43 added · 18 removed between the two most recent 10-Ks. The risks a company starts — or stops — disclosing are often the story.
Newly disclosed
Our reliance on and integration of artificial intelligence ("AI") and machine learning ("ML") technologies expose us to various risks, including operational, data, regulatory, and reputational risks, which could materially affect our business and financial results. • Operational and Model Risk: AI/ML models may rely on complex algorithms and vast datasets.
We utilize certain AI/ML models provided by third-party vendors, including models used for credit scoring and fraud detection, and may use other AI/ML models in the future. • Data Security and Privacy: AI systems may process sensitive customer data.
Security breaches or unauthorized access to these systems could result in data theft, loss of intellectual property, and significant penalties, damaging customer trust. • Regulatory and Compliance Risk: The regulatory landscape for AI is rapidly evolving.
New laws could impose costly compliance burdens, restrict AI use, or introduce liabilities, particularly concerning algorithmic bias and fair lending practices (e.g., "digital redlining"), potentially increasing operational costs and limiting service offerings. • Talent and Third-Party Risk: Attracting and retaining skilled AI professionals is crucial and competitive.
While we do not currently develop AI or ML models internally, 16 Table of Contents future expansion of our AI capabilities may require specialized technical skillsets, and we could face challenges attracting and retaining qualified AI talent if those needs arise. • Reputational and Ethical Risk: Misuse of AI, biased outcomes, or privacy violations can harm our brand, erode customer confidence, and attract negative public attention, potentially affecting demand for our services.
If we cannot effectively manage these challenges, including adapting to rapid technological change and ensuring responsible AI governance, our reputation, competitive position, and financial performance could be significantly harmed.
We also depend on third-party AI vendors, creating dependency risks and potential issues with data handling, model reliability, and licensing, all of which could disrupt operations.
Inflation rose sharply at the end of 2021 and remained elevated through the first half of calendar 2024, before beginning to moderate in the latter half of 2024 and into calendar 2025.
At December 31, 2025, accumulated other comprehensive income was $13.6 million related to unrealized holding gains in the available-for-sale investment securities portfolio.
In a period of declining interest rates, the interest income we earn on our interest-earning assets may decrease more rapidly than the interest we pay on our interest-bearing liabilities, as borrowers prepay mortgage loans and as mortgage-backed securities and callable investment securities are called, requiring us to reinvest those cash flows at lower, prevailing interest rates.
In a period of rising interest rates, increases in interest rates may adversely affect the ability of our borrowers to make loan repayments on adjustable-rate loans, as the interest owed on such loans would increase as interest rates increase.
Errors, biases, or generating false information in these models, or unexpected system failures, could lead to flawed decisions, financial losses, compliance failures, or degraded customer experiences, impacting profitability and client retention.
No longer disclosed
During the year ended December 31, 2024, we incurred other comprehensive losses of $796 thousand related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio.
A deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results of operations.
We are subject to extensive regulation, supervision, and examination by our primary regulators, the Pennsylvania Department of Banking and Securities and the Federal Reserve Bank of Philadelphia, and by the FDIC, the regulating authority that insures customer deposits.
Further, compliance with such regulation may increase our costs and limit our ability to pursue business opportunities. 18 Table of Contents Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
Additionally, these competitors may offer higher interest rates than we do, which could decrease the deposits that we attract or require us to increase our rates to retain existing deposits or attract new deposits.
The Board of Directors has established an Enterprise-Wide Risk Management Committee, consisting of a minimum of four directors, at least three of which are independent directors.
Risks Related to Regulation The fiscal, monetary and regulatory policies of the federal government and its agencies could have an adverse effect on our results of operations.
The Enterprise-Wide Risk Management Committee meets four times a year, or more frequently if needed, and provides minutes of its meetings to the Board of Directors.
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.
Stock price volatility may make it more difficult for investors to sell their common stock when they want and at prices they find attractive.
However, in September, the FRB reduced rates by 50 basis points and by an additional 25 basis points in November and December, respectively.
Risks Related to Economic Conditions Inflation can have an adverse impact on our business and on our customers.