What changed in this filing

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Item 1A. Risk Factors

2026-03-18 compared with 2025-03-14 · 40 added, 41 removed, 307 unchanged (21% of the section changed)

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Economic and Market Risks

Recent events impacting the financial services industry may negatively affect our financial condition and results of operation.

Recent events impacting the financial services industry, including the failure of Silicon Valley Bank, Signature Bank, and First Republic Bank have resulted in decreased confidence in banks among consumer and commercial depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.

These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession.

These recent events could adversely impact the market price and volatility of the Company’s common stock.

These recent events may also result in potentially adverse changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our business.

Inability to access short-term funding or the loss of client deposits could increase our cost of funding, limit access to capital markets or negatively impact our overall liquidity or capitalization.

Moreover, we may be impacted by concerns regarding the soundness or creditworthiness of other financial institutions, which can cause substantial and cascading disruption within the financial markets and increased expenses.

In addition, the cost of resolving the recent bank failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments.

Inflationary pressures in the global economy continue to persist.

Though increases in food, energy and other commodity prices have slowed throughout 2024, core inflation has risen sharply over the prior two year period and has become increasingly persistent.

While inflationary pressures related to the cost of goods and services, including labor, generally have minimal direct impact on the Bank's financial condition or results of operation, such pressures do directly impact the ability of both our commercial and consumer borrowers to meet their own financial obligations as they come due, including their loan payments to the Company.

In addition, while the Federal Reserve’s moves over the 2022 and 2023 fiscal years to raise interest rates in order to quell inflation have slowed the increase in costs and allowed the Federal Reserve to begin reducing interest rates throughout 2024, higher interest rates can have the impact of reducing demand for both the Company’s consumer and commercial products, as well as impact the ability of both our commercial and consumer borrowers to meet their own financial obligations as they come due, including their loan payments to the Company.

Inflationary conditions continue to present risks to the Company, as inflation moderated but remained elevated in key sectors during 2025—with the Consumer Price Index rising 2.7% year‑over‑year in December 2025 and core inflation increasing 2.6%—which may impair borrowers’ ability to meet their obligations.

Despite this easing, housing and certain service categories remained above the Federal Reserve’s long‑term target, sustaining pressure on household and business budgets.

During 2025, the Federal Reserve cut the federal funds target range from 4.25% to 4.50% to 3.50% to 3.75%.

While these reductions eased overall financial conditions, a sustained period of higher interest rates may continue to constrain borrower demand, refinancing activity, and debt‑service capacity into 2026.

As a result, ongoing inflationary pressures and evolving interest‑rate policy could adversely affect the Company’s credit performance, funding costs, and overall financial results.

We could experience an unexpected inability to obtain needed liquidity which could adversely affect our business, profitability, and viability as a going concern.

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We continually strive to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management.

If we become unable to obtain funds when needed, it could have a material adverse effect on our business, financial condition, and results of operations.

Higher interest rates have decreased the value of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.

As a result of inflationary pressures and the resulting rapid increases in interest rates in 2023 and 2022, the trading value of previously issued government and other fixed income securities has declined significantly.

These securities make up a majority

of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the held-to-maturity portion of U.S.

banks’ securities portfolios.

While the Company does not currently intend to sell its securities, with the exception of the following, and none of the Company's securities are classified as held-to-maturity, if the Company were required to sell securities to meet liquidity needs, it may incur losses, which could negatively impact its profitability.

The Company did complete a balance sheet repositioning related to its investment securities portfolio in December 2024.

This consisted of the sale of lower-yielding AFS debt securities, resulting in a pre-tax realized loss on the sale of $5.22 million, which was recorded in December of 2024.

All of the proceeds from the sale of these securities were used to purchase AFS debt securities at higher yields to improve income going forward, while maintaining the liquidity provided by the investment portfolio.

The sale of securities did not impair the Company's capital position.

While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

If we become unable to obtain funds when needed, it could have a material adverse effect on our business, financial condition, and results of operations and could, in severe circumstances, adversely affect our ability to operate our business as contemplated.

The proportion of our deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk in times of financial distress.

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Further, in addition to fraud committed directly against us, the Company may suffer losses as a result of fraudulent activity committed against third parties.

Increased deployment of technologies, such as chip card technology and multi-factor authentication, defray and reduce certain aspects of fraud;

Increased deployment of

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technologies, such as chip card technology and multi-factor authentication, defray and reduce certain aspects of fraud;

however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer and thereby commit fraud.

We may be adversely affected by economic conditions in the local economies in which we conduct our operations, and in the United States in general, including global economic, geopolitical instability, inflationary risks and other global pandemics.

We may be adversely affected by economic conditions in the local economies in which we conduct our operations, and in the United States in general, including global economic and geopolitical instability, inflationary risks and future widespread health emergencies or pandemics.

Our primary market includes the Iowa counties of Johnson, Linn, Washington and Iowa.

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A summary of this process is presented under the heading "Quantitative and Qualitative Disclosures about Market Risk" included under Item 7A of Part II of this Form 10-K.

The Federal Open Market Committee (FOMC), with particular attention being given to labor market conditions, continued inflation pressures and inflation expectations, and financial and international developments.

The Federal Open Market Committee (FOMC), with particular attention being given to labor market conditions, recognized continued inflation pressures and inflation expectations, and financial and international developments.

Prevailing interest rates influence the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings.

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In addition, the ongoing trade policies and potential tariff initiatives being pursued by the U.S.

government under the administration of President Trump could present potential risks unique to the markets within which we operate.

government could present potential risks unique to the markets within which we operate.

As a major producer and exporter of agricultural commodities, including corn, soybeans, and pork, Iowa is particularly vulnerable to negative consequences from such policy initiatives.

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Additionally, any prolonged trade tensions or the implementation of tariffs could negatively impact the broader economic environment in Iowa and the Midwest, potentially leading to reduced consumer spending, lower economic growth, and decreased demand for other banking products and services.

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As a result, our financial performance, including credit quality and loan growth, could be adversely affected by these policy changes.

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Reduction in the value, or impairment of our investment securities, may impact our earnings and stockholders' equity.

We maintained a balance of $944.14 million, or 20.58% of our assets, in investment securities at December 31, 2024.

We maintained a balance of $955.58 million, or 20.56% of our total assets, in investment securities at December 31, 2025.

Changes in market interest rates may affect the value of these investment securities, with increasing interest rates generally resulting in a reduction of value.

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Substantial legal claims could have a detrimental impact on our business, results of operations, and financial condition and may cause reputational harm.

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If we do not continue to meet or exceed regulatory capital requirements and maintain our “well-capitalized” status, there could be an adverse effect on the manner in which we do business and on the confidence of our customers in us.

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Real estate loans, which constitute a large portion of our loan portfolio, include home equity, commercial, construction and residential loans, and such loans are concentrated in the Bank’s trade area.

As of December 31, 2024, 85.55% of our loans had real estate as a primary component of collateral.

As of December 31, 2025, 86.39% of our loans had

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real estate as a primary component of collateral.

The market value of real estate may fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.

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Economic events or governmental regulations outside of the control of the borrower could adversely impact the future cash flow and market values of the affected properties.

If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the amount of security that we anticipated at the time of originating the loan, which could cause us to increase our provision for loan losses and adversely affect our operating results and financial condition.

If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, we may not be able to realize the amount of security that we anticipated at the time of originating the loan, which could cause us to increase our provision for credit losses and adversely affect our operating results and financial condition.

Our real estate loans also include construction loans, including land acquisition and development.

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Repayment of our commercial loans is often dependent on the cash flows of the borrower, which may be unpredictable.

Most often, this collateral is accounts receivable, inventory, machinery and equipment.

Most often, this collateral consists of accounts receivable, inventory, machinery and equipment.

In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

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We sell residential mortgage loans to various parties that purchase mortgage loans for investment.

The agreements under which we sell mortgage loans contain various representations and warranties regarding the origination and characteristics of the mortgage loans, including ownership of the loan, compliance with loan criteria set forth in the applicable agreement, validity of the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, and compliance with applicable origination laws.

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the lien securing the loan, absence of delinquent taxes or liens against the property securing the loan, and compliance with applicable origination laws.

We may be required to repurchase mortgage loans, indemnify the investor, or reimburse the investor for credit losses incurred on loans in the event of a breach of contractual representations or warranties.

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As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments.

These sources include brokered money markets and certificates of deposit, federal funds purchased, lines of credit, the Bank Term Funding Program through the Federal Reserve, and Federal Home Loan Bank advances.

These sources include brokered money markets and certificates of deposit, federal funds purchased, lines of credit, and Federal Home Loan Bank 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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In addition, deterioration in the credit quality of third parties whose securities or obligations we hold could result in losses and/or adversely affect our ability to use those securities or obligations for liquidity purposes.

Our financial condition has not been materially impacted by the deterioration in the credit quality of third parties except as related to borrower credit quality.

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Deterioration in the credit quality of third parties could adversely affect our financial condition and results of operations, including through losses, reduced liquidity, or adverse valuation changes.

Management believes that the allowance for credit losses is adequate to absorb probable losses on any existing loans that may become uncollectible but cannot predict loan losses with certainty and cannot assure that our allowance for credit losses will prove sufficient to cover actual losses in the future.

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This estimate is the result of our continuing evaluation of specific credit risks and loss experience, current loan and debt security portfolio quality, present economic, political and regulatory conditions, industry concentrations, reasonable and supportable forecasts for future conditions and other factors that may indicate losses.

The determination of the appropriate levels of the allowances for loan and debt security credit losses inherently involves a high degree of subjectivity and judgment and requires us to make estimates of current credit risks and future trends, all of which may undergo material changes.

Generally, our nonperforming loans and OREO reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve.

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and future trends, all of which may undergo material changes.

Generally, our nonperforming loans and other real estate owned reflect operating difficulties of individual borrowers and weaknesses in the economies of the markets we serve.

The allowances may not be adequate to cover actual losses, and future allowance for credit losses could materially and adversely affect our financial condition, results of operations and cash flows.

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Generally, for assets that are reported at fair value, we use quoted market prices or valuation models that utilize observable market data inputs to estimate their fair value as of the balance sheet date.

In certain cases, observable market prices and data may not be readily

available or their availability may be diminished due to market conditions.

In certain cases, observable market prices and data may not be readily available or their availability may be diminished due to market conditions.

We use financial models to value certain of these assets.

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These risks are heightened during data system changes or conversions.

Although management has established policies and procedures to address such failures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Although management

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has established policies and procedures to address such failures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

Our risk management framework may not be effective in mitigating risk and loss.

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We are subject to risks associated with technological changes and the resources needed to implement the changes.

Our industry is susceptible to significant technological changes as there continue to be a high level of new technology driven products and services introduced.

Our industry is susceptible to significant technological changes as there continue to be high levels of new technology driven products and services introduced.

Technological advancement aids us in providing customer service and increases efficiency.

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Our operations are dependent on our ability to process financial transactions in a secure manner.

Failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, could disrupt our business or the businesses of our customers, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

Failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, could disrupt

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our business or the businesses of our customers, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

We must ensure that information is properly protected from a variety of threats such as cyber attacks, error, fraud, sabotage, terrorism, industrial espionage, privacy violation, service interruption, and natural disaster.

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As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

Despite these efforts, our cybersecurity measures and those of our third-party service providers may not be effective in preventing, detecting, or mitigating all cybersecurity incidents or breaches.

Any activity that jeopardizes our network and the security of the information stored thereon may result in significant cost and have a significant adverse effect on our reputation.

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Our stock price could fluctuate significantly in response to the impact these risk factors have on our operating results or financial position.

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Our stock is thinly traded.

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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