Orrstown Financial Services, Inc. Announces Record Quarterly Earnings, Increased First Quarter Dividend and Reduction in Risk Assets
SHIPPENSBURG, PA (January 27, 2011)
• Record earnings in 2010 of $16.6 million, a 24.0% improvement over 2009 results
• Assets climb to over $1.5 billion
• Record fourth quarter 2010 earnings, which increased 45.2% vs. fourth quarter 2009
• 10.0% reduction of risk assets in the fourth quarter 2010 compared to the prior quarter
• Nonperforming assets declined 32.2% since March 31, 2010
• Declaration of first quarter 2011 dividend of $0.23 per share, an increase of 4.6% over prior year
Orrstown Financial Services, Inc. (NASDAQ: ORRF) announced today that net income increased 45.2% to $4,375,000 for the quarter ended December 31, 2010, from $3,014,000 for the fourth quarter of 2009. Diluted earnings per share amounted to $0.55 for the quarter ended December 31, 2010, as compared to $0.46 for the corresponding prior year period. The Company also announced that its Board of Directors declared a first quarter cash dividend of $0.23 per share, an increase of 4.6% over the first quarter of 2010, for shareholders of record on February 11, 2011. The dividend will be paid on February 23, 2011.
Commenting on the Company’s results, Thomas R. Quinn, Jr., President and CEO, said, “Our performance in 2010 resulted in the best earnings (net income up 24%) ever in the 91-year history of the organization.”
“Of course 2010 was a challenging year for all community banks, but we nevertheless produced strong results which will be substantially above local peer levels once the year-end results are compiled. Additionally, we bolstered our reserves, added meaningfully to capital and were intensively focused on asset quality, which we believe remains quite solid.”
“While we cannot forecast what the national and regional economic conditions will be, we are cautiously optimistic that our strategies and the execution of our underlying business plan will deliver consistent ongoing returns for our shareholders. We have dedicated people, an experienced senior management team and a very engaged Board of Directors that know our market, recognize our Company’s competitive strengths and understand how to differentiate ourselves to our customers. We look forward to the year ahead and believe we will continue to compete well within our region”, Quinn concluded.
Results of Quarterly Operations
Net interest income for the quarter ended December 31, 2010 increased to $12,270,000 as compared to $10,257,000 in the same prior year period. The net interest margin decreased to 3.60% for the three months ended December 31, 2010, a reduction of ten basis points versus the same quarter in 2009. The Company continues to lower its cost of funds as evidenced by a decrease of 42 basis points to 0.86% for the three months ended December 31, 2010, as compared to 1.28% in the same prior year period. Average interest-earning assets increased by $315 million for the three months ended December 31, 2010, as compared to the same prior year period.
Other income increased to $5,536,000 for the three months ended December 31, 2010, as compared to $5,087,000 in the same prior year period. Noninterest income generation increased across all business lines, including Orrstown Financial Advisors, mortgage origination and deposit based fees. Operating expenses amounted to $10,450,000 for the three months ended December 31, 2010, as compared to $8,045,000 for the corresponding prior year period.
Results of Year-to-Date Operations
Net income totaled $16,581,000 for the year ended December 31, 2010, an increase of $3,208,000, or 24.0%, over 2009’s results. Diluted earnings per share totaled $2.17 for the year ended December 31, 2010, compared to $2.07 in 2009, an increase of 4.8%, despite the issuance of over 1.5 million shares during 2010.
Net interest income for the twelve months ended December 31, 2010, increased to $45,735,000 as compared to $36,570,000 in the same prior year period, reflecting a higher net interest margin on a year-to-date basis and higher levels of interest-earnings assets. The net interest margin increased to 3.72% for the twelve months ended December 31, 2010, a gain of six basis points versus the same period in 2009. The yield on interest-earning assets decreased to 4.71%, as compared to 5.26% in the prior year period. Year to date, the cost of funds decreased to 0.98% for the twelve months ended December 31, 2010, as compared to 1.60% in the same prior year period. Average interest-earning assets increased by $247 million for the twelve months ended December 31, 2010, as compared to the same prior year period.
The provision for loan losses increased to $8,925,000 for the twelve months ended December 31, 2010, as compared to $4,865,000 for the corresponding prior year period.
Other income increased to $23,793,000 for the twelve months ended December 31, 2010, as compared to $17,685,000 in the same prior year period. This includes an increase in securities gains from $1,661,000 through December 31, 2009, to $3,636,000 through December 31, 2010. Operating expenses amounted to $37,552,000 for the twelve months ended December 31, 2010, as compared to $31,967,000 for the corresponding prior year period.
Operating expense levels are often measured in the financial services industry by the efficiency ratio, which expresses non-interest expense, as a percentage of tax-equivalent net interest income and noninterest income. Despite an increase in other expenses primarily related to the growth experienced in all business lines, including Orrstown Financial Advisors, mortgage origination, and retail, the Company was able to improve on its efficiency ratio, which was 54.9% for the year ended December 31, 2010, compared to 58.9% in 2009.
Financial Condition
Assets grew $316 million to $1.512 billion at December 31, 2010, up from $1.196 billion at December 31, 2009. Securities available for sale have increased $235.5 million, or 120.0%, since December 31, 2009. Deposits increased to $1.188 billion at December 31, 2010, from $915 million at December 31, 2009. Stockholders’ equity increased to $160.5 million at December 31, 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
Improvement was made in asset quality through the reduction in the levels of non-accrual loans, loans past due 90 or more days and still accruing, other real estate owned and total delinquencies. The Company's non-accrual loans totaled $13.9 million at December 31, 2010, down $9.1 million, or 39.6%, from the high of $23.0 million at March 31, 2010. 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 $18.5 million as of December 31, 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 1.22% at December 31, 2010, similar 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 106% at December 31, 2010.
With over $1.5 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty 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.
Visit http://www.orrstown.com/ to view the complete release.
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