What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-28 compared with 2023-03-30 · 102 added, 82 removed, 237 unchanged (44% of the section changed)

5 unchanged sentences

The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Also, please read “

Cautionary Note Regarding Forward-Looking Statements.

Also, please read “ Cautionary Note Regarding Forward-Looking Statements.

Risks Related to Our Business

3 unchanged sentences

Among the risks we face are the following:

Credit Risk – the risk that loan customers or other parties will be unable to perform their contractual repayment obligations.

Market Risk – the risk that changes in market rates and prices will adversely affect our financial condition and results of operations.

Liquidity Risk – the risk that the Bancorp or the Bank will have insufficient cash or access to cash to meet its operating needs.

Operational Risk – the risk of financial and reputational loss resulting from fraud, inadequate or failed internal processes, cyber-security breaches, people and systems, or external events.

Economic Risk – the risk that the economy in our markets could decline, resulting in increased unemployment, decreased real estate values, and increased loan charge-offs.

Compliance Risk – the risk of additional action by our regulators or additional regulation that could hinder our ability to do business profitably.

Regulatory Risk – the risk presented by the need to comply with all laws, rules, and regulations from multiple regulatory agencies, including but not limited to the FDIC, the Consumer Financial Protection Bureau, the IDFI, the FRB, the SEC, and the U.S.

Credit Risk – the risk that loan customers or other parties will be unable to perform their contractual repayment obligations.

Market Risk – the risk that changes in market rates and prices will adversely affect our financial condition and results of operations.

Liquidity Risk – the risk that the Bancorp or the Bank will have insufficient cash or access to cash to meet its operating needs.

Operational Risk – the risk of financial and reputational loss resulting from fraud, inadequate or failed internal processes, cyber-security breaches, people and systems, or external events.

Economic Risk – the risk that the economy in our markets could decline, resulting in increased unemployment, decreased real estate values, and increased loan charge-offs.

Page 34 of 122

Compliance Risk – the risk of additional action by our regulators or additional regulation that could hinder our ability to do business profitably.

Regulatory Risk – the risk presented by the need to comply with all laws, rules, and regulations from multiple regulatory agencies, including but not limited to the FDIC, the Consumer Financial Protection Bureau, the IDFI, the FRB, the SEC, and the U.S.

Department of Labor.

Fiduciary Risk – the risk of failing to act in our fiduciary capacity in the best interests of the grantors and beneficiaries of trust accounts and benefit plans. 

Fiduciary Risk – the risk of failing to act in our fiduciary capacity in the best interests of the grantors and beneficiaries of trust accounts and benefit plans.

The Bancorp is subject to liquidity risk in its operations, which could adversely affect the ability to fund various obligations.

7 unchanged sentences

Our ability to borrow could also be impaired by factors that are nonspecific to us, such as severe disruption of the financial markets or negative expectations about the prospects for the financial services industry, as evidenced by the recent failures of certain depository institutions and the resulting market turmoil and volatility stemming from such failures.

Unrealized losses in the Bancorp ’

s investment portfolio could affect liquidity.

As market interest rates increased during 2022 and continued into the early months of 2023, the Bancorp has experienced increased unrealized losses within its investment portfolio.

The Bancorp’s investment portfolio consists of federal funds, interest bearing balances in other financial institutions, U.S.

Unrealized losses in the Bancorp ’ s investment portfolio could affect liquidity.

The increase in market interest rates experienced in 2022 and the early months of 2023, caused the Bancorp to experience increased unrealized losses within its investment portfolio.

The Bancorp’s investment portfolio consists of federal funds, interest bearing balances in other financial institutions, U.S.

government securities, federal agency obligations, obligations of state and local municipalities, and corporate securities.

All of the instruments held in the Bancorp’s investment portfolio are designated as available-for-sale, and many of these instruments are particularly sensitive to interest rate fluctuations, especially long-term fixed-income securities, including U.S.

All of the instruments held in the Bancorp’s investment portfolio are designated as AFS, and many of these instruments are particularly sensitive to interest rate fluctuations, especially long-term fixed-income securities, including U.S.

Treasury notes and bonds and corporate and municipal bonds.

As of December 31, 2023, the Bancorp held approximately $238.7 million of municipal securities within the investment portfolio, which comprised approximately 64.2% of the portfolio, and approximately $123.5 million of collateralized mortgage obligations and residential mortgage-backed securities within the portfolio, which comprised approximately 33.2% of the portfolio.

From December 31, 2021 to December 31, 2022, the investment portfolio experienced unrealized losses of approximately $90.0 million, which coincided with an increase by the Federal Reserve in the federal funds target rate from 0.25% as of December 31, 2021 to 4.50% as of December 31, 2022.

The increase in unrealized losses is reflected in Accumulated Other Comprehensive Income (Loss) (AOCI) on the Bancorp’s balance sheet and reduces the Bancorp’s book capital and tangible common equity ratio.

However, unrealized losses do not affect the Bancorp’s regulatory capital ratios.

From December 31, 2022 to December 31, 2023, the investment portfolio experienced unrealized gains of approximately $16.7 million.

The decrease in unrealized losses is reflected in Accumulated Other Comprehensive Income (Loss) (AOCI) on the Bancorp’s balance sheet and reduces the Bancorp’s book capital and tangible common equity ratio.

However, unrealized losses do not affect the Bancorp’s regulatory capital ratios.

Management continues to actively monitor the investment portfolio and does not currently anticipate the need to realize losses from the investment portfolio, and it is unlikely the Bancorp will be required to sell the securities before recovery of their amortized cost bases, which may be at maturity.

However, the Bancorp’s access to liquidity sources could be affected by unrealized losses if securities within the investment portfolio must be sold at a loss or tangible capital ratios decline from an increase in unrealized losses or realized credit losses.

Page 35 of 122

Above average interest rate risk associated with fixed-rate loans may have an adverse effect on our financial position or results of operations.

Peoples Bank’s loan portfolio includes a significant amount of loans with fixed rates of interest.

At December 31, 2022, $809.7 million, or 53.7% of the Bank’s total loans receivable had fixed interest rates.

Peoples Bank’s loan portfolio includes a significant amount of loans with fixed rates of interest.

At December 31, 2023, $681.4 million, or 45.2% of the Bank’s total loans receivable had fixed interest rates.

The Bank offers adjustable rate mortgage (ARM) loans and fixed-rate loans.

Unlike ARM loans, fixed-rate loans carry the risk that, because they do not reprice to market interest rates, their yield may be insufficient to offset increases in the Bank’s cost of funds during a rising interest rate environment.

Accordingly, a material and prolonged increase in market interest rates could be expected to have a greater adverse effect on the Bank’s net interest income compared to other institutions that hold a materially larger portion of their assets in ARM loans or fixed-rate loans that are originated for committed sale in the secondary market.

Higher loan losses could require the Bancorp to increase its allowance for loan losses through a charge to earnings.

Higher loan losses could require the Bancorp to increase its Allowance for credit losses through a charge to earnings.

When we loan money, we incur the risk that our borrowers will not repay their loans.

8 unchanged sentences

In addition, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined loan-to-value ratios.

Our allowance for loan losses at any particular date may not be sufficient to cover future loan losses.

We may be required to increase our allowance for loan losses, thus reducing earnings.

Our Allowance for credit losses at any particular date may not be sufficient to cover future loan losses.

We may be required to increase our Allowance for credit losses, thus reducing earnings.

Commercial business lending may expose the Bancorp to increased lending risks.

At December 31, 2022, the Bank’s commercial business loan portfolio amounted to $93.3 million, or 6.2% of total loans.

At December 31, 2023, the Bank’s commercial business loan portfolio amounted to $97.4 million, or 6.5% of total loans.

Subject to market conditions and other factors, the Bank intends to expand its commercial business lending activities within its primary market areas.

2 unchanged sentences

Commercial real estate lending may expose the Bancorp to increased lending risks.

At December 31, 2022, the Bank’s commercial real estate loan portfolio amounted to $486.4 million, or 32.2% of total loans.

At December 31, 2023, the Bank’s commercial real estate loan portfolio amounted to $503.2 million, or 33.4% of total loans.

Commercial real estate lending is inherently riskier than residential mortgage lending.

Because payments on loans secured by commercial properties often depend upon the successful operation and management of the properties, repayment of such loans may be affected by adverse conditions in the real estate market or the economy, among other things.

Because payments on loans secured by commercial properties often depend upon the successful operation and management of the properties or related businesses, repayment of such loans may be affected by adverse conditions in the real estate market or the economy, among other things.

Further, these loans typically have larger loan balances, and several of our borrowers have more than one commercial real estate loan outstanding with us.

Consequently, an adverse development with respect to one loan or one credit relationship can expose us to significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.

Finally, if we foreclose on a commercial real estate loan, our holding period for the collateral, if any, typically is longer than for one-to four-family residential mortgage loans because there are fewer potential purchasers of the collateral.

Because we plan to continue to emphasize the origination of these loans, it may be necessary to increase our allowance for loan losses because of the increased credit risk associated with these types of loans.

Any increase to our allowance for loan losses would adversely affect our earnings.

Page 36 of 122

Our mortgage lending profitability could be significantly reduced if we are not able to resell mortgages at a reasonable gain on sale or experience other problems with the secondary market process or we are unable to retain our mortgage loan sales force due to regulatory changes.

2 unchanged sentences

Thus, we are dependent upon the existence of an active secondary market and our ability to profitably sell loans into that market.

Our ability to sell mortgage loans readily is dependent upon the availability of an active secondary market for single-family mortgage loans, which in turn depends in part upon the continuation of programs currently offered by Fannie Mae, Freddie Mac, and Ginnie Mae (the “Agencies”) and other institutional and non-institutional investors.

These entities account for a substantial portion of the secondary market in residential mortgage loans.

4 unchanged sentences

In addition, our ability to sell mortgage loans readily is dependent upon our ability to remain eligible for the programs offered by the Agencies and other institutional and non-institutional investors.

Our ability to remain eligible may also depend on having an acceptable peer-relative delinquency ratio for the Federal Housing Administration (“FHA”) and maintaining a delinquency rate with respect to Ginnie Mae pools that are below Ginnie Mae guidelines.

Any significant impairment of our eligibility with any of the Agencies could materially and adversely affect our operations.

Further, the criteria for loans to be accepted under such programs may be changed from time-to-time by the sponsoring entity which could result in a lower volume of corresponding loan originations.

Further, the criteria for loans to be accepted under such programs may be changed from time-to-time by the sponsoring entity which could result in a lower volume of corresponding loan originations.

The profitability of participating in specific programs may vary depending on a number of factors, including our administrative costs of originating and purchasing qualifying loans and our costs of meeting such criteria.

11 unchanged sentences

The occurrence of operational interruption, cyber incident, or a deficiency in the cyber security of our technology systems (internal or outsourced) could negatively impact our financial condition or results of operations.

Page 37 of 122

We have policies and procedures expressly designed to prevent or limit the effect of a failure, interruption, or security breach of our systems and maintain cyber security insurance.

25 unchanged sentences

Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on our business, financial condition, and results of operations.

Page 38 of 122

We may not be able to attract and retain skilled people.

The Bank’s success depends on its ability to attract and retain skilled people.

Competition for the best people in most activities in which we engage can be intense, and we may not be able to hire people or retain them.

14 unchanged sentences

We may be exposed to risk of environmental liabilities with respect to real property to which we take title.

In the course of our business, we may own or foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties (including liabilities for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination), or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property.

In the course of our business, we may own or foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties (including liabilities for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination), or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property.

Page 39 of 122

We are exposed to intangible asset risk in that our goodwill may become impaired.

As of December 31, 2022, we had $27.2 million of goodwill and other intangible assets.

As of December 31, 2023, we had $25.7 million of goodwill and other intangible assets.

A significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, or slower growth rates could result in impairment of goodwill.

If we were to conclude that a future write-down of our goodwill is necessary, then we would record the appropriate charge, which could be materially adverse to our operating results and financial position.

For further discussion, see Notes 1 and 6, “

Summary of Significant Accounting Policies ”

Goodwill and Other Intangible Assets ,”

to the Consolidated Financial Statements included in Item 8 this report.

For further discussion, see Notes 1 and 6, “ Summary of Significant Accounting Policies ” and “ Goodwill and Other Intangible Assets ,” to the Consolidated Financial Statements included in Item 8 this report.

Damage to our reputation could damage our business.

12 unchanged sentences

potential disruption to our business;

potential diversion of our management’s time and attention away from day-to-day operations;

the possible loss of key employees, business, and customers of the target company;

difficulty in estimating the value of the target company;

potential problems in integrating the target company’s data processing and ancillary systems, customers, and employees with ours.

As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving the payment of cash or the issuance of our debt or equity securities may occur at any time.

3 unchanged sentences

In addition, merger and acquisition costs incurred by the Bancorp may temporarily increase operating expenses.

Page 40 of 122

The Bancorp and Bank are subject to extensive regulation and oversight, including with respect to the Order and MOU.

On November 7, 2023, the Bank entered into a Stipulation and Consent to the Issuance of a Consent Order with its bank regulatory agencies, the FDIC and DFI, consenting to the issuance of a consent order (the “Order”) relating to the Bank’s compliance with the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”).

In consenting to the issuance of the Order, the Bank did not admit or deny any charges of unsafe or unsound banking practices or violations of law or regulation relating to its BSA compliance.

Under the terms of the Order, the Bank or its board of directors is required to take certain affirmative actions to comply with the Bank’s obligations under the BSA.

These include, but are not limited to, the following:

strengthening the board of directors’ oversight of BSA activities;

developing, adopting, and implementing a revised BSA compliance program;

developing a revised system of internal controls designed to ensure full compliance with the BSA;

retaining management qualified to oversee the Bank’s BSA compliance program, including retaining a qualified BSA officer;

assessing BSA staffing needs and identifying staff positions and personnel for BSA compliance;

developing, adopting, and implementing a revised BSA training program;

developing, adopting, and implementing a revised suspicious activity reporting program;

implementing a board-approved customer due diligence program, and reviewing and enforcing enhanced customer due diligence and risk assessment procedures;

eliminating or correcting certain violations of BSA law and regulations, and correcting BSA program weaknesses;

ensuring that all reports required by the BSA are accurately and properly filed;

and developing and implementing a written plan to review past account and transaction activity to determine whether suspicious activity was properly identified and reported.

In addition, under the MOU the Bank has agreed to take various actions and comply with certain requirements to enhance certain areas of the Bank’s operations, including, among other things, the Bank refraining from paying cash dividends without prior regulatory approval and developing and implementing certain plans regarding the Bank’s operations, capital, and strategy.

The Order is expected to result in additional non-interest BSA compliance expenses for the Bank and the Bancorp.

It also may have the effect of limiting or delaying the Bank’s and the Bancorp’s ability to obtain regulatory approval for certain expansionary activities, to the extent desired by the Bancorp.

Our failure to comply with the Order or MOU may result in additional regulatory action, including civil money penalties against the Bank and its officers and directors or enforcement through court proceedings, which could have a material and adverse effect on our business, results of operations, financial condition, cash flows, and stock price.

Risks Related to the Banking Industry

14 unchanged sentences

In addition, unemployment increased significantly during that period, which further contributed to the adverse business environment for households and businesses.

Page 41 of 122

While economic conditions have improved, significant challenges remain, including continued elevated inflation levels and recent uncertainty in the financial institutions industry.

8 unchanged sentences

The process we use to estimate losses inherent in our loan portfolio requires difficult, subjective, and complex judgments.

This process includes analysis of economic conditions and the impact of these economic conditions on borrowers’ ability to repay their loans.

This process includes analysis of economic conditions and the impact of these economic conditions on borrowers’ ability to repay their loans.

The process could no longer be capable of accurate estimation and may, in turn, impact its reliability.

8 unchanged sentences

Customers may withdraw deposits in an effort to ensure the amount they have on deposit with their bank is fully insured and some may seek deposit products or other bank savings and investment products that are collateralized.

Decreases in deposits and changes in the mix of funding sources, particularly in light of recent high profile bank failures and customers’

responses to such events, may adversely affect the Bancorp’s liquidity, funding costs, and net income.

Decreases in deposits and changes in the mix of funding sources, particularly in light of recent high profile bank failures and customers’ responses to such events, may adversely affect the Bancorp’s liquidity, funding costs, and net income.

Page 42 of 122

Turmoil in the financial markets could result in lower fair values for our investment securities.

1 unchanged sentence

Treasury securities, and resulted in volatility in the fair values of our investment securities.

Significant prolonged reduced investor demand could manifest itself in lower fair values for these securities and may result in recognition of an other-than-temporary impairment (“OTTI”), which could have a material adverse effect on our financial condition and results of operations.

Municipal securities can also be impacted by the business environment of their geographic location.

2 unchanged sentences

If the issuer defaults on its payments, it may result in the recognition of OTTI or a total loss, which could have a material adverse effect on our financial condition and results of operations.

We face strong competition in all phases of our business from other banks, financial institutions, and  

We face strong competition in all phases of our business from other banks, financial institutions, and non-banks.

The banking and financial services business in our market areas is highly competitive.

Our competitors include large regional banks, local community banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds, credit unions, neo-banks (a digital or mobile-only bank that exists without any physical bank branches), and other non-bank financial and digital service providers, many of which have greater financial, marketing, and technological resources than us.

Our competitors include large regional banks, local community banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies, finance companies, money market mutual funds, credit unions, neo-banks (a digital or mobile-only bank that exists without any physical bank branches), and other non-bank financial and digital service providers, many of which have greater financial, marketing, and technological resources than us.

Many of these competitors are not subject to the same regulatory restrictions that we are and may be able to compete more effectively as a result.

Also, technology and other changes have lowered barriers to entry and made it possible for customers to complete financial transactions using neo-banks, non-banks, and financial technology (“FinTech”) companies that historically have involved banks at one or both ends of the transaction.

Also, technology and other changes have lowered barriers to entry and made it possible for customers to complete financial transactions using neo-banks, non-banks, and financial technology (“FinTech”) companies that historically have involved banks at one or both ends of the transaction.

These entities now offer products and services traditionally provided by community banks and often at lower costs.

3 unchanged sentences

Use of emerging alternative payment platforms, such as Apple Pay or Bitcoin or other cryptocurrencies, can alter consumer credit card behavior and consequently impact our interchange fee income.

The process of eliminating banks as intermediaries, known as “disintermediation,”

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

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

The effects of disintermediation can also impact the lending business because of the fast growing body of FinTech companies that use software to deliver mortgage lending and other financial services.

1 unchanged sentence

Increased competition in our market may result in a decrease in the amounts of our loans and deposits, reduced spreads between loan rates and deposit rates or loan terms that are more favorable to the borrower.

Any of these results could have a material adverse effect on our ability to maintain our earnings record, grow our loan portfolios, and obtain low-cost funds.

Any of these results could have a material adverse effect on our ability to maintain our earnings record, grow our loan portfolios, and obtain low-cost funds.

If increased competition causes us to significantly discount the interest rates we offer on loans or increase the amount we pay on deposits, our net interest income could be adversely impacted.

1 unchanged sentence

Additionally, many of our competitors are larger in total assets and capitalization, have greater access to capital markets, and offer a broader range of financial services than we can offer.

Page 43 of 122

The Bancorp also is experiencing an increase in competition to acquire other banks, due to the overall strength of financial institutions and their high capital levels.

In addition, credit unions and FinTech companies are now actively pursuing small bank acquisitions.

Increased competition for bank acquisitions may slow the Bancorp’s ability to grow earning assets at comparable historical growth rates.

We are subject to federal regulations that seek to protect the Deposit Insurance Fund and the depositors and borrowers of the Bank, and our federal regulators may impose restrictions on our operations that are detrimental to holders of the Bancorp ’

s common stock.

Increased competition for bank acquisitions may slow the Bancorp’s ability to grow earning assets at comparable historical growth rates.

We are subject to extensive regulation, supervision, and examination by the FRB, IDFI, and FDIC, our primary regulators.

Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of the Bancorp’s common stock.

Our regulators may subject us to supervisory and enforcement actions, such as the imposition of certain restrictions on our operations, requirements that we take remedial action, the classification of our assets and the determination of the level of our allowance for loan losses, that are aimed at protecting the insurance fund and the depositors and borrowers of the Bank but that are detrimental to holders of the Bancorp’s common stock.

Our regulators may subject us to supervisory and enforcement actions, such as the imposition of certain restrictions on our operations, requirements that we take remedial action, the classification of our assets and the determination of the level of our Allowance for credit losses, that are aimed at protecting the insurance fund and the depositors and borrowers of the Bank but that are detrimental to holders of the Bancorp’s common stock.

Any change in our regulation or oversight, whether in the form of regulatory policy, regulations, legislation, or supervisory action, may have a material impact on our operations.

14 unchanged sentences

In addition, failures of other financial institutions, including regional and community banks, could decrease customer confidence in the banking industry as a whole and community banks in particular.

Reduced confidence in the financial institutions sector could result in customer disintermediation and the loss of deposit and borrowing relationships, among other effects, which could result in a material adverse effect on the Bancorp’s financial condition and results of operations.

Risks Related to the Bancorp ’

s Common Stock

An investment in the Bancorp ’

s common stock is not an insured deposit.

The Bancorp’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity.

Investment in the Bancorp’s common stock is inherently risky for the reasons described in this “

Risk Factors ”

section and elsewhere in this prospectus and is subject to the same market forces that affect the price of common stock in any public company.

As a result, if you acquire the Bancorp’s common stock, you could lose some or all of your investment.

Page 44 of 122

Risks Related to the Bancorp ’ s Common Stock

An investment in the Bancorp ’ s common stock is not an insured deposit.

The Bancorp’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity.

Investment in the Bancorp’s common stock is inherently risky for the reasons described in this “ Risk Factors ” section and elsewhere in this prospectus and is subject to the same market forces that affect the price of common stock in any public company.

As a result, if you acquire the Bancorp’s common stock, you could lose some or all of your investment.

The price of our common stock may fluctuate, sometimes significantly, and this may make it difficult for you to resell our common stock at times or at prices you find attractive.

9 unchanged sentences

announcements of new products, strategic developments, new technology, acquisitions, and other material events by us or our competitors;

ability to fund the Bancorp’s assets through core deposits and/or wholesale funding;

the operating and securities price performance of other companies that investors believe are comparable to us;

9 unchanged sentences

These broad market fluctuations may adversely affect our stock price, notwithstanding our operating results.

The trading volume in the Bancorp ’

s common stock is less than that of other larger financial institutions.

Although the Bancorp’s common stock is listed on the Nasdaq Capital Market, the trading volume in the common stock may be less than that of other, larger financial services companies.

A public trading market having the desired characteristics of depth, liquidity, and orderliness depends on the presence in the marketplace of willing buyers and sellers of the Bancorp’s common stock at any given time.

Page 45 of 122

The trading volume in the Bancorp ’ s common stock is less than that of other larger financial institutions.

Although the Bancorp’s common stock is listed on the Nasdaq Capital Market, the trading volume in the common stock may be less than that of other, larger financial services companies.

This presence depends on the individual decisions of investors and general economic and market conditions over which the Bancorp has no control.

During any period of lower trading volume of the Bancorp’s common stock, significant sales of shares of the Bancorp’s common stock, or the expectation of these sales, could cause the Bancorp’s common stock price to fall.

The Bancorp ’

s Articles of Incorporation, Indiana law, and certain banking laws may have an anti-takeover effect.

Provisions of the Bancorp’s Articles of Incorporation, the Indiana Business Corporation Law, and the federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire the Bancorp, even if doing so would be perceived to be beneficial by the Bancorp’s shareholders.

The combination of these provisions could have the effect of inhibiting a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of the Bancorp’s common stock.

The Bancorp may issue additional securities, which could dilute the ownership percentage of holders of the Bancorp ’

s common stock.

The Bancorp may issue additional securities to, among other reasons, raise additional capital or finance acquisitions, and, if it does, the ownership percentage of holders of the Bancorp’s common stock could be diluted potentially materially.

The Bancorp ’ s Articles of Incorporation, Indiana law, and certain banking laws may have an anti-takeover effect.

The Bancorp may issue additional securities, which could dilute the ownership percentage of holders of the Bancorp ’ s common stock.

We may not be able to pay dividends in the future in accordance with past practice.

1 unchanged sentence

The payment of dividends is subject to legal and regulatory restrictions.

Any payment of dividends in the future will depend, in large part, on our earnings, capital requirements, financial condition, and other factors considered relevant by the Bancorp’s board of directors.

The board may, at its discretion, reduce or eliminate dividends or change its dividend policy in the future.

Unresolved Staff Comments

Not applicable.

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