What changed in this filing

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Item 1A. Risk Factors

2025-03-05 compared with 2024-03-11 · 85 added, 67 removed, 321 unchanged (32% of the section changed)

An investment in the Corporation involves risk, some of which, including market, liquidity, credit, operational, legal, compliance, reputational, and strategic risks, could be substantial and is inherent in our business.

An investment in the Corporation involves risk, some of which, including market, liquidity, credit, operational, legal, compliance, regulatory, reputational, and strategic risks, could be substantial and is inherent in our business.

This risk also includes the possibility that the value of the investment could decrease considerably, you could lose all or part of your investment, and dividends or other distributions concerning the investment could be reduced or eliminated.

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Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report.

Risks Related to the Acquisition of SimplyBank

Our proposed transaction with SimplyBank may create incremental business, regulatory and reputational risks.

As previously disclosed on November 13, 2023, we entered into a merger agreement (the “Merger Agreement”) with SimplyBank., a Tennessee-chartered commercial bank (“SimplyBank”) which sets forth the terms of our proposed transaction (the “Merger”).

The Merger with SimplyBank comes with important risks, including, but not limited to:

the expected timing and likelihood of completion of the Merger, including the timing, receipt, and terms and conditions of any required governmental, regulatory, or stockholder approvals or clearance of the Merger;

the occurrence of any event, change, or other circumstances that could give rise to the termination of the Merger Agreement;

the initiation or outcome of any legal proceedings that may in the future be initiated against the parties and others following the announcement of the Merger;

the risks of expanding the Corporation’s business into new territories;

the inability to consummate the Merger due to the failure to satisfy other conditions to complete the Merger;

the risks that the Merger disrupts our current plans and operations;

the potential effect of the announcement and or consummation of the Merger on relationships, including with associates, competitors, employees, and customers;

the risk that management’s attention is diverted from other matters of the business to focus on the Merger;

the risk that the transaction and/or integration costs are greater than expected;

the risks that personnel, business, operational, regulatory, or other issues arise during the integration of the SimplyBank;

the occurrence of any event, change, or other circumstances that could give rise to the termination of the Merger Agreement;

and other risks described in our filings with the SEC.

We may be unable to retain personnel successfully as a result of the acquisition.

The success of the Merger will depend in part on the Corporation’s ability to retain the talents and dedication of key employees from SimplyBank.

It is possible that these employees may decide not to remain with the Corporation.

If the Corporation is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, the Corporation could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how and incur unanticipated recruitment costs.

If key employees terminate their employment, the Corporation’s business activities may be adversely affected and the Corporation will incur costs to locate or retain suitable replacements, or may be unable to locate or retain suitable replacements at all.

We may be unable to retain customers as a result of the acquisition.

The success of the Merger will depend in part on the Corporation’s ability to retain some of its and SimplyBank’s customers.

It is possible that current customers of SimplyBank or the Corporation may decide to move their banking activities as a result of the Merger.

If the Corporation is unable to retain its or SimplyBank’s key customers, loses a large number of customers, or otherwise does not realize all of the anticipated benefits of the Merger, it could have a material adverse effect on the Corporation’s business, financial condition, and result of operations.

Risks Related to Economic and Market Conditions

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These events impacted the confidence of investors and customers in financial institutions as a whole.

It led regulators, investors, and institutions to focus on the on-balance sheet liquidity, customer deposit base, including level of deposits uninsured by the FDIC, the amount of accumulated other comprehensive loss, capital levels, interest rate risk management, and securities holdings of financial institutions.

It led regulators, investors, and institutions to focus on the on-balance sheet liquidity, customer deposit base, including level of deposits uninsured by the FDIC, the

amount of accumulated other comprehensive loss, capital levels, interest rate risk management, and securities holdings of financial institutions.

If any additional financial institutions fail in a similar manner as those financial institutions that failed in 2022, our stock price and deposit base could be negatively impacted.

As a result of these failures, enhanced scrutiny from regulators and potential new legislation may impact our ability to operate.

Depending upon any adopted change in legislation or directives from regulators, we may need to adjust our strategy and operations to comply with such changing laws or regulatory directives and it could materially impact our operating results.

Depending upon any adopted change in legislation or directives from regulators, we may need to adjust our strategy and operations to comply with such changing laws or regulatory directives, which can result in additional operating expenses and could materially impact our operating results.

Continued elevated levels of inflation could adversely impact our business and results of operations.

While the Federal Reserve has taken steps to combat the heightened levels of inflation that began in 2021, continued levels of inflation and monetary policy adopted by the Federal Reserve to combat such inflation, could have complex effects on our business and results of operations, some of which could be materially adverse.

While the Federal Reserve took steps to combat the heightened levels of inflation that began in 2021, primarily through increases to the target fed funds rate, continued levels of inflation and monetary policy adopted by the Federal Reserve to combat such inflation, could have complex effects on our business and results of operations, some of which could be materially adverse.

During 2024, the Federal Reserve began cutting the target fed funds rate and decreased the target by 100 basis points.

The Federal Reserve is still considering additional changes to the target fed funds rate, and the monetary policy adopted in 2025 by the Federal Reserve may impact the results of operations.

While we generally expect any inflation-related increases in our interest expense to be offset by increases in our interest revenue, inflation-driven increases in our levels of non-interest expense could negatively impact our results of operations.

Additionally, if interest rates stay at their current level or continue to rise, we could see consumer sentiment shift and demand for loans may decrease which would impact our results of operations.

The continued effects from elevated levels of inflation recently experienced could also increase volatility and uncertainty in the business environment, which

could adversely affect loan demand and our clients’ ability to repay indebtedness.

The continued effects from elevated levels of inflation recently experienced could also increase volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.

It is also possible that governmental policy responses to the current inflation environment could further affect our business, such as changes to monetary and fiscal policy.

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and other financial markets, and policies of various governmental and regulatory agencies.

Changes in monetary policy, including changes in interest rates, could influence not only the interest that is received on loans and securities and the interest that is paid on deposits and borrowings, but such changes could also affect the Corporation’s ability to originate loans and obtain deposits and the fair value of the Corporation’s financial assets and liabilities.

In 2024, the Federal Reserve cut the target of the fed funds rate by 100 basis points.

The Federal Reserve may take additional actions with respect to the target fed funds rate in 2025, which will have an impact on our net interest income.

Changes in monetary policy, including changes in interest rates, including the target fed funds rate, could influence not only the interest that is received on loans and securities and the interest that is paid on deposits and borrowings, but such changes could also affect the Corporation’s ability to originate loans and obtain deposits and the fair value of the Corporation’s financial assets and liabilities.

If the interest received on loans and other interest-earning assets decreases at a faster rate than the interest rates paid on deposits and other interest-bearing liabilities, our net interest income, and, therefore, our earnings could be adversely affected.

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Such an interest rate environment may also result in us incurring a higher cost to retain our deposits.

While the higher payment amounts we would receive on adjustable-rate or variable-rate loans in a rising interest rate environment may increase our interest income, some borrowers may be unable to afford the higher payment amounts, and this could result in a higher rate of default which could result in a decrease in the value of the collateral securing these loans if the demand for the collateral decreases.

A higher rate of default may also increase our costs associated with servicing these loans, foreclosing on properties, property maintenance on

foreclosed properties, and the liquidation of any foreclosed properties.

Rising interest rates also may reduce the demand for loans and the value of fixed-rate investment securities.

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Competition for qualified personnel in the financial services industry can be intense and we may not be able to hire or retain the key personnel that we depend upon for success.

In addition, we face additional risks of loss of key personnel from our acquisition of SimplyBank, as discussed in the Risk Factor titled “ We may be unable to retain personnel successfully as a result of the acquisition.

Frequently, we compete in the market for talent with entities that are not subject to comprehensive regulation.

The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of the markets in which we operate, years of industry experience, and the difficulty of promptly finding qualified replacement personnel.

The increased frequency of remote work opportunities has also increased the competition to attract and retain talent, as these opportunities have allowed companies from outside our geographic footprint to recruit talent inside our geographic footprint.

The unexpected loss of services of one or more of our key personnel could have a material adverse impact on our business because of their skills, knowledge of the markets in which we operate, years of industry experience, and the difficulty and costs of promptly finding qualified replacement personnel.

Also, the loss of key personnel could jeopardize our relationships with customers and clients and could lead to the loss of accounts.

Losses of accounts managed by key personnel could have a material adverse impact on our business.

Additionally, if we were to experience the unexpected loss of a large number of personnel, whether or not such personnel were considered key personnel, we could experience a material adverse impact on our business because of the loss of their skills and the costs and difficulty of finding a large number of qualified replacement personnel.

Terrorist attacks, threats, or actual war, natural disasters, global climate change, pandemics, other catastrophic events, trade policies, civil unrest, protests, and other global and domestic conflicts may impact all aspects of our operations, revenues, costs, and stock price in unpredictable ways.

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targets, rumors or threats of war, actual conflicts involving the U.S.

or its allies, or military or trade disruptions, may impact our operations as well as the operations of some of our customers.

In addition, natural

disasters, global climate change, pandemics, other catastrophic events, trade policies, domestic civil unrest, protest, and other global or domestic conflicts may impact our operations or the operations of some of our customers as well.

or its allies, including any escalation of or increased U.S.

involvement in currently ongoing conflicts, such as the Russia-Ukraine war or conflicts in the Middle East, military or trade disruptions, may impact our operations as well as the operations of some of our customers.

In addition, natural disasters, global climate change, pandemics, other catastrophic events, trade policies, domestic civil unrest, protest, and other global or domestic conflicts may impact our operations or the operations of some of our customers as well.

Any of these occurrences could have an adverse impact on our operating results, revenues, and costs and may result in the volatility of the market price for our common stock and on the future price of our common stock.

Geographic concentration of the Corporation’s markets makes our business highly susceptible to local economic conditions and a downturn in local economic conditions may adversely affect our business.

Unlike larger banking organizations that are more geographically diversified, the Corporation’s operations are currently concentrated in west central Indiana, east central Illinois, western Kentucky, and middle and western Tennessee, and most of our customers are located in these markets.

Additionally, we will expand further into eastern Tennessee and northern Georgia provided we successfully consummate the Merger.

Unlike larger banking organizations that are more geographically diversified, the Corporation’s operations are currently concentrated in west central Indiana, east central Illinois, western Kentucky, eastern, middle and western Tennessee, northern Georgia, and most of our customers are located in these markets.

The economic conditions in these local markets may be different from, and in some instances be worse than, the economic conditions in the U.S.

As a result of this geographic concentration, the Corporation’s financial results depend largely upon economic conditions in these market areas.

Deterioration in economic conditions in the Corporation’s markets could result in one or more of the following, which may adversely affect our business:

Deterioration in economic conditions in the Corporation’s markets could result in one or more of the following, which may increase our costs, reduce our net income, or otherwise adversely affect our business:

• an increase in loan delinquencies;

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The Corporation’s access to funding sources in amounts adequate to finance its activities or on terms that are acceptable to it could be impaired by factors that affect it specifically or the financial services industry or the general economy.

Factors that could reduce our access to liquidity sources include a downturn in the markets in which our loans are concentrated or adverse regulatory actions against the Corporation.

Factors that could reduce our access to liquidity sources include a downturn in the markets in which our loans are concentrated, a decline in demand in the secondary market for long-term fixed mortgages, or adverse regulatory actions against the Corporation.

The Corporation’s access to deposits may also be affected by the liquidity needs of depositors.

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We estimate and establish reserves for credit risks and probable incurred credit losses that are inherent in our loan portfolio.

This process, which is critical to our financial results and condition, requires difficult, subjective, and complex judgments, including

reviews of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans.

This process, which is critical to our financial results and condition, requires difficult, subjective, and complex judgments, including reviews of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans.

There is the chance that we will fail to identify the proper factors or that we will fail to accurately estimate the impacts of factors that we identify.

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Also, the commercial loan balance per borrower is typically larger than that of residential mortgage loans and consumer loans, indicating higher potential losses on an individual loan basis.

The deterioration of one or a few of these loans could cause a significant increase in nonperforming loans and a reduction in interest income.

An increase in nonperforming loans could result in an increase in the provision for loan losses and an increase in loan charge-offs, both of which could have a material adverse effect on the Corporation’s business, financial condition, and results of operations.

The deterioration of one or a few of these loans could cause a significant increase in nonperforming loans, an increase in the costs of servicing these nonperforming loans, and a reduction in interest income.

An increase in nonperforming loans could also result an in increase in costs associated with workouts and foreclosures, including costs of foreclosing on collateral, and maintaining and liquidating the underlying collateral.

An increase in nonperforming loans could also result in an increase in the provision for loan losses and an increase in loan charge-offs.

An increase in nonperforming loans, workouts, foreclosures, and charge-offs to our commercial and commercial real estate loans could have a material adverse effect on the Corporation’s business, financial condition, and results of operations.

The information that we use in managing our credit risk may be inaccurate or incomplete, which may result in an increased risk of default and otherwise have an adverse effect on our business, results of operations, and financial condition.

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If these events or circumstances were to occur, it could result in a potential loss of revenue and have an adverse effect on our business, results of operations, and financial condition.

Decreased demand from secondary market purchasers of the Corporation’s long-term fixed residential mortgages could adversely affect our business, liquidity, results of operations, and financial condition.

The Corporation sells substantially all of its long-term fixed residential mortgages to secondary market purchasers.

These mortgages are underwritten to specific guidelines.

Decreased demand for our long-term fixed residential mortgages, changed government laws or regulations related to these secondary market purchases, or other disruptions in the secondary market for long-term fixed residential mortgages could adversely affect our business, liquidity, results of operations, and financial condition.

Decreased demand in the secondary market may also have downstream effects to the residential real estate market as a whole, decreasing real estate market prices, volume of home sales, the value of collateral securing the mortgage loans that we hold, income generated from originations of mortgage loans, and our profit margin on those long-term fixed residential mortgages we sell to secondary market purchasers.

Decreased demand in the secondary market may also lead to increase the volume of long-term fixed residential mortgages we hold in our loan portfolio, which would increase our exposure to the residential real estate market and the risks associated with holdings in the residential real estate market, as described in the Risk Factor titled “ The Corporation may foreclose on collateral property and would be subject to the increased costs associated with ownership of real property, resulting in reduced revenues and earnings.

” on Page 23.

The Corporation operates in a highly competitive industry and market, and our business will suffer if we are unable to compete effectively.

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Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting), and merchant banking.

Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Also, technology has lowered barriers to entry and made it possible for non-banks, including cryptocurrencies and other digital assets, to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Many of the Corporation’s competitors have fewer regulatory constraints and may have lower cost structures.

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Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation.

If the models the Corporation uses for interest rate risk and asset-liability management are inadequate, the Corporation may incur increased or unexpected losses upon changes in market interest rates or other market measures.

For example, if the models the Corporation uses for interest rate risk and asset-liability management are inadequate, the Corporation may incur increased or unexpected losses upon changes in market interest rates or other market measures.

If the models the Corporation uses for determining its probable credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs.

If the models the Corporation uses to measure the fair value of our financial instruments are inadequate, the fair value of our financial instruments may fluctuate unexpectedly or may not accurately reflect what the Corporation could realize upon sale or settlement of our financial instruments.

Additionally, if the models the Corporation uses to measure the fair value of our financial instruments are inadequate, the fair value of our financial instruments may fluctuate unexpectedly or may not accurately reflect what the Corporation could realize upon sale or settlement of our financial instruments.

Any failure in the Corporation’s analytical or forecasting models could have a material adverse effect on the Corporation’s business, financial condition, and results of operations.

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This is done, in part, by recruiting, hiring, and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers, and caring about our customers and associates.

If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results, may be materially adversely affected.

If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, by any government or regulatory action, or otherwise, our business and, therefore, our operating results, may be materially adversely affected.

Our operational systems and networks are subject to an increasing risk of continually evolving cybersecurity or other technological risks, which could result in a loss of customer business, financial liability, regulatory penalties, damage to our reputation, or the disclosure of confidential information.

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The financial services industry has experienced an increase in both the number and severity of reported cyber-attacks aimed at gaining unauthorized access to bank systems as a way to misappropriate assets and sensitive information, corrupt and destroy data, or cause operational or business services disruptions.

Any security breach

could result in the misappropriation, loss, or unauthorized disclosure of sensitive customer information, severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations, and have a material adverse effect on our business.

Any security breach, including security breaches that occur as a result of employee error or misconduct, could result in the misappropriation, loss, or unauthorized disclosure of sensitive customer information, severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations, and have a material adverse effect on our business.

We also rely on the integrity and security of a variety of third-party processors and payment, clearing, and settlement systems, as well as the various participants involved in these systems, many of which have no direct relationship with us.

Failure by these participants or their systems to protect our customers’ transaction data may put us at risk for possible losses due to fraud or operational disruption.

Failure by these participants, including their employees either as a result of employee error or misconduct, or their systems to protect our customers’ transaction data may put us at risk for possible losses due to fraud or operational disruption.

In addition, a number of our third-party service providers are large national entities with dominant market presence in their respective fields.

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The occurrence of a cybersecurity incident involving us, third-party service providers, or our customers, regardless of its origin, could damage our reputation and result in a loss of customers and business and subject us to additional regulatory scrutiny, and could expose us to litigation and possible financial liability.

Furthermore, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures arising from operational and security risks.

Furthermore, as technology, including the increasing use of artificial intelligence, machine learning, large language models, and other similar technologies, and cyberattacks change over time, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures arising from operational and security risks.

Any of these events could have a material adverse effect on our financial condition and results of operations.

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The Corporation relies on external vendors to provide products and services necessary to maintain day-to-day operations of the Corporation.

Accordingly, the Corporation’s operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements.

Accordingly, the Corporation’s operations are exposed to risk that these vendors or their employees, agents, or other representatives will not perform in accordance with the contracted arrangements under service level agreements.

The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and services, strategic focus, or for any other reason, could be disruptive to the Corporation’s operations, which could have a material adverse impact on the Corporation’s business and, in turn, the Corporation’s financial condition and results of operations.

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The Corporation may not be able to effectively implement new technology-driven products and services, be successful in marketing these products and services to its customers, or incur significant costs in implementing new technology-driven products and services.

Further, many of our competitors have substantially greater resources to invest in technological improvements.

Further, many of our competitors have substantially greater resources to invest in technological improvements and may do so in a more cost effective manner.

Failure to successfully keep pace with technological change affecting the financial services industry could negatively affect the Corporation’s growth, revenue, and profit.

The implementation of artificial intelligence, machine learning, and other large language models and similar technologies may subject the Corporation to increased regulatory risk, reputational risk, and may have material adverse effects on the Corporation’s business, financial condition, and results of operations.

The growth of artificial intelligence, machine learning, and other large language models and similar technologies (collectively referred to as “AI”), has spurned a new industry of technological advances.

The Corporation implemented a form of AI with its intelligent digital assistant, Gabby, available through the Bank’s website.

Use of AI can expose us to new or increased operation risks, including risks related to our internal controls.

As the use of AI expands and grows, it may become subject to additional regulations or restrictions on use from the U.S.

government and/or our banking regulators.

Additionally, ineffective implementation or failures by any implemented AI could have an adverse effect on our reputation, cause the Corporation to incur additional costs to make the implementation successful, or otherwise result in a loss of expenses incurred if the Corporation decides to terminate the pursuit of a failed AI implementation.

Further, many of our competitors have substantially greater resources to invest in technological improvements and may do so in a more cost effective manner.

The realization of these risks could result in the Corporation failing to realize any anticipated benefits from the implementation of AI and could negatively affect the Corporation’s growth, reputation, revenue, expenses, and results of operations.

The Corporation’s controls and procedures may fail or be circumvented, and the Corporation’s methods of reducing risk exposure may not be effective.

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and (x) natural disasters.

Certain expenditures associated with the ownership of real estate, principally real estate taxes, insurance, and maintenance costs, may adversely affect the income from the real estate.

Certain expenditures associated with

the ownership of real estate, principally real estate taxes, insurance, and maintenance costs, may adversely affect the income from the real estate.

Therefore, the cost of operating real property may exceed the income earned from the real property, and the Corporation may have to advance funds in order to protect its interests, or it may be required to dispose of the real property at a loss.

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Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards.

The remediation costs and any other financial liabilities

associated with an environmental hazard could have a material adverse effect on the Corporation’s business, financial condition, and results of operations.

The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Corporation’s business, financial condition, and results of operations.

The Corporation may become subject to claims and litigation pertaining to intellectual property.

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For example, consumers can pay bills and transfer funds directly without going through a bank.

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

This process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the use of customer deposits as a source of liquidity for income generating activities.

New technologies can also impact consumer use of banks, including the increased prevalence of digital assets or cryptocurrencies, which can present risks that consumers move money out of bank deposits and into these digital assets or cryptocurrencies, decreasing our deposits and source of liquidity.

In addition, changes in consumer spending and savings habits could adversely affect the Corporation’s operations, and the Corporation may be unable to timely develop competitive new products and services in response to these changes.

Our acquisition of SimplyBank presents certain additional risks to our business and operations.

On July 1, 2024, the Corporation completed our previously announced acquisition of SimplyBank., a Tennessee-chartered commercial bank (“SimplyBank”).

While we anticipate that this transaction will improve profitability through geographic expansion, financial management, economies of scale, and expanded services, the recognition of such improved profitability is not guaranteed.

Additionally, as SimplyBank and its personnel are integrated into the Corporation, there remains the presence of ongoing risks, including:

the diversion of management’s attention from other areas of the Corporation;

the loss of customers or employees as a result of the transaction;

and other business, operational, and regulatory risks.

As part of the transaction, SimplyBank provided a number of representations and warranties, including, but not limited to, representations and warranties regarding tax liabilities, interactions with regulators, and compliance procedures, with respect to SimplyBank and its operations.

If such representations and warranties are inaccurate, we may face liabilities, including tax and/or regulatory liabilities, as a result of such inaccurate representations and warranties.

If these risks occur, the Corporation may not realize the improved profitability it anticipated when it acquired SimplyBank and could realize a material adverse effect on its business, reputation, financial condition, standing with its regulators, and results of operations.

Potential acquisitions may disrupt the Corporation’s business and dilute shareholder value.

The Corporation generally seeks merger or acquisition partners that are culturally similar and have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale, or expanded services.

Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things:

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Accordingly, the Corporation may not be able to raise capital when needed or on favorable terms.

If the Corporation cannot raise additional capital when needed, it will be subject to increased regulatory supervision and the imposition of restrictions on its growth and business.

If the Corporation cannot raise additional capital when needed, it will be

subject to increased regulatory supervision and the imposition of restrictions on its growth and business.

These restrictions could negatively impact the Corporation’s ability to operate or further expand its operations through acquisitions or the establishment of additional branches and may result in increases in operating expenses and reductions in revenues that could have a material adverse effect on its financial condition and results of operations.

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Any regulatory action against us or failure to comply with applicable laws and regulations could have an adverse effect on our reputation, business, financial condition, and results of operations.

presidential administration’s regulatory reform agenda could result in a material impact to our regulatory compliance and operations procedures.

We anticipate that the new U.S.

presidential administration will seek to implement a regulatory reform agenda that is significantly different than that of the former U.S.

presidential administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal agencies, include those federal banking regulators responsible for the Corporation’s oversight.

While we do not specifically know what these changes will entail, we may be required to implement different operational processes and procedures

and reform our compliance procedures to align with any regulatory reform.

This may cause the Corporation to incur additional costs and expenses, as well as dedicate management and key personnel time and resources, to comply with any regulatory reform agenda, which can ultimately impact our business, financial condition, and results of operations.

For example, the Consumer Financial Protection Bureau (“CFPB”) under the former administration focused some of its efforts on eliminating “junk fees”, which, while not specifically defined, focused on deposit products and fees such as overdraft fees and non-sufficient funds fees.

The CFPB began a process of soliciting comments on fee practices to determine what steps to take with respect to “junk fees”.

On February 1, 2025, the director of the CFPB, Rohit Chopra, was relieved of his duties by the new presidential administration.

It is currently unknown whether the CFPB will continue its pursuit related to “junk fees”, however if it does, the rules and regulations generated from this undertaking may require us to modify our fee structures and incur costs to comply with any new rules or regulations.

Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, regulatory structure, financial condition, and/or results of operations.

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If our policies, procedures, and systems are deemed deficient, we could be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including any acquisitions we desire to make.

We could also incur increased costs and expenses to improve our anti-money laundering procedures and systems to comply with any regulatory requirements or actions.

Failure to maintain and implement adequate programs to combat money laundering and terrorist

financing could also have serious reputational consequences for us.

could also incur increased costs and expenses to improve our anti-money laundering procedures and systems to comply with any regulatory requirements or actions.

Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.

Any of these results could have a material adverse effect on our business, financial condition, results of operations, and future prospects.

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Future capital needs could result in dilution of shareholder investment.

The Corporation’s Board of Directors may determine from time to time there is a need to or, if our or the Bank’s regulatory capital ratios fall below the required minimums, we could be forced to raise additional capital through the issuance of additional shares of

stock or other securities, including debt securities and senior or subordinated notes.

We are currently authorized to issue up to 40 million shares of common stock, of which 11,842,539 shares were outstanding as of December 31, 2024, and up to 10 million shares of preferred stock, of which no shares are outstanding.

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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