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training to our employees in an effort to ensure that our customers receive superior customer service. We seek to develop superior skills at the transaction level, using a bottom-up approach to management. The use of pods, roundtables, and team huddles are fundamental to our approach.

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We use compensation plans coupled with a complete evaluation program to reward and direct the development of our employees. Our compensation systems reflect the need to retain and develop a superior workforce, recognizing that unique and innovative programs need to be developed and maintained to retain highly qualified employees. We strive to provide pay, benefits, and services that help meet the varying needs of our employees. Compensation and benefits include market-competitive pay, retirement programs, broad-based bonuses, stock options, stock appreciation rights, health and welfare benefits, financial counseling, paid time off, and family leave.

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We are committed to attracting, hiring, and retaining a diverse workforce that is representative of the communities in which we live and serve. As of December 31, 2023, approximately 74% of our workforce self-identified as Latino or Hispanic, and over 66% self-identified as women. We are committed to providing equal opportunities for applicants and employees in all of our employment practices, including but not limited to, hiring, promoting, transferring, and compensating without regard to sex, race, color, national origin, genetic information, citizenship status, age, religion, veteran, disability, or any other characteristic protected by law. We also conduct training programs on equal employment opportunities and diversity and inclusion in the workplace as well as training sessions that coach and develop talent in order to promote and retain a diverse workforce. Our commitment to diversity and inclusion is further underscored by our efforts to reach out to and support minority and women’s organizations and educational institutions that serve significant minority or women student populations. We also participate in events to attract minorities and women and recruit them for available employment opportunities.

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We are also committed to maintaining a safe and healthy work environment, free from work-related injuries and illnesses and where every team member is treated with dignity and respect, without the fear of the threat of discrimination or harassment. As stated in our Board-approved Code of Ethics and Business Conduct, we expect all of our officers, directors, and employees to practice fair dealing, honesty, and integrity in every aspect of our interactions with other IBC employees, our customers, vendors, shareholders, suppliers, competitors, and government authorities, and the communities we serve.

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None of our employees are represented by any collective bargaining unit or are parties to a collective bargaining agreement. We believe that our relations with our employees are good.

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Competition

We are one of the largest independent financial bank holding companies in the State of Texas.  Our primary market area in Texas is bordered on the east by the Galveston area, the northwest by Dallas, the southwest by Del Rio and to the southeast by Brownsville. Our primary market area also includes the State of Oklahoma. We compete for deposits and loans with other commercial banks, savings and loan associations, and credit unions in our primary market area. We have increased our market share in our primary market area in the past through strategic acquisitions.

We also compete against non‑banknon-bank entities, which serve as an alternative to traditional financial institutions. The percentage of bank related services being provided by non‑banknon-bank entities has increased during the last several years.

We do a large amount of business for customers domiciled in Mexico, with an emphasis in Northern Mexico. Deposits from persons and entities domiciled in Mexico comprise a large and stable portion of the deposit base of the Subsidiary Banks. These deposits comprised approximately 27%29%, 28% and 27%25% of the Subsidiary Banks total deposits for the three years ended December 31, 2017, 20162023, 2022 and 2015,2021, respectively.

Under the Gramm Leach Bliley Financial Services Modernization Act of 1999, which is otherwise known as the Gramm-Leach-Bliley Act (GLBA), banks, securities firms and insurance companies may affiliate under an entity known as a financial holding company, which may then serve its

provide financial services. These technological advances may reduce the necessity of depository institutions and other financial intermediaries in the transfer of funds between parties.

Supervision and Regulation

Banking is a complex, highly regulated industry. In addition to the generally applicable state and federal laws governing businesses and employers, we and our Subsidiary Banks are further extensively regulated by special federal and state laws governing financial institutions. These laws comprehensively regulate the operations of theour Subsidiary Banks and include, among other matters:

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Furthermore, Congress, state legislatures and applicable federal and state regulatory agencies are continually reviewing such statutes, regulations, and policies. Any change in such laws or policies applicable to us and our subsidiaries could have a material adverse effect on our business, financial condition or our results of operations. Recent political developments, includingchallenges to the change in the United States’ administration,scope of agencies’ regulatory authority have increased uncertainty with respect to the implementation, scope, and timing of regulatory reforms. With few exceptions, state and federal banking laws have as their principal objective either the maintenance of the safety and soundness of the federal deposit insurance system or the protection of consumers, rather than the specific protection of our shareholders or creditors.

Further, our earnings are affected by the fiscal and monetary policies of the FRB, which regulates the national money supply in order to mitigate recessionary and inflationary pressures. These monetary policies significantly influence the overall growth of bank loans, investments, and deposits, as well as the interest rates charged on loans or paid on time and savings deposits. The nature of future monetary policies and the effect of such policies on our future earnings and business cannot be predicted.

Interest Rate Reform Upon the Discontinuation of LIBOR

The discontinuation of the benchmark interest rate known as U.S.-dollar London Interbank Offered Rate (LIBOR) was completed on June 30, 2023. Prior to that date, we had various loans, derivative contracts, borrowings, and other financial instruments with attributes that were either directly or indirectly dependent on LIBOR. Our completion of the transition from LIBOR during the second quarter of 2023 did not have any adverse impacts on our business, financial condition, or results of operations, and each of the loan documents, financial instruments, and other agreements related to our LIBOR-based securities had fallback provisions that determined what reference rate would replace LIBOR upon its discontinuation. For example, on July 1, 2023, the interest-rate index on the capital and common securities issued by our four statutory business trusts transitioned from LIBOR to the Three-Month CME Term Secured Overnight Financing Rate with a spread adjustment of 26 basis points.

The Dodd-Frank Act

On July 21, 2010, sweeping financial regulatory reform legislation entitled the “Dodd‑FrankThe “Dodd-Frank Wall Street Reform and Consumer Protection Act” (Dodd‑Frank(Dodd-Frank Act), which was signed into law. The Dodd‑Frank Act representsenacted in 2010, represented a significantsweeping overhaul of many aspects of the regulation of the financial services industry,industry.  The Dodd-Frank Act created far-reaching changes across the financial regulatory landscape by addressing among other things,areas like systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending

limits, mortgage lendingmortgage-lending practices, investment-advisor registration, of investment advisors and changes among the bank regulatory agencies. These far‑reaching changes acrossSome of the financial regulatory landscape include provisions that, among other things,most notable reforms under the Dodd-Frank Act have or will:included:

The BHCA and the Change in Bank Control Act of 1978 require that either FRB approval must be obtained or notice must be furnished to the FRB and not disapproved prior to any person or company acquiring “control” of a bank holding company, subject to exception for certain transactions. Control is conclusively presumed to exist if any person acquires 25% or more of the voting securities of a bank holding company; control is a rebuttable presumption between 10% and 25% ownership. Ownership by affiliated persons, or persons acting in concert, is typically aggregated for these purposes. The FRB revised its control rules under the BHCA by expanding the number of presumptions used to determine whether control exists. Effective April 1, 2020, the FRB’s rule amended Regulation Y, the implementing regulation for the BHCA, to provide additional transparency regarding control determinations by implementing a tiered framework establishing factors and thresholds that are indicative of control. To date, the rule has not, as we do not anticipate that it will, have a significant detrimental effect on us given that it is generally consistent with the FRB’s historical practices in making control determinations.

As a bank holding company, we are required to obtain approval prior to merging or consolidating with any other bank holding company, acquiring all or substantially all of the assets of any bank, or acquiring ownership or control of shares of a bank or bank holding company if, after the acquisition, we would directly or indirectly own or control 5% or more of the voting shares of such bank or bank holding company.  In approving acquisitions or the addition of activities, one of the issues the FRB considers is whether the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices.

The USA PATRIOT ActAnti-Money Laundering

Combating money laundering and terrorist financing is a major focus of financial institution regulatory policy. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (PATRIOT Act), substantially expanded the responsibilities of U.S. financial institutions with respect to countering money laundering and terrorist activities. The implementing regulations impose obligations on financial institutions to maintain a risk-based anti-money laundering program that includes appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Also, theThe PATRIOT Act also requires the bank regulatory agencies to consider the record of a bank or bank holding company in combating money laundering activities in their evaluation of bank and bank holding company merger or acquisition transactions. Anti-money laundering regulations are continually evolving. In May 2018, regulatory updates were imposed that require U.S. financial institutions to ascertain and document the beneficial owners of legal entity customers opening new accounts. Those 2018 requirements were supplemented by the Anti-Money Laundering Act of 2020 (AMLA) and, as part of the AMLA, the Corporate Transparency Act (CTA).  

The AMLA streamlines and modernizes certain provisions of the Currency and Foreign Transactions Reporting Act of 1970, as amended (Bank Secrecy Act), by, for example, requiring most legal entities to register their beneficial-ownership information into a national registry maintained by the Financial Crimes Enforcement Network (FinCEN); modernizing and expanding the statutory definition of “financial institution” to include antiquities dealers and entities whose services involve cryptocurrency and other non-cash currency substitutes;  enhancing the type and severity of fines and penalties that violators of the AMLA, the Bank Secrecy Act, and the PATRIOT Act may face; and enhancing whistleblower protections and awards.  Certain implementing regulations that FinCEN has proposed in connection with the AMLA are still being finalized.

In September 2022, FinCEN finalized its regime for beneficial-ownership reporting under the CTA, which took effect on January 1, 2024.  To comply with the CTA’s reporting rule, corporations, limited liability companies, and similar entities must identify and report certain information concerning their beneficial owners, meaning the individuals who ultimately own or control them.  The CTA aims to combat money laundering, securities and tax fraud, terrorism financing, human and drug trafficking, counterfeiting, and other corrupt, nefarious activities by preventing bad actors from concealing their ownership of U.S. entities to advance their illicit operations.  On February 20, 2024, FinCEN’s rule for implementing the access and safeguard provisions of the CTA took effect.  Under the CTA’s access rule, a reporting company’s beneficial-ownership information is deemed confidential but can be disclosed by FinCEN to six categories of recipients,

including financial institutions that are subject to customer due diligence obligations and have received the reporting company’s consent to access its beneficial-ownership information.  

We have a program in place to monitor and enforce our policies on money laundering, corruption, and bribery, as well as our policies on prohibitingthat prohibit the use of Company assets to finance or otherwise aid alleged terrorist groups. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

Nonresident Alien Deposits

In 2013, the IRS published a rule requiring U.S. banks to report on the interest they pay to nonresident alien individuals, and theindividuals.  The IRS will share theshares that information with tax authorities in other countries with whom the United States has an agreement regarding the exchange of tax information.

The investments that may be made under the GLBA are substantially broader in scope than the investment activities otherwise permissible for bank holding companies and are referred to as “merchant banking investments” in “portfolio companies.” The FRB and the Secretary of the Treasury have regulations governing the scope of permissible merchant banking investments. Before making a merchant banking investment, a financial holding company must either be or have a registered securities firm or a qualified insurance affiliate. The merchant banking investments may be made by the financial holding company or any of its subsidiaries, other than a depository institution or a subsidiary of a depository institution. The regulations place restrictions on the ability of a financial holding company to become involved in the routine management or operation of any portfolio company. The regulation also generally limits the ownership period of merchant banking investments to no more than ten years.

The FRB, the Office of the Comptroller of the Currency (OCC), and the FDIC have rules governing the regulatory capital treatment of equity investments in non‑financialnon-financial companies held by banks, bank holding companies and financial holding companies. The rules apply a graduated capital charge on covered equity investments, which would increase as the proportion of such investments to Tier 1 Capitalcapital increases.

On September 8, 2016, the FRB published a report to Congress in which it recommended the repeal of the merchant banking authority granted to financial holding companies under the GLBA. Specifically, the FRB recommended

Nasdaq Listing Standards

Shares of our Common Stockcommon stock are listed and trade on the NASDAQThe Nasdaq Stock Market (Nasdaq) under the symbol “IBOC”.“IBOC.” As such, we must comply with the quantitative and qualitative listing standards of the NASDAQ Stock Market.Nasdaq. In addition to other matters, the Nasdaq listing standards address disclosure requirements and establish standards relating to board independence and other corporate governance matters.

Interstate Banking and Branching

The Riegle‑NealRiegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Interstate Banking Act), rewrote federal law governing the interstate expansion of banks in the United States. Under the Interstate Banking Act, adequately capitalized, well managedwell-managed bank holding companies with FRB approval may acquire banks located in any other state in the United States, provided that the target bank meets the minimum age established by the host state (maximum of fivein which the target bank is located (five years in Texas). Under theThe Interstate Banking Act imposes an anti‑concentrationanti-concentration limit, will barwhich prohibits interstate acquisitions that would give a bank holding company control of more than ten percent10% of all deposits nationwide or thirty percent30% of any one state’s deposits, or such higher or lower percentage established by the host state. The anti‑concentrationanti-concentration limit applicable in each of Texas and Oklahoma has been set at twenty percentis 20% of all federally insured deposits in Texas and Oklahoma, respectively.the state.  The Dodd‑FrankInterstate Banking Act changesfurther expanded interstate banking by allowing banks to establish de novo branches in any state that opted-in to the requirements for interstateInterstate Banking Act’s branching provisions.  However, the opt-in concept was eliminated by permittingthe Dodd-Frank Act, which permits de novo interstate branching if, under the laws of the state where the new branch is to be established, a state bank chartered in that state would be permitted to establish a branch.

At December 31, 2017,2023, there was an aggregate of approximately $731,850,000$1,229,500,000 available for the payment of dividends to our holding company by IBC, IBC-Oklahoma, Commerce Bank, IBC Zapata, and IBC Brownsvilleour Subsidiary Banks under the capital rules applicable as of December 31, 2017,2023, assuming that each of such banks continues to be classified as “well capitalized.”  Further, we could expend the entire $731,850,000$1,229,500,000 and continue to be classified as “well capitalized” under the capital rules applicable as of December 31, 2017.2023.

Source of Strength Doctrine

FRB policy has historically required bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. The Dodd‑FrankDodd-Frank Act codifiescodified this policy as a statutory requirement. Under this requirement, we are expected to commit resources to support our Subsidiary Banks, including at times when we may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to priority of payment. In addition to the foregoing requirements, the Dodd-Frank Act’s provisions authorize the FRB and other federal banking regulators to require a company that directly or indirectly controls a bank to submit reports that are designed both to assess the ability of such company to comply with its “source of strength” obligations and to enforce the company’s compliance with these obligations.

annual rate of approximately 13.4 basis points for an anticipated total of eight quarterly assessment periods, beginning with the first quarterly assessment period of 2024. Banks with total assets under $5 billion will not be subject to the special assessment. Under the final rule, the estimated loss pursuant to the systemic-risk determination will be periodically adjusted, and the FDIC may cease collection early, extend the collection period, and impose a final shortfall special assessment on a one-time basis. None of our Subsidiary Banks were subject to the special assessment.

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Capital Adequacy

Our holding company and our Subsidiary Banks are required to meet certain minimum regulatory capital guidelines. The FRB has historically utilized a system based upon risk-based capital guidelines under a two-tier capital framework to evaluate the capital adequacy of bank holding companies. Tier 1 capital generally consists of common stockholders’ equity, retained earnings, a limited amount of qualifying perpetual preferred stock, qualifying trust preferred

offset market risks. In 2010, the federal bank regulators issued a final risk‑based capital rule related to new accounting standards that make substantive changes in how banking organizations account for more items, including securitized assets that previously had been taken off banks’ balance sheets. The Dodd‑FrankDodd-Frank Act directeddirects the banking agencies to issue capital requirements for banking institutions that are countercyclical. These will require a higher level of capital to be maintained in times of economic expansion and a lower level of capital during times of economic contraction.

Basel III

In July 2013, the FRB and the FDIC published the Basel III Capital Rules establishingcapital rules, which implemented a new comprehensive capital framework for U.S. banking organizations.organizations known as “Basel III” along with certain provisions of the Dodd-Frank Act.  The rules implementedBasel III framework was developed by the Basel Committee on Banking Supervision’s --Supervision, a college of central bankers and other financial regulators from the United States and other advanced economies,  -- December 2010 framework known as “Basel III” for strengtheningto strengthen international capital standards, as well as certain provisions of the Dodd-Frank Act.standards. Basel III when implemented by the U.S. banking agencies and fully phased in, requires

A key provision of the Basel III capital rules permitted usbanks to make a one‑timeone-time irrevocable election to determine howopt out of the Basel III requirement to recognize most items reportedof AOCI in AOCI will be handled for regulatory capital purposes.capital. For institutions like ours that opt out,chose to make the AOCI opt-out election, most AOCI items willare not be included in the calculation of Common Equity Tier 1 capital;CET1; institutions that do not opt out will havemust include most AOCI items included in theCET1 calculation, of Common Equity Tier 1 capital, which affects the institution’s legal lending limit calculation. If a top tiertop-tier banking organization makes the AOCI opt outopt-out election, all consolidated banking subsidiary organizations under it must make the same election. We made the AOCI opt out election in 2015.

UnderThe Basel III capital rules require the initialfollowing minimum capital ratios that became effective on January 1, 2015 are as follows:to be met:

undercapitalized.” A depository institution’s capital tier will dependdepends upon how its capital levels compare withto various relevant capital measures and certain other factors, as established by regulation. The relevant capital measures, which reflect changesthe standards for assessing capital adequacy under the Basel III capital rules that became effective on January 1, 2015, are the total capital ratio, the CET1 capital ratio, the Tier 1 capital ratio, and the leverage ratio. A bank will be considered:

measures historically applied by banks and regulators for management and supervisory purposes, going forward will be required by regulation.

The Basel III liquidity coverage ratio was published in 2013 and uses international liquidity standards that serve to reconcile the differences of the liquidity standards of countries. The Basel Committee is expected to address the net stable funding ratio in the future. These new standards are subject to further rulemaking and their terms may well change

general or subordinated creditors of the bank are entitled to a priority of payment over the claims of holders of any obligation of the institutionbank to its shareholders, including any depository institution holding company (like us) or any shareholder or creditor.creditor thereof.

Community Reinvestment Act

Under the CRA, the FDIC is required to assess the record of each Subsidiary Bank to determine if the bank meets the credit needs of its entire community, including lowlow- and moderate‑incomemoderate-income neighborhoods served by the institution,bank, and to take that record into account in its evaluation of any application made by the bank for, among other things, approval of the acquisition or establishment of a branch or other deposit facility, an office relocation, a merger, or the acquisition of shares of capital stock of another financial institution. In May 2022, the federal bank regulators, including the FDIC, issued a notice of proposed rulemaking intended to revise the CRA’s implementing regulations in order to advance the CRA’s core purpose and adapt the CRA’s regulatory framework to reflect the modern banking industry. The focus of the revised rules, according to the regulators, is to (i) expand access to credit, investment, and basic banking services in low- and moderate-income communities, (ii) adapt to increased provision and use of Internet and mobile banking products and services, (iii) provide greater clarity, consistency, and transparency, (iv) tailor CRA evaluations and data collection to bank size and type, and (v) maintain a unified approach.  

In October 2023, the federal regulators adopted a joint final rule to strengthen and modernize the CRA regulations, which was consistent with the 2022 proposed rule.  Under the final rule, most of the CRA changes will only affect “large” banks with assets of more than $2 billion while allowing small and mid-sized banks to elect to be evaluated based on certain of the new rules. Although updates to the CRA’s implementing regulations were necessary to address the changes in the banking industry and the increase in online and mobile banking, the changes under the final rule include significant increases in data collection, testing, and evaluation metrics related to geography and assessment areas. The final rule takes effect on April 1, 2024, with staggered compliance dates of January 1, 2026 and January 1, 2027.  The asset-size thresholds defined in the joint final rule will apply on January 1, 2026.

Proposed legislation was introduced in September 2022 would further revise the CRA by adding several new substantive and procedural requirements. If enacted, the legislation would broaden the types of legal violations that affect CRA scores, require banks to form community advisory committees in each market they serve (based on metropolitan statistical areas), require proof of impact for community service and charity efforts to receive CRA credit, and require large banks to collect and report even more information related to borrower demographics. The proposed legislation would also require regulators to consider a bank’s partnerships with non-depository lenders and “small-dollar” first-lien mortgages as part of CRA examinations. Like the October 2023 final regulatory revisions, the legislation focuses on applying fair-lending concepts to CRA obligations and examinations. We will continue to monitor this legislation and its potential effect on the revised CRA regulations.

The FDIC prepares a written evaluation of an institution’s record of meeting the credit needs of its entire community and assigns a rating. Federal banking agencies make public a rating of a bank’s performance under the CRA. The Subsidiary Banks conduct an award winningaward-winning financial literacy program in their communities as part of their community outreach.

There are also fair lending laws, including the Equal Credit Opportunity Act and the Fair Housing Act, which prohibit discrimination in connection with lending decisions. The bank regulators periodically conduct fair lending evaluations of banks. EachThree of our Subsidiary Banks received an “Outstanding” CRA rating, and two received a “Satisfactory” CRA rating in itstheir most recently completed

Consumer Laws

In addition to the laws and regulations discussed herein, the Subsidiary Banks are also subject to numerous consumer laws and regulations that are designed to protect consumers in transactions with banks. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. The Subsidiary Banks must comply with the applicable provisions of these consumer finance protection laws and regulations as part of their ongoing customer relations. The Dodd‑FrankDodd-Frank Act providesestablished comprehensive new rules regulating mortgage activities and created the CFPB with direct supervisory authority to enforce certain consumer finance protection laws over banks with assets of $10 billion or more and certain nonbank entities.

The CFPB’s broad authority to issue, interpret, and enforce almost all federal consumer protection laws, and its issuance of applicable disclosure forms, may impact each of the Subsidiary Banks’ consumer compliance programs. The applicable consumer financial protection laws include, in part, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Procedures Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Practices Act, various state law counterparts, and the Consumer Financial Protection Act of 2010, which is part of the Dodd-Frank-Act. The CFPB also has broad authority, among other matters, to declare acts or practices to be “unfair, deceptive, or abusive,” and to develop and require new consumer disclosures. WhileThe CFPB has issued and continues to issue numerous regulations under which IBC and the CFPB does not currently have direct supervisory authority over any of our Subsidiary Banks because they each fall below the $10 billion assets threshold, the CFPB’s broad authoritywill continue to issue, interpret,incur additional expense in connection with ongoing compliance obligations. Significant recent CFPB developments that may affect operations and enforce almost all federal consumer protection laws, and its issuance of applicable disclosure forms, will significantly impact each of the Subsidiary Banks’ consumer compliance programs.costs include:

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The CFPB proposed major small dollar loan consumer protection regulations in 2016, including payday loans, vehicle title loans and certain high-cost installment loans.  Two categories of loans are covered;  loans with a term of 45 days or less; or loans with multiple advances if each advance is required to be repaid within 45 days.  The second category includes loans with terms greater than 45 days, provided that they have an all-in annual percentage rate higher than 36 percent, and either are repaid directly from the consumer’s account or income or are secured by the consumer’s vehicle.  The proposed rules focus on practices involving consumer’s ability to repay their loans and other practices related to withdrawing payments from consumers’ accounts.  Several types of consumer credit would be excluded, including:  loans extended solely to finance the purchase of a car or other consumer good in which the good secures the loan; home mortgages and other loans secured by real property or a dwelling if recorded or perfected; credit cards; student loans; non-recourse pawn loans; and overdraft services and lines of credit.  On October 5, 2017, the CFPB finalized the small dollar loan rules with a planned implementation date of August 2019 for most of its provisions.  However, on January 16, 2018, the CFPB, acting under new Director Mick Mulvaney, announced that it intends to engage in a rulemaking process so that it may reconsider the small dollar loan rule, thus, putting in doubt the rule’s implementation.  Separately, some congressional members are working to overturn the rules through the legislative process.

In light of the new administrationcurrent political climate in Washington, DC and the changechanges in the CFPB’s executive director,CFPB leadership in recent years, we cannot predict what additional actions may be taken by the CFPB with respect to its previous regulations, rulings, and decisions and any impact on our operations. In October 2022, the United States Court of Appeals for the Fifth Circuit held that the mechanism for funding the CFPB is an unconstitutional violation of the Appropriations Clause. The CFPB petitioned the United States Supreme Court to hear its challenge to that holding, and the Supreme Court heard oral arguments in the case in October 2023. The Supreme Court’s decision is expected to be delivered in spring 2024. Since the Fifth Circuit’s decision, numerous legal challenges to CFPB oversight, enforcement, and action have been filed across the country, and several federal courts have stayed CFPB enforcement proceedings pending the Supreme Court’s decision. The Supreme Court’s decision is expected to have a profound impact on the future and scope of regulatory

authority of the CFPB and potentially other agencies and programs that are not funded through the ordinary annual appropriations process.

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Military Lending Act

In 2015, the Department of Defense issued final amendments to the rule that implements the federal Military Lending Act. Under the amended rule, the Department of Defense expanded the definition of “consumer credit” to include a much broader range of credit products, including some credit products offered by depository institutions. The rule requires lenders to provide certain protections to borrowers who are covered under the rule. For instance, lenders must cap the Military Annual Percentage Rule for covered credit products provided to covered borrowers at 36%. Lenders must also provide certain disclosures and other protections to covered borrowers. Although a lender can use any method to determine a borrower’s military status, the lender can obtain a safe harbor by verifying the borrower’s military status either through the Department of Defense Manpower Data Center or by using a consumer credit report that contains military status.

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. The SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking laws and regulations. In July 2023, the SEC issued a final rule that, consistent with its rule proposal from March 2022, requires disclosure of material cybersecurity incidents and annual disclosure of material information concerning cybersecurity risk management, strategy, and governance. Under the final rule, registrants are required to disclose the occurrence of and key details about a material cybersecurity incident within four business days of determining that the incident is material and must provide periodic updates as to the status of the incident in subsequent filings.

In October 2023, President Joe Biden issued an Executive Order (EO) on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI), which sets new standards for AI safety and security, establishes guidelines and processes for the equitable use of AI, calls on Congress to pass bipartisan data-privacy legislation, and directs federal agencies to take various actions to advance the safety, security, and trustworthiness of AI systems and to mitigate AI risks. Several of the directives in the EO involve the financial-services industry. For example, the EO directs the Secretary of the Treasury to prepare a public report advising financial institutions on best practices for managing AI-specific cybersecurity risks, encourages the CFPB director to address how AI tools and automated systems, depending on their use, have the potential to enable unlawful discrimination and biases in the housing and consumer-finance markets or to facilitate compliance with the federal laws that prohibit those discriminatory practices, and encourages regulatory agencies to consider rulemaking to address the risks to financial stability and other risks that may result from using AI.

Increasingly, state regulators are implementing additional privacy and cybersecurity standards and regulations. Recently, several states adopted regulations requiring certain financial institutions to implement cybersecurity programs and provide detailed requirements for such programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. Effective January 1, 2020, Texas amended its data breach notification law, limiting the time frame for notifying individuals whose data has been compromised and requiring notice to the Texas Attorney General in certain circumstances.  We expect state-level activity to continue in this area and will continue monitoring legislative developments in Texas and Oklahoma.

Affiliate Transactions

Our holding company and Subsidiary Banks are “affiliates” within the meaning of Section 23A of the Federal Reserve Act (FRA), which sets forth certain restrictions on (i) loans and extensions of credit between a bank subsidiary and affiliates, (ii) on investments in an affiliate’s stock or other securities, and (iii) on acceptance of such stock or other securities as collateral for loans. These restrictions prevent a bank holding company from borrowing from any of its bank subsidiaries unless the loans are secured by specific obligations. Further, such secured loans and investments by a bank subsidiary are limited in amount, as to a bank holding company or any other affiliate, to 10% of such bank subsidiary’s capital and surplus and, as to the bank holding company and its affiliates, to an aggregate of 20% of such bank subsidiary’s capital and surplus. Certain restrictions do not apply to 80% or more owned sister banks of bank holding companies. Each Subsidiary Bank is wholly‑ownedwholly-owned by our holding company.

Section 23B of the Federal Reserve ActFRA requires that the terms of affiliate transactions be comparable to terms of similar non‑affiliatenon-affiliate transactions. Among other things, the Dodd‑FrankDodd-Frank Act expands the limitations on affiliate transactions by expanding the definitions of “affiliate” and of “covered transactions,” includingwhich include debt obligations of an affiliate utilized as collateral. The Dodd-Frank Act also requires that the 10% of capital limit on covered transactions begin to apply to non‑banknon-bank financial subsidiaries. “Covered transactions” are defined to include a loan or extension of credit, as well as a purchase of securities issued by an affiliate, a purchase of assets (unless otherwise exempted by the FRB) from the affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate. While the Dodd‑Frank ActDodd-Frank Act’s changes to Sections 23A and 23B of the FRA became effective in 2012, the FRB has not issued any guidance nor has it amended Regulation W.  Regulation W predatesto reflect those changes. However, in March 2021, the FRB staff provided guidance (in the form of a memorandum and answers to frequently asked questions developed by the staff) indicating that Sections 23A and 23B of the FRA should be interpreted as having been amended by the Dodd-Frank Act and that the FRB is expectedin the process of revising Regulation W to remain under any deregulation underreflect the current administration.Dodd-Frank Act’s changes.

Insider Loans

The restrictions on loans to directors, executive officers, principal shareholders, and their related interests contained in the Federal Reserve ActFRA and Regulation O apply to all insured institutions and their subsidiaries and holding companies. In general, any such extensions of credit must (i) not exceed certain dollar limitations, (ii) be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (iii) not involve more than the normal risk of repayment or present other unfavorable features.  Additional restrictions are imposed on extensions of credit to executive officers. Certain extensions of credit

mortgage lending, including revisions to the CRA and greater oversight of property appraisals, including related algorithms and machine learning tools that can be used in the appraisal process.

Powers

As a result of the FDICIA, the authority of the FDIC over state‑charteredstate-chartered banks was expanded. The FDICIA limits state chartered banks to only those principal activities permissible for national banks, except for other activities specifically approved by the FDIC. The Texas Banking Act includes a parity provision which establishes procedures for state banks to notify the Texas Banking Commissioner if the bank intends to conduct any activity permitted for a national bank that is otherwise denied to a state bank. The Texas Banking Commissioner has 30 days to prohibit the activity. Also, the Texas Finance Code includes a super parity“super parity” provision with procedures for state banks to notify the Texas Banking Commissioner if the bank intends to conduct any activity permitted for any depository institution in the United States and theStates. Texas Banking Commissioner has 30 days after receiving such notice to prohibit the activity. Similarly, under the Oklahoma Banking Code, Oklahoma state banks have the authority to exercise such incidental powers as may be necessary or desirable to carry on the banking business including, but not limited to, powers conferred upon national banks, unless otherwise prohibited or limited by the Oklahoma Banking Commissioner or the Oklahoma State Banking Board.  Additionally, upon approval of the Oklahoma Banking Commissioner, and subject to all applicable federal and state laws, the operating subsidiaries or financial subsidiaries of an Oklahoma state bank may exercise any power and engage in any activity that is permitted for an operating subsidiary or financial subsidiary of a national bank, unless otherwise prohibited or limited by the Oklahoma Banking Commissioner or Oklahoma State Banking Board.

Incentive Compensation

In June 2010, the FRB, OCC, and FDIC issued the Interagency Guidance on Sound Incentive Compensation Policies, a comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk‑takingrisk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The FRB will review, asAs part of theits regular, risk focusedrisk-focused examination process, the FRB reviews the incentive compensation arrangements of banking organizations. These reviews will beare tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of

of factors. The proposal would apply to financial institutions with more than $1 billion in assets. The rule also includesincluded heightened standards for financial institutions with $50 billion or more in total consolidated assets, that requiresrequiring at least 50 percent50% of incentive basedincentive-based payments for designated executives to be deferred for a minimum of three years. TheIn addition to the provisions of the 2011 proposed rule, the 2016 proposed rule specified that an incentive-based compensation arrangement would only be deemed to have appropriately balanced risk and reward if it included financial and non-financial measures of performance, was designed to allow non-financial measures of performance to override financial measures of performance, and was subject to adjustment to reflect actual losses, inappropriate risks taken, compliance deficiencies, or other measures or aspects of financial and non-financial performance. As with the 2011 proposed rule, no final rule was adopted in connection with the 2016 rule proposal.

In June 2023, the SEC included incentive-based compensation arrangements on its spring 2024 rulemaking agenda. Accordingly, a third round of proposed rulemaking on incentive-based compensation arrangements is expected to occur in the upcoming months. Once the final rule is developed, the interagency rule must be approved by all of the five federal members of the FFIEC, the SEC, and the Federal Housing Finance Agency before comments on the rule are sought. Comments on the proposed interagency rule were due to the agencies by May 31, 2011. A definitive final rule has not been issued.

Regulation Z was amended in 2011 to restrict incentive compensation programs with regard to residential mortgage programs. Such limitations affect mortgage brokers as well as loan officers in the subsidiary banks. Compensation may be tied to volume, but not to terms or conditions of the transaction other than the amount of credit extended. Further amendments to Regulation Z relating to mortgage loan originator compensation were adopted on January 20, 2013, by the CFPB in accordance with the Dodd‑FrankDodd-Frank Act.

In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including Nasdaq, to implement listing standards that required listed companies to adopt policies mandating the recovery or “clawback” of excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Nasdaq implemented the required listing standards under Rule 5608 of its listing rules, which became effective on October 2, 2023. Nasdaq-listed companies were required to adopt a compliant policy no later than December 1, 2023. Prior to that date, we amended and restated our Compensation Clawback Policy to meet the standards set forth in Rule 5608 and to be effective as of October 2, 2023. A copy of our clawback policy is attached as Exhibit 97 hereto.

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The scope and content of the U.S. banking regulators’ policies on executive compensation are continuing to develop and are likely to continue evolving in the near future.evolving. It cannot be determined at this time whether compliance with such policies will adversely affect our ability to hire, retain, and motivate our key employees.

Legislative and Regulatory Initiatives

From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and our operating environment in substantial and unpredictable ways. Such changes could have a material effect on our business, including increasing our cost of doing business, affecting our compensation structure, or limiting or expanding permissible activities. We cannot predict whether any such changes will be adopted and we cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations with respect thereto, would have upon our financial condition or results of our operations. The same uncertainty exists with respect to regulations authorized or required under the Dodd‑FrankDodd-Frank Act, but that have not yet been proposed or finalized. There is also the possibility that the Dodd‑FrankDodd-Frank Act or other federal laws may be revised by Congress in the future because certain bills have been introduced into Congress from time to time that would amend certain provisions of the Dodd‑Frank Act. 

On January 20, 2017,Dodd-Frank Act, or other federal legislation relating to financial institutions. Similarly, it is possible that the White House issued a memorandum to all executive departments and agency heads imposing “…a temporary moratorium on new agency regulations that are not compelled by Congress or public safety.”  Agencies are prohibited from sending any new regulations to the Officelegislatures of the Federal Register (OFR) until a new agency head reviews and approvesState of Texas or the regulation.  Regulations already submittedState of Oklahoma would amend applicable state laws relating to the OFR but not yet published in the Federal Register must be withdrawn, and regulations already published in the Federal Register but not yet in effect must have their effective date postponed for 60 days.  “Guidance documents,”us or agency policies and interpretations of statutory or regulatory issues, are also subject to the regulatory freeze.  The memorandum identifies regulations subject to statutory or judicial deadlines, and regulations that “affect critical health, safety, financial or national security matters,” as determined by the Office of Management and Budget Director as exceptions.  It is not clear, though, whether the announced freeze on federal regulations applies, and certain “independent regulatory agency,” such as the CFPB, the OCC, the FRB, the FDIC, and the SEC may be excluded from that moratorium. 

our Subsidiary Banks.

There are several financial regulatory reform bills pending in the U.S. Congress.  Two of the most prominent are the Financial CHOICE Act (H.R. 10) which passed the House of Representatives in June 2017 and the Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) which passed the Senate Banking Committee in December 2017. The Senate bill is more narrowly targeted than the Financial CHOICE Act which would repeal numerous provisions of the Dodd-Frank Act (e.g., elimination of CFPB’s supervisory and market-monitoring functions, remove CFPB’s UDAAP authority, promote new investment products and choices with a streamlined application process), but they have much in common. While S. 2155 does not really roll back Dodd-Frank, it does include similar versions of fifteen CHOICE Act provisions. Most significantly, both bills include a type of regulatory off-ramp. In the CHOICE Act, the ramp comes in the form of a capital election. It provides regulatory relief to all banks that choose to maintain a higher equity/capital ratio, thus improving their ability to absorb losses and reducing the likelihood of taxpayer bailouts. Banks that make such an election would be exempt from, among other regulations, any federal law, rule, or regulation addressing capital or liquidity requirements, and any of the “heightened prudential standards” implemented by section 165 of Dodd–Frank. The off-ramp offered in S. 2155 is more limited. It provides relief from risk-weighted capital requirements for only some banks. Specifically, the Senate ramp is open only to what federal regulators typically view as community banks: those with total assets of less than $10 billion. The Senate bill also authorizes federal regulators to disqualify banks for this regulatory relief—even those that meet the new leverage ratio. However, they can be blocked by regulators from taking the off-ramp by their risk profile (e.g., off-balance-sheet exposures, trading assets and liabilities, total notional derivatives exposure, and “such other factors as the appropriate Federal banking agencies determine appropriate”).

Item 1A. Risk Factors

Risk Factors

An investment in the Company’s common stock involves risks. The following is a description of the material risks and uncertainties that the Company believes affect its business and an investment in its common stock. If any of the risks described below were to occur, our financial condition, results of operations and cash flows could be materially and adversely affected. If this were to happen, the value of the common stock could decline significantly and all or part of an investment could be lost.

Risks Related to Our Business

Our allowance for probable loan losses may be insufficient.

The determination of an appropriate level of loan loss allowance is an inherently difficult process and is based on numerous assumptions.  This allowance represents management’s best estimate of probable losses that may exist within our existing loan portfolio. The determination of the appropriate level of the allowance for probable loan losses inherently involves a high degree of subjectivity and requires management to make significant estimates and assumptions regarding current credit risks and future trends, all of which may undergo material changes. In addition, if future charge-offs exceed the allowance for probable loan losses, we may need to increase the allowance for probable loan losses. Any increases in the allowance for probable loan losses will result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations.

Our adoption of ASU 2016-13, as amended, on January 1, 2020 impacted our methodology for estimating the allowance for credit losses.  Adopting the CECL methodology pursuant to ASU 2016-03 increased our allowance for probable loan losses and resulted in a one-time cumulative-effect adjustment to retained earnings upon adoption.  For additional information on the CECL methodology, see “Notes to Consolidated Financial Statements – (4) Allowance for Credit Losses” in our 2023 Annual Report to Shareholders, which is filed as Exhibit 13 hereto.

If real estate values in our target markets decline, the loan portfolio would be impaired.

A significant portion of our loan portfolio consists of loans secured by real estate located in the markets we serve.  An adverse change in the economy affecting real estate values generally or in our target markets could significantly impair the value of collateral underlying certain of our loans and our ability to sell the collateral at a profit or at all upon foreclosure.

We operate in a highly competitive industry and market area.

We face substantial competition from a variety of different competitors in our market areas, many of which are larger and may have more financial resources. These competitors include national, regional, and community banks within the various markets we serve. We also face competition from many other types of financial institutions, including credit

External funding which we rely on, in part, to provide liquidity may not be available to us on favorable terms or at all.

Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. We rely on deposits, repurchase agreements, advances from the Federal Home Loan Bank (FHLB) of Dallas, the FHLB of Topeka and other borrowings to meet our liquidity demands. If we were unable to access any of these funding sources when needed, we might be unable to meet customers’ needs, which could adversely impact our financial condition, results of operations, cash flows and liquidity, and level of regulatory-qualifying capital. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry.

Our earnings are subject to interest rate risk.

Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions such as inflation and policies of variousunemployment rates, market forces like geopolitical tensions and investor sentiment, and policy decisions made by the Federal Reserve and other governmental and regulatory agencies and, in particular, the FRB.agencies.  Changes in monetary policy, interest rates, the yield curve, or market riskmarket-risk spreads, a prolonged inverted yield curve or instability in domestic or foreign financial markets could negatively influence the interest we receive on loans and securities, as well as the amount of interest we pay on deposits and borrowings. Since March 2022, the Federal Reserve has increased interest rates a total of eleven times, with the last hike occurring in July 2023 when target interest rates reached their current range of 5.25% to 5.50%, with a benchmark rate at about 5.4%, the highest level in more than two decades.  Although the Federal Reserve has held rates steady since then and indicated that rate reductions would occur sometime in 2024, the timing and extent of those rate cuts are uncertain.  Volatility in interest rates may impact our net interest income and the valuation of our assets and liabilities.  If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Any substantial, unexpected, or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.

We are subject to or may become subject to extensive government regulation and supervision.

Our operations are subject to extensive regulation by federal, state, and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. These regulations affect our lending practices, capital structure, investment practices, and dividend policy, data and privacy protection policies, and growth, among other things. The statutory and regulatory framework under which we operate has changed substantially asover the result of the enactment of the Dodd-Frank Act.years, and will likely continue to do so.  These changes and other changes to statutes and regulations, including changes in the interpretation or implementation of statutes, regulations, or policies, could affect our operations in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products. Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on our business, financial condition, and results of operations.

Our potential future acquisitions and branch expansion could be adversely affected by a number of factors.

Acquisitions of other financial institutions and branch expansion have been a key element of our growth in the past. There are a number of factors that may impact our ability to continue to grow through acquisition transactions, including strong competition from other financial institutions who are active or potential acquirers of financial institutions in our existing or future markets.  Acquisitions of other financial institutions and new branches must be approved by bank regulators and such approvals are dependent on many factors, including the results of regulatory examinations and CRA ratings.

We rely heavily on our chief executive officer.

We have experienced substantial growth in assets and deposits, particularly since Dennis E. Nixon became our President in 1979. We do not have an employment agreement with Mr. Nixon and the loss of his services could have a material adverse effect on our business and prospects.

Our information systems may experience an interruption or breach in security.

We rely heavily on communications and information systems to conduct our business. Our products and services involve the gathering, storage, and transition of sensitive information regarding our customers and their accounts. While we conduct our own data processing, we are reliant on certain external vendors to provide products and services necessary to maintain our day to dayday-to-day operations. As a financial institution we are also subject to and examined for compliance with an array of data protection laws, regulations, and guidance, as well as our own internal privacy and information security policies and programs. If our information systems or infrastructure experience a significant disruption or breach, it could lead to unauthorized access to personal or confidential information of our customers in our possession and unauthorized access to our proprietary information, methodologies, and business secrets. Any failure, interruption, or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, and other systems. In addition, if our partners, vendors, or other market participants experience a disruption or breach, it could lead to unauthorized transactions on our or our customer accounts, or unauthorized access to personal or confidential information maintained by those entities. The occurrence of any failures, interruptions, or security breaches of these information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

Additional capital or funding to increase liquidity levels may not be available when needed or at all.

Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside our control, and our financial performance. We have historically had access to a number of alternative sources of liquidity, but if there is an increase in volatility in the credit and liquidity markets, similar to 2008, there is no assurance that we will be able to obtain such liquidity on terms that are favorable to us, or at all. If we were unable to access any of these funding sources when needed, we might be unable to meet customers’ needs, which could adversely impact our financial condition, results of operations, cash flows and liquidity, and level of regulatory-qualifying capital.

Our holding company relies on dividends from our Subsidiary Banks for most of our revenue.

Our holding company receives substantially all of our revenue from dividends from our Subsidiary Banks.  These dividends are the principal source of funds to pay dividends on our common stock to shareholders of our holding company, as well as interest and principal on our holding company’s debt. Various federal and/or state laws and regulations limit the amount of dividends that our Subsidiary Banks may pay to our holding company. Our Subsidiary Banks’ ability to pay dividends to us is subject to, among other thing, their earnings, financial condition and need for funds, as well as federal and state governmental policies and regulations applicable to our holding company and Subsidiary Banks which limit the amount that may be paid as dividends without prior regulatory approval, including a statutory requirement that our holding company serve as a source of financial strength for our Subsidiary Banks.  Although our holding company has historically declared semi-annual cash dividends on our common stock, we are not required to do so and may reduce or cease to pay common stock dividends in the future. If we reduce or cease to pay common stock dividends, the market price of our common stock could be adversely affected.

Severe weather, natural disasters, pandemics, acts of war or terrorism and other external events could significantly impact our business.

Severe weather, natural disasters, pandemics, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. These events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and cause us to incur additional expenses. Although we have established disaster

recovery policies and procedures, a severe weather event, natural disasterany such event(s) in, near, or other external event in or nearaffecting the markets we serve could have a material adverse effect on our business.

circumstances. Even if these assumptions are adequate, the tools or models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. Any such failure in our analytical or forecasting tools or models could have a material adverse effect on our business, financial condition, and results of operations.

We are subject to claims and litigation pertaining to intellectual property.

Banking and other financial services companies, including us and our Subsidiary Banks, rely on technology companies to provide information technology products and services necessary to support our day‑to‑dayday-to-day operations. Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of

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The Dodd-Frank Act, the powers of the CFPB, and the FDIC Overdraft Payment Supervisory Guidance may increase the likelihood of lawsuits against financial institutions.

The Dodd‑FrankDodd-Frank Act provides that courts must make preemption determinations on a case‑by‑casecase-by-case basis with the respect to particular state laws and can no longer rely on blanket preemption determinations. Also, the CFPB is authorized to protect consumers from “unfair,” “deceptive” and “abusive” acts and practices. Depending on the future actions of the CFPB, the likelihood of lawsuits against financial institutions related to allegedly “unfair,” “deceptive” and “abusive” acts and practices could increase. Moreover, the costs related to such lawsuits would be significantly increased if the CFPB restricts the use of arbitration and/or class action waivers in consumer banking contracts.

Risks Related to the Company’s Stock

The trading price of our common stock may be volatile.

The trading price of our common stock has fluctuated over time due in part to actual or anticipated variations in our earnings, changes in government regulations, policies and guidance, news reports of trends, concerns and other issues related to the financial services industry, operating and stock performance of our peer companies, new technology used or services offered by traditional and non-traditional competitors, continued low trading volume in our common stock and  the impact of short sellingshort-selling activity in our common stock and reports of trends, concerns and other issues related to the financial services industry.stock.  Moreover, general market price declines or market volatility in the future could adversely affect the trading price of our common stock.

The holders of our junior subordinated debentures have rights that are senior to those of our shareholders.

As of December 31, 2017,2023, we had approximately $160$108 million in junior subordinated debentures outstanding that were purchased by our statutory trusts using the proceeds from the sale of trust preferred securities to third party investors. The junior subordinated debentures are senior to our shares of common stock. Payments of the principal and interest on the trust preferred securities are conditionally guaranteed by us to the extent not paid or made by each trust. We must make payments on the junior subordinated debentures (and the related trust preferred securities) before any dividends can be paid on our common stock. While we have the right to defer interest payments on the junior subordinated debentures at any time no dividends may be paid to holders of our common stock during any such deferral, which could cause the trading price of our stock to decline.

The exercise of warrants in connection with our participation in the CPP could negatively impact the market price for our common stock.

In connection with our sale of Senior Preferred Stock under the Capital Purchase Program, we also issued a warrant to purchase 1,326,238 shares of our common stock, which expires on December 23, 2018.  While we have repurchased all of the Senior Preferred Stock, the warrant remains outstanding and was sold to a third party in 2013.  The dilutive impact of the warrant may have a negative effect on the market price of our common stock.  

Item 1B. Unresolved Staff Comments

N/A

Item 1C. Cybersecurity

Risk Management and Strategy

As a financial institution in today’s digital landscape, we understand that cybersecurity and data protection are of paramount importance to our business, our customers, and our reputation. With the proliferation of online banking and the digitalization of financial services, we recognize that our policies and procedures for safeguarding sensitive customer data must be as sophisticated as the cyber threats we are defending against. Accordingly, cybersecurity is a high-priority component of our overall risk-management system and risk-control infrastructure. We have implemented robust, multi-layer security procedures and defense strategies that aim to proactively mitigate cyber risks, enable our early detection and prevention of security incidents, minimize our vulnerability to attacks, and protect us from both internal and external cybersecurity threats.

Commensurate with the risks we face and the sensitivity of the data and systems we are protecting, our Information Systems Security Program (ISSP) includes layers of administrative and technical safeguards designed to protect the confidentiality and integrity of sensitive information belonging to us and our employees, partners, and