Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Shareholder Meeting (April 2015)
45 slides from Orrstown Financial Services's shareholder meeting presentation, Apr 29, 2015
Slide 1: Annual Shareholder Meeting April 28, 2015
Annual Shareholder Meeting April 28, 2015 Exhibit 99
Slide 2: Forward Looking Statement
Forward Looking Statement 2 Certain statements we may make today may constitute “forward looking statements” under the Private Securities Litigation Reform Act of 1995. Orrstown Financial’s actual results may differ significantly from the results discussed in such forward-looking statements. Factors
Slide 3: Rules of Conduct
Rules of Conduct 3 In the interest of an orderly Meeting of the Shareholders of Orrstown Financial Services, Inc. (the “Company”), we ask you to honor the following rules of procedure: Shareholders should not address the Meeting until recognized by the Chairman of the Meeting. Upon recognition b
Slide 4: Rules of Conduct
Rules of Conduct 4 Shareholders should confine comments to one subject at a time in order to give other shareholders an opportunity to speak on that subject. Please permit the speaker to conclude his or her remarks without interruption. A shareholder will be permitted up to two minutes to addres
Slide 5: Rules of Conduct
Rules of Conduct 5 The views, constructive comments and criticisms of the shareholders are welcome, but the purpose of the Meeting will be observed. The Chairman will stop discussions that are: Irrelevant to the matter under consideration, Proposals related to the conduct of the Company’s ordi
Slide 6: Agenda
Agenda 6 Conduct Meeting Business Management Report Questions from our Shareholders Adjournment
Slide 7: Call to Order
Joel R. Zullinger, Chairman of the Board April 28, 2015 Call to Order
Slide 8: Conduct Meeting Business
Joel R. Zullinger, Chairman of the Board April 28, 2015 Conduct Meeting Business
Slide 9: Management Report
Thomas R. Quinn, Jr. President & CEO 9 Management Report
Slide 10: Management Report
Management Report 10 2014: High-level summary of performance Report card on last year’s objectives David Boyle, our CFO, will review the financial results Ben Wallace, EVP of Operations and Technology, will highlight how we are leveraging technology I’ll make some closing remarks looking a
Slide 11: 2014: Summary of Performance
2014: Summary of Performance 11 Significant regulatory progress in 2014 resulted in 4/2/2015 release from all enforcement actions Continued momentum in 2014 Pre-tax income totaled $13.0 million, a 33% increase Improved net interest margin of 3.20% in 2014 vs. 3.03% in 2013 Loan growth of 5
Slide 12: 2014: Summary of Performance
2014: Summary of Performance 12 Major technology and alternative delivery initiatives launched in 2014 and first quarter of 2015 Lancaster Loan Production Office continued to exceed internal growth projections Continued to enhance the Orrstown Bank brand
Slide 13: Update of Last Year's Objectives
Update of Last Year’s Objectives 13 Last year we told you our goals were to: Continue to work with our Primary Regulators to remediate remaining matters Build a diversified and growing balance sheet Focus on revenue growth Leverage data and technology
Slide 14: Update of Last Year's Objectives (continued)
Update of Last Year’s Objectives (continued) 14 Last year we told you our goals were to: Enhance our retail franchise through: Developing delivery channels Simplifying product line Focusing on fee income generation Obtaining a greater share of our customers’ business Improve our effici
Slide 15: Remediate Remaining Regulatory Matters
Remediate Remaining Regulatory Matters 15 Date Actions March 22, 2012 Bank and Company placed under formal enforcement actions by the Pennsylvania Department of Banking & Securities (“PADOB”) and the Federal Reserve Bank of Philadelphia (“FRB”) April 21, 2014 PADOB terminates formal enforcement an
Slide 16: Build and Diversify our Balance Sheet
Build and Diversify our Balance Sheet 16 Established loan growth momentum in second half of 2014 (grew 5.1% for the year) Continued to increase core funding and reduce reliance on higher cost brokered deposits Successfully employed total-rate-of-return investment portfolio strategy Continu
Slide 17: Focus on Revenue Growth
Focus on Revenue Growth 17 2014 revenue challenges: Mortgage refinance slowdown Loan growth tempered by pushing out of certain higher yielding commercial loans Despite those challenges: Interest income grew 2.92% in 2014 while interest expenses declined 17.00% Net interest margin impro
Slide 18: Leverage Data and Technology
18 We made significant investments in 2013-2014 in e-delivery channels, website, mobile applications, customer intelligence, core infrastructure capacity and hardening against cyber security threats We leveraged our technology spend and enhanced data to attract new customers and deepen our relat
Slide 19: Enhance our retail franchise
Enhance our retail franchise 19 We enhanced face to face interactions through needs-based sales approach supported by enhanced sales MIS data We measure and monitor key metrics such as sales activities, products per household, next likely product/service, etc. Explore growth opportunities, p
Slide 20: Improve our Efficiency Ratio
Improve our Efficiency Ratio 20 Efficiency ratio remains too high (83.0% at year end) Need to grow balance sheet and related interest income Strong focus on non-interest income sources Leverage technology investments of 2013 and 2014 Eliminate embedded regulatory costs Continued expens
Slide 21: Restore dividends as soon as we were able
Restore dividends as soon as we were able 21 We were pleased to restore a dividend of $0.07/share* We also continued our longstanding tradition of giving back to the communities we serve: The Orrstown Bank Foundation surpassed 100 students and $100,000 in total scholarship awards in 2014 $
Slide 22: Summary Financial Review
David P. Boyle EVP/Chief Financial Officer 22 Summary Financial Review
Slide 23: 2014: Financial Recap
2014: Financial Recap 23 Dollars in 000s (For the year ended) Balance Sheet 2014 2013 2012 Assets $1,190,443 1,177,812$ 1,232,668$ Loans 704,956 671,037 703,739 Deposits 949,704 1,000,390 1,085,039 Total shareholders equity 127,265 91,439 87,694 Trust AUM*- Market Value 1,017,013 1,085,216 992,378 S
Slide 24: Pre-Tax, Pre-Provision Income
Pre-Tax, Pre-Provision Income 24 (Dollars in 000s) Y/E 2014 Y/E 2013 Y/E 2012 Net Income/(Loss) $29,142 $10,004 ($38,454) Income Tax Expense (Benefit) ($16,132) ($206) $7,995 Provision for Loan Losses ($3,900) ($3,150) $48,300 Pre-Tax, Pre-Provision Income* $9,110 $6,648 $17,801 *Pre-Tax, Pre-Provis
Slide 25: 2014: Continuation of Profitability
25 2014: Continuation of Profitability (net income in millions) $16.58 -$31.96 -$38.45 $10.00 $29.14 -$50.00 -$40.00 -$30.00 -$20.00 -$10.00 $0.00 $10.00 $20.00 $30.00 $40.00 2010 2011 2012 2013 2014 $19.0 goodwill impairment net of tax $20.0 DTA* charge $16.2 DTA* recapture *DTA=Deferred Tax Asset
Slide 26: Quarter View
5 Quarter View 26 (dollars in 000s) 2014 2015 Q1 Q2 Q3 Q4 Q1 Total Assets $1,198,017 $1,167,308 $1,183,392 1,190,443 1,189,420 Loans 673,282 678,854 680,374 704,946 727,753 Total Deposits 1,002,405 981,705 989,234 949,704 945,756 Total Interest Income 9,601 9,585 9,477 9,520 9,228 Total Interest Exp
Slide 27: Establishing Loan Growth Momentum
Establishing Loan Growth Momentum 27 2014 2015 • Four straight quarters of loan growth; accelerated pace of growth over the last two quarters • Overall, 8.09% loan growth over the past four quarters $673,282 $678,854 $680,374 $704,946 $727,753 $640,000 $650,000 $660,000 $670,000 $680,000 $690,000 $7
Slide 28: Disciplined Expense Control
Disciplined Expense Control 28 $41.03 $43.35 $43.25 $43.77 $30.00 $32.00 $34.00 $36.00 $38.00 $40.00 $42.00 $44.00 $46.00 Total Non-Interest Expense (in millions) * *Excludes $19.5 MM Goodwill impairment charge 2011 2012 2013 2014
Slide 29: Capital Preservation and Balance Sheet Impact
Capital Preservation and Balance Sheet Impact 29 Company grew capital without shareholder dilution 2010 2011 2012 2013 2014 Y/E Assets (000s) $1,511,722 $1,444,097 $1,232,688 $1,177,812 $1,190,443 Tier 1 Regulatory Capital $139,623 $121,249 $84,999 $95,741 $110,750 8% Capital Baseline $120,938 $115,
Slide 30: Well Capitalized
Well Capitalized 30 6.82% [VALUE] [VALUE] 8.14% 13.70% 14.97% 9.53% 15.58% 16.84% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% TIER 1 LEVERAGE RATIO TIER 1 RISK-BASED RATIO TOTAL RISK-BASED RATIO 2012 2013 2014
Slide 31: Enhancing Shareholder Value
31 Enhancing Shareholder Value 70% increase in 2013 Y/E 2011 Y/E 2012 Y/E 2013 $8.25 $9.64 $16.35 $17.00 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 Y/E 2011 Y/E 2012 Y/E 2013 Y/E 2014 106% increase over three years 4/27/15 X $17.20
Slide 32: Highlights of Analysts' View
Highlights of Analysts’ View 32 Reported 1Q2015 Results: Reiterate Outperform Rating; Adjusting Estimates and Raising Target Price; “And They’re Off” Matthew Schultheis, CFA / Boenning & Scattergood (April 24, 2015)* *full report available at www.orrstown.com in the investor relations section
Slide 33: Leveraging Technology Investments
Benjamin W. Wallace EVP/Operations & Technology 33 Leveraging Technology Investments
Slide 34: 2013-14: Significant Investments in Operations and Technology
2013-14: Significant Investments in Operations and Technology 34 Enhanced expertise throughout the Operations and Technology Groups Investments in hardware, software, and infrastructure Recognition of changing demographics and customer preferences and support for key revenue enhancing efforts
Slide 35: Industry-wide Customer Preferences are Changing
Industry-wide Customer Preferences are Changing 35 0 2000 4000 6000 8000 10000 12000 14000 Teller Transactions ‘92 ‘96 ‘02 ‘07 ‘13 46.6% decline in teller volume over the past two decades Average monthly volume of teller transactions at community banks and credit unions. Source: FMSI
Slide 36: Industry-wide Customer Preferences are Changing
Industry-wide Customer Preferences are Changing 36 1 9.3% 10.1% 17.5% 34.9% 28.2% ONLINE BANKING USAGE STATISTICS never twice a year monthly weekly daily 63% of customers utilize online banking on a daily or weekly basis (and over 8 in 10 customers use at least once a month) 1 37.7% 16.8% 17.2% 9.8%
Slide 37: On-line Channel (Laptops and PCs)
On-line Channel (Laptops and PCs) 37 Orrstown.com optimized as a sales revenue generating engine Critical delivery channel, particularly for new customer attraction and account growth More mature platform; 7.02% year-over-year growth
Slide 38: Mobile Banking: (Smartphones and Tablets)
Mobile Banking: (Smartphones and Tablets) 38 62,600,000 163,900,000 209,700,000 U.S. Smartphone Ownership 2014 2017 2010 Opportunity in a rapidly growing market Orrstown.com was designed from the ground up with the mobile experience in mind 92.9% growth in mobile usage over the past 12 months;
Slide 39: Leveraging our investments in 2015
Leveraging our investments in 2015 39 Alternative delivery channel focus (web-site, mobile, telesales) Meeting changing customer preferences through unique product and service offerings (“relevancy through delivery channel choice”) Expand geographic markets and increase desirability among new
Slide 40: Cyber Security Remains Critical
Cyber Security Remains Critical 40 Continue to be a regional and national leader in cyber defense
Slide 41: Closing Remarks/2015 Focus
Thomas R. Quinn, Jr. President & Chief Executive Officer Closing Remarks/2015 Focus
Slide 42: Focus for 2015-Execute our Strategic Plan
Focus for 2015-Execute our Strategic Plan 42 Enterprise Risk Management Expense control and efficiency ratio Enhance shareholder value Organic loan growth Take advantage of market disruptions Leverage technology, smart data, and alternative delivery channels to attract new customers to O
Slide 43: Questions from the Floor
Questions from the Floor April 28, 2015
Slide 44: Conduct Meeting Business
Joel R. Zullinger, Chairman of the Board April 28, 2015 Conduct Meeting Business
Slide 45: Thank You
ORRSTOWN FINANCIAL SERVICES, INC. April 28, 2015 Thank You
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