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Item 1A. Risk Factors

2020-03-13 compared with 2019-03-15 · 287 added, 286 removed, 225 unchanged (72% of the section changed)

RISK FACTORS.

In addition to the other information contained in or incorporated by reference into this report and the exhibits hereto, the

following risk factors should be considered carefully in evaluating the Companys business.

The risks disclosed below, either alone or in combination, could materially adversely affect the business, prospects, financial condition or results of

operations of the Company and/or the Bank.

In addition to the other information contained in or incorporated by reference into this report and the exhibits hereto, the following risk

factors should be considered carefully in evaluating the Companys business.

The risks disclosed below, either alone or in combination, could materially adversely affect the business, prospects, financial condition or results of operations of

the Company and/or the Bank.

Additional risks not presently known to the Company, or that the Company currently deems immaterial, may also adversely affect the Companys business, financial condition or results of operations.

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Interest rates in the

financial markets affect the Companys decisions on pricing its assets and liabilities, which impacts net interest income, an important cash flow stream for the Company.

As a result, a substantial part of the Companys risk-management

activities is devoted to managing interest-rate risk.

Currently, the Company does not have any significant risks related to foreign currency exchange, commodities or equity risk exposures.

The Companys earnings and cash flows are largely dependent upon the net interest income of the Company.

income is the difference between interest earned on assets, such as loans and securities, and the cost of interest-bearing liabilities, such as deposits and borrowed funds.

Interest rates are highly sensitive to many factors that are beyond the

Companys control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB.

Changes in monetary policy, including changes in interest rates, could influence not only the

interest the Company receives on loans and securities and the amount of interest the Company pays on deposits and borrowings, but such changes could also affect (i) the Companys ability to originate loans and obtain deposits, which could

reduce the amount of fee income generated;

financial markets affect the Companys decisions on pricing its assets and liabilities, which impacts net interest income, an

important cash flow stream for the Company.

As a result, a substantial part of the Companys risk-management activities is devoted to managing interest-rate risk.

Currently, the Company does

not have any significant risks related to foreign currency exchange, commodities or equity risk exposures.

Companys earnings and cash flows are largely dependent upon the net interest income of the Company.

Net interest income is the difference between interest earned on assets, such as loans and securities, and the cost of interest-bearing

liabilities, such as deposits and borrowed funds.

Interest rates are highly sensitive to many factors that are beyond the Companys control, including general economic conditions and policies of various governmental and regulatory agencies and,

in particular, the FRB.

Changes in monetary policy, including changes in interest rates, could influence not only the interest the Company receives on loans and securities and the amount of interest the Company pays on deposits and borrowings, but

such changes could also affect (i) the Companys ability to originate loans and obtain deposits, which could reduce the amount of fee income generated;

(ii) the fair value of the Companys financial assets and liabilities;

and (iii) the average duration of the Companys mortgage-backed securities portfolio.

If the interest rates paid on

deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Companys net interest income could be adversely affected, which in turn could negatively affect its earnings.

could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Although management believes it has implemented effective asset and liability management strategies to reduce the potential

effects of changes in interest rates on the results of operations of the Company, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the Companys financial condition and results of

For the reasons set forth above, an increase in interest rates generally as a result of such a credit rating downgrade could adversely affect out net interest income levels, thereby resulting in reduced earnings, and reduce loan demand.

Volatility in interest rates may also result in disintermediation, which is the flow of funds away from financial institutions into direct investments, such as United States Government and Agency securities and other investment vehicles, including

mutual funds, which generally pay higher rates of return than financial institutions because of the absence of federal insurance premiums and reserve requirements.

Disintermediation could also result in material adverse effects on the Companys

financial condition and results of operations.

A discussion of the policies and procedures used to identify, assess and

manage certain interest rate risk is set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk.

(iii) the average duration of the Companys mortgage-backed securities portfolio.

If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the

Companys net interest income could be adversely affected, which in turn could negatively affect its earnings.

Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the

interest rates paid on deposits and other borrowings.

Although management believes it has implemented effective asset and

liability management strategies to reduce the potential effects of changes in interest rates on the results of operations of the Company, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on

the Companys financial condition and results of operations.

For the reasons set forth above, an increase in interest rates generally as a result of such a credit rating downgrade could adversely affect out net interest income levels, thereby

resulting in reduced earnings, and reduce loan demand.

Volatility in interest rates may also result in disintermediation, which is the flow of funds away from financial institutions into direct investments, such as United States Government and

Agency securities and other investment vehicles, including mutual funds, which generally pay higher rates of return than financial institutions because of the absence of federal insurance premiums and reserve requirements.

Disintermediation could

also result in material adverse effects on the Companys financial condition and results of operations.

of the policies and procedures used to identify, assess and manage certain interest rate risk is set forth in Item 7A, Quantitative and Qualitative Disclosures about Market Risk.

The Company is subject to lending risk.

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estate loans or consumer loans due primarily to the large amounts loaned to individual borrowers.

Because the loan portfolio contains a significant number of commercial, construction and commercial real estate loans with relatively large balances,

the deterioration of one or a few of these loans could cause a significant increase in non-performing loans.

An increase in non-performing loans could result in a net

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.

Because the loan portfolio contains a

significant number of commercial, construction and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase

in non-performing loans.

An increase in non-performing loans could result in a net 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.

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inherent in the loan portfolio.

The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires management to make significant estimates of current credit risks and future

trends, all of which may undergo material changes.

Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other 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 determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires management to make significant estimates of current

credit risks and future trends, all of which may undergo material changes.

Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other 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.

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

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.

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.

Our operations and profitability are impacted by general business and economic conditions in the State of

Mississippi, and the United States.

These conditions include recession, short-term and long-term interest rates, inflation, money supply, political issues, legislative and regulatory changes, fluctuations in both debt and equity capital markets,

broad trends in industry and finance, and the strength of the U.S.

Our operations and profitability are impacted by general business and economic conditions in the State of Mississippi, and the

United States.

and finance, and the strength of the U.S.

economy and the local economies in which we operate, all of which are beyond our control.

A deterioration in economic conditions could result in an increase in loan delinquencies and

nonperforming assets, decreases in loan collateral values and a decrease in demand for our products and services, among other things, any of which could have a material adverse impact on our financial condition and results of operations.

A deterioration in economic conditions could result in an increase in loan delinquencies and nonperforming assets,

decreases in loan collateral values and a decrease in demand for our products and services, among other things, any of which could have a material adverse impact on our financial condition and results of operations.

The FRB has implemented significant economic strategies that have impacted interest rates, inflation, asset values, and the shape of the yield curve,

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years, the FRB has begun to gradually unwind the remaining domestic monetary policy initiatives as the economy continues to recover.

During 2018, the FRB raised the target federal funds rate by 25 bps in March, June, September and December, bringing

the current range to 2.25 to 2.50 percent.

During 2019, the FRB lowered the target federal funds rate by 25 bps in August, September and October, bringing the

current range to 1.50 to 1.75 percent.

This development, along with the U.S.

governments credit and deficit concerns and international economic considerations, could cause interest rates and borrowing costs to rise, which may

negatively impact our ability to access the debt markets on favorable terms.

governments credit and deficit concerns and international economic considerations, 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.

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

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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.

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

The Company is subject to extensive government regulation and supervision.

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.

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.

The Company is subject to extensive government regulation and

The Company and the Bank are subject to extensive federal and state regulation and supervision.

Banking regulations are

primarily intended to protect depositors funds, federal deposit insurance funds and the banking system as a whole, and not the economic or other interests of shareholders.

These regulations affect the Companys and the Banks lending

practices, capital structure, investment practices, dividend policy and growth, among other things.

Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of the foregoing, could affect the

Company or the Bank in substantial and unpredictable ways.

Such changes could subject the Company to additional costs, limit the types of financial services and products it may offer or increase the ability of

non-banks to offer competing financial services and products, among other things.

Under regulatory capital adequacy guidelines and other regulatory requirements, the Company and the Bank must meet guidelines

that include quantitative measures of assets, liabilities and certain off-balance sheet items, subject to qualitative judgments by regulators about components, risk weightings and other factors.

If the Company

fails to meet these minimum capital guidelines and other regulatory requirements, its financial condition would be materially and adversely affected.

The Companys failure to maintain the status of well capitalized under its

regulatory framework could affect the confidence of its customers in the Company, thus compromising the Companys competitive position.

In addition, failure to maintain the status of well capitalized under the Companys

regulatory framework or well managed under regulatory examination procedures could compromise the Companys status as a bank holding company and related eligibility for a streamlined review process for acquisition proposals.

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

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 including

descriptions of the laws, regulations or policies applicable to us.

Banking regulations are primarily intended to protect depositors funds, federal deposit insurance funds and the banking system as a whole, and not the economic or other interests of shareholders.

These regulations affect the Companys and

the Banks lending practices, capital structure, investment practices, dividend policy and growth, among other things.

Changes to statutes,

regulations or regulatory policies, including changes in interpretation or implementation of the foregoing, could affect the Company or the Bank in substantial and unpredictable ways.

changes could subject the Company to additional costs, limit the types of financial services and products it may offer or increase the ability of non-banks to offer competing financial services and products,

among other things.

Under regulatory capital adequacy guidelines and other regulatory requirements, the Company and the

Bank must meet guidelines that include quantitative measures of assets, liabilities and certain off-balance sheet items, subject to qualitative judgments by regulators about components, risk weightings and

other factors.

If the Company fails to meet these minimum capital guidelines and other regulatory requirements, its financial condition would be materially and adversely affected.

The Companys failure to maintain the status of well

capitalized under its regulatory framework could affect the confidence of its customers in the Company, thus compromising the Companys competitive position.

In addition, failure to maintain the status of well capitalized

under the Companys regulatory framework or well managed under regulatory examination procedures could compromise the Companys status as a bank holding company and related eligibility for a streamlined review process for

acquisition proposals.

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

and public disclosure, 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

including descriptions of the laws, regulations or policies applicable to us.

We are subject to claims and litigation.

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effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

operates in a highly competitive industry and market area.

The Company faces substantial competition in all areas

of its operations from a variety of different competitors, many of which are larger and have more financial resources.

Such competitors primarily include national, regional and community banks within the various markets in which the Company

The Company also faces competition from many other types of financial institutions, including savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial

intermediaries.

The information under the heading Competition in Item 1, Business, provides more information regarding the competitive conditions in the Companys markets.

The Companys industry could become even more competitive as a result of legislative, regulatory and technological

changes and continued consolidation.

Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting,

insurance (both agency and underwriting) and merchant banking.

Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks,

such as automatic transfer and automatic payment systems.

Many of the Companys competitors have fewer regulatory constraints and may have lower cost structures.

Additionally, many of the Companys competitors have substantially greater

resources than the Company, including higher total assets and capitalization, greater access to capital markets and a broader offering of financial services.

The Companys ability to compete successfully depends on a number of factors, including, among other things:

The Company operates in a highly competitive industry and market area.

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which

are larger and have more financial resources.

Such competitors primarily include national, regional and community banks within the various markets in which the Company operates.

The Company also faces competition from many other types of financial

institutions, including savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies and other financial intermediaries.

The information under the heading Competition in Item 1,

Business, provides more information regarding the competitive conditions in the Companys markets.

Companys industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.

Banks, securities firms and insurance companies can merge under the umbrella of a financial

holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking.

Also, technology has lowered barriers to entry and made it possible

for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Many of the Companys competitors have fewer regulatory constraints

and may have lower cost structures.

Additionally, many of the Companys competitors have substantially greater resources than the Company, including higher total assets and capitalization, greater access to capital markets and a broader

offering of financial services.

The Companys ability to compete successfully depends on a number of factors,

including, among other things:

the ability to develop, maintain and build upon long-term customer relationships based on top quality service,

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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

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 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.

We may also suffer severe reputational damage.

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

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.

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.

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Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and

these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types

Insurance and other traditional risk-shifting tools may be held by or available to us in order to 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 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.

addition, in 2010, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced agreement on the calibration and phase-in arrangements for a

strengthened set of capital requirements, known as Basel III.

these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk.

Insurance and other traditional risk-shifting tools may be held by or available to us in order to

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.

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

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.

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

Supervision, announced agreement on the calibration and phase-in arrangements for a strengthened set of capital requirements, known as Basel III.

In 2013, regulators adopted enhancements to United States.

capital standards based on Basel III.

The revised standards create a new emphasis on Tier 1 common equity, modify eligibility

criteria for regulatory capital instruments, and modify the methodology for calculating risk-weighted assets.

The revised standards require the following:

The revised standards create a new emphasis on Tier 1 common equity, modify eligibility criteria for regulatory capital instruments, and modify the methodology for calculating risk-weighted assets.

standards require the following:

Tier 1 Common Equity.

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including the Bank, a minimum supplementary leverage ratio must be maintained that takes into account certain off-balance sheet exposures.

The revised standards took effect on January 1, 2015 for the Company and the Bank.

The capital conservation buffer

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.

The revised standards took effect on January 1, 2015 for the Company and the

The capital conservation buffer 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.

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.

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

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

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.

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.

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

11 unchanged sentences

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.

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 business.

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

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.

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.

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

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 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.

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

Potential acquisitions may disrupt the

Companys business and dilute shareholder value.

From time-to-time, the Company evaluates merger and acquisition opportunities and conducts due diligence activities related to possible transactions with other financial institutions.

As a result, merger or

acquisition discussions and, in some cases, negotiations may take place, and future mergers or acquisitions involving cash, debt or equity securities may occur at any time.

Acquiring other banks, businesses or branches involves various risks

commonly associated with acquisitions, including, among other things:

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 pay obligations or pay dividends on the Companys common stock.

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.

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

From time-to-time, the Company evaluates merger

and acquisition opportunities and conducts due diligence activities related to possible transactions with other financial institutions.

As a result, merger or acquisition discussions and, in some cases, negotiations may take place, and future

mergers or acquisitions involving cash, debt or equity securities may occur at any time.

Acquiring other banks, businesses or branches involves various risks commonly associated with acquisitions, including, among other things:

potential exposure to unknown or contingent liabilities of the target company;

19 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.

Furthermore, the Bank provides

its customers the ability to bank online.

Evolving 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.

Furthermore, the Bank provides its customers the ability to bank online.

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

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.

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.

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 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.

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.

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

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.

Over the course of the past few years, companies such as major

retailers have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information, and other financial data of tens of millions of the retailers customers.

incursions affect cards issued and deposit accounts 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.

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

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.

Over the course of the past few years,

companies such as major retailers have experienced data systems incursions reportedly resulting in the thefts of credit and debit card information, online account information, and other financial data of tens of millions of the retailers

Retailer incursions affect cards issued and deposit accounts 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.

8 unchanged sentences

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.

The Bank has branches along the coast of Mississippi that are subject to risks from hurricanes from time to time.

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.

The preparation of the Companys consolidated financial statements in

conformity with generally accepted accounting principles requires management to make significant estimates that affect the financial statements.

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

impact the Companys business.

The Bank has branches along the coast of Mississippi that are subject to risks

from hurricanes from time to time.

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.

The preparation of the Companys consolidated financial statements in conformity with generally accepted accounting

principles requires management to make significant estimates that affect the financial statements.

The Companys most critical estimate is the level of the allowance for credit losses.

other estimates occasionally become highly significant, especially in volatile situations such as litigation and other loss contingency matters.

However, other estimates occasionally become highly

significant, especially in volatile situations such as litigation and other loss contingency matters.

Estimates are made at specific points in time;

as actual events unfold, estimates are adjusted

Due to the inherent nature of these estimates, it is possible that, at some time in the future, the Company may significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the

provided allowance, or the Company may make some other adjustment that will differ materially from the estimates that the Company makes today.

Expense Control could have an effect on the Companys earnings.

as actual events unfold, estimates are adjusted accordingly.

Due to the inherent nature of these

estimates, it is possible that, at some time in the future, the Company may significantly increase the allowance for credit losses or sustain credit losses that are significantly higher than the provided allowance, or the Company may make some other

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

Expense Control could have an effect on the Companys

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

34 unchanged sentences

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

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

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.

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.

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

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