What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2018-03-15 compared with 2017-03-15 · 239 added, 229 removed, 296 unchanged (61% of the section changed)

55 unchanged sentences

loss of earnings from these loans, an increase in the provision for possible loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on the Companys financial condition and results of operations.

Delays in the Companys ability to foreclose on delinquent mortgage loans may negatively impact our business.

Because the Bank originates loans secured by real estate, the Bank may have to foreclose on the collateral property to protect

its investment and may thereafter own and operate such property,

in which case the Company is exposed to the risks inherent in the ownership of real estate.

The amount realized after a default is dependent upon factors outside of the Companys control,

including, but not limited to:

Delays in the Companys ability to foreclose on delinquent mortgage loans may negatively impact our

Because the Bank originates loans secured by real estate, the Bank may have to foreclose on the collateral

property to protect its investment and may thereafter own and operate such property, in which case the Company is exposed to the risks inherent in the ownership of real estate.

The amount realized after a default is dependent upon factors outside of

the Companys control, including, but not limited to:

general or local economic conditions;

30 unchanged sentences

factors, both within and outside of the Companys control, may require an increase in the allowance for loan losses.

In addition, bank regulatory agencies periodically review the allowance for loan losses and may require an increase in the

provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

In addition, if charge-offs in future

periods exceed the allowance for loan losses, the Company will need additional provisions to increase the allowance for loan losses.

Any increases in the allowance for loan losses will result in

a decrease in net income and, possibly, capital, and may have a material adverse effect on the Companys financial condition and results of operations.

A discussion of the policies and procedures related to managements process for

determining the appropriate level of the allowance for loan losses is set forth in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.

The Company depends on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions, the Company often relies on information furnished by or

on behalf of customers and counterparties, including financial statements, credit reports and other financial information.

The Company may also rely on representations of those customers, counterparties or other third parties, such as independent

auditors, as to the accuracy and completeness of that information.

Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse impact on the Companys business and, in

turn, its financial condition and results of operations.

The Company is subject to environmental liability risk associated with lending activities.

A significant portion of the loan portfolio is secured by real property.

During the ordinary course of business, the

Company may foreclose on and take title to properties securing certain loans.

In doing so, there is a risk that hazardous or toxic substances could be found on these properties.

If hazardous or toxic substances are found, the Company may be liable

for remediation costs, as well as for personal injury and property damage.

Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected propertys value or limit the ability of the Company to

use or sell the affected property.

In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the Companys exposure to environmental liability.

Although management has policies

and procedures to perform an environmental review during the loan application process and also before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.

remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Companys financial condition and results of operations.

In addition, bank regulatory agencies periodically review the allowance for loan

losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management.

In addition, if charge-offs in future periods exceed the allowance for loan

losses, the Company will need additional provisions to increase the allowance for loan losses.

Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on

the Companys financial condition and results of operations.

A discussion of the policies and procedures related to managements process for determining the appropriate level of the allowance for loan losses is set forth in Item 7,

Managements Discussion and Analysis of Financial Condition and Results of Operations.

The Company depends on the accuracy and

completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into

other transactions, the Company often relies on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information.

The Company may also rely on representations of

those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information.

Reliance on inaccurate or misleading financial statements, credit reports or other financial information

could have a material adverse impact on the Companys business and, in turn, its financial condition and results of operations.

The Company is

subject to environmental liability risk associated with lending activities.

A significant portion of the loan

portfolio is secured by real property.

During the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans.

In doing so, there is a risk that hazardous or toxic substances could be found on these

If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage.

Environmental laws may require the Company to incur substantial expenses and may materially

reduce the affected propertys value or limit the ability of the Company to use or sell the affected property.

In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the

Companys exposure to environmental liability.

Although management has policies and procedures to perform an environmental review during the loan application process and also before initiating any foreclosure action on real property, these

reviews may not be sufficient to detect all potential environmental hazards.

The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Companys financial

condition and results of operations.

The Company is subject to risk from adverse economic conditions.

11 unchanged sentences

In December 2015, the Federal Reserve raised the target federal funds rate after a prolonged period of no change by 25 bps and did so again by 25 bps a year later in December 2016.

During 2017, the FRB raised the target federal

funds rate by 25 bps in March, June and December, bringing the current range to 1.25 to 1.50 percent.

These developments, along with the U.

governments credit and deficit concerns, the European sovereign debt crisis and the economic slowdown in China, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on

favorable terms.

Other significant monetary strategies could be implemented in the future including, in particular, so-called tightening strategies.

FRB strategies can, and often are intended to, affect the

domestic money supply, inflation, interest rates, and the shape of the yield curve.

Effects on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks.

Among other things,

easing strategies are intended to lower interest rates, flatten the yield curve, expand the money supply, and stimulate economic activity, while tightening strategies are intended to increase interest rates, steepen the yield curve, tighten the

money supply, and restrain economic activity.

All things being equal, the current transition from easing to possible tightening should tend to diminish or reverse downward pressure on rates, and to diminish or eventually end the stimulus effect that

low rates tend to have on the economy.

Many external factors may interfere with the effects of these plans or cause them to be changed unexpectedly.

Such factors include significant economic trends or events as well as significant international

monetary policies and events.

Risks associated with interest rates and the yield curve are discussed in this Item 1A under the caption The Company is subject to interest rate risk. Such strategies also can affect the United States.

world-wide financial systems in ways that may be difficult to predict.

The profitability of the Company depends significantly on economic conditions

in the State of Mississippi.

The Companys success depends primarily on the general economic conditions of the

State of Mississippi and the specific local markets in which it operates.

Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in East

Central Mississippi.

The local economic conditions in this area have a significant impact on the demand for the Companys products and services, as well as the ability of its customers to repay loans, the value of the collateral securing loans

and the stability of its deposit funding sources.

governments credit and deficit concerns, the European sovereign debt crisis and the economic

slowdown in China, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.

Other significant monetary strategies could be implemented in the future including, in

particular, so-called tightening strategies.

FRB strategies can, and often are intended to, affect the domestic money supply, inflation, interest rates, and the shape of the yield curve.

Effects on the yield

curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks.

Among other things, easing strategies are intended to lower interest rates, flatten the yield curve, expand the money supply, and

stimulate economic activity, while tightening strategies are intended to increase interest rates, steepen the yield curve, tighten the money supply, and restrain economic activity.

All things being equal, the current transition from easing to

possible tightening should tend to diminish or reverse downward pressure on rates, and to diminish or eventually end the stimulus effect that low rates tend to have on the economy.

Many external factors may interfere with the effects of these plans

or cause them to be changed unexpectedly.

Such factors include significant economic trends or events as well as significant international monetary policies and events.

Risks associated with interest rates and the yield curve are discussed in this

Item 1A under the caption The Company is subject to interest rate risk. Such strategies also can affect the United States.

and world-wide financial systems in ways that may be difficult to predict.

The profitability of the Company depends significantly on economic conditions in the State of Mississippi.

The Companys success depends primarily on the general economic conditions of the State of Mississippi and the specific

local markets in which it operates.

Unlike larger national or other regional banks that are more geographically diversified, the Company provides banking and financial services to customers primarily in East Central and South Mississippi.

economic conditions in this area have a significant impact on the demand for the Companys products and services, as well as the ability of its customers to repay loans, the value of the collateral securing loans and the stability of its

deposit funding sources.

The Company is subject to extensive government regulation and supervision.

17 unchanged sentences

The Company is also subject to laws, regulations and standards relating to corporate governance and public disclosure,

including the Sarbanes Act and SEC regulations.

These laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as guidance is provided by regulatory and

governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

The Company is committed to maintaining high standards of

corporate governance and public disclosure.

As a result, the Companys efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased expenses and a diversion of management

time and attention.

Failure to comply with laws, regulations or policies could also result in sanctions by regulatory

agencies and/or civil money penalties, which could have a material adverse effect on the Companys business, prospects, financial condition and results of operations.

While the Company has policies and procedures designed to prevent any such

violations, it cannot assure that such violations will be prevented.

The information under the heading Supervision and Regulation in Item 1, Business, and Note 16, Regulatory Matters to the Consolidated Financial

Statements of the Company in Item 8, Financial Statements and Supplementary Data, provides more information regarding the regulatory environment in which the Company and the Bank operate.

including the Sarbanes Act, the Dodd Frank Act and SEC regulations.

These laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as guidance is

provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

The Company is committed to maintaining

high standards of corporate governance and public disclosure.

As a result, the Companys efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased expenses and a

diversion of management time and attention.

Failure to comply with laws, regulations or policies could also result in

sanctions by regulatory agencies and/or civil money penalties, which could have a material adverse effect on the Companys business, prospects, financial condition and results of operations.

While the Company has policies and procedures

designed to prevent any such violations, it cannot assure that such violations will be prevented.

The information under the heading Supervision and Regulation in Item 1, Business, and Note 16, Regulatory Matters

to the Consolidated Financial Statements of the Company in Item 8, Financial Statements and Supplementary Data, provides more information regarding the regulatory environment in which the Company and the Bank operate.

We are subject to claims and litigation.

28 unchanged sentences

industry and general economic trends.

Failure to perform in any of these areas could significantly weaken the Companys competitive position, which could

adversely affect its growth and profitability, which, in turn, could have a material adverse effect on the Companys financial condition and results of operations.

We are subject to a variety of operational risks, including the risk of fraud or theft by employees, which may

adversely affect our business and results of operations.

We are exposed to many types of operational risks, including

liquidity risk, credit risk, market risk, interest rate risk, legal and compliance risk, strategic risk, information security risk, and reputational risk.

We are also reliant upon our employees, and our operations are subject to the risk of fraud,

theft or malfeasance by our employees.

We have established processes and procedures intended to identify, measure, monitor, report and analyze these risks, however, there are inherent limitations to our risk management strategies as there may exist,

or develop in the future, risks that we have not appropriately anticipated, monitored or identified.

If our risk management framework proves ineffective, we could suffer unexpected losses, we may have to expend resources detecting and correcting the

failure in our systems and we may be subject to potential claims from third parties and government agencies.

Failure to perform in any of these areas could significantly weaken the

Companys competitive position, which could adversely affect its growth and profitability, which, in turn, could have a material adverse effect on the Companys financial condition and results of operations.

We are subject to a variety of operational risks, including the risk of fraud or theft by employees, which may adversely affect our business and results of

We are exposed to many types of operational risks, including liquidity risk, credit risk, market risk,

interest rate risk, legal and compliance risk, strategic risk, information security risk, and reputational risk.

We are also reliant upon our employees, and our operations are subject to the risk of fraud, theft or malfeasance by our employees.

have established processes and procedures intended to identify, measure, monitor, report and analyze these risks, however, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we

have not appropriately anticipated, monitored or identified.

If our risk management framework proves ineffective, we could suffer unexpected losses, we may have to expend resources detecting and correcting the failure in our systems and we may be

subject to potential claims from third parties and government agencies.

We may also suffer severe reputational damage.

Any of these consequences could adversely affect our business, financial condition or results

of operations.

In particular, the unauthorized disclosure, misappropriation, mishandling or misuse of personal, non-public, confidential or proprietary information of customers could result in significant

regulatory consequences, reputational damage and financial loss.

Our risk management policies and procedures may not be fully effective in identifying

or mitigating risk exposure in all market environments or against all types of risk, including employee misconduct.

We have devoted significant resources to develop our risk management policies and procedures and will continue to do so.

Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk.

Many of our methods of managing risk and exposures are

based upon our use of observed historical market behavior or statistics based on historical models.

During periods of market volatility or due to unforeseen events, the historically derived correlations upon which these methods are based may not be

Any of these consequences could adversely affect our business, financial condition or results of operations.

In particular, the

unauthorized disclosure, misappropriation, mishandling or misuse of personal, non-public, confidential or proprietary information of customers could result in significant regulatory consequences, reputational

damage and financial loss.

Our risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all

market environments or against all types of risk, including employee misconduct.

We have devoted significant

resources to develop our risk management policies and procedures and will continue to do so.

Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market

environments or against all types of risk.

Many of our methods of managing risk and exposures are based upon our use of observed historical market behavior or statistics based on historical models.

During periods of market volatility or due to

unforeseen events, the historically derived correlations upon which these methods are based may not be valid.

As a result, these methods may not predict future exposures accurately, which could be significantly greater than what our models indicate.

This could cause us to incur investment losses or cause our hedging and other risk management

strategies to be ineffective.

Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us, which may not always

be accurate, complete, up-to-date or properly evaluated.

This could cause us to incur investment losses or cause our hedging and other risk management strategies to be ineffective.

Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or

other matters that are publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated.

Moreover, we are subject to the risks of errors and misconduct by our employees and advisors, such as fraud, non-compliance with policies, recommending transactions that are not suitable, and improperly using or disclosing confidential information.

5 unchanged sentences

manage certain exposures, but they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.

The Company may be subject to more stringent capital and liquidity requirements which would adversely affect its net income and future growth.

The Dodd-Frank Act applies the same leverage and risk-based capital requirements that apply to insured depository institutions

to most bank holding companies, which, among other things, will change the way in which hybrid securities, such as trust preferred securities, are treated for purposes of determining a bank holding companys regulatory capital.

federal banking agencies published a final rule regarding minimum leverage and risk-based capital requirements for banks and bank holding companies consistent with the requirements of Section

The Company may be subject to more stringent capital and liquidity requirements which would adversely affect

its net income and future growth.

The Dodd-Frank Act applies the same leverage and risk-based capital requirements

that apply to insured depository institutions to most bank holding companies, which, among other things, will change the way in which hybrid securities, such as trust preferred securities, are treated for purposes of determining a bank holding

companys regulatory capital.

In 2011, the federal banking agencies published a final rule regarding minimum leverage and risk-based capital requirements for banks and bank holding companies consistent with the requirements of Section 171

of the Dodd-Frank Act.

For a more detailed description of the minimum capital requirements see Supervision and Regulation Capital Standards.

The Dodd-Frank Act also

increased regulatory oversight, supervision and examination of banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency.

These requirements, and any other new regulations, could adversely affect the

Companys ability to pay dividends, or could require the Company to reduce business levels or to raise capital, including in ways that may adversely affect the Companys results of operations or financial condition.

The Dodd-Frank Act also increased regulatory oversight, supervision and examination of

banks, bank holding companies and their respective subsidiaries by the appropriate regulatory agency.

These requirements, and any other new regulations, could adversely affect the Companys ability to pay dividends, or could require the Company

to reduce business levels or to raise capital, including in ways that may adversely affect the Companys results of operations or financial condition.

In addition, in 2010, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking

32 unchanged sentences

requirement is subject to a phase-in period.

Future increases in minimum capital requirements could adversely affect the

Companys net income.

Furthermore, the Companys failure to comply with the minimum capital requirements could result in regulators taking formal or informal actions against the Company which could restrict future growth or operations.

Negative perceptions or publicity could damage our reputation among existing and potential customers, investors, employees and advisors.

Future increases in minimum capital

requirements could adversely affect the Companys net income.

Furthermore, the Companys failure to comply with the minimum capital requirements could result in regulators taking formal or informal actions against the Company which could

restrict future growth or operations.

Negative perceptions or publicity could damage our reputation among existing and potential customers, investors,

employees and advisors.

Our reputation is one of our most important assets.

Our ability to attract and retain customers, investors, employees and

advisors is highly dependent upon external perceptions of our company.

Damage to our reputation could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to

deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial strength or liquidity, technological, cybersecurity, or other security breaches resulting in improper disclosure of client or

employee personal information, unethical behavior and the misconduct of our employees, advisors and counterparties.

Negative perceptions or publicity regarding these matters could damage our reputation among existing and potential customers,

investors, employees and advisors.

Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.

In addition, the SEC

and other federal and state regulators have increased their scrutiny of potential conflicts of interest.

Our ability to attract and retain

customers, investors, employees and advisors is highly dependent upon external perceptions of our company.

Damage to our reputation could cause significant harm to our business and prospects and may arise from numerous sources, including litigation

or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial strength or liquidity, technological, cybersecurity, or other security breaches resulting in

improper disclosure of client or employee personal information, unethical behavior and the misconduct of our employees, advisors and counterparties.

Negative perceptions or publicity regarding these matters could damage our reputation among existing

and potential customers, investors, employees and advisors.

Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against

In addition, the SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest.

It is possible that potential or perceived conflicts could give rise to litigation or enforcement actions.

It is possible also that the

regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter into transactions in which such a conflict may occur, and will adversely affect our businesses.

possible also that the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter into transactions in which such a conflict may occur and will adversely affect our businesses.

The Company may be required to pay significantly higher FDIC premiums in the future.

5 unchanged sentences

impose additional special assessments in the future, which could have a material adverse effect on future earnings.

The Companys controls and

procedures may fail or be circumvented.

Management regularly reviews and updates the Companys internal control

over financial reporting, disclosure controls and procedures and corporate governance policies and procedures.

Any system of controls, however well designed and operated, has inherent limitations, including the possibility that a control can be

circumvented or overridden, and misstatements due to error or fraud may occur and not be detected.

The Companys controls and procedures may fail or be circumvented.

Management regularly reviews and updates the Companys internal control over financial reporting, disclosure controls and

procedures and corporate governance policies and procedures.

Any system of controls, however well designed and operated, has inherent limitations, including the possibility that a control can be circumvented or overridden, and misstatements due to

error or fraud may occur and not be detected.

Also, because of changes in conditions, internal control effectiveness may vary over time.

Accordingly, even an effective system of internal control

will provide only reasonable assurance with respect to the Companys adherence to financial reporting, disclosure and corporate governance policies and procedures.

The Company may be adversely affected by the soundness of other financial institutions.

Financial institutions are interrelated as a result of trading, clearing, counterparty, or other relationships.

has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional

Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to

the Companys adherence to financial reporting, disclosure and corporate governance policies and procedures.

The Company may be adversely

affected by the soundness of other financial institutions.

Financial institutions are interrelated as a result of

trading, clearing, counterparty, or other relationships.

The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including commercial

banks, brokers and dealers, investment banks, and other institutional clients.

Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client.

In addition, the Companys credit risk may be exacerbated when the collateral held by the Company cannot be realized or

is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.

Any such losses could have a material adverse effect on the Companys financial condition and results of operations.

The Company relies on third party vendors for a number of key components of its business.

In addition, the Companys credit risk may be

exacerbated when the collateral held by the Company cannot be realized or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.

Any such losses could have a material adverse effect

on the Companys financial condition and results of operations.

The Company relies on third party vendors for a number of key components of its

The Company contracts with a number of third party vendors to support its infrastructure.

Many of these vendors are large

national companies who are dominant in their area of expertise and would be difficult to quickly replace.

Failures of certain vendors to provide services could adversely affect the Companys ability to deliver products and services to its

customers, disrupting its business and causing it to incur significant expense.

Many of these

vendors are large national companies who are dominant in their area of expertise and would be difficult to quickly replace.

Failures of certain vendors to provide services could adversely affect the Companys ability to deliver products and

services to its customers, disrupting its business and causing it to incur significant expense.

External vendors also present information security risks.

anticipated growth in new branches and new product and service offerings could result in reduced income.

has placed a strategic emphasis on expanding its branch network and product offerings.

Executing this strategy carries risks of slower than anticipated growth both in new branches and new products.

New branches and products require a significant

investment of both financial and personnel resources.

Lower than expected loan and deposit growth in new investments can decrease anticipated revenues and net income generated by those investments, and opening new branches and introducing new

products could result in more additional expenses than anticipated and divert resources from current core operations.

The Company is substantially

dependent on dividends from the Bank for its revenues.

The Company is a separate and distinct legal entity from the

Bank, and it receives substantially all of its revenue from dividends from the Bank.

Slower than anticipated growth in new branches and new product and service offerings could result in reduced income.

The Company has placed a strategic emphasis on expanding its branch network and product offerings.

Executing this strategy

carries risks of slower than anticipated growth both in new branches and new products.

New branches and products require a significant investment of both financial and personnel resources.

Lower than expected loan and deposit growth in new

investments can decrease anticipated revenues and net income generated by those investments and opening new branches and introducing new products could result in more additional expenses than anticipated and divert resources from current core

The Company is substantially dependent on dividends from the Bank for its revenues.

The Company is a separate and distinct legal entity from the Bank, and it receives substantially all of its revenue from

dividends from the Bank.

These dividends are the principal source of funds to pay dividends on its common stock and interest and principal on debt.

Various federal and state laws and

regulations limit the amount of dividends that the Bank may pay to the Company.

In the event the Bank is unable to pay dividends to the Company, it may not be able to service debt, pay obligations or pay dividends on the Companys common stock.

The inability to receive dividends from the Bank could have a material adverse effect on the Companys business, prospects, financial condition and results of operations.

The information under the heading Supervision and Regulation

in Item 1, Business, provides a discussion about the restrictions governing the Banks ability to transfer funds to the Company.

federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company.

In the event the Bank is unable to pay dividends to the Company, it may not be able to

service debt, pay obligations or pay dividends on the Companys common stock.

The inability to receive dividends from the Bank could have a material adverse effect on the Companys business, prospects, financial condition and results of

The information under the heading Supervision and Regulation in Item 1, Business, provides a discussion about the restrictions governing the Banks ability to transfer funds to the Company.

Potential acquisitions may disrupt the Companys business and dilute shareholder value.

25 unchanged sentences

The Companys information systems may experience an interruption or breach in security.

technologies and the need to protect against and react to cybersecurity risks and electronic fraud requires significant resources.

The Company relies heavily on communications and information systems to conduct its business.

2 unchanged sentences

The secure transmission of confidential information over the internet is a critical element of online banking.

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

disruptions in its customer relationship management, general ledger, deposit, loan and other systems.

While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of the

Companys information systems, there can be no assurance

that any such failures, interruptions or security breaches will be prevented, and if they occur, that they will be adequately addressed.

Additionally, to the extent the Company relies on third

party vendors to perform or assist operational functions, the challenge of managing the associated risks becomes more difficult.

The occurrence of any failures, interruptions or security breaches of the Companys information systems could

damage its reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose it to civil litigation and possible financial liability, any of which could have a material adverse effect on the

financial condition and results of operations of the Company.

The Company continually encounters technological change.

The Companys industry is continually undergoing rapid technological change with frequent introductions of new

technology-driven products and services.

The Company needs to invest in information technology to keep pace with technology changes, and

while the Company invests amounts it believes will be adequate, it may fail to invest adequate amounts such that the efficiency of information technology systems fails to meet operational needs.

Any failure, interruption or breach in security of

these systems could result in failures or disruptions in its customer relationship management, general ledger, deposit, loan and other systems.

While the Company has policies and procedures designed to prevent or limit the effect of the failure,

interruption or security breach of the Companys information systems, there can be no assurance that any such failures, interruptions or security breaches will be prevented, and if they occur, that they will be adequately addressed.

Additionally, to the extent the Company relies on third party vendors to perform or assist operational functions, the challenge of managing the associated risks becomes more difficult.

The occurrence of any failures, interruptions or security

breaches of the Companys information systems could damage its reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose it to civil litigation and possible financial liability, any of

which could have a material adverse effect on the financial condition and results of operations of the Company.

The Company continually encounters

technological change.

The Companys industry is continually undergoing rapid technological change with frequent

introductions of new technology-driven products and services.

The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs.

The Companys future success depends, in part, upon its ability to

address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Companys operations.

Many of the Companys competitors have

substantially greater resources to invest in technological improvements.

The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers.

The Companys future success depends, in part,

upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Companys operations.

Many of the Companys

competitors have substantially greater resources to invest in technological improvements.

The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to

its customers.

Failure to successfully keep pace with technological change affecting the Companys industry could have a material adverse impact on its business and, in turn, the Companys financial condition and results of operations.

The operational functions of business counterparties may experience similar disruptions that could adversely impact us and over which the Company may have

limited or no control.

The operational functions of business counterparties may experience similar disruptions that could adversely impact us and over which the Company may

have limited or no control.

For example, in 2015, 2016 and 2017 major retailers experienced data systems incursions

2 unchanged sentences

maintained by many banks, including the Bank.

Although the Bank systems are not breached in retailer incursions, these events can cause the Bank to reissue a significant number of cards and take other costly steps to avoid significant theft loss to

the Bank and its customers.

Other possible points of incursion or disruption not within the Banks control include internet service providers, electronic mail portal providers, social media portals, distant-server (cloud) service

providers, electronic data security providers, telecommunications companies, and smart phone manufacturers.

Consumers may decide not to use banks to

complete their financial transactions.

While the Company continually attempts to use technology to offer new products

and services, at the same time, technology and other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods.

For example, consumers can now maintain funds in brokerage

accounts, mutual funds or use electronic payment methods such as Apple Pay or PayPal, that would have historically been held as bank deposits.

Consumers can also complete transactions such as paying bills or transferring funds directly without the

assistance of banks.

The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits and

the related income generated from those deposits.

The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on the Companys

financial condition and results of operations.

Severe weather, natural disasters, acts of war or terrorism and other external events could

significantly impact the Companys business.

Severe weather, natural disasters, acts of war or terrorism, and

other adverse external events could have a significant impact on the ability of the Company to conduct business.

Such events could affect the stability of the Companys deposit base, impair the ability of borrowers to repay outstanding loans,

impair the value of collateral securing loans, cause significant property damage, result in loss of revenue or cause the Company to incur additional expenses.

The occurrence of any such event could have a material adverse effect on the

Companys business, prospects, financial condition and results of operations.

Although the Bank systems are not breached in retailer incursions, these events can cause the Bank to reissue a

significant number of cards and take other costly steps to avoid significant theft loss to the Bank and its customers.

Other possible points of incursion or disruption not within the Banks

control include internet service providers, electronic mail portal providers, social media portals, distant-server (cloud) service providers, electronic data security providers, telecommunications companies, and smart phone

manufacturers.

Consumers may decide not to use banks to complete their financial transactions.

While the Company continually attempts to use technology to offer new products and services, at the same time, technology and

other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods.

For example, consumers can now maintain funds in brokerage accounts, mutual funds or use electronic payment

methods such as Apple Pay or PayPal, that would have historically been held as bank deposits.

Consumers can also complete transactions such as paying bills or transferring funds directly without the assistance of banks.

The process of eliminating

banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits.

The loss of these revenue streams and the lower cost deposits

as a source of funds could have a material adverse effect on the Companys financial condition and results of operations.

Severe weather, natural

disasters, acts of war or terrorism and other external events could significantly impact the Companys business.

Severe weather, natural disasters, acts of war or terrorism, and other adverse external events could have a significant impact

on the ability of the Company to conduct business.

Such events could affect the stability of the Companys deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause

significant property damage, result in loss of revenue or cause the Company to incur additional expenses.

The occurrence of any such event could have a material adverse effect on the Companys business, prospects, financial condition and

results of operations.

The Company is subject to Accounting Estimate Risks.

9 unchanged sentences

adjustment that will differ materially from the estimates that the Company makes today.

Expense Control could have an effect on the Companys

Expense Control could have an effect on the Companys earnings.

Expenses and other costs directly affect the Companys earnings.

The Companys ability to

successfully manage expenses is important to its long-term profitability.

The Companys ability to successfully manage

expenses is important to its long-term profitability.

Many factors can influence the amount of the Companys expenses, as well as how quickly they grow.

As the Companys businesses change or expand, additional expenses

can arise from asset purchases, structural reorganization, evolving business strategies, and changing regulations, among other things.

The Company manages expense growth and risk through a variety of means, including actual versus budget management,

imposition of expense authorization, and procurement coordination and processes.

As the Companys businesses change or expand, additional expenses can arise from asset

purchases, structural reorganization, evolving business strategies, and changing regulations, among other things.

The Company manages expense growth and risk through a variety of means, including actual versus budget management, imposition of

expense authorization, and procurement coordination and processes.

Risks Associated With the Companys Common Stock

32 unchanged sentences

We may issue, in

the future, shares of our common stock to acquire additional banks, bank holding companies, and other businesses related to the financial services industry that may complement our

organizational structure.

Resales of substantial amounts of common stock in the public market and the potential of such sales could adversely affect the prevailing market price of our common

stock and impair our ability to raise additional capital through the sale of equity securities.

We may be required to pay an acquisition premium above the fair market value of acquired assets for acquisitions.

Paying this acquisition premium, in

addition to the dilutive effect of issuing additional shares, may also adversely affect the prevailing market price of our common stock.

debt or equity securities or securities convertible into equity securities, any of which may be senior to our common stock as to distributions and in liquidation, which could negatively affect the value of our common stock.

In the future, we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured

or secured by all or up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of secured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock or

securities convertible into or exchangeable for equity securities.

In the event of our liquidation, our lenders and holders of our debt and preferred securities would receive a distribution of our available assets before distributions to the holders

of our common stock.

Because any decision to incur debt or issue securities in future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future

offerings and debt financings.

Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future.

The Companys Articles of Incorporation and Bylaws, as well as certain banking laws, may have an anti-takeover effect.

Provisions of the Companys Articles of Incorporation and Bylaws, which are exhibits to this Annual Report on Form 10-K, and the federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial to the

Companys shareholders.

The combination of these provisions impedes a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of the Companys

the future, shares of our common stock to acquire additional banks, bank holding companies, and other businesses related to the financial services industry that may complement our organizational structure.

Resales of substantial amounts of common

stock in the public market and the potential of such sales could adversely affect the prevailing market price of our common stock and impair our ability to raise additional capital through the sale of equity securities.

We may be required to pay an

acquisition premium above the fair market value of acquired assets for acquisitions.

Paying this acquisition premium, in addition to the dilutive effect of issuing additional shares, may also adversely affect the prevailing market price of our

common stock.

We may issue debt or equity securities or securities convertible into equity securities, any of which may be senior to our common stock

as to distributions and in liquidation, which could negatively affect the value of our common stock.

In the future,

we may attempt to increase our capital resources by entering into debt or debt-like financing that is unsecured or secured by all or up to all of our assets, or by issuing additional debt or equity securities, which could include issuances of

secured or unsecured commercial paper, medium-term notes, senior notes, subordinated notes, preferred stock or securities convertible into or exchangeable for equity securities.

In the event of our liquidation, our lenders and holders of our debt

and preferred securities would receive a distribution of our available assets before distributions to the holders of our common stock.

Because any decision to incur debt or issue securities in future offerings will depend on market conditions and

other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings and debt financings.

Further, market conditions could require us to accept less favorable terms for the issuance of our

securities in the future.

The Companys Articles of Incorporation and Bylaws, as well as certain banking laws, may have an anti-takeover effect.

Provisions of the Companys Articles of Incorporation and Bylaws, which are exhibits to this Annual Report on

Form 10-K, and the federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial

to the Companys shareholders.

The combination of these provisions impedes a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of the

Companys common stock.

UNRESOLVED STAFF COMMENTS.

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