What changed in this filing

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Item 1A. Risk Factors

2026-02-25 compared with 2025-02-24 · 45 added, 24 removed, 279 unchanged (20% of the section changed)

RISK FACTORS.

There are a number of factors, including those specified below, that may adversely affect the Corporation’s business, financial results or stock price.

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Furthermore, the Corporation’s business operations may be disrupted due to vendors and third-party service providers being unable to work or provide services effectively during such a health crisis, including because of illness, quarantines or other government actions.

ITEM 1A., ITEM 1B., AND ITEM 1C.

In addition, an epidemic, a pandemic or another infectious disease outbreak could significantly impact households and businesses, or cause limitations on commercial activity, increased unemployment and general economic and financial instability.

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Furthermore, negative impacts on our customers caused by such a health crisis could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.

Moreover, governmental and regulatory actions taken in response to an epidemic, a pandemic or another infectious disease outbreak may include decreased interest rates, which could adversely impact the Corporation’s interest margins and may lead to decreases in the Corporation’s net interest income.

Moreover, governmental and regulatory actions taken in response to an epidemic, a pandemic or another

ITEM 1A., ITEM 1B., AND ITEM 1C.

infectious disease outbreak may include decreased interest rates, which could adversely impact the Corporation’s interest margins and may lead to decreases in the Corporation’s net interest income.

The extent to which a widespread health crisis may impact the Corporation’s business, results of operations and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and severity of the crisis, the potential for seasonal or other resurgences, actions taken by governmental authorities and other third parties to contain and treat such epidemics, pandemics or other infectious disease outbreaks, and how quickly and to what extent normal economic and operating conditions can resume.

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2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments as amended, on January 1, 2021, which replaced the previous “incurred loss” model for measuring credit losses with an “expected life of loan loss” model described above, referred to as the CECL model.

Consistent with rules adopted by federal banking regulators, the Corporation has elected to phase in the cumulative effect of the adoption on its regulatory capital, at a rate of 25 percent per year, over a three-year transition period that began on January 1, 2021.

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As part of the Corporation’s liquidity management, a number of funding sources are used, including core deposits and repayments and maturities of loans and investments.

Sources also include brokered certificates of deposit, repurchase agreements, federal funds purchased and FHLB advances.

Sources also include brokered certificates of deposit, repurchase agreements, federal funds purchased and Federal Home Loan Bank (“FHLB”) advances.

Negative operating results or changes in industry conditions could lead to an inability to replace these additional funding sources at maturity.

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Use of third-party software and services also exposes the Corporation to cybersecurity risk as numerous service providers host critical data or have direct contact with our bank customers.

Although the Corporation adheres to industry standard practices in conducting thorough due diligence of vendors and contract management, should a vendor experience a breach, similar to the MOVEit breach in 2023 which impacted a vendor utilized by the Bank, the Bank could still suffer reputational harm, and potentially financial losses.

Although the Corporation adheres to industry standard practices in conducting thorough due diligence of vendors and contract management, should a vendor experience a breach, the Bank could still suffer reputational harm, and potentially financial losses.

Expanded use of cloud-based technologies and providing our customers more internet-based product offerings to continue to remain competitive will serve to increase these potential risks.

The Corporation’s third-party management program helps to mitigate risks posed by reliance on third and fourth parties.

The Corporation’s Third-Party Risk Management Program helps to mitigate risks posed by reliance on third and fourth parties.

To combat these ever-present cyber risks, the Corporation maintains a comprehensive Information Security Program, which includes annual risk assessments, an Incident Response Plan, and a layered control environment meant to detect, prevent, and limit unauthorized or harmful actions across our information technology environment.

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Management has established an Information Security Committee in order to assist executive management and the Board of Directors of the Bank in fulfilling their oversight responsibilities related to information security.

The Committee reports its activities, key conclusions and recommendations to the Enterprise Risk Management Committee and the Board’s Risk and Credit Policy Committee of the Board on a quarterly basis.

The Committee reports its activities, key conclusions and recommendations to the Enterprise Risk Management Committee and the Board’s Risk and Credit Policy Committee on a quarterly basis.

At the Information Security Committee, security-related policies and standards are reviewed and approved, annual risk assessment results and action plans are noted, annual penetration test reports shared, current security incidents discussed, and relevant cyber risks and trends are presented.

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The Board considers cybersecurity risks in business strategy by getting updates on the Bank’s cybersecurity risk assessment.

It assesses the experience of management personnel responsible for preventing, mitigating, detecting and remediating any cyber incidents, including the Chief Information Security Officer.

It assesses the experience of management personnel responsible for preventing, mitigating, detecting and remediating any cyber incidents, including the Chief Information Security Officer (“CISO”).

In 2022, the Board appointed Jason Sondhi to its Board of Directors.

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If the Corporation cannot effectively manage these service providers, the service parties fail to materially perform, or the Corporation was to falter in any of the other noted areas, its business or performance could be negatively impacted.

• The Corporation is subject to risks and challenges related to its development and use of artificial intelligence.

The Corporation and its third-party vendors, clients, counterparties, and other market participants use and develop artificial intelligence technologies, including machine-learning and generative artificial intelligence tools, and generative artificial intelligence models.

This use may expose the Corporation to various risks and potential liabilities, including:

enhanced governmental or regulatory scrutiny;

ethical concerns;

confidentiality and security risks;

intellectual property concerns over data rights and protection;

heightened susceptibility to, and increased frequency and severity of, cyberattacks;

inaccurate or biased algorithms or underlying datasets;

and misuse or misappropriation.

These factors could adversely affect our business, reputation, and financial results.

In addition, poor implementation of artificial intelligence by the Corporation or its third-party service providers could subject the Corporation to additional risks that we may not adequately predict or mitigate.

Failure to strategically embrace artificial intelligence or to achieve expected effectiveness, productivity, or cost reductions from artificial intelligence adoption may result in a competitive disadvantage.

We could experience a material adverse effect on our operating results, customer relationships, and growth opportunities if:

we cannot offer new artificial intelligence-facilitated technologies as quickly as our competitors;

our competitors develop more cost-effective solutions or product offerings;

our employees do not adopt such technologies expediently;

or we are unable to source necessary components, including reliable third-party technology solutions and service providers.

The use of artificial intelligence solutions may also introduce operational and control risks, including potential errors in outputs, challenges in oversight and accountability, increased vulnerability to system failures or cyber incidents, and the risk that these technologies may not perform as intended under complex or unforeseen circumstances.

These risks could materially disrupt our business operations and adversely affect our financial condition and reputation.

The evolving legal, regulatory, and compliance framework for artificial intelligence, both in the U.S.

and internationally, may impact our ability to protect our data and intellectual property against infringing use, require changes to our artificial intelligence implementation, and increase our compliance costs and the risk of non-compliance.

Although the Corporation has established governance, risk management, and control frameworks intended to oversee the use of artificial intelligence, these frameworks may not identify or mitigate all current or emerging risks associated with rapidly evolving technologies.

Additionally, we may not be able to control how third-party artificial intelligence solutions we use are developed or maintained, including the source and quality of training data or the frequency and nature of model updates.

We may also be unable to govern or protect the integrity of the data we input into such tools, specifically how that data is retained, reused, co-mingled with other data, or disclosed, even where we have sought protections with respect to these matters.

• The Corporation is subject to environmental liability risk associated with our Bank branches and any real estate collateral we acquire upon foreclosure.

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The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A., ITEM 1B., AND ITEM 1C.

• Significant legal actions could subject the Corporation to substantial uninsured liabilities.

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As a result, the Corporation may not be able to effectively mitigate its risk exposures in particular market environments or against particular types of risk, which could have a material adverse effect on our results of operations and financial condition.

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• The Corporation’s reported financial results depend on management’s selection of accounting methods and certain assumptions and estimates.

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Although the Corporation takes steps to minimize reputation risk in dealing with customers and other constituencies, the Corporation is inherently exposed to this risk.

• Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Corporation’s environmental, social and governance practices may impose additional costs on the Corporation or expose it to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.

Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights.

Increased ESG-related compliance costs for the Corporation as well as among our suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs.

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• Evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Corporation’s environmental, social and governance practices may impose additional costs on the Corporation or expose it to new or additional risks.

The expectations of customers, regulators, investors, and other stakeholders related to the Corporation’s environmental, social and governance (“ESG”) practices and disclosure continue to evolve.

Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and our stock price.

New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

ITEM 1A., ITEM 1B., AND ITEM 1C.

• Climate change and related legislative and regulatory initiatives may materially affect the Corporation’s business and results of operations.

The global business community has increased its political and social awareness surrounding the state of the global environment and the issue of climate change.

Further, the U.S.

Congress, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives related to climate change.

Similar and even more expansive initiatives are expected under the current administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.

The lack of empirical data surrounding the credit and other financial risks posed by climate change make it impossible to predict how specifically climate change may impact our financial condition and results of operations.

The global business community has continued its political and social awareness surrounding the state of the global environment and the issue of climate change.

Further, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives related to climate change.

At the same time, some policymakers have adopted or are considering adopting, requirements that constrain climate change initiatives.

The lack of legislative or regulatory certainty surrounding climate risk management and practices make it impossible to predict how specifically climate change may impact our financial condition and results of operations.

To the extent our customers experience unpredictable and more frequent weather disasters attributed to climate change, the value of real property securing the loans in our portfolios may be negatively impacted.

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In addition to affecting profitability, changes in interest rates can impact the valuation of assets and liabilities.

For example, changes in reference rates linked to financial instruments, such as the Secured Overnight Financing Rate (“SOFR”), may adversely affect the value of financial instruments the Corporation holds or issues and related net interest income.

Rate changes can also affect the ability of borrowers to meet obligations under variable or adjustable rate loans which in turn affect loss rates on those assets.

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Beginning in the first half of 2022, in response to growing signs of inflation, the FOMC began increasing the federal funds benchmark rapidly and the Federal Reserve announced its intention to take actions to mitigate inflationary pressures by continuing to further reduce its purchase program.

Rapid changes in interest rates makes it challenging for the Bank to balance its loan and deposit portfolios, which may adversely affect the Corporation’s results of operations by reducing asset yields or spreads or having other adverse impacts on our business.

Rapid changes in interest rates make it challenging for the Bank to balance its loan and deposit portfolios, which may adversely affect the Corporation’s results of operations by reducing asset yields or spreads or having other adverse impacts on our business.

As discussed above, the increased market interest rates could also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations.

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ITEM 1A., ITEM 1B., AND ITEM 1C.

In response to easing inflation pressures, the Federal Reserve is expected to decrease the target federal funds rate in 2025.

In response to easing inflation pressures, the Federal Reserve decreased the target federal funds rate in 2024 and 2025, but uncertainty remains concerning inflation and interest rates.

If the Federal Reserve were to aggressively lower the target federal funds, those lower rates could pressure our interest rate spread and may adversely affect our results of operations.

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Current market uncertainties and other external factors may impact the competitive landscape for deposits in the banking industry in an unpredictable manner.

In addition, the rising interest rate environment has continued to increase competition for liquidity and the premium at which liquidity is available to meet funding needs.

In addition, the elevated interest rate environment has continued to increase competition for liquidity and the premium at which liquidity is available to meet funding needs.

These possible impacts may adversely affect our future operating results, including net income, and negatively impact capital.

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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