Orrstown Financial Services, Inc. (“Orrstown” or the “Company”)
(NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”),
announced earnings for the three months ended September 30, 2023.
Net income totaled $9.0 million for the three months ended
September 30, 2023, compared to $9.8 million for the three months
ended June 30, 2023 and a net loss of $4.8 million for the three
months ended September 30, 2022, which included a restructuring
charge for branch closures and other expense savings initiatives
and a provision for legal settlement totaling $12.8 million, net of
tax. Diluted earnings per share totaled $0.87 for the three months
ended September 30, 2023, compared to $0.94 for the three months
ended June 30, 2023 and diluted loss per share of $0.47 for the
three months ended September 30, 2022.
“We are pleased with our third quarter results
as Orrstown continues to generate strong earnings in a challenging
environment. We remain focused on delivering strong earnings and
building our long-term capital base through prudent balance sheet
growth. While net interest margin compression has continued, the
impact of higher funding costs has been controlled through
disciplined loan and deposit pricing during the nine months ended
September 30, 2023. Deposits continue to grow modestly as a result
of our relationship-based approach. The Bank has diversified
sources of non-interest income, which have allowed us to offset the
impact of a difficult wealth and mortgage market. We believe we are
well-positioned for future growth,” commented Thomas R. Quinn, Jr.,
President and Chief Executive Officer.
DISCUSSION OF RESULTS
Balance Sheet
Loans
Loans held for investment, which includes SBA
PPP loans of $6.2 million at September 30, 2023, increased by $32.4
million from June 30, 2023 to September 30, 2023, or 6% annualized.
Commercial loans, excluding SBA PPP loan forgiveness activity,
increased by $17.7 million, or 4% annualized, from June 30, 2023 to
September 30, 2023. The residential mortgage portfolio increased by
$16.2 million, or 15% annualized, in the three months ended
September 30, 2023 as there has been increased production of
adjustable-rate mortgages, which have been retained in
portfolio.
Investment Securities
Investment securities, which are all
available-for-sale, decreased by $13.4 million to $495.2 million at
September 30, 2023 compared to $508.6 million at June 30, 2023.
During the third quarter of 2023, net purchases totaled $10.0
million, net unrealized losses increased by $14.4 million and
paydowns were $7.8 million. The increase in net unrealized losses
was primarily due to higher market interest rates. The overall
duration of the Company's investment securities portfolio is 4.7
years at September 30, 2023. The Company has sufficient access to
liquidity such that management does not believe it would be
necessary to sell any of its investment securities at a loss to
offset any unexpected deposit outflows. See Appendix B for a
summary of the Bank's investment securities at September 30, 2023,
highlighting their concentrations, credit ratings and credit
enhancement levels.
Deposits
Deposits increased by $23.6 million, totaling
approximately $2.5 billion at both September 30, 2023 and June 30,
2023. In the third quarter of 2023, time deposits increased by
$31.4 million, or 36% annualized, money market deposits rose by
$22.7 million, or 18% annualized, and interest-bearing demand
deposits increased by $14.2 million, or 6% annualized. These
increases were partially offset by decreases in noninterest-bearing
demand deposits of $30.4 million, or 26% annualized, and savings
deposits of $14.3 million, or 29% annualized. The increase in time
deposits was attributable to promotional offerings of up to
18-month terms. The declines in the noninterest-bearing and savings
deposit categories were primarily the result of clients seeking
higher-yielding products, including reciprocal deposits, with the
Bank. At September 30, 2023, deposits that are uninsured and not
collateralized totaled $387.5 million, or 15%, of total deposits
compared to $409.1 million, or 16%, of total deposits at June 30,
2023. The Bank's loan-to-deposit ratio was 89% at both September
30, 2023 and June 30, 2023.
Borrowings
The Bank actively manages its liquidity position
through its various sources of funding to meet the credit needs of
its clients. FHLB advances and other borrowings increased by $20.5
million to $157.2 million at September 30, 2023 compared to $136.7
million at June 30, 2023. The Bank seeks to maintain sufficient
liquidity to ensure client needs can be addressed on a timely
basis. The Bank had available alternative funding sources, such as
the FHLB advances and other wholesale options, of approximately
$1.0 billion at September 30, 2023.
Income Statement
Net Interest Income and Margin
Net interest income was $26.2 million for the
three months ended September 30, 2023 compared to $26.4 million for
the three months ended June 30, 2023. The net interest margin, on a
tax equivalent basis, declined to 3.73% in the third quarter of
2023 from 3.83% in the second quarter of 2023. Net interest margin
decreased primarily because funding costs continued to increase at
a pace faster than assets repriced.
Interest income on loans increased by $1.7
million to $32.9 million for the three months ended September 30,
2023 compared to $31.2 million for the three months ended June 30,
2023. Loan growth and higher interest rates were the primary
drivers of this increase. Interest income on loans for the three
months ended September 30, 2023 included prepayment fee income of
$0.4 million, an increase of $0.2 million from the three months
ended June 30, 2023, which resulted in an increase of two basis
points in net interest margin.
Interest income on investment securities was
$5.5 million for the three months ended September 30, 2023 compared
to $5.4 million in the second quarter of 2023. The investment
portfolio continues to benefit from increasing yields on
adjustable-rate securities.
Interest expense increased by $2.0 million to
$12.5 million for the three months ended September 30, 2023
compared to $10.5 million for the three months ended June 30, 2023
due primarily to increasing deposit and borrowing rates for both
existing and new balances. In addition, average interest-bearing
deposits increased by $47.7 million; whereas, average borrowed
funds decreased by $2.6 million during the three months ended
September 30, 2023.
Provision for Credit Losses
The Company recorded a provision for credit
losses of $0.1 million for the three months ended September 30,
2023 compared to $0.4 million for the three months ended June 30,
2023. The allowance for credit losses decreased by $0.1 million to
$28.3 million at September 30, 2023 compared to $28.4 million at
June 30, 2023. Although there was loan growth of $32.4 million
during the third quarter of 2023, the allowance for credit losses
was impacted by improvements in the macroeconomic conditions within
the forecasted loss rate model. The allowance for credit losses to
total loans was 1.25% at September 30, 2023 compared to 1.27% at
June 30, 2023. Net charge-offs were $0.2 million for the three
months ended September 30, 2023 compared to net charge-offs of $0.4
million for the three months ended June 30, 2023. Special mention
loans decreased by $13.7 million from $45.5 million at June 30,
2023 to $31.8 million at September 30, 2023 due to repayments of
$10.2 million and upgrades of $3.5 million. Classified loans
increased by $7.3 million to $33.6 million at September 30, 2023
from $26.3 at June 30, 2023. The increase in classified loans was
primarily due to downgrades to two commercial loans, within the
owner-occupied and commercial and industrial loan classes, to one
client totaling $6.3 million. The increase in classified loans was
partially offset by repayments within this category. Non-accrual
loans increased by $1.2 million to $22.3 million at September 30,
2023 from $21.1 million at June 30, 2023 primarily due to one loan
in the owner-occupied loan class. Management believes the allowance
for credit losses to be adequate based on current asset quality
metrics and economic conditions.
Management regularly analyzes the commercial
real estate portfolio, which includes the review of occupancy, cash
flows, expenses and expiring leases, as well as the location of the
real estate. At September 30, 2023, the Company had $244.7 million
in loans related to office space, which had a weighted average
loan-to-value ratio of 57% and a weighted average debt coverage
ratio of 1.62x, compared to $236.7 million at June 30, 2023.
Management believes that the office space portfolio is
well-diversified and includes only limited exposure to properties
located in major metro markets (approximately 3% of the total
commercial real estate loan balance as of September 30,
2023).
Noninterest Income
Noninterest income decreased by $1.3 million to
$5.9 million in the three months ended September 30, 2023 compared
to $7.2 million in the three months ended June 30, 2023. Other
income in the three months ended June 30, 2023 includes a gain of
$1.2 million from the sale of the Bank's Path Valley branch.
Mortgage banking income decreased by $0.2
million from income of $0.1 million in the second quarter of 2023
to a loss of $0.1 million in the third quarter of 2023. During the
three months ended September 30, 2023, mortgage interest rates
increased significantly, which resulted in a decline to the fair
value mark of the Bank's held-for-sale loans of $0.4 million
compared to a decrease in the fair value market of $0.1 million
during the three months ended June 30, 2023. Market conditions and
elevated interest rates continued to hinder mortgage production
during the third quarter of 2023. Most mortgage production remains
in adjustable-rate products, which are held in portfolio.
During the third quarter of 2023, the Company
recorded swap fee income of $0.3 million compared to $0.2 million
in the three months ended June 30, 2023. Swap fee income fluctuates
based on market conditions and client demand.
Noninterest Expenses
Noninterest expenses decreased by $0.3 million
to $20.4 million in the three months ended September 30, 2023 from
$20.7 million in the three months ended June 30, 2023.
Salaries and benefits expense decreased by $0.2
million to $12.9 million for the three months ended September 30,
2023 compared to $13.1 million for the three months ended June 30,
2023. The decrease was attributed primarily to employee severance
costs of $0.5 million during the second quarter of 2023 and a
decline of $0.1 million in healthcare costs, partially offset by
increases in merit-based salaries and incentive compensation of
$0.5 million. The increase in merit-based salaries was a result of
merit increases during the second quarter of 2023, the filling of
vacancies and an additional day in the third quarter of 2023
compared to the second quarter of 2023, which impacts the
accrual.
Advertising and bank promotions expense
decreased by $0.6 million to $0.3 million in the three months ended
September 30, 2023 from $0.9 million for the three months ended
June 30, 2023 due to $0.5 million in contributions to tax credit
programs during the second quarter of 2023. Taxes other than income
increased by $0.3 million to $0.4 million in the three months ended
September 30, 2023 compared to less than $0.1 million in the three
months ended June 30, 2023. This increase reflects the tax credits
recognized on the contributions during the second quarter of
2023.
Professional services expense increased by $0.5
million to $1.0 million in the three months ended September 30,
2023 from $0.5 million in the three months ended June 30, 2023 due
primarily to an increase in consulting costs to support technology
improvements and compliance enhancements.
Other operating expenses decreased by $0.5
million to $1.5 million during the third quarter of 2023 compared
to $2.0 million during the second quarter of 2023. This decrease
included a reduction of $0.3 million in credit value adjustments on
derivatives for the three months ended September 30, 2023 compared
to the three months ended June 30, 2023. The remaining fluctuation
is attributable to normal business operations.
Income Taxes
The Company's effective tax rate for the third
quarter of 2023 was 21.9% compared to 20.6% for the second quarter
of 2023. The Company's effective tax rate for the three months
ended September 30, 2023 is greater than the 21% federal statutory
rate primarily due to an increase in state taxes in addition to the
disallowed portion of interest expense against earnings in
association with the Bank's tax-exempt investments under the Tax
Equity and Fiscal Responsibility Act of 1982, partially offset by
tax-exempt income, including interest earned on tax-exempt loans
and securities and income from life insurance policies and tax
credits. The effective tax rate was 20.7% for the nine-months ended
September 30, 2023 compared to 15.7% for the nine months ended
September 30, 2022. The lower effective tax rate for the nine
months ended September 30, 2022 was partially caused by the impact
of the restructuring charge for branch closures and other expense
savings initiatives and a provision for legal settlement during the
third quarter of 2022. The Company regularly analyzes its projected
taxable income and makes adjustments to the provision for income
taxes accordingly.
Capital
Shareholders’ equity totaled $243.1 million at
September 30, 2023, a decrease of $2.5 million from $245.6 million
at June 30, 2023. The decrease was primarily attributable to other
comprehensive losses of $10.1 million and dividends paid of $2.1
million partially offset by net income of $9.0 million. Other
comprehensive losses increased during the third quarter of 2023 due
to after-tax declines from $11.2 million in net unrealized losses
on investment securities partially offset by net unrealized gains
on cash flow hedges of $1.1 million.
Tangible book value per share(1) decreased to
$20.94 per share at September 30, 2023 from $21.19 per share at
June 30, 2023 due to the decrease in shareholders' equity.
(1) Non-GAAP measure. See Appendix A for
additional information.
The Company's tangible common equity ratio
decreased to 7.3% at September 30, 2023 from 7.5% at June 30, 2023
primarily due to a decrease in tangible equity from net unrealized
losses on investment securities and an increase in total tangible
assets. The Company's total risk-based capital ratio was 13.0% at
both September 30, 2023 and June 30, 2023. The Company's Tier 1
leverage ratio increased from 8.6% at June 30, 2023 to 8.7% at
September 30, 2023. At September 30, 2023, all four capital ratios
applicable to the Company were above regulatory minimum levels to
be deemed “well capitalized” under current bank regulatory
guidelines. The Company continues to believe that capital is
adequate to support the risks inherent in the balance sheet, as
well as growth requirements.
The Board of Directors approved a cash dividend
of $0.20 per share, payable on November 14, 2023, to shareholders
of record as of November 7, 2023.
Investor Relations
Contact: |
Neelesh Kalani |
Executive Vice President,
Chief Financial Officer |
Phone (717) 510-7097 |
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ORRSTOWN
FINANCIAL SERVICES, INC. |
FINANCIAL
HIGHLIGHTS (Unaudited) |
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Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(Dollars in thousands) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Profitability for the
period: |
|
|
|
|
|
|
|
Net interest income |
$ |
26,219 |
|
|
$ |
25,455 |
|
|
$ |
78,888 |
|
|
$ |
72,146 |
|
Provision for credit losses |
|
136 |
|
|
|
1,500 |
|
|
|
1,264 |
|
|
|
3,575 |
|
Noninterest income |
|
5,925 |
|
|
|
6,058 |
|
|
|
19,161 |
|
|
|
20,726 |
|
Noninterest expenses |
|
20,447 |
|
|
|
36,412 |
|
|
|
61,451 |
|
|
|
74,570 |
|
Income (loss) before income tax expense (benefit) |
|
11,561 |
|
|
|
(6,399 |
) |
|
|
35,334 |
|
|
|
14,727 |
|
Income tax expense (benefit) |
|
2,535 |
|
|
|
(1,571 |
) |
|
|
7,314 |
|
|
|
2,316 |
|
Net income (loss) available to common shareholders |
$ |
9,026 |
|
|
$ |
(4,828 |
) |
|
$ |
28,020 |
|
|
$ |
12,411 |
|
|
|
|
|
|
|
|
|
Financial ratios: |
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|
|
|
|
|
Return on average assets (1) |
|
1.18 |
% |
|
(0.68)% |
|
|
1.25 |
% |
|
|
0.59 |
% |
Return on average assets, adjusted (1) (2) (3) |
|
1.18 |
% |
|
|
1.12 |
% |
|
|
1.25 |
% |
|
|
1.19 |
% |
Return on average equity (1) |
|
14.42 |
% |
|
(7.92)% |
|
|
15.51 |
% |
|
|
6.58 |
% |
Return on average equity, adjusted (1) (2) (3) |
|
14.42 |
% |
|
|
13.02 |
% |
|
|
15.51 |
% |
|
|
13.35 |
% |
Net interest margin (1) |
|
3.73 |
% |
|
|
3.92 |
% |
|
|
3.83 |
% |
|
|
3.70 |
% |
Efficiency ratio |
|
63.6 |
% |
|
|
115.5 |
% |
|
|
62.7 |
% |
|
|
80.3 |
% |
Efficiency ratio, adjusted (2) (3) |
|
63.6 |
% |
|
|
64.3 |
% |
|
|
62.7 |
% |
|
|
62.9 |
% |
Income (loss) per common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.87 |
|
|
$ |
(0.47 |
) |
|
$ |
2.71 |
|
|
$ |
1.17 |
|
Basic, adjusted (2) (3) |
$ |
0.87 |
|
|
$ |
0.77 |
|
|
$ |
2.71 |
|
|
$ |
2.37 |
|
Diluted |
$ |
0.87 |
|
|
$ |
(0.47 |
) |
|
$ |
2.68 |
|
|
$ |
1.16 |
|
Diluted, adjusted (2) (3) |
$ |
0.87 |
|
|
$ |
0.75 |
|
|
$ |
2.68 |
|
|
$ |
2.34 |
|
|
|
|
|
|
|
|
|
Average equity to average assets |
|
8.18 |
% |
|
|
8.59 |
% |
|
|
8.09 |
% |
|
|
8.90 |
% |
|
|
|
|
|
|
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|
(1) Annualized. |
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|
(2) Ratio for the three and nine months ended September 30, 2022
has been adjusted for the restructuring charge and provision for
legal settlement. |
(3) Non-GAAP based financial measure. Please refer to Appendix A -
Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP
Reconciliations for a discussion of our use of non-GAAP based
financial measures, including tables reconciling GAAP and non-GAAP
financial measures appearing herein. |
ORRSTOWN
FINANCIAL SERVICES, INC. |
FINANCIAL
HIGHLIGHTS (Unaudited) |
(continued) |
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September 30, |
|
December 31, |
(Dollars in thousands, except per share amounts) |
|
2023 |
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2022 |
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At period-end: |
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Total assets |
$ |
3,054,435 |
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$ |
2,922,408 |
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Total deposits |
|
2,546,435 |
|
|
|
2,476,246 |
|
Loans, net of allowance for credit losses |
|
2,238,558 |
|
|
|
2,126,054 |
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Loans held-for-sale, at fair value |
|
6,448 |
|
|
|
10,880 |
|
Securities available for sale, at fair value |
|
495,162 |
|
|
|
513,728 |
|
Borrowings |
|
175,241 |
|
|
|
123,390 |
|
Subordinated notes |
|
32,076 |
|
|
|
32,026 |
|
Shareholders' equity |
|
243,080 |
|
|
|
228,896 |
|
|
|
|
|
Credit quality and capital
ratios (1): |
|
|
|
Allowance for credit losses to total loans |
|
1.25 |
% |
|
|
1.17 |
% |
Total nonaccrual loans to total loans |
|
0.98 |
% |
|
|
0.96 |
% |
Nonperforming assets to total assets |
|
0.73 |
% |
|
|
0.70 |
% |
Allowance for credit losses to nonaccrual loans |
|
127 |
% |
|
|
122 |
% |
Total risk-based capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
13.0 |
% |
|
|
12.7 |
% |
Orrstown Bank |
|
12.5 |
% |
|
|
12.3 |
% |
Tier 1 risk-based capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
10.6 |
% |
|
|
10.3 |
% |
Orrstown Bank |
|
11.4 |
% |
|
|
11.2 |
% |
Tier 1 common equity risk-based capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
10.6 |
% |
|
|
10.3 |
% |
Orrstown Bank |
|
11.4 |
% |
|
|
11.2 |
% |
Tier 1 leverage capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
8.7 |
% |
|
|
8.5 |
% |
Orrstown Bank |
|
9.3 |
% |
|
|
9.2 |
% |
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|
Book value per common share |
$ |
22.90 |
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$ |
21.45 |
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(1) Capital ratios are estimated, subject to regulatory filings.
The Company elected the three-year phase in option for the day-one
impact of ASU 2016-13 for current expected credit losses ("CECL")
to regulatory capital. In the first year of adoption in 2023, the
Company adjusted retained earnings, allowance for credit losses
includable in tier 2 capital and the deferred tax assets from
temporary differences in risk weighted assets by the permitted
percentage of the day-one impact from adopting the new CECL
standard. |
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ORRSTOWN
FINANCIAL SERVICES, INC. |
CONSOLIDATED BALANCE SHEETS (Unaudited) |
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(Dollars in thousands, except
per share amounts) |
September 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
Cash and due from banks |
$ |
34,728 |
|
|
$ |
28,477 |
|
Interest-bearing deposits with banks |
|
60,211 |
|
|
|
32,346 |
|
Cash and cash equivalents |
|
94,939 |
|
|
|
60,823 |
|
Restricted investments in bank stocks |
|
12,987 |
|
|
|
10,642 |
|
Securities available for sale (amortized cost of $553,222 and
$563,278 at September 30, 2023 and December 31, 2022,
respectively) |
|
495,162 |
|
|
|
513,728 |
|
Loans
held for sale, at fair value |
|
6,448 |
|
|
|
10,880 |
|
Loans |
|
2,266,836 |
|
|
|
2,151,232 |
|
Less:
Allowance for credit losses |
|
(28,278 |
) |
|
|
(25,178 |
) |
Net loans |
|
2,238,558 |
|
|
|
2,126,054 |
|
Premises
and equipment, net |
|
29,385 |
|
|
|
29,328 |
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Cash
surrender value of life insurance |
|
72,754 |
|
|
|
71,760 |
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Goodwill |
|
18,724 |
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|
18,724 |
|
Other
intangible assets, net |
|
2,650 |
|
|
|
3,078 |
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Accrued
interest receivable |
|
12,212 |
|
|
|
11,027 |
|
Deferred
tax assets, net |
|
25,500 |
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|
|
24,031 |
|
Other
assets |
|
45,116 |
|
|
|
42,333 |
|
Total assets |
$ |
3,054,435 |
|
|
$ |
2,922,408 |
|
Liabilities |
|
|
|
Deposits: |
|
|
|
Noninterest-bearing |
$ |
435,488 |
|
|
$ |
494,131 |
|
Interest-bearing |
|
2,110,947 |
|
|
|
1,950,807 |
|
Deposits held for assumption in connection with sale of bank
branch |
|
— |
|
|
|
31,307 |
|
Total deposits |
|
2,546,435 |
|
|
|
2,476,246 |
|
Securities sold under agreements to repurchase and federal funds
purchased |
|
17,991 |
|
|
|
17,251 |
|
FHLB
advances and other borrowings |
|
157,250 |
|
|
|
106,139 |
|
Subordinated notes |
|
32,076 |
|
|
|
32,026 |
|
Accrued
interest and other liabilities |
|
57,603 |
|
|
|
61,850 |
|
Total liabilities |
|
2,811,355 |
|
|
|
2,693,512 |
|
Shareholders’ Equity |
|
|
|
Preferred stock, $1.25 par value per share; 500,000 shares
authorized; no shares issued or outstanding |
|
— |
|
|
|
— |
|
Common stock, no par
value—$0.05205 stated value per share; 50,000,000 shares
authorized; 11,206,480 shares issued and 10,613,271 outstanding at
September 30, 2023; 11,229,242 shares issued and 10,671,413
outstanding at December 31, 2022 |
|
583 |
|
|
|
584 |
|
Additional paid—in capital |
|
188,458 |
|
|
|
189,264 |
|
Retained
earnings |
|
112,144 |
|
|
|
92,473 |
|
Accumulated other comprehensive losses |
|
(44,343 |
) |
|
|
(39,913 |
) |
Treasury
stock— 593,209 and 557,829 shares, at cost at September 30,
2023 and December 31, 2022, respectively |
|
(13,762 |
) |
|
|
(13,512 |
) |
Total shareholders’ equity |
|
243,080 |
|
|
|
228,896 |
|
Total liabilities and shareholders’ equity |
$ |
3,054,435 |
|
|
$ |
2,922,408 |
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(In thousands) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Interest income |
|
|
|
|
|
|
|
|
Loans |
|
$ |
32,738 |
|
|
$ |
23,152 |
|
|
$ |
92,685 |
|
|
$ |
66,548 |
|
Investment securities - taxable |
|
|
4,459 |
|
|
|
2,907 |
|
|
|
13,244 |
|
|
|
6,462 |
|
Investment securities - tax-exempt |
|
|
861 |
|
|
|
1,160 |
|
|
|
2,591 |
|
|
|
3,013 |
|
Short-term investments |
|
|
633 |
|
|
|
200 |
|
|
|
1,349 |
|
|
|
536 |
|
Total interest income |
|
|
38,691 |
|
|
|
27,419 |
|
|
|
109,869 |
|
|
|
76,559 |
|
Interest expense |
|
|
|
|
|
|
|
|
Deposits |
|
|
10,582 |
|
|
|
1,372 |
|
|
|
25,392 |
|
|
|
2,758 |
|
Securities sold under agreements to repurchase and federal funds
purchased |
|
|
31 |
|
|
|
10 |
|
|
|
84 |
|
|
|
24 |
|
FHLB
advances and other borrowings |
|
|
1,354 |
|
|
|
78 |
|
|
|
3,992 |
|
|
|
121 |
|
Subordinated notes |
|
|
505 |
|
|
|
504 |
|
|
|
1,513 |
|
|
|
1,510 |
|
Total interest expense |
|
|
12,472 |
|
|
|
1,964 |
|
|
|
30,981 |
|
|
|
4,413 |
|
Net
interest income |
|
|
26,219 |
|
|
|
25,455 |
|
|
|
78,888 |
|
|
|
72,146 |
|
Provision for credit losses |
|
|
136 |
|
|
|
1,500 |
|
|
|
1,264 |
|
|
|
3,575 |
|
Net interest income after provision for credit losses |
|
|
26,083 |
|
|
|
23,955 |
|
|
|
77,624 |
|
|
|
68,571 |
|
Noninterest income |
|
|
|
|
|
|
|
|
Service
charges |
|
|
1,260 |
|
|
|
1,216 |
|
|
|
3,668 |
|
|
|
3,483 |
|
Interchange income |
|
|
963 |
|
|
|
1,014 |
|
|
|
2,921 |
|
|
|
3,059 |
|
Swap fee
income |
|
|
255 |
|
|
|
197 |
|
|
|
451 |
|
|
|
1,935 |
|
Wealth
management income |
|
|
2,826 |
|
|
|
2,953 |
|
|
|
8,395 |
|
|
|
8,716 |
|
Mortgage
banking activities |
|
|
(142 |
) |
|
|
(1,014 |
) |
|
|
448 |
|
|
|
205 |
|
Investment securities gains (losses) |
|
|
2 |
|
|
|
(14 |
) |
|
|
(8 |
) |
|
|
(163 |
) |
Other
income |
|
|
761 |
|
|
|
1,706 |
|
|
|
3,286 |
|
|
|
3,491 |
|
Total noninterest income |
|
|
5,925 |
|
|
|
6,058 |
|
|
|
19,161 |
|
|
|
20,726 |
|
Noninterest expenses |
|
|
|
|
|
|
|
|
Salaries
and employee benefits |
|
|
12,885 |
|
|
|
12,705 |
|
|
|
38,135 |
|
|
|
35,354 |
|
Occupancy, furniture and equipment |
|
|
2,460 |
|
|
|
2,380 |
|
|
|
7,059 |
|
|
|
7,370 |
|
Data
processing |
|
|
1,248 |
|
|
|
1,192 |
|
|
|
3,666 |
|
|
|
3,410 |
|
Advertising and bank promotions |
|
|
332 |
|
|
|
278 |
|
|
|
1,656 |
|
|
|
1,514 |
|
FDIC
insurance |
|
|
477 |
|
|
|
294 |
|
|
|
1,500 |
|
|
|
767 |
|
Professional services |
|
|
965 |
|
|
|
887 |
|
|
|
2,203 |
|
|
|
2,417 |
|
Taxes
other than income |
|
|
387 |
|
|
|
488 |
|
|
|
847 |
|
|
|
1,160 |
|
Intangible asset amortization |
|
|
228 |
|
|
|
272 |
|
|
|
717 |
|
|
|
845 |
|
Other
operating expenses |
|
|
1,465 |
|
|
|
1,761 |
|
|
|
5,668 |
|
|
|
5,578 |
|
Total noninterest expenses |
|
|
20,447 |
|
|
|
36,412 |
|
|
|
61,451 |
|
|
|
74,570 |
|
Income (loss) before income tax expense (benefit) |
|
|
11,561 |
|
|
|
(6,399 |
) |
|
|
35,334 |
|
|
|
14,727 |
|
Income
tax expense (benefit) |
|
|
2,535 |
|
|
|
(1,571 |
) |
|
|
7,314 |
|
|
|
2,316 |
|
Net income (loss) |
|
$ |
9,026 |
|
|
$ |
(4,828 |
) |
|
$ |
28,020 |
|
|
$ |
12,411 |
|
|
|
|
|
|
|
|
|
|
Share
information: |
|
|
|
|
|
|
|
|
Basic earnings (loss) per
share |
|
$ |
0.87 |
|
|
$ |
(0.47 |
) |
|
$ |
2.71 |
|
|
$ |
1.17 |
|
Diluted earnings (loss) per
share |
|
$ |
0.87 |
|
|
$ |
(0.47 |
) |
|
$ |
2.68 |
|
|
$ |
1.16 |
|
Weighted average shares -
basic |
|
|
10,319 |
|
|
|
10,369 |
|
|
|
10,346 |
|
|
|
10,611 |
|
Weighted average shares -
diluted |
|
|
10,405 |
|
|
|
10,529 |
|
|
|
10,440 |
|
|
|
10,758 |
|
|
|
|
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
ANALYSIS
OF NET INTEREST INCOME |
|
|
|
|
Average
Balances and Interest Rates, Taxable-Equivalent Basis
(Unaudited) |
|
|
|
Three Months Ended |
|
9/30/2023 |
|
6/30/2023 |
|
3/31/2023 |
|
12/31/2022 |
|
9/30/2022 |
(Dollars in
thousands) |
AverageBalance |
|
Taxable-EquivalentInterest |
|
Taxable-EquivalentRate |
|
AverageBalance |
|
Taxable-EquivalentInterest |
|
Taxable-EquivalentRate |
|
AverageBalance |
|
Taxable-EquivalentInterest |
|
Taxable-EquivalentRate |
|
AverageBalance |
|
Taxable-EquivalentInterest |
|
Taxable-EquivalentRate |
|
AverageBalance |
|
Taxable-EquivalentInterest |
|
Taxable-EquivalentRate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold & interest-bearing bank balances |
$ |
57,778 |
|
$ |
633 |
|
|
4.35 |
% |
|
$ |
37,895 |
|
$ |
418 |
|
|
4.42 |
% |
|
$ |
29,599 |
|
$ |
298 |
|
|
4.07 |
% |
|
$ |
28,419 |
|
$ |
238 |
|
|
3.31 |
% |
|
$ |
38,068 |
|
$ |
200 |
|
|
2.08 |
% |
Investment securities (1) |
|
521,234 |
|
|
5,548 |
|
|
4.26 |
|
|
|
526,225 |
|
|
5,510 |
|
|
4.19 |
|
|
|
525,685 |
|
|
5,465 |
|
|
4.18 |
|
|
|
512,779 |
|
|
5,170 |
|
|
4.03 |
|
|
|
528,988 |
|
|
4,377 |
|
|
3.31 |
|
Loans (1)(2)(3) |
|
2,256,727 |
|
|
32,878 |
|
|
5.78 |
|
|
|
2,233,312 |
|
|
31,329 |
|
|
5.63 |
|
|
|
2,180,224 |
|
|
28,844 |
|
|
5.36 |
|
|
|
2,133,052 |
|
|
27,061 |
|
|
5.04 |
|
|
|
2,051,707 |
|
|
23,219 |
|
|
4.49 |
|
Total interest-earning
assets |
|
2,835,739 |
|
|
39,059 |
|
|
5.47 |
|
|
|
2,797,432 |
|
|
37,257 |
|
|
5.34 |
|
|
|
2,735,508 |
|
|
34,607 |
|
|
5.12 |
|
|
|
2,674,250 |
|
|
32,469 |
|
|
4.83 |
|
|
|
2,618,763 |
|
|
27,796 |
|
|
4.22 |
|
Other assets |
|
200,447 |
|
|
|
|
|
|
191,983 |
|
|
|
|
|
|
197,620 |
|
|
|
|
|
|
202,384 |
|
|
|
|
|
|
196,277 |
|
|
|
|
Total assets |
$ |
3,036,186 |
|
|
|
|
|
$ |
2,989,415 |
|
|
|
|
|
$ |
2,933,128 |
|
|
|
|
|
$ |
2,876,634 |
|
|
|
|
|
$ |
2,815,040 |
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand
deposits |
$ |
1,541,728 |
|
|
7,476 |
|
|
1.92 |
|
|
$ |
1,511,468 |
|
|
6,273 |
|
|
1.66 |
|
|
$ |
1,503,421 |
|
|
4,862 |
|
|
1.31 |
|
|
$ |
1,459,109 |
|
|
2,838 |
|
|
0.77 |
|
|
$ |
1,379,082 |
|
|
912 |
|
|
0.26 |
|
Savings deposits |
|
190,817 |
|
|
164 |
|
|
0.34 |
|
|
|
204,584 |
|
|
135 |
|
|
0.26 |
|
|
|
219,408 |
|
|
133 |
|
|
0.25 |
|
|
|
228,521 |
|
|
132 |
|
|
0.23 |
|
|
|
237,462 |
|
|
90 |
|
|
0.15 |
|
Time deposits |
|
357,194 |
|
|
2,942 |
|
|
3.27 |
|
|
|
326,034 |
|
|
2,200 |
|
|
2.71 |
|
|
|
275,880 |
|
|
1,207 |
|
|
1.78 |
|
|
|
254,637 |
|
|
609 |
|
|
0.95 |
|
|
|
265,015 |
|
|
370 |
|
|
0.55 |
|
Total interest-bearing
deposits |
|
2,089,739 |
|
|
10,582 |
|
|
2.01 |
|
|
|
2,042,086 |
|
|
8,608 |
|
|
1.69 |
|
|
|
1,998,709 |
|
|
6,202 |
|
|
1.26 |
|
|
|
1,942,267 |
|
|
3,579 |
|
|
0.73 |
|
|
|
1,881,559 |
|
|
1,372 |
|
|
0.29 |
|
Securities sold under
agreements to repurchase and federal funds purchased |
|
15,006 |
|
|
31 |
|
|
0.83 |
|
|
|
13,685 |
|
|
28 |
|
|
0.82 |
|
|
|
13,868 |
|
|
25 |
|
|
0.72 |
|
|
|
18,211 |
|
|
20 |
|
|
0.46 |
|
|
|
23,480 |
|
|
10 |
|
|
0.18 |
|
FHLB advances and other
borrowings |
|
128,131 |
|
|
1,354 |
|
|
4.19 |
|
|
|
132,094 |
|
|
1,386 |
|
|
4.21 |
|
|
|
106,434 |
|
|
1,252 |
|
|
4.77 |
|
|
|
48,276 |
|
|
509 |
|
|
4.21 |
|
|
|
10,394 |
|
|
78 |
|
|
3.02 |
|
Subordinated notes |
|
32,066 |
|
|
505 |
|
|
6.29 |
|
|
|
32,049 |
|
|
504 |
|
|
6.29 |
|
|
|
32,033 |
|
|
504 |
|
|
6.29 |
|
|
|
32,016 |
|
|
503 |
|
|
6.29 |
|
|
|
32,000 |
|
|
504 |
|
|
6.29 |
|
Total interest-bearing
liabilities |
|
2,264,942 |
|
|
12,472 |
|
|
2.19 |
|
|
|
2,219,914 |
|
|
10,526 |
|
|
1.90 |
|
|
|
2,151,044 |
|
|
7,983 |
|
|
1.50 |
|
|
|
2,040,770 |
|
|
4,611 |
|
|
0.90 |
|
|
|
1,947,433 |
|
|
1,964 |
|
|
0.40 |
|
Noninterest-bearing demand
deposits |
|
468,628 |
|
|
|
|
|
|
476,123 |
|
|
|
|
|
|
495,562 |
|
|
|
|
|
|
540,275 |
|
|
|
|
|
|
575,777 |
|
|
|
|
Other liabilities |
|
54,353 |
|
|
|
|
|
|
50,851 |
|
|
|
|
|
|
52,630 |
|
|
|
|
|
|
74,602 |
|
|
|
|
|
|
49,964 |
|
|
|
|
Total liabilities |
|
2,787,923 |
|
|
|
|
|
|
2,746,888 |
|
|
|
|
|
|
2,699,236 |
|
|
|
|
|
|
2,655,647 |
|
|
|
|
|
|
2,573,174 |
|
|
|
|
Shareholders' equity |
|
248,263 |
|
|
|
|
|
|
242,527 |
|
|
|
|
|
|
233,892 |
|
|
|
|
|
|
220,987 |
|
|
|
|
|
|
241,866 |
|
|
|
|
Total |
$ |
3,036,186 |
|
|
|
|
|
$ |
2,989,415 |
|
|
|
|
|
$ |
2,933,128 |
|
|
|
|
|
$ |
2,876,634 |
|
|
|
|
|
$ |
2,815,040 |
|
|
|
|
Taxable-equivalent net
interest income / net interest spread |
|
|
|
26,587 |
|
|
3.29 |
% |
|
|
|
|
26,731 |
|
|
3.44 |
% |
|
|
|
|
26,624 |
|
|
3.62 |
% |
|
|
|
|
27,858 |
|
|
3.93 |
% |
|
|
|
|
25,832 |
|
|
3.82 |
% |
Taxable-equivalent net
interest margin |
|
|
|
|
3.73 |
% |
|
|
|
|
|
3.83 |
% |
|
|
|
|
|
3.94 |
% |
|
|
|
|
|
4.14 |
% |
|
|
|
|
|
3.92 |
% |
Taxable-equivalent
adjustment |
|
|
|
(368 |
) |
|
|
|
|
|
|
(356 |
) |
|
|
|
|
|
|
(330 |
) |
|
|
|
|
|
|
(374 |
) |
|
|
|
|
|
|
(377 |
) |
|
|
Net interest income |
|
|
$ |
26,219 |
|
|
|
|
|
|
$ |
26,375 |
|
|
|
|
|
|
$ |
26,294 |
|
|
|
|
|
|
$ |
27,484 |
|
|
|
|
|
|
$ |
25,455 |
|
|
|
Ratio of average
interest-earning assets to average interest-bearing
liabilities |
|
|
|
|
125 |
% |
|
|
|
|
|
126 |
% |
|
|
|
|
|
127 |
% |
|
|
|
|
|
131 |
% |
|
|
|
|
|
134 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Yields and
interest income on tax-exempt assets have been computed on a
taxable-equivalent basis assuming a 21% tax rate. |
(2) Average
balances include nonaccrual loans. |
(3) Interest
income on loans includes prepayment and late fees, where
applicable. |
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
|
|
ANALYSIS
OF NET INTEREST INCOME |
|
|
|
|
Average
Balances and Interest Rates, Taxable-Equivalent Basis
(Unaudited) |
|
|
(continued) |
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 30, 2023 |
|
September 30, 2022 |
|
|
|
Taxable- |
|
Taxable- |
|
|
|
Taxable- |
|
Taxable- |
|
Average |
|
Equivalent |
|
Equivalent |
|
Average |
|
Equivalent |
|
Equivalent |
(Dollars in thousands) |
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
Assets |
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold & interest-bearing bank balances |
$ |
41,861 |
|
$ |
1,349 |
|
|
4.31 |
% |
|
$ |
122,509 |
|
$ |
536 |
|
|
0.59 |
% |
Investment securities (1) |
|
524,365 |
|
|
16,523 |
|
|
4.21 |
|
|
|
508,582 |
|
|
10,276 |
|
|
2.70 |
|
Loans (1)(2)(3) |
|
2,223,701 |
|
|
93,051 |
|
|
5.59 |
|
|
|
2,011,881 |
|
|
66,738 |
|
|
4.43 |
|
Total interest-earning
assets |
|
2,789,927 |
|
|
110,923 |
|
|
5.31 |
|
|
|
2,642,972 |
|
|
77,550 |
|
|
3.92 |
|
Other assets |
|
196,694 |
|
|
|
|
|
|
191,090 |
|
|
|
|
Total assets |
$ |
2,986,621 |
|
|
|
|
|
$ |
2,834,062 |
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand
deposits |
$ |
1,519,013 |
|
|
18,611 |
|
|
1.64 |
|
|
$ |
1,399,035 |
|
|
1,470 |
|
|
0.14 |
|
Savings deposits |
|
204,832 |
|
|
431 |
|
|
0.28 |
|
|
|
234,054 |
|
|
209 |
|
|
0.12 |
|
Time deposits |
|
320,000 |
|
|
6,350 |
|
|
2.65 |
|
|
|
279,557 |
|
|
1,079 |
|
|
0.52 |
|
Total interest-bearing
deposits |
|
2,043,845 |
|
|
25,392 |
|
|
1.66 |
|
|
|
1,912,646 |
|
|
2,758 |
|
|
0.19 |
|
Securities sold under
agreements to repurchase and federal funds purchased |
|
14,190 |
|
|
84 |
|
|
0.79 |
|
|
|
23,685 |
|
|
24 |
|
|
0.14 |
|
FHLB advances and other |
|
122,300 |
|
|
3,992 |
|
|
4.36 |
|
|
|
4,693 |
|
|
121 |
|
|
3.44 |
|
Subordinated notes |
|
32,049 |
|
|
1,513 |
|
|
6.29 |
|
|
|
31,985 |
|
|
1,510 |
|
|
6.29 |
|
Total interest-bearing
liabilities |
|
2,212,384 |
|
|
30,981 |
|
|
1.87 |
|
|
|
1,973,009 |
|
|
4,413 |
|
|
0.30 |
|
Noninterest-bearing demand
deposits |
|
480,006 |
|
|
|
|
|
|
562,826 |
|
|
|
|
Other liabilities |
|
52,618 |
|
|
|
|
|
|
46,058 |
|
|
|
|
Total liabilities |
|
2,745,008 |
|
|
|
|
|
|
2,581,893 |
|
|
|
|
Shareholders' equity |
|
241,613 |
|
|
|
|
|
|
252,169 |
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
2,986,621 |
|
|
|
|
|
$ |
2,834,062 |
|
|
|
|
Taxable-equivalent net
interest income / net interest spread |
|
|
|
79,942 |
|
|
3.44 |
% |
|
|
|
|
73,137 |
|
|
3.62 |
% |
Taxable-equivalent net
interest margin |
|
|
|
|
3.83 |
% |
|
|
|
|
|
3.70 |
% |
Taxable-equivalent
adjustment |
|
|
|
(1,054 |
) |
|
|
|
|
|
|
(991 |
) |
|
|
Net interest income |
|
|
$ |
78,888 |
|
|
|
|
|
|
$ |
72,146 |
|
|
|
Ratio of average
interest-earning assets to average interest-bearing
liabilities |
|
|
|
|
126 |
% |
|
|
|
|
|
134 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO
ANALYSIS OF NET INTEREST INCOME: |
|
|
|
|
|
|
|
|
(1) Yields and
interest income on tax-exempt assets have been computed on a
taxable-equivalent basis assuming a 21% tax rate. |
(2) Average
balances include nonaccrual loans. |
(3) Interest
income on loans includes prepayment and late fees, where
applicable. |
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
Profitability for the
quarter: |
|
|
|
|
|
|
|
|
|
Net interest income |
$ |
26,219 |
|
|
$ |
26,375 |
|
|
$ |
26,294 |
|
|
$ |
27,484 |
|
|
$ |
25,455 |
|
Provision for credit losses |
|
136 |
|
|
|
399 |
|
|
|
729 |
|
|
|
585 |
|
|
|
1,500 |
|
Noninterest income |
|
5,925 |
|
|
|
7,158 |
|
|
|
6,078 |
|
|
|
6,226 |
|
|
|
6,058 |
|
Noninterest expenses |
|
20,447 |
|
|
|
20,749 |
|
|
|
20,255 |
|
|
|
21,236 |
|
|
|
36,412 |
|
Income (loss) before income taxes |
|
11,561 |
|
|
|
12,385 |
|
|
|
11,388 |
|
|
|
11,889 |
|
|
|
(6,399 |
) |
Income tax expense (benefit) |
|
2,535 |
|
|
|
2,547 |
|
|
|
2,232 |
|
|
|
2,263 |
|
|
|
(1,571 |
) |
Net income (loss) |
$ |
9,026 |
|
|
$ |
9,838 |
|
|
$ |
9,156 |
|
|
$ |
9,626 |
|
|
$ |
(4,828 |
) |
|
|
|
|
|
|
|
|
|
|
Financial ratios: |
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.18 |
% |
|
|
1.32 |
% |
|
|
1.27 |
% |
|
|
1.33 |
% |
|
(0.68)% |
Return on average assets, adjusted (1)(2)(3) |
|
1.18 |
% |
|
|
1.32 |
% |
|
|
1.27 |
% |
|
|
1.33 |
% |
|
|
1.12 |
% |
Return on average equity (1) |
|
14.42 |
% |
|
|
16.27 |
% |
|
|
15.88 |
% |
|
|
17.28 |
% |
|
(7.92)% |
Return on average equity, adjusted (1)(2)(3) |
|
14.42 |
% |
|
|
16.27 |
% |
|
|
15.88 |
% |
|
|
17.28 |
% |
|
|
13.02 |
% |
Net interest margin (1) |
|
3.73 |
% |
|
|
3.83 |
% |
|
|
3.94 |
% |
|
|
4.14 |
% |
|
|
3.92 |
% |
Efficiency ratio |
|
63.6 |
% |
|
|
61.9 |
% |
|
|
62.6 |
% |
|
|
63.0 |
% |
|
|
115.5 |
% |
Efficiency ratio, adjusted (2)(3) |
|
63.6 |
% |
|
|
61.9 |
% |
|
|
62.6 |
% |
|
|
63.0 |
% |
|
|
64.3 |
% |
|
|
|
|
|
|
|
|
|
|
Per share information: |
|
|
|
|
|
|
|
|
|
Income (loss) per common share: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.87 |
|
|
$ |
0.95 |
|
|
$ |
0.88 |
|
|
$ |
0.93 |
|
|
$ |
(0.47 |
) |
Basic, adjusted (2)(3) |
|
0.87 |
|
|
|
0.95 |
|
|
|
0.88 |
|
|
|
0.93 |
|
|
|
0.77 |
|
Diluted |
|
0.87 |
|
|
|
0.94 |
|
|
|
0.87 |
|
|
|
0.91 |
|
|
|
(0.47 |
) |
Diluted, adjusted (2)(3) |
|
0.87 |
|
|
|
0.94 |
|
|
|
0.87 |
|
|
|
0.91 |
|
|
|
0.75 |
|
Book value |
|
22.90 |
|
|
|
23.15 |
|
|
|
22.46 |
|
|
|
21.45 |
|
|
|
20.34 |
|
Tangible book value |
|
20.94 |
|
|
|
21.19 |
|
|
|
20.50 |
|
|
|
19.47 |
|
|
|
18.34 |
|
Cash dividends paid |
|
0.20 |
|
|
|
0.20 |
|
|
|
0.20 |
|
|
|
0.19 |
|
|
|
0.19 |
|
|
|
|
|
|
|
|
|
|
|
Average basic shares |
|
10,319 |
|
|
|
10,336 |
|
|
|
10,385 |
|
|
|
10,382 |
|
|
|
10,369 |
|
Average diluted shares |
|
10,405 |
|
|
|
10,421 |
|
|
|
10,496 |
|
|
|
10,550 |
|
|
|
10,529 |
|
(1) Annualized. |
(2) Ratio has been adjusted for the restructuring charge and
provision for legal settlement for the three months ended September
30, 2022. |
(3) Non-GAAP based financial measure. Please refer to Appendix A -
Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP
Reconciliations for a discussion of our use of non-GAAP based
financial measures, including tables reconciling GAAP and non-GAAP
financial measures appearing herein. |
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
|
|
|
|
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA
(Unaudited) |
|
|
|
|
(continued) |
|
|
|
|
|
|
|
|
|
(In thousands) |
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
Noninterest income: |
|
|
|
|
|
|
|
|
|
Service charges |
$ |
1,260 |
|
|
$ |
1,251 |
|
|
$ |
1,157 |
|
|
$ |
1,131 |
|
$ |
1,216 |
|
Interchange income |
|
963 |
|
|
|
993 |
|
|
|
965 |
|
|
|
996 |
|
|
1,014 |
|
Swap fee income |
|
255 |
|
|
|
196 |
|
|
|
— |
|
|
|
697 |
|
|
197 |
|
Wealth management income |
|
2,826 |
|
|
|
2,822 |
|
|
|
2,747 |
|
|
|
2,535 |
|
|
2,953 |
|
Mortgage banking activities |
|
(142 |
) |
|
|
112 |
|
|
|
478 |
|
|
|
202 |
|
|
(1,014 |
) |
Other income |
|
761 |
|
|
|
1,786 |
|
|
|
739 |
|
|
|
662 |
|
|
1,706 |
|
Investment securities gains (losses) |
|
2 |
|
|
|
(2 |
) |
|
|
(8 |
) |
|
|
3 |
|
|
(14 |
) |
Total noninterest income |
$ |
5,925 |
|
|
$ |
7,158 |
|
|
$ |
6,078 |
|
|
$ |
6,226 |
|
$ |
6,058 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses: |
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
$ |
12,885 |
|
|
$ |
13,054 |
|
|
$ |
12,196 |
|
|
$ |
12,650 |
|
$ |
12,705 |
|
Occupancy, furniture and equipment |
|
2,460 |
|
|
|
2,266 |
|
|
|
2,333 |
|
|
|
2,442 |
|
|
2,380 |
|
Data processing |
|
1,248 |
|
|
|
1,201 |
|
|
|
1,217 |
|
|
|
1,150 |
|
|
1,192 |
|
Advertising and bank promotions |
|
332 |
|
|
|
919 |
|
|
|
405 |
|
|
|
750 |
|
|
278 |
|
FDIC insurance |
|
477 |
|
|
|
519 |
|
|
|
504 |
|
|
|
316 |
|
|
294 |
|
Professional services |
|
965 |
|
|
|
504 |
|
|
|
734 |
|
|
|
837 |
|
|
887 |
|
Taxes other than income |
|
387 |
|
|
|
3 |
|
|
|
457 |
|
|
|
231 |
|
|
488 |
|
Intangible asset amortization |
|
228 |
|
|
|
239 |
|
|
|
250 |
|
|
|
260 |
|
|
272 |
|
Provision for legal settlement |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
13,000 |
|
Restructuring expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
3,155 |
|
Other operating expenses |
|
1,465 |
|
|
|
2,044 |
|
|
|
2,159 |
|
|
|
2,600 |
|
|
1,761 |
|
Total noninterest expenses |
$ |
20,447 |
|
|
$ |
20,749 |
|
|
$ |
20,255 |
|
|
$ |
21,236 |
|
$ |
36,412 |
|
|
|
|
|
|
|
|
|
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
|
|
|
|
HISTORICAL
TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) |
|
|
|
|
|
|
(continued) |
|
|
|
|
|
|
|
|
|
(In thousands) |
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
Balance Sheet at quarter
end: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
94,939 |
|
|
$ |
76,318 |
|
|
$ |
98,323 |
|
|
$ |
60,823 |
|
|
$ |
66,927 |
|
Restricted investments in bank stocks |
|
12,987 |
|
|
|
12,602 |
|
|
|
12,869 |
|
|
|
10,642 |
|
|
|
6,469 |
|
Securities available for sale |
|
495,162 |
|
|
|
508,612 |
|
|
|
520,232 |
|
|
|
513,728 |
|
|
|
503,596 |
|
Loans held for sale, at fair value |
|
6,448 |
|
|
|
6,450 |
|
|
|
7,341 |
|
|
|
10,880 |
|
|
|
10,175 |
|
Loans: |
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
Owner occupied |
|
376,350 |
|
|
|
366,439 |
|
|
|
339,371 |
|
|
|
315,770 |
|
|
|
313,125 |
|
Non-owner occupied |
|
630,514 |
|
|
|
626,140 |
|
|
|
603,396 |
|
|
|
608,043 |
|
|
|
573,605 |
|
Multi-family |
|
143,437 |
|
|
|
145,257 |
|
|
|
144,053 |
|
|
|
138,832 |
|
|
|
114,561 |
|
Non-owner occupied residential |
|
100,391 |
|
|
|
105,504 |
|
|
|
106,390 |
|
|
|
104,604 |
|
|
|
105,267 |
|
Commercial and industrial (1) |
|
374,190 |
|
|
|
379,905 |
|
|
|
380,683 |
|
|
|
357,774 |
|
|
|
378,574 |
|
Acquisition and development: |
|
|
|
|
|
|
|
|
|
1-4 family residential construction |
|
25,642 |
|
|
|
20,461 |
|
|
|
20,941 |
|
|
|
25,068 |
|
|
|
20,810 |
|
Commercial and land development |
|
153,279 |
|
|
|
143,177 |
|
|
|
174,556 |
|
|
|
158,308 |
|
|
|
148,512 |
|
Municipal |
|
10,334 |
|
|
|
10,638 |
|
|
|
11,329 |
|
|
|
12,173 |
|
|
|
12,683 |
|
Total commercial loans |
|
1,814,137 |
|
|
|
1,797,521 |
|
|
|
1,780,719 |
|
|
|
1,720,572 |
|
|
|
1,667,137 |
|
Residential mortgage: |
|
|
|
|
|
|
|
|
|
First lien |
|
248,335 |
|
|
|
235,813 |
|
|
|
227,031 |
|
|
|
229,849 |
|
|
|
220,970 |
|
Home equity – term |
|
5,223 |
|
|
|
5,228 |
|
|
|
5,371 |
|
|
|
5,505 |
|
|
|
5,869 |
|
Home equity – lines of credit |
|
188,736 |
|
|
|
185,099 |
|
|
|
183,340 |
|
|
|
183,241 |
|
|
|
180,267 |
|
Installment and other loans |
|
10,405 |
|
|
|
10,756 |
|
|
|
11,040 |
|
|
|
12,065 |
|
|
|
13,684 |
|
Total loans |
|
2,266,836 |
|
|
|
2,234,417 |
|
|
|
2,207,501 |
|
|
|
2,151,232 |
|
|
|
2,087,927 |
|
Allowance for credit losses (2) |
|
(28,278 |
) |
|
|
(28,383 |
) |
|
|
(28,364 |
) |
|
|
(25,178 |
) |
|
|
(24,709 |
) |
Net loans held-for-investment |
|
2,238,558 |
|
|
|
2,206,034 |
|
|
|
2,179,137 |
|
|
|
2,126,054 |
|
|
|
2,063,218 |
|
Goodwill |
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
Other intangible assets, net |
|
2,650 |
|
|
|
2,589 |
|
|
|
2,828 |
|
|
|
3,078 |
|
|
|
3,338 |
|
Total assets |
|
3,054,435 |
|
|
|
3,008,197 |
|
|
|
3,011,548 |
|
|
|
2,922,408 |
|
|
|
2,852,092 |
|
Total deposits |
|
2,546,435 |
|
|
|
2,522,861 |
|
|
|
2,515,626 |
|
|
|
2,476,246 |
|
|
|
2,505,853 |
|
Borrowings |
|
175,241 |
|
|
|
152,229 |
|
|
|
176,315 |
|
|
|
123,390 |
|
|
|
22,632 |
|
Subordinated notes |
|
32,076 |
|
|
|
32,059 |
|
|
|
32,042 |
|
|
|
32,026 |
|
|
|
32,010 |
|
Total shareholders' equity |
|
243,080 |
|
|
|
245,641 |
|
|
|
240,161 |
|
|
|
228,896 |
|
|
|
217,378 |
|
(1) This balance includes $6.2 million, $7.2 million, $10.8
million, $13.8 million and $17.0 million of SBA PPP loans, net of
deferred fees and costs, at September 30, 2023, June 30,
2023, March 31, 2023, December 31, 2022 and
September 30, 2022, respectively.
(2) The balance includes $2.4 million in a one-time
cumulative-effect adjustment that increased the allowance for
credit losses from the adoption of the new CECL standard on January
1, 2023.
|
|
|
|
|
|
|
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA
(Unaudited) |
(continued) |
|
|
|
|
|
|
|
|
|
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
Capital and credit quality
measures (1): |
|
|
|
|
|
|
|
|
|
Total
risk-based capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
13.0 |
% |
|
|
13.0 |
% |
|
|
12.8 |
% |
|
|
12.7 |
% |
|
|
12.7 |
% |
Orrstown Bank |
|
12.5 |
% |
|
|
12.5 |
% |
|
|
12.4 |
% |
|
|
12.3 |
% |
|
|
12.9 |
% |
Tier 1
risk-based capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
10.6 |
% |
|
|
10.5 |
% |
|
|
10.4 |
% |
|
|
10.3 |
% |
|
|
10.2 |
% |
Orrstown Bank |
|
11.4 |
% |
|
|
11.4 |
% |
|
|
11.2 |
% |
|
|
11.2 |
% |
|
|
11.8 |
% |
Tier 1 common equity
risk-based capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
10.6 |
% |
|
|
10.5 |
% |
|
|
10.4 |
% |
|
|
10.3 |
% |
|
|
10.2 |
% |
Orrstown Bank |
|
11.4 |
% |
|
|
11.4 |
% |
|
|
11.2 |
% |
|
|
11.2 |
% |
|
|
11.8 |
% |
Tier 1
leverage capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
8.7 |
% |
|
|
8.6 |
% |
|
|
8.5 |
% |
|
|
8.5 |
% |
|
|
8.4 |
% |
Orrstown Bank |
|
9.3 |
% |
|
|
9.3 |
% |
|
|
9.2 |
% |
|
|
9.2 |
% |
|
|
9.6 |
% |
|
|
|
|
|
|
|
|
|
|
Average equity to average assets |
|
8.18 |
% |
|
|
8.11 |
% |
|
|
7.97 |
% |
|
|
7.68 |
% |
|
|
8.59 |
% |
Allowance for credit losses to total loans |
|
1.25 |
% |
|
|
1.27 |
% |
|
|
1.28 |
% |
|
|
1.17 |
% |
|
|
1.18 |
% |
Total nonaccrual loans to total loans |
|
0.98 |
% |
|
|
0.94 |
% |
|
|
0.96 |
% |
|
|
0.96 |
% |
|
|
0.25 |
% |
Nonperforming assets to total assets |
|
0.73 |
% |
|
|
0.70 |
% |
|
|
0.71 |
% |
|
|
0.70 |
% |
|
|
0.19 |
% |
Allowance for credit losses to nonaccrual loans |
|
127 |
% |
|
|
135 |
% |
|
|
134 |
% |
|
|
122 |
% |
|
|
466 |
% |
|
|
|
|
|
|
|
|
|
|
Other information: |
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries) |
$ |
241 |
|
|
$ |
380 |
|
|
$ |
(34 |
) |
|
$ |
116 |
|
|
$ |
70 |
|
Classified loans |
|
33,593 |
|
|
|
26,347 |
|
|
|
34,024 |
|
|
|
36,325 |
|
|
|
19,576 |
|
Nonperforming and other risk assets: |
|
|
|
|
|
|
|
|
|
Nonaccrual loans (2) |
|
22,324 |
|
|
|
21,062 |
|
|
|
21,246 |
|
|
|
20,583 |
|
|
|
5,303 |
|
Other real estate owned |
|
— |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
|
|
— |
|
Total nonperforming assets |
|
22,324 |
|
|
|
21,062 |
|
|
|
21,331 |
|
|
|
20,583 |
|
|
|
5,303 |
|
Financial difficulty modifications / Troubled debt restructurings
still accruing (3) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
682 |
|
|
|
689 |
|
Loans past due 90 days or more and still accruing (2) |
|
277 |
|
|
|
539 |
|
|
|
28 |
|
|
|
439 |
|
|
|
232 |
|
Total nonperforming and other risk assets |
$ |
22,601 |
|
|
$ |
21,601 |
|
|
$ |
21,359 |
|
|
$ |
21,704 |
|
|
$ |
6,224 |
|
(1) Capital
ratios are estimated, subject to regulatory filings. The Company
elected the three-year phase in option for the day-one impact of
ASU 2016-13 for current expected credit losses ("CECL") to
regulatory capital. In the first year of adoption in 2023, the
Company adjusted retained earnings, allowance for credit losses
includable in tier 2 capital and the deferred tax assets from
temporary differences in risk weighted assets by the permitted
percentage of the day-one impact from adopting the new CECL
standard. |
(2) Includes
zero, zero, zero, $0.4 million and $0.2 million of purchased credit
impaired loans at September 30, 2023, June 30, 2023,
March 31, 2023, December 31, 2022, and September 30,
2022, respectively, in accordance with ASC 310-30. Upon adoption of
the CECL standard, purchased credit deteriorated loans were
evaluated on an individual loan level and reported on an individual
loan basis under ASC 310-20, Nonrefundable Fees and Other
Costs. |
(3) On January 1,
2023, the Company adopted ASU No. 2022-02, Financial Instruments –
Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures (“ASU 2022-02”), which eliminated the troubled debt
restructuring ("TDR") accounting model and requires that the
Company evaluate, based on the accounting for loan modifications,
whether the borrower is experiencing financial difficulty and the
modification results in a more-than-insignificant direct change in
the contractual cash flows and represents a new loan or a
continuation of an existing loan. During 2023, the Company did not
have loans meeting the “Financial Difficulty Modification” criteria
in accordance with ASU 2022-02. |
Appendix A- Supplemental Reporting of Non-GAAP Measures
and GAAP to Non-GAAP Reconciliations
As a result of acquisitions, the Company has
intangible assets consisting of goodwill and core deposit and other
intangible assets, which totaled $21.4 million and $21.8 million at
September 30, 2023 and December 31, 2022, respectively.
Additionally, the Company incurred $3.2 million and $13.0 million
in restructuring charges and a provision for legal settlement,
respectively, during the three and nine months ended September 30,
2022.
Management believes providing certain other
“non-GAAP” financial information will assist investors in their
understanding of the effect on recent financial results from
non-recurring charges.
Tangible book value per common share and the
impact of the restructuring charge and legal settlement on net
income and associated ratios, as used by the Company in this
earnings release, are determined by methods other than in
accordance with U.S. Generally Accepted Accounting Principles
("GAAP"). While we believe this information is a useful supplement
to GAAP based measures presented in this earnings release, readers
are cautioned that this non-GAAP disclosure has limitations as an
analytical tool, should not be viewed as a substitute for financial
measures determined in accordance with GAAP, and should not be
considered in isolation or as a substitute for analysis of our
results and financial condition as reported under GAAP, nor are
such measures necessarily comparable to non-GAAP performance
measures that may be presented by other companies. This
supplemental presentation should not be construed as an inference
that our future results will be unaffected by similar adjustments
to be determined in accordance with GAAP.
The following tables present the computation of
each non-GAAP based measure:
(dollars and shares in thousands)
Tangible Book Value
per Common Share |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
|
September 30,2022 |
Shareholders' equity (most directly comparable GAAP-based
measure) |
|
$ |
243,080 |
|
|
$ |
245,641 |
|
|
$ |
240,161 |
|
|
$ |
228,896 |
|
|
$ |
217,378 |
|
Less: Goodwill |
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
Other intangible assets |
|
|
2,650 |
|
|
|
2,589 |
|
|
|
2,828 |
|
|
|
3,078 |
|
|
|
3,338 |
|
Related tax effect |
|
|
(557 |
) |
|
|
(544 |
) |
|
|
(594 |
) |
|
|
(646 |
) |
|
|
(701 |
) |
Tangible common equity
(non-GAAP) |
|
$ |
222,263 |
|
|
$ |
224,872 |
|
|
$ |
219,203 |
|
|
$ |
207,740 |
|
|
$ |
196,017 |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
10,613 |
|
|
|
10,611 |
|
|
|
10,692 |
|
|
|
10,671 |
|
|
|
10,686 |
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share (most
directly comparable GAAP-based measure) |
|
$ |
22.90 |
|
|
$ |
23.15 |
|
|
$ |
22.46 |
|
|
$ |
21.45 |
|
|
$ |
20.34 |
|
Intangible assets per
share |
|
|
1.96 |
|
|
|
1.96 |
|
|
|
1.96 |
|
|
|
1.98 |
|
|
|
2.00 |
|
Tangible book value per share
(non-GAAP) |
|
$ |
20.94 |
|
|
$ |
21.19 |
|
|
$ |
20.50 |
|
|
$ |
19.47 |
|
|
$ |
18.34 |
|
(dollars and shares in thousands) |
|
|
|
|
|
|
|
Adjusted Ratios for
Restructuring Charges and Provision for Legal
Settlement |
September 30,2023 |
|
September 30,2022 |
|
September 30,2023 |
|
September 30,2022 |
|
Three Months Ended |
|
Three Months Ended |
|
Nine Months Ended |
|
Nine Months Ended |
Net income (loss) (A) - most directly comparable GAAP-based
measure |
$ |
9,026 |
|
|
$ |
(4,828 |
) |
|
$ |
28,020 |
|
|
$ |
12,411 |
|
Plus:
Restructuring expenses (B) |
|
— |
|
|
|
3,155 |
|
|
|
— |
|
|
|
3,155 |
|
Plus:
Provision for legal settlement (B) |
|
— |
|
|
|
13,000 |
|
|
|
— |
|
|
|
13,000 |
|
Less:
Related tax effect (C) |
|
— |
|
|
|
(3,393 |
) |
|
|
— |
|
|
|
(3,393 |
) |
Adjusted net income (D=A+B-C) - Non-GAAP |
$ |
9,026 |
|
|
$ |
7,934 |
|
|
$ |
28,020 |
|
|
$ |
25,173 |
|
|
|
|
|
|
|
|
|
Average
assets (E) |
$ |
3,036,186 |
|
|
$ |
2,815,040 |
|
|
$ |
2,986,621 |
|
|
$ |
2,834,062 |
|
Return on average assets (= A / E) - most directly
comparable GAAP-based measure |
|
1.18 |
% |
|
(0.68)% |
|
|
1.25 |
% |
|
|
0.59 |
% |
Return on average assets, adjusted (= D / E) -
Non-GAAP |
|
1.18 |
% |
|
|
1.12 |
% |
|
|
1.25 |
% |
|
|
1.19 |
% |
|
|
|
|
|
|
|
|
Average
equity (F) |
$ |
248,263 |
|
|
$ |
241,866 |
|
|
$ |
241,613 |
|
|
$ |
252,169 |
|
Return on average equity (= A / F) - most directly
comparable GAAP-based measure |
|
14.42 |
% |
|
(7.92)% |
|
|
15.51 |
% |
|
|
6.58 |
% |
Return on average equity, adjusted (= D / F) -
Non-GAAP |
|
14.42 |
% |
|
|
13.02 |
% |
|
|
15.51 |
% |
|
|
13.35 |
% |
|
|
|
|
|
|
|
|
Weighted
average shares - basic (G) - most directly comparable GAAP-based
measure |
|
10,319 |
|
|
|
10,369 |
|
|
|
10,346 |
|
|
|
10,611 |
|
Basic earnings (loss) per share (= A / G) - most directly
comparable GAAP-based measure |
$ |
0.87 |
|
|
$ |
(0.47 |
) |
|
$ |
2.71 |
|
|
$ |
1.17 |
|
Basic earnings per share, adjusted (= D / G) -
Non-GAAP |
$ |
0.87 |
|
|
$ |
0.77 |
|
|
$ |
2.71 |
|
|
$ |
2.37 |
|
|
|
|
|
|
|
|
|
Weighted
average shares - diluted (H) - most directly comparable GAAP-based
measure |
|
10,405 |
|
|
|
10,369 |
|
|
|
10,440 |
|
|
|
10,758 |
|
Diluted earnings (loss) per share (= A / H) - most directly
comparable GAAP-based measure |
$ |
0.87 |
|
|
$ |
(0.47 |
) |
|
$ |
2.68 |
|
|
$ |
1.16 |
|
Weighted
average shares - diluted (H) - Non-GAAP |
|
10,405 |
|
|
|
10,529 |
|
|
|
10,440 |
|
|
|
10,758 |
|
Diluted earnings per share, adjusted (= D / H) -
Non-GAAP |
$ |
0.87 |
|
|
$ |
0.75 |
|
|
$ |
2.68 |
|
|
$ |
2.34 |
|
|
|
|
|
|
|
|
|
Noninterest expense (I) - most directly comparable GAAP-based
measure |
$ |
20,447 |
|
|
$ |
36,412 |
|
|
$ |
61,451 |
|
|
$ |
74,570 |
|
Less:
Restructuring expenses (B) |
|
— |
|
|
|
(3,155 |
) |
|
|
— |
|
|
|
(3,155 |
) |
Less:
Provision for legal expenses (B) |
|
— |
|
|
|
(13,000 |
) |
|
|
— |
|
|
|
(13,000 |
) |
Adjusted noninterest expense (J = I - B) -
Non-GAAP |
$ |
20,447 |
|
|
$ |
20,257 |
|
|
$ |
61,451 |
|
|
$ |
58,415 |
|
|
|
|
|
|
|
|
|
Net
interest income (K) |
$ |
26,219 |
|
|
$ |
25,455 |
|
|
$ |
78,888 |
|
|
$ |
72,146 |
|
Noninterest income (L) |
|
5,925 |
|
|
|
6,058 |
|
|
|
19,161 |
|
|
|
20,726 |
|
Total operating income (M = K + L) |
$ |
32,144 |
|
|
$ |
31,513 |
|
|
$ |
98,049 |
|
|
$ |
92,872 |
|
|
|
|
|
|
|
|
|
Efficiency ratio (= I / M) - most directly comparable
GAAP-based measure |
|
63.6 |
% |
|
|
115.5 |
% |
|
|
62.7 |
% |
|
|
80.3 |
% |
Efficiency ratio, adjusted (= J / M) -
Non-GAAP |
|
63.6 |
% |
|
|
64.3 |
% |
|
|
62.7 |
% |
|
|
62.9 |
% |
Appendix B- Investment Portfolio
Concentrations
The following table summarizes the credit ratings and collateral
associated with the Company's investment security portfolio,
excluding equity securities, at September 30, 2023:
(dollars in thousands)
Sector |
Portfolio Mix |
|
Amortized Book |
|
Fair Value |
|
Credit Enhancement |
|
AAA |
|
AA |
|
A |
|
BBB |
|
NR |
|
Collateral / Guarantee Type |
Unsecured ABS |
1 |
% |
|
$ |
4,053 |
|
$ |
3,527 |
|
31 |
% |
|
— |
% |
|
— |
% |
|
— |
% |
|
— |
% |
|
100 |
% |
|
Unsecured Consumer Debt |
Student Loan ABS |
1 |
|
|
|
5,781 |
|
|
5,711 |
|
27 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100 |
|
|
Seasoned Student Loans |
Federal Family Education Loan
ABS |
18 |
|
|
|
101,485 |
|
|
100,565 |
|
9 |
|
|
7 |
|
|
80 |
|
|
— |
|
|
13 |
|
|
— |
|
|
Federal Family Education Loan
(1) |
PACE Loan ABS |
— |
|
|
|
2,362 |
|
|
1,983 |
|
6 |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
PACE Loans (2) |
Non-Agency CMBS |
4 |
|
|
|
23,349 |
|
|
23,110 |
|
19 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100 |
|
|
|
Non-Agency RMBS |
3 |
|
|
|
16,699 |
|
|
12,666 |
|
14 |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Reverse Mortgages (3) |
Municipal - General
Obligation |
19 |
|
|
|
103,818 |
|
|
88,804 |
|
|
|
10 |
|
|
83 |
|
|
7 |
|
|
— |
|
|
— |
|
|
|
Municipal - Revenue |
22 |
|
|
|
119,989 |
|
|
99,313 |
|
|
|
— |
|
|
82 |
|
|
12 |
|
|
— |
|
|
6 |
|
|
|
SBA ReRemic (5) |
1 |
|
|
|
3,855 |
|
|
3,732 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
SBA Guarantee (4) |
Small Business
Administration |
1 |
|
|
|
8,562 |
|
|
9,100 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
SBA Guarantee (4) |
Agency MBS |
26 |
|
|
|
143,087 |
|
|
129,387 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
Residential Mortgages (4) |
U.S. Treasury securities |
4 |
|
|
|
20,060 |
|
|
17,143 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
U.S. Government Guarantee
(4) |
|
100 |
% |
|
$ |
553,102 |
|
$ |
495,042 |
|
|
|
7 |
% |
|
80 |
% |
|
4 |
% |
|
2 |
% |
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) 97%
guaranteed by U.S. government |
(2) PACE acronym
represents Property Assessed Clean Energy loans |
(3) Non-agency
reverse mortgages with current structural credit enhancements |
(4) Guaranteed by
U.S. government or U.S. government agencies |
(5) SBA ReRemic
acronym represents Re-Securitization of Real Estate Mortgage
Investment Conduits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Ratings in
table are the lowest of the six rating agencies (Standard &
Poor's, Moody's, Fitch, Morningstar, DBRS and Kroll Bond Rating
Agency). Standard & Poor's rates U.S. government obligations at
AA+. |
About the Company
With $3.1 billion in assets, Orrstown Financial
Services, Inc. and its wholly-owned subsidiary, Orrstown Bank,
provide a wide range of consumer and business financial services in
Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry, and York
Counties, Pennsylvania and Anne Arundel, Baltimore, Howard, and
Washington Counties, Maryland, as well as Baltimore City, Maryland.
The Company's lending area also includes adjacent counties in
Pennsylvania and Maryland, as well as Loudon County, Virginia and
Berkeley, Jefferson and Morgan Counties, West Virginia. Orrstown
Bank is an Equal Housing Lender and its deposits are insured up to
the legal maximum by the FDIC. Orrstown Financial Services, Inc.’s
common stock is traded on Nasdaq (ORRF). For more information about
Orrstown Financial Services, Inc. and Orrstown Bank, visit
www.orrstown.com.
Cautionary Note Regarding Forward-Looking
Statements:
This press release contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act. Forward-looking statements
reflect the current views of the Company's management with respect
to, among other things, future events and the Company's financial
performance. These statements are often, but not always, made
through the use of words or phrases such as “may,” “should,”
“could,” “predict,” “potential,” “believe,” “will likely result,”
“expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,”
“intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would”
and “outlook,” or the negative variations of those words or other
comparable words of a future or forward-looking nature. These
forward-looking statements are not historical facts, and are based
on current expectations, estimates, predictions or projections
about events or the Company's industry, management’s beliefs and
certain assumptions made by management, many of which, by their
nature, are inherently uncertain and beyond the Company's control,
and include, but are not limited to, statements related to new
business development, new loan opportunities, growth in the balance
sheet and fee-based revenue lines of business, merger and
acquisition activity, cost savings initiatives, reducing risk
assets and mitigating losses in the future. Accordingly, the
Company cautions you that any such forward-looking statements are
not guarantees of future performance and are subject to risks,
assumptions and uncertainties that are difficult to predict.
Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable as of the date
made, actual results may prove to be materially different from the
results expressed or implied by the forward-looking statements and
there can be no assurances that the Company will achieve the
desired level of new business development and new loans, growth in
the balance sheet and fee-based revenue lines of business,
successful merger and acquisition activity, cost savings
initiatives and continued reductions in risk assets or mitigation
of losses in the future. Factors which could cause the actual
results of the Company's operations to differ materially from
expectations include, but are not limited to: ineffectiveness of
the Company's strategic growth plan due to changes in current or
future market conditions; the effects of competition and how it may
impact our community banking model, including industry
consolidation and development of competing financial products and
services; the integration of the Company's strategic acquisitions;
the inability to fully achieve expected savings, efficiencies or
synergies from mergers and acquisitions, or taking longer than
estimated for such savings, efficiencies and synergies to be
realized; changes in laws and regulations; interest rate movements;
changes in credit quality; inability to raise capital, if
necessary, under favorable conditions; volatility in the securities
markets; the demand for our products and services; deteriorating
economic conditions; geopolitical tensions; operational risks
including, but not limited to, cybersecurity incidents, fraud,
natural disasters and future pandemics; expenses associated with
pending litigation and legal proceedings; and other risks and
uncertainties, including those detailed in our Annual Report on
Form 10-K for the year ended December 31, 2022 under the
sections titled “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and in
subsequently filings made with the Securities and Exchange
Commission. The statements are valid only as of the date hereof and
we disclaim any obligation to update this information. The
foregoing list of factors is not exhaustive.
If one or more events related to these or other
risks or uncertainties materializes, or if the Company's underlying
assumptions prove to be incorrect, actual results may differ
materially from what the Company anticipates. Accordingly, you
should not place undue reliance on any such forward-looking
statements. Any forward-looking statement speaks only as of the
date on which it is made, and the Company does not undertake any
obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise. New risks and uncertainties arise from
time to time, and it is not possible for the Company to predict
those events or how they may affect it. In addition, the Company
cannot assess the impact of each factor on its business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements. All forward-looking statements,
expressed or implied, included in this press release are expressly
qualified in their entirety by this cautionary statement. This
cautionary statement should also be considered in connection with
any subsequent written or oral forward-looking statements that the
Company or persons acting on the Company's behalf may issue.
The review period for subsequent events extends
up to and includes the filing date of a public company’s financial
statements, when filed with the Securities and Exchange Commission.
Accordingly, the consolidated financial information presented in
this announcement is subject to change.
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