What changed in this filing

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Item 1A. Risk Factors

2021-03-10 compared with 2020-03-16 · 29 added, 12 removed, 94 unchanged (30% of the section changed)

6 unchanged sentences

Our enterprise risk process covers each of the following areas.

The COVID-19 pandemic may adversely affect our business

Unexpected and unprecedented changes have occurred during 2020 and into 2021 as the result of COVID-19.

This aggressive and persistent virus causes a respiratory disease and can result in serious illness or death.

The World Health Organization has declared the situation a global pandemic.

The pandemic has created significant market volatility, economic uncertainty, and disruption to normal business operations around the world, with slowdowns and shutdowns affecting entire industries.

The Michigan governor issued on March 23, 2020 a stay-at-home order, which limited gatherings and travel, and required those working, or required individuals working in select businesses who were not deemed essential to sustain or protect life to stay home.

The Michigan stay-at-home order was in effect until early June.

The orders led to financial stress for many businesses and their employees throughout the communities we serve.

Additional executive and Michigan State Health Department orders have been put in place since June 2020.

The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with any accuracy.

Future developments include new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others.

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other factors, its duration, the success of efforts to contain it and the impact of actions taken in response, including the development and distribution of effective vaccines.

Uncertainty created by the COVID-19 pandemic is pervasive, and has impacted our financial results, operations, customers, vendors and various areas of risk.

Areas of risk may include, but are not limited to, cybersecurity, credit, interest rate, litigation and risk related to vendor services.

With the uncertainty created by COVID-19, it's challenging to determine the full impact on our ongoing financial and operational results.

We continue to closely monitor external events and are in continual discussion with our customers to assess, prepare and respond to conditions as they evolve.

Changes in credit quality and required allowance for loan and lease losses

To manage the credit risk arising from lending activities, our most significant source of credit risk, we maintain sound underwriting policies and procedures.

We continuously monitor asset quality in order to manage our credit risk to determine the appropriateness of valuation allowances.

We continuously monitor asset quality in order to determine the appropriateness of valuation allowances.

These valuation allowances take into consideration various factors including, but not limited to, local, regional, and national economic conditions.

8 unchanged sentences

An economic downturn within our local markets, as well as downturns in the state, national, or global markets, could negatively impact household and corporate incomes.

This could lead to decreased demand for both loan and deposit products and lead to an increase of customers who fail to pay interest or principal on their loans.

This could lead to decreased demand for both loan and deposit products and lead to

an increase of customers who fail to pay interest or principal on their loans.

We continually monitor key economic indicators in an effort to anticipate the possible effects of downturns in the local, regional, and national economies.

Our success depends primarily on the general economic conditions of the State of Michigan and the specific local markets in which we operate.

Unlike banks that are more geographically diversified, we provide banking and financial services to customers located primarily in the Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan.

We provide banking and financial services to customers located primarily in the Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan.

The local economic conditions in these areas have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, the value of the collateral securing loans, and the stability of our deposit funding sources.

A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, outbreak of hostilities or other international or domestic occurrences, a health crisis, unemployment, changes in securities markets or other factors could impact these local economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.

A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, international or domestic occurrences, a health crisis, unemployment, changes in securities markets or other factors could impact these local economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.

Interest rate risk

3 unchanged sentences

Liquidity risk

Liquidity risk is the risk to earnings or capital arising from our inability to meet our obligations when they come due without incurring unacceptable costs.

Liquidity risk is the risk to earnings or capital arising from our inability to meet our obligations when they come due without incurring unacceptable and significant costs.

Liquidity risk includes the inability to manage unplanned changes in funding sources, or failure to address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value.

have significant borrowing capacity through correspondent banks and the ability to sell certain investments to fund potential cash shortages, which we may use to help mitigate this risk.

We have significant borrowing capacity through correspondent banks and the ability to sell certain investments to fund potential cash shortages, which we may use to help mitigate this risk.

The value of investment securities may be negatively impacted by fluctuations in the market

4 unchanged sentences

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems, or external events and includes reputation risk and transaction risk.

Operational risk is the risk of loss resulting from failed or inadequate internal processes, staffing, systems, or external events and includes reputation risk and transaction risk.

Reputation risk is managed by developing and retaining marketplace confidence in handling customers’ financial transactions in an appropriate manner and protecting our safety and soundness.

1 unchanged sentence

Transaction risk also encompasses product development and delivery, transaction processing, information technology systems, and the internal control environment.

To minimize potential losses due to operational risks, we have established a robust system of internal controls that is regularly tested by our internal audit department in conjunction with the services of certified public accounting firms who assist in performing such internal audit work.

To minimize potential losses due to operational risks, we have established a robust system of internal controls that are regularly tested by our internal audit department in conjunction with the services of certified public accounting firms who assist in performing such internal audit work.

The focus of these internal audit procedures is to verify the validity and appropriateness of various transactions, processes, and controls.

28 unchanged sentences

For example, consumers can now pay bills and transfer funds directly without banks.

The process of eliminating banks as intermediaries in financial transactions could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits.

The process of diminishing or removing banks as intermediaries in financial transactions could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through cyber attacks, breach of computer systems or other means

12 unchanged sentences

A strong reputation is vital and requires utmost protection.

An operating incident, significant cybersecurity disruption, or other adverse event may have a negative impact on our reputation which could make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, or severely reduce consumer demand for our products.

An operating incident, significant cybersecurity disruption, or other adverse events may have a negative impact on our reputation which could make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, or severely reduce consumer demand for our products.

Our estimates and assumptions may be incorrect

9 unchanged sentences

Anti-takeover provisions

Our articles of incorporation include anti-takeover provisions that require a two-thirds majority vote to approve a sale of the Corporation.

Our articles of incorporation include anti-takeover provisions that require a two-thirds majority vote of our shareholders to approve a sale of the Corporation.

Additionally, changes to our articles of incorporation must be approved by a two-thirds majority vote of our shareholders.

These provisions may make our stock less attractive to potential shareholders.

These provisions may make our common stock less attractive to potential shareholders.

Unresolved Staff Comments.

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