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Item 1A. Risk Factors

2022-02-28 compared with 2021-03-01 · 111 added, 105 removed, 251 unchanged (46% of the section changed)

An investment in the Company’s common stock or the Series A Preferred Stock involves risks.

Stockholders should carefully consider the risks described below, together with other information contained in this Annual Report on Form 10-K, before making any purchase or sale decisions regarding the Company’s common stock or Series A Preferred Stock.

Stockholders should carefully consider the risks described below, together with other information contained in this Annual Report on Form 10-K and that was filed with the Securities and Exchange Commission (the “SEC”), before making any purchase or sale decisions regarding the Company’s common stock or Series A Preferred Stock.

If any of the following risks actually occur, the Company’s financial condition or operating results may be harmed.

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Risks Related to the COVID-19 Pandemic

The ongoing COVID-19 pandemic and measures intended to prevent its spread could adversely affect business activities, financial condition, and results of operations and such effects will depend on future developments, which are highly uncertain and difficult to predict.

Global health concerns relating to the COVID-19 outbreak and related government actions taken to reduce the spread of the virus have been weighing on the macroeconomic environment, both nationally and in the New Jersey and New York market area, and the outbreak has significantly increased economic uncertainty and reduced economic activity.

The COVID-19 outbreak has led to federal, state and local governments enacting various restrictions in an attempt to limit the spread of the virus, including:

the declaration of a federal National Emergency;

multiple cities’ and states’ declarations of states of emergency;

school and business closings;

limitations on social or public gatherings and other social distancing measures, such as working remotely;

travel restrictions, quarantines and shelter in place orders.

Such measures have significantly contributed to the increase in unemployment and changes in consumer and business spending, borrowing needs and saving habits.

In addition, federal and state governments, and various federal agencies, have taken measures to address the economic and social consequences of the pandemic, including the passage of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and the Main Street Lending Program.

The CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including financing, loan forgiveness and automatic forbearance.

Beginning in early April 2020, the Bank began processing loan applications under the Paycheck Protection Program (“PPP”) created under the CARES Act.

The ongoing COVID-19 pandemic and measures intended to prevent its spread could continue to adversely affect the Company’s business activities, financial condition, and results of operations and such effects will depend on future developments, which are highly uncertain and difficult to predict.

Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have continued to affect the macroeconomic environment, both nationally and in the Company’s existing geographic footprint.

The COVID-19 pandemic has led to federal, state, and local governments enacting various restrictions in an attempt to limit the spread of the virus, and along with various federal agencies, have led to measures to address the economic and social consequences of the pandemic.

There can be no assurance that the steps taken by the U.S.

government will be effective or achieve their desired results in a timely fashion.

Additionally, there can be no assurance that federal and state agencies will not pass further measures that provide accommodations that could impact the financial results.

Additionally, the COVID-19 pandemic has significantly affected the financial markets and has resulted in a number of Federal Reserve Bank actions.

Market interest rates have declined significantly.

In March 2020, the Federal Reserve reduced the target federal funds rate and announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic.

In addition, the Federal Reserve reduced the interest that it pays on excess reserves.

The Company expects that these reductions in interest rates, especially if prolonged, could further adversely affect net interest income, margins and profitability.

The Federal Reserve also proposed the Main Street Lending Program, which will offer deferred interest on four-year loans to small and mid-sized businesses, while prohibiting certain capital distributions and certain compensation practices by borrowers.

The full impact of the COVID-19 pandemic on the Company’s business activities as a result of new government and regulatory policies, programs and guidelines, as well as market reactions to such activities, remains uncertain.

or state governments will be effective or achieve their desired results in a timely fashion.

Additionally, there can be no assurance that federal and state agencies will not pass further measures that provide accommodations that could impact the Company’s financial results.

Furthermore, the full impact of the COVID-19 pandemic on the Company’s business activities as a result of new government and regulatory policies, programs, and guidelines, as well as market reactions to such activities, remains uncertain.

The economic effects of the COVID-19 outbreak have had a destabilizing effect on financial markets, key market indices, and overall economic activity.

The uncertainty regarding the duration of the pandemic and the resulting economic disruption has caused increased market volatility and may further depress economic activity and/or consumer confidence and business generally.

The continuation of these conditions caused by the outbreak, including the impacts of the CARES Act and other, federal and state measures, specifically with respect to loan forbearances, can be expected to adversely impact the Company’s businesses and results of operations and the operations of borrowers, customers and business partners.

In particular, these events may be expected to, among other things, (i) adversely affect customer deposits and the stability of the Company’s deposit base, or otherwise impair liquidity, (ii) impair the ability of borrowers to repay outstanding loans or other obligations, resulting in increases in delinquencies, (iii) reduce the demand for loans, wealth management revenues or the demand for other products and services, (iv) impact the creditworthiness of potential and current borrowers, (v) negatively impact the productivity and availability of key personnel and other employees necessary to conduct business, and of third-party service providers who perform critical services, or otherwise cause operational failures due to changes in normal business practices necessitated by the outbreak and related governmental actions, (vi) impair the ability of loan guarantors to honor commitments, (vii) impair the value of the collateral securing loans (particularly with respect to real estate), (viii) impair the value of the securities portfolio, (ix) require an increase in the allowance for credit losses, (x) negatively impact regulatory capital ratios, (xi) increase cyber and payment fraud risk, given increased online and remote activity, (xii) create stress on operations and systems associated with participation in the PPP as a result of high demand and volume of applications, (xiii) result in increased compliance risk as the Company becomes subject to new regulatory and other requirements associated with the PPP and other new programs in which the Company participates, and (xiv) broadly result in lost revenue and income.

Additionally, in response to the COVID-19 pandemic, the Bank offered payment relief to borrowers affected by COVID-19, and has periodically closed certain branch locations on a temporary basis while directing branch customers to drive-thru windows and online banking services.

It is not yet known what impact these operational changes may have on the Company’s financial performance.

The continuation of these conditions caused by the pandemic, including the impacts of federal and state measures, can be expected to adversely impact the Company’s businesses and results of operations and the operations of borrowers, customers, and business partners.

In particular, these events may (i) adversely affect customer deposits and the stability of the Company’s deposit base, or otherwise impair liquidity, (ii) impair the ability of borrowers to repay outstanding loans or other obligations, resulting in increases in delinquencies, (iii) reduce the demand for loans, wealth management revenues, or the demand for other products and services, (iv) impact the creditworthiness of potential and current borrowers, (v) negatively impact the productivity and availability of key personnel and other employees necessary to conduct business, and of third-party service providers who perform critical services, or otherwise cause operational failures due to changes in normal business

practices necessitated by or issues with employee retention caused by the pandemic and related governmental actions or otherwise, (vi) impair the ability of loan guarantors to honor commitments, (vii) impair the value of the collateral securing loans (particularly with respect to real estate), (viii) impair the value of the securities portfolio, (ix) require an increase in the allowance for credit losses, (x) negatively impact regulatory capital ratios, (xi) increase cyber and payment fraud risk, given increased online and remote activity, (xii) result in increased compliance risk as the Company becomes subject to new regulatory and other requirements, and (xiii) broadly result in lost revenue and income.

Prolonged measures by public health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly, or other core business practices would further harm the Bank’s business and that of its customers, in particular small to medium-sized business customers.

Although the Company has business continuity plans and other safeguards in place, there is no assurance that they will be effective.

The ultimate impact of these factors is highly uncertain at this time and the Company does not yet know the full extent of the impact on business, operations or the global economy as a whole.

The ultimate impact of these factors is highly uncertain and the Company does not yet know the full extent of the impact on business, operations, or the global economy as a whole.

However, the decline in economic conditions generally and a prolonged negative impact on small to medium-sized businesses, in particular, due to the COVID-19 pandemic could result in a material adverse effect on the Company’s business, financial condition, and results of operations and may heighten many of the known risks described herein and in other filings with the SEC.

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The Bank’s emphasis on commercial lending may expose the Bank to increased lending risks .

At December 31, 2020, $5.11 billion, or 65.5%, of the Bank’s total loans consisted of commercial real estate, multi-family and land loans, and commercial and industrial loans.

At December 31, 2021, $5.88 billion, or 68.2%, of the Bank’s total loans consisted of commercial real estate, multi-family real estate and land loans, and commercial and industrial loans.

These portfolios have grown in recent years and the Bank intends to continue to emphasize these types of lending.

These types of loans may expose a lender to greater risk of non-payment and loss than residential real estate loans because repayment of the loans often depends o n the successful operation of the property and the income stream of the borrowers.

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

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A financial institution may be subject to this guidance if, among other factors, (i) total reported loans for construction, land acquisition and development and other land represent 100% or more of total capital, or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land acquisition and development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital.

Based on these factors, the Bank has a concentration in multi-family and commercial real estate lending, as such loans represent 321% of total bank capital as of December 31, 2020.

Based on these factors, the Bank has a concentration in multi-family and commercial real estate lending, as such loans represented 400% of total bank capital as of December 31, 2021.

The guidance focuses on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or in an abundance of caution).

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Additionally, conforming fixed-rate loans with a debt-to-income ratio greater than 43% would also qualify as an Ability-To-Repay Qualified Mortgage based upon an automated loan approval from one of the government sponsored mortgage entities.

However, a consumer may assert the lender’s failure to comply with the Ability-To-Repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge whether a loan actually met the criteria to be deemed an Ability-to-Pay Qualified Mortgage.

However, a consumer may assert the lender’s failure to comply with the Ability-To-

Repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge whether a loan actually met the criteria to be deemed an Ability-to-Pay Qualified Mortgage.

These challenges have yet to be addressed by the courts.

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A charge-off reduces the Bank’s reserve for possible credit losses.

If the Bank’s reserves were insufficient, it would be required to record a larger reserve, which would reduce earnings for that period.

If the Bank’s reserves were insufficient, it would be required to record a reserve, which would reduce earnings for that period.

Changes to the economic forecasts within the model could positively or negatively impact the actual results.

Any increase in the allowance for credit losses, or expenses incurred to determine the appropriate level of the allowance for credit losses, may have a material adverse effect on the Company’s financial condition and results of operations.

The Company is subject to regulatory enforcement risk, reputation risk and litigation risk regarding participation in the PPP and is subject to the risk that the SBA may not fund some or all PPP loan guarantees .

The Company is subject to regulatory enforcement risk, reputation risk, and litigation risk regarding participation in the Paycheck Protection Program (“PPP”) and is subject to the risk that the SBA may not fund some or all PPP loan guarantees .

The CARES Act included the PPP as a loan program administered through the SBA.

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Because of the short timeframe between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to PPP were issued after lenders began processing PPP applications.

Also, there was and continues to be uncertainty in the laws, rules and guidance relating to the PPP.

Since the opening of the PPP, several banks have been subject to litigation regarding the procedures used in processing PPP applications, and several banks have been subject to litigation regarding the payment of fees to agents that assisted borrowers in obtaining PPP loans.

Also, the re was and continues to be uncertainty in the laws, rules and guidance relating to the PPP.

Since the opening of the PPP, several banks have been subject to litigation regarding the procedures used in processing PPP applications, and several banks have been sub ject to litigation regarding the payment of fees to agents that assisted borrowers in obtaining PPP loans.

In addition, some banks and borrowers have received negative media attention associated with PPP loans.

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The judicial foreclosure process is protracted, which delays the Company’s ability to resolve non-performing loans through the sale of the underlying collateral.

The longer timelines were the result of the economic crisis, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure.

These reasons, historical issues at the largest mortgage loan servicers, and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures f or residential mortgage lenders.

The longer timelines have been the result of the economic crisis, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure.

These reasons and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures f or residential mortgage lenders.

This may result in a material adverse effect on collateral values and the Bank’s ability to minimize its losses.

Risks Related to Economic Matters

A worsening of economic conditions in the market area could reduce demand for the products and services and/or result in increases in the level of non-performing loans, which could adversely affect the Company’s business, financial condition, and results of operations.

A deterioration in economic conditions, especially local conditions, as a result of COVID-19, inflation or otherwise, could have the following consequences, any of which could have a material adverse effect on the business, financial condition, liquidity and results of operations, and could more negatively affect the Company compared to a financial institution that operates with more geographic diversity:

• demand for the products and services may decline;

• loan delinquencies, problem assets, and foreclosures may increase;

• collateral for loans, especially real estate, may decline in value, thereby reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans;

• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments.

Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, civil unrest, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond the Company’s control could further impact these local economic conditions and could further negatively affect the financial results of banking operations.

In addition, deflationary pressures, while possibly lowering operating costs, could have a significant negative effect on borrowers, especially business borrowers, and the values of underlying collateral securing loans, which could negatively affect financial performance.

A downturn in the local economy or in local real estate values could adversely impact profits .

Most of the Bank’s loans are secured by real estate and are made to borrowers throughout New Jersey and the metropolitan areas of Philadelphia and New York City, as well as their surrounding areas.

Most of the Bank’s loans are secured by real estate and are made to borrowers throughout New Jersey and the major metropolitan areas of Philadelphia, New York, Baltimore, Washington D.C., and Boston, as well as their surrounding areas.

A downturn in the local economy or a decline in real estate values could increase the amount of non-performing loans and cause residential and commercial real estate loans to become inadequately collateralized, which could expose the Bank to a greater risk of loss.

Risks Related to Acquisitions

The Company must successfully integrate the operations and retain the customers of its acquired institutions and manage its growth, larger operations, and control costs .

Since July 31, 2015, the Company has acquired seven financial institutions and continues to explore acquisition opportunities as part of its strategic plan.

Risks Related to Acquisitions and Growth

The Company must successfully integrate the operations and retain the customers of its acquired institutions .

The Company regularly completes acquisitions of financial institutions and continues to explore acquisition opportunities as part of its strategic plan.

Future results of operations will depend in large part on the Company’s ability to successfully integrate the operations of the institutions it acquires and retain the employees and customers of those institutions.

If the Company is unable to successfully manage the integration of the separate cultures, employee and customer bases and operating systems of the institutions it acquires, the Company’s results of operations may be adversely affected.

The Company’s failure to successfully manage its growth may adversely impact its financial condition and results of operation.

The Company may be challenged to successfully manage its business as a result of the strain on management and operations that may result from growth.

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No assurance can be given that the Company will be successful in these efforts.

Finally, substantial growth may stress regulatory capital levels, and may require the Company to raise additional capital.

The Company’s intent to expand its geographic footprint may not be successful in entering into new markets .

The Company intends to expand its geographic footprint through acquisitions and organic growth.

Entering into new markets involves risks, such as competitive disadvantages through a lack of name recognition, increased marketing costs, and the inability to otherwise grow market share as needed to offset the costs associated with expansion.

The failure to successfully implement a geographic growth strategy could adversely affect the Company’s results of operations.

The Company may need to raise additional capital in the future and such capital may not be available when needed or at terms that are beneficial to stockholders.

Substantial growth may stress regulatory capital levels, and may require the Company to raise additional capital.

No assurance can be given that the Company will be able to raise any required capital, or that it will be able to raise capital on terms that are beneficial to stockholders.

A significant portion of the Company’s loan portfolio has grown through acquisition, and therefore may not have been underwritten to meet the Company’s credit standards .

Loans that were acquired as part of the Company’s acquisitions of other depository institutions, were not underwritten or originated in accordance with the Company’s credit standards, and the Company did not have long-standing relationships with many of these borrowers at the time of acquisition.

Loans that were acquired as part of the Company’s acquisitions of other depository institutions, were not underwritten or originated in accordance with the Company’s credit standards, including environmental matters, and the Company did not have long-standing relationships with many of these borrowers at the time of acquisition.

The acquired loans are re-risked at the date of acquisition based on the Company’s credit standards, which can temporarily increase loans classified as special mention and substandard for a period of time until these loans are integrated and conform to the Company’s credit standards.

Although the Company reviewed the loan portfolios of each institution acquired as part of the diligence process, and has established reasonable credit marks with regard to all loans acquired, no assurance can be given that the Company will not incur losses in excess of the credit marks with regard to these acquired loans, or that any such losses, if they occur, will not have a material adverse effect on the Company’s business, financial condition and results of operations.

Future acquisition activity could dilute tangible book value .

Although the Company reviewed the loan portfolios of each institution acquired as part of the diligence process, and believes that it has established reasonable credit marks with regard to all loans acquired, no assurance can be given that the Company will not incur losses in excess of the credit marks with regard to these acquired loans, or that any such losses, if they occur, will not have a material adverse effect on the Company’s business, financial condition, and results of operations.

Future acquisition activity could otherwise negatively affect financial condition and results of operations .

The Company continues to evaluate opportunities to acquire institutions and/or bank branches.

Acquisitions typically involve the payment of a premium over book and trading values, and therefore, may result in the dilution of tangible book value per share.

Acquiring other banks, businesses, or branches may have an adverse effect on financial results and may involve various other risks commonly associated with acquisitions, including those discussed above, as well as, among other things:

• payment of a premium over book and market values that may dilute the tangible book value and earnings per share in the short and long-term;

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

• exposure to potential asset quality problems of the target company;

• inability to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits of the acquisition;

• potential disruption to the business;

• potential diversion of management’s time and attention;

• the possible loss of key employees and customers of the target company;

• potential changes in banking or tax laws or regulations that may affect the target company.

Acquisitions may reduce or not enhance cash flows, business, financial condition, results of operations or prospects as expected and, as a result, such acquisitions may have an adverse effect on the results of operations, particularly during periods in which the acquisitions are being integrated into operations.

Risks Related to Interest Rates

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The Bank’s ability to make a profit largely depends on net interest income, which could be negatively affected by changes in interest rates.

The interest income

earned on interest-earning assets and the interest expense paid on interest-bearing liabilities are generally fixed for a contractual period of time.

Interest-bearing liabilities generally have shorter contractual maturities than interest-earning assets.

This imbalance can create significant earnings volatility, because market interest rates change over time.

This imbalance can create significant earnings volatility as market interest rates change over time.

In a period of rising interest rates, the interest income earned on interest-earning assets may not increase as rapidly as the interest paid on interest-bearing liabilities.

Additionally, a flat or an inverted yield curve, where short-term rates are close to, or below, long-term rates, could adversely affect the Company’s financial condition and results of operations.

Additionally, a flat or an inverted yield curve, where short-term rates are close to, or above, long-term rates, could adversely affect the Company’s financial condition and results of operations.

In addition, changes in interest rates can affect the average life of loans and investment securities.

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

Changes in interest rates also affect the current estimated fair value of the securities portfolio.

Changes in interest rates may also affect the current estimated fair value of the securities portfolio.

Generally, the value of securities moves inversely with changes in interest rates.

Unrealized net losses on securities available-for-sale are reported as a separate component of equity.

Unrealized net losses on securities available-for-sale are reported as a

separate component of stockholders’ equity.

To the extent interest rates increase and the value of the available-for-sale portfolio decreases, stockholders’ equity will be adversely affected.

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At December 31, 2021, the Company maintained a debt securities portfolio of $1.71 billion, of which $568.3 million was classified as available-for-sale.

The estimated fair value of the available-for-sale debt securities portfolio may increase or decrease depending on the credit quality of the underlying issuer, market liquidity, changes in interest rates and other factors.

The estimated fair value of the available-for-sale debt securities portfolio may change depending on the credit quality of the underlying issuer, market liquidity, changes in interest rates and other factors.

Stockholders’ equity is increased or decreased by the amount of the change in the unrealized gain or loss (difference between the estimated fair value and the amortized cost) of the available-for-sale debt securities portfolio, net of the related tax expense or benefit, under the category of accumulated other comprehensive income (loss).

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Factors which are considered in the analysis include, but are not limited to, the extent to which the fair value is less than the amortized cost basis, the financial condition, credit rating and future prospects of the issuer, whether the debtor is current on contractually obligated interest and principal payments and the intent and ability to retain the security for a period of time sufficient to allow for any anticipated recovery in fair value and the likelihood of any near-term fair value recovery.

If such decline is deemed to be uncollectible, the security is written down to a new cost basis and the resulting loss will be recognized as a credit loss expense through an allowance for credit losses.

If such decline is deemed to be uncollectible, the security is written down to a new cost basis and the resulting loss will be recognized as a securities credit loss expense through an allowance for securities credit losses.

Risks Related to Loan Sales

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The laws and regulations that govern the Company’s and the Bank’s operations are designed for the protection of depositors and the public, but not the Company’s stockholders.

financing, attract deposits, make loans and achieve satisfactory interest spreads, and could expose the Company to additional costs, including increased compliance costs.

These provisions, as well as any other aspects of current or future regulatory or legislative changes to laws applicable to the financial industry, may impact the profitability of the Company’s business activities and may change certain business practices, including the ability to offer new products, obtain financing, generate fee income, attract deposits, make loans and achieve satisfactory interest spreads, and could expose the Company to additional costs, including increased compliance costs.

These changes also may require the Company to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect the Company’s business, financial condition, and results of operations.

The Dodd-Frank Act directed the FRB to issue rules to limit debit-card interchange fees, (the fees that issuing banks charge merchants each time a consumer uses a debit card) collected by banks with assets of $10 billion or more.

Under the temporary relief provisions of a joint rule published by the OCC, the FDIC, and the FRB, the Bank received relief from Dodd-Frank limitations on debit card interchange fees collected by banks with assets of $10 billion or more.

At December 31, 2021, the Bank was exempt from this rule but will be subject to reduced interchange fees beginning in July 2022.

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Offering these products can subject the Company to additional regulatory oversight and cost, as well as additional risk.

Title VII of the Dodd-Frank Act contains a comprehensive framework for over-the-counter (“OTC”) derivatives transactions.

The Dodd-Frank Act contains a comprehensive framework for over-the-counter (“OTC”) derivatives transactions.

Even though many of the requirements do not impact the Company directly, since the Bank does not meet the definition of swap dealer or “major swap participant,” the Company continues to review and evaluate the extent to which such requirements impact its business indirectly.

The Commodity Futures Trading Commission (“CFTC”) has issued a final rule that sets the permanent aggregate gross notional amount threshold for the de minimis exception from the definition of swap dealer at $8.0 billion in swap dealing activity entered into by a person over the preceding 12 months.

A rule issued by the Commodity Futures Trading Commission (“CFTC”) sets the permanent aggregate gross notional amount threshold for the de minimis exception from the definition of swap dealer at $8.0 billion in swap dealing activity entered into by a person over the preceding 12 months.

The Bank’s swap dealing activities are currently below this threshold.

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See Regulation and Supervision, Bank Holding Company Regulation .

The Company may be adversely affected by changes in U.S.

Changes in tax laws contained in the Tax Cuts and Jobs Act, enacted in 2017, include a number of provisions that have had and will have an impact on the banking industry, borrowers and the market for single-family residential real estate.

Changes include (i) a lower limit on the deductibility of mortgage interest on single-family residential mortgage loans, (ii) the elimination of interest deductions for home equity loans, (iii) a limitation on the deductibility of business interest expense and (iv) a limitation on the deductibility of property taxes and state and local income taxes.

The changes in the tax laws have had and may continue to have an adverse effect on the market for, and valuation of, residential properties, and on the demand for such loans, and could make it harder for borrowers to make their loan payments.

In addition, these changes may also have a disproportionate effect on taxpayers in states with high residential home prices and high state

and local taxes, such as New Jersey.

If home ownership becomes less attractive, demand for mortgage loans could decrease.

The value of the properties securing loans in the loan portfolio may be adversely impacted as a result of the changing economics of home ownership, which could require an increase in the provision for credit losses, which would reduce profitability and could have a material adverse effect on the Company’s business, financial condition and results of operations.

Monetary policies and regulations of the Federal Reserve Board could adversely affect the Company’s business, financial condition, and results of operations .

In addition to being affected by general economic conditions, the Company’s earnings and growth are affected by the policies of the Federal Reserve Board.

The Company’s earnings and growth are affected by the policies of the Federal Reserve Board.

An important function of the Federal Reserve Board is to regulate the money supply and credit conditions.

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Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board have a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future.

The effects of such policies upon the Company’s business, financial condition and results of operations cannot be predicted.

The monetary policies and regulations of the Federal Reserve Board have a significant effect on the operating results of financial institutions.

However, the extent of such policies upon the Company’s business, financial condition, and results of operations cannot be predicted.

The Company is subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties .

The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions.

A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansion.

A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansion.

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

Such actions could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Furthermore, recent amendments to CRA regulations may make compliance more difficult or costly.

The Federal Reserve Board may require the Company to commit capital resources to support the Bank .

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A capital injection may be required at times when the holding company may not have the resources to provide it and therefore may require the holding company to borrow the funds or raise capital.

Any loans by a holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.

In the event of a holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank.

Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the institution’s general unsecured creditors, including the holders of its note obligations.

Thus, any borrowing that must be done by the Company to make a required capital injection becomes more difficult and expensive and could have an adverse effect on the Company’s business, financial condition and results of operations.

Thus, any borrowing or funds needed to raise capital required to make a capital injection becomes more difficult and expensive and could have an adverse effect on the Company’s business, financial condition, and results of operations.

The Company is subject to heightened regulatory requirements as a result of total assets exceeding $10 billion .

The Company’s total assets were $11.4 billion at December 31, 2020 and $10.2 billion at January 1, 2020, after closing on the Two River and Country Bank acquisitions.

Banks with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including:

the examination authority of the Consumer Financial Protection Bureau to assess compliance with Federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

Additional costs have been and will be incurred to implement processes, procedures, and monitoring of compliance with these imposed requirements, including investing significant management attention and resources to make necessary changes to comply with the new statutory and regulatory requirements under the Dodd-Frank Act.

The Company faces the risk of failing to meet these requirements, which may negatively impact results of operations and financial condition.

The Company’s total assets were $11.7 billion at December 31, 2021 and banks or financial institutions with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including:

the examination authority of the CFPB to assess compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

Additional costs have been and will be incurred to implement processes, procedures, and monitoring of compliance with these imposed requirements, including investing significant management attention and resources to make the necessary changes to comply with the requirements under the Dodd-Frank Act.

The Company faces the risk of failing to meet these requirements, which could result in regulatory action.

While the effect of any presently contemplated or future changes in the laws or regulations or their interpretations would have is unpredictable, these changes could be materially adverse to the Company’s investors.

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Financial institutions whose assets exceed that level receive dividends generally equal to the rate of the 10-year Treasury note, as opposed to 6% for smaller financial institutions.

reduction will significantly decrease the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $2.1 million for the year ended December 31, 2020.

Such reduction has significantly decreased the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $591,000 for the year ended December 31, 2021.

Risks Related to Dividend Payments

There is no guaranty that the Company will be able to continue to pay a dividend on its common stock or, if continued, will be able to pay a dividend at the current rate .

The Board of Directors of the Company determines at its discretion if, when and the amount of dividends that may be paid on the common stock.

The Board of Directors of the Company determines if, when and the amount of dividends that may be paid on the common stock.

In making such determination under the Company’s capital management plan, the Board of Directors takes into account various factors including economic conditions, earnings, liquidity needs, the financial condition of the Company, applicable state law, regulatory requirements and other factors deemed relevant by the Board of Directors.

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If the Board of Directors does not declare a dividend on the Series A Preferred Stock in respect of a dividend period, then no dividend will be payable on the applicable dividend payment date, no dividend will be deemed to have accumulated for such dividend period, and the Company will have no obligation to pay any dividend for that dividend period at any time, whether or not the Board of Directors declares a dividend on the Series A Preferred Stock or any other class or series of the Company’s capital stock for any future dividend period.

Any declaration and payment of dividends on the Series A Preferred Stock will depend upon, among other factors, the Company’s earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, the ability to service any equity or debt obligations senior to the Series A Preferred Stock, any credit agreements to which the Company is a party, and other factors deemed relevant by the Board of Directors.

Any declaration and payment of dividends on the Series A Preferred Stock will depend upon, among other factors, the Company’s earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, the ability to service any equity or debt obligations senior to the Series A Preferred Stock, and other factors deemed relevant by the Board of Directors.

In addition, under the Federal Reserve’s capital rules, dividends on the Series A Preferred Stock may only be paid out of net income, retained earnings, or surplus related to other additional Tier 1 capital instruments.

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Many of these competitors enjoy advantages, including greater financial resources and access to capital, stronger regulatory ratios and higher lending limits, a wider geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs.

In addition, rapid technological changes and consumer preferences may result in increased competition for the Bank’s services.

In addition, rapid technological changes and consumer preferences may result in

increased competition for the Bank’s services.

Increased competition could reduce the Company’s net income by decreasing the number and size of loans that the Bank originates and the interest rates charged on these loans.

Competitive factors driven by consumer sentiment or otherwise can also reduce the Company’s ability to generate fee income, such as through overdraft fees.

In attracting deposits, the Company faces substantial competition from other insured depository institutions such as banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds.

Many competitors enjoy advantages, including greater financial resources and access to capital, stronger regulatory ratios, stronger asset quality and performance, more aggressive marketing campaigns, better brand recognition and more branch locations.

Many competitors enjoy advantages, including greater financial resources and access to capital, stronger regulatory ratios, more aggressive marketing campaigns, better brand recognition and more branch locations.

These competitors may offer higher interest rates than the Company, which could decrease the deposits that the Company attracts or require the Company to increase its rates to retain existing deposits or attract new deposits.

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The governor of New Jersey has proposed that the state form and own a bank in which governmental and municipal entities may deposit their excess funds, with the state owned bank then financing small businesses and municipal projects in New Jersey.

Should this proposal be adopted and a state owned bank formed, it could impede the Company’s ability to attract and retain governmental and municipal deposits and

financing opportunities.

Should this proposal be adopted and a state owned bank formed, it could impede the Company’s ability to attract and retain governmental and municipal deposits and financing opportunities.

Public fund deposits from local government entities such as counties, townships, school districts and other municipalities generally have highe r average balances and the Bank’s inability to retain such funds could adversely affect liquidity or result in the use of higher-cost funding sources.

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The Company’s inability to tailor its retail delivery model to respond to consumer preferences in banking may negatively affect earnings .

The Bank has expanded its market presence through de novo branching and acquisitions.

The Bank has expanded its market presence through acquisitions and growth in lending teams.

The branch continues to be a very significant source of new business generation, however, consumers continue to migrate much of their routine banking to self-service channels.

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Information technology systems are critical to the Company’s business.

Various systems are used to manage customer relationships, deposits and loans, general ledger and securities investments.

The business is required to collect, process, transmit and store significant amounts of confidential information regarding the Company’s customers, employees and its own business, operations, plans and business strategies.

The Company uses various technology systems to manage customer relationships, deposits and loans, general ledger, securities investments, and other processes.

The computer systems, data management and internal processes, as well as those of third parties, are integral to the Company’s performance.

The operational risks include the risk of malfeasance by employees or persons outside the Company, errors relating to transaction processing and technology, systems failures or interruptions, failures to properly implement systems upgrades, breaches of the Company’s internal control systems and compliance requirements, and business continuation and disaster recovery.

Financial institutions and companies have reported 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, disrupt or degrade se rvice, sabotage systems or cause other damage, often through the introduction of computer viruses or malware, cyberattacks, ransomware and other means.

Additionally, there is the risk of distributed denial-of-service or other similar attacks from technically sophisticated and well-resourced third parties, which are intended to disrupt online services, as well as data breaches due to cyberattacks, which result in unauthorized access to customer data.

Despite the Company’s efforts to ensure the integrity of its systems, the Company may not be able to implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because cyberattacks can originate from a wide variety of sources, including third parties such as persons who are involved with organized crime or associated with external service providers or who may be linked to terrorist organizations or hostile foreign governments, often with seemingly limitless resources.

Those parties may also attempt to fraudulently induce employees, customers or other users of the Company’s systems to disclose sensitive information in order to gain access to the Company’s data or that of its customers or clients.

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While management regularly reviews security assessments that were conducted on the Company’s third-party service providers that have access to sensitive and confidential information, there can be no assurance that their information security protocols are sufficient to withstand a cyber-attack or other security breach.

misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company and those of its customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.

An inability to attract and retain qualified personnel and maintain cost controls could have a negative impact on financial condition and results of operations.

The occurrence of any system failures, interruption, or breach of security of the Company’s or its vendors’ systems could cause serious negative consequences for the Company, including significant disruption of the Company’s operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company and those of its customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.

An inability to attract and retain qualified personnel or the unexpected loss of service of any key personnel could have a negative impact on financial condition and results of operations.

The Company’s ability to maximize profitability and manage growth successfully will depend on its ability to continue to attract and retain management and loan officers experienced in banking and financial services and fami liar with the communities in its market area.

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The valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and to rely on projections of future operating performance.

The Company operates in competitive environments and projections of future operating results and cash flows may vary significantly from actual results.

If the analysis results in impairment to goodwill, an impairment charge to earnings would be recorded in the financial statements during the period in which such impairment is determined to exist.

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Management routinely reviews and updates internal controls.

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide

only reasonable, not absolute, assurances that the objectives of the system are met.

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

Changes in management’s estimates and assumptions may have a material impact on the Company’s consolidated financial statements and the financial condition or operating results .

In preparing this annual report, as well as other periodic reports, the Company will be required to file under the Securities Exchange Act of 1934, including the consolidated financial statements, management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date.

In preparing periodic reports, the Company is required to file under the Securities Exchange Act of 1934, including the consolidated financial statements, management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date.

These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty.

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Changes in accounting standards could affect reported earnings .

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission (“SEC”) and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of the Company’s financial statements.

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board (“FASB”), the SEC and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of the Company’s financial statements.

These changes can be hard to predict and can materially impact how the financial condition and results of operations are reported.

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These areas may be vulnerable to flooding or other damage from future storms or hurricanes, which could negatively impact the Company’s results of operations by disrupting operations, adversely impacting the ability of the Company’s borrowers to repay their loans, damaging collateral or reducing the value of real estate used as collateral.

The Company’s business, financial condition and result of operations could be adversely affected by natural disasters, health epidemics, and other catastrophic events.

The Company’s business, financial condition, and results of operations could be adversely affected by natural disasters, health epidemics, and other catastrophic events.

The Company could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a pandemic disease, natural disaster, war, act of terrorism, accident, or other reason.

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Additionally, global markets may be adversely affected by the emergence of widespread health emergencies or pandemics.

Societal 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.

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

The Company and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns.

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

The impact on the Company’s customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities.

Among the impacts could be a drop in demand for the Company’s 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.

The Company takes these risks into account when making lending and other decisions, such as business with climate-friendly companies, which may not be effective in protecting from the negative impact of new laws and regulations or changes in consumer or business behavior.

Risks Related to Card Networks

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Changes in card network rules or standards could adversely affect the Company’s business .

In order to provide debit card and cash management solutions, the Company is a member of the Visa network.

Subsequent to the acquisition of Sun on January 31, 2018, the Company also became a member of the MasterCard network.

As such, the Company is subject to card network rules resulting in a variety of fines or penalties that may be assessed on the Company.

The Company is a member of the Visa and MasterCard networks.

As such, the Company is subject to card network rules resulting in a variety of fines or

penalties that may be assessed on the Company.

The termination of membership or any changes in card network rules or standards, including interpretation and implementation of existing rules or standards, could increase the cost of operating merchant servicer business or limit the ability to provide debit card and cash management solutions to or through customers, and could have a material adverse effect on the Company’s business, financial condition, and results of operations.

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The Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced its intention to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after June 2023.

Subsequently, the Federal Reserve Bank announced final plans for the production of SOFR, which resulted in the commencement of its published rates by the Federal Reserve Bank of New York in 2018.

Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question and the future of LIBOR at this time is uncertain.

Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question.

There are risks inherent with the transition to any alternative rate as the rate may behave differently than LIBOR in reaction to monetary, market and economic events.

The discontinuance of LIBOR may adversely affect the value of and return on the Company’s financial assets and liabilities that are based on or are linked to LIBOR, the Company’s results of operations or financial condition.

In addition, these reforms may also require extensive changes to the contracts that govern these LIBOR based products, as well as the Company’s systems and processes.

In addition, these reforms may require changes to existing contracts that govern LIBOR based products as well as the Company’s systems and processes.

Unresolved Staff Comments

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