What changed in this filing

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Item 1A. Risk Factors

2022-03-11 compared with 2021-03-12 · 42 added, 53 removed, 252 unchanged (27% of the section changed)

58 unchanged sentences

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

Our business, financial condition, liquidity, capital and results of operations have been, and will likely continue to be, adversely affected by the COVID-19

pandemic has created disruptions that have adversely affected, and are likely to continue to adversely affect, our business, financial condition, liquidity, capital and results of operations.

pandemic and actions taken to mitigate its spread and economic impact could adversely affect the Company’s business activities, financial condition, and results of operations.

The spread of COVID-19,

and actions taken by governmental and public health authorities to mitigate its spread, such as instituting quarantines, travel restrictions and “shelter in place” orders, have caused and may continue to cause severe disruptions in both domestic and international economies, which could continue to disrupt the business, activities, and operations of the Company’s customers, as well as its business and operations.

Moreover, since the beginning of January 2020, the COVID-19

pandemic and actions taken to mitigate the spread of it have had and may continue to have an adverse impact on economic activity globally, nationally, and locally.

We cannot predict the extent to which the pandemic will continue to cause such adverse effects.

The extent of any continued or future adverse effects will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the COVID-19

pandemic and its impact on our employees, clients, customers, counterparties and service providers, as well as other market participants.

pandemic and its impact on our

employees, clients, customers, counterparties, and service providers, as well as other market participants.

Circumstances brought about by the pandemic persist, including worsened economic conditions, increased market volatility, ratings downgrades, credit deterioration and defaults, reductions in the targeted federal funds rate, and increased spending on business continuity efforts, which may require that we reduce costs and investments in other areas.

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pandemic subsides, we expect increased credit losses and a decrease in certain sources of fee income.

The FRB has implemented significant economic strategies that have impacted interest rates, inflation, asset values, and the shape of the yield curve to help stimulate the economy due to the COVID-19

pandemic has significantly affected the financial markets and has resulted in a number of actions by the Federal Reserve Bank (“FRB”).

Market interest rates have declined significantly.

On March 3, 2020, the ten-year

Treasury yield fell below 1.00% for the first time, and the FRB reduced the target federal funds rate by 50 basis points to a range of 1.00% to 1.25%.

On March 15, 2020, the FRB further reduced the target federal funds rate by 100 basis points to a range of 0.00% to 0.25% and announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19

The FRB reduced the interest that it pays on excess reserves from 1.60% to 1.10% on March 3, 2020, and then to 0.10% on March 15, 2020.

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.

Risks associated

We would anticipate to see any heavily impacted industries by the pandemic in which the Bank has material credit exposure, including any retail, hospitality, and oil and gas industries, etc.

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 Company’s 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.

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

The local economic conditions in this area have a significant impact on the demand for the Company’s 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.

We would anticipate to see any heavily impacted industries by the pandemic in which the Bank has material credit exposure, including any retail, hospitality, and oil and gas industries, etc.

The Company is subject to extensive government regulation and supervision.

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

The Company operates in a highly competitive financial services industry.

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have greater financial resources.

Such competitors primarily include banks, as well as community banks operating nationwide and regionally 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.

Additionally, fintech developments, such as blockchain and other distributed ledger technologies, have the potential to disrupt the financial industry and change the way banks do business.

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

Some of the Company’s competitors have fewer regulatory constraints and may have lower cost structures.

Additionally, due to their size, many of the Company’s larger competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company.

The Company’s ability to compete successfully depends on a number of factors, including:

the ability to develop, maintain and build upon long-term customer relationships based on top quality service, high ethical standards and safe, sound assets;

the ability to continue to expand the Company’s market position through organic growth and acquisitions;

the scope, relevance and pricing of products and services offered to meet customer needs and demands;

the rate at which the Company’s introduces new products and services relative to its competitors;

and industry and general economic trends.

Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s financial condition or 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.

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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 company’s 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”.

These requirements, and any other new regulations, could adversely affect the Company’s 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 Company’s 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:

Tier 1 Common Equity.

For all supervised financial institutions, including the Company and the Bank, the ratio of Tier 1 common equity to risk-weighted assets (“Tier 1 Common Equity Capital ratio”) must be at least 4.5%.

To be “well capitalized” the Tier 1 Common Equity Capital ratio must be at least 6.5%.

If a capital conservation buffer of an additional 2.5% above the minimum 4.5% (or 7% overall) is not maintained, special restrictions would apply to capital distributions, such as dividends and stock repurchases, and on certain compensatory bonuses.

Tier 1 common equity capital consists of core components of Tier 1 capital:

common stock plus retained earnings net of goodwill, other intangible assets, and certain other required deduction items.

Tier 1 Capital Ratio.

For all banking organizations, including the Bank, the ratio of Tier 1 capital to risk-weighted assets must be at least 6%.

The threshold is raised from the prior 4%, and the risk-weighting method is changed as mentioned above.

To be “well capitalized” the Tier 1 capital ratio must be at least 8%.

Total Capital Ratio.

For all supervised financial institutions, including the Company and the Bank, the ratio of total capital to risk-weighted assets must be at least 8%.

Although this threshold is unchanged from prior requirements, as mentioned above the method for risk-weighting assets has been changed.

As a result of that method change, many banks could have experienced a reduction in this ratio if the change had been effective immediately when the rules were adopted.

Leverage Ratio – Base.

For all banking organizations, including the Bank, the leverage ratio must be at least 4%.

To be “well capitalized” the leverage ratio must be at least 5%.

Leverage Ratio – Supplemental.

For the largest internationally active banking organizations, not 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

Future increases in minimum capital requirements could adversely affect the Company’s net income.

Furthermore, the Company’s 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.

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

44 unchanged sentences

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

transmission of confidential information over the Internet is a critical element of online banking.

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.

37 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.

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.

43 unchanged sentences

General market fluctuations, the potential for breakdowns on electronic trading or other platforms for executing securities transactions, industry factors and general economic and political conditions could cause the Company’s stock price to decrease regardless of operating results.

Climate change and societal responses to climate change could adversely affect the Company’s business and results of operations, including indirectly through impact to its customers.

The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global environment.

As a result, political and social attention to the issue of climate change has increased.

In recent years, governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by limiting greenhouse gas emissions.

The United States Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change.

These agreements and measures may result in the imposition of taxes and fees, the required purchase of emission credits and the implementation of significant operational changes, each of which may require businesses to expend significant capital and incur compliance, operating, maintenance and remediation costs.

Consumers and businesses also may change their behavior on their own as a result of these concerns.

It is not possible to predict how climate change may impact the Company’s financial condition and operations;

however, the Company’s operates in areas where its business and the activities of its customers could be impacted by the effects of climate change.

The effects of climate change may include increased frequency or severity of weather-related events, such as severe storms, hurricanes, flooding and droughts and rising sea levels.

These effects can disrupt business operations, damage property, devalue assets and change customer and business preferences, which may adversely affect borrowers, increase credit risk and reduce demand for the Company’s products and services.

The Company and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns.

The Company and its customers may face cost increases, asset value reductions, operating process changes and the like.

The impact to the Company’s customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities.

In addition, the Company could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans.

The Company’s efforts to take these risks into account may not be effective in protecting it from the negative impact of new laws and regulations or changes in consumer or business behavior and could have a material adverse effect on the Company’s financial condition and results of operations.

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