What changed in this filing

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Item 1A. Risk Factors

2024-02-26 compared with 2023-02-24 · 37 added, 32 removed, 293 unchanged (19% of the section changed)

51 unchanged sentences

Any such negative events may have an adverse effect on our business, financial condition, results of operations and stock price.

The impacts of the COVID-19 pandemic could materially and adversely affect our business, financial condition and results of operations.

The impacts of national or international pandemics could materially and adversely affect our business, financial condition and results of operations.

Our operations and those of our customers and third-party service providers may be adversely affected by the widespread outbreak of contagious disease, including the COVID-19 virus.

The COVID-19 pandemic disrupted U.S.

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The pandemic also caused us to recognize credit losses in our loan portfolios and increases in our allowance for credit losses.

Given the nature of COVID-19 variants, it is difficult to predict whether or when any future outbreaks of the virus may occur or the impacts that any such outbreak may have on our business.

Any impact will depend on future developments, including the long-term scope, severity and duration of the outbreak, the success of vaccination, treatment and other mitigation efforts, any further actions taken by governmental authorities in response to the economic and health effects of the pandemic, and the long-term financial impact of the pandemic on our customers, employees, counterparties and service providers.

The extent to which any future outbreaks of the COVID-19 virus or other contagious diseases may impact general economic and business conditions is highly uncertain and unpredictable.

As part of these uncertainties, we could be subject to a number of risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, results of operations, and ability to execute our growth strategy.

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or a downgrade in our credit ratings.

We could also face an increased risk of governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.

Even as the economic and health impacts of the coronavirus subside, we could experience future volatility in the economy or a prolonged recession that could materially and adversely affect our business, financial condition, liquidity, or results of operations.

We could also face an increased risk of governmental and regulatory scrutiny as a result of the effects of a pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.

Any such occurrence could have a significant adverse impact on our business, financial condition, liquidity or results of operations.

Our FDIC insurance premiums and assessments could increase and result in higher noninterest expense.

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In response to recent inflation and its affects on U.S.

business and consumers, the Federal Reserve Board has implemented eight interest rate increases since March 2022.

It is widely anticipated that the Federal Reserve will implement multiple additional interest rate increases during 2023.

While we experienced loan growth during 2022 through acquisitions and organically sufficient to more than offset our increased interest expense and overall loan demand has remained relatively strong, there can be no assurance that any such future actions by the Federal Reserve Board involving monetary policies will not cause any of the adverse effects described above on our deposit levels, loan demand or business and earnings.

We may be adversely impacted by the transition from the use of the LIBOR interest rate index in the future.

We have certain loans, investment securities and subordinated debt securities indexed to LIBOR to calculate the interest rate.

The continued availability of the LIBOR index is not guaranteed after the United Kingdom administrators of LIBOR have announced that the publication of the most commonly used U.S.

dollar LIBOR settings will cease to be published after June 2023.

We cannot predict, in the interim, whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted.

With respect to our loan assets, at this time, there is some industry guidance regarding acceptable alternatives to LIBOR.

After review and analysis from the Federal Reserve Board’s Alternative Reference Rates Committee, the Consumer Financial Protection Bureau published its final rule recommending the Secured Overnight Financing Rate, or SOFR, as a compliant replacement index to LIBOR that would not trigger a refinance under existing regulations for certain consumer loans.

Loan contracts may also contain alternate rate language permitting transfer to SOFR, Wall Street Journal Prime or another index when LIBOR is no longer available.

The timing and manner in which each customer’s contract transitions to a new index will vary on a case-by-case basis.

There continues to be some uncertainty related to the LIBOR transition.

New index rates and payments will differ from LIBOR, which may lead to increased volatility.

The transition has impacted our market risk profiles and required changes to our risk and pricing models, valuation tools, and product design.

Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation.

With respect to investment securities and subordinated debt securities, we expect similar transition issues.

Failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

business and consumers, the Federal Reserve Board implemented eleven interest rate increases since March 2022.

However, in response to slowing inflation, it is expected that the Federal Reserve Board will begin reducing interest rates sometime in 2024.

Future economic developments and the Federal Reserve Board’s policies in response, however, cannot be predicted with certainty.

At this time, it is unknown how future action by the Federal Reserve Board involving monetary policies will affect our business and the banking industry.

There can be no assurance that any future actions by the Federal Reserve Board involving monetary policies will not cause any of the adverse effects described above on our deposit levels, loan demand or business and earnings

We may experience future adverse impacts from the recent transition from the use of the LIBOR interest rate index.

We have certain loans that were originally indexed to LIBOR to calculate the interest rate.

dollar LIBOR index has not been published since June 2023, which necessitated the refinancing of the existing loans which were indexed to LIBOR.

While these loans have been transitioned to a LIBOR alternative, a residual risk remains for transition issues.

The transition impacted our market risk profiles and required changes to our risk and pricing models, valuation tools, and product design.

Additionally, the new index rates and payments differ from LIBOR, which may lead to increased volatility.

Residual issues that may remain from this transition are not certain and any failure to adequately manage this transition process with our customers may adversely impact our reputation.

The failure of other financial institutions could adversely affect us, and we may incur losses on investments in other financial institutions.

The financial system is highly interrelated, including as a result of lending, trading, clearing, counterparty, and other relationships.

We have exposure to and routinely execute transactions with a wide variety of financial institutions, including brokers, dealers, commercial banks, investment banks and other substantial participants.

In addition, we currently hold and may in the future acquire additional investments in the debt or equity securities of other financial institutions.

Some of the institutions or other participants with whom we transact business or in which we hold investments may experience instability due to financial challenges in the banking industry or may be perceived to be unstable.

If any of these institutions or participants were to fail in meeting its obligations in full and on time, or were to enter bankruptcy, conservatorship, or receivership, the consequences could ripple throughout the financial system and may adversely affect our business, results of operations, financial condition, or prospects.

Our investments in any such institutions could decline in value or become valueless, which could result in us incurring losses in our investment portfolio that may have a materially adverse effect our operating results.

Further, our stock price may be negatively impacted by failures of other financial institutions and their effects on consumer and investor confidence, and we may experience increased deposit insurance premiums, increased regulatory scrutiny and other adverse effects on our business, profitability or financial condition as a result of these failures.

Risks Related to Our Business

70 unchanged sentences

Premiums and discounts are amortized/accreted to the call date to interest income using the constant effective yield method over the estimated life of the security.

The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326.

The Company measures expected credit losses on HTM securities on a collective basis by major security type, with each type sharing similar risk characteristics.

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The Company has made the election to exclude accrued interest receivable on HTM securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense.

Losses are charged against the allowance when management believes the uncollectability of a security is confirmed.

Because of changing economic and market conditions affecting issuers, we may be required to record provisions for credit losses in future periods, which could have a material adverse effect on our business, financial condition or results of operations.

71 unchanged sentences

We continually encounter technological change, and we may have fewer resources than many of our competitors to continue to invest in technological improvements and innovations.

The financial services industry continues to undergo rapid technological changes, with frequent introductions of new technology-driven products and services, including innovative ways that customers can make payments or manage their accounts, such as through the use of digital wallets or digital currencies.

The financial services industry continues to undergo rapid technological changes, including the development and use of artificial intelligence ("AI").

Frequent introductions of new technology-driven products and services, including innovative ways that customers can make payments or manage their accounts, such as through the use of digital wallets or digital currencies, are continually occurring.

In addition to better serving customers, effective use of technology increases efficiency and enables financial institutions to reduce costs.

Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations.

New and evolving AI use, including generative AI, may make us susceptible to uncertain risks and may require additional investment to develop responsible use frameworks.

Many of our competitors have substantially greater resources to invest in technological improvements.

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Any failure, interruption or breach in security or operational integrity of these systems could result in failures or disruptions in our online banking system, customer relationship management, general ledger, deposit and loan servicing and other systems.

The security and integrity of our systems could be threatened by a variety of interruptions or information security breaches, including those caused by computer hacking, cyber-attacks, electronic fraudulent activity or attempted theft of financial assets.

The security and integrity of our systems are increasingly threatened by a variety of interruptions or information security breaches, including those caused by computer hacking, cyber-attacks, electronic fraudulent activity or attempted theft of financial assets.

Our information systems have from time to time experienced such interruptions or breaches despite our best efforts to prevent them.

We cannot assure you that any future failures, interruption or security breaches will not occur, or if they do occur that they will be adequately addressed.

We cannot assure you that any future failures, interruption or security breaches will not occur, or if they do occur that they will be adequately addressed, or that any such events that have occurred or may occur in the future will not result in material harm to our business, operations, reputation or profitability.

While we have certain protective policies and procedures in place, the nature and sophistication of the threats continue to evolve.

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Any failures, interruptions or security breaches in our information systems could damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, or expose us to civil litigation, regulatory fines or losses not covered by insurance.

Future hurricanes or other adverse weather events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on us.

As illustrated in recent years by the impact of Hurricanes Irma, Michael and Ian, our markets in Alabama and Florida, like other coastal areas, are susceptible to hurricanes and tropical storms.

We may incur losses as a result of unforeseen or catastrophic events, including extreme weather events or other natural disasters.

As illustrated in recent years by the impact of Hurricanes Michael, Ian and Idalia our markets in Alabama and Florida, like other coastal areas, are susceptible to hurricanes and tropical storms.

Such weather events can disrupt our operations, result in damage to our properties and negatively affect the local economies in which we operate.

We cannot predict whether or to what extent damage that may be caused by future hurricanes or other weather events will affect our operations or the economies in our market areas, but such weather events could result in a decline in loan originations, a decline in the value or destruction of properties or other collateral securing our loans and an increase in the delinquencies, foreclosures and loan losses.

Our business or results of operations may be adversely affected by these and other negative effects of hurricanes or other significant weather events.

We cannot predict whether or to what extent damage that may be caused by future unforeseen catastrophic events, including hurricanes, other extreme weather events and natural disasters, will affect our operations or the economies in our market areas, but such events could result in a decline in loan originations, a decline in the value or destruction of properties or other collateral securing our loans and an increase in the delinquencies, foreclosures and loan losses.

Our business or results of operations may be adversely affected by these and other negative effects of such events.

We may incur environmental liabilities with respect to properties to which we take title.

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Accordingly, our inability to receive dividends from our bank subsidiary could also have a material adverse effect on our business, financial condition and results of operations and the value of your investment in our common stock.

UNRESOLVED STAFF COMMENTS

There are currently no unresolved Commission staff comments received by the Company more than 180 days prior to the end of the fiscal year covered by this annual report.

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