SHIPPENSBURG, PA (October 28, 2010)
• Third quarter 2010 earnings increased 26.2% vs. third quarter 2009
• 11.0% reduction of risk assets in the third quarter 2010
• Nonperforming assets declined 29.0% since March 31, 2010
• Basic earnings per share of $0.61 for the third quarter 2010, matches third quarter 2009, despite an increase in the number of shares from the March 2010 stock offering
• The Company announced a 2.3% increase in the quarterly dividend over the fourth quarter 2009
Orrstown Financial Services, Inc. (NASDAQ: ORRF) announced today that net income increased 26.2% to $4,896,000 for the quarter ended September 30, 2010, from $3,880,000 for the third quarter of 2009. Diluted earnings per share amounted to $0.61 for the quarter ended September 30, 2010, as compared to $0.60 for the corresponding prior year period. The Company also announced that its Board of Directors declared a fourth quarter cash dividend of $0.225 per share for shareholders of record on November 12, 2010. The dividend will be paid on November 24, 2010.
Commenting on the Company’s results, Thomas R. Quinn, Jr., President and CEO, said, “We are very pleased to report record net income, by quarter, for three sequential quarters and a 17.8% increase in year-to-date earnings compared to the same period last year.”
“Our capital raise in the first quarter of 2010, which increased capital by $37.6 million, combined with our ability to generate deposit growth, allowed us to grow assets 27.4% since September 30, 2009. Our regulatory capital ratios of 9.5% Tier 1 leverage, 13.7% Tier 1 risk-based, and 14.9% Total risk-based are well above the minimums to be considered well capitalized, and position the Company to take advantage of future opportunities.”
Quinn concluded, “Despite a tough banking environment, we have been able to produce consistent operating results, bolster our reserves and capital, and continue our efforts in addressing asset quality. This forward momentum will continue to serve us well during the remainder of 2010 and into 2011.”
Results of Quarterly Operations
Net interest income for the quarter ended September 30, 2010 increased to $11,668,000 as compared to $9,479,000 in the same prior year period. The net interest margin decreased slightly to 3.62% for the three months ended September 30, 2010, a reduction of one basis point versus the same quarter in 2009. The Company continues to lower its cost of funds as evidenced by a decrease of 62 basis points to 0.92% for the three months ended September 30, 2010, as compared to 1.54% in the same prior year period. Average interest-earning assets increased by $286 million for the three months ended September 30, 2010, as compared to the same prior year period.
Other income increased to $6.2 million for the three months ended September 30, 2010, as compared to $4.4 million in the same prior year period. This includes an increase in securities gains from $338,000 during third quarter 2009, to $1,074,000 during third quarter 2010. Noninterest income generation increased across all business lines, including Orrstown Financial Advisors, mortgage origination and deposit based fees. Operating expenses amounted to $9.7 million for the three months ended September 30, 2010, as compared to $8.0 million for the corresponding prior year period.
Results of Year-to-Date Operations
Net interest income for the nine months ended September 30, 2010, increased to $33,465,000 as compared to $26,313,000 in the same prior year period, reflecting a higher net interest margin and higher levels of interest-earnings assets. The net interest margin increased to 3.72% for the nine months ended September 30, 2010, a gain of 19 basis points versus the same period in 2009. The yield on interest-earning assets decreased to 4.76%, as compared to 5.25% in the prior year period. Year to date, the cost of funds decreased to 1.04% for the nine months ended September 30, 2010, as compared to 1.72% in the same prior year period. Average interest-earning assets increased by $225 million for the nine months ended September 30, 2010, as compared to the same prior year period. The provision for loan losses increased to $7,550,000 for the nine months ended September 30, 2010, as compared to $1,265,000 for the corresponding prior year period.
Other income increased to $18.3 million for the nine months ended September 30, 2010, as compared to $12.6 million in the same prior year period. This includes an increase in securities gains from $796,000 through September 30, 2009, to $3,253,000 through September 30, 2010. Operating expenses amounted to $27.1 million for the nine months ended September 30, 2010, as compared to $23.9 million for the corresponding prior year period.
Financial Condition
Assets grew $282 million to $1.478 billion at September 30, 2010, up from $1.196 billion at December 31, 2009. Securities available for sale have increased $232.9 million, or 118.7%, since December 31, 2009. Deposits increased to $1.139 billion at September 30, 2010, from $915 million at December 31, 2009. Stockholders’ equity increased to $163.9 million at September 30, 2010, as compared to $110.9 million at December 31, 2009, boosted by the completion of a common stock offering, in March 2010, that netted approximately $37.6 million in additional capital.
Asset Quality
The Company’s non-accrual loans totaled $14.4 million at September 30, 2010, down $8.6 million, or 37%, from the high of $23.0 million at March 31, 2010. Improvement was made through the reduction in the level of non-accrual loans, loans past due 90 or more days and still accruing, and total delinquency. The Company continues to be diligent in its handling of nonperforming and other risk assets and has been able to reduce the level of risk assets from a high of $32.8 million at March 31, 2010, to $20.5 million as of September 30, 2010. Two large credits, totaling $7.6 million, have been worked off the books since March 2010, which resulted in a $2.0 million charge off in the second quarter. Although the Company’s ratio of total risk assets to total assets increased from 0.96% at December 31, 2009, to 1.39% at September 30, 2010, increases have been noted across the financial services industry and within our peer group. The Company’s allowance for loan losses covered its nonperforming loans and stood at 107% at September 30, 2010.
With over $1.4 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty one banking offices and two remote service facilities located in Cumberland, Franklin 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.
Safe Harbor Statement: This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: ineffectiveness of the Corporation'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 recent Dodd-Frank Wall Street Reform and Consumer Protection Act; interest rate movements; changes in credit quality; volatilities in the securities markets; and deteriorating economic conditions, and other risks and uncertainties, including those detailed in Orrstown Financial Services, Inc.'s filings 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 including the filing date of a public company’s financial statements, when filed with the Securities and Exchange Commission. Accordingly, the consolidated financial information presented in this announcement is subject to change.
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