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New words:
abate, absorb, ACL, adherence, apprised, Army, artificial, attrition, auto, Breast, Cancer, cessation, Chair, chaired, Chase, children, CISO, CISSP, clarified, Codification, CODM, consummation, correlation, Counsel, Craig, culmination, curtailment, customary, CVLY, Database, deceleration, dedesignated, delegated, DIF, disallowed, elapsed, ERG, explanation, explanatory, FDM, fractional, fundraiser, gave, graduate, granular, guarantor, inaugural, joining, jointly, JPMorgan, jumbo, Kauffman, landscape, layer, lessor, LGBTQ, LGD, lieu, lifetime, LIHTC, maker, manifesting, manipulation, merge, merged, metropolitan, morale, multitude, navigate, nondeductible, nonprepayable, nontaxable, paragraph, PCD, PD, pendency, PeoplesBank, petroleum, pharmaceutical, pilot, policymaking, printing, proceeding, recharacterization, recharacterized, reconciling, redeploy, reliant, repair, Republic, Resource, retrospective, retrospectively, Salvation, Science, scientific, sphere, statistical, steady, studied, sunset, surviving, synthetic, TEFRA, tendency, thoughtful, title, treating, unconditionally, undrawn, Unencumbered, unforeseen, Unified, unintended, upper, Walk, women
Removed:
abetted, accretable, acted, Aid, aided, al, alleged, amend, asserted, August, automobile, backed, began, bifurcate, Carol, carryover, Caution, Circuit, claim, Coughlin, deadline, debtor, Declaration, decreasing, deficiency, demonstrated, deny, detected, directional, drove, emergency, enjoin, equitable, facility, feet, finalized, finalizing, formed, granting, guaranty, half, Hamilton, hired, improved, improving, insignificance, interruption, learned, lender, medical, Memorandum, Mercersburg, merit, momentum, nationwide, nonaccretable, occasionally, OREO, Parshall, Paul, Plaintiff, purported, reached, reclassify, referral, rescission, rescissory, resilience, revised, round, ruling, Securitized, show, shutdown, situational, split, square, submit, thereunder, today, unallocated, unprecedented, unspecified, usage, violated, Wheatland
Financial report summary
?Risks
- If our allowance for credit losses is not sufficient to cover actual losses, our earnings would decrease.
- Commercial real estate lending may expose us to a greater risk of loss and impact our earnings and profitability.
- Our loan portfolio has a significant concentration in commercial real estate loans.
- The credit risk related to commercial and industrial loans is greater than the risk related to residential loans.
- Environmental liability associated with our lending activities could result in losses.
- Changes in interest rates could adversely impact our financial condition and results of operations.
- Our securities portfolio performance in difficult market conditions could have adverse effects on our results of operations.
- Potential downgrades of U.S. government securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition.
- Difficult economic and market conditions can adversely affect the financial services industry and may materially and adversely affect us.
- Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.
- Because our business is concentrated in south central Pennsylvania, the greater Baltimore region, and Washington County, Maryland, our financial performance could be materially adversely affected by economic conditions and real estate values in these market areas.
- Inflationary pressures and rising prices may affect our results of operations and financial condition.
- We face significant competition in the financial services industry.
- Our business may be adversely affected if we fail to adapt our products and services to technological advances, evolving industry standards and consumer preferences.
- Development of new products, services and technologies may impose additional costs on us and may expose us to increased operational risk.
- We may incur significant losses as a result of ineffective risk management processes and strategies.
- We face continuing and growing security risks to our information base, including the information we maintain relating to our clients.
- We may not be able to successfully implement future information technology system enhancements, which could adversely affect our business operations and profitability.
- We may become subject to claims and litigation pertaining to fiduciary responsibility.
- Climate change may adversely affect our business and results of operations.
- Our business may be negatively impacted by risk associated with acquisitions.
- The market price of our common stock after acquisitions may be affected by factors different from those affecting our shares currently.
- We may continue to incur substantial costs related to the Merger and integration of CVLY, and these costs may be greater than anticipated due to unexpected events.
- Failure to complete the Merger could negatively impact our business and results of operations.
- We are subject to business uncertainties and contractual restrictions while the Merger is pending.
- Combining with CVLY may be more difficult, costly or time-consuming than expected, and we may fail to realize the anticipated benefits of the Merger.
- Our future results following the Merger may suffer if the combined company does not effectively manage its expanded operations.
- We operate in a highly regulated industry, and laws and regulations, or changes in them, could limit or restrict our activities and could have a material adverse effect on our operations.
- Altering our overdraft fee practices could materially adversely affect our fee income and results of operations.
- Increases in FDIC insurance premiums may have a material adverse effect on our results of operations.
- Legislative, regulatory and legal developments involving income and other taxes could materially adversely affect our results of operations and cash flows.
- We are required to use judgment in applying accounting policies and different estimates and assumptions in the application of these policies could result in a decrease in capital and/or other material changes to the reports of financial condition and results of operations.
- Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.
- We are subject to stringent capital requirements which may adversely impact return on equity, require additional capital raises, or limit the ability to pay dividends or repurchase shares.
- The FRB may require us to commit capital resources to support the Bank.
- We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
- We may become subject to enforcement actions even though noncompliance was inadvertent or unintentional.
- We face significant legal risks, both from regulatory investigations and proceedings and from private actions brought against us.
- We are subject to liquidity risk, which could negatively affect our funding levels.
- Loss of deposits or a change in deposit mix could increase our cost of funding.
- Wholesale funding sources may prove insufficient to replace deposits at maturity and support our operations and future growth.
- The Parent Company is a holding company dependent on liquidity through payments, including dividends, from its bank subsidiary, which is subject to restrictions.
- Concerns about the soundness of other financial institutions could adversely affect us.
- If we want, or are compelled, to raise additional capital in the future, that capital may not be available when it is needed or on terms favorable to current shareholders.
- The market price of our common stock is subject to volatility.
- A reduction in our credit rating could adversely affect our access to capital and could increase our cost of funds.
- We may not be able to attract and retain skilled people.
- Negative public opinion could damage our reputation and adversely affect our earnings.
- Acts of terrorism, natural disasters, global climate change, pandemics, wars and global conflicts may have a negative impact on our business and operations.
- Anti-takeover provisions could negatively impact our shareholders.
Management Discussion
- Net interest income increased by $5.3 million, or 5%, from $99.6 million in 2022 to $104.9 million in 2023. Similarly, net interest income on a taxable-equivalent basis for 2023 increased by $5.3 million, or 5%, compared with 2022. The Company’s net interest spread decreased by 31 basis points from 3.70% in 2022 to 3.39% in 2023 primarily due to the increase in the cost of funds.
- Interest income on loans increased by $33.1 million, from $93.5 million in 2022 to $126.6 million in 2023, and interest income on investment securities increased by $7.1 million, from $14.4 million in 2022 to $21.5 million in 2023. Total interest expense increased by $36.0 million from $9.0 million in 2022 to $45.0 million in 2023. Interest expense on deposits increased by $31.2 million from $6.3 million in 2022 to $37.5 million in 2023, and interest expense on borrowed funds increased by $4.8 million to $2.6 million in 2022 to $7.4 million in 2023.
- Taxable-equivalent net interest margin decreased by one basis point to 3.80% in 2023 from 3.81% in 2022. The taxable-equivalent yield on interest-earning assets increased by 125 basis points to 5.40% in 2023 from 4.15% in 2022, reflecting both the deployment of cash into higher yielding loans and investment securities and the impact of elevated interest rates on these interest-earning assets. The increase in yield was partially offset by an increase of 157 basis points in the cost of interest-bearing liabilities from 0.45% in 2022 to 2.02% in 2023 due to increased funding costs from higher market interest rates, competitive pressures and an increase in higher cost borrowings.