What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-26 · 49 added, 57 removed, 273 unchanged (28% of the section changed)

12 unchanged sentences

Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes.

The Dodd-Frank Act, passed by Congress in 2010, instituted major changes to the banking and financial institutions regulatory regimes in light of the performance of and government intervention in the financial services sector during the economic recession leading up to its enactment.

The act required the issuance of a substantial number of new regulations by federal regulatory agencies affecting financial institutions, some of which still have yet to be issued or implemented.

While the Economic Growth, Regulatory Relief, and Consumer Protection Act enacted in 2018 reduced certain regulatory burdens on community and regional financial institutions resulting from the Dodd-Frank Act, we cannot assure that future legislation will not significantly increase our compliance or operating costs or otherwise have a significant impact on our business.

Certain provisions of the Dodd-Frank Act and regulations promulgated under the act may continue to be implemented, and there could be additional new federal or state laws, regulations and policies regarding lending and funding practices and liquidity standards.

Additionally, financial institution regulatory agencies have intensified their response to concerns and trends identified in examinations, including through the issuance of formal enforcement actions.

While the federal regulatory agencies under the Trump Administration and current Congressional leadership are expected to exhibit a more common sense regulatory posture and pursue initiatives to reduce regulatory burdens on community and regional financial institutions, we cannot assure that future legislation or regulation will not significantly increase our compliance or operating costs or otherwise have a significant impact on our business.

New federal or state laws, regulations and policies may continue to be enacted and implemented that could affect lending and funding practices and liquidity standards.

Additionally, financial institution regulatory agencies may continue to aggressively scrutinize and address any concerns and trends identified in examinations, including through the issuance of formal enforcement actions.

Negative developments in the financial services industry or other new legislation or regulations could adversely impact our operations and our financial performance by subjecting us to additional costs, restricting our business operations, including our ability to originate or sell loans, and/or increasing the ability of non-banks to offer competing financial services.

As regulation of the banking industry continues to evolve, we expect the costs of compliance to continue to increase and, thus, to affect our ability to operate profitably.

As regulation of the banking industry continues to evolve, the costs of compliance may continue to increase and, in turn, adversely affect our ability to operate profitably.

In addition, industry, legislative or regulatory developments may cause us to materially change our existing strategic direction, capital strategies, compensation or operating plans.

If these developments negatively impact our ability to implement our business strategies, it may have a material adverse effect on our results of operations and future prospects.

Further, any changes to or repeal of existing laws, regulations or policies relating to our business, as well as changes in interpretation, implementation or enforcement of such laws, regulations or policies, could affect us in substantial and unpredictable ways.

Among other impacts, the repeal or revision of laws and regulations could necessitate that we implement new processes and procedures, which could divert management time and attention from initiatives designed to grow the Company or enhance our profitability.

If any such developments negatively impact our ability to implement our business strategies, it may have a material adverse effect on our results of operations and future prospects.

We are subject to heightened regulatory requirements as our total assets exceed $10 billion.

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The Dodd-Frank Act and its implementing regulations impose various additional requirements on bank holding companies with $10 billion or more in total assets.

In addition, banks with $10 billion or more in total assets are primarily examined by the CFPB with respect to various federal consumer financial protection laws and regulations.

In addition, banks with $10 billion or more in total assets, at present, are primarily examined by the CFPB with respect to various federal consumer financial protection laws and regulations.

Previously, our bank subsidiary had been subject to regulations adopted by the CFPB, but the Federal Reserve was primarily responsible for examining our bank subsidiary’s compliance with consumer protection laws and those CFPB regulations.

As a relatively new agency with evolving regulations and practices, the CFPB’s examination and regulatory authority has been and continues to be the subject of policy debates and uncertainty among lawmakers and differing presidential administrations, and thus we cannot ascertain the impact, if any, that future changes to the CFPB may have on our business.

As a relatively new agency with evolving regulations and practices, the CFPB’s examination and regulatory authority, including its continued existence as a supervisory agency, has been and continues to be the subject of policy debates and uncertainty among lawmakers and differing presidential administrations, and thus we cannot ascertain the impact, if any, that future changes to or discontinuation of the CFPB may have on our business.

Banks with assets in excess of $10 billion are subject to a deposit assessment based on a scorecard issued by the FDIC that considers, among other things, the bank’s CAMELS rating, results of asset-related stress testing and funding-related stress, as well as our use of core deposits, among other things.

6 unchanged sentences

Prior to becoming subject to the heightened regulatory requirements, we hired additional compliance personnel and implemented structural initiatives to address these requirements.

While some of these requirements, such as annual stress testing, were eliminated by the reforms enacted in May 2018, our continued compliance with the remaining requirements and compliance with any additional requirements that may be imposed in the future may necessitate that we hire additional compliance or other personnel, design and implement additional internal controls, or incur other significant expenses, any of which could have a material adverse effect on our business, financial condition or results of operations.

While some of these requirements, such as annual stress testing, were eliminated by subsequently enacted reforms, our continued compliance with the remaining requirements and compliance with any additional requirements that may be imposed in the future may necessitate that we hire additional compliance or other personnel, design and implement additional internal controls, or incur other significant expenses, any of which could have a material adverse effect on our business, financial condition or results of operations.

Our regulators may also consider our compliance with these regulatory requirements when examining our operations generally or considering any request for regulatory approval we may make, even requests for approvals on unrelated matters.

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

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.

and global supply chains and altered business and economic conditions throughout the U.S.

and globally.

Its economic impacts lowered equity market valuations;

created significant volatility and disruption in financial markets;

contributed to a decrease in the rates and yields on U.S.

Treasury securities;

resulted in ratings downgrades, credit deterioration, and defaults in many industries;

increased demands on capital and liquidity;

increased unemployment levels and decreased consumer confidence.

In addition, the pandemic resulted in temporary or permanent closures of many businesses, the institution of social distancing, face covering requirements and other health directives, and in some cases, self-isolation requirements.

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

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.

These risks include, but are not limited to, increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses;

further volatility in the valuation of real estate and other collateral supporting loans ;

impairment of our goodwill and our financial assets;

increased cost of capital;

inability to satisfy our minimum regulatory capital ratios and other supervisory requirements;

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 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.

6 unchanged sentences

Such changes may require us to pay higher FDIC premiums than our current levels, or the FDIC may charge additional special assessments, either of which would increase our noninterest expense.

Our profitability is vulnerable to interest rate fluctuations and monetary policy and could be adversely affected by any future actions taken by the Federal Reserve Board to address rising inflation.

Our profitability is vulnerable to interest rate fluctuations and monetary policy and could be adversely affected by any future actions taken by the Federal Reserve Board to address inflation or other economic developments.

Our results of operations are affected by the monetary policies of the Federal Reserve Board.

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For example, increases in interest rates can have a negative impact on our results of operations by reducing loan demand and the ability of borrowers to repay their current obligations, while decreases in interest rates may affect loan prepayments.

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

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.

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

business and consumers, the Federal Reserve Board implemented a series of eleven interest rate increases beginning in March 2022.

However, in response to recent slowing inflation, the Federal Reserve Board reduced interest rates three times in 2024.

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

1 unchanged sentence

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.

6 unchanged sentences

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.

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, such as the COVID-19 virus.

The COVID-19 pandemic disrupted U.S.

and global supply chains and altered business and economic conditions throughout the U.S.

and globally.

Its economic impacts lowered equity market valuations;

created significant volatility and disruption in financial markets;

contributed to a decrease in the rates and yields on U.S.

Treasury securities;

resulted in ratings downgrades, credit deterioration, and defaults in many industries;

increased demands on capital and liquidity;

increased unemployment levels and decreased consumer confidence.

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

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.

These risks include, but are not limited to, increased loan losses or other impairments in our loan portfolios and increases in our allowance for loan losses;

further volatility in the valuation of real estate and other collateral supporting loans;

impairment of our goodwill and our financial assets;

increased cost of capital;

inability to satisfy our minimum regulatory capital ratios and other supervisory requirements;

or a downgrade in our credit ratings.

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

Risks Related to Our Business

4 unchanged sentences

In determining the size of the allowance, we analyze our loan portfolio based on our historical loss experience, volume and classification of loans, volume and trends in delinquencies and non-accruals, national and local economic conditions, and other pertinent information.

If our assumptions are incorrect, our current allowance may be insufficient to absorb future loan losses, and increased loan loss reserves may be needed to respond to different economic conditions or adverse developments in our loan portfolio.

During the fourth quarter of 2024, we completed a company-wide asset quality cleanup project, which resulted in net charge-offs for the quarter of $53.4 million and a reduction in our allowance for credit losses of $36.7 million from $312.6 million, or 2.11% of total loans, at September 30, 2024.

The reduction resulting from charge-offs was partially offset by a $16.7 million provision for credit losses during the fourth quarter related to Hurricanes Helene and Milton.

However, no additional provision for credit losses on loans was recorded for the quarter ended December 31, 2024, as the current level of reserves was considered adequate for the loan portfolio.

If our assumptions are incorrect, our current allowance may be insufficient to absorb future loan losses, and we may determine that increased loan loss reserves may be needed to respond to different economic conditions or adverse developments in our loan portfolio.

When there is an economic downturn, it is more difficult for us to estimate the losses that we will experience in our loan portfolio.

27 unchanged sentences

As of December 31, 2024, the legal lending limit of our bank subsidiary for secured loans was approximately $576.1 million.

Our board of directors has established an in-house lending limit of $40.0 million to any one borrowing relationship without obtaining the approval of two of the following:

our Chairman, John W.

Allison, our Vice Chairman, Jack E.

Engelkes, or our director Richard H.

Our board of directors has established an in-house lending limit of $40.0 million to any one borrowing relationship without obtaining the approval of the Chairman, John W.

Allison, and our Vice Chairman, Jack E.

As of December 31, 2024, we had a total of $7.54 billion, or 51.1% of our total loans, committed to the aggregate group of borrowers whose total debt exceeds the established in-house lending limit of $40.0 million.

9 unchanged sentences

Stephen Tipton and Kevin D.

Hester plus Centennial Bank Chairman, Chief Executive Officer and President, Tracy M.

Hester plus Centennial Bank Chairman, Tracy M.

French, as well as other key Centennial Bank personnel.

36 unchanged sentences

Our growth and expansion strategy may not be successful, and our market value and profitability may suffer.

Growth through the acquisition of banks or specific bank assets or liabilities, including FDIC-assisted transactions, and de novo branching represent important components of our business strategy.

Growth through the acquisition of banks or specific bank assets or liabilities, including FDIC-assisted transactions, represents an important component of our business strategy.

Bank acquisitions are subject to regulatory approval, and we cannot assure that we will be able to obtain approval for a proposed acquisition in a timely manner or at all.

15 unchanged sentences

These risks include, among other things, the loss of customers, strain on management resources related to collection and management of problem loans and problems related to integration of personnel and operating systems.

In addition to the acquisition of existing financial institutions or their assets or liabilities, as opportunities arise, we may grow through de novo branching.

In addition to the acquisition of existing financial institutions or their assets or liabilities, as opportunities arise, we may also grow through de novo branching.

De novo branching, and any acquisition carry with them numerous risks, including the following:

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We have acquired 23 banks since we started our first subsidiary bank in 1999, including a total of 18 banks since 2010.

We completed the acquisition of Happy Bancshares, headquartered in Amarillo, Texas, during the second quarter of 2022.

We will continue to consider future strategic acquisitions, with a primary focus on Texas, Arkansas, Florida, Alabama and other nearby markets.

37 unchanged sentences

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.

Our information systems have from time to time experienced such interruptions and 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, 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.

5 unchanged sentences

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.

As illustrated by the impacts of Hurricanes Helene and Milton this past year, 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.

26 unchanged sentences

The rights of our common shareholders are subordinate to the holders of any debt securities that we may issue from time to time and may be subordinate to the holders of any series of preferred stock that may issue in the future.

On January 18, 2022, we issued $300.0 million of 3.125% fixed-to-floating rate subordinated notes, which mature in 2032, and o n April 1, 2022, the Company acquired $140.0 million of subordinated notes from Happy, which mature in 2030 and carry a fixed rate of 5.500% for the first five years.

We currently have outstanding $300.0 million of 3.125% fixed-to-floating rate subordinated notes, which mature in 2032, and $140.0 million of subordinated notes, which mature in 2030 and carry a fixed rate of 5.500% for the first five years.

Thereafter, the notes bear interest at 3-month Secured Overnight Funding Rate (SOFR) plus 5.345%, resetting quarterly.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors