Item 4. Controls and Procedures
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, and after implementing the remediation activities described below, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.
Identification of a Material Weakness
Subsequent to the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 on May 6, 2026 (the “First Quarter 10-Q”) an error was identified in the Consolidated Statement of Cash Flows for the quarter ended March 31, 2026.
Specifically, the First Quarter 10-Q Consolidated Statement of Cash Flows presented the line item of “Dividends paid on common stock” as $20,758,000, omitting the parenthetical indication of a cash outflow. The correct presentation should have been ($20,758,000), a $41,516,000 difference. The dollar amount of dividends actually paid was not affected — the error was one of sign/classification — and it resulted in a corresponding $41,516,000 error of an overstatement of cash flows from financing activities and an understatement of cash flows from operating activities.
The error was limited to the Consolidated Statement of Cash Flows in the First Quarter 10-Q, and did not impact the beginning, ending or change in cash and cash equivalents balance, nor did it impact the Company's Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, or Consolidated Statements of Changes in Shareholders' Equity. The Company concluded that the error was not material to the previously issued financial statements and that no amendment, restatement or refiling of the First Quarter 10-Q was required.
The error resulted from an inadvertent alteration of a formula in a compilation worksheet that was not identified during management's review of the classification of cash flows in the Consolidated Statement of Cash Flows.
Following the identification and evaluation of the deficiency, management has determined that it constituted a material weakness in internal control over financial reporting because the deficiency created a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timely basis. Further, management has determined that this material weakness existed as of March 31, 2026, and management would have concluded that our disclosure controls and procedures were not effective as of that date in our First Quarter 10-Q, notwithstanding the conclusion previously reported therein. Because this error was not identified until after the First Quarter 10-Q was filed, the underlying control deficiency and its effect on the effectiveness of our disclosure controls and procedures as of that date were not identified or disclosed in the First Quarter 10-Q.
Correction of the Error
In this Quarterly Report on Form 10-Q, the dividends paid have been properly presented in the Consolidated Statement of Cash Flows for the six months ended June 30, 2026. The misclassification related to the dividends paid will be corrected in the Consolidated Statement of Cash Flows for the three months ended March 31, 2026 that will be presented within the Quarterly Report on Form 10-Q for the three months ended March 31, 2027, with cash flows from financing activities decreased and cash flows from operating activities increased by the corresponding amount, and no change to total cash flows for the period. The correction will not affect the Company's Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, or Consolidated Statements of Changes in Shareholders' Equity.
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Remediation of Material Weakness
Following identification of the material weakness, management, under the oversight of the Audit Committee of the Board of Directors, designed and implemented a remediation plan addressing the precision of the control related to the classification of cash flows. This remediation plan included:
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enhancing a formal reconciliation and review process linking changes in equity accounts, including dividends declared and paid, to financing activities in the statement of cash flows, with documented review and approval by appropriate finance personnel; enhancing preparation and review controls over the statement of cash flows, including independent verification of the classification of dividends paid and other significant cash flows in accordance with the Company's accounting policies and ASC 230; and
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implementing key spreadsheet-level and system-based controls requiring the preparer and reviewer to validate the classification of dividend-related and other equity-related cash flows before finalizing the statement of cash flows and leveraging artificial intelligence‑enabled tools to support the identification, validation, and consistent classification of cash flow activities within our internal control procedures.
This remediation plan, along with the additional controls, were implemented prior to June 30, 2026. During the period from July 1, 2026 through the filing date of this Quarterly Report on Form 10-Q, management completed testing of the remediated controls. Based on this testing, management concluded that the material weakness described above had been remediated as of June 30, 2026. Accordingly, management has determined that the Company's internal control over financial reporting and disclosure controls and procedures were effective as of that date.
Changes in Internal Control Over Financial Reporting
Other than the remediation measures described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be a party to various legal proceedings arising in the ordinary course of business. Management does not believe the Company or the Bank is currently a party to any material legal proceedings.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.