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New words:
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Removed:
accretable, accrual, agreed, aim, assured, bankruptcy, callable, captured, carry, caution, collectability, collected, collective, competition, credited, demonstrated, designated, detail, deteriorating, distribution, divorce, earlier, earliest, economy, emerge, evaluated, external, finance, forecast, foreseeable, goal, GSE, health, impacting, impaired, inclusion, incorrect, installment, intention, job, larger, largest, legacy, main, marketability, modified, nonaccretable, Northwest, occupancy, occurrence, ordinary, outlook, PCI, periodic, person, personal, PPP, project, projection, realizable, receivable, reducing, registration, regression, Relief, replaced, representation, restriction, retail, retained, returned, reversed, reversion, securing, seek, shareholder, shortfall, simplified, soft, statistical, successful, successfully, susceptible, sustained, target, Targeted, TDR, tenant, transition, troubled, uncertain, unconditionally, unearned, unemployment, unfunded, unsecured, version, Vintage, warehouse
Financial report summary
?Risks
- Our business is adversely affected by unfavorable economic, market, and political conditions.
- Interest rates and other economic conditions will impact our results of operations.
- Adverse developments affecting financial institutions or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity.
- A majority of our business is concentrated in Maryland, Delaware and Virginia, a significant amount of which is concentrated in real estate lending, so a decline in the local economy and real estate markets could adversely impact our financial condition and results of operations.
- Our concentrations of CRE loans could subject us to increased regulatory scrutiny and directives, which could force us to preserve or raise capital and/or limit our future commercial lending activities.
- The Bank may experience credit losses in excess of its allowances, which would adversely impact our financial condition and results of operations.
- Our investment securities portfolio is subject to credit risk, market risk and liquidity risk.
- Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations.
- Our future success will depend on our ability to compete effectively in the highly competitive financial services industry.
- Our funding sources may prove insufficient to replace deposits and support our future growth.
- The cost savings that we estimate for mergers and acquisitions may not be realized.
- Combining acquired businesses may be more difficult, costly, or time-consuming than expected, or could result in the loss of customers.
- The loss of key personnel could disrupt our operations and result in reduced earnings.
- Our lending activities subject us to the risk of environmental liabilities.
- Income from mortgage-banking operations is volatile and we may incur losses with respect to our mortgage-banking operations that could negatively affect our earnings.
- We depend on the accuracy and completeness of information about customers and counterparties and our financial condition could be adversely affected if we rely on misleading information.
- Our exposure to operational, technological and organizational risk may adversely affect us.
- Our information systems may experience an interruption or breach in security.
- Our reliance on third party vendors could expose us to additional cyber risk and liability.
- We outsource certain aspects of our data processing to certain third-party providers which may expose us to additional risk.
- We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations.
- Technological changes affect our business, and we may have fewer resources than many competitors to invest in technological improvements.
- Climate change manifesting as physical or transition risks could adversely affect our operations, businesses and customers.
- Risks Relating to the Regulation of our Industry
- We operate in a highly regulated environment, which could restrain our growth and profitability.
- Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings.
- Our FDIC deposit insurance premiums and assessments may increase.
- We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
- We are subject to evolving and extensive regulations and requirements. Our failure to adhere to these requirements or the failure or circumvention of our controls and procedures could seriously harm our business.
- We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statues and regulations.
- Our common stock is not insured by any governmental entity.
- Our ability to pay dividends is limited by law and contract.
- Our subordinated debentures contain restrictions on our ability to declare and pay dividends on or repurchase our common stock.
- Future sales of our common stock or other securities may dilute the value and adversely affect the market price of our common stock.
- Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.
- We may issue debt and equity securities that are senior to the common stock as to distributions and in liquidation, which could negatively affect the value of the common stock.
Management Discussion
- The Company reported net income for the twelve months ended December 31, 2023 of $11.2 million or diluted earnings per share of $0.42 compared to net income of $31.2 million or diluted earnings per share of $1.57 for the twelve months ended December 31, 2022. The Company’s return on average assets, return on average common equity, and return on average tangible common equity were 0.24%, 2.54%, and 7.74% for the twelve months ended December 31, 2023 compared to 0.90%, 8.76%, and 11.96% for the twelve months ended December 31, 2022. For additional details, see “Reconciliation of Non-GAAP Measures (Unaudited).
- The decrease in net income in 2023 compared to 2022 was primarily due to merger-related expenses and increased provision for credit losses. These decreases to pretax earnings were partially offset by increased net interest income from an increased balance sheet as a result of the merger. The increase in noninterest income was principally due to the bargain purchase gain recognized in the third quarter of 2023 of $8.8 million.
- As shown in the table below, tax-equivalent net interest income increased $34.1 million to $135.6 million for 2023 compared to $101.5 million for 2022. The increase in tax-equivalent net interest income was primarily due to an increase in total interest income of $100.2 million, or 88.0%, which included an increase in interest and fees on loans of $95.2 million, or 96.1%. The increase in interest and fees on loans was primarily due to the increase in the average balance of loans of $1.3 billion, or 58.7%, and an increase in net accretion income of $7.5 million due to the merger.