Item 1A. Risk Factors.
There are risks, many beyond our control, that could cause our financial condition or results of operations to differ materially from management’s expectations. Any of the following risks, by itself or together with one or more other factors, could adversely affect our business, prospects, financial condition, results of operations and cash flows, perhaps materially. The risks presented below are not the only risks that we face. Additional risks that we do not presently know or that we currently deem immaterial may also have an adverse effect on our business, results of operations, financial condition, prospects, and the market price and liquidity of our common stock. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included in this report. Further, to the extent that any of the information contained in this report constitutes forward-looking statements, the risk factors below also are cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. See “Cautionary Note Regarding Forward-Looking Statements” beginning on page 1.
Market and Interest Rate Risks
Our business may be adversely affected by economic conditions.
Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation, monetary supply, fluctuations in the debt and equity capital markets, and the strength of the domestic economy and the local economies in the markets in which we operate. Unfavorable market conditions can result in a deterioration of the credit quality of borrowers, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions for credit losses, adverse asset values and a reduction in assets under management or administration. The majority of our loan portfolio is secured by real estate, 33.2% of which is multifamily and 7.3% of which is commercial real estate. A decline in real estate values can negatively impact our ability to recover our investment should the borrower become delinquent. Loans secured by stock or other collateral may be adversely impacted by a downturn in the economy and other factors that could reduce the recoverability of our investment. Unsecured loans are dependent on the solvency of the borrower, which can deteriorate, leaving us with a risk of loss. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability of or increases in the cost of credit and capital, increases in inflation or interest rates, high unemployment, natural disasters, epidemics and pandemics, state or local government insolvency, or a combination of these or other factors.
There are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, price fluctuations of key natural resources, U.S. intervention in Venezuela and its oil industry, U.S. military strikes and sanctions on Iran, the potential resurgence of economic and political tensions with China, the Russian invasion of Ukraine and increasing oil prices due to Russian supply disruptions, and the Israel-Hamas conflict, each of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers, including due to factors such as inflation and increased cost of goods due to tariff structures on imports, as well as overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets or economies may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes, high unemployment or underemployment, and inflation may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition.
In some cases, management of our risks depends upon the use of analytical and/or forecasting models, which, in turn, rely on assumptions and estimates. If the models used to mitigate these risks are inadequate, or the assumption or estimates are inaccurate or otherwise flawed, we may fail to adequately protect against risks and may incur losses. Artificial Intelligence ("AI") models may amplify existing risks, given the increased complexity of financial modeling and the challenges in explaining the models.
Fiscal challenges facing the U.S. government could negatively impact the value of investments in GSEs and the financial markets, which in turn could have an adverse effect on our financial position or results of operations.
Fiscal challenges facing the U.S. government, such as the federal budget deficit concerns and the potential for political conflict over legislation to fund U.S. government operations and raise the U.S. government's debt limit may increase the possibility of a default by the U.S. government on its debt obligations, additional related credit-rating downgrades, or an economic recession in the U.S. A significant portion of our securities portfolio is invested in GSE securities. As a result of uncertain domestic political conditions, including potential future federal government shutdowns or the possibility of the federal government defaulting on its
obligations for a period of time, investments in financial instruments issued or guaranteed by the federal government pose liquidity and credit risks.
A debt default or further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could also adversely affect the ability of the U.S. government to support the financial stability of Fannie Mae, Freddie Mac and the FHLBNY, with which we do business and in whose securities we invest.
Changes in U.S. trade policies and other global political factors beyond our control, including the imposition of tariffs, retaliatory tariffs, or other sanctions, may adversely impact our business, financial condition and results of operations.
There have been, and may be in the future, changes with respect to U.S. and international trade policies, legislation, treaties and tariffs, embargoes, sanctions and other trade restrictions. In response to a February 2026 Supreme Court ruling that the President does not have authority to impose sweeping global tariffs under the International Emergency Economic Powers Act, the President signed an executive order imposing additional global tariffs. It remains unclear whether and how federal agencies will enforce conflicting mandates on tariffs, and whether parties harmed by tariffs will have recourse against the federal government. Tariffs, retaliatory tariffs or other trade restrictions on products and materials that customers import or export, or a trade war or other related governmental actions related to tariffs, international trade agreements or policies or other trade restrictions continue to have the potential to negatively impact our customers' costs, demand for their products, or the U.S. economy or certain sectors thereof and, thus, could adversely impact our business, financial condition and results of operations.
To the extent this uncertainty in U.S. trade policy and other changes in the global political environment have a negative impact on us, our customers or on the markets in which we operate, our business, results of operations and financial condition could be materially and adversely impacted.
Our operations and clients are concentrated in large metropolitan areas.
The vast majority of our operations and clients are located in New York City, Washington, D.C., and San Francisco. In addition, at December 31, 2025, 82.4% of the properties securing our CRE, multifamily, or construction loans outstanding were located in the states of New York and California, and in Washington, D.C. Our success depends upon the economic vitality, growth prospects, business activity, population, income levels, deposits and real estate activity in those areas and may be impacted by the effects of past and future civil unrest and domestic disturbances in the communities that we serve. In addition, these areas have been and may continue to be the target of terrorist attacks. A major terrorist attack in one of these areas could severely disrupt our operations and the ability of our clients to do business with us and cause losses to loans secured by properties in these areas. Although our customers' business and financial interests may extend well beyond our market areas, adverse economic and social conditions that affect our specific market area could reduce our growth rate, affect the ability of our customers to repay their loans to us and impact the stability of our deposit funding sources. Consequently, declines in economic and social conditions in these markets could generally affect our business, financial condition, results of operations and prospects.
Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings, capital levels and overall results.
The majority of our assets and liabilities are monetary in nature and, as a result, we are subject to significant risk from changes in interest rates, which may affect our net interest income as well as the valuation of our assets and liabilities. Our earnings depend significantly on our net interest income, which is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. We expect to periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates move contrary to our position, this “gap” may work against us, and our earnings may be adversely affected.
When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. Additionally, an increase in the general level of interest rates may also, among other things, adversely affect the demand for loans and our ability to originate loans and decrease loan prepayment rates or adversely affect our results of operations by reducing the ability of borrowers to make payments under their current adjustable-rate loan obligations. Conversely, a decrease in the general level of interest rates, among other things, may lead to prepayments on our loan and mortgage-backed securities portfolios and increased competition for deposits, potentially reducing our deposit base. Accordingly, changes in the general level of market interest rates may adversely affect our net yield on interest-earning assets, loan origination volume and our overall results.
Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in the general level of market interest rates, those rates are affected by many factors outside of our control, including inflation, recession, unemployment, money supply, international disorder, instability in domestic and foreign financial markets and policies of various governmental and regulatory agencies, particularly the Federal Open Market Committee ("FOMC") of the Federal Reserve. Adverse changes in the U.S. monetary policy or in economic conditions could materially and adversely affect us. On January 28, 2026 the FOMC issued a statement that it decided to maintain short-term interest rates at a range of 3.5% to 3.75%, and future rate changes will be data dependent; implying they are holding rates constant for the immediate future. We could experience net interest margin compression if our rates on our interest earning assets fail to increase in tandem with rates on our interest-bearing liabilities. We could experience net interest margin compression if our rates on our interest bearing liabilities fail to decrease in tandem with rates on our interest earning assets. See Impact of Inflation and Changing Interest Rates under Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Similarly, if short-term interest rates increase and long-term interest rates do not increase, or increase but at a slower rate, we could experience net interest margin compression as our rates on interest earning assets decline measured relative to rates on our interest-bearing liabilities. Any such occurrence could have a material adverse effect on our net interest income and on our business, financial condition and results of operations.
We may not be able to accurately predict the likelihood, nature and magnitude of changes in market interest rates or how and to what extent they may affect our business. We also may not be able to adequately prepare for or compensate for the consequences of such changes. Any failure to predict and prepare for changes in interest rates or adjust for the consequences of these changes may adversely affect our earnings and capital levels and overall results.
The fair value of our investment securities could fluctuate because of factors outside of our control, which could have a material adverse effect on us.
As of December 31, 2025, the fair value of our investment securities portfolio was approximately $3.22 billion. Factors beyond our control could significantly affect the fair value of these securities. These factors include, but are not limited to, changes in market conditions including changes in interest rates or spreads, changes in the credit profile of individual securities, changes in prepayment behavior of individual securities, rating agency actions in respect of the securities, or adverse regulatory action. Any of these factors, among others, could cause other-than-temporary impairments, or OTTI, and realized and/or unrealized losses in future periods and declines in earnings and/or other comprehensive income (loss), which could materially and adversely affect our assets, business, cash flow, condition (financial or otherwise), liquidity, results of operations and prospects. The process for determining whether impairment of a security has experienced an OTTI usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer, any collateral underlying the security as well as our intent and ability to hold the security for a sufficient period of time to allow for any anticipated recovery in fair value in order to assess the probability of receiving all contractual principal and interest payments on the security. Our failure to assess any impairments or losses with respect to our securities could have a material adverse effect on our assets, business, cash flow, condition (financial or otherwise), liquidity, results of operations and prospects.
Credit Risks
If we fail to effectively manage credit risk, our business and financial condition will suffer.
As a lender, we are exposed to the risk that our borrowers will be unable to repay their loans according to their terms, and that the collateral securing repayment of their loans, if any, may not be sufficient to ensure repayment. In addition, there are risks inherent in making any loan, including risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers, including the risk that a borrower may not provide information to us about its business in a timely manner, and/or may present inaccurate or incomplete information to us, and risks relating to the value of collateral. In order to manage credit risk successfully, we must, among other things, maintain disciplined and prudent underwriting standards and ensure that our lenders follow those standards. The weakening of these standards for any reason, such as an attempt to attract riskier higher yielding loans, a lack of discipline or diligence by our employees in underwriting and monitoring loans, the inability of our employees to adequately adapt policies and procedures to changes in economic or any other conditions affecting borrowers and the quality of our loan portfolio, may result in loan defaults, foreclosures and additional charge-offs and may necessitate that we significantly increase our allowance, each of which could adversely affect our net income.
We are subject to risk arising from conditions in the commercial real estate market.
As of December 31, 2025, commercial real estate mortgage loans comprised approximately 7.3% of our loan portfolio. Commercial real estate mortgage loans generally involve a greater degree of credit risk than one-to-four family residential real estate mortgage loans because they typically have larger balances and are more affected by adverse conditions in the economy. Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy, including interest rate fluctuations, or changes in government regulations. In recent years, commercial real estate markets have been impacted by entrenched work-from-home expectations which could affect the long-term performance of some types of office properties within our commercial real estate portfolio. Accordingly, the federal banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Failures in our risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which, accordingly, could have a material adverse effect on our business, financial condition and results of operations.
We are exposed to higher credit risk related to our multifamily real estate lending in New York City.
New York State's Housing Stability and Tenant Protection Act of 2019, impacts about one million rent regulated apartment units. Among other things, the legislation: (i) curtails rent increases from material capital improvements and individual apartment improvements; (ii) all but eliminates the ability for apartments to exit rent regulation; (iii) does away with vacancy decontrol and high-income deregulation; and (iv) repealed the 20% vacancy bonus. The act generally limits a landlord’s ability to increase rents on rent-regulated apartments and makes it more difficult to convert rent-regulated apartments to market-rate apartments. In 2024, New York State passed legislation that effectively extends limits on rent hikes and “good cause” eviction requirements to many market-rate tenants in New York City and participating municipalities. As a result, the value of the collateral located in New York State securing our multi-family loans or the future net operating income of such properties could potentially become impaired. At December 31, 2025, our total multifamily loan exposure in New York State is approximately $1.01 billion, of which approximately $821.5 million, or 81%, represents our portfolio’s composition of rent stabilized and rent controlled apartments in the New York City multifamily market.
Our consumer solar loans expose us to higher credit risk.
A borrower’s ability to repay their solar loans can be negatively impacted by increases in their payment obligations to other lenders under mortgage, credit card and other loans resulting from increases in base lending rates or structured increases in payment obligations. If a client defaults on solar loan, we may be unsuccessful in our efforts to collect the amount of the loan. We are limited in our ability to collect on these loans if a client is unwilling or unable to repay them. Although solar loans are secured with security filings, we may be limited in our ability to recover any collateral supporting such loans due to the nature of the solar energy system becoming a fixture to the real property. Additionally, these short-term loans are subject to risks of defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. An increase in defaults precipitated by the risks and uncertainties associated with the above operations and activities could have a detrimental effect on our business.
Our estimated allowance for credit losses may prove to be insufficient to absorb actual losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
We maintain an allowance for credit losses ("ACL") that represents management’s judgment of current expected credit losses and risks inherent in our loan portfolio. As of December 31, 2025, our ACL totaled $57.6 million, which represents approximately 1.16% of our total loans, net. The level of the allowance reflects management’s continuing evaluation of loan levels and portfolio composition, observable trends in nonperforming loans, historical loss experience, known and inherent risks in the portfolio, underwriting practices, adequacy of collateral, credit risk grading assessments, forecasted economic conditions, and other factors. The determination of the appropriate level of the ACL is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes. If, as a result of general economic conditions, there is a decrease in asset quality or growth in the loan portfolio, our management determines that additional increases in ACL are necessary, we may incur additional expenses which will reduce our net income, and our business, results of operations or financial condition may be materially and adversely affected. In addition, inaccurate management assumptions, deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification or deterioration of additional problem loans, acquisition of problem loans and other factors, both within and outside of our control, may require us to increase our ACL.
Operational and Business Risks
We are at risk of increased losses from fraud.
We are exposed to the risk of fraudulent activity, which continues to evolve in scope and sophistication. Fraud may take various forms, including check and debit card fraud, ATM tampering, phishing and other social engineering attacks, and the use of stolen or falsified credentials to impersonate customers. In addition, individuals or entities may properly identify themselves but seek to establish relationships for fraudulent purposes, and we may incur losses from fraud committed against third parties. Criminals increasingly obtain personally identifiable information from external sources, including third‑party data breaches. As a result, we have made and expect to continue making significant investments in fraud detection and prevention systems; however, these measures may not be effective in all cases. Fraudulent activity could result in financial losses, increased operating and compliance costs, reputational harm, regulatory scrutiny or penalties, litigation, business disruption, and could materially adversely affect our business, financial condition, and results of operations.
We could be adversely affected by a failure to establish and maintain effective internal controls over financial reporting.
A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that customers, regulators and investors may have of us. Any failure to maintain internal controls over financial reporting, or any difficulties that we may encounter in such maintenance, could result in significant deficiencies or material weaknesses, result in material misstatements in our consolidated financial statements and cause us to fail to meet our reporting obligations, each of which could result in a material adverse effect on our business, financial condition or results of operations or an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. We continue to devote a significant amount of effort, time and resources to our controls and ensuring compliance with complex accounting standards and regulations. These efforts also include the management of controls to mitigate operational risks for programs and processes across the Company.
Our third party relationships could expose us to operational and regulatory risks.
We rely on third parties to provide internal and customer‑facing services, which may expose us to operational, compliance, and strategic risks. Federal banking regulators expect banks to maintain risk‑based controls to ensure third parties comply with applicable laws and regulations. In June 2023, the federal banking agencies issued “Interagency Guidance on Third‑Party Relationships: Risk Management”, requiring banks to “analyze the risks associated with each third-party relationship and to calibrate its risk management processes.” In July 2024, regulators also issued a joint statement addressing banks’ arrangements with third parties to deliver deposit products and services, concurrent with a request for information on bank‑fintech arrangements, following concerns regarding customer funds deposited through non‑bank entities without adequate controls.
We depend on the accuracy and completeness of information about customers and counterparties.
In extending credit, entering into other transactions, and monitoring our loan and lease portfolio, we rely on financial and other information provided by customers, counterparties, and third parties, including financial statements, credit reports, and representations regarding their accuracy and completeness. If such information is inaccurate, incomplete, fraudulent, misleading, or not received on a timely basis, we could experience credit losses, reputational harm, or other adverse effects that may materially impact our business, financial condition, or results of operations.
We participate in a multi-employer non-contributory defined benefit pension plan for both our unionized and non-unionized employees, which could subject us to substantial cash funding requirements in the future.
We are required to contribute to the Consolidated Retirement Fund, a multi‑employer defined benefit pension plan covering both unionized and non‑unionized employees, and our related expense totaled $8.2 million in 2025. Our future obligations may increase due to changes in the plan’s funded status, investment performance, participant demographics, the financial condition of contributing employers, or actuarial assumptions, and a withdrawal or partial withdrawal could result in significant withdrawal liability, which could materially adversely affect our business, financial condition and results of operations.
Climate related disasters may have an effect on the performance of our business operations and asset quality which could adversely affect our financial condition and results of operations.
Climate‑related disasters may adversely affect our business, asset quality, and earnings. These risks include acute, event‑driven weather events such as hurricanes, storms, freezes, wildfires, floods, and other large‑scale catastrophes, which could disrupt our operations and those of our customers and third‑party vendors. Such events may impair the value of our assets and collateral securing our loans, cause volatility in our investment portfolio, and negatively impact economic and market conditions. In addition, our expenses may increase due to changing consumer preferences and evolving legislation and regulatory requirements related to the transition to a low‑carbon economy. The potential costs associated with climate‑related risks—including strategic planning, regulatory scrutiny, litigation, technology investments, and disaster‑related losses—are difficult to predict and could have a material adverse effect on our business, financial condition, and results of operations.
We are exposed to risks related to our PACE financings.
Property Assessed Clean Energy ("PACE") financing is a means of financing energy-efficient upgrades or the installation of renewable energy sources for commercial, industrial and residential properties that are repaid over a selected term through property tax assessments, which are secured by the property itself and paid as an addition to the owners’ property tax bills. The unique characteristic of PACE assessments is that the assessment is attached to the property rather than the individual borrower. Active programs for residential PACE financing exist in California, Florida and Missouri. As of December 31, 2025, we had a portfolio of $327.4 million in commercial PACE assessments and $953.2 million in residential PACE assessments. These assessments are pari passu with tax liens and generally have priority over first mortgage liens.
Because PACE financing programs are typically enabled through state legislation and authorized at the local government level, variations between each state’s programs may expose us to increased compliance costs and risks. On December 17, 2024, the CFPB issued its final rule implementing Section 307 of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) and amending Regulation Z to address how TILA applies to residential PACE transactions. The final rule amends Regulation Z’s definition of credit to include residential PACE financings, prescribes ability-to-repay requirements, and implements other amendments and exemptions to clarify how other rules in Regulation Z apply. The final rule became effective on March 1, 2026. If we fail to comply with the final rules adopted by the CFPB, we may face reputational and litigation risks with respect to our PACE assessments.
Our trust and investment management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment.
Our trust and investment management business is sensitive to changes in economic and market conditions, as its performance is directly affected by financial and securities market volatility. Market conditions are influenced by domestic and foreign economic factors, general business and financial trends, and global conflicts, all of which are beyond our control. Declines in market performance or lack of sustained growth could reduce the value and performance of assets under management, resulting in lower investment management fees, asset outflows, or increased client disputes. Any of these factors could materially and adversely affect the financial performance of our trust and investment management business.
The investment management contracts we have with our clients are terminable without cause and on relatively short notice by our clients, which makes us vulnerable to short term declines in the performance of the securities under our management.
Our investment management contracts are generally terminable by clients without cause upon less than 30 days’ notice. As a result, even short‑term declines in investment performance—whether due to market or economic conditions, the performance of particular investment strategies or other factors outside our control—could prompt clients to reallocate assets to other investment products or advisers. Because our operating results depend on the performance of the investment portfolios we manage, any reduction in assets under management could lead to lower investment management fees and adversely affect our results of operations.
Risks Related to Privacy and Technology
Information technology systems are critical to our business. Our business requires us to collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and our own business, operations, plans and business strategies. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. Our computer systems, data management and internal processes, as well as those of third parties, are integral to our performance.
Our operations rely on the secure processing, storage and transmission of confidential and other sensitive business and consumer information on our computer systems and networks and third-party providers. Under various federal and state laws, we are
responsible for safeguarding such information. For example, our business is subject to joint federal bank agency rules, the GLBA, the NYDFS cybersecurity regulations, the CCPA, and the CPRA which, among other things: (i) impose certain limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) require that we provide certain disclosures to customers and others about our information collection, sharing and security practices, as well as any use of automated decision making for financial or lending services, and afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions) and automated decision making; (iii) limit retention of customer data; (iv) require notification of certain data breaches be provided to consumers and, in some circumstances, regulators; (v) require notification of extortion payments and ransomware deployments; (vi) require cyber audits and enhanced governance of cyber risk, including risk assessments at least annually and whenever a change in the business or technology causes a material change to our cyber risk; and (vii) require that we develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase our costs.
In particular, information pertaining to us and our customers is maintained, and transactions are executed, on our networks and systems or those of our customers or third-party partners, such as our online banking or reporting systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect us and our customers against fraud and security breaches and to maintain our clients’ confidence.
A breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.
While we have not experienced any material information security breaches, such breaches may occur as a result of intentional or inadvertent acts by individuals with authorized or unauthorized access to our systems or to confidential information of us, our customers, or counterparties, including employees. Cybersecurity risks may increase due to heightened criminal activity and sophistication, technological advances, newly discovered vulnerabilities (including in third‑party technologies such as browsers and operating systems), or geopolitical instability or warfare, including the Russia and Ukraine conflict and reported cyber campaigns by Chinese hackers targeting U.S. infrastructure. We cannot assure that the security measures we or our processors maintain will be effective or sufficient to protect against all current or emerging threats. A breach of our systems, or those of processors, could result in financial losses, loss of customers or business, reputational harm, business disruption, increased expenses (including notification, remediation, and fines), regulatory scrutiny or penalties, litigation, or other adverse consequences, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Our information technology systems may be subject to failure or interruption.
Our operational risks include the risk of errors relating to transaction processing and technology, systems failures or interruptions, and failures of business continuation and disaster recovery plans. While we have established policies and procedures to prevent or limit the impact of system failures and interruptions, there can be no assurance that such events will not occur or will be adequately addressed if they do.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, loss of customers and damage to our reputation, and face regulatory action or civil litigation. Any of these events could have a material adverse effect on our financial condition and results of operations. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.
We depend on information technology and telecommunications systems of third-party servicers, and systems failures, interruptions or breaches of security involving these systems could have an adverse effect on our operations, financial condition and results of operations.
Our business depends on the reliable and uninterrupted operation of our information technology and telecommunications systems, including third‑party accounting systems and mobile and online banking platforms. We outsource many critical systems, including data processing, loan servicing, payment processing, and online banking platforms. Failure of these systems, termination of related third‑party licenses or service agreements, or capacity constraints or interruptions at third‑party providers could disrupt our operations. Sustained or repeated disruptions could impair our ability to process loans, accept deposits, and provide customer service, harm our reputation, result in lost business, increase regulatory scrutiny, and expose us to financial
liability, any of which could materially adversely affect our financial condition and results of operations. In addition, third‑party noncompliance with applicable laws and regulations, or fraud, misconduct, or material errors by our employees or those of our service providers, could disrupt operations or adversely affect our reputation.
It may be difficult for us to replace some of our third-party vendors, particularly vendors providing our core banking, debit card services and information services, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason and even if we are able to replace them, it may be at higher cost or result in the loss of customers. Any such events could have a material adverse effect on our business, financial condition or results of operations.
In November 2021, federal bank regulators issued a joint final rule to establish computer-security incident notification requirements for banking organizations and their bank service providers. The rule requires FDIC-supervised banks to report certain incidents to their case manager and also requires covered bank service providers to promptly notify their FDIC-supervised bank customer when the service provider determines that it has experienced a notification incident.
As a result of financial entities and technology systems becoming more interdependent and complex, a cyber incident, information breach or loss, or technology failure that compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including ourselves. Although we review business continuity and backup plans for our vendors and take other safeguards to support our operations, such plans or safeguards may be inadequate. As a result of the foregoing, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact.
We must respond to rapid technological changes, and these changes may be more difficult or expensive than anticipated.
We will have to respond to future technological changes. Specifically, if our competitors introduce new banking products and services embodying new technologies such as AI and machine learning, or if new banking industry standards and practices emerge, then our existing product and service offerings, technology and systems may be impaired or become obsolete. Implementation of AI and machine learning and other new technologies may have unintended consequences due to their limitations, potential manipulation, or our failure to use them effectively. Conversely, if we fail to adopt or develop new technologies or to adapt our products and services to emerging industry standards, then we may lose current and future customers, which could have a material adverse effect on our business, financial condition and results of operations. Many of our competitors have substantially greater resources to invest in technological improvements than we do. The financial services industry is changing rapidly, and to remain competitive, we must continue to enhance and improve the functionality and features of our products, services and technologies. These changes may be more difficult or expensive than we anticipate.
We expect that new technologies and business processes applicable to the banking industry will continue to emerge, and these new technologies and business processes may be better than those we currently use. Because the pace of technological change is high and our industry is intensely competitive, we may not be able to sustain our investment in new technology as critical systems and applications become obsolete or as better ones become available. A failure to maintain current technology and business processes could cause disruptions in our operations or cause our products and services to be less competitive, all of which could have a material adverse effect on our business, financial condition or results of operations. We expect regulatory risk and compliance costs from AI implementation to increase. Federal and state regulators have intensified their oversight of AI in financial services. Under the Federal Reserve’s November 2025 Supervisory Operating Principles, examiners now prioritize the assessment of "material financial risks" stemming from AI, focusing on the transparency and explainability of models used for capital, liquidity, and credit decisions.
Risks Related to Our Human Capital
We depend on our executive officers and other key employees, and our ability to attract additional key personnel, to continue the implementation of our long-term business strategy, and we could be harmed by the unexpected loss of their services.
We believe that our continued growth and future success will depend in large part on the skills of our executive officers and other key employees and our ability to motivate and retain these individuals, as well as our ability to attract, motivate and retain qualified senior and middle management and other skilled employees. Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business strategy may be lengthy. If the services of any of our of key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, or at all, which could have a material adverse effect on our business, financial condition, results of operation and future prospects. We may not be successful in retaining our key personnel, and the unexpected loss of services of one or more of our key personnel could have a material adverse effect on our business because of their skill, customer relationships, knowledge of our markets, years of industry experience and the difficulty of promptly finding qualified
replacement personnel. Leadership transitions can be inherently difficult to manage, and inadequate transitions may cause disruptions to our business due to, among other things, diverting management’s attention or causing a deterioration in morale.
Our business could suffer if we experience employee work stoppages, union campaigns or other labor difficulties, and efforts by labor unions could divert management attention and adversely affect operating results.
As of December 31, 2025, we had 450 employees, of which approximately 21% are represented by collective bargaining agreements or an employee union. Although we believe that our relationship with our employees is good, and we have not experienced any material work stoppages, work stoppages may occur in the future. Union activities also may significantly increase our labor costs, disrupt our operations and limit our operational flexibility. From time to time, we are subject to unfair labor practice charges, complaints and other legal, administrative and arbitration proceedings initiated against us by unions, the National Labor Relations Board or our employees, which could negatively impact our operating results. In addition, negotiating collective bargaining agreements could divert management attention, which could also adversely affect operating results. On November 29, 2024, we entered into a new collective bargaining agreement with OPEIU, which (i) extended the term of the agreement to June 30, 2026, (ii) provided for a 3.5% wage increase per annum for the term of the agreement, and (iii) made certain modifications to reflect improved terms, inclusive of a healthcare reimbursement account.
Capital and Liquidity Risks
We are subject to liquidity risk.
Liquidity is required to fund the needs of our depositors, repay borrowings, fund loan commitments and investments, pay expenditures and other obligations as they arise. Our access to funding, in adequate amounts and acceptable terms, could be impaired by a wide range of factors that affect us specifically, the financial services industry or the general economy. These factors include an economic downturn affecting our loan portfolio, adverse financial market conditions, adverse regulatory or judicial actions against labor unions, political organizations or not-for profits, or adverse regulatory actions against us.
Our access to deposits may also be affected by the liquidity needs of our depositors, particularly in an adverse interest rate or economic environment where they may be compelled to withdraw deposits. As a part of our liquidity management, we must ensure we can respond effectively to potential volatility in our customers’ deposit balances. Our total on-balance sheet deposits totaled $7.95 billion as of December 31, 2025. For instance, our on-balance sheet deposits from political campaigns, Political Action Committees ("PACs"), and state and national party committee clients totaled $1.73 billion, or 19% of total on-balance sheet deposits as of December 31, 2025. Their their deposit balances decreased significantly after the last election campaign, resulting in short-term volatility in their deposit balances held with us through election cycles. Additionally, our on-balance sheet deposits from labor unions totaled $2.05 billion, or 23% of total on-balance sheet deposits as of December 31, 2025. While historically we have been able to replace deposit outflows and borrowings as necessary, we might not be able to replace such funds in the future, especially if a large number of our depositors or those depositors with a high concentration of deposits sought to withdraw their accounts. We could encounter difficulty meeting a significant deposit outflow which could negatively impact our profitability or reputation. Any long-term decline in deposit funding would adversely affect our liquidity, but we believe our funding sources are adequate to meet any significant unanticipated deposit withdrawal. A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition.
Our business needs and future growth may require us to raise capital, but that capital may not be available or may be dilutive.
Our ability to raise capital will depend on, among other things, conditions in the capital markets, which are outside of our control, and our financial performance. Accordingly, we cannot provide assurance that such capital will be available on terms acceptable to us or at all. Any occurrence that limits our access to capital, may adversely affect our capital costs and our ability to raise capital and, in turn, our liquidity. Further, if we need to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. Any inability to raise capital on acceptable terms when needed could have a material adverse effect on our business, financial condition and results of operations and could be dilutive to both tangible book value and our share price.
In addition, an inability to raise capital when needed may subject us to increased regulatory supervision and the imposition of restrictions on our growth and business. These restrictions could negatively affect our ability to operate or further expand our operations through loan growth, acquisitions or the establishment of additional branches. These restrictions may also result in increases in operating expenses and reductions in revenues that could have a material adverse effect on our financial condition, results of operations and our share price.
We are subject to stringent capital requirements.
We are subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain. From time to time, the regulators change these regulatory capital adequacy guidelines. If we fail to meet these minimum capital guidelines and other regulatory requirements, we may be restricted in the types of activities we may conduct and we may be prohibited from taking certain capital actions, such as paying dividends and repurchasing or redeeming capital securities.
In particular, the capital requirements applicable to us under the Basel III rules, which became fully phased-in on January 1, 2019 required us to satisfy additional, more stringent, capital adequacy standards. A failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our financial condition and results of operations. In addition, these requirements could have a negative impact on our ability to lend, grow deposit balances, make acquisitions or make capital distributions in the form of dividends or share repurchases. Higher capital levels could also lower our return on equity. In July 2023, federal agencies jointly proposed revisions to the Basel III rules to implement the Basel Committee’s 2017 standards and make other changes. Subsequently, federal banking regulators have signaled that they expect to issue a revised proposal as early as 2026, thought contents of the potential revised proposal are not yet known.
Risks Related to Our Strategy
Our social responsibility positions may have a material adverse effect on our business, financial condition or results of operations.
As a socially responsible bank, we take positions to support economic, social, racial and environmental justice that are consistent with our charter as a public benefit corporation and with applicable law; however, these types of positions may be inconsistent with policies promulgated by other institutions or governmental entities, and as a result, we may become a target of public criticism, governmental scrutiny and investigation and litigation. Our positions may have a material adverse effect on our business, financial condition or results of operations.
For example, we support the recruitment and hiring of people from all backgrounds, so that our workforce reflects the communities that we serve, and we support activities that promote an inclusive workforce. We encourage the advancement of equal opportunity without the use of preferential treatment, quotas or other unlawful and discriminatory practices. Additionally, we have expressed support for certain causes through our shareholder activism, which includes the filing of shareholder proposals at other public companies and serving as plaintiffs in class action litigation. Our shareholder activism may draw opposition from other activists, state attorneys general and other governmental entities, which would require the dedication of additional resources and personnel and impact our business, financial condition or results of operation.
We may not be able to implement our growth strategy or manage costs effectively, resulting in lower earnings or profitability.
There can be no assurance that we will be able to continue to grow and to be profitable in future periods, or, if profitable, that our overall earnings will remain consistent or increase in the future. Our growth requires that we increase our loans, assets under management and deposits while managing risks by following prudent loan underwriting standards without increasing interest rate risk or compressing our net interest margin. Additionally, maintaining more than adequate capital at all times, hiring and retaining qualified employees, managing noninterest expenses and successfully implementing strategic initiatives are all key drivers to successful growth. Even if we are able to increase our interest income, our earnings may nonetheless be reduced by increased expenses, such as additional employee compensation or other general and administrative expenses and increased interest expense on any liabilities incurred or deposits solicited to fund increases in assets. Additionally, if our competitors extend credit on terms we find to pose excessive risks, or at interest rates which we believe do not warrant the credit exposure, we may not be able to maintain our lending volume and could experience deteriorating financial performance. Our inability to manage our growth successfully or to continue to expand into new markets could have a material adverse effect on our business, financial condition or results of operations.
New lines of business, products, product enhancements or services may subject us to additional risks.
From time to time, we may implement new lines of business or offer new products or product enhancements as well as new services within our existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances in which the markets are not fully developed. In implementing, developing or marketing new lines of business, products, product enhancements or services, we may invest significant time and resources, although we may not assign the appropriate level of resources or expertise necessary to make these new lines of business, products, product enhancements or
services successful or to realize their expected benefits. Initial timetables for the introduction and development of new lines of business, products, product enhancements or services may not be achieved, and price and profitability targets may not prove feasible. For example, several of our competitors have successfully introduced innovative investment management products. The introduction of such new products requires continued innovative efforts on the part of our management and may require significant time and resources as well as ongoing support and investment. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also affect the implementation of a new line of business or offerings of new products, product enhancements or services. Furthermore, any new line of business, product, product enhancement or service or system conversion could have a significant impact on the effectiveness of our internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our business, financial condition or results of operations.
Our ability to maintain our reputation is critical to the success of our business, including our ability to attract and retain customers, and failure to do so may materially adversely affect our performance.
As a fund manager, we from time-to-time engage in stockholder activism, pressing issuers on a range of corporate governance topics. This engagement has caused and could cause increased scrutiny over our own corporate governance activities. Any failure, or perceived failure, in our own corporate governance practices could damage our reputation adversely affecting our business, results of operations or financial condition.
Maintaining our reputation also depends on our ability to successfully prevent third-parties from infringing on our brand and associated trademarks. Defense of our reputation and our trademarks, including through litigation, could result in costs adversely affecting our business, results of operations or financial condition.
We are a Certified B Corporation TM . The term “Certified B Corporation” does not refer to a particular form of legal entity, but instead refers to companies certified by the B Lab, an independent nonprofit organization, as meeting rigorous standards of social and environmental performance, accountability and transparency. Our reputation could be harmed if we lose our Certified B Corporation TM status, whether by choice or by our failure to meet B Lab’s certification requirements.
The name “Amalgamated” originated with our over a 100 year union history – the Amalgamated Clothing Workers of America – and, over the course of time, other entities use the name Amalgamated, some of which are related parties or affiliates of the Bank and some that are not legally related or affiliated. As a result, we may face risks related to public scrutiny and identity confusion with those other entities that share the same name.
We face strong competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business.
The banking business is highly competitive, and we experience competition in our markets from many other financial institutions. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, non-traditional financial-services providers, other financial service businesses, including investment advisory and wealth management firms, mutual fund companies, and securities brokerage and investment banking firms, as well as super-regional, national and international financial institutions that operate offices in our primary market areas and elsewhere. As customers’ preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for banks to expand their geographic reach by providing services over the Internet and for Fintech, i.e. “non-banks” to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Because of this rapidly changing technology, our future success will depend in part on our ability to address our customers’ needs by using technology and to identify and develop new, value-added products for existing and future customers. Failure to do so could impede our time to market, reduce customer product accessibility, and weaken our competitive position. Customer loyalty can be easily influenced by a competitor’s products, especially offerings that could provide cost savings or a higher return to the customer. Moreover, this competitive industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
In October 2024, the CFPB finalized the required rule making on Personal Financial Data Rights rule to promote “open and decentralized banking” by requiring covered institutions to allow customers to authorize the transfer of certain customer information to other financial institutions. This rule enables greater competition among banks and non-banks for consumer market share, which could have a material adverse effect on our business, financial condition or results of operations. However, the rule's rollout is currently delayed by a "stop work" order issued by the CFPB in early 2025.
Difficulties in obtaining regulatory approval for acquisitions and in combining the operations of acquired entities with the Company’s own operations may prevent us from achieving the expected benefits from our acquisitions.
The Company has expanded its business through a past acquisition and may do so again in the future. Our ability to complete acquisitions is in many instances subject to regulatory approval, and we cannot be certain when or if, or on what terms and conditions, any required regulatory approvals would be granted. In addition, inherent uncertainties exist when integrating the operations of an acquired entity, including in ability to fully achieve the Company’s strategic objectives and planned operating efficiencies in an acquisition, disruption of the Company’s business and diversion of management’s time and attention and exposure to unknown or contingent liabilities of acquired entities.
Legal, Accounting, Regulatory, and Compliance Risks
Change s in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.
Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. From time to time, the FASB changes the financial accounting and reporting standards that govern the preparation of our financial statements. As a result of such changes, whether promulgated or required by the FASB or other regulators, we could be required to change certain of the assumptions or estimates we have previously used in preparing our financial statements, which could negatively affect how we record and report our results of operations and financial condition generally.
Our accounting estimates and risk management processes and controls rely on analytical and forecasting techniques and models and assumptions, which may not accurately predict future events.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment of the most appropriate manner in which to report our financial condition and results. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have been reported under a different alternative.
Certain accounting policies are critical to presenting our financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. Because of the uncertainty of estimates involved in this matters, we may be required to significantly increase the allowance or sustain credit losses that are significantly higher than the reserve provided. Any of these could have a material adverse effect on our business, financial condition or results of operations. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .”
The banking industry is heavily regulated and that regulation, together with any future legislation or regulatory changes, could limit or restrict our activities and adversely affect our operations or financial results.
We operate in an extensively regulated industry and we are subject to examination, supervision, and comprehensive regulation by various federal and state agencies. The Company is subject to Federal Reserve regulations, and the Bank is subject to regulation, supervision and examination by the FDIC and the NYDFS.
The current presidential administration is implementing a regulatory reform agenda that is significantly different from that of the prior administration, impacting the rule making, supervision, examination and enforcement of the banking regulation agencies and our ability to respond to those changes. The 2025 GENIUS Act and related federal mandates, as well as NYDFS rulemaking, to curb “debanking” limits our ability to manage credit and reputational risk, potentially resulting in increased compliance costs to justify account closures, heightened exposure to fraud and AML losses resulting from our limited ability to terminate relationships with customers in high-risk sectors, and adverse impacts on our operational efficiency because of the 30-day mandatory notice period for most account closures. Furthermore, these anti-debanking measures may expose us to customer-led litigation alleging violation of fair access standards. For a more detailed description of anti-debanking measures, see “Fair Lending Requirements.”
Our compliance with banking regulations is costly and restricts some of our other activities besides account closures, including payment of dividends, mergers and acquisitions, investments, loans and interest rates and locations of offices. We are also subject to capitalization guidelines established by our regulators, which require us to maintain adequate capital to support our business. If, as a result of an exam, a banking agency were to determine that the financial condition, capital adequacy, asset quality, asset concentration, earnings prospects, management, liquidity sensitivity to market risk or other aspects of any of our operations has
become unsatisfactory, or that we or our management are in violation of any law or regulation, the banking agency could take a number of different remedial actions as it deems appropriate.
Furthermore, our regulators also have the ability to compel us to take certain actions, or restrict us from taking certain actions entirely, such as actions that our regulators deem to constitute an unsafe or unsound banking practice. Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, could result in sanctions by regulatory agencies (such as a memorandum of understanding, a written supervisory agreement or a cease and desist order), civil money penalties or damage to our reputation, all of which could have a material adverse effect on our business, financial condition or results of operations.
Our trust and investment management businesses are highly regulated.
Through our investment management division, we provide investment management, custody, safekeeping and trust services to institutional clients. These products and services require us to comply with a number of regulations issued by the Department of Labor, the Employee Retirement Income Security Act, the FDIC Statement of Principles of Trust Department Management, and federal and state securities regulators.
Our failure to comply with applicable laws or regulations could result in fines, suspensions of individual employees, litigation, or other sanctions. Any such failure could have an adverse effect on our reputation and could adversely affect our business, financial condition, results of operations or prospects.
The Federal Reserve may require us to commit capital resources to support the Bank.
The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to the Bank if the Bank experiences financial distress.
A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects.
We face a risk of noncompliance with the BSA and other anti-money laundering statutes and regulations and corresponding enforcement proceedings.
The BSA, the PATRIOT Act, the Anti-Money Laundering Act of 2020, and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs, and to file suspicious activity and currency transaction reports as appropriate. FinCEN, established by the U.S. Treasury Department to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and IRS. There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. Federal and state bank regulators also focus on compliance with BSA and anti-money laundering regulations. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we may acquire are deficient, we would be subject to liability, including fines, and regulatory actions such as restrictions on our ability to pay dividends and engage in acquisitions, which would negatively impact our business, financial condition and results of operations. In recent years, sanctions that the regulators have imposed on banks that have not complied with all requirements have been especially severe. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to the Community Reinvestment Act and federal and state fair lending laws, and failure to comply with these laws could lead to material penalties.
The Community Reinvestment Act (“CRA”), the ECOA and the FHA impose nondiscriminatory lending requirements on financial institutions. The FDIC, the NYDFS, the Department of Justice, and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the CRA and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisitions and expansion activity, which could negatively impact our reputation, business, financial condition and results of operations.
We are exposed to litigation and compliance risks related to our Socially Responsible Banking business model.
We may become the target of public criticism, litigation and regulatory and enforcement actions because of our ESG products and our social responsibility mission. For example, anti-debanking regulations promulgated under the GENIUS Act and at the NYDFS target financial institutions that will not lend or have made statements about not lending to certain industries. The potential impact of anti-debanking regulations on our business is discussed under the risk factor, “ The banking industry is heavily regulated and that regulation, together with any future legislation or regulatory changes, could limit or restrict our activities and adversely affect our operations or financial results.”
There has been a significant rise in climate-related probes and litigation, including greenwashing claims, against banks. "Greenwashing" involves a business making misleading sustainability-related claims to investors or consumers, usually to boost its reputation and bottom line. Furthermore, ESG products in the banking and financial services sectors have become subject to heightened regulatory scrutiny for potentially misleading claims and poor controls. Allegations that our ESG products contain claims that have misled investors or consumers, or that the claims are subject to poor controls, even if ultimately unfounded, may fundamentally damage our reputation and our financial performance.
Our financial condition may be affected negatively by the costs of litigation.
In difficult market conditions, the volume of claims and amount of damages sought in litigation and investigations against financial institutions have historically increased. We may be involved from time to time in a variety of litigation, investigations or similar matters arising out of our business. In many cases, we may seek reimbursement from our insurance carriers to cover such costs and expenses. Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed our insurance coverage, they could have a material adverse effect on our business, financial condition and results of operations. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.
From time to time we are, or may become, involved in suits, legal proceedings, information-gatherings, investigations and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.
Many aspects of the banking business involve a substantial risk of legal liability. From time to time, we are, or may become, the subject of information-gathering requests, reviews, investigations and proceedings, and other forms of regulatory inquiry, including by bank regulatory agencies, self-regulatory agencies, and law enforcement authorities. The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way we conduct our business or reputational harm.
Risks Related to Our Common Stock
Shares of our common stock could face volatility due to banking sector uncertainty.
Bank holding company stock prices are sensitive to generalized concerns about the health of the banking industry as a whole, regardless of the health of a particular institution. Ongoing stress in the banking sector could adversely impact the market price of our common stock and our business, financial condition and results of operations. We cannot predict if investors will find our common stock less attractive as a result of these market stresses. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Our ability to pay dividends is subject to regulatory limitations and the Bank’s ability to pay dividends to us is also subject to regulatory limitations.
The Company is a bank holding company that conducts substantially all of its operations through the Bank. As a result, our ability to make dividend payments on our common stock depends primarily on certain federal regulatory considerations and the receipt of dividends and other distributions from the Bank. As is the case with all financial institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates, and in economic conditions in general.
Holders of our common stock are only entitled to receive such cash dividends as our Board of Directors may declare out of funds legally available for such payments. Although we currently expect to continue to pay quarterly dividends, any future determination relating to our dividend policy will be made by our Board of Directors and will depend on a number of factors. Any actual determination relating to our dividend policy and the declaration of future dividends will be made, subject to applicable law and regulatory approvals, by our Board of Directors and will depend on a number of factors, including: (i) our historical and projected financial condition, liquidity and results of operations, (ii) our capital levels and needs, (iii) tax considerations, (iv) any acquisitions or potential acquisitions that we may examine, (v) statutory and regulatory prohibitions and other limitations, (vi) the terms of any credit agreements or other borrowing arrangements that restrict our ability to pay cash dividends, (vii) general economic conditions and (viii) other factors deemed relevant by our Board of Directors. The Board of Directors may determine not to pay any cash dividends at any time. There can be no assurance that we will pay any dividends to holders of our common stock, or as to the amount of any such dividends. For more information, see “ Cautionary Note Regarding Forward-Looking Statements ” and “ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy. ”
We have several significant investors whose individual interests may differ from yours.
A significant percentage of our common stock is currently held by investment funds affiliated with an amalgamation of Workers United and numerous joint boards, locals or similar organizations authorized under the constitution of Workers United (the “Workers United Related Parties”). Workers United Related Parties own approximately 38% of our common stock. Significant stockholders will have a greater ability than our other stockholders to influence the election of directors and the potential outcome of other matters submitted to a vote of our stockholders, including mergers and acquisition transactions, amendments to our certificate of incorporation and bylaws, and other extraordinary corporate matters. The interests of these investors could conflict with the interests of our other stockholders, and any future transfer by these investors of their shares of common stock to other investors who have different business objectives could adversely affect our business, results of operations, financial condition, prospects or the market value of our common stock.
Workers United Related Parties have also entered into agreements with us that contain certain provisions, including, among others, provisions relating to our governance, information rights, tag-along rights, board designation rights, and certain board and stockholder approval rights. Additionally, Workers United Related Parties have entered into agreements with us that provide certain registration rights under existing registration rights agreements, and in the case of the Workers United Related Parties, the establishment of an advisory board.
Transfers of our common stock owned by the Workers United Related Parties could adversely impact your rights as a stockholder and the market price of our common stock.
The Workers United Related Parties may transfer all or part of the shares of our common stock that they own, without allowing you to participate or realize a premium for any investment in our common stock, or distribute shares of our common stock that it owns to their members. Sales or distributions by the Workers United Related Parties of such common stock could adversely impact prevailing market prices for our common stock.
Additionally, a sale of common stock by the Workers United Related Parties to a third party could adversely impact the market price of our common stock and our business, financial condition and results of operations. For example, a change in control caused by the sale of our shares by the Workers United Related Parties may result in a change of management decisions and business policy.
Shares of our common stock are subject to dilution.
We may issue additional shares of our common stock in the future pursuant to current or future equity compensation plans or in connection with future acquisitions or financings. If we choose to raise capital by selling shares of our common stock for any reason, the issuance would have a dilutive effect on the holders of our common stock and could have a material negative effect on the value of our common stock.
