What changed in this filing

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Item 1A. Risk Factors

2022-02-22 compared with 2021-03-05 · 27 added, 27 removed, 84 unchanged (39% of the section changed)

3 unchanged sentences

Some of the Corporation’s significant risks and uncertainties are discussed below.

Coronavirus Outbreak – In December 2019, a coronavirus (COVID-19) was reported in China, and, in March 2020, the World Health Organization declared it a pandemic.

Since first being reported in China, the coronavirus has spread to additional countries including the United States.

In response, many state and local governments, including the Commonwealth of Pennsylvania, have instituted emergency restrictions that have substantially limited the operation of non-essential businesses and the activities of individuals.

It has been widely reported that these restrictions have resulted in significant adverse effects for many different types of businesses, particularly those in the travel, hospitality and food and beverage industries, among many others, and has resulted in a significant number of layoffs and furloughs of employees nationwide and in the regions in which the Corporation operates.

The ultimate effect of COVID-19 on the local or broader economy is not known nor is the ultimate length of the restrictions described and any accompanying effects.

Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which may negatively affect interest income and, therefore, earnings.

Coronavirus Outbreak – The COVID-19 pandemic has caused significant disruptions in the international and U.S.

economies as well as the Corporation’s local economy.

The ultimate effect of COVID-19 on the local or broader economy is not known.

Moreover, the Federal Reserve took action to lower the Federal Funds rate in 2020 and maintained a rate of 0% to 0.25% throughout 2021 but has recently signaled its intent to raise the rate in an effort to contain inflation.

Fluctuations in interest rates triggered by the Federal Reserve’s actions may negatively affect interest income and, therefore, earnings.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus outbreak, and there is no guarantee that the Corporation’s efforts to address the adverse impacts of the coronavirus will be effective.

The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others.

The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of new variants of the coronavirus and actions taken to contain the coronavirus or its impact.

The effect of COVID-19 and related events, including those described above and those not yet known or knowable, could have a negative effect on the Corporation’s business prospects, financial condition and results of operations, as a result of quarantines;

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deterioration in the credit quality of borrowers or the inability of borrowers to satisfy their obligations (and any related forbearances or restructurings that may be implemented);

changes in the value of

collateral securing outstanding loans;

changes in the value of collateral securing outstanding loans;

changes in the value of the investment securities portfolio;

effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating the Corporation’s financial reporting and internal controls;

declines in the demand for loans and other banking services and products;

declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential” by governments;

branch or office closures and business interruptions;

and efforts to integrate the businesses of the Corporation and Covenant.

and declines in the demand for loans and other banking services and products.

Risk Related to Acquisition Activity – As described in Item 1, the Corporation has completed two acquisitions of banking companies over the past two years (Covenant and Monument) and expanded its geographic footprint to Southeastern and Southcentral Pennsylvania.

Further, management intends to continue to pursue additional acquisition opportunities.

Potential acquisitions may disrupt the Corporation’s business and dilute shareholder value.

Potential acquisitions may disrupt the

Corporation’s business and dilute shareholder value.

We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial service companies.

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The Corporation’s assets are predominantly long-term, fixed-rate loans and debt securities.

Funding for these assets comes principally from shorter-term deposits and borrowed funds.

Funding for these assets comes principally from deposits with no stated maturities, term deposits and borrowed funds.

Accordingly, there is an inherent risk of lower future earnings or decline in fair value of the Corporation’s financial instruments when interest rates change.

Significant fluctuations in interest rates could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

Limited Geographic Diversification - The Corporation grants commercial, residential and personal loans to customers primarily in the Corporation’s legacy markets of the northern tier/north central regions of Pennsylvania and southern tier of New York and in Southeastern and southcentral Pennsylvania.

Limited Geographic Diversification - The Corporation grants commercial, residential and personal loans to customers primarily in the Corporation’s legacy markets of the Northern tier/Northcentral regions of Pennsylvania and Southern tier of New York and in Southeastern and Southcentral Pennsylvania.

Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within these regions.

4 unchanged sentences

Furthermore, developments increasing the nature or level of competition could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

Inability to Attract and Develop Qualified Personnel – The Corporation believes that our future success will depend in large part on our ability to attract, develop and retain highly qualified management, lending, financial, technical, marketing, sales, and support personnel.

Competition for qualified personnel is intense and we cannot ensure success in attracting or retaining qualified personnel.

1 unchanged sentence

Our ability to retain key officers and employees may be further impacted by legislation and regulation affecting the financial services industry.

For example, legislation and bank regulatory action that places restrictions on executive compensation at, and the pay practices of, financial institutions may further impact our ability to compete for talent with other industries that are not subject to the same limitations as financial institutions.

that are not subject to the same limitations as financial institutions.

Any inability to attract, develop and retain significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.

Breach of Information Security and Technology Dependence - The Corporation relies on software, communication, and information exchange on a variety of computing platforms and networks and over the Internet.

Despite numerous safeguards, the Corporation cannot be certain that its systems are entirely free from vulnerability to attack or other technological difficulties or failures.

The Corporation relies on the services of a variety of vendors to meet its data processing and communication needs.

If information security is breached or other technology difficulties or failures occur, information may be lost or misappropriated, services and operations may be interrupted, and the Corporation could be exposed to claims from customers.

Any of these results could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

Cyber Security Risks and Technology Dependence – In the ordinary course of business, the Corporation collects and stores sensitive data, including proprietary business information and personally identifiable information of our customers and employees in systems and on networks.

In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.

The secure processing, maintenance and use of this information is critical to operations and our business strategy.

The Corporation has invested in accepted technologies, and continually reviews processes and practices that are designed to protect our networks, computers and data from damage or unauthorized access, and maintains an information security risk insurance policy.

On an on-going basis the Corporation assesses its cyber security procedures and controls and performs network penetration tests on at least an annual basis.

All employees receive monthly information security awareness training.

Despite these security measures, the Corporation’s computer systems and infrastructure or those of third parties used by us to compile, process or store such information may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions.

A breach of any kind could compromise systems and the information stored there could be accessed, damaged or disclosed.

A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Corporation’s reputation, which could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

Government Regulation and Monetary Policy - The Corporation and the banking industry are subject to extensive regulation and supervision under federal and state laws and regulations.

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The Corporation owns common stock of the FHLB-Pittsburgh to qualify for membership in the FHLB system and access services from the FHLB-Pittsburgh.

The FHLB-Pittsburgh faces a variety of risks in its operations including interest rate risk, counterparty credit risk,

and adverse changes in its regulatory framework.

The FHLB-Pittsburgh faces a variety of risks in its operations including interest rate risk, counterparty credit risk, and adverse changes in its regulatory framework.

In addition, the 11 Federal Home Loan Banks are jointly liable for the consolidated obligations of the FHLB system.

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In such events, the Corporation’s cost of funds may increase, thereby reducing net interest income, or the Corporation may need to sell a portion of its securities and/or loan portfolio, which, depending upon market conditions, could necessitate realizing a loss.

Securities Markets – The fair value of the Corporation’s available-for-sale debt securities, as well as the revenues the Corporation earns from its Trust and Financial Management and brokerage services, are sensitive to price fluctuations and market events.

Securities Markets – The fair value of the Corporation’s available-for-sale debt securities, as well as the revenues the Corporation earns from its wealth management services, are sensitive to price fluctuations and market events.

Declines in the values of the Corporation’s securities holdings, combined with adverse changes in the expected cash flows from these investments, could result in other-than-temporary impairment charges.

For additional information regarding debt securities, see the “Securities” section of Management’s Discussion and Analysis and Note 7 to the consolidated financial statements.

The Corporation’s Trust and Financial Management revenue is determined, in part, from the value of the underlying investment portfolios.

The Corporation’s trust revenue is determined, in part, from the value of the underlying investment portfolios.

Accordingly, if the values of those investment portfolios decrease, whether due to factors influencing U.S.

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors