The imposition of increased tariffs on imports and exports is believed by some economists to entail the possibility of increased inflationary pressures on the U.S.

The impact of these developments on the business of our clients and on our business cannot be predicted with certainty but could present challenges in 2025 and beyond.

Beginning in 2021, the U.S.

economy began to reflect relatively rapid rates of increase in the consumer price index and other economic indices;

elevated rate of inflation could present risks for the U.S.

economy began to reflect relatively rapid rates of increase in the consumer price index, inflation rates, and other economic indices;

a prolonged elevated rate of inflation could present risks for the U.S.

banking industry and our business.

During the latter part of 2021 and into 2023, the U.S.

economy exhibited relatively rapid rates of increase in the consumer price index and

other economic indices.

economy exhibited relatively rapid rates of increase in the consumer

price index, inflation rate, and other economic indices.

economy encounters a significant, prolonged rate of inflation, this could pose higher relative risks to the banking industry and our business.

Such inflationary periods have historically corresponded with

relatively weaker earnings and higher loan losses for banks.

Such inflationary periods have

historically corresponded with relatively weaker earnings and higher loan losses for banks.

In the past, inflationary environments have caused financing conditions to tighten and have increased borrowing costs for some marginal borrowers, which, in turn, has impacted bank credit quality and loan growth.

Additionally, a sustained period of inflation could prompt broad-based selling of longer-duration, fixed-rate debt, which could have negative implications for equity and real estate markets.

Small businesses and

leveraged loan borrowers can be challenged in a materially higher-rate environment.

Small businesses and leveraged loan borrowers can be

challenged in a materially higher-rate environment.

Higher interest rates can also present challenges for commercial real estate projects, pressuring valuations and loan-to-value ratios.

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These smaller institutions are likely to cater to the same small to medium-sized businesses that we target.

Additionally, financial technology companies allow clients to obtain loans via

the Internet in an expeditious manner and have become competitors.

If we are unable to attract and retain customers, we may be unable to continue to grow our loan and deposit portfolios and our operations and financial condition may otherwise be

adversely affected.

Additionally, non-traditional financial services firms, such as financial

technology companies, are less regulated and continue to expand their offerings of services traditionally provided by financial institutions.

If we are unable to attract and retain customers, we may be unable to continue to grow our loan and

deposit portfolios and our operations and financial condition may otherwise be adversely affected.

Ultimately, we may be unable to compete successfully against current and future competitors.

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loans repaid in late fall and winter as crops are harvested and sold.

As previously noted, increased tariffs by foreign countries on goods exported to such countries from the U.S.

could adversely impact agricultural producers in the U.S., including the Company’s customers in the

agricultural sector.

The impact of climate change and governmental and societal responses to climate change, including on the availability of water and the transition to a low-carbon

economy, could adversely affect our business and our clients’ businesses.

Despite the fact that 2023 had significant levels of precipitation in California, the State has experienced severe drought conditions at times over the past

Despite the fact that 2024 had above-average levels of precipitation in California, the State has experienced severe drought conditions at times over the past

several years.

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requirements.

Climate-related physical changes and hazards, such as wildfires, could also pose credit risks for us.

For example, our borrowers may have collateral properties or operations located in areas at risk of wildfires or

subject to the risk of drought in California.

The properties pledged as collateral on our loan portfolio could also be damaged by wildfires, earthquakes or other natural disasters, and thereby the recoverability of loans could be impaired.

number of factors can affect credit losses, including the extent of damage to the collateral, the extent of damage not covered by insurance, the extent to which unemployment and other economic conditions caused by the natural disaster adversely

affect the ability of borrowers to repay their loans, and the cost of collection and foreclosure to us.

Additionally, there could be increased insurance premiums and deductibles, or a decrease in the availability of coverage, due to severe losses

resulting from wildfires or other climate-related physical hazards.

The ultimate outcome on our business of a natural disaster, whether or not caused by climate change, is difficult to predict but could have a material adverse effect on financial

condition, results of operations or profitability.

Additional legislation and regulatory requirements and changes in consumer preferences, including those associated with the transition to a low-carbon economy, could increase expenses of, or otherwise adversely

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Risks Related to Our Growth

If we are not able to maintain our past levels of growth, our future prospects and competitive position could be diminished and our profitability could be

We may not be able to sustain our deposit, loan, and asset growth at the rate we have attained during the past several years.

Our growth over the past several years has been driven primarily by agricultural and commercial real

estate growth in our market areas, growth in non-real estate agricultural and commercial loans, commercial leasing, and residential real estate.

A failure to attract and retain high performing employees, heightened competition from other

financial services providers, and an inability to attract additional core deposits and lending clients, among other factors, could limit our ability to grow as rapidly as we have in the past and as such could have a negative effect on our

financial condition and operations.

If we are unable to manage our growth effectively, we may incur higher than anticipated costs, and our ability to execute our growth strategy could be impaired.

It is our objective to continue to grow our assets and deposits by increasing our product and service offerings and expanding our operations organically.

Our ability to manage growth successfully will depend on our ability to (i) identify

suitable markets for expansion;

If we are not able to manage our growth effectively, our future prospects and competitive position could be diminished and our profitability could be reduced.

may also incur higher than anticipated costs, and our ability to execute our growth strategy could be impaired.

It is our objective to continue to grow our assets and deposits by increasing our product and service offerings and

expanding our operations organically.

Our ability to manage growth successfully will depend on our ability to (i) identify suitable markets for expansion;

(ii) attract and retain qualified management;

(iii) attract funding to support additional growth;

(iii) attract funding to support additional

(iv) maintain asset quality and cost controls;

(v) maintain adequate regulatory capital and profitability to support

our lending activities;

and (vi) may include finding attractive acquisition targets and successfully acquire and integrate the acquisitions in an efficient manner.

If we do not manage our growth effectively, we may be unable to realize the

benefit from our investments in technology, infrastructure, and personnel that we have made to support our expansion.

In addition, we may incur higher costs and realize less revenue growth, which would reduce our earnings and diminish our future

Failing to maintain effective financial and operational controls, as we grow, such as appropriate loan underwriting procedures, adequate allowances for credit losses and compliance with regulatory requirements could have a negative

effect on our financial condition and operations, such as increased credit losses, reduced earnings and potential regulatory restrictions on growth.

(v) maintain adequate regulatory capital and profitability to support our lending activities;

and (vi) may include finding attractive acquisition targets and successfully acquire and

integrate the acquisitions in an efficient manner.

If we do not manage our growth effectively, we may be unable to realize the benefit from our investments in technology, infrastructure, and personnel that we have made to support our expansion.

In addition, we may incur higher costs and realize less revenue growth, which would reduce our earnings and diminish our future prospects.

Failing to maintain effective financial and operational controls as we grow, such as appropriate loan

underwriting procedures, adequate allowances for credit losses and compliance with regulatory requirements, could have a negative effect on our financial condition and operations, such as increased credit losses, reduced earnings and potential

regulatory restrictions on growth.

Entering new market areas, new lines of business, or new products and services may subject us to additional risks.

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A significant source of risk arises from the possibility that we could

sustain losses due to loan defaults and non-performance on loans.

sustain losses due to adverse economic conditions which, among other factors, could cause loan defaults and non-performance on loans.

We maintain an allowance for credit losses in accordance with U.S.

generally accepted accounting principles to provide for such defaults and other non-performance.

determination of the appropriate level of this allowance is an inherently difficult process and is based on numerous assumptions.

The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes

in interest rates, which may be beyond our control.

In addition, our underwriting policies, adherence to credit monitoring processes, and risk management systems and controls may not prevent unexpected losses.

Our allowance for credit losses may

not be adequate to cover actual credit losses.

generally accepted accounting principles to

provide for such defaults and other non-performance.

The determination of the appropriate level of this allowance is an inherently difficult process and is based on numerous assumptions.

The amount of future losses is susceptible to changes in

economic, operating and other conditions, including changes in interest rates, which may be beyond our control.

In addition, our underwriting policies, adherence to credit monitoring processes, and risk management systems and controls may not

prevent unexpected losses.

Our allowance for credit losses may not be adequate to cover actual credit losses.

Moreover, any increase in our allowance for credit losses will adversely affect our earnings.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 became

effective January 1, 2020, and substantially changed the accounting for credit losses on loans and other financial assets held by banks, financial institutions and other organizations.

The standard replaced existing incurred loss impairment

guidance and established a single allowance framework for financial assets carried at amortized cost.

Upon adoption of ASU 2016-13, companies must recognize credit losses on these assets equal to management’s estimate of credit losses over the

full remaining expected life.

Companies must consider all relevant information when estimating expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts.

We adopted and fully

implemented this accounting standard effective January 1, 2022.

The adoption of ASU 2016-13 did not have a material negative effect on the level of allowance for credit loss held by us or on our reported earnings.

The potential negative effect

that the adoption of this new accounting pronouncement may have on future lending by us or the banking industry in general is still not well known.

We believe that our allowance for credit losses as of December 31, 2023 was adequate to absorb

expected credit losses inherent in our loan portfolio;

however, we cannot assure that such levels will be sufficient to cover actual or future losses.

Our financial and accounting estimates and risk management framework rely on analytical forecasting and models, and our risk exposures and losses could be

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Finally, information we provide to our regulators based on poorly designed or implemented models could also be inaccurate or misleading.

of the decisions that our regulators make, including those related to capital distributions to our stockholders, could be affected adversely due to their perception that the quality of the models used to generate the relevant information is

of the decisions that our regulators make, including those related to capital distributions to our shareholders, could be affected adversely due to their perception that the quality of the models used to generate the relevant information is

insufficient.

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We maintain a significant amount of

our assets in investment securities, and must periodically evaluate investment securities for current expected credit losses after the adoption of ASU 2016-13.

We evaluate our investment securities portfolio for impairment as of each reporting

At December 31, 2023, we had no investment securities that were impaired.

our assets in investment securities, and must periodically evaluate investment securities for current expected credit losses as required by ASC 326.

We evaluate our investment securities portfolio for impairment as of each reporting date.

December 31, 2024, we had no investment securities that were impaired.

Changes in accounting standards could materially affect our financial statements.

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We may be unable to, or choose not to, pay dividends on our common shares.

We have consistently declared an annual cash dividend for over 88 years.

We have consistently declared an annual cash dividend for 89 years.

ability to continue to pay dividends depends on various factors.

The Company is a legal entity separate and distinct from the Bank, and does not conduct stand-alone operations, which means that the Bank must first pay dividend(s) to the

The Company is a legal entity separate and distinct from the Bank, and does not conduct stand-alone operations, which means that the Bank must first pay dividend(s) to the Company.

The FDIC, the DFPI and California corporate and banking laws may, under certain circumstances, prohibit the Bank’s payment of dividends to the Company.

Federal Reserve policy requires bank holding companies to pay cash dividends on

common shares only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.

The Company’s Board of Directors may determine

that, even though funds are available for dividend payments, retaining the funds for other internal uses, such as expansion of our operations, is necessary or appropriate in light of our business plan and objectives.

A failure to pay dividends

may negatively affect your investment.

The price of our common shares may fluctuate significantly and our stock may have low trading volumes, which may make it difficult for you to resell common

shares owned by you at times or prices you find attractive.

The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility.

The markets may produce downward pressure on stock

prices for certain issuers without regard to those issuers’ underlying financial strength.

As a result, the trading volume in our common shares may fluctuate and cause significant price variations to occur.

This may make it difficult for you to

resell common shares owned by you at times or at prices you find attractive.

The historically low trading volume in our common shares on the OTCQX, under the symbol “FMCB,” means that our shares may have less liquidity than other companies, whose shares are more broadly traded.

ensure that the volume of trading in our common shares or the price of our common shares will be maintained or will increase in the future.

Our stock price can fluctuate significantly in response to a variety of factors discussed in this section,

including, among other things:

Federal Reserve policy requires bank holding companies to pay cash dividends on common shares

only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition.

The Company’s Board of Directors may determine that, even though

funds are available for dividend payments, retaining the funds for other internal uses, such as expansion of our operations, is necessary or appropriate in light of our business plan and objectives.

A failure to pay dividends may negatively

affect your investment.

The price of our common shares may fluctuate significantly particularly given the illiquid nature of our common stock and our stock may have low trading volumes,

which may make it difficult for a shareholder to resell common shares owned at times or prices they find attractive.

The stock market and, in particular, the market for financial institution stocks, has experienced significant

The markets may produce downward pressure on stock prices for certain issuers without regard to those issuers’ underlying financial strength.

As a result, the trading volume in our common shares may fluctuate and cause significant

price variations to occur.

The low trading volume in our common shares on the OTCQX, under the symbol “FMCB,” means that our shares may have less liquidity than other companies, whose shares are more broadly traded.

We cannot ensure that

the volume of trading in our common shares or the price of our common shares will be maintained or will increase in the future.

Our stock price can fluctuate significantly in response to a variety of factors discussed in this section, including,

among other things:

actual or anticipated variations in quarterly results of operations;

operating and stock price performance of other companies that investors deem comparable to our Company;

news reports relating to trends, concerns

and other issues in the financial services industry;

news reports relating to trends, concerns and other

issues in the financial services industry;

available investment liquidity in our market area since our stock is not listed on any exchange;

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Our ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions.

The high-profile bank failures of Silicon Valley Bank, Signature Bank and First Republic Bank last year, and related negative media attention, also generated significant market trading volatility among

publicly-traded bank holding companies and, in particular, regional and community banks.

These developments negatively impacted customer confidence in the safety and soundness of regional and community banks.

The FDIC took steps to ensure that

depositors of these failed banks would have access to their deposits, including uninsured deposit accounts.

bank regulators have taken action in an effort to further strengthen public confidence in the banking system through the creation of

a new Bank Term Funding Program.

There can be no assurance that these actions will be successful in restoring customer confidence in regional and community banks and the banking system more broadly.

The rapid contraction of the M1 and M2 money supply in 2022 and the first quarter of 2023 materially impacted liquidity levels at many financial institutions.

The high-profile bank failures of Silicon Valley Bank,

Signature Bank and First Republic Bank in 2023, and related negative media attention, also generated significant market trading volatility among publicly-traded bank holding companies and, in particular, regional and community banks.

developments negatively impacted customer confidence in the safety and soundness of regional and community banks.

These events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies, enhanced regulatory supervision and examination policies and priorities, and/or the

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Information security risks for financial institutions have increased recently in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct

financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.

In addition to cyber-attacks or other security breaches involving the theft of

sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions, particularly denial of service attacks that are designed to disrupt key business services, such as client-facing websites.

are not able to anticipate or implement effective preventive measures against all potential security breaches, because the techniques used change frequently and because attacks can originate from a wide variety of sources.

We employ detection and

response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection.

financial and other business transactions, and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists, nation-state adversaries, and others.

In addition to cyber-attacks or other security

breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions, particularly denial of service and ransomware attacks that are designed to disrupt key business

services, such as client-facing websites.

We are not able to anticipate or implement effective preventive measures against all potential security breaches, because the techniques used change frequently and because attacks can originate from a

wide variety of sources.

We employ detection and response mechanisms designed to contain and mitigate security incidents, but early detection may be thwarted by sophisticated attacks and malware designed to avoid detection.

We also face risks related to cyber-attacks and other security breaches in connection with credit and debit card transactions that typically involve the transmission of sensitive information regarding our clients

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While we regularly conduct security assessments on these third parties, we cannot be sure that their information security protocols are sufficient at all times to withstand a cyber-attack or other security breach.

The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our clients or our own proprietary information, software, methodologies, and business secrets could

result in significant legal and financial exposure, supervisory liability, damage to our reputation or a loss of confidence in the security of our systems, products and services, which could have a material adverse effect on our financial

condition or operations.

In the past several years, there have been a number of well-publicized attacks or breaches affecting others in our industry that have heightened concern by consumers and have resulted in increased regulatory focus.

Furthermore, cyber-attacks or other breaches in the future, whether affecting others or us, could intensify consumer concern and regulatory focus and result in reduced use of our cards and increased costs, all of which could have a material

adverse effect on our business.

To the extent we are involved in any future cyber-attacks or other breaches, our brand and reputation could be affected, and this could have a material adverse effect on our financial condition and operations.

we experience a cyber-attack, our insurance coverage may not cover all losses, and furthermore, we may experience a loss of reputation.

The access by unauthorized

persons to, or the improper disclosure by us of, confidential information regarding our clients or our own proprietary information, software, methodologies, and business secrets could result in significant legal and financial exposure,

supervisory liability, damage to our reputation or a loss of confidence in the security of our systems, products and services, which could have a material adverse effect on our financial condition or operations.

In the past several years, there

have been a number of well-publicized attacks or breaches affecting others in our industry that have heightened concern by consumers and have resulted in increased regulatory focus.

Furthermore, cyber-attacks or other breaches in the future,

whether affecting others or us, could intensify consumer concern and regulatory focus and result in reduced use of our cards and increased costs, all of which could have a material adverse effect on our business.

To the extent we are involved in

any future cyber-attacks or other breaches, our brand and reputation could be affected, and this could have a material adverse effect on our financial condition and operations.

If we experience a cyber-attack, our insurance coverage may not

cover all losses, and furthermore, we may experience a loss of reputation.

We rely on our information technology and telecommunications systems and third-party servicers, and the failure of these systems could adversely affect our

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers.

We rely on these systems to process new and renewal

loans, provide client service, facilitate collections and share data across our organization.

The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could

interrupt our operations.

Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party

systems fail or experience interruptions.

If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewal loans and provide client service or compromise our ability to collect

loan payments in a timely manner.

Our ability to adopt new information technology and technological products needed to meet our clients’ banking needs may be limited if our third-party servicers are slow to adopt or choose not to adopt such new

technology and products.

Such a failure to provide this technology and products to our clients could result in a loss of clients, which would negatively affect our financial condition and operations.

We rely on these systems to process deposit services,

electronic funds transfer services (including wires and ACH), new and renewal loans, provide client service, facilitate collections and share data across our organization.

The failure of these systems, or the termination of a third-party software

license or service agreement on which any of these systems is based, could interrupt our operations.

Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service

denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions.

If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process deposit

services, electronic funds transfer services (including wires and ACH), new and renewal loans and provide client service or compromise our ability to collect loan payments in a timely manner.

Our ability to adopt new information technology and

technological products needed to meet our clients’ banking needs may be limited if our third-party servicers are slow to adopt or choose not to adopt such new technology and products.

Such a failure to provide this technology and products to our

clients could result in a loss of clients, which would negatively affect our financial condition and operations.

Other Operational Risks

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Although we have business continuity and disaster recovery programs in place, a significant catastrophic event could materially adversely affect the Bank’s operating results.

The physical effects of climate change, as well as governmental and societal responses to climate change could materially adversely affect our operations,

businesses and customers.

There is increasing concern over the risks of climate change and related environmental sustainability matters.

The physical effects of climate change include rising average global temperatures, rising sea

levels and an increase in the frequency and severity of extreme weather events and natural disasters, including droughts, wildfires, floods, hurricanes and tornados.

Most of the Company’s operations and customers are located in California, which

could be adversely impacted by severe weather events.

Agriculture is especially dependent on climate, and climate impacts could include shifting average growing conditions, increased climate and weather variability, decreases in available water

sources, and more uncertainty in predicting climate and weather conditions, any or all of which could have a particularly adverse impact on our agricultural customers.

affect, the Company, its businesses or its customers.

Our customers and we may face cost increases, asset value reductions, operating process changes, reduced availability of insurance, and the like, because of governmental actions or societal

responses to climate change.

New and/or more stringent regulatory requirements relating to climate change or environmental sustainability could materially affect the Company’s results of operations by increasing our compliance costs.

Regulatory changes or market shifts to low-carbon products could also affect the creditworthiness of some of our customers or reduce the value of assets securing loans, which may require the Company to adjust our lending portfolios and business

Risks Related to Our Regulatory Environment

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escrow accounts maintained for “higher priced mortgage loans.” These rules create operational and strategic challenges for us, as we are both a mortgage originator and a servicer.

As noted previously, the new Trump Administration has made leadership changes at the CFPB.

The long-term impact of these and other changes at the CFPB cannot be predicted at this time.

We are subject to stringent capital requirements.

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required capital.

Issuing additional common shares would dilute our current stockholders’ percentage of ownership and could cause the price of our common shares to decline.

Issuing additional common shares would dilute our current shareholders’ percentage of ownership and could cause the price of our common shares to decline.

Any debt would be entitled to a priority of payment over the claims of

53 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