Orrstown Financial Services, Inc. ("Orrstown" or the “Company”)
(NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”),
announced earnings for the three months and year ended December 31,
2023. Net income totaled $7.6 million for the three months ended
December 31, 2023, compared to $9.0 million for the three months
ended September 30, 2023 and $9.6 million for the three months
ended December 31, 2022. Diluted earnings per share totaled $0.73
for the three months ended December 31, 2023, compared to $0.87 for
the three months ended September 30, 2023 and $0.91 for the three
months ended December 31, 2022. For the fourth quarter of 2023,
excluding the impact from the merger-related expenses, net income
and diluted earnings per share were $8.6 million(1) and $0.83(1),
respectively.
Net income totaled $35.7 million and $22.0
million for the years ended December 31, 2023 and 2022,
respectively. Diluted earnings per share totaled $3.42 for the year
ended December 31, 2023, compared to diluted earnings per share of
$2.06 for the year ended December 31, 2022. Excluding the impact
from the merger-related expenses, net income and diluted earnings
per share were $36.6 million(1) and $3.51(1) for the year ended
December 31, 2023, respectively. For the year ended December 31,
2022, net income and diluted earnings per share were $34.8
million(1) and $3.25(1), respectively, excluding the restructuring
charge and legal settlement.
"Orrstown’s strong fourth quarter reflects the
team’s tremendous efforts for the past several years, which led us
to the Company’s strongest earnings on record in 2023. We believe
that our relationship banking model and hands-on approach enabled
us to have a successful year while navigating through the many
headwinds facing the industry in 2023. Loan production and deposit
gathering continue to be steady, which has helped us maintain a
healthy net interest margin and limit margin compression. While
enhancing fee income continues to be challenging, our wealth
management group has successfully grown income throughout the year.
Our capital ratios continue to improve through earnings generation,
which puts us in a good position for the next exciting phase in
Orrstown’s growth cycle. We look forward to taking the momentum we
have built and joining, in the near future, our successful partner
in Codorus Valley Bancorp to create an even stronger institution,"
commented Thomas R. Quinn, Jr., President and Chief Executive
Officer.
(1) Non-GAAP measure. See Appendix A for
additional information.
DISCUSSION OF RESULTS
Balance Sheet
Loans
Loans held for investment increased by $31.5
million from September 30, 2023 to December 31, 2023, or 6%
annualized. Commercial loans increased by $16.6 million, or 4%
annualized, from September 30, 2023 to December 31, 2023. The
residential mortgage portfolio increased by $15.5 million, or 14%
annualized, in the three months ended December 31, 2023 as there
has been increased production of adjustable-rate mortgages, which
have been retained in portfolio. Since December 31, 2022, loans
held for investment increased by $147.1 million, or 7%, to $2.3
billion at December 31, 2023. During 2023, commercial loans
increased by $110.2 million, or 6% and residential mortgages
increased by $39.2, or 9%. These increases were partially offset by
a decrease of $2.3 million, or 19%, in installment and other
consumer loans.
Investment Securities
Investment securities, all of which are
classified as available-for-sale, increased by $18.3 million to
$513.5 million at December 31, 2023 compared to $495.2 million at
September 30, 2023. During the fourth quarter of 2023, net
unrealized losses on investment securities declined by $22.5
million, net purchases totaled $4.0 million and paydowns were $7.5
million. The improvement in net unrealized losses was primarily due
to lower market interest rates. Net unrealized losses on investment
securities totaled $35.6 million and $49.6 million at December 31,
2023 and 2022, respectively. The overall duration of the Company's
investment securities portfolio is 4.3 years at December 31, 2023.
See Appendix B for a summary of the Bank's investment securities at
December 31, 2023, highlighting their concentrations, credit
ratings and credit enhancement levels.
Deposits
During the fourth quarter of 2023, deposits
increased by $12.4 million, totaling approximately $2.6 billion at
December 31, 2023 compared to $2.5 billion at September 30, 2023.
In the fourth quarter of 2023, money market deposits increased by
$33.4 million, or 26% annualized and time deposits rose by $29.2
million, or 31% annualized. These increases were partially offset
by decreases in interest-bearing demand deposits of $36.5 million,
or 14% annualized, savings deposits of $9.2 million, or 5%
annualized, and non-interest bearing deposits of $4.5 million, or
4% annualized. The increase in time deposits was attributable to
promotional offerings of up to 18-month terms. The declines in the
noninterest-bearing deposits, interest bearing demand deposits and
savings deposits were primarily due to clients shifting to
higher-yielding products within the Bank. At December 31, 2023,
deposits that are uninsured and not collateralized totaled $442.7
million, or 17%, of total deposits compared to $387.5 million, or
15%, of total deposits at September 30, 2023. The Bank's
loan-to-deposit ratio was 90% at December 31, 2023 compared to 89%
at September 30, 2023.
Borrowings
The Bank actively manages its liquidity position
through its various sources of funding to meet the needs of its
clients. FHLB advances and other borrowings decreased by $27.9
million to $147.3 million at December 31, 2023 compared to $175.2
million at September 30, 2023. The Bank repaid some overnight
borrowings and FHLB advances during the fourth quarter of 2023
based on available liquidity from deposits and paydowns on
investment securities. 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 December 31, 2023.
Income Statement
Net Interest Income and Margin
Net interest income was $26.0 million for the
three months ended December 31, 2023 compared to $26.2 million for
the three months ended September 30, 2023. The net interest margin,
on a tax equivalent basis, declined to 3.71% in the fourth quarter
of 2023 from 3.73% in the third quarter of 2023. While the net
interest margin decreased only slightly, funding costs increased
due to the rise in money market deposits and time deposit
balances.
Interest income on loans increased by $1.2
million to $34.1 million for the three months ended December 31,
2023 compared to $32.9 million for the three months ended September
30, 2023. Loan growth and a full quarter impact from the third
quarter 2023 fed funds rate increase were the primary drivers of
this increase. Interest income on loans for the three months ended
December 31, 2023 included prepayment fee income of $0.2 million, a
decrease of $0.2 million from the three months ended September 30,
2023, which resulted in a decrease of two basis points in net
interest margin.
Interest income on investment securities was
$5.9 million for the three months ended December 31, 2023 compared
to $5.5 million in the third quarter of 2023. The additional
investment income was driven by increasing yields on
adjustable-rate securities from the prior quarter fed funds rate
increase.
Interest expense increased by $1.5 million to
$14.0 million for the three months ended December 31, 2023 compared
to $12.5 million for the three months ended September 30, 2023 due
primarily to higher average deposit balances and an increase in
deposit rates. Average interest-bearing deposits increased by $24.3
million during the three months ended December 31, 2023.
Provision for Credit Losses
The Company recorded a provision for credit
losses of $0.4 million for the three months ended December 31, 2023
compared to $0.1 million for the three months ended September 30,
2023. The allowance for credit losses increased by $0.4 million to
$28.7 million at December 31, 2023 compared to $28.3 million at
September 30, 2023. The allowance for credit losses was impacted
primarily by loan growth of $31.5 million during the fourth quarter
of 2023 as well as slight downward revisions to economic
assumptions utilized in the model. The allowance for credit losses
to total loans was 1.25% at both December 31, 2023 and September
30, 2023. Net recoveries were an inconsequential amount for the
three months ended December 31, 2023 compared to net charge-offs of
$0.2 million for the three months ended September 30, 2023. Special
mention loans decreased by $7.6 million from $31.8 million at
September 30, 2023 to $24.2 million at December 31, 2023 due to net
downgrades to classified status of $5.9 million and repayments of
$1.1 million. Classified loans increased by $21.4 million to $55.0
million at December 31, 2023 from $33.6 million at September 30,
2023. The increase in classified loans was primarily due to
downgrades to five commercial loans, spread within commercial real
estate and commercial and industrial loan segments, totaling $23.0
million. The increase in classified loans was partially offset by
repayments within this category totaling $2.3 million. Non-accrual
loans increased by $3.2 million to $25.5 million at December 31,
2023 from $22.3 million at September 30, 2023 primarily due to five
loans to one client within the residential real estate segments.
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 December 31, 2023, the Company had $236.4 million
in loans related to office space, which had a weighted average
loan-to-value ratio of 56% and a weighted average debt coverage
ratio of 1.77x, compared to $244.7 million at September 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 2% of the total
commercial real estate loan balance as of December 31, 2023).
Noninterest Income
Noninterest income increased by $0.6 million to
$6.5 million in the three months ended December 31, 2023 compared
to $5.9 million in the three months ended September 30, 2023.
During the fourth quarter of 2023, the Company
recorded swap fee income of $0.6 million compared to $0.3 million
in the three months ended September 30, 2023. Swap fee income
fluctuates based on market conditions and client demand.
Mortgage banking income increased by $0.3
million from a loss of $0.1 million in the third quarter of 2023 to
income of $0.2 million in the fourth quarter of 2023. During the
three months ended December 31, 2023, the fair value mark of the
Bank's held-for-sale loans declined by $0.3 million to a decrease
of $0.1 million compared to a decrease of $0.4 million during the
three months ended September 30, 2023. Market conditions and
elevated interest rates continued to hinder mortgage production
during the fourth quarter of 2023.
Noninterest Expenses
Noninterest expenses increased by $2.0 million
to $22.4 million in the three months ended December 31, 2023 from
$20.4 million in the three months ended September 30, 2023.
During the fourth quarter of 2023, the Company
announced it has entered into an agreement to merge with Codorus
Valley. For the three months ended December 31, 2023,
merger-related expenses totaled $1.1 million inclusive of due
diligence costs, legal expenses and a fairness opinion. The Company
expects to incur additional merger-related expenses due to the
pending completion of this merger of equals.
Salaries and benefits expense was $12.8 million
for the three months ended December 31, 2023 compared to $12.9
million for the three months ended September 30, 2023. The decrease
was primarily attributed to a decline of $0.1 million in employee
benefit costs.
Advertising and bank promotions expense
increased by $0.2 million to $0.5 million in the three months ended
December 31, 2023 from $0.3 million for the three months ended
September 30, 2023 due to $0.3 million in contributions to tax
credit programs during the fourth quarter of 2023. Taxes other than
income decreased by $0.2 million to $0.2 million in the three
months ended December 31, 2023 compared to $0.4 million in the
three months ended September 30, 2023. This decrease reflects the
tax credits recognized on the contributions during the fourth
quarter of 2023.
Professional services expense decreased by $0.3
million to $0.7 million in the three months ended December 31, 2023
from $1.0 million in the three months ended September 30, 2023 due
primarily to a reduction in consulting costs as certain technology
improvements and compliance enhancements were completed.
Other operating expenses increased by $1.1
million to $2.6 million during the fourth quarter of 2023 compared
to $1.5 million during the third quarter of 2023. This increase
included an increase of $0.8 million in credit value adjustments on
derivatives for the three months ended December 31, 2023 compared
to the three months ended September 30, 2023. The remaining
fluctuation is attributable to normal business operations.
Income Taxes
The Company's effective tax rate for the fourth
quarter of 2023 was 21.2% compared to 21.9% for the third quarter
of 2023. The effective tax rate was 20.8% for the year ended
December 31, 2023 compared to 17.2% for the year ended December 31,
2022. The nondeductible merger-related costs increased the
effective tax rate by 0.3% for the year ended December 31, 2023.
Similarly, the nondeductible merger-related costs increased the
effective tax rate by 1.4% for the fourth quarter of 2023.
The Company's effective tax rate for the three
months ended December 31, 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 lower effective tax rate in 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. The Company regularly analyzes its
projected taxable income and makes adjustments to the provision for
income taxes accordingly.
Capital
Shareholders’ equity totaled $265.1 million at
December 31, 2023, an increase of $22.0 million from $243.1 million
at September 30, 2023. The increase was primarily attributable to
other comprehensive income of $15.9 million and net income of $7.6
million partially offset by dividends paid of $2.1 million. Other
comprehensive income generated during the fourth quarter of 2023
was due to after-tax net unrealized gains on investment securities
of $17.5 million partially offset by net unrealized losses on cash
flow hedges of $1.6 million.
Tangible book value per share(1) increased to
$23.03 per share at December 31, 2023 from $20.94 per share at
September 30, 2023 and $19.47 per share at December 31, 2022 due to
the increase in shareholders' equity.
(1) Non-GAAP measure. See Appendix A for
additional information.
The Company's tangible common equity ratio
increased to 8.0% at December 31, 2023 from 7.3% at September 30,
2023 and 7.1% at December 31, 2022, primarily due to an increase in
tangible equity from an improvement in net unrealized losses on
investment securities as well as earnings. The Company's total
risk-based capital ratio was 13.0% at both December 31, 2023 and
September 30, 2023. The Company's Tier 1 leverage ratio increased
from 8.7% at September 30, 2023 to 8.9% at December 31, 2023. At
December 31, 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.
Investor Relations
Contact: |
Neelesh Kalani |
Executive Vice President,
Chief Financial Officer |
Phone (717) 510-7097 |
|
ORRSTOWN FINANCIAL
SERVICES, INC. |
|
|
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|
FINANCIAL HIGHLIGHTS
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
(Dollars in thousands) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Profitability for the
period: |
|
|
|
|
|
|
|
Net interest income |
$ |
26,018 |
|
|
$ |
27,484 |
|
|
$ |
104,906 |
|
|
$ |
99,630 |
|
Provision for credit losses |
|
418 |
|
|
|
585 |
|
|
|
1,682 |
|
|
|
4,160 |
|
Noninterest income |
|
6,491 |
|
|
|
6,226 |
|
|
|
25,652 |
|
|
|
26,952 |
|
Noninterest expenses |
|
22,392 |
|
|
|
21,236 |
|
|
|
83,843 |
|
|
|
95,806 |
|
Income before income tax expense |
|
9,699 |
|
|
|
11,889 |
|
|
|
45,033 |
|
|
|
26,616 |
|
Income tax expense |
|
2,056 |
|
|
|
2,263 |
|
|
|
9,370 |
|
|
|
4,579 |
|
Net income available to common shareholders |
$ |
7,643 |
|
|
$ |
9,626 |
|
|
$ |
35,663 |
|
|
$ |
22,037 |
|
|
|
|
|
|
|
|
|
Financial ratios: |
|
|
|
|
|
|
|
Return on average assets(1) |
|
1.00 |
% |
|
|
1.33 |
% |
|
|
1.19 |
% |
|
|
0.77 |
% |
Return on average assets, adjusted(1) (2) (3) |
|
1.13 |
% |
|
|
1.33 |
% |
|
|
1.22 |
% |
|
|
1.22 |
% |
Return on average equity(1) |
|
12.21 |
% |
|
|
17.28 |
% |
|
|
14.66 |
% |
|
|
9.02 |
% |
Return on average equity, adjusted(1) (2) (3) |
|
13.77 |
% |
|
|
17.28 |
% |
|
|
15.06 |
% |
|
|
14.25 |
% |
Net interest margin(1) |
|
3.71 |
% |
|
|
4.14 |
% |
|
|
3.80 |
% |
|
|
3.81 |
% |
Efficiency ratio |
|
68.9 |
% |
|
|
63.0 |
% |
|
|
64.2 |
% |
|
|
75.7 |
% |
Efficiency ratio, adjusted(2) (3) |
|
65.6 |
% |
|
|
63.0 |
% |
|
|
63.4 |
% |
|
|
62.9 |
% |
Income per common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.74 |
|
|
$ |
0.93 |
|
|
$ |
3.45 |
|
|
$ |
2.09 |
|
Basic, adjusted(2) (3) |
$ |
0.84 |
|
|
$ |
0.93 |
|
|
$ |
3.54 |
|
|
$ |
3.30 |
|
Diluted |
$ |
0.73 |
|
|
$ |
0.91 |
|
|
$ |
3.42 |
|
|
$ |
2.06 |
|
Diluted, adjusted(2) (3) |
$ |
0.83 |
|
|
$ |
0.91 |
|
|
$ |
3.51 |
|
|
$ |
3.25 |
|
|
|
|
|
|
|
|
|
Average equity to average assets |
|
8.18 |
% |
|
|
7.68 |
% |
|
|
8.11 |
% |
|
|
8.59 |
% |
|
|
|
|
|
|
|
|
(1)Annualized for the three months ended December 31, 2023 and
2022. |
(2)Ratio for the three and twelve months ended December 31, 2023
has been adjusted for merger-related costs. Ratio for the twelve
months ended December 31, 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) |
|
|
|
|
December 31, |
|
December 31, |
(Dollars in thousands, except per share amounts) |
|
2023 |
|
|
|
2022 |
|
At period-end: |
|
|
|
Total assets |
$ |
3,064,240 |
|
|
$ |
2,922,408 |
|
Total deposits |
|
2,558,814 |
|
|
|
2,476,246 |
|
Loans, net of allowance for credit losses |
|
2,269,611 |
|
|
|
2,126,054 |
|
Loans held-for-sale, at fair value |
|
5,816 |
|
|
|
10,880 |
|
Securities available for sale, at fair value |
|
513,519 |
|
|
|
513,728 |
|
Borrowings |
|
147,285 |
|
|
|
123,390 |
|
Subordinated notes |
|
32,093 |
|
|
|
32,026 |
|
Shareholders' equity |
|
265,056 |
|
|
|
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 |
|
1.11 |
% |
|
|
0.96 |
% |
Nonperforming assets to total assets |
|
0.83 |
% |
|
|
0.70 |
% |
Allowance for credit losses to nonaccrual loans |
|
112 |
% |
|
|
122 |
% |
Total risk-based capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
13.0 |
% |
|
|
12.7 |
% |
Orrstown Bank |
|
12.8 |
% |
|
|
12.3 |
% |
Tier 1 risk-based capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
10.8 |
% |
|
|
10.3 |
% |
Orrstown Bank |
|
11.6 |
% |
|
|
11.2 |
% |
Tier 1 common equity risk-based capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
10.8 |
% |
|
|
10.3 |
% |
Orrstown Bank |
|
11.6 |
% |
|
|
11.2 |
% |
Tier 1 leverage capital: |
|
|
|
Orrstown Financial Services, Inc. |
|
8.9 |
% |
|
|
8.5 |
% |
Orrstown Bank |
|
9.5 |
% |
|
|
9.2 |
% |
|
|
|
|
Book value per common share |
$ |
24.98 |
|
|
$ |
21.45 |
|
|
|
|
|
(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. |
|
ORRSTOWN FINANCIAL
SERVICES, INC. |
|
|
|
CONSOLIDATED BALANCE
SHEETS (Unaudited) |
|
|
|
|
|
|
|
(Dollars in thousands, except
per share amounts) |
December 31,2023 |
|
December 31,2022 |
Assets |
|
|
|
Cash and due from banks |
$ |
32,586 |
|
|
$ |
28,477 |
|
Interest-bearing deposits with
banks |
|
32,575 |
|
|
|
32,346 |
|
Cash and cash equivalents |
|
65,161 |
|
|
|
60,823 |
|
Restricted investments in bank
stocks |
|
11,992 |
|
|
|
10,642 |
|
Securities available for sale
(amortized cost of $549,089 and $563,278 at December 31, 2023
and December 31, 2022, respectively) |
|
513,519 |
|
|
|
513,728 |
|
Loans held for sale, at fair
value |
|
5,816 |
|
|
|
10,880 |
|
Loans |
|
2,298,313 |
|
|
|
2,151,232 |
|
Less: Allowance for credit
losses |
|
(28,702 |
) |
|
|
(25,178 |
) |
Net loans |
|
2,269,611 |
|
|
|
2,126,054 |
|
Premises and equipment,
net |
|
29,393 |
|
|
|
29,328 |
|
Cash surrender value of life
insurance |
|
73,204 |
|
|
|
71,760 |
|
Goodwill |
|
18,724 |
|
|
|
18,724 |
|
Other intangible assets,
net |
|
2,414 |
|
|
|
3,078 |
|
Accrued interest
receivable |
|
13,630 |
|
|
|
11,027 |
|
Deferred tax assets, net |
|
22,017 |
|
|
|
24,031 |
|
Other assets |
|
38,759 |
|
|
|
42,333 |
|
Total assets |
$ |
3,064,240 |
|
|
$ |
2,922,408 |
|
Liabilities |
|
|
|
Deposits: |
|
|
|
Noninterest-bearing |
$ |
430,959 |
|
|
$ |
494,131 |
|
Interest-bearing |
|
2,127,855 |
|
|
|
1,950,807 |
|
Deposits held for assumption in connection with sale of bank
branch |
|
— |
|
|
|
31,307 |
|
Total deposits |
|
2,558,814 |
|
|
|
2,476,246 |
|
Securities sold under
agreements to repurchase and federal funds purchased |
|
9,785 |
|
|
|
17,251 |
|
FHLB advances and other
borrowings |
|
137,500 |
|
|
|
106,139 |
|
Subordinated notes |
|
32,093 |
|
|
|
32,026 |
|
Accrued interest and other
liabilities |
|
60,992 |
|
|
|
61,850 |
|
Total liabilities |
|
2,799,184 |
|
|
|
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; 11,204,599 shares issued and 10,612,390 outstanding at
December 31, 2023; 11,229,242 shares issued and 10,671,413
outstanding at December 31, 2022 |
|
583 |
|
|
|
584 |
|
Additional paid—in
capital |
|
189,027 |
|
|
|
189,264 |
|
Retained earnings |
|
117,667 |
|
|
|
92,473 |
|
Accumulated other
comprehensive losses |
|
(28,476 |
) |
|
|
(39,913 |
) |
Treasury stock— 592,209 and
557,829 shares, at cost at December 31, 2023 and
December 31, 2022, respectively |
|
(13,745 |
) |
|
|
(13,512 |
) |
Total shareholders’ equity |
|
265,056 |
|
|
|
228,896 |
|
Total liabilities and shareholders’ equity |
$ |
3,064,240 |
|
|
$ |
2,922,408 |
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
(In thousands) |
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
Interest
income |
|
|
|
|
|
|
|
|
Loans |
|
$ |
33,910 |
|
|
$ |
26,980 |
|
$ |
126,595 |
|
|
$ |
93,528 |
|
Investment securities -
taxable |
|
|
4,787 |
|
|
|
3,775 |
|
|
18,031 |
|
|
|
10,237 |
|
Investment securities -
tax-exempt |
|
|
871 |
|
|
|
1,102 |
|
|
3,462 |
|
|
|
4,115 |
|
Short-term investments |
|
|
460 |
|
|
|
238 |
|
|
1,809 |
|
|
|
774 |
|
Total interest income |
|
|
40,028 |
|
|
|
32,095 |
|
|
149,897 |
|
|
|
108,654 |
|
Interest
expense |
|
|
|
|
|
|
|
|
Deposits |
|
|
12,118 |
|
|
|
3,579 |
|
|
37,510 |
|
|
|
6,337 |
|
Securities sold under
agreements to repurchase and federal funds purchased |
|
|
30 |
|
|
|
20 |
|
|
114 |
|
|
|
44 |
|
FHLB advances and other
borrowings |
|
|
1,358 |
|
|
|
509 |
|
|
5,350 |
|
|
|
630 |
|
Subordinated notes |
|
|
504 |
|
|
|
503 |
|
|
2,017 |
|
|
|
2,013 |
|
Total interest expense |
|
|
14,010 |
|
|
|
4,611 |
|
|
44,991 |
|
|
|
9,024 |
|
Net interest income |
|
|
26,018 |
|
|
|
27,484 |
|
|
104,906 |
|
|
|
99,630 |
|
Provision for credit
losses |
|
|
418 |
|
|
|
585 |
|
|
1,682 |
|
|
|
4,160 |
|
Net interest income after provision for credit losses |
|
|
25,600 |
|
|
|
26,899 |
|
|
103,224 |
|
|
|
95,470 |
|
Noninterest
income |
|
|
|
|
|
|
|
|
Service charges |
|
|
1,198 |
|
|
|
1,131 |
|
|
4,866 |
|
|
|
4,614 |
|
Interchange income |
|
|
952 |
|
|
|
996 |
|
|
3,873 |
|
|
|
4,055 |
|
Swap fee income |
|
|
588 |
|
|
|
697 |
|
|
1,039 |
|
|
|
2,632 |
|
Wealth management income |
|
|
2,945 |
|
|
|
2,535 |
|
|
11,340 |
|
|
|
11,251 |
|
Mortgage banking
activities |
|
|
143 |
|
|
|
202 |
|
|
591 |
|
|
|
407 |
|
Investment securities (losses)
gains |
|
|
(39 |
) |
|
|
3 |
|
|
(47 |
) |
|
|
(160 |
) |
Other income |
|
|
704 |
|
|
|
662 |
|
|
3,990 |
|
|
|
4,153 |
|
Total noninterest income |
|
|
6,491 |
|
|
|
6,226 |
|
|
25,652 |
|
|
|
26,952 |
|
Noninterest
expenses |
|
|
|
|
|
|
|
|
Salaries and employee
benefits |
|
|
12,848 |
|
|
|
12,650 |
|
|
50,983 |
|
|
|
48,004 |
|
Occupancy, furniture and
equipment |
|
|
2,534 |
|
|
|
2,442 |
|
|
9,593 |
|
|
|
9,812 |
|
Data processing |
|
|
1,247 |
|
|
|
1,150 |
|
|
4,913 |
|
|
|
4,560 |
|
Advertising and bank
promotions |
|
|
501 |
|
|
|
750 |
|
|
2,157 |
|
|
|
2,264 |
|
FDIC insurance |
|
|
460 |
|
|
|
316 |
|
|
1,960 |
|
|
|
1,083 |
|
Professional services |
|
|
702 |
|
|
|
837 |
|
|
2,905 |
|
|
|
3,254 |
|
Taxes other than income |
|
|
203 |
|
|
|
231 |
|
|
1,050 |
|
|
|
1,391 |
|
Intangible asset
amortization |
|
|
236 |
|
|
|
260 |
|
|
953 |
|
|
|
1,105 |
|
Merger-related expenses |
|
|
1,059 |
|
|
|
— |
|
|
1,059 |
|
|
|
— |
|
Provision for legal
settlement |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
13,000 |
|
Restructuring expenses |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
3,155 |
|
Other operating expenses |
|
|
2,602 |
|
|
|
2,600 |
|
|
8,270 |
|
|
|
8,178 |
|
Total noninterest expenses |
|
|
22,392 |
|
|
|
21,236 |
|
|
83,843 |
|
|
|
95,806 |
|
Income before income tax expense |
|
|
9,699 |
|
|
|
11,889 |
|
|
45,033 |
|
|
|
26,616 |
|
Income tax expense |
|
|
2,056 |
|
|
|
2,263 |
|
|
9,370 |
|
|
|
4,579 |
|
Net
income |
|
$ |
7,643 |
|
|
$ |
9,626 |
|
$ |
35,663 |
|
|
$ |
22,037 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
Share
information: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.74 |
|
|
$ |
0.93 |
|
$ |
3.45 |
|
|
$ |
2.09 |
|
Diluted earnings per
share |
|
$ |
0.73 |
|
|
$ |
0.91 |
|
$ |
3.42 |
|
|
$ |
2.06 |
|
Dividends paid per share |
|
$ |
0.20 |
|
|
$ |
0.19 |
|
$ |
0.80 |
|
|
$ |
0.76 |
|
Weighted average shares -
basic |
|
|
10,321 |
|
|
|
10,382 |
|
|
10,340 |
|
|
|
10,553 |
|
Weighted average shares -
diluted |
|
|
10,419 |
|
|
|
10,550 |
|
|
10,435 |
|
|
|
10,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
ANALYSIS
OF NET INTEREST INCOME |
|
|
|
|
Average
Balances and Interest Rates, Taxable-Equivalent Basis
(Unaudited) |
|
|
|
Three Months Ended |
|
12/31/2023 |
|
9/30/2023 |
|
6/30/2023 |
|
3/31/2023 |
|
12/31/2022 |
(Dollars in
thousands) |
|
|
Taxable- |
|
Taxable- |
|
|
|
Taxable- |
|
Taxable- |
|
|
|
Taxable- |
|
Taxable- |
|
|
|
Taxable- |
|
Taxable- |
|
|
|
Taxable- |
|
Taxable- |
Average |
|
Equivalent |
|
Equivalent |
|
Average |
|
Equivalent |
|
Equivalent |
|
Average |
|
Equivalent |
|
Equivalent |
|
Average |
|
Equivalent |
|
Equivalent |
|
Average |
|
Equivalent |
|
Equivalent |
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds sold & interest-bearing bank balances |
$ |
37,873 |
|
$ |
460 |
|
|
4.82 |
% |
|
$ |
57,778 |
|
$ |
633 |
|
|
4.35 |
% |
|
$ |
37,895 |
|
$ |
418 |
|
|
4.42 |
% |
|
$ |
29,599 |
|
$ |
298 |
|
|
4.07 |
% |
|
$ |
28,419 |
|
$ |
238 |
|
|
3.31 |
% |
Investment securities
(1)(2) |
|
508,891 |
|
|
5,890 |
|
|
4.63 |
|
|
|
521,234 |
|
|
5,548 |
|
|
4.26 |
|
|
|
526,225 |
|
|
5,510 |
|
|
4.19 |
|
|
|
525,685 |
|
|
5,465 |
|
|
4.18 |
|
|
|
512,779 |
|
|
5,170 |
|
|
4.03 |
|
Loans (1)(3)(4) |
|
2,286,678 |
|
|
34,055 |
|
|
5.91 |
|
|
|
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 |
|
Total interest-earning
assets |
|
2,833,442 |
|
|
40,405 |
|
|
5.67 |
|
|
|
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 |
|
Other assets |
|
204,382 |
|
|
|
|
|
|
200,447 |
|
|
|
|
|
|
191,983 |
|
|
|
|
|
|
197,620 |
|
|
|
|
|
|
202,384 |
|
|
|
|
Total assets |
$ |
3,037,824 |
|
|
|
|
|
$ |
3,036,186 |
|
|
|
|
|
$ |
2,989,415 |
|
|
|
|
|
$ |
2,933,128 |
|
|
|
|
|
$ |
2,876,634 |
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand
deposits |
$ |
1,543,575 |
|
|
8,333 |
|
|
2.14 |
|
|
$ |
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 |
|
Savings deposits |
|
178,351 |
|
|
153 |
|
|
0.34 |
|
|
|
190,817 |
|
|
164 |
|
|
0.34 |
|
|
|
204,584 |
|
|
135 |
|
|
0.26 |
|
|
|
219,408 |
|
|
133 |
|
|
0.25 |
|
|
|
228,521 |
|
|
132 |
|
|
0.23 |
|
Time deposits |
|
392,085 |
|
|
3,632 |
|
|
3.67 |
|
|
|
357,194 |
|
|
2,942 |
|
|
3.27 |
|
|
|
326,034 |
|
|
2,200 |
|
|
2.71 |
|
|
|
275,880 |
|
|
1,207 |
|
|
1.78 |
|
|
|
254,637 |
|
|
609 |
|
|
0.95 |
|
Total interest-bearing
deposits |
|
2,114,011 |
|
|
12,118 |
|
|
2.27 |
|
|
|
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 |
|
Securities sold under
agreements to repurchase and federal funds purchased |
|
13,874 |
|
|
30 |
|
|
0.85 |
|
|
|
15,006 |
|
|
31 |
|
|
0.83 |
|
|
|
13,685 |
|
|
28 |
|
|
0.82 |
|
|
|
13,868 |
|
|
25 |
|
|
0.72 |
|
|
|
18,211 |
|
|
20 |
|
|
0.46 |
|
FHLB advances and other
borrowings |
|
127,843 |
|
|
1,358 |
|
|
4.21 |
|
|
|
128,131 |
|
|
1,354 |
|
|
4.19 |
|
|
|
132,094 |
|
|
1,386 |
|
|
4.21 |
|
|
|
106,434 |
|
|
1,252 |
|
|
4.77 |
|
|
|
48,276 |
|
|
509 |
|
|
4.21 |
|
Subordinated notes |
|
32,083 |
|
|
504 |
|
|
6.29 |
|
|
|
32,066 |
|
|
505 |
|
|
6.29 |
|
|
|
32,049 |
|
|
504 |
|
|
6.29 |
|
|
|
32,033 |
|
|
504 |
|
|
6.29 |
|
|
|
32,016 |
|
|
503 |
|
|
6.29 |
|
Total interest-bearing
liabilities |
|
2,287,811 |
|
|
14,010 |
|
|
2.43 |
|
|
|
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 |
|
Noninterest-bearing demand
deposits |
|
441,695 |
|
|
|
|
|
|
468,628 |
|
|
|
|
|
|
476,123 |
|
|
|
|
|
|
495,562 |
|
|
|
|
|
|
540,275 |
|
|
|
|
Other liabilities |
|
59,876 |
|
|
|
|
|
|
54,353 |
|
|
|
|
|
|
50,851 |
|
|
|
|
|
|
52,630 |
|
|
|
|
|
|
74,602 |
|
|
|
|
Total liabilities |
|
2,789,382 |
|
|
|
|
|
|
2,787,923 |
|
|
|
|
|
|
2,746,888 |
|
|
|
|
|
|
2,699,236 |
|
|
|
|
|
|
2,655,647 |
|
|
|
|
Shareholders' equity |
|
248,442 |
|
|
|
|
|
|
248,263 |
|
|
|
|
|
|
242,527 |
|
|
|
|
|
|
233,892 |
|
|
|
|
|
|
220,987 |
|
|
|
|
Total |
$ |
3,037,824 |
|
|
|
|
|
$ |
3,036,186 |
|
|
|
|
|
$ |
2,989,415 |
|
|
|
|
|
$ |
2,933,128 |
|
|
|
|
|
$ |
2,876,634 |
|
|
|
|
Taxable-equivalent net
interest income / net interest spread |
|
|
|
26,395 |
|
|
3.24 |
% |
|
|
|
|
26,587 |
|
|
3.29 |
% |
|
|
|
|
26,731 |
|
|
3.44 |
% |
|
|
|
|
26,624 |
|
|
3.62 |
% |
|
|
|
|
27,858 |
|
|
3.93 |
% |
Taxable-equivalent net
interest margin |
|
|
|
|
3.71 |
% |
|
|
|
|
|
3.73 |
% |
|
|
|
|
|
3.83 |
% |
|
|
|
|
|
3.94 |
% |
|
|
|
|
|
4.14 |
% |
Taxable-equivalent
adjustment |
|
|
|
(377 |
) |
|
|
|
|
|
|
(368 |
) |
|
|
|
|
|
|
(356 |
) |
|
|
|
|
|
|
(330 |
) |
|
|
|
|
|
|
(374 |
) |
|
|
Net interest income |
|
|
$ |
26,018 |
|
|
|
|
|
|
$ |
26,219 |
|
|
|
|
|
|
$ |
26,375 |
|
|
|
|
|
|
$ |
26,294 |
|
|
|
|
|
|
$ |
27,484 |
|
|
|
Ratio of average
interest-earning assets to average interest-bearing
liabilities |
|
|
|
|
124 |
% |
|
|
|
|
|
125 |
% |
|
|
|
|
|
126 |
% |
|
|
|
|
|
127 |
% |
|
|
|
|
|
131 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
balance of investment securities is computed at fair value. |
(3) Average
balances include nonaccrual loans. |
(4) 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) |
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
December 31, 2023 |
|
December 31, 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 |
$ |
40,856 |
|
$ |
1,809 |
|
|
4.43 |
% |
|
$ |
98,793 |
|
$ |
774 |
|
|
0.78 |
% |
Investment securities
(1)(2) |
|
520,465 |
|
|
22,414 |
|
|
4.31 |
|
|
|
509,640 |
|
|
15,446 |
|
|
3.03 |
|
Loans (1)(3)(4) |
|
2,239,574 |
|
|
127,107 |
|
|
5.68 |
|
|
|
2,042,422 |
|
|
93,799 |
|
|
4.59 |
|
Total interest-earning
assets |
|
2,800,895 |
|
|
151,330 |
|
|
5.40 |
|
|
|
2,650,855 |
|
|
110,019 |
|
|
4.15 |
|
Other assets |
|
198,632 |
|
|
|
|
|
|
193,945 |
|
|
|
|
Total assets |
$ |
2,999,527 |
|
|
|
|
|
$ |
2,844,800 |
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand
deposits |
$ |
1,525,204 |
|
|
26,944 |
|
|
1.77 |
|
|
$ |
1,414,177 |
|
|
4,308 |
|
|
0.30 |
|
Savings deposits |
|
198,157 |
|
|
585 |
|
|
0.30 |
|
|
|
232,660 |
|
|
341 |
|
|
0.15 |
|
Time deposits |
|
338,170 |
|
|
9,981 |
|
|
2.95 |
|
|
|
273,276 |
|
|
1,688 |
|
|
0.62 |
|
Total interest-bearing
deposits |
|
2,061,531 |
|
|
37,510 |
|
|
1.82 |
|
|
|
1,920,113 |
|
|
6,337 |
|
|
0.33 |
|
Securities sold under
agreements to repurchase and federal funds purchased |
|
14,111 |
|
|
114 |
|
|
0.80 |
|
|
|
22,305 |
|
|
44 |
|
|
0.20 |
|
FHLB advances and other
borrowings |
|
123,697 |
|
|
5,350 |
|
|
4.32 |
|
|
|
15,678 |
|
|
630 |
|
|
4.01 |
|
Subordinated notes |
|
32,058 |
|
|
2,017 |
|
|
6.29 |
|
|
|
31,993 |
|
|
2,013 |
|
|
6.29 |
|
Total interest-bearing
liabilities |
|
2,231,397 |
|
|
44,991 |
|
|
2.02 |
|
|
|
1,990,089 |
|
|
9,024 |
|
|
0.45 |
|
Noninterest-bearing demand
deposits |
|
470,349 |
|
|
|
|
|
|
557,142 |
|
|
|
|
Other liabilities |
|
54,447 |
|
|
|
|
|
|
53,288 |
|
|
|
|
Total liabilities |
|
2,756,193 |
|
|
|
|
|
|
2,600,519 |
|
|
|
|
Shareholders' equity |
|
243,334 |
|
|
|
|
|
|
244,281 |
|
|
|
|
Total liabilities and
shareholders' equity |
$ |
2,999,527 |
|
|
|
|
|
$ |
2,844,800 |
|
|
|
|
Taxable-equivalent net
interest income / net interest spread |
|
|
|
106,339 |
|
|
3.39 |
% |
|
|
|
|
100,995 |
|
|
3.70 |
% |
Taxable-equivalent net
interest margin |
|
|
|
|
3.80 |
% |
|
|
|
|
|
3.81 |
% |
Taxable-equivalent
adjustment |
|
|
|
(1,433 |
) |
|
|
|
|
|
|
(1,365 |
) |
|
|
Net interest income |
|
|
$ |
104,906 |
|
|
|
|
|
|
$ |
99,630 |
|
|
|
Ratio of average
interest-earning assets to average interest-bearing
liabilities |
|
|
|
|
126 |
% |
|
|
|
|
|
133 |
% |
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
balance of investment securities is computed at fair value. |
(3) Average
balances include nonaccrual loans. |
(4) Interest
income on loans includes prepayment and late fees, where
applicable. |
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
Profitability for the
quarter: |
|
|
|
|
|
|
|
|
|
Net interest income |
$ |
26,018 |
|
|
$ |
26,219 |
|
|
$ |
26,375 |
|
|
$ |
26,294 |
|
|
$ |
27,484 |
|
Provision for credit losses |
|
418 |
|
|
|
136 |
|
|
|
399 |
|
|
|
729 |
|
|
|
585 |
|
Noninterest income |
|
6,491 |
|
|
|
5,925 |
|
|
|
7,158 |
|
|
|
6,078 |
|
|
|
6,226 |
|
Noninterest expenses |
|
22,392 |
|
|
|
20,447 |
|
|
|
20,749 |
|
|
|
20,255 |
|
|
|
21,236 |
|
Income before income taxes |
|
9,699 |
|
|
|
11,561 |
|
|
|
12,385 |
|
|
|
11,388 |
|
|
|
11,889 |
|
Income tax expense |
|
2,056 |
|
|
|
2,535 |
|
|
|
2,547 |
|
|
|
2,232 |
|
|
|
2,263 |
|
Net income |
$ |
7,643 |
|
|
$ |
9,026 |
|
|
$ |
9,838 |
|
|
$ |
9,156 |
|
|
$ |
9,626 |
|
|
|
|
|
|
|
|
|
|
|
Financial ratios: |
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.00 |
% |
|
|
1.18 |
% |
|
|
1.32 |
% |
|
|
1.27 |
% |
|
|
1.33 |
% |
Return on average assets, adjusted (1)(2)(3) |
|
1.13 |
% |
|
|
1.18 |
% |
|
|
1.32 |
% |
|
|
1.27 |
% |
|
|
1.33 |
% |
Return on average equity (1) |
|
12.21 |
% |
|
|
14.42 |
% |
|
|
16.27 |
% |
|
|
15.88 |
% |
|
|
17.28 |
% |
Return on average equity, adjusted (1)(2)(3) |
|
13.77 |
% |
|
|
14.42 |
% |
|
|
16.27 |
% |
|
|
15.88 |
% |
|
|
17.28 |
% |
Net interest margin (1) |
|
3.71 |
% |
|
|
3.73 |
% |
|
|
3.83 |
% |
|
|
3.94 |
% |
|
|
4.14 |
% |
Efficiency ratio |
|
68.9 |
% |
|
|
63.6 |
% |
|
|
61.9 |
% |
|
|
62.6 |
% |
|
|
63.0 |
% |
Efficiency ratio, adjusted (2)(3) |
|
65.6 |
% |
|
|
63.6 |
% |
|
|
61.9 |
% |
|
|
62.6 |
% |
|
|
63.0 |
% |
|
|
|
|
|
|
|
|
|
|
Per share information: |
|
|
|
|
|
|
|
|
|
Income per common share: |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.74 |
|
|
$ |
0.87 |
|
|
$ |
0.95 |
|
|
$ |
0.88 |
|
|
$ |
0.93 |
|
Basic, adjusted (2)(3) |
|
0.84 |
|
|
|
0.87 |
|
|
|
0.95 |
|
|
|
0.88 |
|
|
|
0.93 |
|
Diluted |
|
0.73 |
|
|
|
0.87 |
|
|
|
0.94 |
|
|
|
0.87 |
|
|
|
0.91 |
|
Diluted, adjusted (2)(3) |
|
0.83 |
|
|
|
0.87 |
|
|
|
0.94 |
|
|
|
0.87 |
|
|
|
0.91 |
|
Book value |
|
24.98 |
|
|
|
22.90 |
|
|
|
23.15 |
|
|
|
22.46 |
|
|
|
21.45 |
|
Tangible book value |
|
23.03 |
|
|
|
20.94 |
|
|
|
21.19 |
|
|
|
20.50 |
|
|
|
19.47 |
|
Cash dividends paid |
|
0.20 |
|
|
|
0.20 |
|
|
|
0.20 |
|
|
|
0.20 |
|
|
|
0.19 |
|
|
|
|
|
|
|
|
|
|
|
Average basic shares |
|
10,321 |
|
|
|
10,319 |
|
|
|
10,336 |
|
|
|
10,385 |
|
|
|
10,382 |
|
Average diluted shares |
|
10,419 |
|
|
|
10,405 |
|
|
|
10,421 |
|
|
|
10,496 |
|
|
|
10,550 |
|
(1) Annualized. |
(2) Ratio has been adjusted for the merger-related costs for the
three months ended December 31, 2023. |
(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) |
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
Noninterest income: |
|
|
|
|
|
|
|
|
|
Service charges |
$ |
1,198 |
|
|
$ |
1,260 |
|
|
$ |
1,251 |
|
|
$ |
1,157 |
|
|
$ |
1,131 |
|
Interchange income |
|
952 |
|
|
|
963 |
|
|
|
993 |
|
|
|
965 |
|
|
|
996 |
|
Swap fee income |
|
588 |
|
|
|
255 |
|
|
|
196 |
|
|
|
— |
|
|
|
697 |
|
Wealth management income |
|
2,945 |
|
|
|
2,826 |
|
|
|
2,822 |
|
|
|
2,747 |
|
|
|
2,535 |
|
Mortgage banking activities |
|
143 |
|
|
|
(142 |
) |
|
|
112 |
|
|
|
478 |
|
|
|
202 |
|
Other income |
|
704 |
|
|
|
761 |
|
|
|
1,786 |
|
|
|
739 |
|
|
|
662 |
|
Investment securities (losses) gains |
|
(39 |
) |
|
|
2 |
|
|
|
(2 |
) |
|
|
(8 |
) |
|
|
3 |
|
Total noninterest income |
$ |
6,491 |
|
|
$ |
5,925 |
|
|
$ |
7,158 |
|
|
$ |
6,078 |
|
|
$ |
6,226 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses: |
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
$ |
12,848 |
|
|
$ |
12,885 |
|
|
$ |
13,054 |
|
|
$ |
12,196 |
|
|
$ |
12,650 |
|
Occupancy, furniture and equipment |
|
2,534 |
|
|
|
2,460 |
|
|
|
2,266 |
|
|
|
2,333 |
|
|
|
2,442 |
|
Data processing |
|
1,247 |
|
|
|
1,248 |
|
|
|
1,201 |
|
|
|
1,217 |
|
|
|
1,150 |
|
Advertising and bank promotions |
|
501 |
|
|
|
332 |
|
|
|
919 |
|
|
|
405 |
|
|
|
750 |
|
FDIC insurance |
|
460 |
|
|
|
477 |
|
|
|
519 |
|
|
|
504 |
|
|
|
316 |
|
Professional services |
|
702 |
|
|
|
965 |
|
|
|
504 |
|
|
|
734 |
|
|
|
837 |
|
Taxes other than income |
|
203 |
|
|
|
387 |
|
|
|
3 |
|
|
|
457 |
|
|
|
231 |
|
Intangible asset amortization |
|
236 |
|
|
|
228 |
|
|
|
239 |
|
|
|
250 |
|
|
|
260 |
|
Merger-related expenses |
|
1,059 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other operating expenses |
|
2,602 |
|
|
|
1,465 |
|
|
|
2,044 |
|
|
|
2,159 |
|
|
|
2,600 |
|
Total noninterest expenses |
$ |
22,392 |
|
|
$ |
20,447 |
|
|
$ |
20,749 |
|
|
$ |
20,255 |
|
|
$ |
21,236 |
|
|
ORRSTOWN
FINANCIAL SERVICES, INC. |
|
|
|
|
|
|
|
|
HISTORICAL
TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) |
|
|
|
|
|
|
(continued) |
|
|
|
|
|
|
|
|
|
(In thousands) |
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
Balance Sheet at quarter
end: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
65,161 |
|
|
$ |
94,939 |
|
|
$ |
76,318 |
|
|
$ |
98,323 |
|
|
$ |
60,823 |
|
Restricted investments in bank stocks |
|
11,992 |
|
|
|
12,987 |
|
|
|
12,602 |
|
|
|
12,869 |
|
|
|
10,642 |
|
Securities available for sale |
|
513,519 |
|
|
|
495,162 |
|
|
|
508,612 |
|
|
|
520,232 |
|
|
|
513,728 |
|
Loans held for sale, at fair value |
|
5,816 |
|
|
|
6,448 |
|
|
|
6,450 |
|
|
|
7,341 |
|
|
|
10,880 |
|
Loans: |
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
Owner occupied |
|
373,757 |
|
|
|
376,350 |
|
|
|
366,439 |
|
|
|
339,371 |
|
|
|
315,770 |
|
Non-owner occupied |
|
694,638 |
|
|
|
630,514 |
|
|
|
626,140 |
|
|
|
603,396 |
|
|
|
608,043 |
|
Multi-family |
|
150,675 |
|
|
|
143,437 |
|
|
|
145,257 |
|
|
|
144,053 |
|
|
|
138,832 |
|
Non-owner occupied residential |
|
95,040 |
|
|
|
100,391 |
|
|
|
105,504 |
|
|
|
106,390 |
|
|
|
104,604 |
|
Commercial and industrial (1) |
|
367,085 |
|
|
|
374,190 |
|
|
|
379,905 |
|
|
|
380,683 |
|
|
|
357,774 |
|
Acquisition and development: |
|
|
|
|
|
|
|
|
|
1-4 family residential construction |
|
24,516 |
|
|
|
25,642 |
|
|
|
20,461 |
|
|
|
20,941 |
|
|
|
25,068 |
|
Commercial and land development |
|
115,249 |
|
|
|
153,279 |
|
|
|
143,177 |
|
|
|
174,556 |
|
|
|
158,308 |
|
Municipal |
|
9,812 |
|
|
|
10,334 |
|
|
|
10,638 |
|
|
|
11,329 |
|
|
|
12,173 |
|
Total commercial loans |
|
1,830,772 |
|
|
|
1,814,137 |
|
|
|
1,797,521 |
|
|
|
1,780,719 |
|
|
|
1,720,572 |
|
Residential mortgage: |
|
|
|
|
|
|
|
|
|
First lien |
|
266,239 |
|
|
|
248,335 |
|
|
|
235,813 |
|
|
|
227,031 |
|
|
|
229,849 |
|
Home equity – term |
|
5,078 |
|
|
|
5,223 |
|
|
|
5,228 |
|
|
|
5,371 |
|
|
|
5,505 |
|
Home equity – lines of credit |
|
186,450 |
|
|
|
188,736 |
|
|
|
185,099 |
|
|
|
183,340 |
|
|
|
183,241 |
|
Installment and other loans |
|
9,774 |
|
|
|
10,405 |
|
|
|
10,756 |
|
|
|
11,040 |
|
|
|
12,065 |
|
Total loans |
|
2,298,313 |
|
|
|
2,266,836 |
|
|
|
2,234,417 |
|
|
|
2,207,501 |
|
|
|
2,151,232 |
|
Allowance for credit losses (2) |
|
(28,702 |
) |
|
|
(28,278 |
) |
|
|
(28,383 |
) |
|
|
(28,364 |
) |
|
|
(25,178 |
) |
Net loans held-for-investment |
|
2,269,611 |
|
|
|
2,238,558 |
|
|
|
2,206,034 |
|
|
|
2,179,137 |
|
|
|
2,126,054 |
|
Goodwill |
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
Other intangible assets, net |
|
2,414 |
|
|
|
2,650 |
|
|
|
2,589 |
|
|
|
2,828 |
|
|
|
3,078 |
|
Total assets |
|
3,064,240 |
|
|
|
3,054,435 |
|
|
|
3,008,197 |
|
|
|
3,011,548 |
|
|
|
2,922,408 |
|
Total deposits |
|
2,558,814 |
|
|
|
2,546,435 |
|
|
|
2,522,861 |
|
|
|
2,515,626 |
|
|
|
2,476,246 |
|
Borrowings |
|
147,285 |
|
|
|
175,241 |
|
|
|
152,229 |
|
|
|
176,315 |
|
|
|
123,390 |
|
Subordinated notes |
|
32,093 |
|
|
|
32,076 |
|
|
|
32,059 |
|
|
|
32,042 |
|
|
|
32,026 |
|
Total shareholders' equity |
|
265,056 |
|
|
|
243,080 |
|
|
|
245,641 |
|
|
|
240,161 |
|
|
|
228,896 |
|
(1) This balance includes $5.7 million, $6.2 million, $7.2 million,
$10.8 million and $13.8 million of Small Business Administration
Paycheck Protection Program loans, net of deferred fees and costs,
at December 31, 2023, September 30, 2023, June 30,
2023, March 31, 2023 and December 31, 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) |
|
|
|
|
|
|
|
|
|
|
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
Capital and credit quality
measures (1): |
|
|
|
|
|
|
|
|
|
Total risk-based capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
13.0 |
% |
|
|
13.0 |
% |
|
|
13.0 |
% |
|
|
12.8 |
% |
|
|
12.7 |
% |
Orrstown Bank |
|
12.8 |
% |
|
|
12.5 |
% |
|
|
12.5 |
% |
|
|
12.4 |
% |
|
|
12.3 |
% |
Tier 1 risk-based
capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
10.8 |
% |
|
|
10.6 |
% |
|
|
10.5 |
% |
|
|
10.4 |
% |
|
|
10.3 |
% |
Orrstown Bank |
|
11.6 |
% |
|
|
11.4 |
% |
|
|
11.4 |
% |
|
|
11.2 |
% |
|
|
11.2 |
% |
Tier 1 common equity
risk-based capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
10.8 |
% |
|
|
10.6 |
% |
|
|
10.5 |
% |
|
|
10.4 |
% |
|
|
10.3 |
% |
Orrstown Bank |
|
11.6 |
% |
|
|
11.4 |
% |
|
|
11.4 |
% |
|
|
11.2 |
% |
|
|
11.2 |
% |
Tier 1 leverage capital: |
|
|
|
|
|
|
|
|
|
Orrstown Financial Services, Inc |
|
8.9 |
% |
|
|
8.7 |
% |
|
|
8.6 |
% |
|
|
8.5 |
% |
|
|
8.5 |
% |
Orrstown Bank |
|
9.5 |
% |
|
|
9.3 |
% |
|
|
9.3 |
% |
|
|
9.2 |
% |
|
|
9.2 |
% |
|
|
|
|
|
|
|
|
|
|
Average equity to average assets |
|
8.18 |
% |
|
|
8.18 |
% |
|
|
8.11 |
% |
|
|
7.97 |
% |
|
|
7.68 |
% |
Allowance for credit losses to total loans |
|
1.25 |
% |
|
|
1.25 |
% |
|
|
1.27 |
% |
|
|
1.28 |
% |
|
|
1.17 |
% |
Total nonaccrual loans to total loans |
|
1.11 |
% |
|
|
0.98 |
% |
|
|
0.94 |
% |
|
|
0.96 |
% |
|
|
0.96 |
% |
Nonperforming assets to total assets |
|
0.83 |
% |
|
|
0.73 |
% |
|
|
0.70 |
% |
|
|
0.71 |
% |
|
|
0.70 |
% |
Allowance for credit losses to nonaccrual loans |
|
112 |
% |
|
|
127 |
% |
|
|
135 |
% |
|
|
134 |
% |
|
|
122 |
% |
|
|
|
|
|
|
|
|
|
|
Other information: |
|
|
|
|
|
|
|
|
|
Net (recoveries) charge-offs |
$ |
(6 |
) |
|
$ |
241 |
|
|
$ |
380 |
|
|
$ |
(34 |
) |
|
$ |
116 |
|
Classified loans |
|
55,030 |
|
|
|
33,593 |
|
|
|
26,347 |
|
|
|
34,024 |
|
|
|
36,325 |
|
Nonperforming and other risk assets: |
|
|
|
|
|
|
|
|
|
Nonaccrual loans (2) |
|
25,527 |
|
|
|
22,324 |
|
|
|
21,062 |
|
|
|
21,246 |
|
|
|
20,583 |
|
Other real estate owned |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
85 |
|
|
|
— |
|
Total nonperforming assets |
|
25,527 |
|
|
|
22,324 |
|
|
|
21,062 |
|
|
|
21,331 |
|
|
|
20,583 |
|
Financial difficulty modifications / Troubled debt restructurings
still accruing (3) |
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
682 |
|
Loans past due 90 days or more and still accruing (2) |
|
66 |
|
|
|
277 |
|
|
|
539 |
|
|
|
28 |
|
|
|
439 |
|
Total nonperforming and other risk assets |
$ |
25,602 |
|
|
$ |
22,601 |
|
|
$ |
21,601 |
|
|
$ |
21,359 |
|
|
$ |
21,704 |
|
(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, zero and $0.4 million of purchased credit
impaired loans at December 31, 2023, September 30, 2023,
June 30, 2023, March 31, 2023, and December 31,
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 modified
terms for two loans totaling $1.4 million, including one existing
nonaccrual loan totaling $1.4 million, which met 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
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.
As a result of acquisitions, the Company has
intangible assets consisting of goodwill and core deposit and other
intangible assets, which totaled $21.1 million and $21.8 million at
December 31, 2023 and December 31, 2022, respectively. In
addition, during the three and twelve months ended
December 31, 2023, the Company incurred $1.1 million in
merger-related expenses. Additionally, the Company incurred $3.2
million and $13.0 million in restructuring charges and a provision
for legal settlement, respectively, during the year ended
December 31, 2022.
Tangible book value per common share and the
impact of the merger-related expenses, 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 |
|
December 31,2023 |
|
September 30,2023 |
|
June 30,2023 |
|
March 31,2023 |
|
December 31,2022 |
Shareholders' equity (most directly comparable GAAP-based
measure) |
|
$ |
265,056 |
|
|
$ |
243,080 |
|
|
$ |
245,641 |
|
|
$ |
240,161 |
|
|
$ |
228,896 |
|
Less: Goodwill |
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
|
|
18,724 |
|
Other intangible assets |
|
|
2,414 |
|
|
|
2,650 |
|
|
|
2,589 |
|
|
|
2,828 |
|
|
|
3,078 |
|
Related tax effect |
|
|
(507 |
) |
|
|
(557 |
) |
|
|
(544 |
) |
|
|
(594 |
) |
|
|
(646 |
) |
Tangible common equity
(non-GAAP) |
|
$ |
244,425 |
|
|
$ |
222,263 |
|
|
$ |
224,872 |
|
|
$ |
219,203 |
|
|
$ |
207,740 |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
10,612 |
|
|
|
10,613 |
|
|
|
10,611 |
|
|
|
10,692 |
|
|
|
10,671 |
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share (most
directly comparable GAAP-based measure) |
|
$ |
24.98 |
|
|
$ |
22.90 |
|
|
$ |
23.15 |
|
|
$ |
22.46 |
|
|
$ |
21.45 |
|
Intangible assets per
share |
|
|
1.95 |
|
|
|
1.96 |
|
|
|
1.96 |
|
|
|
1.96 |
|
|
|
1.98 |
|
Tangible book value per share
(non-GAAP) |
|
$ |
23.03 |
|
|
$ |
20.94 |
|
|
$ |
21.19 |
|
|
$ |
20.50 |
|
|
$ |
19.47 |
|
|
|
|
|
|
|
|
|
|
|
|
(dollars and shares in thousands) |
Three Months Ended |
|
Twelve Months Ended |
Adjusted Ratios for
Merger-Related Expenses, Restructuring Charges and Provision for
Legal Settlement |
December 31,2023 |
|
December 31,2022 |
|
December 31,2023 |
|
December 31,2022 |
Net income (A) - most directly comparable GAAP-based measure |
$ |
7,643 |
|
|
$ |
9,626 |
|
|
$ |
35,663 |
|
|
$ |
22,037 |
|
Plus: Merger-related expenses
(B) |
|
1,059 |
|
|
|
— |
|
|
|
1,059 |
|
|
|
— |
|
Plus: Provision for legal
settlement (B) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,000 |
|
Plus: Restructuring expenses
(B) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,155 |
|
Less: Related tax effect
(C) |
|
(79 |
) |
|
|
— |
|
|
|
(79 |
) |
|
|
(3,393 |
) |
Adjusted net income
(D=A+B-C) - Non-GAAP |
$ |
8,623 |
|
|
$ |
9,626 |
|
|
$ |
36,643 |
|
|
$ |
34,799 |
|
|
|
|
|
|
|
|
|
Average assets (E) |
$ |
3,037,824 |
|
|
$ |
2,876,634 |
|
|
$ |
2,999,527 |
|
|
$ |
2,844,800 |
|
Return on average
assets (= A / E) - most directly comparable GAAP-based
measure |
|
1.00 |
% |
|
|
1.33 |
% |
|
|
1.19 |
% |
|
|
0.77 |
% |
Return on average
assets, adjusted (= D / E) - Non-GAAP |
|
1.13 |
% |
|
|
1.33 |
% |
|
|
1.22 |
% |
|
|
1.22 |
% |
|
|
|
|
|
|
|
|
Average equity (F) |
$ |
248,442 |
|
|
$ |
220,987 |
|
|
$ |
243,334 |
|
|
$ |
244,281 |
|
Return on average
equity (= A / F) - most directly comparable GAAP-based
measure |
|
12.21 |
% |
|
|
17.28 |
% |
|
|
14.66 |
% |
|
|
9.02 |
% |
Return on average
equity, adjusted (= D / F) - Non-GAAP |
|
13.77 |
% |
|
|
17.28 |
% |
|
|
15.06 |
% |
|
|
14.25 |
% |
|
|
|
|
|
|
|
|
Weighted average shares -
basic (G) - most directly comparable GAAP-based measure |
|
10,321 |
|
|
|
10,382 |
|
|
|
10,340 |
|
|
|
10,553 |
|
Basic earnings per
share (= A / G) - most directly comparable GAAP-based
measure |
$ |
0.74 |
|
|
$ |
0.93 |
|
|
$ |
3.45 |
|
|
$ |
2.09 |
|
Basic earnings per
share, adjusted (= D / G) - Non-GAAP |
$ |
0.84 |
|
|
$ |
0.93 |
|
|
$ |
3.54 |
|
|
$ |
3.30 |
|
|
|
|
|
|
|
|
|
Weighted average shares -
diluted (H) - most directly comparable GAAP-based measure |
|
10,419 |
|
|
|
10,550 |
|
|
|
10,435 |
|
|
|
10,706 |
|
Diluted earnings per
share (= A / H) - most directly comparable GAAP-based
measure |
$ |
0.73 |
|
|
$ |
0.91 |
|
|
$ |
3.42 |
|
|
$ |
2.06 |
|
Diluted earnings per
share, adjusted (= D / H) - Non-GAAP |
$ |
0.83 |
|
|
$ |
0.91 |
|
|
$ |
3.51 |
|
|
$ |
3.25 |
|
|
|
|
|
|
|
|
|
Noninterest expense (I) - most
directly comparable GAAP-based measure |
$ |
22,392 |
|
|
$ |
21,236 |
|
|
$ |
83,843 |
|
|
$ |
95,806 |
|
Less: Merger-related expenses
(B) |
|
(1,059 |
) |
|
|
— |
|
|
|
(1,059 |
) |
|
|
— |
|
Less: Provision for legal
settlement (B) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13,000 |
) |
Less: Restructuring expenses
(B) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,155 |
) |
Adjusted noninterest
expense (J = I - B) - Non-GAAP |
$ |
21,333 |
|
|
$ |
21,236 |
|
|
$ |
82,784 |
|
|
$ |
79,651 |
|
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31,2023 |
|
December 31,2022 |
|
December 31,2023 |
|
December 31,2022 |
Net interest income (K) |
$ |
26,018 |
|
|
$ |
27,484 |
|
|
$ |
104,906 |
|
|
$ |
99,630 |
|
Noninterest income (L) |
|
6,491 |
|
|
|
6,226 |
|
|
|
25,652 |
|
|
|
26,952 |
|
Total operating income
(M = K + L) |
$ |
32,509 |
|
|
$ |
33,710 |
|
|
$ |
130,558 |
|
|
$ |
126,582 |
|
|
|
|
|
|
|
|
|
Efficiency ratio (= I
/ M) - most directly comparable GAAP-based measure |
|
68.9 |
% |
|
|
63.0 |
% |
|
|
64.2 |
% |
|
|
75.7 |
% |
Efficiency ratio,
adjusted (= J / M) - Non-GAAP |
|
65.6 |
% |
|
|
63.0 |
% |
|
|
63.4 |
% |
|
|
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 December 31, 2023:
(dollars in thousands)
Sector |
Portfolio Mix |
|
Amortized Book |
|
Fair Value |
|
Credit Enhancement |
|
AAA |
|
AA |
|
A |
|
BBB |
|
NR |
|
Collateral / Guarantee Type |
Unsecured ABS |
1 |
% |
|
$ |
3,779 |
|
$ |
3,386 |
|
29 |
% |
|
— |
% |
|
— |
% |
|
— |
% |
|
— |
% |
|
100 |
% |
|
Unsecured Consumer Debt |
Student Loan ABS |
1 |
|
|
|
5,378 |
|
|
5,260 |
|
27 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100 |
|
|
Seasoned Student Loans |
Federal Family Education Loan
ABS |
18 |
|
|
|
98,419 |
|
|
97,208 |
|
9 |
|
|
7 |
|
|
80 |
|
|
— |
|
|
13 |
|
|
— |
|
|
Federal Family Education Loan
(1) |
PACE Loan ABS |
— |
|
|
|
2,315 |
|
|
2,033 |
|
6 |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
PACE Loans (2) |
Non-Agency CMBS |
5 |
|
|
|
28,104 |
|
|
28,336 |
|
25 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
100 |
|
|
|
Non-Agency RMBS |
3 |
|
|
|
16,467 |
|
|
13,133 |
|
14 |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Reverse Mortgages (3) |
Municipal - General
Obligation |
18 |
|
|
|
102,305 |
|
|
94,366 |
|
|
|
10 |
|
|
83 |
|
|
7 |
|
|
— |
|
|
— |
|
|
|
Municipal - Revenue |
22 |
|
|
|
119,318 |
|
|
108,756 |
|
|
|
— |
|
|
82 |
|
|
12 |
|
|
— |
|
|
6 |
|
|
|
SBA ReRemic (5) |
1 |
|
|
|
3,487 |
|
|
3,448 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
SBA Guarantee (4) |
Small Business
Administration |
2 |
|
|
|
8,381 |
|
|
8,894 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
SBA Guarantee (4) |
Agency MBS |
25 |
|
|
|
140,953 |
|
|
130,733 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
Residential Mortgages (4) |
U.S. Treasury securities |
4 |
|
|
|
20,057 |
|
|
17,840 |
|
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
— |
|
|
U.S. Government Guarantee
(4) |
|
100 |
% |
|
$ |
548,963 |
|
$ |
513,393 |
|
|
|
7 |
% |
|
79 |
% |
|
4 |
% |
|
2 |
% |
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
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 inability to complete mergers and acquisitions in a
timely manner or at all, or to successfully integrate strategic
mergers or acquisitions; the impact of certain restrictions during
the pendency of any proposed merger or acquisition on the parties'
ability to pursue certain business opportunities and strategic
transactions; potential adverse reactions or changes to business or
employee relationships, including those resulting from the
announcement or completion of a proposed merger or acquisition; the
inability to fully achieve expected revenues, savings, efficiencies
or synergies from mergers and acquisitions, or taking longer than
estimated for such revenues, 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 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
subsequent filings made with the Securities and Exchange
Commission.
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 disclaims 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. Annualized, pro forma,
projected and estimated numbers in this document are used for
illustrative purposes only, and are not forecasts and may not
reflect actual results.
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