What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-25 · 37 added, 27 removed, 306 unchanged (17% of the section changed)

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The factors below, among others, could materially and adversely affect our business, financial condition, results of operations, liquidity or capital position, or cause our results to differ materially from our historical results or the results expressed or implied in our forward-looking statements.

Additionally, investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic and resulting economic conditions have adversely impacted, and are likely to continue to adversely impact, our business, as well as our customers and third-party vendors;

The COVID-19 pandemic and resulting economic conditions have adversely impacted our business, and may adversely impact our business in the future, as well as our customers and third-party vendors;

and the ultimate severity of these impacts is dependent on future events, including the scope and duration of, and governmental responses to, the pandemic, that are highly uncertain and challenging to predict.

Although we have business continuity plans and other safeguards in place, the COVID-19 pandemic and responses to it have impacted, and are likely to continue to adversely impact, our business, results of operations, and financial condition, as well as those of our customers and third-party vendors, due to, among other things, significant and widespread disruption in our usual methods of working caused by social distancing, quarantines, and other restrictions.

The COVID-19 pandemic has caused extensive disruptions to the global economy and the lives of people around the world.

The COVID-19 pandemic and responses to it have impacted, and are likely to continue to adversely impact, our business, results of operations, and financial condition, as well as those of our customers and third-party vendors.

The COVID-19 pandemic has caused significant disruptions to the global economy and the lives of people around the world.

As a result of the pandemic, governmental authorities, businesses, and the public have taken unprecedented actions designed to limit the scope and duration of the COVID-19 pandemic, as well as mitigate its effects.

However, at this time, we are unable to determine whether these actions will be ultimately effective, or how long it may take for the pandemic to subside.

In fact, future developments related to the pandemic could cause the imposition of additional measures that may further increase the severity of its effects.

Many responses to the COVID-19 pandemic have adversely impacted the economy and forced temporary closures of nonessential businesses, and as a result the businesses of many of our customers have been adversely impacted.

However, at this time, we are unable to determine whether these actions have been or will be effective, or how long it may take for the pandemic to subside.

Many responses to the COVID-19 pandemic have adversely impacted the businesses of many of our customers.

If these responses are ultimately unsuccessful, we could continue to experience material adverse impacts to our business, financial condition, and results of operations.

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We may experience financial losses and declines in our financial condition due to a number of factors associated with the pandemic, including, among other things, deteriorations in credit quality, past due loans, challenges faced by our third-party vendors who provide key services, and charge offs resulting from difficulties faced by our hospitality, retail, restaurant, energy, and other borrowers as a result of the pandemic and responses to it.

Loan payment deferral programs and government assistance programs, such as the Paycheck Protection Program (“PPP”), may mask credit deterioration in the Company’s loan portfolio by making less applicable otherwise standard measures of identifying developing financial weakness in a customer or a loan portfolio, which may cause the our credit quality to decline and adversely impact our allowance for credit losses and require additional provisions.

We may also incur adverse rulings, judgements, settlements, or other outcomes from litigation or government action arising from our participation in and administration of programs related to the pandemic (including, among other things, the PPP originally authorized by the Coronavirus Aid, Relief, and Economic Security Act) that could have significant effects on the Company, its financial condition and its operations.

Loan payment deferral programs and government assistance programs, such as the Paycheck Protection Program (“PPP”), may be masking credit deterioration in the Company’s loan portfolio by making standard measures of identifying developing financial weakness in a customer or a loan portfolio less applicable, which may cause our credit quality to decline and adversely impact our allowance for credit losses and/or require additional provisions.

The COVID-19 pandemic has contributed to significant volatility in the financial markets.

Depending on the extent and duration of the COVID-19 pandemic, and perceptions regarding national and global recovery from the pandemic, volatility in the financial markets may continue which may adversely impact the price of the Company’s common stock.

In response to the COVID-19 pandemic, in March 2020 the Federal Reserve lowered the target range for the federal funds rate to a range from 0%-0.25%.

A prolonged period of low interest rates could adversely impact the value of the Company’s assets and of collateral associated with existing loans to decline, and could reduce the Company’s net interest income and have an adverse impact on the Company’s cash flows.

The Company has begun to see certain adverse impacts of the current low interest rate environment on its operations.

The ultimate severity of adverse impacts of the COVID-19 pandemic will depend on future developments, including, among other things, how long the pandemic lasts, how successful vaccination efforts are, the significant spread of new strains of the virus, and when restrictions imposed on businesses and individuals are fully lifted, which, at this time, are unknown.

The ultimate severity of adverse impacts of the COVID-19 pandemic will depend on future developments, including, among other things, how long the pandemic lasts, how successful vaccination efforts are, the significant spread of new strains of the virus, and whether additional restrictions are imposed on businesses and individuals.

If the severity of the COVID-19 pandemic worsens, additional actions may be taken by federal, state, and local governments to contain COVID-19 or treat its impact.

There can be no assurance that any efforts by the Company to address the adverse impacts of the COVID-19 pandemic will be effective.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future, or as a result of changes in the behavior of customers, businesses and their employees.

Additionally, the COVID-19 pandemic may also have the effect of heightening many of the other risks described herein and in other filings we make with the SEC.

Risks Related to the Company’s Lending Activities

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If the interest rates we pay on deposits increases at a faster rate than the interest we receive on loans and other investments, then our net interest income could be adversely affected.

The impact of these changes may be magnified if we do not effectively manage the relative sensitivity of our assets and liabilities to changes in market interest rates, and our ability to manage such relative sensitivity may be adversely impacted by competitive conditions in the banking industry and in the financial markets.

If the Federal Reserve raises interest rates, we may not be able to reflect increasing interest rates in rates charged on loans or paid on deposits due to competitive pressures, which would negatively impact our financial condition and results of operations.

In addition, the impact of these changes may be magnified if we do not effectively manage the relative sensitivity of our assets and liabilities to changes in market interest rates, and our ability to manage such relative sensitivity may be adversely impacted by competitive conditions in the banking industry and in the financial markets.

Due to the changing conditions in the national economy, we cannot predict with certainty how future changes in interest rates, deposit levels, and loan demand will impact our business and profitability.

Changes in the method pursuant to which the London Interbank Offered Rate (“LIBOR”) and other benchmark rates are determined, as well as the discontinuance and replacement of LIBOR as a reference rate, could adversely impact our business and results of operations.

On July 27, 2017, the Chief Executive of the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calibration of LIBOR to the administrator of LIBOR after 2021, and Intercontinental Exchange, Inc.

the company that administers LIBOR, has stated that it intends to cease the publication of one week and two-month LIBOR rates immediately after the LIBOR publication on December 31, 2021, and the remaining LIBOR rates immediately following the LIBOR publication on June 30, 2023, and will consult on such intentions.

These announcements indicate that the continuation of LIBOR on the current basis cannot be guaranteed after 2021.

LIBOR and certain other interest rate benchmarks are the subject of recent national and international reform.

Intercontinental Exchange, Inc.

the company that administers LIBOR, stated in March 2021 that it intends to cease the publication of one week and two-month LIBOR rates immediately after the LIBOR publication on December 31, 2021, and the remaining LIBOR rates immediately following the LIBOR publication on June 30, 2023.

federal banking agencies have issued statements to encourage U.S.

banks to transition away from U.S.

dollar LIBOR as soon as practicable and not to enter into new contracts that use U.S.

dollar LIBOR after December 31, 2021.

Due to LIBOR’s extensive use across financial markets, the transition away from LIBOR may pose risks and challenges to financial markets and financial institutions, including the Company, and liquidity in certain interbank markets on which LIBOR estimates are based has been declining.

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Certain of our LIBOR-based financial products and contracts, including, but not limited to, hedging products, debt obligations, investments, and loans, extend beyond 2021.

We are continuing to assess the impact that a cessation or market replacement of LIBOR would have on these various products and contracts and working to transition many LIBOR based products and contracts to other interest rate structures.

to other interest rate structures.

The market transition away from LIBOR to alternative reference rates is a complex process and could have a range of effects on the Company’s business, financial condition and results of operations, including but not limited to by (i) adversely affecting the interest rates received or paid on the revenues and expenses associated with, or the value of the Company’s LIBOR-based assets and liabilities;

(ii) adversely affecting the interest rates paid on or received from other securities or financial arrangements, given LIBOR’s historically prominent role in determining market interest rates globally, or (iii) resulting in disputes, litigation or other actions with borrowers or other counterparties about the interpretation or enforceability of certain fallback language contained in LIBOR-based loans, securities or other contracts.

The discontinuation of LIBOR could result in operational, legal and compliance risks and, if we are unable to adequately manage such risks and transition from LIBOR to new reference rates, our business, financial condition, results of operations and future prospects may be adversely impacted.

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It also had a detrimental impact on industry-wide performance nationally as well as the Company’s market areas.

While improvement in several economic indicators have been noted since 2013, including increasing consumer confidence levels, increased economic activity and a continued decline in unemployment levels the COVID-19 pandemic led to extensive additional disruptions to the economy generally during 2020.

While improvement in several economic indicators have been noted since 2013, including increasing consumer confidence levels, increased economic activity and a continued decline in unemployment levels as a result of the COVID-19 pandemic led to extensive additional disruptions to the economy generally during 2020 and 2021.

Past market conditions have also led to the failure or merger of a number of prominent financial institutions.

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If financial market volatility worsens, or if there are more disruptions in the financial markets, including disruptions to the United States or international banking systems, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.

Our concentration of banking activities in Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas, including our real estate loan portfolio, makes us more vulnerable to adverse conditions in the particular local markets in which we operate.

Our subsidiary bank operates primarily within the states of Arkansas, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas, where the majority of the buildings and properties securing our loans and the businesses of our customers are located.

Our financial condition, results of operations and cash flows are subject to changes in the economic conditions in these seven states, the ability of our borrowers to repay their loans, and the value of the collateral securing such loans.

Our concentration of banking activities in Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas, including our real estate loan portfolio, makes us more vulnerable to adverse conditions in the particular local markets in which we operate.

Our subsidiary bank operates primarily within the states of Arkansas, Kansas, Missouri, Oklahoma, Tennessee and Texas, where the majority of the buildings and properties securing our loans and the businesses of our customers are located.

Our financial condition, results of operations and cash flows are subject to changes in the economic conditions in these six states, the ability of our borrowers to repay their loans, and the value of the collateral securing such loans.

We largely depend on the continued growth and stability of the communities we serve for our continued success.

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We also face competition from many other types of financial institutions, including, among others, credit unions, finance companies, insurance companies, brokerage and investment banking firms.

If we are unable to effectively compete for banking customers, we may lose loan and deposit market share, as well as experience reductions in net interest margin, fee income, and profitability, and our business, financial condition, and results of operations could be adversely affected.

Certain nonbank competitors of the Company are increasingly offering products and services that traditionally were banking products due to technological advances, and many of these nonbank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks.

As a result, some of the competitors in our markets have the ability to offer products and services that we are unable to offer or to offer such products and services at more competitive rates.

If we are unable to effectively compete for customers, we may lose loan and deposit market share, as well as experience reductions in net interest margin, fee income, and profitability, and our business, financial condition, and results of operations could be adversely affected.

Changes in service delivery channels and emerging technologies pose a competitive risk.

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It could also require additional, costly investments in technology to remain competitive.

We anticipate that new technologies will continue to emerge that may be superior to, or render obsolete, the technologies currently used by the Company and the Bank in their products and services.

Developing or acquiring access to new technologies and incorporating those technologies into our products and services, or using them to expand our products and services, in each case in a way that enables us to remain competitive, may require significant investments, may take considerable time to complete, and ultimately may not be successful.

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

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These risks may increase in the future as we continue to increase our mobile payments and other internet-based product offerings and expand our internal usage of web-based products and applications.

Furthermore, because certain of our employees are working, or may work, remotely due to the COVID-19 pandemic or otherwise, there is an increased risk of disruption to our systems because remote networks and infrastructure may not be as secure as in our office environment.

If our security systems were penetrated or circumvented, it could cause serious negative consequences for us, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage our computers or systems and those of our customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on us.

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The effect of such revised or new standards on our financial statements can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

For example, in June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments , that effective January 1, 2020, substantially changed the accounting for credit losses and other financial assets held by banks, financial institutions and other organizations.

For example, in June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments , that substantially changed the accounting for credit losses and other financial assets held by banks, financial institutions and other organizations.

The standard removed the existing “probable” threshold in generally accepted accounting principles (“US GAAP”) for recognizing credit losses and instead requires companies to reflect their estimate of credit losses over the life of the financial assets.

Companies must consider all relevant information when estimating expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts.

We adopted, an optional three-year phase-in period for the day-one adverse regulatory capital impact upon adoption of the standard with the additional two year delay allowed by the regulators in response to the COVID-19 pandemic..

We adopted an optional three-year phase-in period for the day-one adverse regulatory capital impact upon adoption of the standard with the additional two year delay allowed by regulators in response to the COVID-19 pandemic.

The adoption of the standard resulted in an overall material increase in the allowance for credit losses.

However, the impact at adoption was influenced by the portfolios' composition and quality at the adoption date as well as economic conditions and forecasts at that time.

However, the impact at adoption was influenced by our portfolios' composition and quality at the adoption date and economic conditions and forecasts at that time.

In addition, our management must exercise judgment in appropriately applying many of our accounting policies and methods so they comply with generally accepted accounting principles.

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Accordingly, our inability to receive dividends from our subsidiary bank 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.

Our subsidiary bank’s ability to pay dividends or make other payments to us, as well as our ability to pay dividends on our common stock, is limited by the bank’s obligation to maintain sufficient capital and by other general regulatory restrictions on its dividends, including restrictions imposed by state laws and regulations.

Our subsidiary bank’s ability to pay dividends or

make other payments to us, as well as our ability to pay dividends on our common stock, is limited by the bank’s obligation to maintain sufficient capital and by other general regulatory restrictions on its dividends, including restrictions imposed by state laws and regulations.

There may be future sales of additional common stock or preferred stock or other dilution of our equity, which may adversely affect the value of our common stock.

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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