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Item 9A. Controls and Procedures

2024-03-29 compared with 2023-03-15 · 18 added, 5 removed, 128 unchanged (15% of the section changed)

2 unchanged sentences

First Keystone Corporation maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) designed to ensure that information required to be disclosed in the reports that the Corporation files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

Based upon their evaluation of those disclosure controls and procedures performed as of the end of the period covered by this report, the Chief Executive Officer and Chief Financial Officer of the Corporation concluded that the Corporation’s disclosure controls and procedures were effective as of December 31, 2022.

Management’s Report on Internal Control Over Financial Reporting

1 unchanged sentence

The Corporation’s internal control system was designed to provide reasonable assurance to the Corporation’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, the application of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that compliance with the policies or procedures may deteriorate.

The management of First Keystone Corporation, along with participation of the Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2023.

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the Internal Control — Integrated Framework (2013).

Based on our assessment we believe that, as of December 31, 2022, the Corporation’s internal control over financial reporting is effective based on those criteria.

First Keystone Corporation’s independent registered public accounting firm that audited the consolidated financial statements has issued an audit report on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2022.

Based on our assessment we believe that, as of December 31, 2023, the Corporation’s internal control over financial reporting was not effective based on those criteria.

Management identified a material weakness in internal controls relating to the failure to properly review and update remaining life calculations and the qualitative factors grid related to the allowance for credit losses calculations under the Corporation’s CECL model.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant's annual or interim financial statements will not be prevented or detected on a timely basis.

The identified material weaknesses did not result in any material misstatement in the Company's consolidated financial statements.

We are implementing remedial changes to improve our internal controls over financial reporting described below.

Remediation Activities

Management has been actively engaged in developing remediation plans to address the above control deficiency.

Management has instituted a new control requiring that the remaining life calculations are run on a quarterly basis in order to recalculate the annual attrition rate.

The quarterly calculation of the annual attrition rate will be subsequently reviewed with members of the CECL committee after quarter-end but before the quarterly CECL calculation is rolled forward, and the discussion will be memorialized in the minutes of the CECL committee.

In addition, management has introduced several refinements in its qualitative factors grid utilized in the calculation of the allowance for credit losses and eliminated duplicative and overlapping values when defining the ranges used to determine the magnitude of qualitative adjustments.

Management believes the foregoing efforts will effectively remediate the material weakness.

As management continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.

This report can be found in Item 8 of this Form 10-K.

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OTHER INFORMATION

There was no information required on Form 8-K during this quarter that was not reported.

During the year ended December 31, 2023, no director or officer of the Corporation adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

39 unchanged sentences

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

74 unchanged sentences

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 9A. Controls and Procedures