ITEM 1A RISK FACTORS There have been no In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factors represent material changes updates and additions to the risk factors previously disclosed in the Companys Annual Report on Form 10-K 10- K for the year ended December 31, 2023 2023, as filed with the SEC on March 22, 2024. Additional risks not presently known, or that are currently deemed immaterial, may also adversely affect the Company's business, financial condition or results of operations. The Merger with TowneBank may distract management of the Company from its other responsibilities. The Merger could cause management of the Company to focus its time and energies on matters related to the Merger that otherwise would be directed to the Companys business and operations. Any such distraction on the part of management of the Company, if significant, could affect its ability to service existing business and develop new business and may adversely affect the business and earnings of the Company. Termination of the Agreement with TowneBank could negatively impact the Company. Each of the Companys and TowneBanks obligation to consummate the Merger remains subject to a number of conditions which must be fulfilled to consummate the Merger, and there can be no assurance that all of the conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected timeframe, or at all. Any delay in completing the Merger could cause the Company not to realize some or all of the benefits that the Company expects to achieve if the Merger is successfully completed within its expected timeframe. If the Agreement is terminated, the Companys business may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger. Additionally, if the Agreement is terminated, the market price of the Companys common stock could decline to the extent that the current market prices reflect a market assumption that the Merger will be completed. TowneBank and/or the Company may be subject to litigation related to any failure to complete the Merger or to proceedings commenced against either company to perform obligations under the Agreement. If the Agreement is terminated under certain circumstances, including circumstances involving a change in recommendation by the Companys board of directors, the Company may be required to pay to TowneBank a termination fee of $4.8 million. In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Agreement. If the Merger is not completed, the Company would have to recognize these expenses and would have committed substantial time and resources by management, without the Companys shareholders receiving cash proceeds from the Merger. In addition, failure to consummate the Merger also may result in negative reactions from the financial markets or from the Companys customers, vendors and employees. The Agreement with TowneBank limits the ability of the Company to pursue alternatives to the Merger. The Agreement contains customary no-shop provisions that, subject to limited exceptions, limit the ability of the Company to initiate, solicit, endorse, encourage or knowingly facilitate any inquiries or proposals with respect to any competing third-party proposals to acquire all or a significant part of the Company. In addition, under certain circumstances, if the Agreement is terminated and the Company consummates a similar transaction with a party other than TowneBank, the Company must pay to TowneBank a fee of $4.8 million. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing the acquisition even if it were prepared to pay consideration, with respect to the Company or its shareholders, with a higher per share market price than that proposed in the Merger. 54 The Company will be subject to business uncertainties and contractual restrictions while the Merger is pending. Uncertainty about the effects of the Merger on employees and customers may have an adverse effect on the Company. These uncertainties may impair the Companys ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others that deal with the Company to seek to change existing business relationships with the Company. Retention of certain employees by the Company may be challenging while the Merger is pending, as certain employees may experience uncertainty about their future roles with the Company or the combined company following the Merger. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the Company or the combined company following the Merger, the Companys business could be harmed. In addition, the Company has agreed to operate its business in the ordinary course prior to the closing of the Merger and from taking certain specified actions without the consent of TowneBank. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Merger. Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated, or cannot be met. Before the Merger may be completed, various approvals, consents and non-objections must be obtained from bank regulatory authorities, including the FDIC. In determining whether to grant these approvals, the regulators consider a variety of factors, including the regulatory standing of each party. T hese approvals could be delayed or not obtained at all, including due to an adverse development in either partys regulatory standing or in any other factors considered by regulators in granting such approvals governmental, political or community group inquiries, investigations or opposition or changes in legislation or the political environment generally. The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined companys business or require changes to the terms of the transactions contemplated by the Agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the Agreement or imposing additional material costs on the Company. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Merger. The completion of the Merger is conditioned on the receipt of the requisite regulatory approvals without the imposition of any materially burdensome regulatory condition and the expiration of all statutory waiting periods. Additionally, the completion of the Merger is conditioned on the absence of any order, decree or injunction by any court or governmental entity of competent jurisdiction that would enjoin or prohibit the completion of the Merger. If the consummation of the Merger is delayed, including by a delay in receipt of necessary regulatory approvals, the Companys business, financial condition and results of operations may be adversely affected. Shareholder litigation could prevent or delay the completion of the Merger or otherwise negatively impact the Companys business, financial condition and results of operations. Shareholders of the Company and/or TowneBank may file lawsuits against the Company, TowneBank and/or the directors and officers of either company in connection with the Merger. One of the conditions to the closing is that no order, decree or injunction by any court or governmental entity of competent jurisdiction that would enjoin or prohibit the completion of the Merger be in effect. If any plaintiff were successful in obtaining an injunction prohibiting the Company or TowneBank from completing the Merger or any of the other transactions contemplated by the Agreement, then such injunction may delay or prevent the effectiveness of the Merger and could result in significant costs to the Company, including any cost associated with the indemnification of the Companys directors and officers. The Company may incur costs in connection with the defense or settlement of any shareholder lawsuits filed in connection with the Merger. Shareholder lawsuits may divert management attention from management of the Companys business or operations. Such litigation could have an adverse effect on the Companys business, financial condition and results of operations and could prevent or delay the completion of the Merger.