What changed in this filing

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Item 1A. Risk Factors

2025-03-07 compared with 2024-03-06 · 85 added, 86 removed, 418 unchanged (29% of the section changed)

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• External Risks

Adverse changes in the economic conditions, particularly such changes in the Illinois and Iowa markets we operate, may adversely impact our borrowers and our business.

Adverse changes in the economic conditions, particularly such changes in the Illinois and Iowa markets in which we operate, may adversely impact our borrowers and our business.

We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.

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The creditworthiness of a borrower is affected by many factors including local market conditions and general economic conditions.

If the overall economic climate in the U.S., generally, or our market areas, specifically, experience a material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require significant additional provisions for credit losses.

In general, these risks have increased as a result of the recent increases in prevailing interest rates, which have potentially increased the risk of a near-term decline in growth or an economic downturn.

If the overall economic climate in the U.S.

generally, or our market areas specifically, experience a material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs and delinquencies could rise and require significant additional provisions for credit losses.

Our risk management practices, such as monitoring the concentration of our loans within specific industries and our credit approval, review and administrative practices may not adequately reduce credit risk, and our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio.

Moreover, default risk may arise from events or circumstances that are difficult to detect, such as fraud, or difficult to predict, such as the impact of catastrophic events on certain industries.A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income.

Moreover, default risk may arise from events or circumstances that are difficult to detect, such as fraud, or difficult to predict, such as the impact of catastrophic events on certain industries.

A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income.

As a result, our inability to successfully manage credit risk could have an adverse effect on our business, financial condition and results of operations.

The small to midsized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

The small to mid-sized businesses to which we lend may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.

We target our business development and marketing strategy primarily to serve the banking and financial services needs of small to mid-sized businesses.

These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, can have less access to capital sources and loan facilities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.

In addition, the success of a small or medium-sized business often depends on the management talents and efforts of one person or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan.

These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, may have less access to capital sources and loan facilities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.

In addition, the success of a small or mid-sized business often depends on the management talents and efforts of one person or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan.

If general economic conditions negatively impact the markets in which we operate or any of our borrowers otherwise are affected by adverse business developments, our small to mid-sized borrowers may be disproportionately affected and their ability to repay outstanding loans may be negatively affected, resulting in an adverse effect on our results of operations and financial condition.

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

The majority of our loan portfolio consists of commercial and regulatory CRE loans, which may have a higher degree of risk than some other types of loans.

Commercial and regulatory CRE loans are often larger and involve greater risks than other types of lending.

The majority of our loan portfolio consists of commercial and commercial real estate loans, which may have a higher degree of risk than some other types of loans.

Commercial and commercial real estate loans, including multi-family loans, are often larger and may involve greater risks than some other types of lending.

Because payments on such loans are often dependent on the successful operation or development of the property or business involved, repayment of such loans is often more sensitive than other types of loans to adverse conditions in the real estate market or the general business climate and economy.

Accordingly, a downturn in the real estate market or a challenging business and economic environment may increase our risk related to commercial and commercial real estate loans.

Accordingly, a downturn in the real estate market or a challenging business and economic environment, including those which disproportionately affect a class of borrower, may increase our risk associated with our loan portfolio.

Unlike residential mortgage loans, which generally are made on the basis of the borrowers’ ability to make repayment from their employment and other income and which are secured by real property whose value tends to be more easily ascertainable, commercial loans typically are made on the basis of the borrowers’ ability to make repayment from the cash flow of the commercial venture.

Economic events, including decreases in office occupancy following the COVID-19 pandemic, or governmental regulations outside of the control of the borrower or lender could negatively impact the future cash flow and market values of the affected properties.

Economic events, including decreases in office occupancy following the COVID-19 pandemic as a result of the shift to remote and hybrid work environments, or governmental regulations outside of our control or the control of the borrower could negatively impact the future cash flow and market values of the affected properties.

Our commercial operating loans are primarily made based on the identified cash flow of the borrower and secondarily on the collateral underlying the loans.

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If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired.

Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial or regulatory CRE loans could have a material adverse impact on our financial condition and results of operations.

Due to the larger average size of each commercial loan as compared with other loans such as residential loans, as well as collateral that is generally less readily-marketable, losses incurred on a small number of commercial or commercial real estate loans could have a material adverse impact on our financial condition and results of operations.

Real estate construction loans are based upon estimates of costs and values associated with the complete project.

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An increase in market interest rates may affect the fair value of our securities portfolio, potentially reducing accumulated other comprehensive income or earnings.

The fair value of these investments may also be affected by factors other than the underlying performance of the issuer of the securities or the mortgages underlying the securities, such as changes in the interest rate environment, negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity for certain investment securities.

In addition, we may sell securities in our available-for-sale investment securities portfolio, and any such sale could cause us to realize currently unrealized losses that resulted from the recent increases in the prevailing interest rates.

The fair value of these investments may also be affected by factors other than the underlying performance of the issuer of the securities or the mortgages underlying the securities, such as negative trends in the residential and commercial real estate markets, ratings downgrades, adverse changes in the business climate and a lack of liquidity for certain investment securities.

Additionally, an increase in market interest rates may reduce the value of our loan portfolio, although, in accordance with GAAP, such a decline in value may not be reflected in the carrying balance of our loans in the same manner as our debt securities available-for-sale.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

The monetary policies and regulations of the Federal Reserve have a significant effect on the operating results of commercial banks.

The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve.

An important function of the Federal Reserve is to regulate the money supply and credit conditions.

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government securities, adjustments to the federal funds target rate, and changes in banks’ reserve requirements against bank deposits.

These instruments are used in varying

combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.

These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits.

Their use also affects interest rates charged on loans or paid on deposits.

In the current environment, economic and business conditions are significantly affected by U.S.

monetary policy, particularly the actions of the Federal Reserve in its effort to fight elevated levels of inflation.

The Federal Reserve is mandated to pursue the goals of maximum employment and price stability, and beginning in March 2022 it made a series of significant increases to the target Federal Funds rate as part of an effort to combat elevated levels of inflation affecting the U.S.

This has helped drive a significant increase in prevailing interest rates and, while this increased our net interest income, it also led to $105.5 million of unrealized losses in the available-for-sale debt securities portfolio during the year ended December 31, 2022, which negatively affected our tangible book value per share.

Some of this unrealized loss reversed during the year ended December 31, 2023 with a $16.9 million unrealized gain on debt securities available-for-sale.

Higher interest rates can also negatively affect our customers’ businesses and financial condition, and the value of collateral securing loans in our portfolio.

Beginning in March 2022, the Federal Open Market Committee of the Federal Reserve (the "FOMC") made a series of significant increases to the federal funds target range as part of an effort to combat elevated levels of inflation affecting the U.S.

While the significant increase in prevailing interest rates increased our net interest income, it also led to increased losses in our available-for-sale debt securities portfolio.

Since 2022, the magnitude of our net unrealized losses on debt securities available-for-sale have partially reversed and were $59.4 million as of December 31, 2024.

It is currently expected that during 2025, and perhaps beyond, the FOMC may decrease interest rates.

In September 2024, the FOMC began lowering interest rates with the target range for the federal funds rate decreasing by 100 basis points to a range of 4.25% to 4.50% by the end of 2024.

The decrease was expressly made in response to inflation moderating and the labor market weakening.

Any future change in monetary policy by the FOMC, in an effort to stimulate the economy or otherwise, resulting in lower interest rates would likely result in lower revenue through lower net interest income over time, which could adversely affect our results of operations.

These effects from interest rate changes or from other sustained economic stress or a recession, among other matters, could have a material adverse effect on our business, financial condition, liquidity, and results of operations.

Given the complex factors affecting the strength of the U.S.

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credit card debt;

increasing delinquencies in mortgages, auto loans, and credit cards;

geopolitical developments, such as Russia's invasion of Ukraine and the Israeli-Palestinian conflict;

tight labor market conditions;

and supply chain issues, there is a meaningful risk that the Federal Reserve and other central banks may continue to raise interest rates or maintain them at elevated levels, which may negatively impact the entire national economy.

As noted above, this could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio.

the implementation of policies proposed by the new presidential administration;

and geopolitical developments, such as future terrorist attacks and threats, widespread disease or pandemics, and acts of war including the Russian invasion of Ukraine and ongoing conflicts in the Middle East, there is a meaningful risk that the Federal Reserve and other central banks may maintain interest rates at elevated levels, which may negatively impact the entire national economy.

This could decrease loan demand, harm the credit characteristics of our existing loan portfolio and decrease the value of collateral securing loans in the portfolio.

LIQUIDITY RISKS

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Our most important source of funds consists of our customer deposits.

Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff.

Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return trade-off.

If customers move money out of bank deposits and into other investments, we could lose a relatively low-cost source of funds, which could require us to seek wholesale funding alternatives in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.

In addition to our deposit base, our liquidity is provided by cash from operations and investment maturities, redemptions and sales as well as cash flow from loan prepayments and maturing loans that are not renewed.

When needed, additional liquidity is sometimes provided by our ability to borrow from the Federal Reserve Bank of Chicago and the Federal Home Loan Bank of Chicago (the "FHLB"), through federal funds lines with our correspondent banks, and through other wholesale funding sources including brokered certificates of deposits or deposits placed with the Certificate of Deposit Account Registry Service.

When needed, additional liquidity may be available by borrowing from the Federal Reserve Bank of Chicago or the Federal Home Loan Bank of Chicago (the "FHLB"), through federal funds lines with our correspondent banks, and through other wholesale funding sources including brokered deposits.

Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to us could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry.

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Financial institutions are interconnected as a result of trading, investment, liquidity management, clearing, counterparty and other relationships.

Concerns about, or a default by, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships.

Concerns about, or a failure of, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships.

Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by various institutions.

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The widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require us in the future to make substantial expenditures to modify or adapt our existing products and services as we grow and develop new products to satisfy our customers’ expectations and comply with regulatory guidance.

In addition, we expect that new technologies and business processes applicable to the banking industry will continue to emerge, and these new technologies and business processes may be better than those we currently use.

In addition, emerging trends, such as generative artificial intelligence, have the potential to disrupt the banking industry.

Although generative artificial intelligence offers opportunities to enhance operational efficiency, it also introduces risks, including fraud, security vulnerabilities, and compliance challenges.

The implementation of technological changes and upgrades to maintain current systems and integrate new ones may cause service interruptions, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws.

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restrictions on dividends or other capital distributions;

and establishment of new offices or branches.

These requirements may constrain our operations or require us to

obtain approval from our regulators before engaging in certain activities, with no assurance that such approvals may be obtained, either in a timely manner or at all.

establishment of new offices or branches.

These requirements may constrain our operations or require us to obtain approval from our regulators before engaging in certain activities, with no assurance that such approvals may be obtained, either in a timely manner or at all.

Also, the burden imposed by those federal and state regulations may place banks in general at a competitive disadvantage compared to their non-bank competitors.

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Our failure to comply with banking laws, regulations and policies, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, the commencement of informal or formal enforcement actions against us, and other negative consequences, including reputational damage, any of which could adversely affect our business, financial condition, results of operations, capital base and the price of our securities.

Legal, regulatory and policy changes may directly affect financial institutions and the global economy.

Changes in policy and at banking agencies, including changes in interpretation and prioritization, occur over time through policy and personnel changes following federal and state-level elections, which lead to changes involving the level of oversight and focus on the financial services industry.

The nature, timing and economic and political effects of potential changes to the current legal and regulatory framework affecting financial institutions remain highly uncertain in connection with a change in presidential administration.

Given the complex factors affecting the strength of the U.S.

economy, including uncertainties regarding the persistence of inflation, geopolitical developments such as ongoing conflicts in the Middle East and the Russian invasion of Ukraine, and resulting disruptions in the global energy market, tight labor market conditions domestically, supply chain issues both domestically and internationally and the potential effects of a new presidential administration, including its response to the foregoing, potential imposition of new tariffs, mass deportations and changes to tax or other financial regulations, uncertainty surrounding future changes may adversely affect our operating environment and therefore our business, financial condition, results of operations and growth prospects.

Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings.

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We are subject to capital adequacy requirements and may be subject to more stringent capital requirements and, if we fail to meet these requirements, we will be subject to restrictions on our ability to make capital distributions and other restrictions.

The Basel III Rule require us to maintain a minimum Common Equity Tier 1 capital ratio of 4.5%, a minimum total Tier 1 capital ratio of 6%, a minimum total capital ratio of 8% and a minimum Tier 1 leverage ratio of 4%, and a capital conservation buffer of greater than 2.5% of risk-weighted assets (the "Capital Conservation Buffer").

The Basel III Rule requires us to maintain a minimum Common Equity Tier 1 capital ratio of 4.5%, a minimum total Tier 1 capital ratio of 6%, a minimum total capital ratio of 8% and a minimum Tier 1 leverage ratio of 4%,

and a capital conservation buffer of greater than 2.5% of risk-weighted assets (the "Capital Conservation Buffer").

Failure to maintain the Capital Conservation Buffer would result in increasingly stringent restrictions on our ability to make dividend payments and other capital distributions and to pay discretionary bonuses to our executive officers.

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The Federal Reserve may also set higher capital requirements for holding companies whose circumstances warrant it.

example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.

For example, holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.

The Federal Reserve may require us to commit capital resources to support the Bank.

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The Bank is not subject to the examination and supervisory authority of the CFPB because it has less than $10 billion in total assets, but it is required to comply with the rules and regulations issued by the CFPB.

The FDIC has the primarily responsibility for supervising and examining the Bank’s compliance with federal consumer financial laws and regulations, including CFPB regulations.

The FDIC has the primarily responsibility for supervising and examining the Bank’s compliance with federal consumer

financial laws and regulations, including CFPB regulations.

See "Supervision and Regulation—Supervision and Regulation of the Bank—Consumer Financial Services" for additional information.

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Any of these outcomes could materially and adversely affect us.

Laws impacting cannabis-related businesses may have an impact on the Company’s operations and risk profile.

The Controlled Substances Act makes it illegal under federal law to manufacture, distribute, or dispense marijuana.

Starting January 1, 2020, however, the Illinois Cannabis Regulation and Tax Act began permitting adults 21 years or older to legally purchase marijuana for recreational use from licensed dispensaries.

Bank’s current practice to avoid knowingly providing banking products or services to entities or individuals that directly manufacture, distribute, or dispense marijuana or hemp products, or those with a significant financial interest in such entities.

The Bank uses reasonable measures, including appropriate new account screening and customer due diligence measures, to ensure that existing and potential customers that operate in the states in which the Bank operates do not engage in any such activities.

Nonetheless, shifts in Illinois law legalizing cannabis use have increased the number of direct and indirect cannabis-related businesses in Illinois, and therefore increases the likelihood that the Bank could interact with such businesses, as well as their owners and employees.

Such interactions could create additional legal, regulatory, strategic, and reputational risk to the Bank and the Company.

Non-compliance with the USA PATRIOT Act, the Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

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We are subject to various regulations related to privacy and data security, and we could be negatively impacted by these regulations.

For example, we are subject to the safeguards guidelines under the Gramm-Leach-Bliley Act ("GLBA").

For example, we are subject to the safeguards guidelines under the Gramm-Leach-Bliley Act.

The safeguards guidelines require that each financial institution develop, implement and maintain a written, comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities and the sensitivity of any customer information at issue.

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Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.

Our business is subject to increased litigation and regulatory enforcement risks due to a number of factors, including the highly regulated nature of the financial services industry and the focus of state and federal prosecutors on banks and the financial services industry generally.

prosecutors on banks and the financial services industry generally.

This focus has intensified in recent years, with regulators and prosecutors focusing on a variety of financial institution practices and requirements, including foreclosure, overdraft fees, compliance with applicable consumer protection laws, and compliance with anti-money laundering statutes, the BSA and sanctions administered by the Office of Foreign Assets Control of the Treasury.

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We anticipate that much of our future growth will be dependent on our ability to successfully implement our acquisition growth strategy because certain of our market areas are comprised of mature, rural communities with limited population growth.

A risk exists, however, that we will not be able to identify suitable additional candidates for acquisitions.

In addition, even if suitable targets are identified, we expect to compete for such businesses with other potential bidders, which may have greater financial resources than we have, which may adversely affect our ability to make acquisitions at attractive prices.

A risk exists, however, that we will not be able to identify suitable candidates for acquisitions.

our ability to make acquisitions at attractive prices.

In light of the foregoing, our ability to continue to grow successfully will depend to a significant extent on our capital resources.

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• the time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions;

• inaccuracies in the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution.

If the actual results fall short or exceed our estimates, our earnings, capital and financial condition may be materially and adversely affected;

• inaccuracies in the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to the target institution (if the actual results fall short or exceed our estimates, our earnings, capital and financial condition may be materially and adversely affected);

• the ability to finance an acquisition and possible dilution to existing stockholders;

• the failure to realize some or all of the anticipated transaction benefits within the expected time frame, or ever;

• potential goodwill impairment;

• compliance and legal risks associated with acquiring unfamiliar customers, products and services, and branches in new geographical markets;

• risks associated with integrating the operations and personnel of the acquired business in a manner that permits growth opportunities and does not materially disrupt existing customer relationships or result in decreased revenues resulting from any loss of customers.

With respect to the risks particularly associated with the integration of an acquired business, we may encounter a number of difficulties, such as:

With respect to the risks particularly associated with the integration of an acquired business, we may encounter a number of difficulties, including, among other things:

• customer loss and revenue loss;

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• possible inconsistencies in standards, control procedures and policies;

and/or (6) unexpected problems with costs, operations, personnel, technology and credit.

• unexpected problems with costs, operations, personnel, technology and credit.

In addition to the risks posed by the integration process itself, the focus of management’s attention and effort on integration may result in a lack of sufficient management attention to other important issues, causing harm to our business.

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Such regulators could deny our applications based on various prescribed criteria or other considerations, which would restrict our growth, or the regulatory approvals may not be granted on terms that are acceptable to us.

For example, we could be required to sell banking centers as a condition to receiving regulatory approvals and such a condition may not be acceptable to us or may reduce the benefit of any acquisition.

For example, we could be required to sell banking centers as a condition to receiving regulatory approvals and such a condition may not be acceptable to us or may reduce the benefit of

any acquisition.

These regulatory approvals and the factors considered in reviewing such applications are described in greater detail in "Supervision and Regulation—Acquisitions and Branching."

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The Voting Trust may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.

The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control of the Company and might ultimately affect the market price of our common stock.

The Voting Trust could sell its interest in us to a third-party in a private transaction, which may not lead to your realization of any change of control premium on shares of our common stock and would subject us to the influence of a presently unknown third-party.

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Holders of our common stock are only entitled to receive such cash dividends as our board, in its sole discretion, may declare out of funds legally available for such payments.

Any decision to declare and pay dividends will be dependent on a variety of factors, including our financial condition, earnings, legal requirements, our general liquidity needs, and other factors that our board deems relevant.

Any decision to declare and pay

dividends will be dependent on a variety of factors, including our financial condition, earnings, legal requirements, our general liquidity needs, and other factors that our board deems relevant.

As a bank holding company, our ability to declare and pay dividends to our stockholders is subject to certain banking laws, regulations, and policies, including minimum capital requirements and, as a Delaware corporation, we are subject to certain restrictions on dividends under the DGCL.

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The number of shares of our common stock issued in connection with an acquisition or investment could constitute a material portion of our then-outstanding shares of our common stock.

We are an “emerging growth company” and may elect to comply with reduced public company reporting requirements which could make our common stock less attractive to investors.

We are an emerging growth company, as defined in the Jumpstart Our Business Act of 2012 (the “JOBS Act”).

For as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various public company reporting requirements.

These exemptions include, but are not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements, and (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We could be an emerging growth company until the end of the fiscal year following the fifth anniversary of the completion of our initial public offering, which is December 31, 2024.

However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue exceeds $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company prior to the end of such five-year period.

We have taken advantage of certain reduced disclosure obligations regarding executive compensation and may elect to take advantage of other reduced disclosure obligations in future filings.

As a result, the information that we provide to holders of our common stock may be different than you might receive from other public reporting companies in which you hold equity interests.

We cannot predict if investors will find our common stock less attractive as a result of our reliance on these exemptions.

If some investors find our common stock less attractive as a result of any choice we make to reduce disclosure, there may be a less active trading market for our common stock and the price for our common stock may be more volatile.

Under the JOBS Act, emerging growth companies may also elect to delay adoption of new or revised accounting standards until such time as those standards apply to private companies.

We have elected to use this extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies.

Anti-takeover provisions in our charter documents and Delaware law, and the banking laws and regulations to which we are subject, might discourage or delay acquisition attempts for us that you might consider favorable.

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These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Furthermore, banking laws impose notice, approval and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect "control," as defined under applicable law, of an FDIC- insured

depository institution.

These laws include the BHCA and the CBCA.

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Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation and price levels, tax policy, monetary policy, unemployment and the strength of the domestic economy and the local economy in the markets in which we operate.

Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for loan losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio.

Unfavorable market conditions can result in a deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio.

Unfavorable or uncertain economic and market conditions can be caused by, among other factors, declines in economic growth, business activity or investor or business confidence;

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Continued levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse.

For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail

customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense.

For example, elevated inflation harms consumer purchasing power, which could negatively affect our retail customers and the economic environment and, ultimately, many of our business customers, and could also negatively affect our levels of non-interest expense.

In addition, if interest rates were to rise in response to elevated levels of inflation, the value of our securities and loan portfolios may be negatively impacted.

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The duration and severity of the current inflationary period cannot be estimated with precision.

Labor shortages and failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition.

A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, decreased labor force size and participation rates, and potential government actions affecting the labor force.

Although we have not experienced any material labor shortage to date, we have recently observed an overall tightening and competitive local labor market.

A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased compensation expense to attract and retain employees.

In addition, if we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures we may take to respond to a decrease in labor availability have unintended negative effects, our business could be adversely affected.

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

The State of Illinois has experienced significant financial difficulties, and this could adversely impact certain borrowers and our business.

Historically, the financial condition of the State of Illinois has been characterized by significant financial difficulties, including material pension funding shortfalls and large budget deficits.

These issues could impact the economic vitality of the State of Illinois and our customers, and could specifically encourage businesses to relocate, and discourage new employers from starting or moving businesses to Illinois.

These issues could also result in delays in the payment of accounts receivable owed to borrowers that conduct business with the State of Illinois and Medicaid payments to nursing homes and other healthcare providers in Illinois and impair their ability to repay their loans when due.

Failure to attract and retain qualified employees could negatively impact our business, results of operations and financial condition.

The Company’s success depends, in large part, on its ability to attract and retain key individuals.

Competition for qualified candidates in the activities in which the Company engages and markets that the Company serves is significant, and the Company may not be able to hire candidates and retain them.

Growth in the Company’s business, including through acquisitions, may increase its need for additional qualified personnel.

The Company is increasingly competing for personnel with financial technology providers and other less regulated entities who may not have the same limitations on compensation as the Company does.

This can be particularly constraining when competing for skill sets which are in high demand, such as technology, risk and information security.

Recruiting and compensation costs may increase as a result of changes in the marketplace, which may increase costs and adversely impact the Company.

The increase in remote and hybrid-work arrangements and opportunities in regional, national and global labor markets has also increased competition for the Company to attract and retain skilled personnel.

The Company’s current or future approach to in-office and remote-work arrangements may not meet the needs or expectations of current or prospective employees or may not be perceived as favorable as compared with the arrangements offered by other companies, which could adversely affect the Company’s ability to attract and retain employees.

If the Company is not able to hire or retain highly skilled, qualified and diverse individuals, it may be unable to execute its business strategies and may suffer adverse consequences to its business, financial condition and results of operations.

Climate change could have a material negative impact on the Company and our customers.

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• credit risk from borrowers with significant exposure to climate risk;

• legal and regulatory compliance risk as our regulators, investors, and other stakeholders have increasingly viewed financial institutions as important in helping to address the risks related to climate change, both directly and with respect to their customers, which may result in financial institutions coming under increased pressure regarding the disclosure and management of their climate risks and related lending and investment activities;

• reputational risk from stakeholder concerns about the Company’s practices related to climate change, the Company’s carbon footprint, and the Company’s business relationships with clients who operate in carbon-intensive industries.

• legal and regulatory compliance risk;

• reputational risk from stakeholder concerns about the Company’s practices related to climate change and the Company’s business relationships with clients who operate in carbon-intensive industries.

The risks associated with climate change are changing and evolving in an escalating fashion, making them difficult to assess due to limited data and other uncertainties.

The Company could experience increased expenses resulting from strategic planning, litigation, technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due

to the Company’s response to climate change and its climate change strategy, which, in turn, could have a material negative impact on business, results of operations, and financial condition.

Our future growth and success will depend on our ability to compete effectively in a highly competitive environment.

We face substantial competition in all phases of our operations from a variety of different competitors.

Our future growth and success will depend on our ability to compete effectively in this highly competitive environment.

Our future growth and success will depend on our ability to compete effectively in this highly competitive

To date, our competitive strategies have focused on attracting deposits in our local markets and growing our loan portfolio by emphasizing specific loan products in which we have significant experience and expertise, identifying and targeting markets in which we believe we can effectively compete with larger institutions and other competitors, and offering highly competitive pricing to borrowers with appropriate risk profiles.

We compete for loans, deposits and other financial services with other commercial banks, credit unions, brokerage houses, mutual funds, insurance companies, real estate conduits, mortgage brokers and specialized finance companies.

We compete for loans, deposits and other financial services with other commercial banks, credit unions, FinTechs, digital asset service providers, brokerage houses, mutual funds, insurance companies, real estate conduits, mortgage brokers and specialized finance companies.

Many of our competitors offer products and services that we do not offer, and some offer loan structures and have underwriting standards that are not as restrictive as our required loan structures and underwriting standards.

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Additionally, technology and other changes are allowing consumers and businesses to complete financial transactions through alternative methods that historically have involved banks.

For example, the wide acceptance of Internet-based commerce has resulted in a number of alternative payment processing systems and lending platforms in which banks play only minor roles.

Customers can now maintain funds in prepaid debit cards or digital currencies and pay bills and transfer funds directly without the direct assistance of banks.

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This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates.

Maintenance of our reputation depends not only on our success in maintaining our service-focused

culture, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, customer personal information and privacy issues, employee, customer and other third-party fraud, recordkeeping, regulatory investigations, and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements.

Maintenance of our reputation depends not only on our success in maintaining our service-focused culture, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, customer personal information and privacy issues, employee, customer and other third-party fraud, recordkeeping, regulatory investigations, and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements.

If our reputation is negatively affected, by the intentional, inadvertent or unsubstantiated misconduct of our employees, directors, customers, third parties, or otherwise, our business and, therefore, our operating results and the value of our stock may be materially adversely affected.

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