What changed in this filing

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Item 1A. Risk Factors

2025-03-07 compared with 2024-03-07 · 131 added, 48 removed, 185 unchanged (49% of the section changed)

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The Company’s business, financial condition, results of operations and the trading price of its securities can be materially and adversely affected by many events and conditions including the following:

Pandemic or other health related events may have a material adverse effect on operations and financial condition.

The outbreak of disease or other health related events on a regional, national or global level, such as the spread of the COVID-19 coronavirus, may have a material adverse effect on commerce, which may, in turn impact the Company’s lines of business.

The Company’s operations are significantly affected by the general economic conditions of New Jersey, Eastern Pennsylvania and the specific local markets in which the Company operates.

To the extent these markets are negatively impacted by health related matters, such as pandemics like COVID-19, our results of operations may be materially affected.

The Company has been and may continue to be adversely affected by national financial markets and economic conditions, as well as local conditions.

The Company has been and may continue to be affected by national financial markets and economic conditions, as well as local conditions.

The Company’s business and results of operations are affected by the financial markets and general economic conditions in the United States, including factors such as the level and volatility of interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, investor confidence and the strength of the U.S.

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The Company’s financial results, the credit quality of its existing loan portfolio and the ability to generate new loans with acceptable yield and credit characteristics may be adversely affected by changes in prevailing economic conditions, including declines in real estate values, changes in interest rates, adverse employment conditions and the monetary and fiscal policies of the federal government.

The Company cannot assure that positive trends or developments discussed in this annual report will continue or that negative trends or developments will not have a significant adverse effect on itself.

A significant portion of the Company’s loan portfolio is secured by real estate and events that negatively impact the real estate market could hurt its business.

The Company cannot assure that any positive trends or developments discussed in this annual report will continue or that negative trends or developments will not arise.

A significant portion of the Company’s loan portfolio is secured by real estate and events that negatively impact the real estate market in the Company’s trade area could hurt its business.

A significant portion of the Company’s loan portfolio is secured by real estate.

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

Any future declines in home prices in the New Jersey, New York and Pennsylvania markets the Company serves also may result in increases in delinquencies and losses in its loan portfolios.

Any future declines in real estate values in the New Jersey, New York and Pennsylvania markets that the Company serves also may result in increases in delinquencies and losses in its loan portfolios.

Stress in the real estate market, combined with any weakness in economic conditions could drive losses beyond that which is provided for in the Company’s allowance for credit losses.

In that event, the Company’s earnings could be adversely affected.

There is a risk that the SBA will not honor their guarantee.

The Company has historically been a participant in various SBA lending programs which guarantee up to 90% of the principal on the underlying loan.

There is a risk that the SBA will not honor its guarantee if a loan is not underwritten and administered to SBA guidelines.

The Company follows the underwriting guidelines of the SBA;

however, its ability to manage this will depend on the Company’s ability to continue to attract, hire and retain skilled employees who have knowledge of the SBA program.

If the SBA program does not honor the guarantee, this could adversely impact the Company’s financial performance.

A significant portion of the Company’s loan portfolio is secured by commercial real estate and events that negatively impact the commercial real estate market could adversely affect our asset quality and profitability for those loans secured by real property and increase the number of defaults and the level of losses within our loan portfolio.

A significant portion of the Company’s loan portfolio is secured by commercial real estate.

As of December 31, 2024, total commercial real estate loans, including construction loans, represented 53.8 percent of our loan portfolio.

Included in this portfolio are loans to industries including hotel/motel, retail, educational facilities, office space, warehouses, food/beverage services and religious facilities.

Additionally, mixed-use loans, in their hybrid nature, may include these industries, as well as others not denoted above.

These types of loans generally expose a lender to a higher degree of credit risk of non-payment and loss than residential mortgage loans do for several factors, including dependence on the successful operation of a business or a project for repayment.

Further, the Company facilitates construction-to-permanent financing, which may come with heightened credit risks.

In addition, commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans.

The value of the real estate collateral that provides an alternate source of repayment in the event of default by the borrower could deteriorate during the time the credit is extended.

Underwriting and portfolio management activities cannot completely eliminate all risks related to these loans.

Any significant failure to pay on time by our clients or a significant default by our clients would materially and adversely affect us.

Concentrations in commercial real estate are closely monitored by regulatory agencies and subject to especially heightened scrutiny both on a public and confidential basis.

Any formal or informal action by our supervisors may require us to increase our reserves on these loans and adversely impact our earnings.

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

If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and shareholders’ equity could be adversely affected.

Any weakening of the commercial real estate market may increase the likelihood of default on these loans, which could negatively impact our loan portfolio’s performance and asset quality.

For example, any declines in commercial real estate prices in the New Jersey, New York and Pennsylvania markets we primarily serve, along with the unpredictable long-term path of the economy, may result in increases in delinquencies and losses in our loan portfolios.

Unexpected decreases in commercial real estate prices coupled with slow economic growth and elevated levels of unemployment could drive losses beyond those which are provided for in our allowance for credit losses.

We also may incur losses on commercial real estate loans due to declines in occupancy rates and rental rates, which may decrease property values and may decrease the likelihood that a borrower may find permanent financing alternatives.

Any of these events could increase our costs, require Management's time and attention, and materially and adversely affect us.

Small Business Administration lending is an important part of our business.

Our SBA lending program is dependent upon the U.S.

federal government, and we face specific risks associated with originating SBA loans.

Our SBA lending program is dependent upon the U.S.

federal government.

The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management.

When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions.

Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress or funding for the SBA program may also have a material adverse effect on our business.

In addition, any default by the U.S.

government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially and adversely affect our business, results of operations and financial condition.

The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes.

Typically, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market.

These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans.

For the reasons described above, we may not be able to continue originating these loans or selling them in the secondary market.

Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors.

When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA.

If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us.

Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition or results of operations.

The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future.

We cannot predict the effects of these changes on our business and profitability.

Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.

The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks.

We have historically originated a significant number of SBA loans, and sold a significant portion of the guaranteed portions of these loans on the secondary market.

We generally retain the non-guaranteed portions of the SBA loans that we originate.

Consequently, as of December 31, 2024, we held $36.9 million of SBA loans on our balance sheet, $36.1 million of which primarily consisted of the non-guaranteed portion of SBA loans.

The non-guaranteed portion of SBA loans have a higher degree of credit risk and risk of loss as compared to the guaranteed portion of such loans.

We generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be adversely impacted.

When we sell the guaranteed portion of SBA loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA loans and the manner in which they were originated.

Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of these representations or warranties, in which case we may record a loss.

In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected.

Imposition of limits by bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.

In 2006, the OCC, the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the “CRE Guidance.” Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure will receive increased supervisory scrutiny where total nonowner occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months.

Using regulatory guidance definitions, the Bank’s commercial real estate loan balance decreased 1.55% for the year ended December 31, 2024 and commercial real estate loans represented 235.05% of the Bank’s risk-based capital at December 31, 2024, a decrease from 269.98% at December 31, 2023.

In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending, or the “2015 Statement.” In the 2015 Statement, the Agencies, among other things, indicated the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward.

If the FDIC, our primary federal regulator, were to impose restrictions on the amount of such loans we can hold in our portfolio or require us to implement additional compliance measures, for reasons noted above or otherwise, our earnings could be adversely affected as would our earnings per share.

There is a risk that the Company may not be repaid in a timely manner, or at all, for loans it makes or securities it purchases.

The risk of nonpayment (or deferred or delayed payment) of loans is inherent in banking.

Such nonpayment, or delayed or deferred payment, of loans to the Company may have a material adverse effect on its earnings and overall financial condition.

Such nonpayment, or delayed or deferred payment, of loans to the Company may have a material adverse effect on its earnings and overall financial condition, such as increased provision for credit losses, asset recovery costs and lower interest income.

Additionally, in compliance with applicable banking laws and regulations and U.S.

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GAAP”), the Company maintains an allowance for credit losses created through charges against earnings.

As of December 31, 2023, the Company’s allowance for credit losses was $25.9 million, or 1.19 percent of its total loan portfolio and 134.75 percent of its nonperforming assets.

As of December 31, 2024, the Company’s allowance for credit losses was $26.8 million, or 1.18 percent of its total loan portfolio and 204.77 percent of its nonaccrual loans.

The Company’s marketing focus on small to medium size businesses may result in the assumption by the Company of certain lending risks that are different from or greater than those which would apply to loans made to larger companies.

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Such nonpayment, or delayed or deferred payment on securities held by the Company, if they occur may have a material adverse effect on the Company’s earnings and overall financial condition.

As of December 31, 2023, the Company maintained a valuation reserve on a single available for sale security for $1.3 million.

As of December 31, 2024, the Company maintained a valuation reserve on a single available for sale security of $2.8 million.

The Company seeks to minimize its credit risk exposure on securities through ongoing monitoring and credit controls, which evaluate the financial condition of the issuer of the securities.

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A risk system, consisting of multiple-grading categories, is utilized as an analytical tool to assess risk and the appropriate level of loss reserves.

Along with the risk system, management further evaluates risk characteristics of the loan portfolio under current economic conditions and considers such factors as the financial condition of the borrowers, past and expected credit loss experience, historical trends and other factors management feels deserve recognition in establishing an adequate reserve.

This risk assessment process is performed at least quarterly and, as adjustments become necessary, they are realized in the periods in which they become known.

Along with the risk system, Management further evaluates risk characteristics of the loan portfolio under current economic conditions and considers such factors as the financial condition of the borrowers, past and expected credit loss experience, historical trends and other factors that Management feels deserve recognition in establishing an adequate reserve.

This risk assessment process is performed at least quarterly and, as adjustments become necessary, they

are realized in the periods in which they become known.

The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond the Company’s control, and these losses may exceed current estimates.

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Generally, the Act is effective the day after it is signed into law, but different effective dates apply to specific sections of this law, many of which will not become effective until various Federal regulatory agencies have promulgated rules implementing the statutory provisions.

In addition, subsequent legislation and regulatory action has, and future legislation and regulatory action may, amend or revise various provisions of the Dodd-Frank Act.

Uncertainty remains as to the ultimate impact of the Dodd-Frank Act and the implementing regulations thereunder, which could have a material adverse impact either on the financial services industry as a whole, or on the Company’s business, results of operations and financial condition.

For a more detailed discussion of the Dodd-Frank Act, see “Item 1-Business – Supervision and Regulation.”

It is difficult to predict at this time what specific impact certain provisions and yet-to-be-finalized rules and regulations will have on the Company, including any regulations promulgated by the CFPB.

Financial reform legislation and rules could have adverse implications on the financial industry, the competitive environment and the Company’s ability to conduct business.

Management will have to apply resources to ensure compliance with all applicable provisions of regulatory reforms, including the Dodd-Frank Act and any implementing rules, which may increase the Company’s costs of operations and adversely impact its earnings.

The provisions of the Dodd-Frank Act, as well as any other aspects of current or proposed regulatory or legislative changes to laws or regulations applicable to the financial industry, may impact the profitability of business activities and may change certain business practices, including the ability to offer new products, obtain financing, 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 business, financial condition and results of operations.

As the Company continues to grow its total assets, the Company will be subject to heighted regulatory and reporting requirements.

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

The Company is subject to changes in accounting policies or accounting standards.

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Some of these policies require the use of estimates and assumptions that may affect the value of assets or liabilities and financial results.

The Company has identified its accounting policies regarding the allowance for credit losses and security valuations and security credit events to be critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain.

The Company has identified its accounting policies regarding the allowance for credit losses to be critical because they require Management to make difficult, subjective and complex judgments about matters that are inherently uncertain.

Under these policies, it is possible that materially different amounts would be reported under different conditions, using different assumptions, or as new information becomes available.

From time to time, the Financial Accounting Standards Board (“FASB”) and the SEC change their guidance governing the form and content of the Company’s external financial statements.

From time to time, the Financial Accounting Standards Board (“FASB”) and the U.S.

Securities and Exchange Commission (“SEC”) change their guidance governing the form and content of the Company’s external financial statements.

In addition, accounting standard setters and those who interpret U.S.

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GAAP may require costly technology changes, additional training and personnel and other expenses that would negatively impact results of operations.

Declines in value may adversely impact the investment portfolio.

As of December 31, 2023, the Company had approximately $91.8 million, $36.1 million and $7.8 million in debt securities available for sale, debt securities held to maturity and equity investment securities, respectively.

The Company may be required to record credit charges in earnings related to credit losses on its investment securities if they suffer a decline in value related to credit.

Additionally, (i) if the Company intends to sell a security or (ii) it is more likely than not that it will be required to sell the security prior to recovery of its amortized cost basis, the Company will be required to recognize a charge in the statement of income equal to the full amount of the decline in fair value below amortized cost.

Factors, including lack of liquidity, absence of reliable pricing information, adverse actions by regulators or unanticipated changes in the competitive environment, could have a negative effect on the investment portfolio and may result in impairment on investment securities in future periods.

We are dependent on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.

The use of statistical and quantitative models, and other quantitative and qualitative analyses, is necessary for bank decision-making, and the employment of such analyses is becoming increasingly widespread in our operations.

Liquidity stress testing, interest rate sensitivity analysis, the identification of possible violations of anti-money laundering regulations and the estimation of credit losses are all examples of areas in which we are dependent on models and the data that underlies them.

The use of statistical and quantitative models is also becoming more prevalent in regulatory compliance.

While we are not currently subject to annual Dodd-Frank stress testing and the Comprehensive Capital Analysis and Review submissions, we anticipate that model-derived testing may become more extensively implemented by regulators in the future.

We anticipate data-based modeling will penetrate further into bank decision-making, particularly risk management efforts, as the capacities developed to meet rigorous stress testing requirements are able to be employed more widely and in differing applications.

While we believe these quantitative techniques and approaches improve our decision-making, they also create the possibility that faulty data or flawed quantitative approaches could negatively impact our decision-making ability or, if we become subject to regulatory stress-testing in the future, adverse regulatory scrutiny.

Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision-making.

Liquidity risk.

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net cash provided from operations and access to other funding sources.

Customer account balances can decrease when customers perceive alternative investments, such as fixed income securities or money market funds, as providing a better risk/return trade off or if customers are concerned about the safety of their deposits, as happened in the first quarter of 2023.

If customers move money out of bank deposits and into other investments, or if customers perceive a risk in leaving their deposits with the Bank and transfer the deposits to larger institutions seen as less risky, the Company could lose a low-cost source of funds, increasing its funding costs and reducing the Company’s net interest income and net income.

The Company maintains elevated wholesale funding balances, including brokered CDs, brokered money market accounts, FHLB advances and other borrowing and deposit sources.

These wholesale funding balances typically result in higher funding costs compared to other sources and reduce the Company’s net interest income and net income.

As of December 31, 2024, $815.1 million, or 38.8%, of the Company’s deposits were time deposits with $768.6 million, or 94.3% of those time deposits, maturing within one year.

The Company’s liquidity position could be impacted by these deposits if its customers decide to withdraw funds at maturity and invest in non-deposit products, including but not limited to U.S.

Additionally, the Company’s earnings could be impacted if interest rates increase and the Company needs to increase the rates offered on time deposits to retain these funds.

The Company’s management monitors the deposit composition of its Consolidated Balance Sheet through various Board and Management reporting on a regular basis.

The Company maintains elevated wholesale funding balances, including brokered deposits, FHLB advances and other borrowing and deposit sources.

These types of wholesale funding typically result in higher funding costs compared to other sources and reduce the Company’s net interest income and net income.

Additionally, these sources typically are only available to the Company if the Bank maintains certain capital levels.

The Company’s management team monitors wholesale funding as a composition of its balance sheet via the risk management process;

The Company’s management team monitors wholesale funding as a composition of its Consolidated Balance Sheet via the risk management process;

however, wholesale deposits may be more prone to liquidity risk.

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In addition, financial technology companies, either directly or in partnership with other insured depository institutions, compete for loan and deposit customers.

Similarly, larger legacy non-financial companies, such as Apple, Alphabet and Amazon, are further increasing competition to compete for loans, deposits and payments.

Similarly, larger legacy non-financial companies, such as

Apple, Alphabet and Amazon, are further increasing competition to compete for loans, deposits and payments.

A number of the Company’s competitors have substantially greater resources than it does to expend upon advertising and marketing, and their substantially greater capitalization enables them to make much larger loans.

Additionally, many of these competitors have less regulation than the Company as they are not financial institutions.

The Company’s success depends a great deal upon its judgment that large and mid-size financial institutions do not adequately serve small businesses in its principal market area and upon the Company’s ability to compete favorably for such customers.

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central bank digital currency (“CBDC”).

While this is in the earliest of stages, if this CBDC is implemented by the Federal Reserve, it could change banking on a larger scale as Americans would be able to transact directly with the Federal Reserve.

The Company has also been active in competing for New Jersey governmental and municipal 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 would deposit their excess funds, with the state owned bank then financing small businesses and municipal projects in New Jersey.

While legislation has been introduced in the state legislature, the New Jersey Public Bank Implementation Board has provided its final recommendations to the governor, including that the public bank entity should not be a depository institution but should seek funding from a diverse range of investors and non-depository investment vehicles.

While no legislation has been introduced in the state legislature, the New Jersey Public Bank Implementation Board has provided its final recommendations to the governor, including that the public bank entity should not be a depository institution but should seek funding from a diverse range of investors and non-depository investment vehicles.

However, 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, thereby impairing the Company’s liquidity.

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These loans may have delinquency or charge-off levels above our expectations, which could negatively affect our performance.

Additionally, although the majority of residential mortgages historically originated by the Bank would be considered Qualified Mortgages, the Bank has and may continue to make residential mortgage loans that would not qualify.

As a result, the Bank might experience increased compliance costs, loan losses, litigation related expenses and delays in taking title to real estate collateral, if these loans do not perform and borrowers challenge whether the Bank satisfied the ability-to-repay rule upon originating the loan.

Future offerings of common stock may adversely affect the market price of the Company’s stock.

In the future, if the Company’s or the Bank’s capital ratios fall below the prevailing regulatory required minimums, the Company or the Bank could be forced to raise additional capital by making additional offerings of common stock or preferred stock.

In the future, if the Company’s or the Bank’s capital ratios fall below the prevailing regulatory required minimums, or should the Company seek to expand through acquisitions, the Company or the Bank could be forced to raise additional capital by making additional offerings of common stock or preferred stock.

Additional equity offerings may dilute the holdings of existing shareholders or reduce the market price of common stock, or both.

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The Company is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees) and to the risk that the Company’s (or its vendors’) business continuity and data security systems prove to be inadequate.

The Company maintains a system of comprehensive policies and a control framework designed to monitor vendor risks including, among other things, (i) changes in the vendor’s organizational structure or internal controls, (ii) changes in the vendor’s financial condition, (iii) changes in the vendor’s support for existing products and services and (iv) changes in the vendor’s strategic focus.

(ii) changes in the vendor’s financial condition;

(iii) changes in the vendor’s support for existing products and services and (iv) changes in the vendor’s strategic focus.

In addition, the Company maintains cyber liability insurance to mitigate against certain losses it may incur.

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The loss of these employees could have an adverse impact on the Company’s operating capacities and the ability to implement growth strategies and adversely impact the financial performance.

Hurricanes, flooding or other adverse weather events could negatively affect local economies or disrupt operations, which would have an adverse effect on the Company’s business or results of operations.

Hurricanes, flooding and other weather events can disrupt the Company’s operations, result in damage to its properties and negatively affect the local economies in which it operates.

In addition, these weather events may result in a decline in value or destruction of properties securing loans and an increase in delinquencies, foreclosures and loan losses.

Pandemic or other health related events may have a material adverse effect on operations and financial condition.

The outbreak of disease or other health related events on a regional, national or global level and the government’s reaction to such events, may have a material adverse effect on commerce, which may, in turn impact the Company’s lines of business as well as the businesses of its customers.

Climate change, hurricanes, flooding, earthquakes, terrorism or other adverse events could negatively affect local economies or disrupt operations, which would have an adverse effect on the Company’s business or results of operations.

There is an increasing concern over the risks of climate change and related environmental sustainability matters.

Climate change presents (i) physical risks from the direct impacts of changing climate patterns and acute weather events and (ii) transition risks from changes in regulations, disruptive technologies, and shifting market dynamics towards a lower carbon economy.

The physical risks of climate change include discrete events such as hurricanes, flooding, earthquakes that can disrupt the Company’s operations, result in damage to its properties and negatively affect the local economies in which it operates.

Ongoing legislative or regulatory uncertainties and changes regarding climate risk management and practices may result in higher regulatory, compliance, credit and reputational risks and costs.

Climate change could also present incremental risks to the execution of the Company’s long-term strategy.

Additionally, transitioning to a low-carbon economy may entail extensive policy, legal, technology and market initiatives.

In addition, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our clients’ involvement, in certain industries or projects, in the absence of mitigation and/or transition measures, associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.

As climate risk is interconnected with all key risk types, the Company continues to embed climate risk considerations into risk management strategies.

Furthermore, these weather events may result in a decline in value or destruction of properties securing loans and an increase in delinquencies, foreclosures and credit losses.

The Company does maintain property insurance policies to cover certain costs associated with these events;

however, it is possible that the expenses may exceed coverage, may not be covered at all or may ultimately increase costs associated with future insurance premiums.

Additionally, New York City and New Jersey remain central targets for potential acts of terrorism against the United States.

Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses.

The occurrence of any such event in the future could have material adverse effect on the business, which in turn, could have a materially adverse impact on the financial condition and results of operations of the Company.

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

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Further, the Company’s business may be adversely affected by changes in tax laws if there are any increases in its state and local tax rates in markets where it has locations.

The Company’s financial results and condition may be adversely impacted by banking failures or future similar events.

Certain events impacting the banking industry, including the bank failures in March and April 2023, resulted in significant disruption and volatility in the capital markets, reduced valuation of bank securities, and decreased confidence in banks among certain depositors and counterparties.

While the U.S.

Department of Treasury, the Federal Reserve, and the FDIC took steps to ensure the depositors of the failed banks in early 2023 would have access to their insured and uninsured deposits, there is no assurance that these or similar actions will restore customer confidence in the baking system, and the Company may be further impacted by concerns regarding the soundness, real or perceived, of

other financial institutions or other future bank failures or disruptions.

Any loss in client deposits or changes in the Company’s perception could increase the cost of funding, limit access to capital markets or negatively impact the Company’s overall liquidity or capitalization.

Further, the cost of resolving the bank failures also prompted the FDIC to issue a special assessment to recover costs to the DIF.

The special assessment did not impact the Company;

however, the FDIC maintains the ability to impose additional shortfall special assessments, which may adversely impact the Company, in the future.

Claims and litigation could result in significant expenses, losses and damage to the Company’s reputation.

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This may adversely impact the operating results.

Net gains on sales of mortgage and/or SBA loans are a significant component of the Company’s noninterest income and could fluctuate in future periods.

Net gains on sales of mortgage and SBA loans represented a notable portion of the Company’s noninterest income for the years ended December 31, 2023 and 2022, respectively.

The Company’s ability to sell a portion of its mortgage or SBA loan production in the secondary market is dependent upon, amongst other factors, the levels of market interest rates, consumer demand for marketable loans, the Company’s sales and pricing strategies and the economy.

A change in one or more of these, or other factors, could significantly impact the Company’s ability to sell mortgage loans and SBA loans in the future and adversely impact the level of our noninterest income.

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

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Although the Company has policies and procedures aimed at detecting and preventing the use of its banking network for money laundering and related activities, those policies and procedures may not eliminate instances in which the Company may be used by customers to engage in illegal or improper activities.

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

The Company’s ability to maintain its reputation is critical to the success of the business and the failure to do so may materially adversely impact its performance.

To the extent that the Company fails to fully comply

with the applicable laws and regulations, banking agencies may have the authority to impose fines, other penalties and sanctions on the Company.

The Company’s ability to maintain its reputation is critical to the success of the business and the failure to do so may adversely impact its performance.

The Company’s reputation is one of the most valuable components of its business.

As such, the Company strives to conduct its business in a manner that maintains its reputation.

If the Company’s reputation is negatively impacted by the actions of an employee, certain litigations, regulatory actions, or certain financial concerns the business and therefore, the operating results may be materially adversely impacted.

If the Company’s reputation is negatively impacted by the actions of an employee, certain litigations, regulatory actions, or certain financial concerns, the business and therefore the operating results may be adversely impacted.

In addition, stakeholder expectations regarding environmental, social, and governance matters continue to evolve and are not uniform.

We have established, and may continue to establish, various goals and initiatives on these matters.

We cannot guarantee that we will achieve these goals and initiatives.

Any failure, or perceived failure, by us to achieve these goals and initiatives could adversely affect our reputation and results of operations.

The Company’s controls and procedures may fail or be circumvented, which may result in a material adverse effect on its business, results of operations and financial condition.

6 unchanged sentences

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

What changed 10-K

Item 1A. Risk Factors