Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Debt Investor Presentation (December 2018)
32 slides from Orrstown Financial Services's debt investor presentation, Dec 20, 2018
Slide 1: Subordinated Notes Offering
Exhibit 99.1 ORRSTOWN Financial Services, Inc. Subordinated Notes Offering December, 2018 Confidential Version 12/10/2018 ORRSTOWN
Slide 2: Confidentiality Notice and Safe Harbor Statement
Confidentiality Notice and Safe Harbor Statement Orrstown Financial Services, Inc., a Pennsylvania corporation (the "Company"}, has engaged Boenning & Scattergood, Inc. (the "Agent") to exclusively assist the Company in raising capital in connection with a private placement of subordinated notes (re
Slide 3: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include statement
Slide 4: Section Page
Section Page I. Executive Summary 5 Il. Market and Company Overview 12 I. Strategic Investments and M&A Activity 21 IV. Selected Supplemental Financial Data 28 V. Glossary of Terms 31
Slide 5: I. Executive Summary
ORRSTOWN Financial Services, Inc. |. Executive Summary ORRSTOWN Financial Services,
Slide 6: Private Placement Summary
Private Placement Summary Aggregate Principal Amount Denomination Security Type Credit Rating Call Provision Offering Type Covenants / Registration Rights Use of Proceeds Sole Placement Agent Orrstown Financial Services, Inc. (NASDAQ: ORRF) $20.0 million $1,000 Fixed-to-floating rate Subordinated No
Slide 7: Orrstown Snapshot
Orrstown Snapshot CompPaNy HIGHLIGHTS? @ Overview: = Headquarters: Shippensburg, PA = Expertise: Seasoned commercial lending, trust and wealth management, and mortgage lending ® Listing: ORRF (NASDAQ); included in Russell 2000 = Market capitalization: ~$195 million? @ Pro Forma Balance Sheet: = Asse
Slide 8: M&A and Market Expansion
M&A and Market Expansion @ Recent activity: Two recent acquisitions, one in-market and another which extends current footprint into greater Baltimore market. Assets ($ in billions) = In May 2018 ORRF announced the acquisition of Mercersburg Financial Corporation for $32.4 million (closed October 1,
Slide 9: Company Highlights
Company Highlights GROWING REGIONAL FINANCIAL INSTITUION DIVERSIFIED, SCALABLE BUSINESS MODEL WELL POSITIONED FOR SUSTAINED GROWTH CONSISTENT STRONG OPERATING RESULTS Favorable regional demographics. Positioned to continue to benefit from market disruption associated with M&A activity involving larg
Slide 10: Experienced Leadership Team
Experienced Leadership Team Name/Title Banking Joined Experience / Disciplines Prior Expe: ice Experience ORRF Thomas R. Quinn, Jr. President & CEO David P. Boyle EVP/Chief Financial Officer Barbara E. Brobst EVP/Chief Human Resources Officer Robert G. Coradi EVP/Chief Risk Officer Philip E. Fague E
Slide 11: Financial Highlights
Financial Highlights? 1,200,000 1,089,706 1,016,101 1,000,000 886,159 ; 787,630 800,000 708,108 8 600,000 8 a9 400,000 200,000 0 2014 2015 2016 2017 9/30/2018 1,600,000 1,429,170 1,400,000 1,219,515 1,200,000 1,152,452 1,032,167 1,000,000 949,704 8 800,000 8 2 600,000 400,000 200,000 o 2014 2015 201
Slide 12: II. Market and Company Overview
ORRSTOWN Financial Services, Inc. Il. Market and Company Overview ORRSTOWN Financial Services,
Slide 13: South Central Pennsylvania Demographics
South Central Pennsylvania Demographics Percent Change in Population, 2010 to 2017 ——— 2019 2010 - 2019 County MedianHH Estimated #of HH Population Population Growth Rate Cumberland $69,844 253,247 102,597 7.58% York $67,969 448 835 173,234 3.19% Adams $64,535 102,802 38,950 1.38% Lancaster $66,927
Slide 14: Maryland Demographics
Maryland Demographics / KL cansout / ey | / ANNE ARUNDEL DORCHESTER Copyright 2005 digital-topo-maps.com ¢ Maryland has highest median household income (“HHI”) in nation - 35% higher than national median. ¢ All counties in Hamilton footprint are above state median, with Howard County ranking as weal
Slide 15: Key Metrics: Quarter Trend
Key Metrics: 5 Quarter Trend* Gross Loans ($000s) Total Assets (SO00s) $1,100,000 $1,084,941 $1,750,000 $1,720,755 $1,080,000 $1,700,000 $4,080}000 $1,644,118 $1,040,000 $1010012 $1,850,000 $1,635,906 $1,020,000 $1,000,000 $1,600,000 $980,000 $960,000 — 934,382 $1,550,000 940}000 $1,500,000 $1,474,9
Slide 16: Key Metrics: Quarter Trend
Key Metrics: 5 Quarter Trend Cost of Interest-Bearing Deposits (%) 1.00 0.94 0.90 0.80 0.76 0.67 0.70 . 0.62 0.65 0.60 — 0.50 2017 Q3 2017 Q4 2018 Ql 2018 Q2 2018 Q3 Net Interest Margin (%) 3.34 3.32 3,32 3.31 3.30 589 3.28 3.28 : 3.26 3.26 3.24 3,22 2017 03 2017 a4 2018 Ql 2018 a2 2018 03 Source: S
Slide 17: Key Metrics: Quarter Trend
Key Metrics: 5 Quarter Trend ALLL / Gross Loans (%) NPLs / Loans (%) 1.20 1.38 1.05 1.36 1.00 1.34 pe Fs 0.80 1.30 1.28 0.60 1.26 1.24 0.40 122 0.20 1.20 1.18 0.00 Q2 2017 Q3 2017 Q4 2017 Qi 2018 Q2 2018 Q3 2018 Q2 2017 Q3 2017 Q4 2017 Qi 2018 Q2 2018 3 2018 Texas Ratio NCOs / Avg. Loans (%) 8.00 7.
Slide 18: Key Metrics: 2015 to Current
Key Metrics: 2015 to Current ROAA (%) ROAE (%) 1.00 0.95 12.00 10.86 0.90 0.80 10.00 0.70 0.64 _ 0.60 0.50 = 5.99 5.73, 0.50 6.00 4.80 0.40 0.30 4,00 0.20 — 0.10 0.00 0.00 2015 2016 2017 2018 Q3 YTD 2015 2016 2017 2018 Q3 YTD Efficiency Ratio (%) EPS ($) 86.00 8558 2.00 130 84.00 82.80 1.80 82.00 16
Slide 19: Deposit & Loan Composition
Deposit & Loan Composition Farm Construction 1.2% 4.0% Transaction 10.9% 1-4 Family 4 5Y Time < $100k 24.5% 16.0% C&l 10.0% Other Consumer ¥ MMDA + sie Multifamily + Savings CRE 65.5% 40.7% 457% | 0.93%] 223.08% 26.80% Source: S&P Global Market Intelligence. Unless otherwise noted, financial data di
Slide 20: Diversified and Growing Revenue Streams
Diversified and Growing Revenue Streams $80,000 $70,000 “es bo al $50,000 — Lo - $40,000 $30,000 67 5% 68.4% aed Margin 9 64.8% ve $20,000 64.6% Margin Margin BUSINESS 2 Margin B Business Revenue Business Revenue Revenue evenue $10,000 Revenue $0 UI 2015 2016 2017 2018 YTD Annualized Other $1,633 $1
Slide 21: III. Strategic Investments and M&A Activity
ORRSTOWN Financial Services, Inc. Ill. Strategic Investments and M&A Activity ORRSTOWN Financial Services, Inc.
Slide 22: 2015-Present: Strategic Investments Continue
2015-Present: Strategic Investments Continue Investments in customer-facing talent to take advantage of significant market disruption: * Cash Management Team * Commercial Lender lift outs begin ¢ First investment in Lancaster County * “Acquisition without the intangibles” ¢ Investments in customer-
Slide 23: Mercersburg: Key Transaction Terms and Assumptions
Mercersburg: Key Transaction Terms and Assumptions ™ Mercersburg shareholders could elect 1.5291 ORRF shares or $40.00 in cash @ Proration to ensure 85% of Mercersburg shares exchanged for stock and 15% for cash @ Per share consideration valued at $40.002 @ Aggregate consideration valued at $32.4 mi
Slide 24: Transaction Pricing and Financial Impact
Transaction Pricing and Financial Impact Price / LTM Earnings? 2307x 27.5x Normalized Price / LTM Earnings?* 19.0x DT5x Normalized Price / LTM Earnings + Cost Savings? 7.6x 11.4y Price / Tangible Book Value (LTM ROATCE) 1.53x (6.2%) 1.60x (5.9%) Normalized Price / Tangible Book Value (LTM ROATCE)? 1
Slide 25: Hamilton: Key Transaction Terms and Assumptions
Hamilton: Key Transaction Terms and Assumptions & Hamilton common shares exchanged for 0.54 ORRF shares and $4.10 in cash? & Hamilton options cashed out at the difference between merger and exercise price @ Per share consideration valued at $16.90? @ Aggregate consideration valued at $58.5 million?
Slide 26: Transaction Pricing and Financial Impact
Transaction Pricing and Financial Impact Transaction Pricing: ORRF / HBK? Recent Deals? Normalized Price / LTM Earnings + Cost Savings?# 10.1x 12.2x Normalized Price / Tangible Book Value* 1.31x 1.91x Core Deposit Premium’ 4.3% 11.7% Financial Impact: ORRF / HBK 2020E EPS Accretion 8.0% Internal Rat
Slide 27: New Branches Continue to Outperform Growth Projections
New Branches Continue to Outperform Growth Projections Lancaster Branch Deposits ($000’s) - $75,832 $1,988 = Reciprocal Deposits _» Spring Valley (6/2016) » New Holland (8/2017) = Manheim (4/2017) = Olde Hickory (9/2018) Harrisburg Regional Office Deposits (S000's) 28,727 Q4 2016 Q1 2017 Q2 2017 Q3
Slide 28: IV. Selected Supplemental Pro Forma Financial Data
ORRSTOWN Financial Services, Inc. IV. Selected Supplemental Pro Forma Financial Data ORRSTOWN Financial Services,
Slide 29: Pro Forma Double Leverage and Interest Coverage
Pro Forma Double Leverage and Interest Coverage @ Dividend capacity from bank to holding company of $20 million while maintaining an 8% total capital ratio as of September 30, 2018. @ Low pro forma September 30, 2018 double leverage ratio of 104.6%. @ Significant pro forma September 30, 2018 interes
Slide 30: Pro Forma Capital Ratios
Pro Forma Capital Ratios Net Pro Forma ORRF Adjustments for ORRF Pro Forma with Pro Forma Mercersburg with Pro Forma Adjustments Acquisitions and Hamilton Acquisitions For Sub-Debt and Sub-Debt (dollars in thousands) Acquisitions 9/30/18 Raise 9/30/18 Financial Summary 4 Cash and Securities $ 539,71
Slide 31: V. Glossary of Terms
ORRSTOWN Financial Services, Inc. V. Glossary of Terms ORRSTOWN Financial Services,
Slide 32: Glossary of Terms
Glossary of Terms @ ALLL: Allocated Losses on Loans and Leases @ ROAA: Return on Average Assets @ Bps: Basis Points @ ROAE: Return on Average Equity & Construction Loans: Loans for construction and land @ ROATCE: Return on Average Tangible Common Equity development @ TCE/TA: Tangible Common Equity /
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