Burke & Herbert Financial Services (BHRB) risk factors, FY2024 10-K

Risk Related to Our Lending Activities

1. 01We may not be able to measure and limit our credit risk adequately, which could adversely affect our profitability
2. 02Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate, which could materially and adversely affect our business, financial condition, results of operations, cash flows, and/or future prospects
3. 03If our non-performing assets increase, our earnings will be adversely affected
4. 04Our focus on lending to small to medium-sized businesses may increase our credit risk
5. 05Adverse changes in the real estate market or economy in our market area could lead to higher levels of problem loans and charge-offs, adversely affecting our earnings and financial condition
6. 06We are exposed to higher credit risk by commercial real estate, commercial and industrial, and acquisition, construction & development-based lending as well as large lending relationships
7. 07We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with foreclosure and the ownership of real property
8. 08A significant percentage of our loans are attributable to a relatively small number of borrowers
9. 09The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property and other real estate owned may not accurately reflect the net value of the asset

Risk Related to Funding and Liquidity

1. 10Liquidity risk could impair our ability to fund operations and meet our obligations as they become due
2. 11Loss of deposits or a change in deposit mix could increase our cost of funding
3. 12Limits on our ability to use brokered deposits as part of our funding strategy may affect our profitability

Risks Related to Our Business, Industry and Markets

1. 13We operate in a highly competitive market and face increasing competition from a variety of traditional and new financial services providers
2. 14Our financial performance may be negatively affected if we are unable to execute our strategy
3. 15Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability
4. 16We follow a relationship-based operating model, and our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially adversely affect our performance
5. 17We are dependent on our management team and key employees
6. 18Changes in interest rates and monetary policy may negatively affect our earnings, income, and financial condition, as well as the value of our assets
7. 19We are subject to physical and financial risks associated with climate change and other weather and natural disaster impacts

Risks Related to Our Operations

1. 20We face risks related to our operational, technological, and organizational infrastructure
2. 21System failure or breaches of our network security, including as a result of cyber-attacks or data security breaches, could subject us to increased operating costs, as well as litigation and other liabilities
3. 22We rely on third parties to provide key components of our business infrastructure, and a failure of these parties to perform for any reason could disrupt our operations
4. 23We could be subject to losses, regulatory action, or reputational harm due to fraudulent and negligent acts on the part of loan applicants, our employees, and vendors
5. 24We are subject to claims and litigation pertaining to intellectual property
6. 25We may be adversely affected by the lack of soundness of other financial institutions or other market participants
7. 26Our risk management framework may not be effective in mitigating risks and/or losses to us
8. 27Demand for the Company’s services is influenced by general economic and consumer trends beyond the Company’s control, including disruptions in the financial services industry, in general, and events such as global pandemics and geopolitical conflict
9. 28share prices and on the availability of credit for financial institutions and corporations, while also driving up interest rates, further complicating borrowing and lending activities
10. 29Our results may suffer if we do not effectively manage our expanded operations, including complying with any enhanced regulatory requirements

Risks Related to our Regulatory Environment

1. 30Our industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a materially adverse effect on our operations
2. 31We are subject to stringent capital requirements, which could have an adverse effect on our operations
3. 32We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statutes and regulations
4. 33We are subject to laws regarding the privacy, information security, and protection of personal information and any violation of these laws or other incident involving personal, confidential, or proprietary information of individuals could damage our reputation and otherwise adversely affect our business
5. 34Our use of third-party vendors and our other ongoing third-party business relationships are subject to increasing regulatory requirements and attention
6. 35Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability
7. 36Evolving expectations from customers, regulators, investors, and other stakeholders with respect to Environmental, Social, and Governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks

Risks Related to an Investment in Our Common Stock

1. 37We currently qualify as an “emerging growth company”, and the reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companies may make our Common Stock less attractive to investors
2. 38If we fail to design, implement and maintain effective internal control over financial reporting or remediate any future material weakness in our internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud
3. 39We may issue additional equity securities, or engage in other transactions, which could affect the priority of our Common Stock, which may adversely affect the market price of our Common Stock
4. 40An investment in our Common Stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment
5. 41Holders of our junior subordinated debentures and preferred stock have rights that are senior to those of our common stockholders