Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Investor Presentation (December 2021)
33 slides from Orrstown Financial Services's investor presentation, December 2021
Slide 1: Presentations Given During Fourth Quarter 2021
Orrstown Financial Services, Inc. MISSION: “We create value for our shareholders by providing outstanding client experiences through community engagement and local decisions from people you know and trust.” VISION: “We aspire to be the financial institution of choice focused on quality client servic
Slide 2: Cautionary Note Regarding Forward Looking Statements | Non-GAAP Disclosures
Cautionary Note Regarding Forward Looking Statements | Non-GAAP Disclosures 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 21E of the Securities Ex
Slide 3: Trendline: Profitable and Effective Franchise Expansion
Trendline: Profitable and Effective Franchise Expansion $3,500,000 1.40% 1.21% 1.20% $3,000,000 1.00% 1.00% $2,500,000 0.75% 0.76% 0.64% 0.80% 0.50% 0.54% 0.60% $2,000,000 0.40% $1,500,000 0.20% $1,000,000 0.00% TOTAL 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 YTD 2021 ROAA AS
Slide 4: Company Overview: Strong Geographically Diverse Markets
Company Overview: Strong Geographically Diverse Markets Geographic Focus Driven by Relationship Banking Model • Four geographic regions: Market Presidents have full authority and autonomy (within ERM guidelines) • Market Presidents are all seasoned best-in-class bankers • Markets connected by signif
Slide 5: Company Overview: Product Suite Provides Expansion Opportunity
Company Overview: Product Suite Provides Expansion Opportunity COMMERCIAL BANKING INVESTMENTS & TRUST MORTGAGE BANKING PERSONAL BANKING • C&I and CRE Lending • Wealth Management • Fixed-rate and Adjustable Rate Mortgages • Deposit Products and Services • Treasury Management • Retirement Planning • P
Slide 6: 2021 / 2022 Strategic Focus: Optimizing Results
2021 / 2022 Strategic Focus: Optimizing Results SBA PPP portfolio provides significant earnings contribution: • Approximately $260 million in net PPP loans at September 30, 2021 • At September 30, 2021, total of $8.6 million in net deferred fees remaining - expect majority of fees $8.6 Cross to be e
Slide 7: 2021 / 2022 Strategic Focus: Investments for Growth
2021 / 2022 Strategic Focus: Investments for Growth Investments in Revenue Producing Talent: • Committed to additional investments in client-facing bankers as we grow our relationship banking model, particularly in our growth markets Expand Use of Technology: • Continue to assess and adapt to changi
Slide 8: Technology Transformation Underway
Technology Transformation Underway Improving client interaction with new Commercial and Small Business loan origination solution. Contactless capability in new ATM units. Enhanced card management features. Improved electronic signature capabilities. Frictionless Client Interaction Utilizing data to
Slide 9: Financial Overview: Balance Sheet Mix
Financial Overview: Balance Sheet Mix Deposit Mix Loan Mix (September 30, 2021) (September 30, 2021) Residential Rental, Consumer / HELOC, 10.9% Residential 8.9% Mortgage, DDA, 59.2% 10.8% Construction, 4.3% Municipal, 0.7% Jumbo CDs, 2.1% Commercial RE, * Commercial, 24.6% Retail CDs, 11.0% 26.3% M
Slide 10: Financial Overview: Revenue Mix—3Q'21
Financial Overview: Revenue Mix—3Q’21 Service Charges, Other Income, 13.0% 18.0% Interchange Noninterest Income, 13.5% Net Interest Income, 27.1% Mortgage Income, 72.9% Banking, 17.4% Wealth Management, 38.1% Opportunity to gain market share in growth markets Wealth management and mortgage not yet
Slide 11: Right People and Aligned for Success
Right People and Aligned for Success Name/Title Banking Joined Experience ORRF Significant Experience Compensation Aligned with Shareholder Value Thomas R. Quinn, Jr. 31 years 2009 • Average 27 years of banking experience President & CEO • Pay for profitability, not growth Neelesh Kalani • Average 9
Slide 12: Select Loan Concentration Analysis
Select Loan Concentration Analysis COVID-19 Modification Experience ($ millions) $300.0 $239.3 16.00% $250.0 $198.1 14.00% 12.00% $200.0 10.00% $150.0 $78.4 8.00% 6.00% $100.0 4.00% $50.0 $18.2 $7.5 $3.9 $0.3 2.00% $0.0 0.00% 03/20 06/20 09/20 12/20 03/21 06/21 09/21 Covid Modifications Covid Mods A
Slide 13: PPP: Generating Long-Term Opportunity
PPP: Generating Long-Term 2020: Execution Opportunity of SBA’s Payroll Protection Program • Success in PPP serves as “proof of concept” for future growth • Prior hires of commercial lenders and access to new clients were crucial to PPP volume 2019 2020 and Early 2021 Mid-2021 and Beyond • Hired 17 c
Slide 14: Value Proposition
Value Proposition Orrstown Financial Services, Inc. (ORRF) Financial Highlights Peer Analysis Line Item 12/31/18 09/30/2021 CAGR Recent Market Performance (as of 12/09/2021) Price/2021 Price/2022 Price/ Core Deposit Tangible Book Value per Market Value Dividend Yield Price/LTM Earnings Estimated EPS
Slide 15: Performance Ratios: 5-Year Trend
Performance Ratios: 5-Year Trend Growth Growth YTD Profitability Ratios 2016 2017 2018 2019 2020 1 Year 3 Year 9/30/21 Reported Pre-tax Pre-provision Income ($ millions) 8.1 13.4 15.2 20.5 37.8 84% 182% 32.4 Pre-tax Pre-provision Inc / Avg Assets 0.61% 0.90% 0.89% 0.92% 1.43% 1.49%1 Pre-tax Pre-prov
Slide 16: For Additional Information
For Additional Information Thomas R. Quinn, Jr. Neil Kalani President & CEO Chief Financial Officer tquinn@orrstown.com nkalani@orrstown.com 717-530-2602 717-510-7097 Robert Coradi Matthew C. Schultheis, CFA Chief Risk Officer Investor Relations rcoradi@orrstown.com mschultheis@orrstown.com 717-709-
Slide 17: Appendix and Supplemental Information
Appendix and Supplemental Information 17
Slide 18: Five Year Trends: Summary Financials
Five Year Trends: Summary Financials (Dollars in thousands, except per share data, unless indicated) 2020 2019 2018 2017 2016 Results of Operations: Tax-equivalent interest income 100,455 94,037 67,084 53,900 44,185 Interest expense 16,024 23,699 13,510 7,644 5,417 Tax-equivalent net interest income
Slide 19: Five Year Trends: Key Performance Metrics
Five Year Trends: Key Performance Metrics 2020 2019 2018 2017 2016 Performance Ratios (%): Return on average assets 1.00 0.76 0.75 0.54 0.50 Return on average common equity 11.66 8.21 8.56 5.73 4.80 Yield on average interest-earning assets 4.09 4.59 4.20 3.90 3.61 Rate on average interest-bearing li
Slide 20: Five Quarter Trends: Summary Financials
Five Quarter Trends: Summary Financials (Dollars in thousands, except per share data, unless indicated) 09/21 06/21 03/21 12/20 09/20 Results of Operations: Tax-equivalent interest income 22,419 23,877 24,125 26,617 24,423 Interest expense 1,571 1,755 2,074 2,697 3,398 Tax-equivalent net interest in
Slide 21: Five Quarter Trends: Key Performance Indicators
Five Quarter Trends: Key Performance Indicators (Percent unless indicated) 09/21 06/21 03/21 12/20 09/20 Performance Ratios (%): Return on average assets 0.98 1.20 1.44 1.47 0.72 Return on average common equity 10.69 13.56 16.31 17.01 8.67 Yield on average interest-earning assets 3.26 3.49 3.70 4.15
Slide 22: Performance Trends
Performance Trends Reported: Net Interest Margin (%) Reported: Net Interest Margin (%) 3.73 3.80 3.80 3.60 3.44 3.60 3.38 3.40 3.21 3.40 3.24 3.24 3.43 3.20 3.35 3.36 3.20 3.00 3.00 2.80 3.03 2.80 2017 2018 2019 2020 YTD 09/21 09/20 12/20 03/21 06/21 09/21 ORRF Peers ORRF Peers Efficiency Ratio (%)
Slide 23: Performance Trends (continued)
Performance Trends (continued) Reported: ROAA (%) 2.00 1.47 1.44 1.50 1.20 1.00 0.98 0.50 0.72 0.00 09/20 12/20 03/21 06/21 09/21 ORRF Peers Reported: ROAE (%) Reported: ROAE (%) 15.00 13.49 20.00 17.01 11.66 16.31 13.56 15.00 10.00 8.56 10.00 8.21 5.00 10.69 8.67 5.73 5.00 0.00 0.00 2017 2018 2019
Slide 24: Capital Trends
Capital Trends Leverage Ratio (%) Leverage Ratio (%) 9.50 8.50 8.95 8.25 8.30 9.00 8.05 8.10 8.50 8.25 7.90 7.81 8.07 8.42 8.56 8.02 8.00 7.70 8.05 7.50 7.50 2017 2018 2019 2020 YTD 09/21 09/20 12/20 03/21 06/21 09/21 ORRF Peers ORRF Peers Tier 1 Ratio (%) Tier 1 Ratio (%) 13.50 13.16 13.50 12.78 13
Slide 25: Asset Quality Trends
Asset Quality Trends NPAs/ Assets (%) NPAs/ Assets (%) 0.80 0.60 0.50 0.60 0.69 0.40 0.40 0.27 0.30 0.37 0.34 0.46 0.33 0.37 0.20 0.28 0.32 0.20 0.32 0.10 0.00 0.00 2017 2018 2019 2020 YTD 09/21 09/20 12/20 03/21 06/21 09/21 ORRF Peers ORRF Peers Reserves/ Loans Held For Investment (%) Reserves/ Loa
Slide 26: Income Statement Trends
Income Statement Trends dollars in millions Growth Growth Income Statement 2016 2017 2018 2019 2020 1 Year 3 Year Net Interest Income 36.5 43.8 52.2 69.3 83.6 21% 91% Non-Interest Income 18.3 18.8 20.0 23.8 28.3 19% 51% Net Securities Gains 1.4 1.2 1.0 4.7 0.0 (100%) -101% Total Revenue 56.3 63.8 73
Slide 27: Balance Sheet Trends & Select Loan Metrics
Balance Sheet Trends & Select Loan Metrics dollars in millions Growth Growth Loan Portfolio Mix 2016 2017 2018 2019 2020 1 Year 3 Year Total Gross Loans 886 1,016 1,251 1,654 1,991 20% 96% Residential Mortgage 16% 16% 19% 20% 12% Home Equity 15% 14% 12% 11% 8% Other Consumer 1% 2% 3% 3% 1% Total Con
Slide 28: Capital Adequacy
Capital Adequacy dollars in millions Growth Growth Capital Adequacy 2016 2017 2018 2019 2020 1 Year 3 Year Tier 1 Capital $127.0 $138.8 $160.1 $196.5 $217.6 11% 57% Tier 2 Capital $ 12.0 $ 13.6 $ 46.9 $ 47.6 $ 53.6 13% 294% Total Regulatory Capital $139.0 $152.4 $207.0 $244.0 $271.2 11% 78% Tier 1 L
Slide 29: ESG Initiatives and Focus
ESG Initiatives and Focus Environmental Social Governance General Philosophy General Philosophy General Philosophy Environmental responsibility is in alignment with strong As a community bank, caring for our communities is not a • Our Governance worldview is best summarized in our business practices
Slide 30: Summary Financial Trends
Summary Financial Trends dollars in millions (except for per share information) Growth Growth Summary Trends (as of and for the year ended December 31, ) 2016 2017 2018 2019 2020 1 Year 3 Year Assets $1,415 $1,559 $1,934 $2,383 $2,751 15% 76% Net Loans 873 1,003 1,237 1,630 1,960 20% 95% Deposits 1,
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation APPENDIX - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations Management believes providing certain “non-GAAP” financial information will assist investors in their understanding of the effect of acquisition activity on reported results, p
Slide 32: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) ($ in millions, except per share data) Non GAAP Financial Measure Reconciliation Reported 2016 2017 2018 2019 2020 Income Statement / Diluted Share 2016 2017 2018 2019 2020 Net Interest Income 36.5 43.8 52.2 69.3 83.6 Core Revenue (C) 54.9 62.6 72.2 93.1 1
Slide 33: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) ($ in thousands) Efficiency Ratio Reconciliation 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Non-interest expense (A) $ 19,035 $ 17,033 $ 17,783 $ 18,080 $ 19,265 Net interest income (B) 20,620 21,901 21,855 23,728 20,818 Non-interest income (C) 7,6
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