What changed in this filing

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Item 1A. Risk Factors

2026-03-25 compared with 2025-03-31 · 53 added, 67 removed, 246 unchanged (33% of the section changed)

32 unchanged sentences

The Company’s investment portfolio consists of federal funds, interest bearing balances in other financial institutions, U.S.

government securities, federal agency obligations, obligations of state and local municipalities, and corporate securities.

government securities, U.S.

Treasury securities, federal agency obligations, obligations of state and local municipalities, mortgage-backed securities and corporate securities.

All of the instruments held in the Company’s investment portfolio are designated as available-for-sale, and many of these instruments are particularly sensitive to interest rate fluctuations, especially long-term fixed-income securities, including U.S.

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As of December 31, 2025, the Company held approximately $201.2 million of municipal securities within the investment portfolio, which comprised approximately 63.6% of the portfolio, and approximately $104.7 million of collateralized mortgage obligations and residential mortgage-backed securities within the portfolio, which comprised approximately 33.1% of the portfolio.

From December 31, 2023 to December 31, 2024, the investment portfolio experienced unrealized losses of approximately $9.0 million.

The increase in unrealized losses is reflected in Accumulated Other Comprehensive Income (Loss) (AOCI) on the Company’s balance sheet and reduces the Company’s book capital and tangible common equity ratio.

From December 31, 2024 to December 31, 2025, the investment portfolio experienced a reduction in unrealized losses of approximately $21.6 million.

The decrease in unrealized losses is reflected in AOCI on the Company’s balance sheet and increases the Company’s book capital and tangible common equity ratio.

However, unrealized losses do not affect the Company’s regulatory capital ratios.

Management continues to actively monitor the investment portfolio and may sell securities from the portfolio before maturity in order to take advantage of restructuring opportunities.

Management continues to actively monitor the investment portfolio and may sell securities from the portfolio before maturity in order to take advantage of restructuring opportunities, which would include reinvestment of sale proceeds at higher rates of return, improving duration or improving interest rate risk exposure.

That said, it is unlikely the Company will be required to sell the securities before recovery of their amortized cost bases, which may be at maturity.

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At December 31, 2025, $636.9 million, or 44.0% of the Bank’s total loans receivable had fixed interest rates.

The Bank offers adjustable rate mortgage (ARM) loans and fixed-rate loans.

The Bank offers ARM loans

and fixed-rate loans.

Unlike ARM loans, fixed-rate loans carry the risk that, because they do not reprice to market interest rates, their yield may be insufficient to offset increases in the Bank’s cost of funds during a rising interest rate environment.

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Thus, we are dependent upon the existence of an active secondary market and our ability to profitably sell loans into that market.

Our ability to sell mortgage loans readily is dependent upon the availability of an active secondary market for single-family mortgage loans, which in turn depends in part upon the continuation of programs currently offered by Fannie Mae, Freddie Mac, and Ginnie Mae (the “Agencies”) and other institutional and non-institutional investors.

Our ability to sell mortgage loans readily is dependent upon the availability of an active secondary market for single-family mortgage loans, which in turn depends in part upon the continuation of programs currently offered by the Agencies and other institutional and non-institutional investors.

These entities account for a substantial portion of the secondary market in residential mortgage loans.

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Although to date, the conservatorship has not had a significant or adverse effect on our operations, and during 2010 and 2012 the Federal Housing Finance Agency indicated that the Treasury Department is committed to funding Fannie Mae and Freddie Mac to levels needed in order to sufficiently meet their funding needs, it is currently unclear whether further changes would significantly and adversely affect our operations.

In addition, our ability to sell mortgage loans readily is dependent upon our ability to remain eligible for the programs offered by the Agencies and other institutional and non-institutional investors.

Our ability to remain eligible may also depend on having an acceptable peer-relative delinquency ratio for the Federal Housing Administration (“FHA”) and maintaining a delinquency rate with respect to Ginnie Mae pools that are below Ginnie Mae guidelines.

In addition, our ability to sell mortgage loans readily is dependent upon our ability to remain eligible for the programs offered by the Agencies and other institutional and non-institutional

Our ability to remain eligible may also depend on having an acceptable peer-relative delinquency ratio for the FHA and maintaining a delinquency rate with respect to Ginnie Mae pools that are below Ginnie Mae guidelines.

Any significant impairment of our eligibility with any of the Agencies could materially and adversely affect our operations.

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The Bank relies heavily on internal and outsourced digital technologies, communications, and information systems to conduct its business.

As our reliance on technology systems increases, the potential risks of technology-related operation interruptions in our customer relationship management, general ledger, deposit, loan, or other systems or the occurrence of cyber incidents also increases.

Cyber incidents can result from deliberate attacks or unintentional events including (i) unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruptions;

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or (iii) intelligence gathering and social engineering aimed at obtaining information.

The occurrence of operational interruption, cyber incident, or a deficiency in the cyber security of our technology systems (internal or outsourced) could negatively impact our financial condition or results of operations.

The occurrence of operational interruption, cyber incidents, or a deficiency in the cyber security of our technology systems (internal or outsourced) could negatively impact our financial condition or results of operations.

We have policies and procedures expressly designed to prevent or limit the effect of a failure, interruption, or security breach of our systems and maintain cyber security insurance.

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Significant interruptions to our business from technology issues could result in expensive remediation efforts and distraction of management.

Although we have not experienced any material losses related to a technology-related operational interruption or cyber-attack, there can be no assurance that such failures, interruptions, or security breaches will not occur in the future or, if they do occur, that the impact will not be substantial.

Although we have not experienced any material losses related to technology-related operational interruption or cyber-attack, there can be no assurance that such failures, interruptions, or security breaches will not occur in the future or, if they do occur, that the impact will not be substantial.

The occurrence of any failures, interruptions, or security breaches of our technology systems could damage our reputation, result in a loss of customer business, result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of proprietary information, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition, results of operations, or stock price.

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Should any events or factors that can undermine our reputation occur, there is no assurance that the additional costs and expenses that we may need to incur to address the issues giving rise to the reputational harm would not adversely affect our earnings and results of operations.

Potential acquisitions may disrupt our business and dilute stockholder value.

We periodically evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies.

We generally seek merger or acquisition partners that are culturally similar and possess either significant market presence or have potential for improved profitability through financial management, economies of scale, or expanded services.

Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things:

potential exposure to unknown or contingent liabilities of the target company;

exposure to potential asset quality issues of the target company;

potential disruption to our business;

potential diversion of our management’s time and attention away from day-to-day operations;

the possible loss of key employees, business, and customers of the target company;

difficulty in estimating the value of the target company;

potential problems in integrating the target company’s data processing and ancillary systems, customers, and employees with ours.

As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving the payment of cash or the issuance of our debt or equity securities may occur at any time.

Acquisitions typically involve the payment of a premium over book, and, therefore, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction.

To the extent we were to issue additional shares of common stock in any such transaction, our current shareholders would be diluted and such an issuance may have the effect of decreasing our stock price, perhaps significantly.

Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.

In addition, merger and acquisition costs incurred by the Company may temporarily increase operating expenses.

The Company and Bank are subject to extensive regulation and oversight, including with respect to the Order and MOU.

On November 7, 2023, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order with its bank regulatory agencies, the FDIC and DFI, consenting to the issuance of a consent order (the “Order”) relating to the Bank’s compliance with the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”).

In consenting to the issuance of the Order, the Bank did not admit or deny any charges of unsafe or unsound banking practices or violations of law or regulation relating to its BSA compliance.

See “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations – Regulatory Developments Regarding the Company and the Bank ” below for certain disclosures regarding the Order and MOU.

The Order has resulted and is expected to continue to result in additional non-interest BSA compliance expenses for the Bank and the Company.

It also may have the effect of limiting or delaying the Bank’s and the Company’s ability to obtain regulatory approval for certain expansionary activities, to the extent desired by the Company.

Our failure to comply with the Order or MOU may result in additional regulatory action, including civil money penalties against the Bank and its officers and directors or enforcement through court proceedings, which could have a material and adverse effect on our business, results of operations, financial condition, cash flows, and stock price.

Regulatory changes to diversity, equity, and inclusion ( “ DEI ” ) and environmental, social, and governance ( “ ESG ” ) practices may adversely impact our reputation, compliance costs, and business operations.

In light of the recent executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” which revokes previous mandates promoting DEI and directs federal agencies to combat “illegal DEI” practices in the private sector, many companies, including the Company, must reassess their ESG strategies to ensure compliance with the evolving regulatory environment.

The order signals a shift in federal oversight and enforcement priorities, potentially affecting internal policies, hiring practices, supplier diversity programs, and corporate governance frameworks.

The executive order rescinds prior directives, such as Executive Order 11246, which required affirmative action and non-discriminatory practices by federal contractors.

As a result, federal agencies may reevaluate existing contracts, scrutinize hiring and promotion policies, and take enforcement actions against companies perceived to be engaging in practices that do not align with the revised federal standards.

Additionally, new guidance or rulemaking stemming from the executive order could impose restrictions on voluntary DEI initiatives, training programs, or supplier diversity efforts.

These developments may necessitate changes to our internal policies, reporting obligations, and public disclosures, creating operational and compliance challenges.

Failure to align our DEI and ESG efforts with the current legal framework could result in reputational damage, legal challenges, and adverse impacts on our operations.

Government investigations, enforcement actions, or private litigation challenging our DEI- and ESG-related policies could lead to financial penalties, increased legal costs, and potential restrictions on our ability to engage in government contracting.

Moreover, various private third-party organizations continue to evaluate companies based on ESG and DEI practices.

Unfavorable ratings from these entities could influence investor decisions, limit access to capital, and generate negative sentiment among stakeholders.

While the executive order aims to eliminate specific DEI programs, investors, customers, and other stakeholders may still expect transparency and commitment to broader ESG goals, including workforce diversity, community engagement, and responsible corporate governance.

Companies that scale back DEI initiatives to comply with federal mandates may face backlash from institutional investors, advocacy groups, and employees who view such actions as a retreat from social responsibility commitments.

Additionally, inconsistencies between federal and state-level DEI policies may create further complexities, as certain states continue to mandate affirmative action or corporate diversity disclosures.

Moreover, the rapid pace of change in legal frameworks, regulatory guidance, and enforcement priorities resulting from the recent Presidential transition yields considerably increased uncertainty and compounds the difficulty of establishing and maintaining compliance.

Adapting to the recent regulatory changes is crucial to maintaining our reputation, ensuring operational continuity, and meeting stakeholder expectations in the evolving ESG landscape.

Noncompliance or perceived noncompliance with the executive order and related regulatory guidance could expose us to increased regulatory scrutiny, litigation risks, and limitations on business opportunities.

At the same time, misalignment with investor and stakeholder expectations regarding ESG and DEI commitments could impair our brand value, reduce employee engagement and retention, and negatively impact our stock performance.

Given these factors, we must carefully assess and adjust our policies, disclosures, and risk mitigation strategies to navigate the shifting legal and business environment effectively.

The Company and Bank are subject to extensive regulation and oversight, including with respect to the MOU.

On August 9, 2024, the Bank entered into the MOU with the FDIC and DFI.

The MOU is an informal administrative agreement pursuant to which the Bank has agreed to take various actions and comply with certain requirements to enhance certain areas of the Bank’s operations.

See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments Regarding the Bank ” below for certain disclosures regarding the MOU.

Our failure to comply with the MOU may result in additional regulatory action, including civil money penalties against the Bank and its officers and directors or enforcement through court proceedings, which could have a material and adverse effect on our business, results of operations, financial condition, cash flows, and stock price.

Risks Related to the Banking Industry

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While overall economic growth was favorable and unemployment rates remained low compared to past economic cycles, the aggregate effects of inflation experienced from 2021 to 2023 coupled with continued elevated interest rate levels negatively impacted many sectors of the economy.

While economic conditions have remained relatively stable in spite of these headwinds, significant challenges remain, including the continued aggregate effect of inflation levels experienced in recent years and uncertainty related to government spending levels and federal budget deficits, as well as the potential effect of changes in trade policy and tariffs under the new Trump administration.

As a result, there can be no assurance that economic conditions will continue on their current course.

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Many of these competitors are not subject to the same regulatory restrictions that we are and may be able to compete more effectively as a result.

Also, technology and other changes have lowered barriers to entry and made it possible for customers to complete financial transactions using neo-banks, non-banks, and financial technology (“FinTech”) companies that historically have involved banks at one or both ends of the transaction.

Also, technology and other changes have lowered barriers to entry and made it possible for customers to complete financial transactions using neo-banks, non-banks, and financial technology companies that historically have involved banks at one or both ends of the transaction.

These entities now offer products and services traditionally provided by community banks and often at lower costs.

11 unchanged sentences

Additionally, many of our competitors are larger in total assets and capitalization, have greater access to capital markets, and offer a broader range of financial services than we can offer.

The Company also is experiencing an increase in competition to acquire other banks, due to the overall strength of financial institutions and their high capital levels.

In addition, credit unions and FinTech companies are now actively pursuing small bank acquisitions.

Increased competition for bank acquisitions may slow the Company’s ability to grow earning assets at comparable historical growth rates.

Due to the development of new technologies and regulatory actions encouraging the use of these technologies, consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks.

For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds, or general-purpose reloadable prepaid cards.

Consumers can complete transactions, such as paying bills and/or transferring funds directly without the assistance of banks.

Transactions utilizing digital assets, including cryptocurrencies, stablecoins, and other similar assets, have increased substantially over the course of the last several years.

For example, the enactment of the Guiding and Establishing National Innovation for U.S.

Stablecoins Act of 2025 (GENIUS Act) provides a legal framework for stablecoins to be issued in the United States, which may allow new and existing competitors to compete for funds that may have otherwise been deposited with banks, such as the Bank.

Certain characteristics of digital asset transactions, such as the speed with which such transactions can be conducted, the ability to transact without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, and the anonymous nature of the transactions, are appealing to certain consumers notwithstanding the various risks posed by such transactions as illustrated by the current and ongoing market volatility.

Accordingly, digital asset service providers, which at present are not subject to supervision and regulation comparable to that which is faced by banking organizations and other financial institutions, have become active competitors for our customers’ banking business.

The Trump Administration, through executive actions and public announcements, has established a more relaxed regulatory framework for cryptocurrencies, digital assets, and financial technology firms, and created a more favorable environment for those asset classes and firms.

The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.

On October 22, 2024, the CFPB adopted a final rule regarding personal financial data rights that is designed to promote “open banking.” The final rule requires, among other things, that data providers, including any financial institution, make available to consumers and certain authorized third parties upon request certain covered transaction, account, and payment information.

However, in August 2025, the CFPB issued an advanced notice of proposed rulemaking to reconsider its final rule and, in October 2025, a district court issued a preliminary injunction preventing the CFPB from enforcing the final rule until the CFPB has completed its reconsideration of the rule.

A final rule, if implemented, could lead to greater competition for products and services among banks and nonbanks alike.

The loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

We are subject to federal regulations that seek to protect the Deposit Insurance Fund and the depositors and borrowers of the Bank, and our federal regulators may impose restrictions on our operations that are detrimental to holders of the Company ’ s common stock.

3 unchanged sentences

Any change in our regulation or oversight, whether in the form of regulatory policy, regulations, legislation, or supervisory action, may have a material impact on our operations.

Acquisitions and the addition of branch facilities may not produce revenue enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties and dilution to existing shareholder value.

We regularly explore opportunities to establish branch facilities and acquire other banks or financial institutions.

New or acquired branch facilities and other facilities may not be profitable.

We may not be able to correctly identify profitable locations for new branches.

The costs to start up new branch facilities or to acquire existing branches, and the additional costs to operate these facilities, may increase our noninterest expense and decrease earnings in the short term.

It may be difficult to adequately and profitably manage growth through the establishment of these branches.

In addition, we can provide no assurance that these branch sites will successfully attract enough deposits to offset the expenses of operating these branch sites.

Any new or acquired branches will be subject to regulatory approval, and there can be no assurance that we will succeed in securing such approvals.

The soundness of other financial institutions could adversely affect us.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships.

We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients.

funds, and other institutional clients.

Many of these transactions expose us to credit risk in the event of default by our counterparty or client.

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Reduced confidence in the financial institutions sector could result in customer disintermediation and the loss of deposit and borrowing relationships, among other effects, which could result in a material adverse effect on the Company’s financial condition and results of operations.

The use of, or inability to use, artificial intelligence by us, our customers, and our shareholders presents risks and challenges that may adversely impact our business and operating results or the business and operating results of our customers and vendors.

We may use generative AI tools in our operations.

If our competitors and peers use AI tools to optimize operations and we fail to utilize AI tools in a comparable manner, we may be competitively disadvantaged.

However, while AI tools may facilitate optimization and operational efficiencies, they also have the potential for inaccuracy, bias, infringement, or misappropriation of intellectual property, and risks related to data privacy and cybersecurity.

The use of AI tools may introduce errors or inadequacies that are not easily detectable, including deficiencies, inaccuracies, or biases in the data used for AI training, or in the content, analyses, or recommendations generated by AI applications.

The results of such errors or inadequacies may adversely affect our business, financial condition, and results of operations.

The legal requirements relating to AI continue to evolve and remain uncertain, including how legal developments could impact our business and ability to enforce our proprietary rights or protect against infringement of those rights.

Cybersecurity threat actors may utilize AI tools to automate and enhance cybersecurity attacks against us.

We utilize software and platforms designed to detect such cybersecurity threats, including AI-based tools, but these threats could become more sophisticated and harder to detect and counteract, which may pose significant risks to our data security and systems.

Such cybersecurity attacks, if successful, could lead to data breaches, loss of confidential or sensitive information, and financial or reputational harm.

Our customers also may use AI tools in their personal or business activities without our knowledge, and the providers of these tools may not meet the evolving regulatory or industry standards for privacy and data protection.

Consequently, this may inhibit our or our customers’ ability to uphold an appropriate level of service and data privacy.

If we, our customers, or other third parties with which we conduct business experience an actual or perceived breach of privacy or security incident due to the use of AI, we may be adversely impacted, lose valuable intellectual property or confidential information, and incur harm to our reputation and the public perception of the effectiveness of our security measures.

In addition, investors, analysts, and other market participants may use AI tools to process, summarize, or interpret our financial information or other data about us.

The use of AI tools in financial and market analysis may introduce risks similar to those described above, including an inaccurate interpretation of our financial or operational performance or market trends or conditions, which in turn could result in inaccurate conclusions or recommendations.

Our inability to adopt new technological capabilities and enhancements, including AI and machine learning, may put us at a competitive disadvantage or cause us to miss opportunities to innovate and achieve efficiencies in our operations which could adversely impact our business, reputation, results of operations, and financial condition.

Risks Related to the Company ’ s Common Stock

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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