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Orrstown Financial Services, Inc. Reports Third Quarter 2024 Results

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Orrstown Financial Services, Inc. reported its third quarter 2024 results, reflecting the merger with Codorus Valley Bancorp, Inc. The merger added $2.2 billion in assets, $1.6 billion in loans, and $1.9 billion in deposits. The company posted a net loss of $7.9 million, or $0.41 per diluted share, due to $17 million in merger-related expenses, $15.5 million in credit loss provisions, and $4.8 million for executive retirement. Excluding these, net income was $21.4 million, or $1.11 per diluted share. Net interest margin increased to 4.14%, with noninterest income rising to $12.4 million. Return on average assets was -0.57%, and return on average equity was -5.85%, but excluding non-recurring charges, these figures improved to 1.55% and 15.85%, respectively. The Board declared a $0.23 per share dividend, payable on November 12, 2024.

Orrstown Financial Services, Inc. ha riportato i risultati del terzo trimestre 2024, riflettendo la fusione con Codorus Valley Bancorp, Inc. La fusione ha aggiunto 2,2 miliardi di dollari in attivi, 1,6 miliardi di dollari in prestiti e 1,9 miliardi di dollari in depositi. L'azienda ha registrato una perdita netta di 7,9 milioni di dollari, ovvero 0,41 dollari per azione diluita, a causa di 17 milioni di dollari in spese legate alla fusione, 15,5 milioni di dollari in accantonamenti per perdite su crediti e 4,8 milioni di dollari per pensionamenti esecutivi. Escludendo queste voci, il reddito netto è stato di 21,4 milioni di dollari, ovvero 1,11 dollari per azione diluita. Il margine d'interesse netto è aumentato al 4,14%, con un reddito non da interessi che è salito a 12,4 milioni di dollari. Il ritorno sugli attivi medi è stato -0,57%, e il ritorno sui mezzi propri medi è stato -5,85%, ma escludendo le spese non ricorrenti, queste cifre sono migliorate rispettivamente a 1,55% e 15,85%. Il Consiglio ha dichiarato un dividendo di 0,23 dollari per azione, pagabile il 12 novembre 2024.

Orrstown Financial Services, Inc. reportó sus resultados del tercer trimestre de 2024, reflejando la fusión con Codorus Valley Bancorp, Inc. La fusión sumó 2.2 mil millones de dólares en activos, 1.6 mil millones de dólares en préstamos, y 1.9 mil millones de dólares en depósitos. La compañía registró una pérdida neta de 7.9 millones de dólares, o 0.41 dólares por acción diluida, debido a 17 millones de dólares en gastos relacionados con la fusión, 15.5 millones de dólares en provisiones para pérdidas crediticias, y 4.8 millones de dólares por jubilación de ejecutivos. Excluyendo estos gastos, el ingreso neto fue de 21.4 millones de dólares, o 1.11 dólares por acción diluida. El margen de interés neto aumentó al 4.14%, con el ingreso no relacionado con intereses que subió a 12.4 millones de dólares. El retorno sobre activos promedio fue de -0.57%, y el retorno sobre capital promedio fue de -5.85%, pero excluyendo cargos no recurrentes, estas cifras mejoraron a 1.55% y 15.85%, respectivamente. La Junta declaró un dividendo de 0.23 dólares por acción, que se pagará el 12 de noviembre de 2024.

오르스타운 금융 서비스, 주식회사는 2024년 3분기 실적을 보고했으며, 이는 코도루스 밸리 뱅콥과의 합병을 반영합니다. 합병으로 자산이 22억 달러, 대출이 16억 달러, 예금이 19억 달러 증가했습니다. 회사는 790만 달러의 순손실을 기록했으며, 이는 희석주식당 0.41달러에 해당하며 합병 관련 비용 1700만 달러, 신용 손실 준비금 1550만 달러, 경영진 퇴직금 480만 달러가 원인입니다. 이러한 비용을 제외하면 순익은 2140만 달러, 희석주식당 1.11달러였습니다. 순이자 마진은 4.14%로 증가했고, 비이자 수익은 1240만 달러로 상승했습니다. 평균 자산 수익률은 -0.57%, 평균 자기자본 수익률은 -5.85%였으나 비정기 비용을 제외하면 이러한 수치는 각각 1.55%와 15.85%로 개선되었습니다. 이사회는 주당 0.23달러의 배당금을 선언했으며, 이는 2024년 11월 12일에 지급됩니다.

Orrstown Financial Services, Inc. a rapporté ses résultats du troisième trimestre 2024, reflétant la fusion avec Codorus Valley Bancorp, Inc. La fusion a ajouté 2,2 milliards de dollars d'actifs, 1,6 milliard de dollars de prêts et 1,9 milliard de dollars de dépôts. La société a affiché une perte nette de 7,9 millions de dollars, soit 0,41 dollar par action diluée, en raison de 17 millions de dollars de dépenses liées à la fusion, 15,5 millions de dollars de provisions pour pertes sur créances et 4,8 millions de dollars pour les retraites des cadres. En excluant ces éléments, le revenu net s'élevait à 21,4 millions de dollars, soit 1,11 dollar par action diluée. La marge d'intérêt nette a augmenté à 4,14%, tandis que le revenu non lié aux intérêts a atteint 12,4 millions de dollars. Le retour sur actifs moyens était de -0,57%, et le retour sur capitaux propres moyens était de -5,85%, mais en excluant les charges non récurrentes, ces chiffres s'amélioraient respectivement à 1,55% et 15,85%. Le conseil a déclaré un dividende de 0,23 dollar par action, payable le 12 novembre 2024.

Orrstown Financial Services, Inc. hat seine Ergebnisse für das dritte Quartal 2024 bekannt gegeben, die die Fusion mit Codorus Valley Bancorp, Inc. widerspiegeln. Die Fusion fügte 2,2 Milliarden Dollar an Vermögenswerten, 1,6 Milliarden Dollar an Krediten und 1,9 Milliarden Dollar an Einlagen hinzu. Das Unternehmen verzeichnete einen Nettoverlust von 7,9 Millionen Dollar, oder 0,41 Dollar pro verwässerter Aktie, aufgrund von 17 Millionen Dollar an fusionsbezogenen Ausgaben, 15,5 Millionen Dollar an Rückstellungen für Wertberichtigungen und 4,8 Millionen Dollar für die Pensionierung von Führungskräften. Ohne diese Kosten betrug der Nettogewinn 21,4 Millionen Dollar, oder 1,11 Dollar pro verwässerter Aktie. Die Nettozinsmarge stieg auf 4,14%, während das nichtzinsbezogene Einkommen auf 12,4 Millionen Dollar anstieg. Die Rendite auf das durchschnittliche Vermögen betrug -0,57%, und die Rendite auf das durchschnittliche Eigenkapital lag bei -5,85%, aber ohne einmalige Kosten verbesserten sich diese Werte auf 1,55% und 15,85%. Der Vorstand erklärte eine Dividende von 0,23 Dollar pro Aktie, die am 12. November 2024 ausgezahlt wird.

Positive
  • Net interest margin increased to 4.14% from 3.54%.
  • Noninterest income rose by $5.1 million to $12.4 million.
  • Excluding non-recurring charges, net income was $21.4 million, and diluted EPS was $1.11.
  • Return on average equity, excluding non-recurring charges, was 15.85%.
Negative
  • Net loss of $7.9 million due to merger-related expenses and credit loss provisions.
  • Nonaccrual loans increased to $26.9 million from $8.4 million.
  • Tangible book value per share decreased to $21.12 from $24.08.
  • Provision for credit losses was $13.7 million, up from $812 thousand.

Insights

Orrstown Financial Services' Q3 2024 results reflect significant changes due to its merger with Codorus Valley Bancorp. The reported net loss of $7.9 million ($0.41 per diluted share) was primarily due to non-recurring charges related to the merger, including $17.0 million in merger expenses and $15.5 million in provision for credit losses on non-PCD loans.

However, excluding these charges, the core performance was strong, with adjusted net income of $21.4 million ($1.11 per diluted share). The merger significantly expanded Orrstown's scale, with total assets increasing to approximately $5.5 billion. Key metrics improved, including:

  • Net interest margin increased to 4.14% from 3.54% in Q2
  • Noninterest income rose by $5.1 million to $12.4 million
  • Assets under management grew to $3.2 billion from $2.1 billion

While tangible book value per share decreased due to merger-related adjustments, management expects loan fair value adjustments to accrete back over time, potentially driving future earnings and capital growth. The integration appears on track, with system conversion scheduled for November 2024.

This merger of equals between Orrstown and Codorus creates a stronger regional player in Pennsylvania and Maryland. The combined entity now has increased market penetration and a more diversified footprint. Some key observations:

  • Loan-to-deposit ratio remains healthy at 86%, indicating good balance sheet structure
  • Uninsured deposits are 15% of total deposits, which is manageable
  • Available liquidity sources of $1 billion provide a solid buffer
  • Classified loans increased to $105.5 million, requiring close monitoring

The 4.14% net interest margin is strong in the current environment, boosted by $5.8 million in purchase accounting accretion. Core deposit intangible of $35.9 million suggests a valuable, stable funding base. While merger expenses and credit provisions impacted short-term results, the $21.4 million adjusted quarterly earnings demonstrate the earnings power of the combined franchise. Successful integration and realization of cost synergies will be important to maximizing shareholder value going forward.

  • Orrstown Financial Services, Inc. ("Orrstown" or the “Company”) closed the merger of equals transaction with Codorus Valley Bancorp, Inc. ("Codorus") on July 1, 2024, creating a premier Pennsylvania and Maryland community bank; as a result, the Company's results for the three months ended September 30, 2024 reflect the combined operating results of the combined companies;
  • Codorus contributed, after fair value purchase accounting adjustments, approximately $2.2 billion in total assets, $1.6 billion in loans, and $1.9 billion in deposits at July 1, 2024;
  • Net loss of $7.9 million, or $0.41 per diluted share, for the three months ended September 30, 2024 compared to net income of $7.7 million, or $0.73 per diluted share, for the three months ended June 30, 2024, reflecting the impact of $17.0 million in expenses related to the merger, $15.5 million of provision for credit losses on non-purchase credit deteriorated ("PCD") loans and $4.8 million for the previously announced executive retirement, net of taxes, collectively the "non-recurring charges";
  • Excluding the impact of the non-recurring charges, net income and diluted earnings per share, respectively, were $21.4 million(1) and $1.11(1) for the third quarter of 2024 compared to net income and diluted earnings per share of $8.7 million(1) and $0.83(1), respectively, as adjusted for the impact of $1.1 million in merger-related expenses, net of taxes, recorded for the second quarter of 2024;
  • Net interest margin, on a tax equivalent basis, was 4.14% in the third quarter of 2024 compared to 3.54% in the second quarter of 2024; the net accretion impact of purchase accounting marks on loans, deposits and borrowings was $5.8 million of net interest income, which represents 52 basis points of net interest margin;
  • Noninterest income increased by $5.1 million to $12.4 million in the three months ended September 30, 2024 compared to $7.2 million in the three months ended June 30, 2024; continued strength in wealth management and swap fee generation by commercial teams are driving fee income growth;
  • Return on average assets for the three months ended September 30, 2024 was (0.57)% compared to 0.97% for the three months ended June 30, 2024; excluding the non-recurring charges, return on average assets was 1.55%(1) for the three months ended September 30, 2024 compared to 1.09%(1) for the three months ended June 30, 2024, excluding merger-related expenses;
  • Return on average equity for the three months ended September 30, 2024 was (5.85)% compared to 11.41% for the three months ended June 30, 2024; excluding the non-recurring charges, return on average equity was 15.85%(1) for the three months ended September 30, 2024 compared to 12.88%(1) for the three months ended June 30, 2024, excluding merger related expenses;
  • The provision for credit losses was $13.7 million for the three months ended September 30, 2024 compared to $812 thousand for the three months ended June 30, 2024; the provision for credit losses on non-PCD loans for the three months ended September 30, 2024 was $15.5 million; excluding the impact of the merger, the provision for credit losses for the three months ended September 30, 2024 was a reversal of $1.8 million;
  • At September 30, 2024, nonaccrual loans totaled $26.9 million, an increase of $18.5 million from $8.4 million at June 30, 2024; non-accrual loans acquired from Codorus totaled $12.8 million;
  • Tangible book value per common share(1) decreased to $21.12 per share at September 30, 2024 compared to $24.08 per share at June 30, 2024; this decrease was primarily due to the impact of loan marks associated with the merger and the net loss incurred for the third quarter of 2024;
  • The Board of Directors declared a cash dividend of $0.23 per common share, payable November 12, 2024, to shareholders of record as of November 5, 2024.

(1) Non-GAAP measure. See Appendix A for additional information.

HARRISBURG, Pa., Oct. 22, 2024 (GLOBE NEWSWIRE) -- Orrstown Financial Services, Inc. (NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”), announced earnings for the three months ended September 30, 2024. Net loss totaled $7.9 million for the three months ended September 30, 2024, compared to net income of $7.7 million for the three months ended June 30, 2024 and $9.0 million for the three months ended September 30, 2023. Diluted loss per share was $0.41 for the three months ended September 30, 2024, compared to diluted earnings per share of $0.73 for the three months ended June 30, 2024 and $0.87 for the three months ended September 30, 2023. For the third quarter of 2024, excluding the impact from the non-recurring charges, net of taxes, net income and diluted earnings per share were $21.4 million(1) and $1.11(1), respectively. For the second quarter of 2024, excluding the impact of the merger-related expenses, net of taxes, net income and diluted earnings per share were $8.7 million(1) and $0.83(1), respectively.

“While the results for the quarter reflected the impact of certain non-recurring charges, the core income generated by the business demonstrates the significant opportunities afforded by the additional scale and synergies created by the merger. Our core earnings were strong. We already have taken significant steps to achieve the cost savings announced in December, which we are on target to achieve in full in the defined timeline. Our system conversion in scheduled for completion in November 2024, at which time we expect further expense savings to be realized. We believe we are well on our way to improving our client experience, expanding and deepening our community presence, and enhancing shareholder value,” commented Thomas R. Quinn, Jr., President and Chief Executive Officer.

DISCUSSION OF RESULTS

Merger Update

The Company acquired Codorus and its wholly-owned bank subsidiary PeoplesBank, A Codorus Valley Company on July 1, 2024. The merger and acquisition method of accounting was used to account for the transaction with the Company as the acquirer. The Company recorded the assets and liabilities of Codorus at their respective fair values as of July 1, 2024. The transaction was valued at approximately $234 million and expanded the Bank’s footprint into the York, Pennsylvania market while increasing its market penetration in its existing markets.

At the time of the merger, Codorus contributed, after fair value purchase accounting adjustments, approximately $2.2 billion in assets, $1.6 billion in loans, $326.7 million in investment securities and $1.9 billion in deposits. The excess of the merger consideration over the fair value of net Codorus assets resulted in goodwill of $51.9 million. The merger led to a 12% dilution in our tangible book value per share which was $21.12 at September 30, 2024 compared to $24.08 at June 30, 2024. The principal cause of the dilution was the impact of the associated purchase accounting marks on loans. The Company’s tangible common equity ratio at September 30, 2024 was 7.5%. The loan fair value adjustments are expected to accrete back through income and capital as the loans mature and should lead to earnings per share and capital accretion moving forward. The fair value of assets and liabilities are subject to refinement for up to one year after the acquisition date as allowable under U.S. Generally Accepted Accounting Principles.

The Company incurred expenses of $32.5 million and $34.3 million for the three and nine months ended September 30, 2023, respectively, related to merger costs and an increased allowance for credit losses on non-PCD portion of the loans assumed from Codorus.

The Company’s financial results for any periods ended prior to July 1, 2024 reflect Orrstown’s results only on a standalone basis. As a result of this factor and the below listed adjustments related to the merger, the Company’s financial results for the third quarter of 2024 may not be directly comparable to prior reported periods.

Balance Sheet

Loans

Loans held for investment increased by $1.7 billion from June 30, 2024 to September 30, 2024 as $1.6 billion of loans, net of purchase accounting marks, were assumed in the merger with Codorus.

Investment Securities

Investment securities, all of which are classified as available-for-sale, increased by $297.7 million to $826.8 million at September 30, 2024 from $529.1 million at June 30, 2024. Investments with a fair value of $326.7 million were assumed in the merger with Codorus. During the third quarter of 2024, investment securities totaling $162.7 million were sold from the portfolio acquired from Codorus. The portfolio was restructured to align the interest rate risk and credit profile for the combined balance sheet. Most of these proceeds were reinvested in investment securities as purchases of $140.4 million were made in the three months ended September 30, 2024. These purchases were partially offset by paydowns of investment securities of $20.6 million and two calls totaling $5.0 million. The overall duration of the Company's investment securities portfolio was 4.6 years at September 30, 2024 compared to 4.2 years at June 30, 2024. See Appendix B for a summary of the Bank's investment securities at September 30, 2024, highlighting their concentrations, credit ratings and credit enhancement levels.

Deposits

During the third quarter of 2024, deposits increased by $2.0 billion to approximately $4.7 billion at September 30, 2024 compared to $2.7 billion at June 30, 2024. Deposits of $1.9 billion were assumed in the merger. At September 30, 2024, deposits that are uninsured and not collateralized totaled $692.6 million, or 15% of total deposits compared to $422.3 million, or 16% of total deposits at June 30, 2024. The Bank's loan-to-deposit ratio decreased slightly to 86% at September 30, 2024 from 87% at June 30, 2024.

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 were $115.4 million at September 30, 2024 and $115.0 million at June 30, 2024. 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 FHLB advances and other wholesale options, of approximately $1.0 billion at September 30, 2024. The Bank's FHLB borrowing capacity at September 30, 2024 was not inclusive of Codorus, which will be reflected in the fourth quarter.

The Company assumed $31.0 million aggregate principal amount of subordinated debentures and $10.3 million aggregate amount of trust preferred securities from Codorus in the merger. Fair value adjustments of $5.1 million were recorded on July 1, 2024 which reduced the amounts recorded on the balance sheet.

Income Statement

Net Interest Income and Margin

Net interest income was $51.7 million for the three months ended September 30, 2024 compared to $26.1 million for the three months ended June 30, 2024. The net interest margin, on a tax equivalent basis, increased to 4.14% in the third quarter of 2024 from 3.54% in the second quarter of 2024. The net interest margin was positively impacted by the net accretion impact of purchase accounting marks on loans, deposits and borrowings of $5.8 million, which represents 52 basis points of net interest margin. Funding costs show signs of stabilizing.

Several components of the net interest margin increased primarily as the result of the assets and liabilities assumed in the merger with Codorus.

Interest income on loans, on a tax equivalent basis, increased by $35.2 million to $70.8 million for the three months ended September 30, 2024 compared to $35.7 million for the three months ended June 30, 2024.

Interest income on investment securities, on a tax equivalent basis, was $10.1 million for the third quarter of 2024 compared to $6.1 million in the second quarter of 2024.

Interest expense, on a tax equivalent basis, increased by $14.1 million to $31.3 million for the three months ended September 30, 2024 compared to $17.2 million for the three months ended June 30, 2024. Average interest-bearing deposits increased by $1.6 billion during the three months ended September 30, 2024 compared to the three months ended June 30, 2024. Average borrowings increased by $35.8 million during the three months ended September 30, 2024 compared to the three months ended June 30, 2024. Interest expense includes $0.4 million and $0 of amortization of purchase accounting marks for the three months ended September 30, 2024 and June 30, 2024, respectively.

Provision for Credit Losses

The Company recorded a provision for credit losses of $13.7 million for the three months ended September 30, 2024 compared to $0.8 million for the three months ended June 30, 2024. The allowance for credit losses ("ACL") on loans increased to $49.6 million at September 30, 2024 from $29.9 million at June 30, 2024. The increase in the ACL was primarily due to the addition of $21.4 million of reserves as a result of the merger. This increase was made up of $15.5 million for non-PCD loans, which was recognized through the provision for credit losses, and $5.9 million for PCD loans which was recognized through retained earnings. The provision for credit losses for the three months ended September 30, 2024 included a provision reversal of $1.8 million due to changes in qualitative factors, a change in the peer group utilized for the calculation and a reduction in the required reserve for unfunded commitments. The ACL to total loans was 1.25% at September 30, 2024 compared to 1.27% at June 30, 2024. Net charge-offs were $0.3 million for the three months ended September 30, 2024 compared to net charge-offs of $0.1 million for the three months ended June 30, 2024.

As a result of the merger, classified loans increased by $56.8 million to $105.5 million at September 30, 2024 from $48.7 million at June 30, 2024. Non-accrual loans increased by $18.5 million to $26.9 million at September 30, 2024 from $8.4 million at June 30, 2024 due primarily to the assumption of $12.8 million of non-accrual loans from Codorus. Nonaccrual loans to total loans increased to 0.68% at September 30, 2024 compared to 0.36% at June 30, 2024 and decreased from 1.11% at December 31, 2023. Management believes the ACL to be adequate based on current asset quality metrics and economic conditions.

Noninterest Income

Noninterest income increased by $5.1 million to $12.4 million in the three months ended September 30, 2024 compared to $7.2 million in the three months ended June 30, 2024 primarily due to the merger.

Wealth management income increased to $5.0 million in the three months ended September 30, 2024 compared to $3.3 million for the three months ended June 30, 2024. The strong sales efforts, organic growth and stock market performance have collectively driven exceptional wealth results throughout the year. As a result of the merger, assets under management increased to approximately $3.2 billion at September 30, 2024 from $2.1 billion at June 30, 2024.

During the third quarter of 2024, the Company recorded swap fee income of $0.5 million compared to $0.4 million in the three months ended June 30, 2024. Swap fee generation has been strong, but fluctuates based on market conditions and client demand.

Noninterest Expenses

Noninterest expenses increased by $37.7 million to $60.3 million in the three months ended September 30, 2024 from $22.6 million in the three months ended June 30, 2024 primarily due to the merger.

For the three months ended September 30, 2024, merger-related expenses totaled $17.0 million, an increase of $15.9 million, compared to $1.1 million for the three months ended June 30, 2024. The increase is due to primarily to employee separation costs, vendor contract terminations, and professional fees incurred during the third quarter of 2024. The Company will incur additional merger-related expenses from the operational and technology processes to combine systems and services of both companies, which is expected to be completed in November 2024.

Salaries and benefits expense increased by $14.0 million to $27.2 million for the three months ended September 30, 2024 compared to $13.2 million for the three months ended June 30, 2024. The three months ended September 30, 2024 includes $4.8 million of expenses associated with the retirement of an executive.

Intangible asset amortization increased to $2.5 million for the three months ended September 30, 2024 compared to $0.2 million for the three months ended June 30, 2024. This increase is due to the amortization expense recognized on the core deposit intangible of $35.9 million and wealth customer relationship intangible of $10.4 million established on July 1, 2024 from the merger.

Taxes other than income increased to $0.5 million in the three months ended September 30, 2024 compared to less than $0.1 million in the three months ended June 30, 2024. This increase reflects the tax credits recognized on the contributions during the second quarter of 2024.

There was $257 thousand of restructuring expenses recognized in the three months ended September 30, 2024 associated with previously announced branch closures.

Income Taxes

The Company's effective tax rate for the third quarter of 2024 was 20.1% compared to 21.2% for the second quarter of 2024. The Company's effective tax rate for the three months ended September 30, 2024 is less than the 21% federal statutory rate primarily due to tax-exempt income, including interest earned on tax-exempt loans and securities and income from life insurance policies and tax credits partially offset by 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 ("TEFRA") and the impact of nondeductible merger-related costs. The Company regularly analyzes its projected taxable income and makes adjustments to the provision for income taxes accordingly.

Capital

Shareholders’ equity totaled $516.2 million at September 30, 2024, an increase of $237.8 million from $278.4 million at June 30, 2024. The increase was primarily attributable to the equity assumed in the merger, net of purchase accounting adjustments, partially offset by a net loss of $7.9 million and dividends paid of $4.4 million.

Tangible book value per share(1) decreased to $21.12 per share at September 30, 2024 from $24.08 per share at June 30, 2024 due to the purchase accounting adjustments associated with the merger.

The Company's tangible common equity ratio decreased to 7.5% at September 30, 2024 from 8.1% at June 30, 2024 due to purchase accounting marks and a net loss recorded during the third quarter of 2024. The Company's total risk-based capital ratio was 12.5% at September 30, 2024 compared to 13.3% at June 30, 2024. The Company's Tier 1 leverage ratio was 8.0% at September 30, 2024 compared to 8.9% at June 30, 2024. The loan fair value adjustments are expected to accrete back through income and capital as the loans mature and should lead to earnings per share and capital accretion moving forward.

At September 30, 2024, 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.

(1) Non-GAAP measure. See Appendix A for additional information.

Investor Relations Contact:
Neelesh Kalani
Executive Vice President, Chief Financial Officer
Phone (717) 510-7097


FINANCIAL HIGHLIGHTS (Unaudited)       
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30, September 30, September 30,
(In thousands) 2024   2023   2024   2023 
        
Profitability for the period:       
Net interest income$51,697  $26,219  $104,681  $78,888 
Provision for credit losses 13,681   136   14,791   1,264 
Noninterest income 12,386   5,925   26,188   19,161 
Noninterest expenses 60,299   20,447   105,407   61,451 
(Loss) income before income tax (benefit) expense (9,897)  11,561   10,671   35,334 
Income tax (benefit) expense (1,994)  2,535   2,305   7,314 
Net (loss) income available to common shareholders$(7,903) $9,026  $8,366  $28,020 
        
Financial ratios:       
Return on average assets (1)(0.57)%  1.18%  0.28%  1.25%
Return on average assets, adjusted (1) (2) (3) 1.55%  1.18%  1.33%  1.25%
Return on average equity (1)(5.85)%  14.42%  3.10%  15.51%
Return on average equity, adjusted (1) (2) (3) 15.85%  14.42%  14.59%  15.51%
Net interest margin (1) 4.14%  3.73%  3.88%  3.83%
Efficiency ratio 94.1%  63.6%  80.5%  62.7%
Efficiency ratio, adjusted (2) (3) 60.2%  63.6%  62.6%  62.7%
(Loss) income per common share:       
Basic$(0.41) $0.87  $0.63  $2.71 
Basic, adjusted (2) (3)$1.12  $0.87  $2.96  $2.71 
Diluted$(0.41) $0.87  $0.62  $2.68 
Diluted, adjusted (2) (3)$1.11  $0.87  $2.93  $2.68 
        
Average equity to average assets 9.75%  8.18%  9.13%  8.09%
        
(1) Annualized for the three and nine months ended September 30, 2024 and 2023.
(2) Ratio for the three and nine months ended September 30, 2024 has been adjusted for the non-recurring charges.
(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.


FINANCIAL HIGHLIGHTS (Unaudited)   
(continued)   
 September 30, December 31,
(Dollars in thousands, except per share amounts) 2024   2023 
At period-end:   
Total assets$5,470,589  $3,064,240 
Loans, net of allowance for credit losses 3,931,807   2,269,611 
Loans held-for-sale, at fair value 3,561   5,816 
Securities available for sale, at fair value 826,828   513,519 
Total deposits 4,650,853   2,558,814 
FHLB advances and other borrowings and Securities sold under agreements to repurchase 137,310   147,285 
Subordinated notes and trust preferred debt 68,510   32,093 
Shareholders' equity 516,206   265,056 
    
Credit quality and capital ratios (1):   
Allowance for credit losses to total loans 1.25%  1.25%
Total nonaccrual loans to total loans 0.68%  1.11%
Nonperforming assets to total assets 0.49%  0.83%
Allowance for credit losses to nonaccrual loans 184%  112%
Total risk-based capital:   
Orrstown Financial Services, Inc. 12.5%  13.0%
Orrstown Bank 12.3%  12.8%
Tier 1 risk-based capital:   
Orrstown Financial Services, Inc. 10.0%  10.8%
Orrstown Bank 11.1%  11.6%
Tier 1 common equity risk-based capital:   
Orrstown Financial Services, Inc. 9.8%  10.8%
Orrstown Bank 11.1%  11.6%
Tier 1 leverage capital:   
Orrstown Financial Services, Inc. 8.0%  8.9%
Orrstown Bank 8.8%  9.5%
    
Book value per common share$26.65  $24.98 
    
(1) Capital ratios are estimated for the current period, 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. Beginning 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 CECL standard.


CONSOLIDATED BALANCE SHEETS (Unaudited)   
    
(Dollars in thousands, except per share amounts)September 30, 2024 December 31, 2023
Assets   
Cash and due from banks$65,064  $32,586 
Interest-bearing deposits with banks 171,716   32,575 
Cash and cash equivalents 236,780   65,161 
Restricted investments in bank stocks 20,247   11,992 
Securities available for sale (amortized cost of $845,869 and $549,089 at September 30, 2024 and December 31, 2023, respectively) 826,828   513,519 
Loans held for sale, at fair value 3,561   5,816 
Loans 3,981,437   2,298,313 
Less: Allowance for credit losses (49,630)  (28,702)
Net loans 3,931,807   2,269,611 
Premises and equipment, net 49,839   29,393 
Cash surrender value of life insurance 142,895   73,204 
Goodwill 70,655   18,724 
Other intangible assets, net 46,144   2,414 
Accrued interest receivable 20,562   13,630 
Deferred tax assets, net 38,517   22,017 
Other assets 82,754   38,759 
Total assets$5,470,589  $3,064,240 
    
Liabilities   
Deposits:   
Noninterest-bearing$815,404  $430,959 
Interest-bearing 3,835,449   2,127,855 
Total deposits 4,650,853   2,558,814 
Securities sold under agreements to repurchase and federal funds purchased 21,932   9,785 
FHLB advances and other borrowings 115,378   137,500 
Subordinated notes and trust preferred debt 68,510   32,093 
Other liabilities 97,710   60,992 
Total liabilities 4,954,383   2,799,184 
    
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; 19,723,217 shares issued and 19,373,354 outstanding at September 30, 2024; 11,204,599 shares issued and 10,612,390 outstanding at December 31, 2023 1,027   583 
Additional paid—in capital 422,177   189,027 
Retained earnings 117,311   117,667 
Accumulated other comprehensive loss (15,888)  (28,476)
Treasury stock— 349,863 and 592,209 shares, at cost at September 30, 2024 and December 31, 2023, respectively (8,421)  (13,745)
Total shareholders’ equity 516,206   265,056 
Total liabilities and shareholders’ equity$5,470,589  $3,064,240 


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
         
  Three Months Ended Nine Months Ended
  September 30, September 30, September 30, September 30,
(Dollars in thousands, except per share amounts)  2024   2023   2024  2023 
Interest income        
Loans $70,647  $32,738  $142,417 $92,685 
Investment securities - taxable  9,005   4,459   18,588  13,244 
Investment securities - tax-exempt  883   861   2,641  2,591 
Short-term investments  2,452   633   5,272  1,349 
Total interest income  82,987   38,691   168,918  109,869 
Interest expense        
Deposits  28,603   10,582   57,384  25,392 
Securities sold under agreements to repurchase and federal funds purchased  96   31   148  84 
FHLB advances and other borrowings  1,154   1,354   3,780  3,992 
Subordinated notes and trust preferred debt  1,437   505   2,925  1,513 
Total interest expense  31,290   12,472   64,237  30,981 
Net interest income  51,697   26,219   104,681  78,888 
Provision for credit losses  13,681   136   14,791  1,264 
Net interest income after provision for credit losses  38,016   26,083   89,890  77,624 
Noninterest income        
Service charges  2,360   1,260   4,843  3,668 
Interchange income  1,779   963   3,651  2,921 
Swap fee income  505   255   1,079  451 
Wealth management income  5,037   2,826   11,451  8,395 
Mortgage banking activities  491   (142)  1,318  448 
Investment securities gains (losses)  271   2   254  (8)
Other income  1,943   761   3,592  3,286 
Total noninterest income  12,386   5,925   26,188  19,161 
Noninterest expenses        
Salaries and employee benefits  27,190   12,885   54,137  38,135 
Occupancy, furniture and equipment  4,333   2,460   9,677  7,059 
Data processing  2,046   1,248   4,548  3,666 
Advertising and bank promotions  537   332   1,709  1,656 
FDIC insurance  862   477   1,722  1,500 
Professional services  1,119   965   2,551  2,203 
Taxes other than income  503   387   1,046  847 
Intangible asset amortization  2,464   228   2,904  717 
Merger-related expenses  16,977   —   18,784  — 
Restructuring expenses  257   —   257  — 
Other operating expenses  4,011   1,465   8,072  5,668 
Total noninterest expenses  60,299   20,447   105,407  61,451 
(Loss) income before income tax (benefit) expense  (9,897)  11,561   10,671  35,334 
Income tax (benefit) expense  (1,994)  2,535   2,305  7,314 
Net (loss) income $(7,903) $9,026  $8,366 $28,020 
continued
         
  Three Months Ended Nine Months Ended
  September 30, September 30, September 30, September 30,
   2024   2023   2024  2023 
Share information:        
Basic (loss) earnings per share $(0.41) $0.87  $0.63 $2.71 
Diluted (loss) earnings per share $(0.41) $0.87  $0.62 $2.68 
Dividends paid per share $0.23  $0.20  $0.63 $0.60 
Weighted average shares - basic  19,088   10,319   13,298  10,346 
Weighted average shares - diluted  19,226   10,405   13,441  10,440 


ANALYSIS OF NET INTEREST INCOME    
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)  
 Three Months Ended
 9/30/2024 6/30/2024 3/31/2024 12/31/2023 9/30/2023
   Taxable- Taxable-   Taxable- Taxable-   Taxable- Taxable-   Taxable- Taxable-   Taxable- Taxable-
 (InAverage Equivalent Equivalent Average Equivalent Equivalent Average Equivalent Equivalent Average Equivalent Equivalent Average Equivalent Equivalent
 thousands)Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets                             
Federal funds sold & interest-bearing bank balances$184,465 $2,452  5.29% $142,868 $1,864  5.25% $74,523 $956  5.16% $37,873 $460  4.82% $57,778 $633  4.35%
Investment securities (1)(2) 849,700  10,123  4.77   538,451  6,114  4.54   519,851  5,694  4.39   508,891  5,890  4.63   521,234  5,548  4.26 
Loans (1)(3)(4)(5) 3,989,259  70,849  7.07   2,324,942  35,690  6.17   2,308,103  36,382  6.34   2,286,678  34,055  5.91   2,256,727  32,878  5.78 
Total interest-earning assets 5,023,424  83,424  6.61   3,006,261  43,668  5.84   2,902,477  43,032  5.96   2,833,442  40,405  5.67   2,835,739  39,059  5.47 
Other assets 491,719      204,863      196,295      204,382      200,447    
Total assets$5,515,143     $3,211,124     $3,098,772     $3,037,824     $3,036,186    
Liabilities and Shareholders' Equity                        
Interest-bearing demand deposits$2,554,743  16,165  2.52  $1,649,753  10,118  2.47  $1,570,622  9,192  2.35  $1,543,575  8,333  2.14  $1,541,728  7,476  1.92 
Savings deposits 283,337  148  0.21   165,467  140  0.34   170,005  144  0.34   178,351  153  0.34   190,817  164  0.34 
Time deposits 1,014,628  12,290  4.82   481,721  5,007  4.18   428,443  4,180  3.92   392,085  3,632  3.67   357,194  2,942  3.27 
Total interest-bearing deposits 3,852,708  28,603  2.95   2,296,941  15,265  2.67   2,169,070  13,516  2.51   2,114,011  12,118  2.27   2,089,739  10,582  2.01 
Securities sold under agreements to repurchase and federal funds purchased 23,075  96  1.66   13,412  27  0.81   12,010  25  0.85   13,874  30  0.85   15,006  31  0.83 
FHLB advances and other borrowings 115,388  1,154  3.98   115,000  1,152  4.03   137,505  1,474  4.31   127,843  1,358  4.21   128,131  1,354  4.19 
Subordinated notes and trust preferred debt 68,399  1,437  8.36   32,118  734  9.19   32,100  754  9.45   32,083  504  6.29   32,066  505  6.29 
Total interest-bearing liabilities 4,059,570  31,290  3.07   2,457,471  17,178  2.81   2,350,685  15,769  2.70   2,287,811  14,010  2.43   2,264,942  12,472  2.19 
Noninterest-bearing demand deposits 807,886      423,037      417,469      441,695      468,628    
Other liabilities 110,017      57,828      62,329      59,876      54,353    
Total liabilities 4,977,473      2,938,336      2,830,483      2,789,382      2,787,923    
Shareholders' equity 537,670      272,788      268,289      248,442      248,263    
Total$5,515,143     $3,211,124     $3,098,772     $3,037,824     $3,036,186    
Taxable-equivalent net interest income / net interest spread   52,134  3.55%    26,490  3.02%    27,263  3.26%    26,395  3.24%    26,587  3.29%
Taxable-equivalent net interest margin    4.14%     3.54%     3.77%     3.71%     3.73%
Taxable-equivalent adjustment   (437)      (387)      (382)      (377)      (368)  
Net interest income  $51,697      $26,103      $26,881      $26,018      $26,219   
Ratio of average interest-earning assets to average interest-bearing liabilities    124%     122%     123%     124%     125%
                              
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.
(5) Interest income on loans includes interest recovered of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status in the three months ended March 31, 2024.


ANALYSIS OF NET INTEREST INCOME    
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)  
(continued)           
 Nine Months Ended
 September 30, 2024 September 30, 2023
   Taxable- Taxable-   Taxable- Taxable-
 Average Equivalent Equivalent Average Equivalent Equivalent
(In thousands)Balance Interest Rate Balance Interest Rate
Assets           
Federal funds sold & interest-bearing bank balances$134,136 $5,272  5.25% $41,861 $1,349  4.31%
Investment securities (1)(2) 636,781  21,931  4.60   524,365  16,523  4.21 
Loans (1)(3)(4)(5) 2,878,171  142,921  6.63   2,223,701  93,051  5.59 
Total interest-earning assets 3,649,088  170,124  6.23   2,789,927  110,923  5.31 
Other assets 298,334      196,694    
Total assets$3,947,422     $2,986,621    
Liabilities and Shareholders' Equity           
Interest-bearing demand deposits$1,927,337  35,475  2.46  $1,519,013  18,611  1.64 
Savings deposits 206,552  432  0.28   204,832  431  0.28 
Time deposits 642,959  21,477  4.46   320,000  6,350  2.65 
Total interest-bearing deposits 2,776,848  57,384  2.76   2,043,845  25,392  1.66 
Securities sold under agreements to repurchase and federal funds purchased 16,191  148  1.22   14,190  84  0.79 
FHLB advances and other borrowings 122,604  3,780  4.12   122,300  3,992  4.36 
Subordinated notes and trust preferred debt 44,294  2,925  8.82   32,049  1,513  6.29 
Total interest-bearing liabilities 2,959,937  64,237  2.90   2,212,384  30,981  1.87 
Noninterest-bearing demand deposits 550,407      480,006    
Other liabilities 76,846      52,618    
Total liabilities 3,587,190      2,745,008    
Shareholders' equity 360,232      241,613    
Total liabilities and shareholders' equity$3,947,422     $2,986,621    
Taxable-equivalent net interest income / net interest spread   105,887  3.33%    79,942  3.44%
Taxable-equivalent net interest margin    3.88%     3.83%
Taxable-equivalent adjustment   (1,206)      (1,054)  
Net interest income  $104,681      $78,888   
Ratio of average interest-earning assets to average interest-bearing liabilities    123%     126%
            
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.
(5) Interest income on loans includes interest recovered of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status for the nine months ended September 30, 2024.
 


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)    
          
(In thousands)September 30,
2024		 June 30,
2024		 March 31,
2024		 December 31,
2023		 September 30,
2023
Profitability for the quarter:         
Net interest income$51,697  $26,103  $26,881  $26,018  $26,219 
Provision for credit losses 13,681   812   298   418   136 
Noninterest income 12,386   7,172   6,630   6,491   5,925 
Noninterest expenses 60,299   22,639   22,469   22,392   20,447 
(Loss) income before income taxes (9,897)  9,824   10,744   9,699   11,561 
Income tax (benefit) expense (1,994)  2,086   2,213   2,056   2,535 
Net (loss) income$(7,903) $7,738  $8,531  $7,643  $9,026 
          
Financial ratios:         
Return on average assets (1)(0.57)%  0.97%  1.11%  1.00%  1.18%
Return on average assets, adjusted (1)(2)(3) 1.55%  1.09%  1.19%  1.13%  1.18%
Return on average equity (1)(5.85)%  11.41%  12.79%  12.21%  14.42%
Return on average equity, adjusted (1)(2)(3) 15.85%  12.88%  13.79%  13.77%  14.42%
Net interest margin (1) 4.14%  3.54%  3.77%  3.71%  3.73%
Efficiency ratio 94.1%  68.0%  67.0%  68.9%  63.6%
Efficiency ratio, adjusted (2)(3) 60.2%  64.6%  65.0%  65.6%  63.6%
          
Per share information:         
(Loss) income per common share:         
Basic$(0.41) $0.74  $0.82  $0.74  $0.87 
Basic, adjusted (2)(3) 1.12   0.84   0.89   0.84   0.87 
Diluted (0.41)  0.73   0.81   0.73   0.87 
Diluted, adjusted (2)(3) 1.11   0.83   0.88   0.83   0.87 
Book value 26.65   25.97   25.38   24.98   22.90 
Tangible book value(3) 21.12   24.08   23.47   23.03   20.94 
Cash dividends paid 0.23   0.20   0.20   0.20   0.20 
          
Average basic shares 19,088   10,393   10,349   10,321   10,319 
Average diluted shares 19,226   10,553   10,482   10,419   10,405 
(1) Annualized.
(2) Ratio has been adjusted for non-recurring expenses for the three months ended September 30, 2024, June 30, 2024, March 31, 2024 and 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.
 


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)    
(continued)         
(In thousands)September 30,
2024		 June 30,
2024		 March 31,
2024		 December 31,
2023		 September 30,
2023
Noninterest income:         
Service charges$2,360 $1,283  $1,200  $1,198  $1,260 
Interchange income 1,779  961   911   952   963 
Swap fee income 505  375   199   588   255 
Wealth management income 5,037  3,312   3,102   2,945   2,826 
Mortgage banking activities 491  369   458   143   (142)
Other income 1,943  884   765   704   761 
Investment securities gains (losses) 271  (12)  (5)  (39)  2 
Total noninterest income$12,386 $7,172  $6,630  $6,491  $5,925 
          
Noninterest expenses:         
Salaries and employee benefits$27,190 $13,195  $13,752  $12,848  $12,885 
Occupancy, furniture and equipment 4,333  2,705   2,639   2,534   2,460 
Data processing 2,046  1,237   1,265   1,247   1,248 
Advertising and bank promotions 537  774   398   501   332 
FDIC insurance 862  419   441   460   477 
Professional services 1,119  801   631   702   965 
Taxes other than income 503  49   494   203   387 
Intangible asset amortization 2,464  215   225   236   228 
Merger-related expenses 16,977  1,135   672   1,059   — 
Restructuring expenses 257  —   —   —   — 
Other operating expenses 4,011  2,109   1,952   2,602   1,465 
Total noninterest expenses$60,299 $22,639  $22,469  $22,392  $20,447 
          
 


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)      
(continued)         
(In thousands)September 30,
2024		 June 30,
2024		 March 31,
2024		 December 31,
2023		 September 30,
2023
Balance Sheet at quarter end:         
Cash and cash equivalents$236,780  $132,509  $182,722  $65,161  $94,939 
Restricted investments in bank stocks 20,247   11,147   11,453   11,992   12,987 
Securities available for sale 826,828   529,082   514,909   513,519   495,162 
Loans held for sale, at fair value 3,561   1,562   535   5,816   6,448 
Loans:         
Commercial real estate:         
Owner occupied 622,726   371,301   364,280   373,757   376,350 
Non-owner occupied 1,164,501   710,477   707,871   694,638   630,514 
Multi-family 276,296   151,542   147,773   150,675   143,437 
Non-owner occupied residential 190,786   89,156   91,858   95,040   100,391 
Commercial and industrial 601,469   374,976   365,524   367,085   374,190 
Acquisition and development:         
1-4 family residential construction 56,383   32,439   22,277   24,516   25,642 
Commercial and land development 262,317   129,883   118,010   115,249   153,279 
Municipal 27,960   10,594   10,925   9,812   10,334 
Total commercial loans 3,202,438   1,870,368   1,828,518   1,830,772   1,814,137 
Residential mortgage:         
First lien 451,195   271,153   270,748   266,239   248,335 
Home equity – term 6,508   4,633   4,966   5,078   5,223 
Home equity – lines of credit 303,165   192,736   189,966   186,450   188,736 
Installment and other loans 18,131   8,713   8,875   9,774   10,405 
Total loans 3,981,437   2,347,603   2,303,073   2,298,313   2,266,836 
Allowance for credit losses (49,630)  (29,864)  (29,165)  (28,702)  (28,278)
Net loans held for investment 3,931,807   2,317,739   2,273,908   2,269,611   2,238,558 
Goodwill 70,655   18,724   18,724   18,724   18,724 
Other intangible assets, net 46,144   1,974   2,189   2,414   2,650 
Total assets 5,470,589   3,198,782   3,183,331   3,064,240   3,054,435 
Total deposits 4,650,853   2,702,884   2,695,951   2,558,814   2,546,435 
FHLB advances and other borrowings and and Securities sold under agreements to repurchase 137,310   129,625   127,099   147,285   175,241 
Subordinated notes and trust preferred debt 68,510   32,128   32,111   32,093   32,076 
Total shareholders' equity 516,206   278,376   271,682   265,056   243,080 


HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)      
(continued)         
 September 30,
2024		 June 30,
2024		 March 31,
2024		 December 31,
2023		 September 30,
2023
Capital and credit quality measures(1):         
Total risk-based capital:         
Orrstown Financial Services, Inc. 12.5%  13.3%  13.4%  13.0%  13.0%
Orrstown Bank 12.3%  13.1%  13.1%  12.8%  12.5%
Tier 1 risk-based capital:         
Orrstown Financial Services, Inc. 10.0%  11.1%  11.2%  10.8%  10.6%
Orrstown Bank 11.1%  12.0%  11.9%  11.6%  11.4%
Tier 1 common equity risk-based capital:         
Orrstown Financial Services, Inc. 9.8%  11.1%  11.2%  10.8%  10.6%
Orrstown Bank 11.1%  12.0%  11.9%  11.6%  11.4%
Tier 1 leverage capital:         
Orrstown Financial Services, Inc. 8.0%  8.9%  9.0%  8.9%  8.7%
Orrstown Bank 8.8%  9.5%  9.6%  9.5%  9.3%
          
Average equity to average assets 9.75%  8.50%  8.66%  8.18%  8.18%
Allowance for credit losses to total loans 1.25%  1.27%  1.27%  1.25%  1.25%
Total nonaccrual loans to total loans 0.68%  0.36%  0.56%  1.11%  0.98%
Nonperforming assets to total assets 0.49%  0.26%  0.40%  0.83%  0.73%
Allowance for credit losses to nonaccrual loans 184%  357%  226%  112%  127%
          
Other information:         
Net charge-offs (recoveries)$269  $113  $(42) $(6) $241 
Classified loans 105,465   48,722   48,997   55,030   33,593 
Nonperforming and other risk assets:         
Nonaccrual loans 26,927   8,363   12,886   25,527   22,324 
Other real estate owned 138   —   —   —   — 
Total nonperforming assets 27,065   8,363   12,886   25,527   22,324 
Financial difficulty modifications still accruing 9,497   —   —   9   — 
Loans past due 90 days or more and still accruing 337   187   99   66   277 
Total nonperforming and other risk assets$36,899  $8,550  $12,985  $25,602  $22,601 
(1) Capital ratios are estimated for the current period, 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. Beginning 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.

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, core deposit and other intangible assets, which totaled $116.8 million and $21.1 million at September 30, 2024 and December 31, 2023, respectively. In addition, during the three months ended September 30, 2024, June 30, 2024, March 31, 2024 and December 31, 2023, the Company incurred $17.0 million, $1.1 million, $0.7 million and $1.1 million in merger-related expenses, respectively. During the three months ended September 30, 2024, the Company incurred other non-recurring charges totaling $20.2 million.

Tangible book value per common share and the impact of the non-recurring expenses 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:

(In thousands)

Tangible Book Value per Common Share September 30,
2024		 June 30,
2024		 March 31,
2024		 December 31,
2023		 September 30,
2023
Shareholders' equity (most directly comparable GAAP-based measure) $516,206  $278,376  $271,682  $265,056  $243,080 
Less: Goodwill  70,655   18,724   18,724   18,724   18,724 
Other intangible assets  46,144   1,974   2,189   2,414   2,650 
Related tax effect  (9,690)  (415)  (460)  (507)  (557)
Tangible common equity (non-GAAP) $409,097  $258,093  $251,229  $244,425  $222,263 
           
Common shares outstanding  19,373   10,720   10,705   10,612   10,613 
           
Book value per share (most directly comparable GAAP-based measure) $26.65  $25.97  $25.38  $24.98  $22.90 
Intangible assets per share  5.53   1.89   1.91   1.95   1.96 
Tangible book value per share (non-GAAP) $21.12  $24.08  $23.47  $23.03  $20.94 
           


(In thousands)Three Months Ended Nine Months Ended
Adjusted Ratios for Non-recurring ChargesSeptember 30,
2024		 June 30, 2024 March 31,
2024		 December 31,
2023		 September 30,
2023		 September 30,
2024		 September 30,
2023
Net (loss) income (A) - most directly comparable GAAP-based measure$(7,903) $7,738  $8,531  $8,531  $9,026  $8,366  $28,020 
Plus: Merger-related expenses (B) 16,977   1,135   672   672   —   18,784   — 
Plus: Executive retirement expenses (B) 4,758   —   —   —   —   4,758   — 
Plus: Provision for credit losses on non-PCD loans (B) 15,504   —   —   —   —   15,504   — 
Less: Related tax effect (C) (7,915)  (139)  (1)  (1)  —   (8,056)  — 
Adjusted net (loss) income (D=A+B-C) - Non-GAAP$21,421  $8,734  $9,202  $9,202  $9,026  $39,356  $28,020 
              
Average assets (E)$5,515,143  $3,211,124  $3,098,772  $3,098,772  $3,036,186  $3,947,422  $2,986,621 
Return on average assets (= A / E) - most directly comparable GAAP-based measure (1)(0.57)%  0.97%  1.11%  1.11%  1.18%  0.28%  1.25%
Return on average assets, adjusted (= D / E) - Non-GAAP (1) 1.55%  1.09%  1.19%  1.19%  1.18%  1.33%  1.25%
              
Average equity (F)$537,670  $272,788  $268,289  $268,289  $248,263  $360,232  $241,613 
Return on average equity (= A / F) - most directly comparable GAAP-based measure (1)(5.85)%  11.41%  12.79%  12.79%  14.42%  3.10%  15.51%
Return on average equity, adjusted (= D / F) - Non-GAAP (1) 15.85%  12.88%  13.79%  13.79%  14.42%  14.59%  15.51%
              
Weighted average shares - basic (G) - most directly comparable GAAP-based measure 19,088   10,393   10,349   10,349   10,319   13,298   10,346 
Basic (loss) earnings per share (= A / G) - most directly comparable GAAP-based measure$(0.41) $0.74  $0.82  $0.82  $0.87  $0.63  $2.71 
Basic earnings per share, adjusted (= D / G) - Non-GAAP$1.12  $0.84  $0.89  $0.89  $0.87  $2.96  $2.71 
              
Weighted average shares - diluted (H) - most directly comparable GAAP-based measure 19,226   10,553   10,482   10,482   10,405   13,441   10,440 
Diluted (loss) earnings per share (= A / H) - most directly comparable GAAP-based measure$(0.41) $0.73  $0.81  $0.81  $0.87  $0.62  $2.68 
Diluted earnings per share, adjusted (= D / H) - Non-GAAP$1.11  $0.83  $0.88  $0.88  $0.87  $2.93  $2.68 
              
continued
(1) Annualized             


 Three Months Ended Nine Months Ended
 September 30,
2024		 June 30, 2024 March 31,
2024		 December 31,
2023		 September 30,
2023		 September 30,
2024		 September 30,
2023
Noninterest expense (I) - most directly comparable GAAP-based measure$60,299  $22,639  $22,469  $22,469  $20,447  $105,407  $61,451 
Less: Merger-related expenses (B) (16,977)  (1,135)  (672)  (672)  —   (18,784)  — 
Less: Executive retirement expenses (B) (4,758)  —   —   —   —   (4,758)  — 
Adjusted noninterest expense (J = I - B) - Non-GAAP$38,564  $21,504  $21,797  $21,797  $20,447  $81,865  $61,451 
              
Net interest income (K)$51,697  $26,103  $26,881  $26,881  $26,219  $104,681  $78,888 
Noninterest income (L) 12,386   7,172   6,630   6,630   5,925   26,188   19,161 
Total operating income (M = K + L)$64,083  $33,275  $33,511  $33,511  $32,144  $130,869  $98,049 
              
Efficiency ratio (= I / M) - most directly comparable GAAP-based measure 94.1%  68.0%  67.0%  67.0%  63.6%  80.5%  62.7%
Efficiency ratio, adjusted (= J / M) - Non-GAAP 60.2%  64.6%  65.0%  65.0%  63.6%  62.6%  62.7%
              
              
              
(1) Annualized             

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, 2024:

(In thousands)

SectorPortfolio Mix Amortized Book Fair Value Credit Enhancement AAA AA A BBB NR Collateral / Guarantee Type
Unsecured ABS—% $3,199 $2,975 27% —% —% —% —% 100% Unsecured Consumer Debt
Student Loan ABS1   4,348  4,283 27  —  —  —  —  100  Seasoned Student Loans
Federal Family Education Loan ABS10   83,199  82,962 11  7  80  —  13  —  Federal Family Education Loan (1)
PACE Loan ABS—   2,034  1,813 7  100  —  —  —  —  PACE Loans (2)
Non-Agency CMBS2   13,750  14,045 26  —  —  —  —  100   
Non-Agency RMBS2   16,749  14,212 16  100  —  —  —  —  Reverse Mortgages (3)
Municipal - General Obligation12   99,779  93,395   11  82  7  —  —   
Municipal - Revenue14   121,130  112,705   —  82  12  —  6   
SBA ReRemic (5)—   2,427  2,409   —  100  —  —  —  SBA Guarantee (4)
Small Business Administration1   6,632  7,042   —  100  —  —  —  SBA Guarantee (4)
Agency MBS18   154,058  154,762   —  100  —  —  —  Residential Mortgages (4)
Agency CMO38   316,385  315,677   —  100  —  —  —   
U.S. Treasury securities2   20,047  18,373   —  100  —  —  —  U.S. Government Guarantee (4)
Corporate bonds—   1,932  1,975   —  —  52  48  —   
 100% $845,669 $826,628   4% 89% 3% 1% 3%  
                    
(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 $5.5 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, Harford, 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, 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: general economic conditions (including inflation and concerns about liquidity) on a national basis or in the local markets in which the Company operates; ineffectiveness of the Company's strategic growth plan due to changes in current or future market conditions; changes in interest rates; the diversion of management's attention from ongoing business operations and opportunities; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products and services; changes in consumer behavior due to changing political, business and economic conditions, or legislative or regulatory initiatives; changes in laws and regulations; 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; the possibility that the anticipated benefits of the merger with Codorus (the “Merger”) are not realized when expected or at all; the possibility that the Merger may be more expensive to complete than anticipated; the possibility that revenues following the Merger may be lower than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the Merger; the ability to complete the integration of the two companies successfully; the dilution caused by the Company’s issuance of additional shares of its capital stock in connection with the Merger; and other risks and uncertainties, including those detailed in our Annual Report on Form 10-K for the year ended December 31, 2023 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.


FAQ

What were Orrstown Financial Services' third quarter 2024 results?

Orrstown Financial Services reported a net loss of $7.9 million for Q3 2024, with a net interest margin of 4.14% and noninterest income of $12.4 million.

How did the merger with Codorus Valley Bancorp impact Orrstown Financial Services?

The merger added $2.2 billion in assets, $1.6 billion in loans, and $1.9 billion in deposits. It also resulted in $17 million in merger-related expenses.

What was Orrstown Financial Services' net income excluding non-recurring charges for Q3 2024?

Excluding non-recurring charges, Orrstown's net income was $21.4 million, with diluted EPS of $1.11.

What was the provision for credit losses for Orrstown Financial Services in Q3 2024?

The provision for credit losses was $13.7 million in Q3 2024, compared to $812 thousand in Q2 2024.

What dividend did Orrstown Financial Services declare in Q3 2024?

The Board declared a cash dividend of $0.23 per share, payable on November 12, 2024.

Stock ORRF logo
Orrstown Financial Services Inc

NASDAQ:ORRF

ORRF Rankings

#2769 Ranked by Market Cap
#1268 Ranked by Dividends

ORRF Latest News

Jul 23, 2024
Orrstown Financial Services, Inc. Reports Second Quarter 2024 Results and Increases Quarterly Dividend by $0.03 per Share
Jul 1, 2024
Orrstown Financial Services and Codorus Valley Bancorp Successfully Complete Merger of Equals
Jun 17, 2024
Orrstown Financial Services, Inc. and Codorus Valley Bancorp, Inc. Announce Receipt of Regulatory Approvals for Merger of Equals
May 30, 2024
Orrstown Financial Services, Inc. and Codorus Valley Bancorp, Inc. Announce Receipt of Shareholder Approvals for Merger of Equals
Apr 23, 2024
Orrstown Financial Services, Inc. Reports First Quarter 2024 Results

ORRF Stock Data

779.87M
19.37M
4.18%
39.32%
0.95%
Banks - Regional
State Commercial Banks
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United States of America
HARRISBURG