What changed in this filing

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Item 1A. Risk Factors

2025-03-10 compared with 2024-03-08 · 99 added, 101 removed, 678 unchanged (23% of the section changed)

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The economy in the United States and globally has experienced volatility in recent

years and may continue to do so for the foreseeable future, particularly as a result of the COVID-19 pandemic.

There can be no

assurance that economic conditions will not worsen.

Our business may be affected by unfavorable or uncertain economic conditions

such as the level and volatility of interest rates, availability and market conditions of financing, business activity or investor

or business confidence, unexpected changes in gross domestic product, economic growth or its sustainability, inflation, supply

chain disruptions, consumer spending, employment levels, labor shortages, wage inflation, federal government shutdowns, developments

related to the U.S.

federal debt ceiling, energy prices, home prices, commercial property values, bankruptcies, fluctuations or

other significant changes in both debt and equity capital markets and currencies, liquidity of financial markets and the availability

and cost of capital and credit, natural disasters, epidemics and pandemics (including COVID-19), terrorist attacks, acts of war

or a combination of these or other factors.

years and may continue to do so for the foreseeable future, particularly as a result of regulatory changes from the new administration.

There can be no assurance that economic conditions will not worsen.

Our business has been and may in the future continue to be

affected by unfavorable or uncertain economic conditions such as the level and volatility of interest rates, availability and

market conditions of financing, business activity or investor or business confidence, unexpected changes in gross domestic product,

economic growth or its sustainability, inflation, supply chain disruptions, consumer spending, employment levels, labor shortages,

wage inflation, federal government shutdowns, developments related to the U.S.

federal debt ceiling, energy prices, home prices,

commercial property values, bankruptcies, fluctuations or other significant changes in both debt and equity capital markets and

currencies, liquidity of financial markets and the availability and cost of capital and credit, natural disasters, epidemics and

pandemics (including COVID-19), terrorist attacks, acts of war or a combination of these or other factors.

fluctuations may impact our margin requirements and affect our business liquidity.

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of credit markets, and competition.

In response to the economic conditions resulting from the COVID-19 pandemic, the Federal Reserve

Board’s target Fed Funds Rate was reduced to nearly 0% in March 2020.

However, in a series of actions to combat rising inflation

that began in March 2022, the Federal Reserve Board raised the Fed Funds Rate to 4.50% - 4.75% as of February 1, 2023.

in monetary policy, including changes in interest rates, influence not only the interest we receive on loans and securities and

the interest we pay on deposits and borrowings, but such changes could affect our ability to originate loans and obtain deposits,

the fair value of financial assets and liabilities, and the average duration of our assets.

During 2024, the Federal Reserve Board began reducing the federal funds rate, which had been

raised significantly during 2022 and 2023 to combat rising inflation in the U.S.

Notwithstanding these reductions, there can be

no assurances that the Federal Reserve Board will continue to cut the target federal funds rate in 2025 and it may remain open

to increasing rates further should inflation dynamics remain unfavorable.

Changes in monetary policy, including changes in interest

rates, influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings,

but such changes could affect our ability to originate loans and obtain deposits, the fair value of financial assets and liabilities,

and the average duration of our assets.

Company’s earnings and cash flows are largely dependent upon its net interest income, meaning the difference between interest

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

Inflation continued

at elevated levels in 2023 and inflationary pressures may remain elevated in 2024.

Additionally, the Federal Reserve has raised

certain benchmark interest rates in response to this elevated inflation.

As discussed above, changes in interest rates could hurt

our profits, as inflation increases and market interest rates rise, the value of the Company’s investment securities, particularly

those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.

inflation generally increases the cost of goods and services the Company uses in its business operations, such as electricity

and other utilities, and also generally increases employee wages, any of which can increase the Company’s non-interest expenses.

Furthermore, the Company’s customers are also affected by inflation 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 the Company.

higher interest rates by the Federal Reserve Board to tame persistent inflationary price pressures could also push down asset

prices and weaken economic activity.

A deterioration in economic conditions in the United States and the Company’s markets

could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease

in demand for the Company’s products and services, all of which, in turn, would adversely affect the Company’s business,

financial condition and results of operations.

While the Federal

Reserve began reducing the federal funds rate in 2024, there can be no assurances that the Federal Reserve will continue to cut

target funds rates in 2025 and it may remain open to increasing rates further should inflation dynamics remain unfavorable in

Additionally, the Federal Reserve has raised certain benchmark interest rates in response to this elevated inflation.

discussed above, changes in interest rates could hurt our profits, as inflation increases and market interest rates rise, the

value of the Company’s investment securities, particularly those with longer maturities, would decrease, although this effect

can be less pronounced for floating rate instruments.

In addition, inflation generally increases the cost of goods and services

the Company uses in its business operations, such as electricity and other utilities, and also generally increases employee wages,

any of which can increase the Company’s non-interest expenses.

Furthermore, the Company’s customers are also affected

by inflation 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 the Company.

Sustained higher interest rates by the Federal Reserve Board to tame persistent

inflationary price pressures could also push down asset prices and weaken economic activity.

A deterioration in economic conditions

in the United States and the Company’s markets could result in an increase in loan delinquencies and non-performing assets,

decreases in loan collateral values and a decrease in demand for the Company’s products and services, all of which, in turn,

would adversely affect the Company’s business, financial condition and results of operations.

Company’s Allowance for Credit Losses May Not be Adequate to Cover Loan Losses, Which Could Have a Material Adverse Effect

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loans before they become nonperforming assets, or be able to limit losses on those loans that have been identified to be nonperforming.

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses ( Topic 326 ):

Measurement of Credit Losses on Financial Instruments , which replaced the incurred loss methodology with an expected loss

methodology that is referred to as CECL methodology.

The adoption of this ASU did not have a material adverse effect on the Company’s

financial condition and results of operation.

in the Company’s Nonperforming Assets Could Adversely Affect the Company’s Results of Operations and Financial Condition

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While the Company pays interest expense

to fund nonperforming assets, no interest income is recorded on nonaccrual loans or other real estate owned, thereby adversely

to fund nonperforming assets, no interest income is recorded on nonperforming loans or other real estate owned, thereby adversely

affecting income and returns on assets and equity.

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in a decrease in our net interest income, we do not have significant sources of fee income to make up for decreases in net interest

Similar to the COVID-19 Pandemic Could Adversely Affect our Business Activities, Financial Condition, and Results of Operations.

The occurrence of events which adversely affect the global, national and regional

economies, like the COVID-19 pandemic, may have a negative impact on our business.

Like other financial institutions, our business

relies upon the ability and willingness of our customers to transact business with us, including banking, borrowing and other

financial transactions.

A strong and stable economy at each of the local, federal and global levels is often a critical component

of consumer confidence and typically correlates positively with our customers’ ability and willingness to transact certain

types of business with us.

Local and global events outside of our control may therefore negatively impact our business and financial

A public health crisis such as the COVID-19 pandemic is no exception, and its adverse health and economic effects may

adversely impact our business and financial condition.

Impacting Global, National and Regional Economies Could Adversely Affect our Business Activities, Financial Condition, and Results

of Operations.

The occurrence of events which adversely affect the global, national

and regional economies may have a negative impact on our business.

Like other financial institutions, our business relies upon

the ability and willingness of our customers to transact business with us, including banking, borrowing and other financial transactions.

A strong and stable economy at each of the local, federal and global levels is often a critical component of consumer confidence

and typically correlates positively with our customers’ ability and willingness to transact certain types of business with

Local and global events outside of our control may therefore negatively impact our business and financial condition.

Company is Subject to Environmental Risks Associated with Real Estate Held as Collateral or Occupied.

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and provide for other liquidity needs.

At December 31, 2023, the Bank had $1.7 million in brokered time deposits.

One of the Bank’s

sources for deposits is CDARS.

At December 31, 2023, the Bank has $28.7 million in CDARS reciprocal deposits and $35.1 million

in Insured Cash Sweep or ICS network deposits.

At December 31, 2024 and 2023, the Bank had $1.7 million in brokered time deposits.

of the Bank’s sources for deposits is CDARS.

At December 31, 2024, the Bank has $36.9 million in CDARS reciprocal deposits

and $22.3 million in ICS network deposits.

These amounts, are reciprocal and are not considered brokered deposits under recent

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It receives substantially all of its revenue from dividends paid by the Bank.

These dividends are the principal

source of funds used to pay dividends on the Company’s common stock and interest and principal on the Company’s subordinated

Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company.

due to its capital position, inadequate net income levels, or otherwise, is unable to pay dividends to the Company, then the Company

will be unable to service debt, pay obligations or pay dividends on the Company’s common stock.

The OCC also has the authority

to use its enforcement powers to prohibit the Bank from paying dividends if, in its opinion, the payment of dividends would constitute

an unsafe or unsound practice.

The Bank’s inability to pay dividends could have a material adverse effect on the Company’s

business, financial condition, results of operations and the market price of the Company’s common stock.

These dividends are the

principal source of funds used to pay dividends on the Company’s common stock and interest and principal on the

Company’s subordinated debt.

Various federal and state laws and regulations limit the amount of dividends that the Bank may

pay to the Company.

If the Bank, due to its capital position, inadequate net income levels, or otherwise, is unable to pay dividends

to the Company, then the Company will be unable to service debt, pay obligations or pay dividends on the Company’s common

The OCC also has the authority to use its enforcement powers to prohibit the Bank from paying dividends if, in its opinion,

the payment of dividends would constitute an unsafe or unsound practice.

The Bank’s inability to pay dividends could have a

material adverse effect on the Company’s business, financial condition, results of operations and the market price of the

Company’s common stock.

Carrying Value of the Company’s Goodwill Could Become Impaired.

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in order to raise the necessary funds to support the Company’s operations and growth.

In particular, regulators are increasingly

focused on liquidity risk after the bank failures of 2023.

Any such increase in funding costs or restrictions could have a negative

impact on the Company’s net interest income and, consequently, on its results of operations and financial condition.

The 2023 collapse and subsequent regulatory

takeover of certain U.S.

regional banks may result in modifications or additional laws which we could be subject to, including

potentially increasing capital requirements, modifying regulations related to liquidity risk management, deposit concentrations,

capital adequacy and other oversight requirements.

Any such increase in funding costs or restrictions could have a negative impact

on the Company’s net interest income and, consequently, on its results of operations and financial condition.

Operate In a Highly-Regulated Environment That is Subject to Extensive Government Supervision and Regulation, Which May Interfere

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laws, regulations and policies are subject to amendment by Congress, state legislatures and federal and state regulatory agencies.

Changes to statutes, regulations or policies, including changes in the interpretation of regulations or policies, could materially

impact our business.

These changes could also impose additional costs on us and limit the types of products and services that

we may offer our customers.

Compliance with laws and regulations can be difficult and costly, and the failure to comply with any

law, regulation or policy could result in sanctions by financial regulatory agencies, including civil monetary penalties, private

lawsuits, or reputational damage, any of which could adversely affect our business, financial condition, or results of operations.

While we have policies and procedures designed to prevent such violations, there can be no assurance that violations will not

See the section titled, “Supervision and Regulation” in ITEM 1.

Changes to statutes, regulations or policies, including changes in the interpretation of regulations or policies and changes in

enforcement and regulatory priorities, could materially impact our business.

These changes could also impose additional costs

on us and limit the types of products and services that we may offer our customers.

Compliance with laws and regulations can be

difficult and costly, and the failure to comply with any law, regulation or policy could result in sanctions by financial regulatory

agencies, including civil monetary penalties, private lawsuits, or reputational damage, any of which could adversely affect our

business, financial condition, or results of operations.

While we have policies and procedures designed to prevent such violations,

there can be no assurance that violations will not occur.

See the section titled, “Supervision and Regulation” in

the 2008 global financial crisis, financial institutions have been subject to increased scrutiny from Congress, state legislatures

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and services and technological advances are likely to intensify competition.

The effective use of technology increases efficiency

and enables financial institutions to better serve customers and to reduce costs.

Our future success depends, in part, upon our

ability to address the needs of our customers by using technology to provide products and services that will satisfy customer

demands, as well as to create additional efficiencies in our operations.

Many of our competitors have substantially greater resources

to invest in technological improvements.

We may not be able to effectively implement new technology-driven products and services

or be successful in marketing these products and services to customers.

Failure to successfully keep pace with technological changes

affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition

and results of operations.

The effective use of technology, including emerging

technologies, increases efficiency and enables financial institutions to better serve customers and to reduce costs.

success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services

that will satisfy customer demands, as well as to create additional efficiencies in our operations.

Many of our competitors have

substantially greater resources to invest in technological improvements.

We may not be able to effectively implement new technology-driven

products and services or be successful in marketing these products and services to customers.

Failure to successfully keep pace

with technological changes affecting the financial services industry could have a material adverse impact on our business and,

in turn, our financial condition and results of operations.

in the Local Economy May Affect our Future Growth Possibilities.

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Dilution Could Occur if Additional Stock is Issued in the Future.

If the Company’s Board of Directors should determine

in the future that there is a need to obtain additional capital through the issuance of additional shares of the Company’s

common stock or securities convertible into shares of common stock, such issuances could result in dilution to existing stockholders’

ownership interest.

Similarly, if the Board of Directors decides to grant additional stock awards or options for the purchase

of shares of common stock, the issuance of such additional stock awards and/or the issuance of additional shares upon the exercise

of such options would expose stockholders to dilution.

If the Board should determine in the future that there

is a need to obtain additional capital through the issuance of additional shares of the Company’s common stock or securities

convertible into shares of common stock, such issuances could result in dilution to existing stockholders’ ownership interest.

Similarly, if the Board decides to grant additional stock awards or options for the purchase of shares of common stock, the issuance

of such additional stock awards and/or the issuance of additional shares upon the exercise of such options would expose stockholders

Company’s Financial Condition and Results of Operation Rely in Part on Management Estimates and Assumptions.

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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