What changed in this filing

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Item 1A. Risk Factors

2025-02-28 compared with 2024-02-28 · 111 added, 95 removed, 222 unchanged (48% of the section changed)

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Additionally, increases in interest rates may decrease loan demand or make it more difficult for borrowers to repay variable rate loans.

Potential sovereign debt defaults, actions that the U.S.

government may take to avoid exceeding the debt ceiling, or uncertainties surrounding the debt ceiling and the federal budget may severely impact global and domestic economies and may lead to significantly tighter liquidity and impact the availability of credit.

Although inflation has slowed since the levels experienced in recent years, possible inflationary pressures and any increases in market interest rates could cause the value of investment securities, particularly those with longer maturities, to decrease, although this effect can be less pronounced for floating rate instruments.

In addition, inflation generally increases the cost of goods and services the Company uses in business operations, such as electricity and other utilities, which increases the Company’s non-interest expenses.

Furthermore, the Company’s customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their deposits and/or ability to repay their loans or other obligations increasing the Company’s credit risk.

The inflationary outlook in the United States is currently uncertain.

If inflationary pressures do not significantly subside, sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.

Economic growth may slow down and the national or global economy may experience downturns, including recessionary periods.

Market disruption, including potential disruption resulting from inflation and global supply chain interruption, government and central bank policy actions designed to counteract the effects of recession, changes in investor expectations regarding compensation for market risk, credit risk and liquidity risk and changing economic data could impact both the volatility and magnitude of the directional movements of interest rates.

Market disruption, including potential disruption resulting from inflation, tariffs and global supply chain interruption, government and central bank policy actions designed to counteract the effects of recession, changes in investor expectations regarding compensation for market risk, credit risk and liquidity risk and changing economic data could impact both the volatility and magnitude of the directional movements of interest rates.

Additionally, potential sovereign debt defaults or actions taken by U.S.

government to avoid exceeding the debt ceiling may severely impact global and domestic economies and may lead to significantly tighter liquidity and impact the availability of credit.

Although the Company pursues an asset/liability management strategy designed to manage its risk arising from changes in interest rates, the Company’s strategy may not be fully effective, or may be effective in part, and changes in market interest rates can have a material adverse effect on the Company’s profitability.

Risks Related to Recent Events Impacting the Financial Services Industry

During 2023, events impacting the financial services industry, including several high profile bank failures, resulted in decreased confidence in banks among depositors, investors and other counterparties, as well as competition for deposits, significant disruption, volatility and depressed 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 increased unrealized losses on certain investment securities and increased competition for bank deposits and may increase the risk of a potential recession.

These events have, had, and could continue to have, an adverse impact on the market price and volatility of the Company’s common stock.

These events also have resulted in, and could continue to result in, increased regulatory scrutiny and expectations, and could further lead to potentially adverse changes to laws or regulations applicable to the Company, which could have a material impact on the Company’s business and result in increased costs necessary to comply with any such changes.

Events impacting the financial services industry may result in decreased confidence in banks among depositors, investors and other counterparties, as well as competition for deposits and significant disruption, volatility and depressed valuations of equity and other securities of banks in the capital markets.

Certain events impacting the financial services industry, including recent bank failures, have had, and may continue to have, an adverse impact on the market price and volatility of the Company’s common stock.

Moreover, these events have resulted in, and may continue to result in, increased regulatory scrutiny and expectations, and could lead to further changes to laws or regulations applicable to the Company, which could have a material adverse impact on the Company’s business and result in increased costs necessary to comply with any such changes.

Additionally, the cost of resolving recent bank failures may prompt the FDIC to increase its premiums above the current levels or result in additional special assessments.

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If loan customers fail to repay loans according to the terms of the loans, the Company may experience significant credit losses that could have a material adverse effect on its operating results and capital ratios.

The Company makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of borrowers, the value of the real estate and other assets serving as collateral for the repayment of loans, and the enforceability of its loan documents.

In determining the amount of the

allowance for credit losses, the Company, in addition to assessing the collectability of its loan portfolio, relies on experience and evaluation of economic conditions.

In determining the amount of the allowance for credit losses, the Company, in addition to assessing the collectability of its loan portfolio, relies on an evaluation of economic conditions, which involves a high level of subjectivity, as well as significant estimates of current credit risks and trends using existing qualitative and quantitative information and reasonable supportable forecasts of future economic conditions, all of which may undergo frequent and material changes.

If the assumptions underlying the determination of its allowance for credit losses prove to be incorrect, the current allowance for credit losses may not be sufficient to cover losses inherent in the Company’s loan portfolio and an adjustment may be necessary to allow for different economic conditions or adverse developments in its loan portfolio.

A problem with one or more loans could require the Company to significantly increase the level of its allowance for credit losses.

In addition, federal and state regulators periodically review the Company’s allowance for credit losses and may require it to increase its allowance for credit losses or recognize further loan charge-offs.

Material additions to the allowance would materially decrease the Company’s net income and could have an adverse effect on the Company's results of operations or financial condition.

Material additions to the allowance would materially decrease the Company’s net income and could have a material adverse effect on the Company’s results of operations or financial condition.

A significant amount of the Company’s loans are concentrated in the Bank’s geographic footprint and adverse conditions in this geographic footprint could negatively impact its results of operations.

Substantially all of the loans the Company originates are secured by properties located in, or are made to businesses that operate in, Massachusetts and, to a lesser extent, Rhode Island.

Substantially all of the loans the Company originates are secured by properties located in, or are made to businesses that operate in, Massachusetts and the broader New England area.

Because of the current concentration of the Company’s loan origination activities in its geographic footprint, in the event of adverse economic conditions impacting the region (including, but not limited to, increased unemployment, downward pressure on the value of residential or commercial real estate, or political or business developments that may affect the ability of property owners and businesses to make payments of principal and interest on the underlying loans in the Bank’s geographic footprint), the Company would likely experience higher rates of loss and delinquency on its loans than if its loan portfolio were more geographically diversified, which could have an adverse effect on the Company’s results of operations or financial condition.

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The real estate collateral securing the Company’s loans provides an alternate source of repayment in the event of default by the borrower.

Should real estate values deteriorate or further deteriorate during the time the credit is extended, the Company is potentially exposed to greater losses.

Should real estate values deteriorate during the time the credit is extended, the Company is potentially exposed to greater losses.

A downturn in the real estate market in the Company’s primary market areas could result in an increase in the number of borrowers who default on loans and a reduction in the value of the collateral securing loans, which in turn could have an adverse effect on the Company’s profitability and asset quality.

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The Company’s commercial loan portfolio includes commercial and industrial loans, commercial real estate loans, commercial construction loans, and small business banking loans.

Commercial and industrial loans may expose the Company to additional risks since their underwriting is typically based on the borrower's ability to make repayments from the cash flow of its business and they are secured by non-real estate collateral that may depreciate over time.

Commercial real estate loans and small business loans generally expose the Company to greater risk of non-payment and loss than residential mortgage loans because repayment of the loans often depends on the successful operation of the property and the continuity of tenant rental payments.

Commercial and industrial loans may expose the Company to additional risks since their underwriting is typically based on the borrower’s ability to make repayments from the cash flow of its business and may be secured by non-real estate collateral that may depreciate over time, or by owner-occupied real estate, the value of which is subject to market fluctuations and may deteriorate over the life of the loan.

Commercial real estate loans and small business loans generally expose the Company to greater risk of non-payment and loss than residential mortgage loans because repayment of the loans typically

depends on the successful operation of the property and the continuity of tenant rental payments.

Commercial real estate loans also typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential mortgage loans.

Factors such as increased prevalence of remote work arrangements and consumer preference for online shopping have led and could continue to lead to a decreased demand for office and retail space, which could impact the value of the future cash flow and value of the involved property that serves as loan collateral.

Factors such as increased prevalence of remote or hybrid work arrangements and consumer preference for online shopping have led and continue to lead to a decreased demand for office and retail space creating increased property vacancies and declining rent growth, which could impact the value of the future cash flow and value of the involved property that serves as loan collateral.

Such trends could ultimately result in a shrinkage of the commercial real estate market, which could materially impact the Company’s results of operations and financial condition and possibly the Company’s long-term business strategy because commercial real estate loans are currently the Company’s largest loan category.

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Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction as compared to estimated costs.

Changes in economic conditions that are out of the control of the borrower and lender could impact the value of the future cash flow and value of the underlying loan collateral.

Additionally, some commercial borrowers may have more than one outstanding loan with the Company and, as a result, an adverse development with respect to a commercial credit relationship may expose the Company to greater risk of loss as compared to an adverse development associated with a consumer loan borrower.

Changes in economic conditions that are outside of the control of the borrower and lender could impact the value of the future cash flow and value of the underlying loan collateral.

The Company may experience losses and expenses if security interests granted for loans are not enforceable.

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If there is a loan default the Bank may seek to foreclose upon collateral and enforce the security interests to obtain repayment and eliminate or mitigate the Company’s loss.

Drafting errors, recording errors, other defects or imperfections in the security interests granted to the Bank and/or changes in law may render liens granted to the Bank unenforceable.

The Company may incur losses or expenses if security interests granted to the Bank are not enforceable.

Drafting errors, granting errors, recording errors, other defects or imperfections in the security interests granted to the Bank and/or changes in law may render liens granted to the Bank unenforceable.

The Company may incur losses or expenses if security interests granted to the Bank are not properly perfected or are otherwise unenforceable.

Risks Related to Legal, Regulatory and Policy Matters

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Congress, or the Massachusetts legislature could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

In the wake of several bank failures in 2023, the Massachusetts Commissioner of Banks, FDIC, Federal Reserve and certain other regulators have intensified regulatory scrutiny and heightened expectations with respect to banking institutions.

Such intensified scrutiny and heightened expectations may lead to increased costs of compliance as well an increased risk of formal or informal regulatory actions.

In addition, personnel changes at such regulatory agencies may result in differing interpretations of existing rules and guidelines, including more stringent enforcement and more severe penalties.

Any such changes may lead to increased costs of compliance as well an increased risk of formal or informal regulatory actions.

Additionally, aspects of current or proposed regulatory or legislative changes to laws applicable in the financial services industry, including the adoption of new rules or more aggressive examination and enforcement by the Company’s regulators over its overdraft protection practices, have led certain banking organizations to modify their overdraft protection programs, including the imposition of overdraft transaction fees.

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Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.

The costs of defending, and any adverse outcome from, any challenge with respect to our compliance with fair lending laws could damage our reputation or could have a material adverse effect on our business, financial condition or results of operations.

The costs of defending, and any adverse outcome from, any challenge with respect to the Company’s compliance with fair lending laws could damage the Company’s reputation or could have a material adverse effect on the Company’s business, financial condition or results of operations.

The impact of changes to the Internal Revenue Code or federal, state or local taxes may adversely affect the Company’s financial results or business.

The Company is subject to changes in tax law which could impact the Company’s effective tax rate.

Changes in U.S.

federal, state and local tax law, interpretation of existing tax law, or adverse determinations by tax authorities, could increase the Company’s tax burden or otherwise adversely affect the Company’s financial condition or results of operations.

The Company’s results of operations may be impacted by changes resulting from different political philosophies governing individual and corporate taxation, as well as regulation, which may result from the policies of the new

presidential administration.

For example, changes to tax laws and regulations, including various provisions of the Tax Cut and Jobs Act (“TCJA”), which will expire in 2025 if not extended, may negatively impact the Company’s effective income tax rate, financial results, or the amount of any tax assets or liabilities.

Tax law changes may or may not be retroactive to previous periods and could negatively affect the current and future financial performance of the Company.

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and international trade policies, legislation, treaties and tariffs, embargoes, sanctions and other trade restrictions.

Tariffs, retaliatory tariffs or other trade restrictions on products and materials that customers import or export, or a trade war or other

related governmental actions related to tariffs, international trade agreements or policies or other trade restrictions have the potential to negatively impact the Company's and/or the Bank's customers' costs, demand for the Bank's customers' products, and/or the U.S.

Tariffs, retaliatory tariffs or other trade restrictions on products and materials that customers import or export, including tariffs imposed by the new U.S.

presidential administration, or a trade war or other related governmental actions related to tariffs, international trade agreements or policies or other trade restrictions have the potential to negatively impact the Company’s and/or the Bank's customers' costs, demand for the Bank's customers' products, and/or the U.S.

economy or certain sectors thereof and, thus, could adversely impact the Company’s business, financial condition and results of operations.

In addition, to the extent changes in the global political environment, including the Russia-Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, have had and may continue to have a negative impact on the Company or on the markets in which the Company operates, the Company's business, results of operations and financial condition could be materially and adversely impacted in the future.

In addition, to the extent changes in the global political environment, including the Russia-Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, have had and may continue to have a negative impact on the global economy, including the financial services industry generally and, as a result, the Company and the markets in which the Company operates, the Company’s business, results of operations and financial condition could be materially and adversely impacted in the future.

The Company may not be able to detect money laundering and other illegal or improper activities fully or on a timely basis, which could expose it to additional liability and could have a material adverse effect on the Company.

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These laws and regulations have become increasingly complex and detailed, require improved systems and sophisticated monitoring and compliance personnel and have become the subject of enhanced government supervision.

The policies and procedures the Company has adopted for the purposes of detecting and preventing the use of its banking network for money laundering and related activities may not completely eliminate instances in which the Company may be used by customers to engage in money laundering and other illegal or improper activities.

The policies and procedures the Company has adopted for the purposes of detecting and preventing the use of its banking network for money laundering and related activities may not completely eliminate instances in which the Company’s platforms may be used by customers to engage in money laundering and other illegal or improper activities.

To the extent the Company fails to fully comply with applicable laws and regulations, banking agencies have the authority to impose fines and other penalties on the Company.

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Risks Related to the Company’s Strategic Activities

Part of the Company’s growth has been through acquisitions, and the inability to continue to execute on future acquisitions could have an impact on the Company's results of operations.

While focusing on organic growth, the Company's strategy also includes, in part, growth through acquisitions.

The Company may not be able to identify suitable acquisition candidates, or complete acquisitions.

Further, the success of any acquisition depends on the ability to effectively integrate the acquired business, including integrating operations and achieving synergies and cost efficiencies.

Acquisitions can be disruptive as they result in diversion of management's attention from other business activities and can consume significant executive and employee resources as the Company integrates the target's operations and functional business into its operations and business.

The Company may experience complications or delays while integrating.

In addition, once integrated, acquired businesses may not achieve levels of expected profitability or profitability comparable to those achieved by the Company’s existing operations, or otherwise may not perform as expected.

Further acquisitions involve numerous risks, including lower than expected performance or higher than expected costs, potential dilution of stockholder value, changes in relationships with customers, and the potential loss of key employees.

In addition, the Company may not be successful in mitigating deposit erosion or loan quality deterioration at acquired institutions.

Failure to consummate, or any delay in consummating, the acquisition of Enterprise Bancorp, Inc.

for any reason could negatively impact the future business and financial results of the Company.

On December 9, 2024, the Company announced its entry into a definitive agreement (the “Merger Agreement”) under which the Company will acquire Enterprise Bancorp, Inc.

(“Enterprise”) and Rockland Trust Company will acquire Enterprise Bank and Trust Company (the “Merger”).

Completion of the Merger is subject to various closing conditions, including, among others, (i) the receipt of the requisite approval of Enterprise’s shareholders of the Merger Agreement, (ii) the receipt of all required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Massachusetts Commissioner of Banks, in each case without the imposition of a “Materially Burdensome Regulatory Condition” as defined in the Merger Agreement, (iii) the absence of any order, injunction, decree or other legal restraint preventing the completion of the Merger or making it illegal, and (iv) the listing of the shares of the Company’s common stock issuable pursuant to the Merger on Nasdaq, subject to official notice of issuance.

Each party’s obligation to complete the Merger is also subject to additional customary conditions, including the accuracy of the representations and warranties of the

other party, subject to certain exceptions, and the performance in all material respects by each party of its obligations under the Merger Agreement.

The Merger Agreement provides certain termination rights for both the Company and Enterprise, including that a termination fee of $22,488,000 will be payable by Enterprise in connection with the termination of the Merger Agreement under certain circumstances.

If the Merger is not completed for any reason, the business of the Company may be adversely affected and, without realizing any of the benefits of having completed the Merger, the Company could be subject to a number of risks.

In this regard, the Company faces risks and uncertainties due both to the pendency of the Merger and the potential failure to consummate the merger, including:

• the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

• the risk that Enterprise’s shareholders may not adopt and approve the Merger Agreement;

• the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated;

• delays in closing the Merger or other risks that any of the closing conditions to the Merger may not be satisfied in a timely manner;

• the diversion of management’s time and resources from ongoing business operations due to issues relating to the Merger;

• material adverse changes in the Company’s or Enterprise’s operations or earnings;

• potential litigation in connection with the Merger.

In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement.

If the Merger is not consummated, the Company could have to recognize these and other expenses without realizing the expected benefits of the Merger.

Acquisitions, including the Merger, may be more difficult, costly or time consuming than expected, and the expected benefits of such acquisitions may not be realized.

While focusing on organic growth, the Company’s strategy also includes, in part, growth through opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses.

The Company may not be able to identify suitable acquisition candidates or complete such acquisitions in the future.

Competition for acquisitions can be highly competitive, and the Company may not be able to acquire other institutions on acceptable terms.

The ability to grow may be limited if the Company is unable to successfully make acquisitions in the future.

The Company's ability to make opportunistic acquisitions is contingent on regulators granting any requisite approvals.

Part of the Company's business strategy includes seeking to make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time.

Any possible acquisition may be subject to regulatory approval, and there can be no assurance that the Company will be able to obtain any such approval in a timely manner or at all.

Acquisitions may also result in potential dilution of stockholder value or possible future impairment of goodwill and other intangibles.

In addition, fees, expenses and charges associated with any acquisition transaction may be higher than anticipated.

Costs or difficulties relating to integration matters might be greater than expected and the Company may be unable to realize expected cost savings and synergies from its acquisitions, such as the Merger, in the amounts and in the timeframe anticipated.

For example, it is possible that any integration process could result in the loss of key employees, the disruption of the Company’s ongoing business or diversion of management’s attention from other business activities or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with customers and employees or to achieve the anticipated benefits and cost savings of a merger.

The loss of key employees could adversely affect the Company’s ability to successfully conduct its business in the markets in which an acquired company operates, which could have an adverse effect on the Company’s financial results and the value of its common stock.

Further, following any acquisition, the combined company’s actual cost savings and revenue enhancements, if any, cannot be quantified in advance.

Any actual cost savings or revenue enhancements will depend on future expense levels and operating results, the timing of certain events and general industry, regulatory and business conditions.

In addition, the Company may not be successful in mitigating deposit erosion or loan quality deterioration at acquired institutions.

Many of these events will be beyond the control of the combined company.

With respect to the Merger, the Company’s belief that cost savings and revenue enhancements are achievable is a forward-looking statement that is inherently uncertain.

The Company may not realize the value of strategic investments and strategic initiatives that it pursues and such investments and initiatives could divert resources or introduce unforeseen risks to the Company’s business.

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These strategic initiatives and investments may introduce new costs or liabilities which could impact the Company’s ability to grow or maintain acceptable performance.

The Company may be unable to integrate systems, personnel or technologies from its strategic investments and initiatives.

The Company may be unable to

integrate systems, personnel or technologies from its strategic investments and initiatives.

Strategic investments and initiatives may also present unforeseen legal, regulatory or other challenges that the Company may not be able to manage effectively.

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The Company’s securities portfolio performance in difficult market conditions could have adverse effects on the Company’s results of operations.

Under accounting principles generally accepted in the United States of America ("GAAP"), the Company measures expected credit losses on its securities portfolios in accordance with the CECL methodology, taking into consideration current market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, current analysts’ evaluations, the Company’s ability and intent to hold investments until a recovery of amortized cost, as well as other factors.

Under accounting principles generally accepted in the United States of America (“GAAP”), the Company measures expected credit losses on its securities portfolios in accordance with the CECL methodology, taking into consideration quantitative and qualitative factors such as current market conditions, the extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, current analysts’ evaluations, the Company’s ability and intent to hold investments until a recovery of amortized cost, as well as other factors.

Adverse developments with respect to one or more of these factors could require the Company to recognize an allowance for credit losses, with the credit related portion of the reduction in the value required to be recognized as a charge to the Company’s earnings.

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Any deterioration in the FHLB of Boston’s performance or financial condition may affect the Company’s ability to access funding and/or require the Company to deem the required investment in FHLB of Boston stock to be impaired.

If the Company is not able to access funding, it may not be able to meet its liquidity needs, which could have an adverse effect on the results of operations or financial condition.

If the Company is not able to access funding, it may not be able to meet its liquidity needs, which could have an adverse effect on its results of operations or financial condition.

Similarly, if the Company deems all or part of its investment in FHLB of Boston stock impaired, such action could have a material adverse effect on the Company’s results of operations or financial condition.

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A deferred tax asset is created by the tax effect of the differences between an asset’s book value and its tax basis.

The Company assesses the deferred tax assets periodically to determine the likelihood of the Company’s ability to realize the benefits.

The Company assesses its deferred tax assets periodically to determine the likelihood of the Company’s ability to realize available benefits.

These assessments consider the performance of the associated business and its ability to generate future taxable income.

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Certain accounting policies require the use of estimates and assumptions that may affect the value of the Company’s assets and liabilities and results of operations.

The Company identified the accounting policies regarding the allowance for credit losses,

security valuations and allowance for credit losses, business combinations, and income taxes to be critical because these policies require management to make difficult, subjective and complex judgments, estimates and assumptions about matters that are inherently uncertain.

The Company identified the accounting policies regarding the allowance for credit losses, security valuations and allowance for credit losses, valuation of goodwill, and income taxes to be critical because these policies require management to make difficult, subjective and complex judgments, estimates and assumptions about matters that are inherently uncertain.

Under each of these policies, it is possible that materially different values and results of operations would be reported under different conditions, different judgments, or different estimates or assumptions.

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The risk of electronic fraudulent activity within the financial services industry, especially in the commercial banking sector, due to cyber-attacks (crime committed through or involving the internet, such as phishing, hacking, denial of service attacks, stealing information, unauthorized intrusions into internal systems or the systems of the Company’s third-party vendors) continues to increase and could adversely impact the Company’s operations or damage its reputation.

The Company's information technology infrastructure and systems may be vulnerable to cyber-terrorism, computer viruses, damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, system failures and other intentional or unintentional interference, fraud and other unauthorized attempts to access or interfere with the systems.

Information security risks have increased because of the proliferation of new technologies, including artificial intelligence, and the increased number as well as sophistication and level of activity of perpetrators of cyber-attacks, which include nation-state actors.

The Company’s information technology infrastructure and systems may be vulnerable to cyber-terrorism, computer viruses, damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, system or third-party software failures and other intentional or unintentional interference, fraud, and other unauthorized attempts to access or interfere with the systems.

Information security risks exist because of the proliferation of modern technologies, including artificial intelligence, as well as sophistication and level of activity of perpetrators of cyber-attacks.

Many financial institutions and service providers to financial institutions have reported significant breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, deny service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means.

While the Company has seen attempts to gain access against its systems, and expects such attacks will continue, and may intensify, in the future.

Although to date the Company has not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer losses in the future.

The Company expects risk exposure to cyber-attacks will remain elevated or increase in the future due to, among other things, the increasing size and prominence of the Company in the financial services industry, its expansion of Internet and mobile banking tools and products based on customer needs, and its increasing use of operational software hosted on the Internet as more and more software solutions used in the Company’s operations migrate from solutions hosted within the Company’s firewalls to internet-hosted solutions at third-party locations.

The Company has seen attempts to gain unauthorized access to its systems and expects such attempts will continue, and may intensify, in the future.

Internet as more and more software solutions used in the Company’s operations migrate from solutions hosted within the Company’s firewalls to internet-hosted solutions at third-party locations.

To help manage the Company’s cyber-risks, when entering a new vendor relationship, the Company reviews and assesses the cyber-security risk of third-party service providers.

A successful cyber-security attack on one of the Company’s third-party service providers could disrupt operations, adversely affect the Company’s business, or result in the disclosure or misuse of the Company’s confidential information, including customer confidential information.

There can be no assurance that the precautions the Company takes to seek to manage cyber risk related to third-party service providers will be effective or

prevent a cyber-attack that could expose the Company to significant operational costs and damages or reputational harm.

There can be no assurance that the precautions the Company takes to seek to manage cyber risk related to third-party service providers will be effective or prevent a cyber-attack that could expose the Company to significant operational costs and damages or reputational harm.

Although the Company maintains an insurance policy covering these sorts of cyber risks, there can be no assurance that this policy will afford coverage for all possible losses or would be adequate to cover all financial losses, damages, and penalties, including lost revenues, should the Company experience any system failure or cyber-attack in one or more Company or third-party systems.

The Company’s risk-based technology and systems or the personnel who monitor such technology and systems may not identify and prevent or effectively mitigate successful cyber-attacks when they occur.

The Company’s risk-based technology and systems or the personnel who monitor such technology and systems may not identify and/or prevent or effectively mitigate successful cyber-attacks when they occur.

Significant operational costs and damages or reputational harm may occur if the Company fails to identify and prevent or effectively mitigate, or there is a delay in identifying, a cyber-attack on its systems or those of its third-party service providers.

Any breach, damage or failure that causes an interruption in operations could have a material adverse effect on the Company’s financial condition and results of operations due to the time and money needed to correct the issue.

Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through Company computer systems and network infrastructure, which may result in litigation or significant liability to the Company and may cause existing and potential customers to refrain from doing business with the Company.

Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through the Company computer systems and network infrastructure, which may result in litigation or significant liability to the Company and may cause existing and potential customers to refrain from doing business with the Company.

Finally, depending on the type of incident, banking regulators may impose restrictions on the Company’s business and consumer laws may require reimbursement of customer losses.

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The failure to understand and adapt to these changes could negatively impact the Company’s business, financial condition and results of operations.

Financial services industries continually experience rapid technological change with frequent introductions of new technology-driven products and services, such as artificial intelligence.

Financial services industries continually experience rapid technological change with frequent introductions of new technology-driven products and services, such as artificial intelligence, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze or generate data or other materials or content.

These new technologies may be superior to, or render obsolete, the technologies currently used in the Company’s products and services.

An effective use of technology can increase efficiency, enable financial institutions to better serve customers, and reduce costs.

Additionally, as a result of the Coronavirus ("COVID-19") pandemic and the related shift toward remote banking, customers have become more reliant on, and their expectations have increased with respect to, new technology-driven products and services.

Additionally, as a result of the shift toward remote banking, the Company’s customers have become more reliant on, and their expectations have increased with respect to, new technology-driven products and services.

In addition, technology has lowered barriers to entry and made it possible for “non-banks” to offer traditional bank products and services using innovative technological platforms such as fintech and blockchain.

These “digital banks” may be able to achieve economies of scale and offer better pricing than the Company offers for banking products and services, and they may have fewer regulatory burdens than traditional banks such as the Company.

However, some new technologies needed to compete effectively result in incremental operating costs and capital investments.

However, some modern technologies needed to compete effectively result in incremental operating costs and capital investments.

The Company’s future success depends in part upon its ability to continue to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in operations.

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Ensuring that the collection, use, transfer, and storage of personal information by the Company complies with all applicable laws and regulations can increase costs.

Furthermore, the Company may not be able to ensure that all of its

customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of information exchanged with them, particularly where such information is transmitted by electronic means.

Furthermore, the Company may not be able to ensure that all its customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of information exchanged with them, particularly where such information is transmitted by electronic means.

If personal, confidential, or proprietary information of customers or others were to be mishandled or misused, the Company could be exposed to litigation or regulatory sanctions under personal information laws and regulations.

Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause the Company to lose customers or potential customers and thereby reduce revenues.

Concerns regarding the effectiveness of the Company’s measures to safeguard personal information, or even the perception that such measures are inadequate, could cause the Company to lose customers or potential customers and thereby reduce revenues.

Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject the Company to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage the Company’s reputation and otherwise adversely affect the Company’s results of operations and financial condition.

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Any failure or circumvention of the Company’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company’s business, results of operations and financial condition.

Certain of the Company’s employees work remotely and/or hybrid, which arrangements may contribute to heightened cybersecurity, information security and operational risks.

The Company has not experienced any material impact to the Company’s internal control over financial reporting due to the fact that most of the Company’s employees responsible for financial reporting are working remotely and/or hybrid, but the Company is continually monitoring and assessing the impact of remote or hybrid work policies on the Company’s internal control over financial reporting to minimize any impact on the design and operating effectiveness.

In addition, while the Company maintains a control framework designed to monitor service provider risks, including those relating to internet vulnerability fraud and operational errors of employees, the failure of a service provider to perform in accordance with the contracted arrangements could be disruptive to the Company’s operations, which could have a material adverse impact on the Company’s financial condition or results of operations, and the Company’s (or the service provider’s) business continuity plans, risk management processes and procedures or security systems may not adequately mitigate such risk.

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Factors that could detrimentally impact the Company’s access to liquidity sources include a decrease in the level of business activity as a result of a downturn in the markets in which the Company’s loans are concentrated or an adverse regulatory action against the Company.

The Company’s ability to borrow could also be impaired by factors that are not specific to the Company, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry generally.

The Company’s ability to borrow could also be impaired by factors that are not specific to the Company, such as a disruption in the financial markets or negative views and expectations about prospects for the financial services industry generally.

Risks Related to Environmental and Social Matters

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If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage.

Environmental laws may require the Company to incur substantial expenses and may materially

reduce the affected property’s value or limit the Company’s ability to use or sell the affected property.

Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property.

In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Company’s exposure to environmental liability.

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Responses to climate change could adversely affect the Company’s business and performance, including indirectly through impacts on its customers.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts.

Concerns over the long-term impacts of climate change have led and could continue to lead to governmental efforts in certain regions of the world to mitigate those impacts.

Consumers and businesses also may change their behavior on their own as a result of these concerns.

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The Company and its customers may face cost increases, asset value reductions, operating process changes, and the like.

Among the impacts to the Company could include a drop in demand for its products and services, particularly in certain sectors.

Impacts to the Company could include a drop in demand for its products and services, particularly in certain sectors.

In addition, the Company could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans.

Adverse weather conditions and natural disasters could adversely affect the Company's business or results of operations, and this risk may be exacerbated by shifts in weather patterns caused by climate change.

The Company’s market area includes coastal regions that are susceptible to adverse weather conditions and natural disasters including, but not to limited to, rain storms, hurricanes, blizzards and nor'easters and related flooding and wind damage.

The nature and level of such natural disasters cannot be predicted and may be exacerbated by global climate change.

Such events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where the Company operates, which would also impact the Company’s customers and borrowers.

See also “Natural disasters, severe weather, public health crises, or other catastrophic or man-made events could have an adverse effect on the Company's business or results of operations” below.

Environmental, social and governance (“ESG”) risks could adversely affect the Company’s reputation, business and performance and the trading price of its common stock.

Companies are facing increasing scrutiny from investors, customers, regulators and other stakeholders related to their ESG practices and disclosure.

Investors, investor advocacy groups and investment funds are also increasingly focused on these practices, especially as they relate to the environment, climate change, diversity and inclusion, workplace conduct and human capital management.

These stakeholders often have differing priorities and expectations regarding ESG issues.

The consideration of ESG factors in making investment and voting decisions is relatively new.

Certain stakeholders have commenced, or threatened to commence, lawsuits opposing various ESG measures.

Accordingly, the frameworks and methods for assessing ESG policies are not fully developed, vary considerably among the investment community, and will likely continue to evolve over time.

Moreover, the subjective nature of methods used by various stakeholders to assess a company with respect to ESG criteria could result in erroneous perceptions or a misrepresentation of our actual ESG policies and practices.

The Company may face scrutiny from some investors, customers, regulators and other stakeholders related to its ESG practices.

Some investors, investor advocacy groups and investment funds are focused on ESG practices, especially as they relate to the environment, climate change, diversity and inclusion, workplace conduct and human capital management.

These stakeholders often have differing priorities and expectations regarding ESG issues, and in some cases conflicting priorities.

In addition, “anti-ESG” sentiment is gaining momentum across the U.S., with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions, and the new U.S.

presidential administration having recently issued an executive order opposing diversity equity and inclusion (“DEI”) initiatives in the private sector.

The subjective nature of methods used by various ESG stakeholders to assess a company with respect to ESG criteria could result in erroneous perceptions or a misrepresentation of our actual ESG policies and practices.

Organizations that provide ratings information to investors on ESG matters may also assign unfavorable ratings to the Company.

Certain clients might also require that the Company implement additional ESG procedures or standards in order to continue to do business with them.

Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, our ability to do business with certain customers, vendors, suppliers or other third parties, the Company’s ability to attract and retain employees and our stock price.

Failure to adapt to or comply with changing investor or stakeholder expectations and standards on ESG could negatively impact our reputation, our ability to do business with certain customers, vendors, suppliers or other third parties, the Company’s ability to attract and retain employees and our stock price.

The Company could also face negative publicity or reputational harm based on the identity of those with whom we choose to do business.

Increased ESG-related compliance costs could result in increases to our overall operational costs, which could impact our profitability.

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

Any of the foregoing could have an adverse impact on our business, financial condition or results of operations.

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The Company’s reputation is vulnerable to threats that can be difficult or impossible to control, and costly or impossible to remediate.

Regulatory inquiries, actual or alleged incidents of employee misconduct and rumors, among other things, can substantially damage the Company’s reputation, even if the

inquiries, allegations, or rumors are baseless or satisfactorily addressed.

Regulatory inquiries, actual or alleged incidents of employee misconduct and rumors, among other things, can substantially damage the Company’s reputation, even if the inquiries, allegations, or rumors are baseless or satisfactorily addressed.

Adverse perceptions regarding the Company’s reputation in the consumer, commercial and funding markets could result in difficulties in generating and maintaining accounts and business, as well as in financing accounts and the Company’s business.

Further, adverse perceptions can result in decreases in the levels of deposits that customers and potential customers choose to maintain with the Company, any of which could have a material adverse effect on the Company’s results of operations or financial condition.

If the Company’s risk management framework does not effectively identify or mitigate the Company’s risks, the Company could suffer unexpected losses and the results of operations and financial condition could be materially adversely affected.

If the Company’s risk management framework does not effectively identify or mitigate the Company’s risks, the Company could suffer unexpected losses and its results of operations and financial condition could be materially adversely affected.

The Company’s risk management framework seeks to mitigate risk and appropriately balance risk and return.

The Company has established processes and procedures intended to identify, measure, monitor and report the types of risk to which it is subject, including credit risk, operations risk, compliance risk, reputation risk, strategic risk, market risk and liquidity risk.

The Company has established processes and procedures intended to identify, measure, monitor and report the types of risk to which it is subject, including strategic and emerging risk, culture risk, credit risk, liquidity risk, market and interest rate risk, operations risk, reputation risk, compliance risk, and technology and cyber risk.

The Company seeks to monitor and control its risk exposure through a framework of policies, procedures and reporting requirements.

Management of the Company’s risks in some cases depends upon the use of analytical and/or forecasting models, which, in turn, rely on assumptions and estimates.

If the models used to mitigate these risks are inadequate, or the assumption or estimates are inaccurate or otherwise flawed, the Company may fail to adequately protect against risks and may incur losses.

If the models used to mitigate these risks are inadequate, or the assumptions or estimates are inaccurate or otherwise flawed, the Company may fail to adequately protect against risks and may incur losses.

In addition, there may be risks that exist, or that develop in the future, that the Company has not appropriately anticipated, identified or mitigated, which could lead to unexpected losses and the Company’s results of operations or financial condition could be materially adversely affected.

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The loss of key personnel could adversely affect the Company’s ability to maintain and manage these functions effectively, which could negatively affect the Company’s net income.

In addition, loss of key personnel could result in increased recruiting and hiring expenses, which could adversely impact the Company’s net income.

The Company’s continued ability to compete effectively depends on its ability to attract new employees and to retain and motivate its existing key employees.

In addition, loss of key personnel could result in increased recruiting and hiring expenses or failure to attract talented key personnel, which could adversely impact the Company’s net income.

The Company’s continued ability to compete effectively depends on its ability to attract new talented employees and to retain and motivate its existing key employees.

Competition for the best people in the Company’s markets and businesses can be intense, and the Company may not be able to hire people or to retain them, in particular due to an increasingly competitive labor market.

The labor market continues to experience elevated levels of turnover in the aftermath of the COVID-19 pandemic and the Company has been impacted by an extremely competitive labor market, including increased competition for talent across all aspects of the Company’s business, as well as increased competition with non-traditional competitors, such as fintech companies.

Employers are offering increased compensation and opportunities to work with greater flexibility, including remote work, on a permanent basis.

The labor market continues to experience elevated levels of turnover and the Company has been impacted by an extremely competitive labor market, including increased competition for talent across all aspects of the Company’s business, as well as increased competition with non-traditional competitors, such as fintech companies.

Employers are offering increased compensation and opportunities to work with greater flexibility, including remote and hybrid work environments, on a permanent basis.

These can be important factors in a current employee’s decision to leave the Company as well as in a prospective employee’s decision to join the Company.

As competition for skilled professionals remains intense, the Company may have to devote significant resources to attract and retain qualified personnel, which could negatively impact earnings.

As competition for skilled professionals remains intense, the Company may have to devote significant resources to attract and retain qualified personnel, which could negatively impact earnings, and the Company cannot guarantee that all of its key personnel will remain with the Company.

Natural disasters, severe weather, public health crises or other catastrophic or man-made events could have an adverse effect on the Company’s business or results of operations.

The nature and level of such natural disasters, public health crises, such as the COVID-19 pandemic and any resurgences thereof or other pandemics or epidemics, or man-made events, including political events such as war, civil unrest or terrorist attacks, and other catastrophic events cannot be predicted.

The nature and level of such natural disasters, public health crises, pandemics or epidemics, or man-made events, including political events such as war, civil unrest or terrorist attacks, and other catastrophic events cannot be predicted.

Additionally, the Company’s market area includes coastal regions that are susceptible to adverse weather conditions and natural disasters which cannot be predicted and may be exacerbated by global climate change, including, but not to limited to, rain storms, hurricanes, blizzards and nor’easters and related flooding and wind damage.

Such events can disrupt operations, result in damage to properties and negatively affect the local economies in the markets where the Company operates.

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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