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Item 1A. Risk Factors

2026-03-17 compared with 2025-03-11 · 689 added, 1440 removed, 100 unchanged (96% of the section changed)

These disclosures under this item reflect the Company’s

beliefs and opinions as to factors that could materially and

adversely affect the Company and its securities in the future.

References to past events are examples only,

intended to be a complete listing or a representation as to whether or not such factors

have occurred in the past or their

likelihood of occurring in the future.

Any of the following risks could harm our business, results of operations and

financial condition and an investment in our

The risks discussed below also include forward-looking statements, and our

actual results may differ substantially

from those discussed in these forward-looking statements.

Risk Factor Summary

The following summarizes the risks provided after this summary and is qualified

by the more detailed discussion of “Risk

Factors” that follows this Summary,

and which should be read in their entirety.

Our risks include operational risks,

financial risks and legal and regulatory risks, which are related and

intertwined as discussed more fully in the Risk Factors

that follow this summary.

Operational risks are inherent in our business, and include:

The effects of local, national and regional market and economic conditions

and cyclicality, including the

and rates of change in inflation and interest rates, and the effects on depositors,

borrowers and markets, including

the real estate and securities markets;

Our allowance for credit losses is based on estimates and judgments and may prove

to be inadequate to our credit

The risks and costs of nonperforming assets

The soundness of other financial institutions and perceptions regarding our

industry, especially when other

experience difficulties or fail;

Our concentrations in commercial real estate loans in our market;

We operate in

a highly competitive market and compete against a number of larger national and

competitors, as well as smaller institutions, nonbanks and credit unions;

Our ability to attract and retain key people;

Inflation and strong labor markets may affect our non-interest expenses;

Technological changes

affect our business, and we may have fewer resources than our

larger regulated and

unregulated competitors, both in and outside our market area, which may increase

the competition we face;

Potential gaps in our risk management, including managing the risks related

to maintaining our data security and

cybersecurity and those of our third-party service providers;

Continuity risks to us and our service providers due to power,

information technology and telecommunication

disruptions and outages, could affect our customer service,

reputation and our results of operations, financial

condition, customer relationship and reputation;

Risks of severe weather, natural disasters, climate changes,

epidemics and severe health issues in the population,

wars and acts of terrorism and other events;

Future acquisitions may disrupt our business, dilute shareholder value

and adversely affect our operating results

and financial condition, among other risks.

Financial risks result in part from our operational risks and the risk of our business,

Increases in costs of funds due to inflation, monetary and fiscal policies, changes

in costumer behaviors and

competitive pressures;

Our results of operations and financial condition, including the values of our

assets and liquidity, may be

by changes in interest rates and interest rate levels, the shape of the yield curve and

economic conditions;

Liquidity risks, including the costs and availability of funding, and the

liquidity of our assets, including our

investment securities portfolio, and institutional lending sources;

Changes in accounting and tax rules;

The adequacy of our capital and availability of capital, if needed;

Potentially excessive risk taking by our associates;

Our ability to pay dividends depends on our earnings, liquidity and regulatory

requirements related to our capital

and our risks;

Our common stock trades in limited volumes.

Legal and regulatory risks include:

The Company is a legal entity separate and distinct from the Bank, and

transactions between the Bank and the

Company are limited by law;

The Company is required to be a source of financial and managerial strength

to the Bank, even in circumstances

where further investment in the Bank may not be warranted;

Privatization of Fannie Mae and Freddie Mac incident to the ending of their conservatorships

and the resulting

effects on the costs and availability of mortgage loans and the mortgage

markets, generally, and

the Company as a

mortgage originator, and seller and

servicer of residential mortgage loans;

The scope, volume, complexity and clarity of regulations and regulatory

and legal changes affect us, increase the

time and costs of compliance and may limit our business and adversely

affect our financial condition and results of

The pace and volume of regulatory changes and interpretations, especially by

the bank regulators, the CFPB and

the SEC, and well as numerous Executive Orders, and changes in government

leadership, personnel and policies.

Even where changes ultimately will benefit the Company,

changes in regulation and policies require time and

attention, and involve costs to implement;

Litigation, investigations and other claims by government agencies

and private parties and regulatory actions,

including those related to assertions of compliance failures;

The amounts and changes in the capital we are required to maintain in respect

of our business and risks, and

regulatory perceptions of us and our industry;

Liquidity requirements and changes in rules that affect brokered

and reciprocal deposits and other sources and

measures of liquidity.

Additional Executive Orders and Administration and regulatory

decisions, directives and actions, including modifications

or changes to those discussed in this report, may occur at any time with currently

unpredictable effects.

financial condition and an investment in our stock.

The risks discussed below also include forward-looking statements, and

our actual results and financial condition may differ

substantially from those discussed in these forward-looking statements.

Operational Risks

Market conditions and economic cyclicality may adversely affect our industry.

We believe the

following, among other things, may affect us in 2025:

Extraordinary monetary and fiscal stimulus in 2020 and in early 2021 offset

certain of the COVID-19 pandemic’s

adverse economic effects, but together with supply chain disruptions,

continued consumer demand, Russia’s war

in Ukraine and its effects on energy and food prices,

and tight labor markets, resulted in inflation.

Inflation began

running at levels unseen in decades and well above the Federal Reserve’s

long term inflation goal of 2.0%

Beginning in March 2022, the Federal Reserve raised its target federal

funds interest rates and reduced

its securities holdings in an effort to reduce inflation.

Inflation subsided in 2024.

In February 2025 inflation

remains above the Federal Reserve’s

target rate, the labor market remains strong and the Federal Reserve cut its

target federal funds rate in September through December 2024

100 basis points from 5.25-5.50% to 4.25%-4.50%,

and reduced the rate of decline in reinvestments of maturing securities proceeds.

The new presidential Administration that took office in January

2025 has established DOGE to increase

government efficiency and reduce fiscal expenditures, imposed

and threatened tariffs, and proposed tax cuts and

tax cut extensions, the net effect of which is unknown.

The nature and timing of any future changes in monetary

and fiscal policies, government policies and their administration and personnel,

and their effects on us cannot be

Market developments, including unemployment, inflation

and price levels, stock and bond market volatility,

Market conditions and economic cyclicality may adversely affect us and our industry.

The Company’s income depends

largely on the difference between interest income

earned on its loans and securities

(earning assets) and its interest expense on its deposits and other borrowings.

Market interest rates affect the spread

between our interest income and our interest expense and the values of our

investment securities.

Market rates are affected

by Federal Reserve monetary policy,

fiscal policy, inflation and inflation

expectations, and various other factors.

more directly affects our noninterest costs, as well as our customers’

savings and payment behaviors.

Market developments, including unemployment rates, price and inflation

levels, stock and bond market volatility,

changes, including those resulting from Russia’s

war in Ukraine and governmental fiscal, operational and

monetary policies affect consumer confidence

levels, economic activity and interest rates.

Increases in market

interest rates and inflation, and adverse changes in consumer and business confidence

may change customers’

savings and payment behaviors, including potential increases in loan delinquencies

and default rates.

affect our credit quality,

and our results of operations and financial condition.

Our ability to assess the creditworthiness of our customers and those we do business with,

and the values of our

assets and loan collateral may be adversely affected and less predictable

as a result of inflation and fluctuating

market interest rates and changes in monetary and fiscal policies.

CECL on January 1, 2023 as

required by generally accepted accounting principles (“GAAP”).

CECL changed the loss model to take into

account current expected credit losses in place of the incurred loss method used historically

war in Ukraine and other wars and armed conflicts, tariffs

policies, and government fiscal, operational and monetary policies affect

consumer confidence levels, economic activity

and interest rates.

Increases in inflation and market interest rates and future expectations

of these, and adverse changes in

consumer and business confidence may change customers’ savings, payment

and borrowing behaviors, and may increase in

loan delinquencies and loan losses.

These could affect our

credit quality, our results of

operations and financial condition.

Changes in market interest rates and the shape of the yield curve affect

the value of our investment securities.

interest rates may result in unrealized losses on investment securities and accumulated

other comprehensive income

Increases in AOCI reduce our reported stockholders’ equity.

Our allowance for loan losses is affected by general economic conditions

and we may be negatively affected by credit risk

Our models for determining our allowance for credit losses are based on “current

expected credit losses” (“CECL”)

principles in generally accepted accounting principles (“GAAP”),

and may be adversely affected by changes in the

CECL uses current

expected credit losses instead of the “as incurred” loss method used historically

to estimate losses inherent in our credit exposures.

The process for estimating expected losses requires difficult,

subjective, and complex judgments, including forecasts of economic

conditions, unemployment levels in Alabama,

and how those economic predictions might affect the ability of our

borrowers to repay their loans or the value of

Changes in economic conditions and factors used in our CECL models may

increase the variability of our

The process for estimating

expected losses requires difficult, subjective

and complex judgments, including forecasts of economic conditions,

and how those economic predictions might affect the

ability of our borrowers to repay their loans or the value of assets.

Macroeconomic factors used in our CECL model

include the Alabama unemployment rate, the Alabama home price index, the national

commercial real estate price index

and the Alabama gross state product.

Changes in economic conditions and factors used in our CECL models, including the

effects of changes in government policies, including

monetary and fiscal policies, may increase the variability of our

provisions for loan losses and our earnings.

Changes in market interest rates and the shape of the yield curve affect

the value of our investment securities and

our other accumulated other comprehensive income or “AOCI.”

Our allowance for loan losses may prove inadequate

or we may be negatively affected by credit risk exposures.

We periodically

review the allowance for loan losses for adequacy considering economic conditions

and trends, collateral

values and credit quality indicators, including past charge-off

experience and levels of past due loans and nonperforming

certain that our allowance for loan losses will be adequate over time to cover credit

losses in our

portfolio because of unanticipated adverse changes in the economy,

including fiscal and monetary policy changes, inflation,

market conditions or events adversely affecting specific customers,

industries or markets, including disruptions of supply

chains, the war in Ukraine, changes in taxes and regulations and changes in borrower

Certain borrowers and their

businesses and real estate and commercial projects and businesses may be adversely

affected by inflation and higher interest

rates, and economic slowdowns arising from tighter monetary policies, and

may request or need loan modifications and

businesses will be unable to fully pass on increased costs due to inflation, supply

chain disruptions and

changes and other factors, and their profits may shrink.

If the credit quality of our customer base materially decreases, if the

risk profile of the market, industry or group of customers changes materially

or weaknesses in the real estate markets

worsen, borrower payment behaviors change, or if our allowance for loan

losses is not adequate, our business, financial

condition, including our liquidity and capital, and results of operations

could be materially adversely affected.

accounting standard for estimating expected future loan losses, became effective

for the Company beginning January 1,

2023, and its effects upon the Company over a full business cycle

The CECL model incorporates various

economic condition factors, where changes in fiscal and monetary policy,

as well as market interest rates and unemployment

rates in our markets, among other factors, could result in more volatility in

our provisions for loan losses under CECL, which

could adversely affect our net income.

The CECL standard has not been in effect over a full business cycle and

effects in times of severe economic stress may not be fully known.

See Note 1 to our Financial Statements –

“Allowance for Credit Losses – Loans.”

Nonperforming and similar assets take significant time to resolve

and may adversely affect our results of operations

financial condition.

Our nonperforming loans were 0.09% of total loans as of December 31, 2024,

and we had no other real estate owned as

result of foreclosures or otherwise in full or partial payments in respect of loans (“OREO”).

Non-performing assets may

adversely affect our net income in various ways.

We do not record

interest income on nonaccrual loans or OREO and these

assets require higher loan administration and other costs, thereby adversely

affecting our income.

Decreases in the value of

these assets, or the underlying collateral, or in the related borrowers’ performance

or financial condition, whether or not due

to economic and market conditions beyond our control, could adversely

affect our business, results of operations and

financial condition.

In addition, the resolution of nonperforming assets requires commitments of time from

which can be detrimental to the performance of their other responsibilities.

Loan deferrals and modifications made to help

resolve borrower issues and avoid foreclosures may not be successful.

There can be no assurance that we will not

experience increases in nonperforming loans in the future, much of which

is affected by the economy and the levels of

interest rates, generally.

for Credit Losses – Loans.”

Unanticipated adverse changes in the economy,

including those resulting from

fiscal, monetary or other government

policies adversely

We periodically

review the expected effects of economic conditions and trends in reviewing

our allowance for credit

We may be adversely affected

because of unanticipated adverse changes in the economy,

fiscal and monetary policy changes, unemployment levels, inflation,

market conditions or events adversely affecting

specific customers, industries or markets, including disruptions of supply

chains, war and armed conflicts, changes in taxes

and regulation, and changes in borrower behaviors.

Borrowers and their businesses, and real estate and commercial

projects and businesses may be adversely affected by inflation

and higher interest rates, as well as from tighter monetary

policies, and may request or need loan modifications and deferrals.

Businesses may be unable to fully pass on to their

customers increased costs due to inflation, supply chain disruptions, tariffs

and other factors, and their cash flows and

profits may be adversely affected.

If the credit quality and risk profile of our customers materially change adversely,

the risk profile of the market, industry or group of customers changes materially,

or conditions in the real estate and other

markets worsen, or borrower payment behaviors change, our business,

could be materially

adversely affected.

Changes in the real estate markets, including the

secondary market for residential mortgage loans,

may continue to

adversely affect us.

Beginning in March 2022, inflation and the Federal Reserve increases in interest rates to

fight inflation have caused

mortgage rates to increase significantly.

Higher interest rates and the increased level of housing costs since 2020 have

origination and secondary markets for residential mortgage

continue to adversely affect us.

Inflation and the Federal Reserve monetary actions to fight inflation have caused

residential mortgage rates to increase

significantly.

interest rates and the increased prices of housing during and following the COVID-19 pandemic

slowed housing sales.

Although short term interest rates decreased in last half of 2024, longer term rates, including

mortgage rates, have remained elevated.

Inventories of existing homes for sale have remained generally low,

believe that higher mortgage rates discourage potential sellers from selling

their existing houses and incurring higher

mortgage costs on replacement homes.

These conditions have adversely affected housing affordability

and increased

monthly mortgage payments.

These conditions adversely affect our mortgage loan production

and may affect the value of

residential mortgage collateral.

Commercial real estate projects’ economic assumptions may be adversely

higher interest rates, and certain projects with short term and/or unhedged

variable rate debt may be especially affected by

increased interest rates and/or a slower economy.

The CFPB’s mortgage and servicing

rules, including TRID rules for closed end credit transactions, enforcement actions,

reviews and settlements, affect the mortgage markets and our mortgage

The Tax Cuts and

Jobs Act’s (the “2017 Tax

Act”) limitations on the deductibility of residential mortgage interest and state

and local property and other taxes often called “SALT,”

could adversely affect consumer behaviors and the volumes of

housing sales, mortgage and home equity loan originations, as well as the value

and liquidity of residential property held as

collateral by lenders such as the Bank, and the secondary markets for

single and multi-family loans.

construction and development loans for residential development may be similarly

adversely affected.

The new Trump

administration has indicated it is considering increasing the amount of

SALT permitted

to be deducted for federal income

Unless extended, many provisions of the 2017 Tax

Act, including the cap on SALT

deductions expire at the end of

2025, and the marginal individual tax brackets will increase.

Fannie Mae and Freddie Mac have been in conservatorship since September

The newly appointed Secretary of

Housing and Urban Development has stated that coordinating the effort

to privatize these GSEs would be his priority.

Since these GSEs dominate the residential mortgage markets, any changes

in their operations and requirements, as well as

their respective restructurings and capital and the costs of their borrowings

as private institutions, could adversely affect the

primary and secondary mortgage markets, and our residential mortgage

businesses, our results of operations and the returns

These conditions have adversely affected

housing affordability and increased monthly mortgage

Although short term interest rates have decreased since Fall 2024, longer

term mortgage rates have remained

higher than before the pandemic, and purchase money residential mortgages

and refinancings continue to be adversely

Our mortgage loan production and income have

been adversely affected.

Our concentration of commercial real

estate loans could result in further increased

loan losses, and adversely affect our

business, earnings, and financial condition.

Commercial real estate (“CRE”) is cyclical.

Rapid CRE growth and concentrations of CRE loans, in dollar amounts and

geographic concentrations, present risks of possible loss.

Loans for the acquisition and development of land and residential

construction which are generally viewed as higher risk than loans on existing

We had approximately

68% of our loan portfolio in CRE loans at year-end 2025, of which approximately

18% were owner-

The bank regulators’ CRE Guidance requires banks with high levels of CRE and

CRE growth, to implement

improved underwriting, internal controls, risk management policies and

portfolio stress testing, as well as higher levels of

allowances for possible losses and capital levels.

Increases in interest rates beginning in March 2022 and reduced market

transactions may adversely affect the assumptions and performance

of CRE, especially for projects financed with short term

or unhedged variable rate debt, and the ability of CRE borrowers to refinance

on terms that their projects can support.

Lower demand for CRE and fewer CRE purchase and sale transactions, and reduced

availability of, and higher interest rates

and costs for, CRE loans could adversely

affect the values and liquidity of CRE collateral and our CRE loans, and

other real estate owned, and therefore our earnings and financial condition,

including our capital and liquidity.

Sheet Analysis - Loans” and “Supervision and Regulation – CRE.”

Resolution of the Fannie Mae and Freddie Mac Conservatorships

may have adverse consequences

Fannie Mae and Freddie Mac (the “GSEs”) have been in conservatorship

since September 2008.

The federal government is

considering privatizing these GSEs and ending the conservatorship.

Since these GSEs dominate the residential mortgage

markets, any changes in their operations and requirements, as well as their respective

restructurings, and the costs of their

capital and borrowings as private institutions, could adversely affect

the primary and secondary mortgage markets, and our

residential mortgage businesses, our results of operations and the returns

on capital deployed in these businesses.

Resolution of these extremely large GSEs will be complex,

and the timing and

effects of such resolution and the effects on

mortgage originators and the mortgage markets and their participants, including

the Company, cannot be

be contractually obligated to repurchase

and the timing and effects of such resolution and the effects

mortgage originators and the mortgage markets and their participants,

including the Company,

cannot be predicted.

be obligated to repurchase

mortgage loans we sold to third parties on terms unfavorable

As part of its routine business, the Company originates mortgage loans

that it subsequently sells in the secondary market,

generally to Fannie Mae.

In connection with such loan sales, the Company makes customary representations and

warranties, the breach of which may result in the Company being required

to repurchase the loan or loans.

Furthermore, the

amount paid may be greater than the fair value of the loan or loans at the time of the

Although mortgage loan

repurchase requests made to us have been limited historically,

if these increased, we may have to establish reserves for

possible repurchases and adversely affect our results of

operation and financial condition.

Mortgage servicing rights requirements

may change and require

us to incur additional costs and risks.

The CFPB’s residential mortgage

servicing standards may adversely affect our costs to service residential

mortgage loans.

Reduced mortgage activity due to higher market interest rates has decreased our

generation of new mortgage loans and

related MSRs.

This may be offset partially by decreases in mortgage

prepayments and refinancings, and corresponding

increases in the duration of our existing MSRs and their values.

This net effect could reduce our aggregate income from

servicing these types of loans and make it more difficult and costly to

timely realize the value of collateral securing such

loans upon a borrower default.

The Basel III Capital Rules relating to MSRs may also increase the potential

required as a result of MSRs, when considered with other capital rule adjustments

and deductions.

The Company originates residential mortgage loans.

sells these loans, primarily to Fannie Mae, pursuant to

customary contract representations and warranties.

Mortgage buyers

may request that sellers repurchase mortgages for

breach of their seller obligations, if the mortgages do not perform.

Such requests increased substantially during the Credit

Although we have had negligible mortgage loan repurchase requests historically,

including during the Credit Crises,

a stressed economy could increase mortgage loan credit issues that may increase mortgage

repurchase requests.

The soundness of other financial institutions could adversely affect us.

execute transactions with counterparties in the financial services industry,

including brokers and dealers,

central clearinghouses, banks, including our correspondent banks and

other financial institutions.

Our ability to engage in

routine investment and banking transactions, as well as the quality and values of our

investments in holdings of obligations

of other financial institutions such as the FHLB-Atlanta, could be adversely affected

by the actions, financial condition,

profitability and regulation of such other financial institutions, including

the FHLB-Atlanta and our correspondent banks.

including securities firms, central

clearinghouses, and banks.

Our ability to engage in routine investment

and banking transactions, as well as the quality and

values of our investments in holdings of obligations of other financial institutions

such as the FHLB-Atlanta, could be

adversely affected by the actions, financial condition, profitability

and regulation of such other financial institutions.

Financial services institutions are interrelated as a result of shared

1 unchanged sentence

relationships.

The failures of Silicon Valley

Bank, Signature Bank and First Republic Bank in March and May 2023 due

to concentrations

of deposits and depositors holding large amounts of deposits in

excess of FDIC insurance limits, as well as flawed business

models and management, adversely affected the financial

system and public confidence.

These resulted in increased

regulatory scrutiny of bank liquidity,

funding and capital, depressed bank stock values generally,

and higher FDIC deposit

insurance premiums on the largest banks.

The federal bank regulators have been advocating more use of the Federal

Reserve discount window to improve bank

At the same time, the 2023 bank failures have also led to calls to reduce Federal Home Loan Bank lending

Traditionally,

the Federal Home Loan Banks have been stable sources of liquidity and funding for banks.

Federal Housing Finance Agency (“FHFA)

regulates the Federal Home Loan Banks.

FHLBank System at

Focusing on the Future

2023) indicates less traditional

Federal Home Loan Bank lending to banks, especially

banks experiencing financial stress.

Sandra Thompson, the FHFA

Director retired on January 19, 2025 and Bill Pulte has

been nominated to succeed her, subject to

Senate confirmation.

views on Federal Home Loan Bank lending to

banks are unknown.

These changes, together with any exposures that other institutions may

have to crypto or digital assets, or cybersecurity and

data breaches, could cause disruption and unexpected changes in the industry.

The Trump Administration has issued

Executive Order “Strengthening American Leadership in Digital Financial

and Congressional hearings on

“debanking” may increase the use of digital assets and the volume of digital

asset transactions with, and the risks to, banks.

Any losses, defaults by, or

failures of, the institutions we do business with could adversely affect our holdings

of the equity

in such other institutions, our participation interests in loans originated by

other institutions, and our business, including our

liquidity, financial condition

and earnings.

several banks

Failures and near failures of several mid-sized banks in Spring 2023 caused significant

market volatility

for financial

service companies’

securities and

changes in regulatory views and emphases that

may adversely affect us and may not be disclosable under law.

organizations,

regional banks

concerns about

credit quality

dilutive equity capital raise.

These failures

have resulted

in bank regulators

focusing supervisory

activities, generally,

on capital adequacy

and liquidity

concentrations

relationships;

liquidity plans

director resolutions,

understanding, and

other regulatory

criticism, and

formal, public

enforcement actions.

“confidential

organizations.

capital, liquidity,

resolution planning of banking organizations with over

$100 billion in assets.

Our concentration of commercial real

estate loans could result in further increased

loan losses, and adversely affect our

business, earnings, and financial condition.

Commercial real estate, or CRE, is cyclical and poses risks of possible loss due

to concentration levels and the risks of the

assets being financed, which include loans for the acquisition and development

of land and residential construction.

federal bank regulatory agencies’ issued guidance on “Concentrations

in Commercial Real Estate Lending” in 2006 (the

“CRE Guidance”).

The CRE Guidance defines CRE loans as exposures secured by raw land, land development

construction loans (including 1-4 family residential construction

loans), multi-family property,

and non-farm non-

residential property,

where the primary or a significant source of repayment is derived from rental income associated

the property (that is, loans for which 50% or more of the source of repayment comes from third

party, non-affiliated,

income) or the proceeds of the sale, refinancing, or permanent financing of the

Loans to REITs and unsecured

loans to developers that closely correlate to the inherent risks in CRE markets are also CRE loans.

Loans on owner

occupied commercial real estate are generally excluded from CRE for purposes of

this guidance.

Excluding owner occupied commercial real estate, we had 42% of our loan portfolio

in CRE loans at year-end 2024

compared to 40% at year-end 2023.

The bank regulators continue to scrutinize CRE lending and require banks with

elevated CRE under the CRE Guidance, to implement improved underwriting,

internal controls, risk management policies

and portfolio stress testing, as well as higher levels of allowances for possible losses and

capital levels as a result of CRE

lending growth and exposures.

Increases in interest rates beginning in March 2022 and reduced market

transactions may

adversely affect the assumptions and performance of CRE, especially

for projects financed with short term or unhedged

variable rate debt, and the ability of CRE borrowers to refinance on terms that their

projects can support.

for CRE and fewer CRE purchase and sale transactions, and reduced availability

of, and higher interest rates and costs for,

CRE loans could adversely affect CRE values and liquidity,

our CRE loans and sales of OREO, and therefore our earnings

and financial condition, including our capital and liquidity.

issues for bank stocks, regulatory enforcement actions and uncertainty in

the investor community and among bank

regulators, customers and investors, generally.

In such situations, depositors and other customers tend to reduce their

uninsured deposits and bank supervisors more closely scrutinize bank risks.

These failures resulted in bank regulators

focusing, generally,

on capital adequacy and liquidity in light of bank growth rates, customer,

asset and deposit

concentrations and risks;

uninsured deposit levels;

crypto business

and customers.

About the same time, smaller

banks’ engagement with third-party vendors or “partners” providing

digital, electronic and (“BaaS”) and fintech

relationships raised bank regulatory concerns and enforcement actions

regarding such activities and their effects on bank

safety and soundness;

the banks’ strategic, capital and liquidity

plans and contingency plans;

and vendor diligence and risk

Any losses, defaults by, or

failures of, the institutions we do business with or which affect could

adversely affect our

business, including our liquidity,

financial condition and earnings.

The federal government’s

digital innovation focus may increase our competition

and operational risks

The Executive Order “Strengthening American Leadership in Digital Financial Technology”

(2025) and the federal bank

regulators’ implementation of it, including

rapidly chartering new digital asset banks and trust companies, encouraging

stablecoins and other digital assets, as well as

investigating “de-banking” of the crypto industry and others,

the use of digital assets and the volume of digital asset transactions, and

the risks of such transactions to banks and to

financial stability, generally.

The proposed CLARITY Act legislation may enable the payment of yield or interest

equivalents on stablecoins that may compete with bank transaction accounts.

These changes could increase competition,

disruption and unexpected changes in the banking industry,

including us.

Increases in banks’ and other financial services

companies’ direct and indirect risk exposures to crypto or digital assets may increase their

cybersecurity and data breach

risks, fraud risks, and AML/CFT and sanctions compliance risks.

Our future success is dependent on our ability

to compete effectively in highly competitive markets.

The East Alabama banking markets where we operate are highly competitive

and our future growth and success will

depend on our ability to compete effectively in these markets.

This MSA is served by 19 banks, 10 of which are

headquartered outside of Alabama.

Other banks have 35 offices in our MSA.

National and regional competitors that have

offices in our market include J.P.

Morgan Chase, Wells

Fargo, Truist, PNC, Regions,

National, SouthState and

Lee County and the surrounding areas of East Alabama, where we primarily operate,

are highly competitive.

future growth and success will depend on our ability to compete effectively

in these markets.

Lee County is served by 21

banks, including 12 national and regional competitors.

We compete for

loans, deposits and other financial services and products with local, regional and national

commercial banks, thrifts, credit unions, mortgage lenders, and

securities and insurance brokerage firms.

competitors offer services through the mail, by telephone

and over the Internet.

The national and regional financial banks

and financial services companies we compete with have substantially greater

resources, and numerous offices and affiliates

operating over wide geographic areas.

Lenders operating nationwide over the internet are growing rapidly.

loans, deposits and other financial services and

products with local, regional and national commercial banks, thrifts, credit

unions, mortgage lenders, and securities and

insurance brokerage firms, including services offered in

Increasingly, non-banking

firms are using technology

to compete for loans, payments, and other banking services.

of these traditional and nontraditional firms offer

services in our market without any physical presence here.

Many competitors have numerous offices and affiliates

operating over wide geographic areas and have diverse customer

and geographic bases to draw upon.

competitors offer products and services different

from ours, and have substantially greater resources, name recognition

advertising than we do, which helps them attract business.

In addition, larger competitors may be able to price loans and

deposits more aggressively than we are able to and have broader and more diverse

customer and geographic bases to draw

Out of state banks may branch into our markets.

Fintech and other non-bank competitors also compete for our

customers, and may partner with other banks and/or seek to enter the payments system.

The failures or sales of other banks

with offices in our markets could also lead to the entrance of new,

stronger competitors in our markets.

from ours, and have substantially greater resources including technology,

name recognition and advertising than we do, which helps them attract business.

In addition, larger competitors may be

able to price loans and deposits more aggressively than us.

Out of state banks have branched into our markets.

Our success depends on local economic conditions.

Our success depends on the general economic conditions in East Alabama,

including Lee County,

economic conditions in our markets have a significant effect on

our commercial, real estate and construction loans, the

ability of borrowers to repay these loans and the value of the collateral securing

Adverse changes in the

economic conditions of the Southeastern United States in general, or in one or more

of our local markets, including the

effects of higher market interest rates and inflation, supply

chain disruptions, changes in customer behaviors and in the

workforce and demand for space since the COVID-19 pandemic, and the timing

and magnitude of future inflation and

interest rates, as well as federal healthcare and education funding, could negatively

affect our results of operations and our

profitability.

Our local economy is also affected by the growth of automobile manufacturing

and related suppliers located

in our markets and nearby.

Auto sales and housing sales are cyclical and generally are affected adversely

by higher sticker

prices and interest rates, and may be adversely affected by tariffs,

especially the 25% tariffs on imported steel and

aluminum and autos, as well as threatened (i) tariffs on automaker

suppliers in Canada and Mexico and (ii) reciprocal tariffs

on countries that impose tariffs on U.S.

Major employers in our market include education and healthcare, which

may be adversely affected by changes in Federal government

policies and funding.

Our success depends on general economic conditions, especially conditions

in our primary market.

Adverse changes in

such economic conditions, including higher market interest rates and inflation,

supply chain disruptions, changes in

customer behaviors and in the workforce and demand for space since the COVID-19

pandemic, and the timing and

magnitude of future inflation and interest rates, could negatively affect

our results of operations and financial condition.

Our local economy is also affected by the growth of automobile

manufacturing and related suppliers located in Lee County

Auto sales and housing sales are cyclical and generally are affected

adversely by higher prices, higher inflation

and interest rates, and tariffs and changes in tariffs.

Other major employers in our market include education and healthcare,

which may be adversely affected by changes in Federal government

policies, including education and healthcare funding,

and the availability and costs of student loans.

Attractive acquisition opportunities may not be available to us in the

While we seek continued organic growth, including loan

growth, we also may consider the acquisition of other businesses.

We expect that

other banking and financial companies, many of which have significantly greater

resources, will compete

with us to acquire financial services businesses.

This competition could increase prices for potential acquisitions that we

believe are attractive.

Also, acquisitions are subject to various regulatory approvals.

If we fail to receive the appropriate

regulatory approvals, we will not be able to consummate an acquisition that

we believe is in our best interests, and

regulatory approvals could contain conditions or commitments that reduce

the anticipated benefits of any transaction.

Among other things, our regulators consider our capital, liquidity,

profitability, regulatory compliance

and levels of

goodwill and intangibles when considering acquisition and expansion

Any acquisition could be dilutive to our

earnings and shareholders’ equity per share of our common stock.

The regulatory agencies carefully review and analyze

financial institution mergers, and the merger

application process has lengthened.

Future acquisitions and expansion activities may

disrupt our business, dilute shareholder

value and adversely affect our

We seek continued

organic growth, including loan growth, and we also may consider the acquisition

of banks, branches,

deposits, or other parts of financial services businesses.

expect that other financial services companies, including credit

unions and nonbanking institutions, some of which have significantly

greater resources, will compete with us to acquire

financial services businesses.

This competition could increase prices for potential

acquisitions that we believe are attractive.

Any acquisition could be dilutive to our earnings and shareholders’ equity per

share of our common stock.

Future acquisitions and expansion activities may disrupt

our business, dilute shareholder value and adversely affect

operating results and financial condition.

evaluate potential acquisitions and expansion opportunities, including

new branches and other offices.

extent that we grow through acquisitions, we cannot assure you that we will be

able to adequately or profitably manage this

Acquiring other banks, branches, or businesses, as well as other geographic and product

expansion activities,

involve various risks including:

risks of unknown or contingent liabilities, and potential asset quality issues;

unanticipated costs and delays, including the regulatory application process;

risks that acquired new businesses will not perform consistently with our growth

and profitability expectations;

risks of entering new markets or product areas where we have limited experience;

risks that growth will strain our infrastructure, staff, internal controls

and management, which may require

additional personnel, time and expenditures;

difficulties, expenses and delays of integrating the operations and

personnel of acquired institutions, including the

desirability of closing duplicative or overlapping facilities;

potential disruptions to our business;

possible loss of key employees and customers of acquired institutions;

potential short-term decreases in profitability;

diversion of our management’s time

and attention from our existing operations and business.

We evaluate potential

acquisitions and expansion opportunities, including new branches and

other offices.

To the extent

that we grow through acquisitions or new locations, we cannot assure you that we will be able to adequately

or profitably

manage such growth.

Acquiring other banks, branches, or businesses, as well as other geographic

and product expansion

activities involve various known and unknown risks, including credit

quality, valuation and pricing,

systems conversions,

retention and integration of people, retention and growth of customers,

as well as transaction expenses, all of which require

time and coordination with third parties such as service providers.

and other expansion activities may fail to

generate the opportunities and customers, revenues or cost savings forecasted.

Technological

changes affect our business, and we may have fewer resources

than many competitors to invest in

technological improvements.

than many competitors to invest in and

effectively implement technological improvements;

and manage the related risks related

to operating technology and

realizing returns on technology

The financial services industry is undergoing rapid technological

changes with frequent introductions of new technology-

driven products and services and growing demands for mobile and user-based

banking applications.

The effective use of

technology may help us better analyze our customers and their needs better,

and the effective use of technology may

increase efficiency and reduce our operating costs.

At the same time the initial costs of acquiring and implementing

technology may be material, and such technology may entail fraud, compliance

with the AML/CFT anti-money laundering

laws and rules, among others, and various operational and other risks.

Largely unregulated “fintech” businesses have

increased their participation in the lending and payments businesses, and have

increased competition in these businesses.

Our future success will depend, in part, upon our ability to use technology

effectively to provide products and services that

meet our customers’ preferences and create additional efficiencies

in operations, while avoiding cyber-attacks and

disruptions, data breaches, violations of AML/CFT laws, and other potential

violations of law.

Remote work has

accelerated electronic banking activity and the need for increased operational

efficiencies and data security in our electronic

and mobile banking services.

to make significant additional capital investments in technology,

artificial intelligence, cyber

and data security, and we may not be

able to effectively implement new technology-driven

products and services, or such technology may prove less effective and/or

more costly than anticipated.

competitors have substantially greater resources to invest in technological

improvements and, increasingly,

firms are using technology to compete for loans, payments, and

other banking services.

As a result, our competition from

service providers not located in our markets has increased.

Operational risks are inherent

in our businesses.

Operational risks and losses can result from internal and external fraud;

gaps or weaknesses in our risk management or

internal audit procedures;

errors by employees or third parties, including

our vendors, failures to document transactions

properly or obtain proper authorizations;

failure to comply with applicable

regulatory requirements in the various

jurisdictions where we do business or have customers;

failures in our estimates or

the models that we rely on;

failures, including those caused by natural disasters, or by electrical, telecommunications

or other essential utility outages;

business continuity and data security system failures, including those caused by

computer viruses, cyberattacks, unforeseen

problems encountered while implementing major new computer systems or

upgrades, failures to timely and properly

upgrade and patch existing systems or inadequate access to data or poor response

capabilities in light of business continuity

plans in the event of data security system failures;

or the inadequacy or failure

of systems and controls, including those of

our vendors or counterparties.

The COVID-19 pandemic presented operational challenges to maintaining

continuity of

operations of customer services while protecting our employees’ and

customers’ safety, and similar situations

In addition, we face certain risks inherent in the ownership and operation of our bank premises

and other real-

estate, including liability for accidents on our properties.

Although we have implemented risk controls and loss mitigation

actions, and substantial resources are devoted to developing efficient

procedures, identifying and rectifying weaknesses in

existing procedures and training staff, it is not possible to be certain that

such actions have been or will be effective in

controlling these various operational risks that evolve continuously.

changes, including new technology-driven products and

ervices and growing demands for user-based banking

applications that can be used anywhere.

Artificial intelligence is at an early stage of development and is expensive,

but may offer opportunities for better customer

services at reduced costs, but with a high level of unknown risks.

The effective use of technology may help us better

analyze our customers and their needs better,

and the effective use of technology may enable us to increase efficiency

reduce our operating costs.

At the same time, the initial costs of acquiring and implementing technology

may be material,

and such technology requires ongoing attention to the related risks, including

fraud, cybersecurity and customer privacy,

compliance with the AML/CFT anti-money laundering and

sanctions laws, among others, and various operational and other

Our future success will depend, in part, upon our ability to use technology effectively

and efficiently to provide

products and services that meet our customers’ preferences and create additional

efficiencies in operations, while

maintaining the security of our systems and data, and complying with applicable

Severe weather,

natural disasters and conflicts could have significant adverse effects on our business.

Severe weather and natural disasters such as hurricanes, tornados, floods, and

acts of war, terrorism, or armed conflict, may

potentially interrupt our business and damage our properties and

collateral securing our loans, result in lost revenues and

additional expenses.

Such events also could affect the general economic

conditions that affect us, the stability of our deposit

base, disrupt our customers’ businesses and impair our borrowers’ capacity

to repay loans.

Although management has

established disaster recovery and business continuity policies and procedures,

severe weather and natural disasters and

these other events could have a material adverse effect on our business.

Potential gaps in our risk management policies and internal audit procedures

may leave us exposed to unidentified or

unanticipated risk, which could negatively affect our business.

unanticipated risks, which could negatively affect our business.

Our enterprise risk management and internal audit program are designed

to mitigate material risks and losses to us.

have developed and continue to develop risk management and internal

audit policies and procedures to reflect the ongoing

review of our risks and expect to continue to do so in the future.

Nonetheless, our

policies and procedures may not be

comprehensive and may not anticipate and identify timely every risk

to which we are exposed, and our internal audit

process may fail to detect such weaknesses or deficiencies timely in our risk

management framework.

Many of our risk

management models and estimates use observed historical market

regularly review our risks in an effort to maintain risk management

and internal audit policies and procedures addressing

Nonetheless, our policies and procedures may not anticipate and identify timely every

risk to which we may be

Our internal audit process may fail to detect such weaknesses or deficiencies

management models and estimates are based on assumptions, estimates and

judgments from observed historical market

behavior to model or project potential future exposure.

The models used by our business, including our CECL models, are based on

assumptions and projections.

may not operate properly,

or our inputs and assumptions may be inaccurate, or changes in economic

and market conditions,

customer behaviors or regulations may adversely affect

the accuracy or usefulness of the models.

As a result, these

methods may not fully or timely predict future exposures, which can be

significantly greater and/or faster than historically.

Other risk management methods depend upon the evaluation of information

regarding markets, clients, or other matters that

are publicly available or otherwise accessible to us.

This information

may not always be accurate, complete, up-to-date or

properly evaluated.

Furthermore, there can be no assurance that we can effectively review and monitor

all risks or that all

of our employees will closely follow our risk management policies and procedures,

nor can there be any assurance that our

risk management policies and procedures will enable us to accurately

identify all risks and limit our exposures based on our

In addition, we may have to implement more extensive and perhaps different

risk management policies and procedures as

our regulation and technology uses changes.

All of these could adversely affect our costs, and our financial condition

results of operations.

Other models used

by our business, including our CECL models,

also are based on assumptions, estimates and projections.

These models may

not operate properly or timely,

or our inputs,

estimates and assumptions may be inaccurate, or changes in economic

and market conditions, customer behaviors or

regulations may adversely affect the accuracy or usefulness of

These models may not fully or timely predict

future exposures, which may occur significantly faster or

in greater magnitudes than historically.

risk management

methods depend upon the evaluation of information regarding markets,

clients, or other matters that are publicly available

or otherwise accessible.

This information may not always be accurate,

complete, up-to-date or properly evaluated.

to implement more extensive and perhaps different risk management

policies and procedures to reflect

changes in the economy,

threats to our systems and data, our markets and customers, regulation, and technology uses and

All of these could adversely affect our costs.

Any failure to protect

the confidentiality of customer information could adversely affect our reputation

and have a material

adverse effect on our business, financial condition and results

of operations

laws enforced by the bank regulators and other agencies protect the privacy

and security of customers’ non-public

personal information.

Many of our employees have access to, and routinely

process personal information of clients through

a variety of media, including information technology systems.

Our internal processes, policies and controls are designed to

protect the confidentiality of customer information we hold and that

is accessible to us and our employees.

It is possible

that an employee could, intentionally or unintentionally,

disclose or misappropriate confidential client information or our

data could be the subject of a cybersecurity attack.

Such personal data could also be compromised via intrusions into our

systems or those of our service providers or other persons we do business with such

as credit bureaus, data processors and

merchants who accept credit or debit cards for payment.

If we fail to maintain adequate internal controls, or if our

employees fail to comply with our policies and procedures, misappropriation

or inappropriate disclosure or misuse of client

the confidentiality of customer information could have material adverse effects on us.

laws enforced by the bank regulators and other government agencies protect

the privacy and security of customers’

non-public personal information maintained by banks and their vendors.

internal processes, policies and controls are

designed to protect the confidentiality of customer information

we hold and that is accessible to us, our vendors and

It is possible that a vendor or an employee could permit unauthorized

access to or improperly use confidential

customer information.

Personal customer data also could be compromised

via intrusions into our systems or those of our

service providers or other persons we do business with such as credit bureaus,

data processors and merchants who accept

credit or debit cards for payment.

If our internal controls are inadequate, or

if our employees, vendors and other third parties

fail to comply with our policies and procedures, misappropriation or inappropriate

disclosure and misuse of customer

information could occur.

Such internal control inadequacies or non-compliance could materially damage

our reputation,

lead to remediation costs and civil or criminal penalties.

These could have a material adverse effect on our business,

financial condition and results of operations.

of this report for more information about cybersecurity and our

management and strategies.

Our information systems may experience interruptions and

security breaches.

We rely heavily

on communications and information systems, including those of third-party service

providers, to conduct

our business.

Any failure, interruption, or security breach of these systems could result in failures

or disruptions which

could affect our business, our customers’ privacy and our customer

relationships, generally.

Our business continuity plans,

including those of our service providers, for back-up and service restoration,

may not be effective in the case of widespread

outages due to severe weather, natural disasters, pandemics,

or power, communications and other failures.

this report for more information about cybersecurity and our management

and strategies.

Our systems and networks, as well as those of our third-party service providers,

are subject to security risks and could be

susceptible to disruption through cyber-attacks,

such as denial of service attacks, hacking, terrorist activities, or identity

Cybercrime risks have increased as electronic and mobile banking activities have

increased, and may increase further

as a result of the Russia’s war in Ukraine,

tensions with mainland China and other countries, and foreign government

What changed 10-K

Item 1A. Risk Factors