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Item 1A. Risk Factors

2024-03-25 compared with 2023-03-24 · 271 added, 276 removed, 117 unchanged (82% of the section changed)

We believe the risks described below are the risks that are material to us.

Any of the following risks, as well as risks that we do not know or currently deem immaterial,

could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Any of the following risks, as well as risks that we do not know or currently deem immaterial, could

have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Risks Relating to Our Business and Market

Our business is concentrated in, and largely dependent upon, the continued growth and welfare of our markets, and adverse economic conditions in these

markets could negatively impact our operations and customers.

Our business is concentrated in, and largely dependent upon, the continued growth and welfare of our markets, and adverse economic conditions in these markets

could negatively impact our operations and customers.

Our business is primarily affected by the economies of Oklahoma, Texas and to a smaller degree the State of Kansas.

Our success depends to a significant extent upon the business activity,

population, income levels, employment trends, deposits and real estate activity in these markets.

As of December 31, 2022, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in our markets and the substantial majority of our

secured loans were secured by collateral located in our markets.

Accordingly, we are exposed to risks associated with a lack of geographic diversification as any regional or local economic downturn that affects our markets, our existing or

prospective borrowers, or property values in our markets may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically focused.

In addition, market developments may affect consumer confidence levels and may cause adverse changes in payment patterns, causing increases in delinquencies and default rates, which could

impact our charge-offs and provision for credit losses.

Adverse changes in economic conditions in these markets could reduce our growth in loans and deposits, impair our ability to collect our loans, increase our problem loans and charge-offs and

otherwise negatively affect our performance and financial condition.

Our success depends to a significant extent upon the business activity, population,

income levels, employment trends, deposits and real estate activity in these markets.

As of December 31, 2023, the substantial majority of the loans in our loan portfolio were made to borrowers who live and/or conduct business in our markets and the substantial majority of our secured

loans were secured by collateral located in our markets.

Accordingly, we are exposed to risks associated with a lack of geographic diversification as any regional or local economic downturn that affects our markets, our existing or prospective

borrowers, or property values in our markets may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically focused.

In addition, market developments may affect consumer confidence levels and may cause adverse changes in payment patterns, causing increases in delinquencies and default rates, which could impact our

charge-offs and provision for credit losses.

Adverse changes in economic conditions in these markets could reduce our growth in loans and deposits, impair our ability to collect our loans, increase our problem loans and charge-offs and otherwise

negatively affect our performance and financial condition.

We have credit exposure to the energy industry.

The energy industry is a significant sector in our Oklahoma market, and to a lesser extent, Kansas and the Dallas/Fort Worth metropolitan area.

A downturn or lack of growth in the energy

industry and energy-related business, including sustained low oil or gas prices or the failure of oil or gas prices to rise in the future, could adversely affect our business, financial condition and results of operations.

As of December 31,

2022, our energy loans, which include loans to exploration and production companies, midstream companies, purchasers of mineral and royalty interests and service providers totaled $182.8 million, or 14.4% of total loans, as compared to $98.5

million, or 9.6% of total loans as of December 31, 2021.

In addition to our direct exposure to energy loans, we also have indirect exposure to energy prices, as some of our non-energy customers’ businesses are directly affected by volatility with

the oil and gas industry and energy prices and otherwise are dependent on energy-related businesses.

A downturn or lack of growth in the energy industry and

energy-related business, including sustained low oil or gas prices or the failure of oil or gas prices to rise in the future, could adversely affect our business, financial condition and results of operations.

As of December 31, 2023, our energy

loans, which include loans to exploration and production companies, midstream companies, purchasers of mineral and royalty interests and service providers totaled $190.6 million, or 14.0% of total loans, as compared to $182.8 million, or 14.4% of

total loans as of December 31, 2022.

In addition to our direct exposure to energy loans, we also have indirect exposure to energy prices, as some of our non-energy customers' businesses are directly affected by volatility with the oil and gas

industry and energy prices and otherwise are dependent on energy-related businesses.

As of December 31, 2023, we had $55.1 million in unfunded commitments to borrowers in the oil and gas industry.

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At December 31, 2023, this exposure was approximately $298.5

$244.3 million, or 19.2%, of the total loan portfolio, along with an additional $15.5 million in unfunded debt, as compared to $198.4 million, or 19.2%, of the total loan portfolio, along with an additional $41.5 million in unfunded debt as of

December 31, 2021.

million, or 21.9%, of the total loan portfolio, along with an additional $5.7 million in unfunded debt, as compared to $244.3 million, or 19.2%, of the total loan portfolio, along with an additional $15.5 million in unfunded debt as of December 31,

The hospitality industry is subject to changes in the travel patterns of business and leisure travelers, both of which are affected by the strength of the economy, as well as other factors.

The performance of the hospitality

industry has traditionally been closely linked with the performance of the general economy and, specifically, growth in gross domestic product.

Changes in travel patterns of both business and leisure travelers, particularly during periods of

economic contraction or low levels of economic growth, may create difficulties for the industry over the long-term.

Although we have made a large portion of our hospitality loans to long-term, well-established hotel operators in strategic

locations, a general downturn in the supply growth of such markets or hotel occupancy or room rates could negatively impact the borrowers’ ability to repay.

A significant loss in this portfolio could materially and adversely affect the Company’s

financial condition and results of operations.

The performance of the hospitality industry has

traditionally been closely linked with the performance of the general economy and, specifically, growth in gross domestic product.

Changes in travel patterns of both business and leisure travelers, particularly during periods of economic

contraction or low levels of economic growth, may create difficulties for the industry over the long-term.

Although we have made a large portion of our hospitality loans to long-term, well-established hotel operators in strategic locations, a

general downturn in the supply growth of such markets or hotel occupancy or room rates could negatively impact the borrowers’ ability to repay.

A significant loss in this portfolio could materially and adversely affect the Company’s financial

condition and results of operations.

We have a concentration in commercial real estate lending that could cause our regulators to restrict our ability to grow.

As a part of their regulatory oversight, the federal regulators have issued guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, or the CRE

Concentration Guidance, with respect to a financial institution’s concentrations in CRE lending activities.

The CRE Concentration Guidance identifies certain concentration levels that, if exceeded, will expose the institution to additional

supervisory analysis with regard to the institution’s CRE concentration risk.

The CRE Concentration Guidance is designed to promote appropriate levels of capital and sound loan and risk management practices for institutions with a concentration

of CRE loans.

In general, the CRE Concentration Guidance establishes the following supervisory criteria as preliminary indications of possible CRE concentration risk:

(1) the institution’s total construction, land development and other land loans

represent 100% or more of total capital;

or (2) total CRE loans as defined in this guidance, or Regulatory CRE, represent 300% or more of total capital, and the institution’s Regulatory CRE has increased by 50% or more during the prior 36-month

Pursuant to the CRE Concentration Guidance, loans secured by owner occupied CRE are not included for purposes of the CRE concentration calculation.

As of December 31, 2022, our Regulatory CRE represented 304.72% of our total Bank capital

and our construction, land development and other land loans represented 101.20% of our total Bank capital, as compared to 302.47% and 129.02% as of December 31, 2021, respectively.

During the prior 36-month period, our Regulatory CRE has

decreased 39.1%.

We are actively working to manage our Regulatory CRE concentration, and we believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan

concentrations are currently sufficient to address the CRE Concentration Guidance.

As a part of their regulatory oversight, the federal regulators have issued guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, or the CRE Concentration

Guidance, with respect to a financial institution’s concentrations in CRE lending activities.

The CRE Concentration Guidance identifies certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis

with regard to the institution’s CRE concentration risk.

The CRE Concentration Guidance is designed to promote appropriate levels of capital and sound loan and risk management practices for institutions with a concentration of CRE loans.

general, the CRE Concentration Guidance establishes the following supervisory criteria as preliminary indications of possible CRE concentration risk:

(1) the institution’s total construction, land development and other land loans represent 100% or

more of total capital;

the CRE Concentration Guidance, loans secured by owner occupied CRE are not included for purposes of the CRE concentration calculation.

As of December 31, 2023, our Regulatory CRE represented 290.69% of our total Bank capital and our construction,

land development and other land loans represented 73.97% of our total Bank capital, as compared to 304.72% and 101.20% as of December 31, 2022, respectively.

During the prior 36-month period, our Regulatory CRE has decreased 53.10%.

We are actively

working to manage our Regulatory CRE concentration, and we believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are currently sufficient

to address the CRE Concentration Guidance.

We utilize enhanced CRE monitoring techniques as expected by banking regulators as our concentrations have approached or exceeded the regulatory guidance.

Nevertheless, the Federal Reserve could become concerned about our CRE loan concentrations, and it could limit our ability to grow by restricting its approvals for the establishment or acquisition of branches, or approvals of mergers or other

acquisition opportunities, or by requiring us to raise additional capital, reduce our loan concentrations or undertake other remedial actions.

Because a portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity

could impair the value of collateral securing our real estate loans and result in loan and other losses.

Nevertheless, the Federal Reserve could become

concerned about our CRE loan concentrations, and it could limit our ability to grow by restricting its approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities, or by requiring us to

raise additional capital, reduce our loan concentrations or undertake other remedial actions.

Because a portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could

impair the value of collateral securing our real estate loans and result in loan and other losses.

Adverse developments affecting real estate values, particularly in Oklahoma City and the Dallas/Fort Worth metropolitan area, could increase the credit risk associated with our real estate loan

Real estate values may experience periods of fluctuation, and the market value of real estate can fluctuate significantly in a short period of time.

Adverse changes affecting real estate values and the liquidity of real estate in one

or more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect credit quality, financial condition and results of operation.

Negative changes in the economy affecting

real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses.

may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans.

Adverse changes affecting real estate values and the liquidity of real estate in one or

more of our markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect credit quality, financial condition and results of operation.

Negative changes in the economy affecting real

estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses.

Collateral may have

to be sold for less than the outstanding balance of the loan, which could result in losses on such loans.

Such declines and losses could have a material adverse impact on our business, results of operations and growth prospects.

estate values decline, it is also more likely that we would be required to increase our allowance, which could adversely affect our business, financial condition and results of operations.

If real estate

values decline, it is also more likely that we would be required to increase our allowance, which could adversely affect our business, financial condition and results of operations.

Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.

As of December 31, 2022, we had approximately $1.26 billion of commercial purpose loans, which include general commercial, energy, agricultural, and CRE loans, representing approximately 98.8%

of our gross loan portfolio.

As of December 31, 2023, we had approximately $1.35 billion of commercial purpose loans, which include general commercial, energy, agricultural, and CRE loans, representing approximately 98.9% of our

gross loan portfolio.

Commercial purpose loans are often larger and involve greater risks than other types of lending.

Because payments on these loans are often dependent on the successful operation or development of the property or

business involved, their repayment is more sensitive than other types of loans to adverse conditions in the real estate market or the general economy.

Because payments on these loans are often dependent on the successful operation or development of the property or business

involved, their repayment is more sensitive than other types of loans to adverse conditions in the real estate market or the general economy.

Accordingly, a downturn in the real estate market or the general economy could heighten our risk related to commercial purpose loans, particularly energy and CRE loans.

Unlike residential

mortgage loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial purpose

loans typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the commercial venture.

Unlike residential mortgage

loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial purpose loans

typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the commercial venture.

If the cash flow from business operations is reduced, the borrowers’ ability to repay the loan may be impaired.

result of the larger average size of each commercial purpose loan as compared with other loans such as residential loans, as well as the collateral which is generally less readily marketable, losses incurred on a small number of commercial

purpose loans could have a material adverse impact on our financial condition and results of operations.

As a result of

the larger average size of each commercial purpose loan as compared with other loans such as residential loans, as well as the collateral which is generally less readily marketable, losses incurred on a small number of commercial purpose loans

could have a material adverse impact on our financial condition and results of operations.

Our largest loan relationships make up a material percentage of our total loan portfolio .

As of December 31, 2022, our 20 largest borrowing relationships ranged from approximately $15.4 million to $35.8 million (including unfunded commitments) and totaled approximately $451.1

million in total commitments (representing, in the aggregate, 35.4% of our total outstanding commitments as of December 31, 2022).

Each of the loans associated with these relationships has been underwritten in accordance with our underwriting

policies and limits.

Along with other risks inherent in these loans, such as the deterioration of the underlying businesses or property securing these loans, this concentration of borrowers presents a risk that, if one or more of these

relationships were to become delinquent or suffer default, we could be exposed to material losses.

The allowance for loan losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the

allowance would negatively affect our earnings and capital.

As of December 31, 2023, our 20 largest borrowing relationships ranged from approximately $16.7 million to $38.7 million (including unfunded commitments) and totaled approximately $533.1 million in

total commitments (representing, in the aggregate, 32.8% of our total outstanding commitments as of December 31, 2023).

Each of the loans associated with these relationships has been underwritten in accordance with our underwriting policies and

become delinquent or suffer default, we could be exposed to material losses.

The allowance for credit losses may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance would negatively

affect our earnings and capital.

Even if these loans are adequately collateralized, an increase in classified assets could harm our reputation with our regulators and inhibit our ability to execute our business plan.

Our largest deposit relationships currently make up a material percentage of our deposits and the withdrawal of deposits by our largest depositors could

force us to fund our business through more expensive and less stable sources.

Our largest deposit relationships currently make up a material percentage of our deposits and the withdrawal of deposits by our largest depositors could force us

to fund our business through more expensive and less stable sources.

At December 31, 2023, our 20 largest deposit relationships accounted for 24.0% of our total deposits.

Withdrawals of deposits by any one of our largest depositors or by one of our related

customer groups could force us to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net interest margin and results of operations.

We may also be forced, as a result of

withdrawals of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources.

Additionally, such circumstances could require us to raise deposit rates in an attempt to attract new deposits, which would

adversely affect our results of operations.

Withdrawals of deposits by any one of our largest depositors or by one of our related customer

groups could force us to rely more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net interest margin and results of operations.

We may also be forced, as a result of withdrawals

of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources.

Additionally, such circumstances could require us to raise deposit rates in an attempt to attract new deposits, which would adversely affect our

results of operations.

Under applicable regulations, if the Bank were no longer “well capitalized,” the Bank would not be able to accept brokered deposits without the approval of the FDIC.

A substantial portion of our loan portfolio consists of loans maturing within one year, and there is no guarantee that these loans will be replaced upon

maturity or renewed on the same terms or at all.

As of December 31, 2022, approximately 37.6% of our gross loans were maturing within one year, compared to approximately 38.4% of our gross loans that were maturing within one year as of

December 31, 2021.

A substantial portion of our loan portfolio consists of loans maturing within one year, and there is no guarantee that these loans will be replaced upon maturity

or renewed on the same terms or at all.

As of December 31, 2023, approximately 40.0% of our gross loans were maturing within one year, compared to approximately 37.6% of our gross loans that were maturing within one year as of December 31,

As a result, we will either need to renew or replace these loans during the course of the year.

There is no guarantee that these loans will be originated or renewed by borrowers on the same terms or at all, as demand for such

loans may decrease.

Furthermore, there is no guarantee that borrowers will qualify for new loans or that existing loans will be renewed by us on the same terms or at all, as collateral values may be insufficient or the borrowers’ cash flow may be

materially less than when the loan was initially originated.

There is no guarantee that these loans will be originated or renewed by borrowers on the same terms or at all, as demand for such loans may

less than when the loan was initially originated.

This could result in a significant decline in the size of our loan portfolio.

Our allowance for loan losses may not be adequate to cover our actual loan losses, which could adversely affect our earnings.

We maintain an allowance for loan losses in an amount that we believe is appropriate to provide for losses inherent in the portfolio.

Our allowance for Credit losses may not be adequate to cover our actual credit losses, which could adversely affect our earnings.

We maintain an allowance for credit losses in an amount that we believe is appropriate to provide for losses inherent in the portfolio.

While we strive to carefully monitor credit quality and to

identify loans that may become nonperforming, at any time there are loans included in the portfolio that will result in losses but that have not been identified as nonperforming or potential problem loans.

We cannot be sure that we will be able

to identify deteriorating loans before they become nonperforming assets or that we will be able to limit losses on those loans that are identified.

We cannot be sure that we will be able to

identify deteriorating loans before they become nonperforming assets or that we will be able to limit losses on those loans that are identified.

As a result, future additions to the allowance may be necessary.

Additionally, future additions

may be required based on changes in the loans comprising the portfolio and changes in the financial condition of borrowers, such as may result from changes in economic conditions or as a result of incorrect assumptions by management in

determining the allowance.

Federal banking regulators, as an integral part of their supervisory function, periodically review our allowance for loan losses.

These regulatory agencies may require us to increase our provision for loan losses or

to recognize further loan charge-offs based upon their judgments, which may be different from ours.

Any increase in the allowance for loan losses could have a negative effect on our financial condition and results of operations.

Commercial and

commercial real estate loans comprise a significant portion of our total loan portfolio.

Additionally, future additions may

be required based on changes in the loans comprising the portfolio and changes in the financial condition of borrowers, such as may result from changes in economic conditions or as a result of incorrect assumptions by management in determining the

Federal banking regulators, as an integral part of their supervisory function, periodically review our allowance for credit losses.

These regulatory agencies may require us to increase our provision for credit losses or to recognize

further loan charge-offs based upon their judgments, which may be different from ours.

Any increase in the allowance for credit losses could have a negative effect on our financial condition and results of operations.

Commercial and commercial

real estate loans comprise a significant portion of our total loan portfolio.

These types of loans typically are larger than residential real estate loans and other consumer loans.

Because our loan portfolio contains a significant

number of commercial and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in nonperforming assets.

An increase in nonperforming loans could result in a

loss of earnings from these loans, an increase in the allowance for loan losses, or an increase in loan charge-offs, which could have an adverse impact on our results of operations and financial condition.

Because our loan portfolio contains a significant number of

commercial and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in nonperforming assets.

An increase in nonperforming loans could result in a loss of

earnings from these loans, an increase in the allowance for credit losses, or an increase in loan charge-offs, which could have an adverse impact on our results of operations and financial condition.

Our profitability depends on interest rates generally, and we may be adversely affected by changes in market interest rates.

Our profitability depends in substantial part on our net interest income.

Net interest income is the difference between the amounts received by us on our interest-earning assets and the

interest paid by us on our interest-bearing liabilities.

Our net interest income depends on many factors that are partly or completely outside of our control, including competition, federal economic, monetary and fiscal policies and economic

conditions generally.

Net interest income is the difference between the amounts received by us on our interest-earning assets and the interest paid

by us on our interest-bearing liabilities.

Our net interest income depends on many factors that are partly or completely outside of our control, including competition, federal economic, monetary and fiscal policies and economic conditions

Our net interest income will be adversely affected if market interest rates change so that the interest we pay on deposits and borrowings increases faster than the interest we earn on loans and investments.

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Interest rate increases often result in larger payment requirements for our borrowers, which increase the potential for default.

At the same time, the marketability of any underlying property

that serves as collateral for such loans may be adversely affected by any reduced demand resulting from higher interest rates.

An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans

may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows.

Further, when we place a loan on nonaccrual status, we reverse any

accrued but unpaid interest receivable, which decreases interest income.

At the same time, the marketability of any underlying property that

serves as collateral for such loans may be adversely affected by any reduced demand resulting from higher interest rates.

An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may

lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows.

Further, when we place a loan on nonaccrual status, we reverse any accrued but

unpaid interest receivable, which decreases interest income.

Subsequently, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense.

Thus, an increase in the amount of nonaccrual loans would have an adverse impact on net interest income.

Rising interest rates in prior periods have increased interest expense, which in turn has adversely affected net interest income, and may do so in the future if the Federal Reserve raises

rates as anticipated.

Thus, an increase

in the amount of nonaccrual loans would have an adverse impact on net interest income.

Rising interest rates in prior periods have increased interest expense, which in turn has adversely affected net interest income, and may do so in the future if the Federal Reserve raises rates

as anticipated.

In a rising interest rate environment, competition for cost-effective deposits increases, making it more costly to fund loan growth.

In addition, a rising rate environment could cause mortgage and mortgage warehouse

lending volumes to substantially decline.

In addition, a rising rate environment could cause mortgage and mortgage warehouse lending

volumes to substantially decline.

Any rapid and unexpected volatility in interest rates creates uncertainty and potential for unexpected material adverse effects.

The Company actively monitors and manages the balances of maturing and

repricing assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurances that the Company can avoid all material adverse effects that such interest rate changes may have on the Company’s net

interest margin and overall financial condition.

The ratio of variable- to fixed-rate loans in our loan portfolio, the ratio of short-term (maturing at a given time within 12 months) to long-term loans, and the ratio of our demand, money

market and savings deposits to certificates of deposit (and their time periods), are the primary factors affecting the sensitivity of our net interest income to changes in market interest rates.

The composition of our rate-sensitive assets or

liabilities is subject to change and could result in a more unbalanced position that would cause market rate changes to have a greater impact on our earnings.

Fluctuations in market rates and other market disruptions are neither predictable nor

controllable and may adversely affect our financial condition and earnings.

The Company actively monitors and manages the balances of maturing and repricing

assets and liabilities to reduce the adverse impact of changes in interest rates, but there can be no assurances that the Company can avoid all material adverse effects that such interest rate changes may have on the Company's net interest margin

and overall financial condition.

The ratio of variable- to fixed-rate loans in our loan portfolio, the ratio of short-term (maturing at a given time within 12 months) to long-term loans, and the ratio of our demand, money market and

savings deposits to certificates of deposit (and their time periods), are the primary factors affecting the sensitivity of our net interest income to changes in market interest rates.

The composition of our rate-sensitive assets or liabilities is

subject to change and could result in a more unbalanced position that would cause market rate changes to have a greater impact on our earnings.

Fluctuations in market rates and other market disruptions are neither predictable nor controllable and

may adversely affect our financial condition and earnings.

We rely on short-term funding, which can be adversely affected by local and general economic conditions.

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million of the remaining balance of deposits consists of certificates of deposit, of which approximately $224.8 million, or 87.6% of remaining deposits, was due to mature within one year.

Based on our experience, we believe that our

savings, money market and non-interest-bearing accounts are relatively stable sources of funds.

Based on our experience, we believe that our savings, money

market and non-interest-bearing accounts are relatively stable sources of funds.

Historically, a majority of non-brokered certificates of deposit are renewed upon maturity as long as we pay competitive interest rates.

Many of these

customers are, however, interest-rate conscious and may be willing to move funds into higher-yielding investment alternatives.

Our ability to attract and maintain deposits, as well as our cost of funds, has been, and will continue to be

significantly affected by general economic conditions.

Many of these customers are,

however, interest-rate conscious and may be willing to move funds into higher-yielding investment alternatives.

Our ability to attract and maintain deposits, as well as our cost of funds, has been, and will continue to be significantly affected by

general economic conditions.

In addition, as market interest rates rise, we will have competitive pressure to increase the rates we pay on deposits.

If we increase interest rates paid to retain deposits, our earnings may

be adversely affected.

If we increase interest rates paid to retain deposits, our earnings may be adversely affected.

Liquidity risk could impair our ability to fund operations and meet our obligations as they become due and could jeopardize our financial condition.

Liquidity is essential to our business.

Liquidity risk is the potential that we will be unable to meet our obligations as they come due because of an inability to liquidate assets or obtain

adequate funding.

Liquidity risk is the potential that we will be unable to meet our obligations as they come due because of an inability to liquidate assets or obtain adequate

The Bank’s primary funding source is customer deposits.

In addition, the Bank has historically had access to advances from the Federal Home Loan Bank of Topeka, or the FHLB, the Federal Reserve Bank of Kansas City, or the FRB,

discount window and other wholesale sources, such as internet-sourced deposits to fund operations.

We participate in the Certificate of Deposit Account Registry Service, or CDARS, where customer funds are placed into multiple certificates of

deposit, each in an amount under the standard FDIC insurance maximum of $250,000, and placed at a network of banks across the United States.

Although the Bank has historically been able to replace maturing deposits and advances as necessary, it

might not be able to replace such funds in the future.

In addition, the Bank has historically had access to advances from the Federal Home Loan Bank of Topeka, or the FHLB, the Federal Reserve Bank of Kansas City, or the FRB, discount

window and other wholesale sources, such as internet-sourced deposits to fund operations.

We participate in the Certificate of Deposit Account Registry Service, or CDARS, where customer funds are placed into multiple certificates of deposit, each

in an amount under the standard FDIC insurance maximum of $250,000, and placed at a network of banks across the United States.

Although the Bank has historically been able to replace maturing deposits and advances as necessary, it might not be able

to replace such funds in the future.

An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on liquidity.

Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial

services industry or economy in general.

Factors that could detrimentally impact access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the markets in which our loans are concentrated or

adverse regulatory actions against us.

The Bank’s ability to borrow or attract and retain deposits in the future could be adversely affected by the Bank’s financial condition or regulatory restrictions, or impaired by factors that are not

specific to it, such as FDIC insurance changes, disruption in the financial markets or negative views and expectations about the prospects for the banking industry.

Borrowing capacity from the FHLB or FRB may fluctuate based upon the condition of

the Bank or the acceptability and risk rating of loan collateral and counterparties could adjust discount rates applied to such collateral at the lender’s discretion.

Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services

industry or economy in general.

regulatory actions against us.

such as FDIC insurance changes, disruption in the financial markets or negative views and expectations about the prospects for the banking industry.

Borrowing capacity from the FHLB or FRB may fluctuate based upon the condition of the Bank or the

acceptability and risk rating of loan collateral and counterparties could adjust discount rates applied to such collateral at the lender’s discretion.

The FRB or FHLB could restrict or limit the Bank’s access to secured borrowings.

Correspondent banks can withdraw unsecured lines of credit or require collateralization for the purchase of fed

Correspondent banks can withdraw unsecured lines of credit or require collateralization for the purchase of fed funds.

Liquidity also may be affected by the Bank’s routine commitments to extend credit.

Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability

maturities and deposit withdrawals, meet contractual obligations and fund asset growth and new business transactions at a reasonable cost, in a timely manner and without adverse consequences.

Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and

deposit withdrawals, meet contractual obligations and fund asset growth and new business transactions at a reasonable cost, in a timely manner and without adverse consequences.

Any substantial, unexpected or prolonged change in the level or cost of liquidity could have a material adverse effect on our financial condition and results of operations, and could impair our

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We conduct a portion of our business over the internet.

We rely heavily upon data processing, including loan servicing and deposit processing, software, communications and information systems

from a number of third parties to conduct our business.

We rely heavily upon data processing, including loan servicing and deposit processing, software, communications and information systems from a

number of third parties to conduct our business.

As a bank, we are more likely to be targeted by cyber-attacks in an effort to unlawfully access customer funds or customer personally identifiable information.

Third-party or internal systems and networks may fail to operate properly or become disabled due to deliberate attacks or unintentional events.

Our operations are vulnerable to disruptions from

human error, natural disasters, power loss, computer viruses, spam attacks, denial of service attacks, unauthorized access and other unforeseen events.

Our operations are vulnerable to disruptions from human

error, natural disasters, power loss, computer viruses, spam attacks, denial of service attacks, unauthorized access and other unforeseen events.

Undiscovered data corruption could render our customer information inaccurate.

may obstruct our ability to provide services and process transactions.

These events may

obstruct our ability to provide services and process transactions.

While we believe we are in compliance with all applicable privacy and data security laws, an incident could put our customer confidential information at risk.

Although we have not experienced a cyber-incident which has been successful in compromising our data or systems, we can never be certain that all of our systems are entirely free from

vulnerability to breaches of security or other technological difficulties or failures.

Although we have not experienced a cyber-incident which has been successful in compromising our data or systems, we can never be certain that all of our systems are entirely free from vulnerability to

breaches of security or other technological difficulties or failures.

We monitor and modify, as necessary, our protective measures in response to the perpetual evolution of known cyber-threats.

A breach in the security of any of our information systems, or other cyber-incident, could have an adverse impact on, among other things, our revenue, ability to attract and maintain customers

and our reputation.

A breach in the security of any of our information systems, or other cyber-incident, could have an adverse impact on, among other things, our revenue, ability to attract and maintain customers and our

In addition, as a result of any breach, we could incur higher costs to conduct our business, to increase protection, or related to remediation.

Furthermore, our customers could incorrectly blame us and terminate their account

with us for a cyber-incident which occurred on their own system or with that of an unrelated third party.

In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible

financial liability.

Furthermore, our customers could incorrectly blame us and terminate their account with us

for a cyber-incident which occurred on their own system or with that of an unrelated third party.

In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible financial

Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking

We depend to a significant extent on a number of relationships with third-party service providers.

Specifically, we receive core systems processing, essential web hosting and other internet

systems, loan and deposit processing and other processing services from third-party service providers.

If these third-party service providers experience financial, operational or technological difficulties or terminate their services and we are

unable to replace them with other service providers, our operations could be interrupted.

If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be materially

adversely affected.

Specifically, we receive core systems processing, essential web hosting and other internet systems,

loan and deposit processing and other processing services from third-party service providers.

If these third-party service providers experience financial, operational or technological difficulties or terminate their services and we are unable to

replace them with other service providers, our operations could be interrupted.

If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be materially adversely

Even if we are able to replace our service providers, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.

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Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation reached a near 40-year high in late 2021, and high levels of inflation persisted during 2022 and may continue in 2023.

Bureau of Labor Statistics reported that the 12-month

percent change in the Consumer Price Index for All Urban Consumers (not seasonally adjusted) for all items was 6.5% for December 2021 to December 2022, 7.0% for December 2020 to December 2021, 1.4% for December 2019 to December 2020, and 2.3% for

December 2018 to December 2019.

Inflation reached a near 40-year high in late 2021, and high levels of inflation persisted during 2022 and 2023, and may continue in 2024.

Bureau of Labor Statistics reported that the

12-month percent change in the Consumer Price Index for All Urban Consumers (not seasonally adjusted) for all items was 3.4% for December 2022 to December 2023, 6.5% for December 2021 to December 2022, 7.0% for December 2020 to December 2021, 1.4%

for December 2019 to December 2020, and 2.3% for December 2018 to December 2019.

Inflationary pressures are currently expected to remain elevated throughout 2024.

Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger

Small to medium -sized businesses may be impacted more during periods of high inflation as they are not able to leverage economics of scale to mitigate cost pressures compared to larger businesses.

Consequently, the ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition.

the rate of inflation accelerates, there is an erosion of consumer and customer purchasing power.

Accordingly, this could impact our business by reducing our tolerance for extending credit, and our customer’s desire to obtain credit, or causing

us to incur additional provisions for loan losses resulting from a possible increased default rate.

When the rate of

inflation accelerates, there is an erosion of consumer and customer purchasing power.

Accordingly, this could impact our business by reducing our tolerance for extending credit, and our customer’s desire to obtain credit, or causing us to incur

additional provisions for credit losses resulting from a possible increased default rate.

Inflation may lead to lower loan re-financings.

Furthermore, a prolonged period of inflation could cause wages and other costs to further

increase which could adversely affect our results of operations and financial condition.

Furthermore, a prolonged period of inflation could cause wages and other costs to further increase which

could adversely affect our results of operations and financial condition.

Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push down asset prices and weaken economic activity.

deterioration in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all

of which, in turn, would adversely affect our business, financial condition and results of operations.

A deterioration

in economic conditions in the United States and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for our products and services, all of which, in

turn, would adversely affect our business, financial condition and results of operations.

A natural disaster affecting our market areas could adversely affect the Company’s financial condition and results of operations.

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Almost all of our credit exposure is in that area.

This geographic region has been subject to

tornadoes and severe hail storms with occasional flooding.

Natural disasters could harm our operations directly through interference with communications, which would prevent us from gathering deposits, originating loans, and processing and

controlling our flow of business, as well as through the destruction of facilities and our operational, financial and management information systems.

A natural disaster or recurring power outages may also impair the value of our loan portfolio,

as uninsured or underinsured losses, including losses from business disruption, may reduce our borrowers’ ability to repay their loans.

Disasters may also reduce the value of the real estate securing our loans, impairing our ability to recover

on defaulted loans through foreclosure and making it more likely that we would suffer losses on defaulted loans.

The occurrence of natural disasters in our market areas could have a material adverse effect on our business, prospects, financial

condition, and results of operations.

This geographic region has been subject to tornadoes

and severe hail storms with occasional flooding.

Natural disasters could harm our operations directly through interference with communications, which would prevent us from gathering deposits, originating loans, and processing and controlling our

flow of business, as well as through the destruction of facilities and our operational, financial and management information systems.

A natural disaster or recurring power outages may also impair the value of our loan portfolio, as uninsured or

underinsured losses, including losses from business disruption, may reduce our borrowers’ ability to repay their loans.

Disasters may also reduce the value of the real estate securing our loans, impairing our ability to recover on defaulted loans

through foreclosure and making it more likely that we would suffer losses on defaulted loans.

The occurrence of natural disasters in our market areas could have a material adverse effect on our business, prospects, financial condition, and results

of operations.

Risks Relating to Our Regulatory Environment

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adversely impact our earnings and ability to grow.

We operate in a highly regulated environment and are subject to regulation, supervision and examination by a number of governmental regulatory agencies, including the Federal Reserve, the OBD,

and the FDIC.

Regulations adopted by these agencies, which are generally intended to provide protection for depositors, customers and the DIF, rather than for the benefit of shareholders, govern a comprehensive range of matters relating to

ownership and control of our shares, our acquisition of other companies and businesses, permissible activities for us to engage in, maintenance of adequate capital levels, dividend payments and other aspects of our operations.

regulators possess broad authority to prevent or remedy unsafe or unsound practices or violations of law.

Following examinations, we may be required, among other things, to change our asset valuations or the amounts of required loan loss

allowances or to restrict our operations, as well as increase our capital levels, which could adversely affect our results of operations.

The laws and regulations applicable to the banking industry could change at any time and we cannot predict

the effects of these changes on our business, profitability or growth strategy.

We operate in a highly regulated environment and are subject to regulation, supervision and examination by a number of governmental regulatory agencies, including the Federal Reserve, the OBD, and the

control of our shares, our acquisition of other companies and businesses, permissible activities for us to engage in, maintenance of adequate capital levels, dividend payments and other aspects of our operations.

These bank regulators possess broad

authority to prevent or remedy unsafe or unsound practices or violations of law.

Following examinations, we may be required, among other things, to change our asset valuations or the amounts of required credit loss allowances or to restrict our

operations, as well as increase our capital levels, which could adversely affect our results of operations.

The laws and regulations applicable to the banking industry could change at any time and we cannot predict the effects of these changes on

our business, profitability or growth strategy.

Increased regulation could increase our cost of compliance and adversely affect profitability.

Moreover, certain of these regulations contain significant punitive

sanctions for violations, including monetary penalties and limitations on a bank’s ability to implement components of its business plan, such as expansion through mergers and acquisitions or the opening of new branch offices.

In addition, changes

in regulatory requirements may add costs associated with compliance efforts.

Moreover, certain of these regulations contain significant punitive sanctions for violations, including

monetary penalties and limitations on a bank’s ability to implement components of its business plan, such as expansion through mergers and acquisitions or the opening of new branch offices.

In addition, changes in regulatory requirements may add

costs associated with compliance efforts.

Furthermore, government policy and regulation, particularly as implemented through the Federal Reserve, significantly affect credit conditions.

Negative developments in

the financial industry and the impact of new legislation and regulation in response to those developments could negatively impact our business operations and adversely impact our financial performance.

Negative developments in the financial industry and the impact

of new legislation and regulation in response to those developments could negatively impact our business operations and adversely impact our financial performance.

Monetary policy and other economic factors could affect our profitability adversely.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve.

An important function of the Federal Reserve is to

regulate the money supply and credit conditions.

An important function of the Federal Reserve is to regulate

the money supply and credit conditions.

Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S.

government securities, adjustments of the discount rate and changes in

banks’ reserve requirements against bank deposits.

government securities, adjustments of the discount rate and changes in banks’

reserve requirements against bank deposits.

These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.

Their use also affects interest rates

charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the

Their use also affects interest rates charged

on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal

information and adversely affect our business opportunities.

We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these

For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things:

Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information

and adversely affect our business opportunities.

We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification, and we could be negatively impacted by these laws.

example, our business is subject to the Gramm-Leach-Bliley Act which, among other things:

(i) imposes certain limitations on our ability to share non-public personal information about our customers with non-affiliated third parties;

(ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with non-affiliated third parties (with

certain exceptions) and (iii) requires we develop, implement and maintain a written comprehensive information security program containing safeguards appropriate 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.

Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying

levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach.

Moreover, legislators and regulators in the United States are increasingly adopting or revising privacy,

information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and

safeguarding of consumer or employee information, and some of our current or planned business activities.

On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify their regulators within

36 hours of a “computer-security incident” that rises to the level of a “notification incident.” This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives.

This includes

increased privacy-related enforcement activity at the federal level by the Federal Trade Commission, as well as at the state level.

(ii) requires

that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain

exceptions) and (iii) requires we develop, implement and maintain a written comprehensive information security program containing safeguards appropriate 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.

Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual,

consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach.

Moreover, legislators and regulators in the United States are increasingly adopting or revising privacy, information security and data

protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer or employee

information, and some of our current or planned business activities.

Bank are required to notify their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.” This could increase our costs

of compliance and business operations and could reduce income from certain business initiatives.

This includes increased privacy-related enforcement activity at the federal level by the Federal Trade Commission, as well as at the state level.

We rely on third parties, and in some cases subcontractors, to provide information technology and data services.

Although we provide for appropriate protections through our contracts and

perform information security risk assessments of its third-party service providers and business associates, we still have limited control over their actions and practices.

Although we provide for appropriate protections through our contracts and perform

information security risk assessments of its third-party service providers and business associates, we still have limited control over their actions and practices.

In addition, despite the security measures that we have in place to ensure

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errors or other similar events.

In such cases, notification to affected individuals, state and federal regulators, state attorneys general and media may be required, depending upon the number of affected individuals and whether personal

information including financial data was subject to unauthorized access.

Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting customer or employee data to which we

are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations.

Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could

have a material adverse effect on our business, financial condition or results of operations.

including financial data was subject to unauthorized access.

Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting customer or employee data to which we are

subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial conditions or results of operations.

failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have

a material adverse effect on our business, financial condition or results of operations.

Risks Related to Our Common Stock

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This could cause the market price of our common stock to drop significantly.

Our principal shareholders (collectively, the “Haines Family Trusts”) have the benefit of certain registration rights covering all of their shares of our common stock pursuant to the

registration rights agreement that we entered into with the Haines Family Trusts in connection with our initial public offering.

Sales of a substantial number of these shares in the public market, or the perception that these sales could occur,

could cause the market price of our common stock to decline or to be lower than it might otherwise be.

In addition, as of December 31, 2022 approximately 57.3% of our outstanding common stock is beneficially owned by our principal shareholders,

executive officers and directors.

The substantial amount of common stock that is owned by and issuable to our principal shareholders, executive officers and directors may adversely affect our share price, our share price volatility and the

development and persistence of an active and liquid trading market.

Our principal shareholders (collectively, the “Haines Family Trusts”) have the benefit of certain registration rights covering all of their shares of our common stock pursuant to the registration

rights agreement that we entered into with the Haines Family Trusts in connection with our initial public offering.

Sales of a substantial number of these shares in the public market, or the perception that these sales could occur, could cause the

market price of our common stock to decline or to be lower than it might otherwise be.

In addition, as of December 31, 2023 approximately 56.7% of our outstanding common stock is beneficially owned by our principal shareholders, executive officers

and directors.

of an active and liquid trading market.

The sale of these shares could impair our ability to raise capital through the sale of additional equity securities.

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As of December 31, 2023, the Haines Family Trusts control approximately 50.5% of our common stock.

So long as the Haines Family Trusts continue to control more than 50% of our outstanding

shares of common stock, they will have the ability, if they vote in the same manner, to determine the outcome of all matters requiring shareholder approval, including the election of directors, the approval of mergers, material acquisitions and

dispositions and other extraordinary transactions, and amendments to our certificate of incorporation, bylaws and other corporate governance documents.

In addition, this concentration of ownership may delay or prevent a change in control of our

Company and make some transactions more difficult or impossible without the support of the Haines Family Trusts.

So long as the Haines Family Trusts continue to control more than 50% of our outstanding shares of

common stock, they will have the ability, if they vote in the same manner, to determine the outcome of all matters requiring shareholder approval, including the election of directors, the approval of mergers, material acquisitions and dispositions

and other extraordinary transactions, and amendments to our certificate of incorporation, bylaws and other corporate governance documents.

In addition, this concentration of ownership may delay or prevent a change in control of our Company and make

some transactions more difficult or impossible without the support of the Haines Family Trusts.

The Haines Family Trusts also have certain rights, such as registration rights, that our other shareholders do not have.

these matters, the interests of the Haines Family Trusts may differ from or conflict with our interests as a company or the interests of other shareholders.

Accordingly, the Haines Family Trusts could influence us to enter into transactions or

agreements that other shareholders would not approve or make decisions with which other shareholders may disagree.

In any of these matters, the

interests of the Haines Family Trusts may differ from or conflict with our interests as a company or the interests of other shareholders.

Accordingly, the Haines Family Trusts could influence us to enter into transactions or agreements that other

shareholders would not approve or make decisions with which other shareholders may disagree.

We are a “controlled company” within the meaning of the rules of NASDAQ, and qualify for exemptions from certain corporate governance requirements.

result, our shareholders do not have the same protections afforded to shareholders of companies that are subject to such requirements.

We are a “controlled company” under NASDAQ’s corporate governance listing standards, meaning that more than 50% of the voting power for the election of our board of directors will be held by a

single person, entity or group.

our shareholders do not have the same protections afforded to shareholders of companies that are subject to such requirements.

We are a “controlled company” under NASDAQ’s corporate governance listing standards, meaning that more than 50% of the voting power for the election of our board of directors will be held by a single

person, entity or group.

As a controlled company, we are exempt from the obligation to comply with certain corporate governance requirements, including the requirements:

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Even though we are a “controlled company,” we currently intend to comply with each of these requirements.

However, we may avail ourselves of certain of these other exemptions for as long as we

remain a “controlled company.” Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of NASDAQ’s corporate governance requirements, which could make our stock less attractive

to investors or otherwise harm our stock price.

However, we may avail ourselves of certain of these other exemptions for as long as we remain

a “controlled company.” Accordingly, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of NASDAQ’s corporate governance requirements, which could make our stock less attractive to

investors or otherwise harm our stock price.

We are a bank holding company and our only source of cash, other than further issuances of securities, is distributions from the Bank.

We are a bank holding company with no material activities other than activities incidental to holding the common stock of the Bank.

Our principal source of funds to pay distributions on our

common stock and service any of our obligations, other than further issuances of securities, would be dividends received from the Bank.

Furthermore, the Bank is not obligated to pay dividends to us, and any dividends paid to us would depend on

the earnings or financial condition of the Bank and various business considerations.

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.

Our principal source of funds to pay distributions on our common

stock and service any of our obligations, other than further issuances of securities, would be dividends received from the Bank.

Furthermore, the Bank is not obligated to pay dividends to us, and any dividends paid to us would depend on the

earnings or financial condition of the Bank and various business considerations.

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.

In addition, various federal and state statutes limit the amount of dividends that the Bank may pay to the Company without regulatory approval.

Unresolved Staff Comments

Not applicable.

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

What changed 10-K

Item 1A. Risk Factors