What changed in this filing

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Item 1A. Risk Factors

2025-07-01 compared with 2024-02-23 · 68 added, 61 removed, 273 unchanged (32% of the section changed)

6 unchanged sentences

A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects.

Our business and operations are sensitive to business and economic conditions in the United States, generally, and particularly the state of Illinois and the St.

Louis metropolitan area.

If the national, regional and local economies experience worsening economic conditions, our growth and profitability could be harmed.

Our business and operations are sensitive to business and economic conditions in the United States generally and the state of Illinois and the St.

Louis metropolitan area in particular.

If the national, regional and local economies experience worsening economic conditions, including as a result of recent changes in U.S.

trade policy and U.S.

and global tariff rates, our growth and profitability could be harmed.

Weak economic conditions are characterized by, among other indicators, elevated levels of unemployment, fluctuations in debt and equity capital markets, increased delinquencies on mortgage, commercial and consumer loans, residential and commercial real estate price declines, and lower home sales and commercial activity.

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Although management believed, as of such date, that the allowance for credit losses on loans was adequate to absorb losses on any existing loans that may become uncollectible, we may be required to take additional provisions for credit losses on loans in the future to further supplement the allowance for credit losses on loans, either due to management’s decision to do so or because our banking regulators require us to do so.

Our bank regulatory agencies will periodically review our allowance for credit losses on loans and the value attributed to nonaccrual loans or to real estate acquired through foreclosure and may require us to adjust our determination of the value for these items.

Our bank regulatory agencies will periodica

lly review our allowance for credit losses on loans and the value attributed to nonaccrual loans or to real estate acquired through foreclosure and may require us to adjust our determination of the value for these items.

These adjustments may adversely affect our business, financial condition and results of operations.

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Adverse changes affecting real estate values and the liquidity of real estate in one or more of our markets could increase the credit risk associated with our loan portfolio, significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses, which could result in losses that would adversely affect profitability.

Such declines and losses would have a material adverse impact on our business, results of operations and growth prospects.

Such declines and losses could have a material adverse impact on our business, results of operations and growth prospects.

In addition, if hazardous or toxic substances are found on properties pledged as collateral, the value of the real estate could be impaired.

If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for

personal injury and property damage.

If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for personal injury and property damage.

Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.

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If general economic conditions negatively impact the markets in which we operate and small to midsized businesses are adversely affected or our borrowers are otherwise affected by adverse business developments, our business, financial condition and results of operations may be adversely affected.

In addition, we have provided an aggregate of $230.2 million of financing to the two third-party buyers that purchased participation interests in consumer loans that were originated through GreenSky's consumer loan origination platform.

The ability of each of these buyers to repay the obligations to us will depend significantly on the performance of the consumer loans.

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

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Our other real estate owned portfolio consists of properties that we obtained through foreclosure or through an in-substance foreclosure in satisfaction of loans.

Properties in our other real estate owned portfolio are recorded at the lower of the recorded investment in the loans for which

the properties previously served as collateral or the “fair value,” which represents the estimated sales price of the properties on the date acquired less estimated selling costs.

Properties in our other real estate owned portfolio are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the “fair value,” which represents the estimated sales price of the properties on the date acquired less estimated selling costs.

In response to market conditions and other economic factors, we may utilize alternative sale strategies other than orderly disposition, such as immediate liquidation sales.

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We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud.

However, it is possible that these protections may not be sufficient to eliminate the significant and growing risks in this area, including risks relating to the use of artificial intelligence in fraud schemes.

If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

The COVID pandemic could continue to adversely affect the U.S.

economy and our customers.

The COVID pandemic could continue to negatively impact the United States and world economy.

In recent months, the pandemic and global responses have continued to disrupt large portions of the global economy, affecting rates of inflation, work and lifestyle patterns, the real estate market and other matters.

These trends have, among other things, negatively impacted the fair value of our securities portfolio, loan demand, the value of collateral securing our loans, our growth strategy, and other matters.

Our strategy of pursuing growth via acquisitions exposes us to financial, execution and operational risks that could have a material adverse effect on our business, financial position, results of operations and growth prospects.

Our acquisition activities could require us to use a substantial amount of cash, or other liquid assets and/or incur debt.

There are risks associated with an acquisition strategy, including the following:

• We may incur time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business.

• We are exposed to potential asset and credit quality risks and unknown or contingent liabilities of the banks or businesses we acquire.

If these issues or liabilities exceed our estimates, our earnings, capital and financial condition may be materially and adversely affected.

Any acquisitions we may engage in could expose us to financial, execution and operational risks that could have a material adverse effect on our business, financial position, results of operations and growth prospects.

Any acquisition transactions we engage in could require us to use a substantial amount of cash, or other liquid assets and/or incur debt.

There are risks associated with acquisitions, including the following:

• We may incur time and expense associated with evaluating potential acquisitions and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business.

• We could be exposed to potential asset and credit quality risks and unknown or contingent liabilities of the banks or businesses we acquire.

If these issues or liabilities were to exceed our estimates, our earnings, capital and financial condition may be materially and adversely affected.

• The acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity.

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In addition to the foregoing, we may face additional risks in acquisitions to the extent we acquire new lines of business or new products, or enter new geographic areas, in which we have little or no current experience, especially if we lose key employees of the acquired operations.

We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions.

Our inability to overcome risks associated with acquisitions could have an adverse effect on our ability to successfully implement our acquisition growth strategy and grow our business and profitability.

We may not be able to continue growing our business, particularly if we cannot make acquisitions or increase loans through organic loan growth.

While we intend to continue to grow our business through strategic acquisitions coupled with organic loan growth, because certain of our market areas are comprised of mature, rural communities with limited population growth, we anticipate that much of our future growth will be dependent on our ability to successfully implement our acquisition growth strategy.

A risk exists, however, that we will not be able to execute this strategy.

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

Furthermore, many acquisitions we may wish to pursue would be subject to approvals by bank regulatory authorities, and we cannot predict whether any targeted acquisitions will receive the required regulatory approvals.

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

If we choose to engage in an acquisition transaction, we cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with acquisitions.

Our inability to overcome risks associated with acquisitions could have an adverse effect on our ability to grow our business and profitability.

We may not be able to continue growing our business, particularly if we cannot increase loans through organic loan growth.

While we intend to continue to grow our business through organic loan growth, certain of our market areas are comprised of mature, rural communities with limited population growth, which presents a challenging market for loan origination.

Our growth will also depend upon our ability to attract deposits and to identify favorable loan and investment opportunities and on whether we can continue to fund growth while maintaining cost controls and asset quality, as well on other factors beyond our control, such as national, regional and local economic conditions and interest rate trends.

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The loss of Mr.

Lemke or any of our other key personnel could have an adverse impact on our business and growth because of their skills, years of industry experience, knowledge of our market areas and the difficulty of finding qualified replacement personnel, particularly in light of the fact that

we are not headquartered in a major metropolitan area.

In addition, although we have non-competition agreements with each of our executive officers and with several others of our senior personnel, we do not have any such agreements with other employees who are important to our business, and in any event the enforceability of non-competition agreements varies across the states in which we do business.

1 unchanged sentence

The departure of any of our personnel who are not subject to enforceable non-competition agreements could have a material adverse impact on our business, results of operations and growth prospects.

The termination of our partnership with GreenSky could have an adverse effect on loan growth and profitability.

On January 24, 2023, we notified GreenSky that, effective October 21, 2023, we would terminate our participation in GreenSky’s consumer loan origination program.

As the existing loans from our GreenSky portfolio pay off, we plan to reinvest the cash flows into either new loan originations or investment securities, or use the cash flows to pay off higher cost funding sources, which is expected to mitigate the impact of the loan payoffs on our earnings.

Should the pace of payoffs in the GreenSky portfolio exceed a normalized level and we do not have sufficient opportunities to reinvest most of the cash flows into new loan originations, there could be an adverse impact on our overall loan growth and profitability during the period of time in which the GreenSky portfolio runs off.

We may be liable to purchasers of mortgage loans and mortgage servicing rights, including as a result of any breach of representations and warranties we make to the purchasers.

21 unchanged sentences

In deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements conform to GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer.

We also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our clients.

We also may rely on customer representations and certifications, or other audit or accountants’ reports,

with respect to the business and financial condition of our clients.

Our financial condition, results of operations, financial reporting and reputation could be negatively affected if we rely on materially misleading, false, inaccurate or fraudulent information.

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Legal, Accounting and Compliance Risks

If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could require charges to earnings, which would have a negative impact on our financial condition and results of operations.

We have identified material weaknesses in our internal control over financial reporting, which material weaknesses could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP.

Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

As described elsewhere in this Annual Report on Form 10-K, our management identified material weaknesses in our internal control over the risk assessment process for identifying whether third-party loan origination and servicing contracts

present unique accounting considerations that should be further evaluated and the financial reporting related to our accounting and financial reporting of third party lending and servicing arrangements.

See Item 9A — Controls and Procedures.

As a result of these material weaknesses, our independent registered public accounting firm concluded that our internal control over financial reporting was not effective as of December 31, 2024 and December 31, 2023.

In addition, we restated our financial statements for the years ended December 31, 2023 and 2022, and the interim quarterly periods in 2024 and 2023 Any failure to maintain adequate internal control over financial reporting could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis.

We can give no assurance that our plans to remediate these material weaknesses will be successful or prevent any future material weaknesses, or that further restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls.

In addition, our controls and procedures may not be adequate to prevent or identify irregularities or errors, which could affect the fair presentation of our consolidated financial statements.

We may incur impairment charges to the goodwill that we recorded in connection with prior business acquisitions, which would negatively impact our business, financial condition and results of operations.

Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we acquired in connection with the purchase.

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We determine impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.

If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment charge is recognized in an amount equal to that excess.

Any such adjustments are reflected in our results of operations in the periods in which they become known.

There can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.

For example, during the first quarter of 2025, Management determined that a triggering event had occurred at its Banking reporting unit as a result of further deteriorated credit quality coupled with the trends in the stock price.

The Company performed a quantitative impairment test on its Banking reporting unit as of March 31, 2025, and engaged a third-party service provider to assist Management with the determination of the fair value.

The resulting calculation indicated that the carrying amount exceeded the fair value of the Company's Banking reporting unit.

As a result of the assessment, the Company expects to recognize goodwill impairment expense between $135.0 million and $154.0 million in the first quarter of 2025.

This non-cash impairment expense did not impact our regulatory capital ratios, tangible common equity ratio nor our liquidity position, and will not result in future cash expenditures.

There can be no assurance that our future evaluations of our existing goodwill or goodwill we may acquire in the future will not result in additional findings of impairment and related charges, which could adversely affect our business, financial condition and results of operations.

Our risk management framework may not be effective in mitigating risks and/or losses to us.

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In addition, companies in our industry are frequently the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and proceedings.

The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which we conduct our business, or reputational harm.

We believe we face an elevated risk of the foregoing proceedings in connection with the matters leading us to restate our financial statements and in connection with LendingPoint's 2023 system conversion and any potential effects on certain loans, as discussed in this Annual Report on Form 10-K.

reputational harm.

We are not able to estimate the likelihood of such developments or the likely magnitude or significance of any liability or other outcomes of any such proceedings.

Although we establish accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, we do not have accruals for all legal proceedings where we face a risk of loss.

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We are required to comply with these and other anti-money laundering requirements.

The federal banking agencies and Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S.

The federal banking agencies and Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S.

Department of Justice, Drug Enforcement Administration and Internal Revenue Service.

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At this time, it is difficult to predict the legislative and regulatory changes that will result from having a new President of the United States.

The new administration and Congress may cause broad economic changes due to changes in governing ideology and governing style.

The new administration and Congress may cause broad economic changes due to changes in governing ideology and governing style, included as a result of implementation of proposed policies regarding tariffs, mass deportations and tax regulations.

New appointments to the Board of Governors of the Federal Reserve could affect monetary policy and interest rates, and changes in fiscal policy could affect broader patterns of trade and economic growth.

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

In the past year, the Federal Reserve has significantly increased the target Federal Funds rate as part of its efforts to decrease inflation, which has helped drive a significant increase in prevailing interest rates.

The elevated interest rate environment is expected to continue.

While this helped increase our net interest income, it has also harmed the value of our securities portfolio, which had $99.9 million in unrealized losses at December 31, 2023, and which has negatively affected our tangible book value.

Future actions of the Federal Reserve could continue to have negative effects on our business, by decreasing loan demand, increasing our costs of deposits and other sources of funding, further harming the value of our securities portfolio, and negatively impacting the earnings of our wealth management business.

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

The Federal Reserve reduced the federal funds rate several times in 2024 based upon improving economic conditions.

These recent reductions have resulted in decreases in asset yields and funding costs.

Future rate reductions of the Federal Reserve could continue to have positive effects on our business, by increasing loan demand, decreasing our costs of deposits and other sources of funding, improving the value of our securities portfolio, and increasing the earnings of our wealth management business.

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

Fluctuations in interest rates may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

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Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.

For example, fixed-rate securities acquired by us are generally subject to decreases in market value when interest rates rise, which we expect to continue in 2024.

For example, fixed-rate securities acquired by us are generally subject to decreases in market value when interest rates rise.

Additional factors include, but are not limited to, rating agency downgrades of the securities or our own analysis of the value of the security, defaults by the issuer or individual mortgagors with respect to the underlying securities, and continued instability in the credit markets.

Any of the foregoing factors could cause an other-than-temporary impairment in future periods and result in realized losses.

The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our financial condition and results of operations.

Downgrades in the credit rating of one or more insurers that provide credit enhancement for our state and municipal securities portfolio may have an adverse impact on the market for and valuation of these types of securities.

We invest in tax-exempt state and local municipal securities, some of which are insured by monoline insurers.

Even though management generally purchases municipal securities on the overall credit strength of the issuer, the reduction in the credit rating of an insurer may negatively impact the market for and valuation of our investment securities.

Such downgrade could adversely affect our liquidity, financial condition and results of operations.

Our mortgage banking profitability could significantly decline if we are not able to originate and resell a high volume of mortgage loans.

Mortgage production, especially refinancing activity, declines in rising interest rate environments, and in a rising interest rate environment, there can be no assurance that our mortgage production will continue at historical levels.

Because we sell a substantial portion of the mortgage loans we originate, the profitability of our mortgage banking business also depends in large part on our ability to aggregate a high volume of loans and sell them in the secondary market at a gain.

We may be required to record additional credit reserve charges if our investment securities suffer a decline in fair value that has resulted from credit losses or other factors.

If we determine that a significant reserve is needed, we would be required to charge against earnings the credit-related portion, which could have a material adverse effect on our results of operations in the periods in which the write-offs occur.

In addition, we may determine to 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 increases in the prevailing interest rates.

Our mortgage banking revenue has been and could continue to be adversely impacted by an elevated interest rate environment.

Mortgage production, especially refinancing activity, is adversely affected by high or rising interest rate environments.

Though the Federal Reserve reduced the federal funds rate several times in 2024, should interest rates remain elevated, it could adversely affect our mortgage production levels.

Because we sell a substantial portion of the mortgage loans we originate, the

revenue and profitability of our mortgage banking business also depends in large part on our ability to aggregate a high volume of loans and sell them in the secondary market at a gain.

Thus, in addition to our dependence on the interest rate environment, we are dependent upon (i) the existence of an active secondary market and (ii) our ability to profitably sell loans or securities into that market.

If our level of mortgage production declines, the profitability will depend upon our ability to reduce our costs commensurate with the reduction of revenue from our mortgage operations.

To the extent we are not able to achieve a high level of mortgage production, our revenue and profitability will depend upon our ability to reduce our costs commensurate with the reduction of revenue from our mortgage operations.

Liquidity and Funding Risks

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Such deposit balances can decrease when customers perceive alternative investments, such as the stock market, as providing a better risk/return tradeoff, or, in connection with our commercial mortgage servicing business, third parties for whom we provide servicing choose to terminate that relationship with us.

If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would 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.

If customers move money out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would 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.

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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Our ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and on our financial condition and performance.

Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us.

In addition, as a result of the delayed filing of our Annual Report on Form 10-K for the year ended December 31, 2024, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until we have timely filed all periodic reports required under the Exchange Act for at least 12 calendar months, which could negatively affect our ability to raise any additional capital in a timely and efficient manner.

We cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us.

If we fail to maintain capital to meet regulatory requirements, our financial condition, liquidity and results of operations would be materially and adversely affected.

7 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