Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Investor Presentation (February 2020)
37 slides from Orrstown Financial Services's investor presentation, Feb 18, 2020
Slide 1: This is Your Town; This is Our Town; This is Orrstown
al Services, In ___ ——— es —— This is Your Town; This is Our Town; This is Orrstown Celebrating 101 Years as an Independent Community Bank By Investing for the Future Presentations Given First Quarter 2020
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21£ of the Securities Exchange Act of 1934, as amended. Forward-looking statement reflect the current
Slide 3: Non-GAAP Measures Disclosure
Non-GAAP Measures Disclosure In this presentation we refer to adjusted net income, excluding net securities gains, and branch consolidation expenses, and net interest margin, excluding the impact of purchase accounting adjustments for interest accretion, which are non-GAAP measures. For a reconcilia
Slide 4: Company Overview
Company Overview Key Performance Indicators (at 12/31/2019) [Market Cap ‘$2533 million Assets $24 billion Loans ‘SL6 billion (Deposits $1.9 billion Net interest Margin 343% ROAE 0.76% ROAA 8.21% Efficiency Ratio 70.5% * Four geographic regions: Market Presidents have full authority and autonomy (wit
Slide 5: Company Overview (continued)
Company Overview (continued) + Favorable regional demographics in both South Central Pennsylvania and Maryland in MD + Market President organizational structure; benefitting from mix of talent from larger Fl’s and solid legacy sales force + Executive leadership from more complex Fi’s and have M&A ex
Slide 6: Experienced Leadership Team
Experienced Leadership Team Experience / Di: Name/Title Banking Joined Experience | ORRF Thomas R. Quinn, Jr. President & CEO Thomas R. Brugger 29 years 2009 CEO | Strategy | Sales | Executive Finance | Treasury | Citi, Fifth Third pve/chef raneelGieen years 2019 Bes eel Sun National, Customers, Sov
Slide 7: Demographics Trends & Market Share
Demographics Trends & Market Share 2020-5 Year | 2020 Median 2020 May19 | Entered Branch Market Households Proj. Gr. HHI Businesses] Unemploy| Market Count Share Geography (#) (h) (S) (#) (%) (Year) (#) (%) Cumberland, PA 103,264 «3.55 73.270 9,335 34 1919 7 9.39 Dauphin, PA 115602 196, 66,540 11,83
Slide 8: In an Unsettled Market
In an Unsettled Market Deal ‘Announce Target Mergerof Value Buyer! Target Name Date State Equals (mm) Howard Bancom, Inc/Patapsce Banco, Inc. Completed MD No 104 4 2284 1835 Hamiton Bancom, IncJFairmount Bancorp, Inc Completed 04/16/15 MD No 184 1 736 46 Ikopemik Bank/Koscluscko Federal Savings Bank
Slide 9: 2015-2019: Strategic Investments Continue
2015-2019: Strategic Investments Continue 2015 2016 Investments Investments in customer-facing talent customer-facing talent to take advantage of continue: * 14 new customer- disruption: facing hires * Cash Management * Continue franchise Team expansion east of Susquehanna River (Lancaster and Dauph
Slide 10: Peer Profitability Comparison
Peer Profitability Comparison As a Percentage of Average Assets Peers Orrstown Q4 2019 Net Interest Income 3.30% 3.06% ~ Loan Loss Provision 0.13% 0.00% thereis a pathto a Fl + Noninterest Income 0.97% 1.20% improvingreturns. urrent below-peer . " a It -Noninterest Expense 2.70% 3.36% Branch returns
Slide 11: Path to Improving Profitability
Path to Improving Profitability * Continuation of execution of growing the relationship community bank + Expand loan origination capacity with 3 new lending teams and investin new locations (York County, Central Region, Maryland Region) in target markets + Branch efficiency optimization using new co
Slide 12: Long Term Phases of Growth
Long Term Phases of Growth Phase 1 Phase 2 Phase 3 Phase 4 (completed) 2021-2022 2022-2025 (ongoing) BUILD SCALE WITH ENHANCE AND ACHIEVE GROWTH DISCIPLINED GROWTH ACQUISITIONS, OPTIMIZE THROUGH AND EXECUTION OF ORGANIC GROWTH, PROFITABILITY OF ACQUISTION AND STRATEGIC PLAN AND KEY HIRES BALANCE SHE
Slide 13: Geographic Source of Loans
Geographic Source of Loans Total Loans at 12/31/2019 $1,022.8 62% MAIl Other Markets mi Legacy Markets Our Legacy market continues to be a material source of interest income. However, newer markets (Eastern, Central, and Maryland) now account for nearly 2/3rds of total loan outstandings. Newer marke
Slide 14: Proven Track Record of Organic Expansion in New Markets
Proven Track Record of Organic Expansion in New Markets eee ee 47,805,426 IManheim Pike Lancaster) [33 30,827,303] INew Holland (Lancaster) [723 T's25.670376 [Olde Hickory (Lancaster) [717 | $12,873,848) hady Maple (Lancaster) [7221315907555 Litite (Lancaster) [1s 5,261,365 [the Crossings (Lancaster
Slide 15: 2019: Investments in Organic Expansion
2019: Investments in Organic Expansion Commercial Pipeline Trend (S$ inmillions) Jur-8 Jub18 Aug-18 Sep-18 Oct-18 Novi8 Dec-18 Jan-19 Feb-19 Mar19 Apr19 May-19 Jun19 Jub19 Aug-19 Sep-19 Oct-19 Nov19 Dec19 impact of lender recruiting] Recruiting Philosophy: Recruit experienced market presidents from
Slide 16: Favorable Conditions for Success in Maryland
Favorable Conditions for Success in Maryland + Strategically located in the Mid-Atlantic, Baltimore is the 20 most populated MSA in the nation + Significant market disruption expected from BB&T/SunTrust, Old Line/WesBanco, Sandy Spring/Revere mergers + Greater Baltimore's growth has outpaced Philade
Slide 17: Continued Technology Investments are Priority
Continued Technology Investments are Priority actor penetration attempts (left) * Real-time monitoring of network, core, and ancillary systems by location (right) Underwriting queue by processorandstatus Offensive capabil * Beg behavior to predict add telligence based on client nal products/services
Slide 18: Orrstown Bank's ESG focus begins with our Core Values
Orrstown Bank's ESG focus begins with our Core Values: * ACCOUNTABLE: We are accountable to our clients and each other * COMMUNICATE: We strive to communicate timely and clearly with openness and respect * COMMUNITIES: We are actively engaged in our communities + INNOVATE: We constantly strive to in
Slide 19: Environmental
Environmental Environmental respon: alignment with strong business practices and our core values. B good stewards of the environment, reducing energy consumption and eliminating waste through proactive and conscious planning reduces costs, enhances our profitability and helps mitigate negative envir
Slide 20: General Philosophy
General Philosophy Specific Items Asa community bank, caring for our communities is not a policy, it’s part of our DNA and our social responsi jes are included in our mission statement and core values. First time homebuyer program and outreach Free no minimum balance checking SBA lender Participant
Slide 21: Governance
Governance General Philosophy Our Governance worldview is best summarized in our Mission statement: We create value for our shareholders by providing outstanding client experiences through community engagement and local decisions from people you know and trust. + Our Board actively assesses the Comp
Slide 22: Loan Mix
Loan Mix Orrstown Financial Services, Inc. an Mix Year-end YTD 5Yr 2014 2015. 2016 2017 2018 1213112019 CAGR Category (Emi) | Smiy “| Smiy “GY | Emiy CY [Sm GH) [Smit (4) Construction 302 43 | 507 65 | 307 35 31034 49.440 57435 37 ConsumeniHELOC 956 136 | 1182 151 | 1273 144 | 1540 152 | 1769 142 |
Slide 23: Asset Quality Trends
Asset Quality Trends NPAs/ Assets (% NPAs/Assets (%) 150 134 0.80 1.00 os 233 032 Pel 052 048 050 068 027 020 0.00 0.00 ae 03/19 06/19 09/19 2s —eORRF oe Peers eo ORRF —e— Peers agro 12/2016 12/2017 2j201g 12/2018 Reserves/Loans Held for Investment (9) Reserves/ Loans Held For investment (%) 174 200
Slide 24: Deposit Mix
Deposit Mix ‘Orrstown Financial Services, Inc. Yearend or 201 2018 2018 2oir___[ [2018 2049 cack Category ($ mil.) _(%)_| ($ mil) _(%)_ | ($ mil. (S0) {$ mil. ($ mil. ($ mil. BDA tia 122 | (14 127 | 1507 131] 128 133 | 2088 734] 2530 135 | toe Now asa7 372 | 2665 245 | 44a gas | 47os 301 | 5509 257
Slide 25: Key Metrics: 2015 to Current
Key Metrics: 2015 to Current Return metrics improved due to: + Capacity utilization a —a + Loan growth and mix shift 080 075 076 ost i 054 + Capital deployment, and 0.60 0.50 + The risk profile of the company Oe ie a z5 = eon eo Peers Efficiency Ratio (24 NPAs/Assets (%) ee 76.28 74.35 we ne aa 1.00
Slide 26: Thomas R. Quinn, Jr.
Thomas R. Quinn, Jr. President & CEO tquinn@orrstown.com 717-530-2602 Thomas R. Brugger Chief Financial Officer tbrugger@orrstown.com 717-510-7131 Matthew C. Schultheis, CFA Investor Relations mschultheis@orrstown.com 717-510-7127
Slide 27: Appendix
Appendix * Five year performance metrics and operating results * Five quarter performance metrics and operating results * GAAP to non-GAAP reconciliations * S&P Global Market Intelligence reconciliations
Slide 28: Five Year Trends: Summary Financials
Five Year Trends: Summary Financials Clr in touzande nls nice 2019 2018 2017 2016 2015 Results of Operations: Texcequivalentinterestincome 94037 67,084 53.900 44,185 40,686 Interest expense 2369913511 7644 sat7 4301 Tex-equivalentnetinterestincome 70338 $3573 46,288. 38,768 36,365 Tex-equivalent adj
Slide 29: Performance Ratios 2015-2019
(Percent unless indicated) 2019 2018 2017 2016 2015 Performance Ratios: Return on average assets 076 0.75 0.54 0.50 0.64 Return on average common equity 821 8.56 573 4.80 5.99 Yield on average interest-eaming assets 459 4.20 3.90 361 3.54 Rate on average interest-bearing liabilities 1.35 0.99 0.65 0
Slide 30: Five Quarter Trends: Summary Financials
Five Quarter Trends: Summary Financials in thousands, unless insicatc) 4219 919 06/19 039 42118 Results of Operations: Tax-equivalentinterestincome 24228 25086 24,764 20,004 19,541 interest expense 6057 67ST S057 4.808 4.402 Taxcequivalent net iterestincome 1819818287 18807 15,106 15,139 Taxcequival
Slide 31: Five Quarter Trends: Key Performance Metrics
Five Quarter Trends: Key Performance Metrics (Percent unless indicated) 12119 09/19 06/19 03/19 1218 Performance Ratios: Return on average assets 072 115 0.48 0.65 0.24 Return on average common equity 7.53 1237 5.26 723 270 Yield on average interest-eaming assets 451 452 478 454 437 Rate on average
Slide 32: Performance Trends
Performance Trends Reported: Net Interest Margin QTD (4 3.80 3.60 3.63 3.40 320 3.35 336 58 338 = 3.37 3.20 3.30 3.00 3.7 3.16 2.80 3.00 2015 2016 2017 2018 2019 ape 03/19 06/19 09/19 pas eo ORRF = Peers me onne See Peers Data Source: S&P Global Market intelligence Data Source: S&P Global Market int
Slide 33: Performance Trends (Continued)
Performance Trends (Continued) Reported: ROAA YTD (24 Reported: ROAA QTD (%4 120 150 ion SSS 0.80 1.00 Ts 0.60 075 076 0.64 oe 050 054 oso 065 072 0.20 048 0.00 0.00 028 2015 2016 2017 2018 2019 12/18 03/19 06/19 09/19 wig eH ORRF ee Peers Om ORRF mem Peers Reported: ROAE YTD (%) Reported: ROAE QTD
Slide 34: Capital Trends
Capital Trends Leverage Ratio (9 —eORRF —e— Peers 10.00 9.77. 10.00 9.00 B42 85 8.46 B36 242 856 3850 817 —_ 8.00 2015 2016 2017 2018 2019 12/18 03/19 06/19 09/19 12/19 =e ORRF ge Peers O-ORRF —e— Peers: 15.00 J458 125 14.00 2S 11.89 : 5m 11.33 eORRF eo Peers: Data Source: S&P Global Market Intellig
Slide 35: GAAP to Non-GAAP Reconciliation
Slide 36: S&P Global Reconciliation
S&P Global Reconciliation Appendix: Reconciliation of S&P Global Market Intelligence Efficiency Ratio Full Year farsinth 2018 2017 2016 GAAP Total Expenses S$ 77,302 S$ 57.871 § 50,312 § 47,958 $44,373 Amortization of Intangible Assets 1.571 286 107 99 207 -Mergerselated Costs 7.976 3.197 - - - Insu
Slide 37: S&P Global Reconciliation
S&P Global Reconciliation Appendix: Reconciliation of S&P Global Market Intelligence Efficiency Ratio Quarter Ended larsin thousar 1273119 __ 09/30/19 06/30/19 03/31/19 12/31/18 GAAP Total Expenses S$ 19,709 $ 18,140 § 23,292 § 16,161 $ 18.283 -Amortization of Intangible Assets 475 486 402 208 214 -
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