What changed in this filing

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Item 1A. Risk Factors

2025-11-25 compared with 2024-11-22 · 77 added, 26 removed, 311 unchanged (25% of the section changed)

24 unchanged sentences

• Competition in our industry could intensify as a result of increasing consolidation of financial services companies in connection with current market conditions.

Significant changes to the size, structure, powers and operations of the federal government, changes to U.S.

economic policies, and uncertainties regarding the potential for these changes may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.

The current U.S.

administration has implemented significant changes in federal priorities and has taken steps to change the operations, structure, and policy focus of various federal agencies, as well as regulatory priorities, policy approaches and interpretations of existing laws by those federal agencies.

For example, recent executive actions and proposed legislation has changed agency mandates, modified or reduced federal program funding, altered regulatory frameworks, or adjusted the size and composition of the federal workforce.

Moreover, leadership transitions at key federal agencies have impacted or may impact rulemaking, supervision, enforcement, and examination priorities across the financial regulatory landscape.

These developments in the federal government may have varying effects on the banking and financial services industry that are difficult to predict, which makes it difficult for us to anticipate and mitigate attendant risks.

Compliance with changing federal and regulatory priorities could, among other things, increase the costs of operating our business, reduce the demand for our products and services, impact our ability to achieve our business goals, and increase our legal, operational and reputational risks, any or all of which could materially adversely affect our results of operations.

The current U.S.

administration also has implemented rapid shifts in macroeconomic policies, such as those relating to trade restrictions and tariffs, which have created significant uncertainties regarding U.S.

economic growth, the potential for recession, and concerns over an increase in inflation.

Slow economic growth, economic contraction or recession, or shifts in broader consumer and business trends would significantly impact our ability to originate loans, the ability of borrowers to repay loans, and the value of the collateral securing loans.

Other political and economic events within the U.S., including a contentious domestic political environment, changes in or disagreements over U.S.

monetary policy and actions of the FRS, disagreements over long-term federal budget and deficit reduction plans, disagreements over or threats not to increase the U.S.

government's borrowing limit (or "debt ceiling"), and risk of further downgrade of the ratings of U.S.

government debt obligations, also may negatively impact financial markets and the U.S.

Further, the perception of the potential for additional significant changes in federal regulatory or economic policy has also increased uncertainty and may exacerbate declines in investor and consumer confidence, which in turn may adversely impact financial markets and the broader economy of the U.S.

Regional business and economic conditions are a major driver of our results of operations.

Difficult conditions in the regionals business and economic environment, including those cause by the lack of stability and predictability of U.S.

policymaking, may materially adversely affect our operating expenses, the quality of our assets, credit losses, and the demand for our products and services.

Inflation can have an adverse impact on our business and on our customers.

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.

From 2022 to 2023, the FRS raised certain benchmark interest rates in an effort to combat elevated inflation,.

As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.

In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-

interest expense.

In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expense.

Furthermore, our customers are also affected by inflation, higher interest rates, and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.

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In general, changes in market and competitive interest rates result from events that we do not control and over which we generally have little or no influence.

As a result, mitigation of the adverse effects of changing interest rates is generally limited

to controlling the composition of the assets and liabilities that we hold.

As a result, mitigation of the adverse effects of changing interest rates is generally limited to controlling the composition of the assets and liabilities that we hold.

To monitor our positions, we maintain an interest rate risk modeling system which is designed to measure our interest rate risk sensitivity.

Using customized modeling software, the Association prepares periodic estimates of the amounts by which the net present value of its cash flows from assets, liabilities and off balance sheet items (the institution’s EVE) would change in the event of a range of assumed changes in market interest rates.

The simulation model uses a discounted cash flow analysis and an option-based pricing approach in measuring the interest rate sensitivity of EVE.

At September 30, 2025, in the event of an immediate 200 basis point increase in all interest rates, our model projects that we would experience a $333.1 million, or 23.62%, decrease in EVE.

Our calculations further project that, at September 30, 2024, in the event that market interest rates used in the simulation were adjusted in equal monthly amounts (termed a "ramped" format) during the twelve month measurement period to an aggregate increase in 200 basis points, we would expect our projected net interest income for the twelve months ended September 30, 2025, to increase by 1.27%.

Quantitative and Qualitative Disclosures about Market Risk .

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(3) a total capital ratio of 8%;

(4) a Tier 1 leverage ratio of 4%.

and (4) a Tier 1 leverage ratio of 4%.

The regulations also establish a "capital conservation buffer" of 2.5%, which results in the following minimum ratios:

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The application of these capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements.

Specifically, our ability to pay dividends to the Company is limited for any association that does not maintain the capital conservation buffer required by the capital rules, which may limit our ability to pay dividends to our stockholders.

Specifically, our ability to pay dividends to the Company

is limited for any association that does not maintain the capital conservation buffer required by the capital rules, which may limit our ability to pay dividends to our stockholders.

The FRS may require the Company to commit capital resources to support the Association, and we may not have sufficient access to such capital resources.

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The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

We may be required to raise additional capital in the future, but that capital may not be available when it is needed, or it may only be available on unacceptable terms, which could adversely affect our financial condition and results of operations.

We may be required to raise additional capital in the future, but that capital may not be available when it is needed, or it may only be available on unfavorable terms, which could adversely affect our financial condition and results of operations.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations.

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Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial performance.

Accordingly, we may not be able to raise additional capital, if needed, on terms acceptable to us.

Accordingly, we may not be able to raise additional capital, if needed, on terms favorable to us.

If we cannot raise additional capital when needed, our ability to further expand our operations and pursue our growth strategy could be materially impaired and our financial condition and liquidity could be materially and adversely affected.

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Our lending activities provide lower interest rate returns than financial institutions that originate more commercial loans.

Our principal lending activity consists of originating, and essentially all of our loan portfolio consists of, residential real estate mortgage loans.

Our principal lending activity consists of originating, and essentially all of our loan portfolio consists of, residential mortgage loans.

We originate our loans with a focus on limiting credit risk exposure and not necessarily to generate the highest return possible or maximize our interest rate spread.

In addition, residential real estate mortgage loans generally have lower interest rates than commercial business loans, commercial real estate loans and consumer loans.

In addition, residential mortgage loans generally have lower interest rates than commercial business loans, commercial real estate loans and consumer loans.

As a result, we may generate lower interest rate spreads and rates of return when compared to our competitors who originate more consumer or commercial loans than we do.

We intend to continue our focus on residential real estate lending.

We intend to continue our focus on residential lending.

Our business may be adversely affected by credit risk associated with residential property.

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Loan sales provide a portion of our non-interest income.

In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential real estate loans and increased investor yield requirements for these loans.

In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential mortgage loans and increased investor yield requirements for these loans.

These conditions may fluctuate or worsen in the future.

4 unchanged sentences

If we are required to repurchase mortgage loans or provide indemnification or other recourse, this could significantly increase our costs and thereby affect our future earnings.

If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease.

If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings would decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.

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Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing stockholder value.

We have established processes and procedures intended to identify, measure, monitor, report and analyze the types of risk to which we are subject to, including credit, liquidity, operational, information technology, regulatory compliance, reputational and strategic.

However, as with any risk management framework, there are inherent limitations to our risk management strategies as risks may exist, or develop in the future, that we have not appropriately anticipated or identified.

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Our board of directors relies to a large degree on management and outside consultants in overseeing cybersecurity risk management.

The Association has a standing Technology Steering Committee, consisting of several senior managers (CAO, CIO, CSO, CXO, and ISO).

The Association has a standing Technology Steering Committee, consisting of several senior managers (CAO, CIO, CXO, and ISO).

The Committee meets quarterly, or more frequently if needed, and reports to the Board of Directors after each meeting through Committee minutes.

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Depending on the capitalization status and regulatory treatment of depository institutions, including whether an institution is subject to a supervisory prompt corrective action directive, certain additional regulatory restrictions and prohibitions may apply, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends, and restrictions on the acceptance of brokered deposits.

Potential complications with the implementation of our new core banking system could have an adverse effect on our business and operations.

We are in the process of implementing a new core banking system, which is expected to be operational by July 2026.

The new core system will modernize the system currently used, improve efficiency throughout the Company, and enhance customer experience.

This upgrade is a major investment in our technology needs and is a key initiative within our strategic plan.

The new core system implementation process has required, and will continue to require, the investment of significant personnel and financial resources.

We may not be able to successfully implement the new core system without experiencing delays, increased costs and other operational difficulties.

If we are unable to successfully implement the new core system as planned, our operations, financial positions, results of operations and cash flows could be negatively impacted.

Additionally, if we do not effectively implement the new core system as planned or the new core system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be delayed or diminished.

Furthermore, as with any of our other operating systems, a failure to fully implement security measures could expose us to greater risk of cyber-security attacks or other security breaches.

Recently we have held larger levels of certificates of deposit, which has increased our cost of funds and could continue to do so in the future.

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Our reputation is one of the most valuable components of our business and is critical to our success.

The ability to attract and retain customers, investors, employees and advisors may depend upon external perceptions of the Company.

Damage to the Company's reputation could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, unethical behavior and the misconduct of employees, advisors and counterparties.

The ability to attract and retain customers, investors, associates and advisors may depend upon external perceptions of the Company.

Adverse developments with respect to the financial services industry may also, by association, negatively impact the Company's reputation or result in greater regulatory or legislative scrutiny or litigation against the Company.

Furthermore, shareholders, customers and other stakeholders have begun to consider how corporations are addressing ESG issues.

Governments, investors, customers and the general public are increasingly focused on ESG practices and disclosures, and views about ESG are diverse and rapidly changing.

These shifts in investing priorities may result in adverse effects on the trading price of the Company’s common stock if investors determine that the Company has not made sufficient progress on ESG matters.

We could also face potential negative ESG-related publicity in traditional media or social media if shareholders or other stakeholders determine that we have not adequately considered or addressed ESG matters.

If the Company, or our relationships with certain customers, vendors or suppliers, became the subject of negative publicity, our ability to attract and retain customers and employees, and our financial condition and results of operations, could be adversely impacted.

A protracted government shutdown may result in reduced loan originations and related gains on sales and could negatively affect our financial condition and results of operations.

2 unchanged sentences

In addition, we believe that some borrowers may decide not to proceed with their home purchase and not close on their loans, which would result in a permanent loss of the related non-interest income.

A federal government shutdown could also result in reduced income for government employees or employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-performing, criticized, and classified assets, and a decline in demand for our products and services.

A federal government shutdown could also result in reduced income for government employees or

employees of companies that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-performing, criticized, and classified assets, and a decline in demand for our products and services.

Fraud by merchants or others could have a material adverse effect on our business and financial condition.

We may be liable for fraudulent transactions initiated by merchants or others.

Examples of fraud include when a merchant or other party knowingly uses a stolen or counterfeit card to make a transaction, or if a merchant intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction.

Criminals are using increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud.

It is possible that incidents of fraud could increase in the future.

Failure to effectively managed risk and prevent fraud would increase our chargeback liability or other liability, and as result could have a material adverse effect on our business, financial condition, and results of operations.

The potential for fraud in the card payment industry is significant and could adversely affect our business and results of operations.

Issuers of prepaid and debit cards and other companies have suffered significant losses in recent years with respect to the theft of cardholder data that has been illegally exploited for personal gain.

The theft of such information is regulatory reported and affects individuals and businesses.

Losses from various types of fraud have been substantial for certain card industry participants.

We also rely upon third parties for transaction processing services, which subjects us and our customers to risks related to the vulnerabilities of those third parties.

We, in many cases, have indemnification agreements with third parties;

however, these agreements may not fully cover losses.

Fraudulent activity could also result in the imposition of regulatory sanctions, including significant monetary fines, which could adversely affect our business, results of operations and financial condition.

Although fraud has not had a material impact on our profitability, it is possible that such activity could adversely impact profitability in the future.

The grant of bank charters and special purpose fintech charters by the OCC to fintech companies could present financial risk and market risk to us generally and the payments processing business specifically.

In 2018, the OCC announced that it would begin to accept and evaluate charters for entities that wanted to conduct certain components of a banking business pursuant to a federal charter, known as a special purpose national bank charter.

Intended to promote economic opportunity and spur financial innovation, an institution with a special purpose national bank charter may engage in paying checks, lending money and taking deposits.

The OCC has granted national bank charters to companies that were previously non-bank fintech companies.

If, in the future, the OCC determines to grant any special purpose national bank charter applications or continues to grant bank charters to fintech applicants, recipients of such charters may enter the U.S.

payments market and other business activities that we conduct, which could increase the competition we face and have a material adverse effect on us.

This could result in lower fee income and loss of deposits, related to our payment processing business.

We face funds transfer and payments-related risks.

As a financial institution, we bear funds transfer risks of different types, which result from large transaction volumes and large dollar amounts of incoming and outgoing money transfers.

Loss exposure may result if money is transferred before it is received, or legal rights to reclaim monies transferred are asserted, including payments made to merchants for payment clearing, while customers have statutory periods to reverse their payments.

Exposure also results from payments made prior to receipt of offsetting funds, as an accommodation to our customers.

We are subject to unique settlement risks as our transfers may be larger than typical financial institutions of our size.

Transfers could also be made in error or as a result of fraud.

Additionally, as with other financial institutions, we may incur legal liability or reputational risk if we unknowingly process payments for companies in violation of money laundering laws or other regulations or immoral activities.

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