- Net income for the three months ended December 31, 2013 totaled $2.9 million, representing the fifth consecutive quarter of positive earnings and an improvement of $1.9 million from the same period in 2012.
- Net income totaled $10.0 million for the twelve months ended December 31, 2013, an improvement of $48.5 million from the net loss of $38.5 million for the twelve months ended December 31, 2012.
- The allowance for loan losses as a percent of total loans outstanding remained strong and totaled 3.12% at December 31, 2013, or 108.4% of nonaccrual loans.
- $3.8 million of targeted expenses, or 75% of the previously announced two-year total of $5.0 million, were eliminated during the year ended December 31, 2013 – allowing for infrastructure investments to support future growth.
SHIPPENSBURG, Pa., Jan. 22, 2014 (GLOBE NEWSWIRE) -- Orrstown Financial Services, Inc. (the "Company") (Nasdaq:ORRF), the parent company of Orrstown Bank (the "Bank"), announced earnings of $2.9 million for the fourth quarter of 2013, compared to $1.0 million for the same quarter in 2012. Net income was $10.0 million for the year ended December 31, 2013, compared to a loss of $38.5 million for the year ended December 31, 2012.
Diluted earnings (loss) per share amounted to $0.36 for the three months ended December 31, 2013, as compared to $0.13 for the fourth quarter of 2012. Return on average assets and return on average equity totaled 0.99% and 12.82%, respectively, for the three months ended December 31, 2013. Diluted earnings (loss) per share amounted to $1.24 for the year ended December 31, 2013, as compared to ($4.77) for the same period in 2012. Return on average assets and return on average equity totaled 0.84% and 11.30%, respectively, for the year ended December 31, 2013.
Thomas R. Quinn, Jr., President and Chief Executive Officer, stated, "Our ability to address enterprise risk management issues during the past two years allowed for a renewed focus of the Company in 2013 to develop new customer relationships, entrance into Lancaster County, and made investments in technology which have strengthened our operating practices. These efforts allowed the Company to post earnings in each quarter during the year, and totaled over $10.0 million for the year ended December 31, 2013." Quinn added, "In addition to these new initiatives, we continued to remediate problem loans, including the recovery of $3.2 million from a customer whose loan was partially charged-off, allowing us to record a negative provision for loan losses."
"With the strengthening of our balance sheet and capital ratios, we were able to invest excess liquidity into loans and securities, allowing expansion in our net interest margin to 3.19% for the quarter ended December 31, 2013 compared to 2.96% for the prior quarter," Quinn noted.
OPERATING RESULTS
Net Interest Income
Net interest income totaled $8.5 million for the three months ended December 31, 2013, a 0.5% increase compared to the same period in 2012, and a 9.6% increase from the three months ended September 30, 2013. As a result of the sustained improvement in the Company's asset quality and earnings performance during 2013, the Company was able to invest its excess liquidity into its securities, and to a lesser extent, loan portfolios, and away from its interest bearing bank balances. In addition, several nonaccrual loans were paid off in the fourth quarter of 2013, which resulted in the recognition of interest income. The combined effect of these factors resulted in an overall improvement in the Company's net interest margin. Net interest margin was 3.19% for the three months ended December 31, 2013, compared to 3.00% for the same period in 2012 and 2.96% for the three months ended September 30, 2013.
For the year ended December 31, 2013, net interest income totaled $32.1 million, a decrease of $5.8 million from the $37.9 million earned in the same period in 2012. Despite improvements in net interest income and net interest margin in the fourth quarter, on a year to date basis, the decline in net interest income is a result of both a decrease in the volume of interest earning assets and in the average interest rates earned. Average earning assets were $1.1 billion for the year ended December 31, 2013, a decrease of $166 million, or 12.9% from the average of $1.3 billion for the same period in 2012. The reduction in interest-earning assets was primarily a result of the two loan sales in 2012 and the Company's desire to decrease assets to maintain its capital ratios, resulting in reduced net interest income. Net interest margin has trended lower due to the proceeds from asset sales, loan and security prepayments and maturities being reinvested in lower interest rate instruments. Net interest margin was 3.03% for the year ended December 31, 2013, compared to 3.12% for the same period in 2012.
The Company has been able to effectively manage its cost of funds to partially offset lower yields earned on assets. The cost of funds declined to 0.40% and 0.45% for the three and twelve months ended December 31, 2013, respectively, an improvement from 0.51% and 0.59% for the same periods in 2012.
Provision for Loan Losses
The Company recorded a negative provision for loan losses, or a reversal of amounts previously provided, of $1.8 million and $3.2 million for the three months and twelve months ended December 31, 2013, respectively. During the periods, the Company received payments on classified loans with partial charge-offs previously recorded. As payments received during the periods exceeded the carrying value of these loans, the excess was included in recoveries of loan amounts previously charged-off. In connection with our quarterly evaluation of the adequacy of the allowance for loan losses, it was determined that large recoveries specific to loans in one customer relationship were not needed to replenish the reserve, and were taken into income for the periods through a negative provision for loan losses.
Noninterest Income
Noninterest income, excluding securities gains, totaled $4.1 million for the three months ended December 31, 2013, compared to $5.2 million for the same period in 2012. Several factors led to the lower revenues for the three months ended December 31, 2013 as compared to the same period in 2012. During the past several months, mortgage interest rates have risen, leading to a reduction in the number of customers refinancing their residential mortgages, resulting in a $781 thousand decline in mortgage banking revenues to $469 thousand for the quarter ended December 31, 2013, as compared to the same period in 2012. The Company has experienced a decline in other services charges which is consistent with trends noted in consumer spending behavior and lower loan and deposit balances. Partially offsetting these unfavorable variances were the revenues generated by Orrstown Financial Advisors, which generates trust and brokerage income. Orrstown Financial Advisors recorded revenues of $1.6 million for the quarter ended December 31, 2013, an increase of 4.6% over the same period in the prior year.
For the year ended December 31, 2013, noninterest income, excluding securities gains, totaled $17.5 million compared to $18.4 million for the year ended December 31, 2012. Despite interest rates favorably impacting mortgage banking revenue during the first half of 2013, the rise in rates in the second half of the year reduced refinancing volumes, resulting in mortgage banking revenues totaling $3.1 million for the year ended December 31, 2013, a $340 thousand, or 10%, decrease from the same period in 2012. Furthermore, service charges on deposit accounts and other service charges and fees were $511 thousand and $205 thousand lower, respectively, for the year ended December 31, 2013 as compared to the year ended December 31, 2012, as a result of consumer spending behavior and less overdrafts and lower loan and deposit balances. Offsetting these amounts were the revenues generated by Orrstown Financial Advisors, which were $6.7 million for the year ended December 31, 2013, a 10.4% increase over the same period in 2012.
Net securities gains totaled $53 thousand and $332 thousand for the three and twelve months ended December 31, 2013, respectively, compared to $0 and $4.8 million for the same periods in 2012, respectively. In 2013, asset/liability management strategies and interest rate conditions resulted in a limited number of securities sales. Strategic considerations and interest rate conditions, as well as a desire to maintain capital levels, factored into the extent and timing of securities gains taken in 2012.
Noninterest expenses
Noninterest expenses totaled $11.4 million for the three months ended December 31, 2013, compared to $10.6 million for the corresponding prior year period, an increase of 7.9%. Noninterest expenses amounted to $43.2 million for the year ended December 31, 2013, a decrease of $102 thousand, or 0.2%, from $43.3 million for the same period in 2012. The changes in certain components of the noninterest expenses between 2012 and 2013, as described below, are reflective of the Company's asset quality remediation efforts, and focus on investing in additional talent and technology to better serve the needs of our customers, and efforts to develop new relationships.
Asset quality related costs, including collection, problem loan and real estate owned expenses, totaled $131 thousand and $811 thousand, respectively, for the three and twelve months ended December 31, 2013, which represent reductions of $404 thousand and $2.3 million, respectively, from the same periods in 2012. In addition, during the twelve months ended December 31, 2013, the Company was able to lower its consulting expenses, which are included in professional services, by $694 thousand compared to the same period in 2012. These reductions in expenses are consistent with the Company's previously disclosed 'Operation Bottom Line' initiative, in which certain expenses were targeted to be reduced by $5.0 million over a two year period.
Growth in salaries and employee benefits were experienced during 2013, with total expenses for the three and twelve months ended December 31, 2013 totaling $6.2 million and $23.0 million, respectively, representing increases of $881 thousand and $3.1 million over the same periods in 2012. During 2013, the Company expanded its work force, as we enhanced our enterprise risk management practices, invested to ensure compliance with regulations, and strengthened our technology and operations departments to allow for the expansion of our product offerings. An additional factor contributing to the increase in salaries and benefit expense was the restoration of certain incentive based employee benefits as a result of the Company's return to profitability.
As the Company began to lay the foundation for new product offerings and improvements to the customer experience across our delivery channels, increased furniture and equipment expenses were incurred, which totaled $918 thousand and $3.4 million for the three and twelve months ended December 31, 2013, respectively, compared to $754 thousand and $2.9 million for the same periods in 2012.
The Company's efficiency ratio increased for the three and twelve months ended December 31, 2013 to 87.1% and 83.3%, respectively, compared to 74.0% and 72.2%, respectively, for the same periods in 2012. The higher, or less favorable, ratios were the result of the declines in net interest income between the two periods, and lower levels of noninterest income. The efficiency ratio expresses noninterest expense as a percentage of tax equivalent net interest income and noninterest income, excluding securities gains, intangible asset amortization and other real estate income and expenses.
Income Taxes
Income tax expense (benefit) totaled $15 thousand and ($206) thousand for the three and twelve months ended December 31, 2013, respectively, on pre-tax income of $2.9 million and $10.0 million for the three and twelve months ended December 31, 2013, respectively. This compared to an income tax expense of $1.0 million and $8.0 million recorded on pre-tax income (loss) of $2.0 million and ($30.5) million, respectively, for the three and twelve months ended December 31, 2012.
During the third quarter of 2012, an evaluation was completed on the net deferred tax asset that existed at that time, which principally resulted from credit and credit related losses and expenses that the Company had experienced. As a result of the taxable losses that were generated during 2012, and our inability to fully offset the tax to the two preceding carryback years allowed by tax regulation, our net deferred tax asset was dependent on tax planning strategies and future taxable income. Based on forecasted taxable income at that time, combined with limited available tax planning strategies, we were not able to conclude that the deferred tax asset would more likely than not be realized in its entirety, and as such, a valuation allowance was established for the full amount beginning in the third quarter of 2012, which resulted in a charge at that time of $19.9 million. An updated evaluation was completed at December 31, 2013, and we continue to believe that the valuation allowance is appropriate. The net benefit recorded during 2013 pertains to a state income tax refund, offset by estimated federal alternative minimum tax.
FINANCIAL CONDITION
Assets at December 31, 2013 were nearly $1.18 billion, a $54.9 million decrease from $1.23 billion at December 31, 2012. Gross loans, excluding those held for sale, totaled $671.0 million at December 31, 2013, a $32.7 million decrease from December 31, 2012, and a $12.6 million decrease from the September 30, 2013 balance. During 2013, pay downs on loans, including criticized assets which were successfully paid down or moved out of the Bank, exceeded new loan origination volumes. Current economic and market conditions in the Company's markets have not led to a great deal of growth or activity, and competition for new business opportunities is strong.
As a result of the reduction in gross loans during the year ended December 31, 2013, the Company allowed run-off in its deposits, particularly time deposits which have a higher interest cost associated with them, resulting in total deposits declining by $84.6 million, or 7.8% during the twelve months ended December 31, 2013. In addition, during 2013 the Company invested some of its liquidity that was maintained in cash equivalents at December 31, 2012 into higher yielding securities available for sale. Both of these deposit and securities initiatives were implemented to improve net interest margin, while retaining sufficient liquidity to fund future loan growth.
Shareholders' Equity
Shareholders' equity totaled $91.4 million at December 31, 2013, an increase of $3.7 million, or 4.3%, since December 31, 2012. This increase was primarily the result of net income of $10.0 million posted for the year ended December 31, 2013, offset by a $6.6 million decrease in accumulated other comprehensive income (loss). The Company's regulatory capital ratios continue to exceed all regulatory minimums required to be considered well capitalized, and have shown continued improvement since December 31, 2012. At December 31, 2013, the Company's regulatory capital ratios consisted of a Tier-1 leverage ratio of 8.1%, a Tier-1 risk-based capital ratio of 13.7%, and a total risk-based capital ratio of 15.0%, which represent increases from 6.8%, 10.9% and 12.2%, respectively, at December 31, 2012. Net income recorded for the period combined with a reduction in risk weighted assets resulted in the improved ratios.
Asset Quality
Risk assets, defined as nonaccrual loans, restructured loans, loans past due 90 days or more and still accruing, and real estate owned totaled $26.3 million at December 31, 2013, which was an increase from December 31, 2012's balance of $22.9 million. Restructured loans still accruing was the primary reason for the increase, and totaled $6.0 million at December 31, 2013 compared to $3.1 million at December 31, 2012. The increase was primarily the result of one relationship in which the borrower was experiencing reduced cash flows. The Bank has been working with the borrower through this period of reduced cash flow.
The allowance for loan losses totaled $21.0 million at December 31, 2013, a decrease of $2.2 million from $23.2 million at December 31, 2012, principally due to a negative provision for loan losses of $3.2 million recorded in 2013, offset by net recoveries of $949 thousand for the year. Despite the negative provision for loan losses and the net recoveries recorded during 2013, the allowance for loan losses to total loans ratio was 3.12% at December 31, 2013, and the allowance for loan losses coverage ratio of nonaccrual loans and restructured loans remained strong at 82.8%.
The Company recognizes asset quality as a high priority and continues efforts to mitigate future losses through capturing and monitoring credit risk within the portfolio and actively working with customers in order to allow them to meet their debt service requirements. Further, active monitoring and follow-up will continue on loans previously charged off in order to realize recoveries when borrowers' conditions have improved.
| Operating Highlights (Unaudited): | For the | For the | ||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||
| (Dollars in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 |
| Net income (loss) | $ 2,927 | $ 1,030 | $ 10,004 | $ (38,454) |
| Diluted earnings (loss) per share | $ 0.36 | $ 0.13 | $ 1.24 | $ (4.77) |
| Dividends per share | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 |
| Return on average assets | 0.99% | 0.33% | 0.84% | (2.84%) |
| Return on average equity | 12.82% | 4.69% | 11.30% | (35.22%) |
| Net interest income | $ 8,513 | $ 8,471 | $ 32,087 | $ 37,888 |
| Net interest margin | 3.19% | 3.00% | 3.03% | 3.12% |
| Balance Sheet Highlights: | ||||
| December 31, | December 31, | |||
| (Dollars in thousands, except per share data) | 2013 | 2012 | ||
| Assets | $ 1,177,812 | $ 1,232,668 | ||
| Loans, gross | 672,973 | 711,601 | ||
| Allowance for loan losses | (20,965) | (23,166) | ||
| Deposits | 1,000,390 | 1,085,039 | ||
| Shareholders' equity | 91,439 | 87,694 | ||
| ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||
| December 31, | December 31, | |
| (Dollars in thousands) | 2013 | 2012 |
| Assets | ||
| Cash and cash equivalents | $ 37,560 | $ 150,688 |
| Securities available for sale | 406,943 | 301,970 |
| Loans held for sale | 1,936 | 7,862 |
| Loans | 671,037 | 703,739 |
| Less: Allowance for loan losses | (20,965) | (23,166) |
| Net loans | 652,008 | 688,435 |
| Premises and equipment, net | 26,441 | 26,782 |
| Other assets | 54,860 | 64,793 |
| Total assets | $ 1,177,812 | $ 1,232,668 |
| Liabilities | ||
| Deposits: | ||
| Non-interest bearing | $ 116,371 | $ 121,090 |
| Interest bearing | 884,019 | 963,949 |
| Total deposits | 1,000,390 | 1,085,039 |
| Borrowings | 75,109 | 47,120 |
| Accrued interest and other liabilities | 10,874 | 12,815 |
| Total liabilities | 1,086,373 | 1,144,974 |
| Shareholders' Equity | ||
| Common stock | 422 | 421 |
| Additional paid - in capital | 123,105 | 122,724 |
| Retained earnings (accumulated deficit) | (27,255) | (37,259) |
| Accumulated other comprehensive income (loss) | (4,813) | 1,828 |
| Treasury stock | (20) | (20) |
| Total shareholders' equity | 91,439 | 87,694 |
| Total liabilities and shareholders' equity | $ 1,177,812 | $ 1,232,668 |
| ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | December 31, | December 31, | |
| (Dollars in thousands, except per share data) | 2013 | 2012 | 2013 | 2012 |
| Interest and dividend income | ||||
| Interest and fees on loans | $ 7,755 | $ 8,930 | $ 31,558 | $ 39,647 |
| Interest and dividends on investment securities | 1,888 | 1,057 | 5,540 | 5,789 |
| Total interest and dividend income | 9,643 | 9,987 | 37,098 | 45,436 |
| Interest expense | ||||
| Interest on deposits | 1,009 | 1,353 | 4,445 | 6,712 |
| Interest on borrowings | 121 | 163 | 566 | 836 |
| Total interest expense | 1,130 | 1,516 | 5,011 | 7,548 |
| Net interest income | 8,513 | 8,471 | 32,087 | 37,888 |
| Provision for loan losses | (1,750) | 1,000 | (3,150) | 48,300 |
| Net interest income after provision for loan losses | 10,263 | 7,471 | 35,237 | (10,412) |
| Noninterest income | ||||
| Service charges on deposit accounts | 1,409 | 1,601 | 5,716 | 6,227 |
| Trust department and brokerage income | 1,628 | 1,557 | 6,681 | 6,053 |
| Mortgage banking activities | 469 | 1,250 | 3,053 | 3,393 |
| Other income | 554 | 756 | 2,026 | 2,765 |
| Investment securities gains (losses) | 53 | 0 | 332 | 4,824 |
| Total noninterest income | 4,113 | 5,164 | 17,808 | 23,262 |
| Noninterest expenses | ||||
| Salaries and employee benefits | 6,237 | 5,356 | 22,954 | 19,864 |
| Occupancy, furniture and equipment | 1,452 | 1,211 | 5,501 | 4,888 |
| Data processing | 173 | 140 | 542 | 574 |
| Advertising and bank promotions | 535 | 296 | 1,251 | 1,411 |
| FDIC insurance | 639 | 708 | 2,577 | 2,727 |
| Professional services | 454 | 795 | 2,255 | 3,076 |
| Collection and problem loan | 109 | 407 | 674 | 2,297 |
| Real estate owned expenses | 22 | 128 | 137 | 834 |
| Other operating expenses | 1,813 | 1,559 | 7,356 | 7,678 |
| Total noninterest expenses | 11,434 | 10,600 | 43,247 | 43,349 |
| Income (loss) before income tax (benefit) | 2,942 | 2,035 | 9,798 | (30,499) |
| Income tax expense (benefit) | 15 | 1,005 | (206) | 7,955 |
| Net income (loss) | $ 2,927 | $ 1,030 | $ 10,004 | $ (38,454) |
| Per share information: | ||||
| Basic earnings (loss) per share | $ 0.36 | $ 0.13 | $ 1.24 | $ (4.77) |
| Diluted earnings (loss) per share | 0.36 | 0.13 | 1.24 | (4.77) |
| Dividends per share | 0.00 | 0.00 | 0.00 | 0.00 |
| Average shares and common stock equivalents outstanding | 8,106,451 | 8,079,520 | 8,093,306 | 8,066,148 |
| ANALYSIS OF NET INTEREST INCOME | ||||||
| Average Balances and Interest Rates, Taxable Equivalent Basis | ||||||
| Three Months Ended | ||||||
| December 31, 2013 | December 31, 2012 | |||||
| Tax | Tax | Tax | Tax | |||
| Average | Equivalent | Equivalent | Average | Equivalent | Equivalent | |
| (Dollars in thousands) | Balance | Interest | Rate | Balance | Interest | Rate |
| Assets | ||||||
| Federal funds sold & interest bearing bank balances | $ 34,566 | $ 22 | 0.25% | $ 111,600 | $ 73 | 0.26% |
| Securities | 394,526 | 2,018 | 2.03 | 295,362 | 1,139 | 1.53 |
| Loans | 686,619 | 8,062 | 4.66 | 779,197 | 9,258 | 4.73 |
| Total interest-earning assets | 1,115,711 | 10,102 | 3.59 | 1,186,159 | 10,470 | 3.51 |
| Other assets | 61,251 | 60,701 | ||||
| Total | $ 1,176,962 | $ 1,246,860 | ||||
| Liabilities and Shareholders' Equity | ||||||
|
Interest bearing demand deposits |
$ 491,981 | $ 191 | 0.15% | $ 496,030 | $ 228 | 0.18% |
| Savings deposits | 79,667 | 33 | 0.16 | 74,012 | 31 | 0.17 |
| Time deposits | 321,602 | 785 | 0.97 | 409,348 | 1,094 | 1.06 |
| Short term borrowings | 42,593 | 28 | 0.26 | 11,289 | 7 | 0.25 |
| Long term debt | 16,289 | 93 | 2.27 | 37,671 | 156 | 1.65 |
| Total interest bearing liabilities | 952,132 | 1,130 | 0.47 | 1,028,350 | 1,516 | 0.59 |
| Non-interest bearing demand deposits | 118,878 | 119,122 | ||||
| Other | 15,346 | 12,099 | ||||
| Total Liabilities | 1,086,356 | 1,159,571 | ||||
| Shareholders' Equity | 90,606 | 87,289 | ||||
| Total | $ 1,176,962 | 0.40% | $ 1,246,860 | 0.51% | ||
| Net interest income (FTE)/net interest spread | 8,972 | 3.12% | 8,954 | 2.92% | ||
| Net interest margin | 3.19% | 3.00% | ||||
| Tax-equivalent adjustment | (459) | (483) | ||||
| Net interest income | $ 8,513 | $ 8,471 | ||||
| NOTES: Yields and interest income on tax-exempt assets have been computed on a fully taxable equivalent basis assuming a 35% tax rate. | ||||||
| For yield calculation purposes, nonaccruing loans are included in the average loan balance. | ||||||
| ANALYSIS OF NET INTEREST INCOME | ||||||
| Average Balances and Interest Rates, Taxable Equivalent Basis | ||||||
| Twelve Months Ended | ||||||
| December 31, 2013 | December 31, 2012 | |||||
| Tax | Tax | Tax | Tax | |||
| Average | Equivalent | Equivalent | Average | Equivalent | Equivalent | |
| (Dollars in thousands) | Balance | Interest | Rate | Balance | Interest | Rate |
| Assets | ||||||
| Federal funds sold & interest bearing bank balances | $ 67,132 | $ 174 | 0.26% | $ 109,298 | $ 287 | 0.26% |
| Securities | 368,208 | 5,940 | 1.61 | 315,581 | 6,420 | 2.03 |
| Loans | 683,272 | 32,779 | 4.80 | 859,985 | 40,994 | 4.77 |
| Total interest-earning assets | 1,118,612 | 38,893 | 3.48 | 1,284,864 | 47,701 | 3.71 |
| Other assets | 69,929 | 67,363 | ||||
| Total | $ 1,188,541 | $ 1,352,227 | ||||
| Liabilities and Shareholders' Equity | ||||||
| Interest bearing demand deposits | $ 484,114 | $ 785 | 0.16% | $ 511,800 | $ 1,236 | 0.24% |
| Savings deposits | 78,714 | 129 | 0.16 | 74,180 | 124 | 0.17 |
| Time deposits | 352,905 | 3,531 | 1.00 | 455,507 | 5,352 | 1.17 |
| Short term borrowings | 24,312 | 61 | 0.25 | 30,581 | 120 | 0.39 |
| Long term debt | 28,752 | 505 | 1.76 | 43,576 | 716 | 1.64 |
| Total interest bearing liabilities | 968,797 | 5,011 | 0.52 | 1,115,644 | 7,548 | 0.68 |
| Non-interest bearing demand deposits | 119,146 | 116,930 | ||||
| Other | 12,051 | 10,469 | ||||
| Total Liabilities | 1,099,994 | 1,243,043 | ||||
| Shareholders' Equity | 88,547 | 109,184 | ||||
| Total | $ 1,188,541 | 0.45% | $ 1,352,227 | 0.59% | ||
| Net interest income (FTE)/net interest spread | 33,882 | 2.96% | 40,153 | 3.03% | ||
| Net interest margin | 3.03% | 3.12% | ||||
| Tax-equivalent adjustment | (1,795) | (2,265) | ||||
| Net interest income | $ 32,087 | $ 37,888 | ||||
| NOTES: Yields and interest income on tax-exempt assets have been computed on a fully taxable equivalent basis assuming a 35% tax rate. | ||||||
| For yield calculation purposes, nonaccruing loans are included in the average loan balance. | ||||||
| Nonperforming Assets / Risk Elements | |||
| December 31, | September 30, | December 31, | |
| (Dollars in Thousands) | 2013 | 2013 | 2012 |
| Nonaccrual loans (cash basis) | $ 19,347 | $ 16,813 | $ 17,943 |
| Other real estate (OREO) | 987 | 965 | 1,876 |
| Total nonperforming assets | 20,334 | 17,778 | 19,819 |
| Restructured loans still accruing | 5,986 | 5,289 | 3,092 |
| Loans past due 90 days or more and still accruing | 0 | 20 | 0 |
| Total risk assets | $ 26,320 | $ 23,087 | $ 22,911 |
| Loans 30-89 days past due | $ 3,264 | $ 4,059 | $ 3,578 |
| Asset quality ratios: | |||
| Total nonaccrual loans to loans | 2.88% | 2.46% | 2.55% |
| Total nonperforming assets to assets | 1.73% | 1.47% | 1.61% |
| Total nonperforming assets to total loans and OREO | 3.03% | 2.60% | 2.81% |
| Total risk assets to total loans and OREO | 3.92% | 3.37% | 3.25% |
| Total risk assets to total assets | 2.23% | 1.90% | 1.86% |
| Allowance for loan losses to total loans | 3.12% | 3.11% | 3.29% |
| Allowance for loan losses to nonaccrual loans | 108.36% | 126.40% | 129.11% |
| Allowance for loan losses to nonaccrual and restructured loans still accruing | 82.76% | 96.15% | 110.13% |
| Roll Forward of Allowance for Loan Losses | ||||
| Three Months Ended | Twelve Months Ended | |||
| December 31, | December 31, | December 31, | December 31, | |
| (Dollars in Thousands) | 2013 | 2012 | 2013 | 2012 |
| Balance at beginning of period | $ 21,252 | $ 36,700 | $ 23,166 | $ 43,715 |
| Provision for loan losses | (1,750) | 1,000 | (3,150) | 48,300 |
| Recoveries | 2,131 | 2,602 | 6,676 | 5,410 |
| Loans charged-off | (668) | (17,136) | (5,727) | (74,259) |
| Balance at end of period | $ 20,965 | $ 23,166 | $ 20,965 | $ 23,166 |
About the Company
With nearly $1.2 billion in assets, Orrstown Financial Services, Inc. and its wholly-owned subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-two banking offices and two remote service facilities located in Cumberland, Franklin, Lancaster and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.'s stock is traded on the NASDAQ Capital Market under the symbol ORRF.
Cautionary Note Regarding Forward-looking Statements:
This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, including, without limitation, our ability to remediate problem loans, ensure compliance with regulations, support future growth, reduce expenses by $5.0 million over a two year period, expand our product offerings as desired, mitigate future losses through capturing and monitoring credit risk within the portfolio, actively monitor and follow-up on loans previously charged off, or realize recoveries when the financial condition of borrower has improved. Actual results and trends could differ materially from those set forth in such statements and there can be no assurances that we will be able to remediate problem loans, ensure compliance with regulations, support future growth, reach the full level of expense reduction within the desired timeframe, expand our product offering as desired, mitigate future losses through capturing and monitoring credit risk within the portfolio, actively monitor and follow-up on loans previously charged off, or realize recoveries when the financial condition of a borrower has improved. Factors that could cause actual results to differ from those expressed or implied by the forward looking statements include, but are not limited to, the following: ineffectiveness of the Company's business strategy due to changes in current or future market conditions; the effects of competition, including industry consolidation and development of competing financial products and services; changes in laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; interest rate movements; changes in credit quality; inability to raise capital, if necessary, under favorable conditions, volatilities in the securities markets; and deteriorating economic conditions, and other risks and uncertainties, including those detailed in Orrstown Financial Services, Inc.'s Form 10-K for the fiscal year ended December 31, 2012, and the Form 10-Qs for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013 and other filings made with the Securities and Exchange Commission. The statements are valid only as of the date hereof and Orrstown Financial Services, Inc. disclaims any obligation to update this information.
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.