Orrstown Financial Services (ORRF) risk factors, FY2024 10-K

Risks Related to Credit

1. 01Difficult and volatile economic and market conditions in the U.S. and globally as well as changes in fiscal, monetary, trade and regulatory policies can adversely affect the financial services industry and may materially and adversely affect us
2. 02If our allowance for credit losses is not sufficient to cover actual losses, our earnings would decrease
3. 03Commercial real estate lending may expose us to a greater risk of loss and impact our earnings and profitability
4. 04Our loan portfolio has a significant concentration in commercial real estate loans
5. 05The credit risk related to commercial and industrial loans is greater than the risk related to residential loans
6. 06Environmental liability associated with our lending activities could result in losses

Risks Related to Interest Rates and Investments

1. 07Changes in interest rates could adversely impact our financial condition and results of operations
2. 08Our securities portfolio performance in difficult market conditions could have adverse effects on our results of operations
3. 09Potential 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

Risks Related to Competition and to Our Business Strategy

1. 10Because 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
2. 11We face significant competition in the financial services industry
3. 12Our business may be adversely affected if we fail to adapt our products and services to technological advances, evolving industry standards and consumer preferences
4. 13Development of new products, services and technologies may impose additional costs on us and may expose us to increased operational risk
5. 14We may incur significant losses as a result of ineffective risk management processes and strategies
6. 15We face continuing and growing security risks to our information base, including the information we maintain relating to our clients
7. 16We may not be able to successfully implement future information technology system enhancements, which could adversely affect our business operations and profitability
8. 17We may become subject to claims and litigation pertaining to fiduciary responsibility
9. 18Climate change may adversely affect our business and results of operations

Risks Related to Mergers and Acquisitions

1. 19Our business may be negatively impacted by risk associated with acquisitions
2. 20Goodwill generated in acquisitions may negatively affect our financial condition
3. 21The market price of our common stock after acquisitions may be affected by factors different from those affecting our shares currently
4. 22We may continue to incur substantial costs related to the Codorus Valley Merger and the integration of Codorus Valley, and these costs may be greater than anticipated due to unexpected events
5. 23We may fail to realize the anticipated benefits of the Codorus Valley Merger
6. 24Our future results following our recently completed Codorus Valley Merger may suffer if the combined company does not effectively manage its expanded operations

Risks Related to Regulatory Compliance and Legal Matters

1. 25We 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
2. 26Altering our overdraft fee practices could materially adversely affect our fee income and results of operations
3. 27Legislative, regulatory and legal developments involving income and other taxes could materially adversely affect our results of operations and cash flows
4. 28We 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
5. 29Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition
6. 30We 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
7. 31The FRB may require us to commit capital resources to support the Bank
8. 32We 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
9. 33We may become subject to enforcement actions even though noncompliance was inadvertent or unintentional
10. 34We face significant legal risks, both from regulatory investigations and proceedings and from private actions brought against us

Risks Related to Liquidity

1. 35If we are unable to access the capital markets, have prolonged net deposit outflows, or our borrowing costs increase, our liquidity and competitive position will be negatively affected
2. 36Loss of deposits or a change in deposit mix could increase our cost of funding
3. 37We must maintain sufficient funds to respond to the needs of depositors and borrowers. To manage liquidity, we draw upon a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments
4. 38The Parent Company is a holding company dependent on liquidity through payments, including dividends, from its bank subsidiary, which is subject to restrictions
5. 39Concerns about the soundness of other financial institutions could adversely affect us

Risks Related to Owning Our Stock

1. 40If 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
2. 41The market price of our common stock is subject to volatility
3. 42A reduction in our credit rating could adversely affect our access to capital and could increase our cost of funds
4. 43We may not be able to attract and retain skilled people
5. 44We could be adversely affected by a failure in our internal controls
6. 45Negative public opinion could damage our reputation and adversely affect our earnings
7. 46Acts of terrorism, natural disasters, global climate change, future pandemics, wars and global conflicts may have a negative impact on our business and operations
8. 47Anti-takeover provisions could negatively impact our shareholders