Item 1A. Risk Factors
Item 1A. RISK FACTORS
The section titled Risk Factors in Part I, Item 1A of the Company’s 2024 Annual Report on Form 10-K included a discussion of the many risks and uncertainties the Company faces, any one or more of which could have a material adverse effect on its business, results of operations, financial condition (including capital and liquidity), prospects, or the value of or return on an investment in the Company. The information presented below provides an update to, and should be read in conjunction with the risk factors and other information contained in Part I, Item 1A of the Company’s 2024 Annual Report on Form 10-K.
As a result of the Company entering into the Merger Agreement with FineMark, certain risk factors have been identified:
The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.
The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the Merger. Those conditions include, among other things: (i) adoption and approval of the Merger Agreement by FineMark’s shareholders; (ii) the receipt of required regulatory approvals, including the approval of the Federal Reserve and the Missouri Division of Finance; and (iii) the absence of any law, order, injunction, decree or other law preventing or making illegal the completion of the Merger or any of the other transactions contemplated by the Merger Agreement. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the Merger Agreement and (c) the receipt by each party of an opinion from its counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986.
These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time, before or after the requisite FineMark shareholder approval, or the Company or FineMark may elect to terminate the Merger Agreement in certain other circumstances.
Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the Merger.
Before the Merger and the Bank Merger may be completed, various approvals, consents and non-objections must be obtained from the Federal Reserve, the Missouri Division of Finance, and other regulatory authorities in the United States. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals; governmental, political, or community group inquiries, investigations, or opposition; or changes in legislation or the political environment generally.
The approvals that are granted may impose terms and conditions, limitations, obligations, or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the Merger Agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations, or restrictions and that such conditions, limitations, obligations, or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the Merger Agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the Merger or otherwise reducing the anticipated benefits of the Merger if the Merger was consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations, or restrictions will not result in the delay or abandonment of the Merger. Additionally, the completion of the Merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the Merger Agreement.
Failure to complete the Merger could negatively impact the Company.
If the Merger is not completed for any reason, including as a result of FineMark’s shareholders failing to adopt and approve the Merger Agreement, there may be various adverse consequences, and the Company may experience negative reactions from the
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financial markets and from its customers and employees. For example, the Company’s business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. Also, the Company has devoted significant internal resources to the pursuit of the Merger and the expected benefit of those resource allocations would be lost if the Merger is not completed. Additionally, if the Merger Agreement is terminated, the market price of the Company’s common stock could decline to the extent that current market prices reflect a market assumption that the Merger will be beneficial and will be completed.
Combining the two companies may be more difficult, costly, or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be realized.
The Company and FineMark have operated and, until the completion of the Merger, will continue to operate independently. The success of the Merger, including anticipated benefits and cost savings, will depend, in part, on the Company's ability to successfully combine and integrate the businesses of the Company and FineMark in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits and cost savings of the Merger. If the Company experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of the Company and FineMark during this transition period and for an undetermined period after completion of the Merger on the combined company. An inability to realize the full extent of the anticipated benefits of the Merger and the other transactions contemplated by the Merger Agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the Company following the completion of the Merger, which may adversely affect the value of the common stock of the Company following the completion of the Merger.
The combined company may be unable to retain the Company and/or FineMark personnel successfully after the Merger is completed.
The success of the Merger will depend in part on the combined company’s ability to retain the talent and dedication of key employees currently employed by the Company or FineMark. It is possible that these employees may decide not to remain with the Company or FineMark, as applicable, while the Merger is pending or with the combined company after the Merger is consummated. If the Company and FineMark are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company and FineMark could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the Merger, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. The Company and FineMark also may not be able to locate or retain suitable replacements for any key employees who leave either company.
The Company has incurred and is expected to incur substantial costs related to the Merger.
Both the Company and FineMark will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, retention, severance, and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs. Some of these costs are payable by the Company regardless of whether or not the Merger is completed.
The Company or FineMark or both may be subject to claims and litigation pertaining to the Merger that could prevent or delay the completion of the Merger.
Any lawsuits filed in connection with the Merger could prevent or delay completion of the Merger and result in additional costs to the Company and FineMark, including any costs associated with indemnification. The defense or settlement of any lawsuit or claim that may be filed seeking remedies against FineMark, its board of directors or the Company or its board of directors in connection with the Merger that remains unresolved at the effective time of the Merger may adversely affect the Company’s business, financial condition, results of operations and cash flows.
The other risk factors that could affect the Company’s financial condition or operating results remain unchanged from those previously disclosed in the Company’s 2024 Annual Report on Form 10-K.
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