What changed in this filing

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Item 1A. Risk Factors

2026-03-13 compared with 2025-03-14 · 33 added, 39 removed, 428 unchanged (14% of the section changed)

28 unchanged sentences

Certain expenditures associated with the ownership of real estate, principally real estate taxes and maintenance costs, may also adversely affect our operating expenses.

In recent years commercial real estate markets both nationally and locally have been adversely affected by the COVID-19 pandemic.

Remote employee work opportunities during the pandemic have impacted, and may continue to impact, the occupancy of commercial properties.

Weakness in our commercial real estate market could result in an increased delinquency rate and losses from these loans.

In recent years commercial real estate markets both nationally and locally have been adversely affected by a weakening demand.

Weakness in our commercial real estate market could result in increased delinquency rate and losses from these loans.

We believe that the resilience of our market and borrowers provides an ability to adjust to and withstand such risks.

33 unchanged sentences

In addition, bank regulatory authorities may require an increase to the allowance for credit losses to cover future charge-offs, based on their judgments which may differ from ours.

We may be required to increase our provisions for credit losses and to charge off loans in the future, which increases in provision and charges could materially adversely affect us.

There is no precise method of predicting the timing of loan losses.

We can give no assurance that our allowance for credit losses is or will be sufficient to absorb actual loan losses.

We may be required to increase our provisions for credit losses and to charge off loans in the future;

increases in provision and charge offs could materially adversely affect us.

There is no precise method of predicting the timing of credit losses.

We can give no assurance that our allowance for credit losses is or will be sufficient to absorb actual credit losses.

We maintain an allowance for credit losses on loans, which is a reserve established through a provision for credit losses charged to expense, that represents management’s estimable and observable losses within the existing portfolio of loans.

2 unchanged sentences

Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase our allowance for credit losses.

Increases in nonperforming loans have a significant impact on our allowance for credit losses.

Increases in non-performing loans may have an impact on our allowance for credit losses.

In addition, bank regulatory agencies periodically review our allowance for credit losses and may require us to increase the provision for credit losses or to recognize further loan charge-offs, based on judgments that differ from those of management.

9 unchanged sentences

While these procedures are designed to provide us with the information needed to implement policy adjustments where necessary, and to take proactive corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.

Our stress tests may not accurately predict our financial condition.

We perform credit and capital stress testing on an quarterly basis using stress test assumptions we believe are reasonable.

Within our stress test, we estimate our credit losses, resources available to absorb those losses, and any necessary additions to capital.

The results of these stress tests involve many assumptions about the future economy, credit losses and default rates and may not accurately reflect our financial condition.

Any deterioration in the economy could result in significantly higher credit losses and negative impacts on our financial condition and capital than projected by our internal stress tests.

We are subject to environmental liability risk associated with our lending activities.

38 unchanged sentences

However, our loan demand has historically exceeded the rate at which we have been able to build core deposits for which there is substantial competition from a variety of different competitors, so we have relied on interest-sensitive deposits, including wholesale deposits, as sources of funds.

Those deposits may not be as stable as other types of deposits and, in the future, depositors may not renew those deposits when they mature, or we may have to pay a higher rate of interest to attract or retain them or to replace them with other deposits or with funds from other sources.

In the future, depositors may not renew these deposits when they mature, or we may have to pay a higher rate of interest to attract or retain them or to replace them with other deposits or with funds from other sources.

Not being able to attract deposits, or to retain or replace them as they mature, would adversely affect our liquidity.

10 unchanged sentences

Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have an adverse impact on our business, financial condition or results of operations.

Payments Services.

In 2016, we added a new funding source by way of facilitating payment services.

We are continuing to identify and solicit new customers in need of these specialized services.

The primary reasons for expanding into payment services are to secure an additional source of low-cost deposits and to capture additional fee income.

A bank’s risks when dealing with a processor account are similar to risks from other activities in which customers conduct transactions through the bank on behalf of the customers’ clients.

It is necessary for a bank to implement an adequate processor approval, monitoring and auditing program that extends beyond credit risk management and is conducted on an ongoing basis.

When a bank is not able to identify and understand the nature and source of transactions processed through accounts, the bank’s risks and the likelihood of suspicious activity can increase.

Without these precautions, a bank could be vulnerable to processing illicit or sanctioned transactions.

BAAS Software Solutions .

Developing and deploying a software program has added, and may contain to add, additional risk, including financial, cybersecurity, compliance and reputational concerns.

In 2021, the Company began development of a proprietary BAAS solution, Avenu, to provide an embedded banking solution that connects our partners (fintech, application developers, money movers, and entrepreneurs) directly and seamlessly to our Software as a Service (SAAS).

At the end of 2024, management reviewed the Avenu platform’s performance.

Delays in bringing Avenu to market and subsequent changes in revenue generation potential necessitated a review for impairment and a resulting charge to earnings of the full value of its capitalized intangible software.

For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We face risks related to our operational, technological, and organizational infrastructure.

19 unchanged sentences

Our financial, accounting, data processing or other operating systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially beyond the Company’s control, such as a spike in transaction volume, cyber-attack or other unforeseen catastrophic events, which may adversely affect our ability to process these transactions or provide services.

In addition, our operations rely on the secure processing, storage and transmission of confidential, proprietary and other information on our computer systems, networks.

and cloud infrastructure.

In addition, our operations rely on the secure processing, storage and transmission of confidential, proprietary and other information on our computer systems, networks, and cloud infrastructure.

Although we take protective measures to maintain the confidentiality, integrity, and availability of our and our clients’ information across all geographic and product lines, and endeavor to modify these protective measures as circumstances warrant, the nature of the threats continues to evolve.

62 unchanged sentences

nonetheless, our insurance coverage may not be sufficient to offset the impact of a material loss event (including if our insurer denies coverage as to any particular claim in the future), and such insurance may increase in cost or cease to be available on commercially reasonable terms, or at all, in the future.

The adoption and use of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment or fraudulent behavior by our employees, clients, or counterparties, or other third parties.

Our adoption and use of 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 (collectively, "AI"), for internal use has increased our efficiency, and we expect to continue to adopt such tools as appropriate, in line with our AI Strategy.

In addition, we expect our third-party vendors and service providers to increasingly develop and incorporate AI into their product offerings faster than we are able to do so independently.

The adoption and incorporation of such AI tools can lead to concerns around safety and soundness, fair access to financial services, fair treatment of consumers, and compliance with applicable laws and regulations.

We have implemented an AI governance function and risk management framework that includes a risk assessment of internal and vendor AI solutions, due diligence, and controls.

In addition, regulation of AI is rapidly evolving as legislatures and regulators are increasingly focused on these powerful emerging technologies.

The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and cybersecurity, consumer protection, competition, equal opportunity, and fair lending laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.

AI is the subject of ongoing review by various U.S.

governmental and regulatory agencies, and various U.S.

states are applying, or are considering applying, existing laws and regulations to AI or are considering general legal frameworks for AI.

We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.

Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all the legal, operational or technological risks that may arise relating to the use of AI.

Our use of AI may require additional resources, including the incurrence of additional costs, to develop and maintain our products and services to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position, and to address any ethical, reputational, technical, operational, legal, competitive or regulatory issues which may arise as a result of any of the foregoing.

We rely on third party service providers to provide key components of our business infrastructure, and a failure of these parties to perform for any reason could disrupt our operations.

44 unchanged sentences

We cannot assure you that any such losses would not materially and adversely affect our business, financial condition or results of operations.

COVID-19 and its variants have not been completely eliminated.

The Company has resumed pre-COVID-19 pandemic business activities, and our employees have returned to the office.

The Bank’s branch offices are open and operating during normal business hours.

To protect the health of its customers and employees, the Company continues to take precautions.

Those actions have not impaired our ability to conduct business and fully serve our customers.

While the adverse impacts of the COVID-19 pandemic have dissipated, COVID-19 and its variants have not been completely eliminated.

New variants could adversely disrupt our future operations.

Health emergencies or pandemics may re-emerge.

The re-emergence of widespread health emergencies or pandemics, such as coronavirus, could lead to quarantines, business shutdowns, increases in unemployment, labor shortages, disruptions to supply chains, and overall economic instability.

12 unchanged sentences

Our ability to identify appropriate markets for expansion, recruit and retain qualified personnel, and fund growth at reasonable cost, depends upon prevailing economic conditions, maintenance of sufficient capital, competitive factors, changes in banking laws, and other factors.

We cannot be certain as to our ability to manage increased levels of assets and liabilities without increased expenses and higher levels of nonperforming assets.

We cannot be certain as to our ability to manage increased levels of assets and liabilities without increased expenses and higher levels of non-performing assets.

We may be required to make additional investments in equipment and personnel to manage higher asset levels and loan balances, which may adversely affect earnings, shareholder returns, and our efficiency ratio.

Increases in operating expenses or nonperforming assets may decrease our earnings and the value of the Company’s capital stock.

Increases in operating expenses or non-performing assets may decrease our earnings and the value of the Company’s capital stock.

We may face increasing deposit-pricing pressures, which may, among other things, reduce our profitability.

8 unchanged sentences

In order to keep deposits required for funding purposes, it may be necessary to raise deposit rates without commensurate increases in asset pricing in the short term.

Prior to 2022, it had been the policy of the Federal Reserve to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities.

As a result, market rates on the loans we originated and the yields on securities we purchased during that period have been at historically low levels.

As discussed above, rates are fluctuating, and due to a number of factors including changes in monetary policies of the Federal Reserve, will likely continue to fluctuate.

External and Market-Related Risks

1 unchanged sentence

Our success depends, to a certain extent, upon general business economic and political conditions, local and national, as well as governmental monetary policies.

Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and, therefore our growth and earnings.

Conditions such as inflation, tariffs, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may adversely affect our asset quality, deposit levels and loan demand and, therefore our growth and earnings.

In addition, there are continuing concerns related to, among other things, the level of U.S.

4 unchanged sentences

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation began to rise sharply at the beginning of 2022 and remained at an elevated level through the present time.

Inflation began to rise sharply at the beginning of 2022 and remained at an elevated level for a period of time.

Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses.

33 unchanged sentences

Such regulation and supervision govern the activities in which we may engage, and are intended primarily for the protection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of our capital stock.

Various consumers and compliance laws also affect our operations.

Various consumer and compliance laws also affect our operations.

Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for credit losses.

96 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors