Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Investor Presentation (June 2020)
47 slides from Orrstown Financial Services's investor presentation, Jun 25, 2020
Slide 1: Mission and Vision
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 service, innovative solutions and sound
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 Tye 7 Key Performance Indicators (3/31/2020) Market ap" $1542 millon [assets $24 bilion Toans S18 ilion [Deposits $1. bilion Net interes Mara 3an% ROAE 396% A] rosa en [Etficieny Ratio svteayl si * Four geographic regions: Market Presidents have full authority and autonomy (wi guide
Slide 5: Company Overview (continued)
Company Overview (continued) + Favorable regional demographics in both South Central Pennsylvania and Maryland TORSTEN continue to benefit from market disruption in PA and seeing similar benefit in MD + Market President organizational structure; benefitting from mix of talent from larger Fi’s and so
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 20205 Year [2020 Median 2020 ‘April 20 Entered Branch Market Households Proj.Gr.| HHI Businesses|Unemployment| Market Count Share Geograph @) (%) (S) @ (%) | (Year) @) (%) [Cumberland PA_] 703,264 3.55 | 73,270 9,336 121 1919 T 9.39 Dauphin, PA 115,602 1.96 | 66,54
Slide 8: Proven Track Record of Organic Expansion in New Markets
Proven Track Record of Organic Expansion in New Markets Total Deposits: Lancaster County (millions)? 250 200 5150 s100 sso so Total Loans: Lancaster County (excluding PPP) (millions?) $323.0 $240.1 $258.9 + Since entering Lancaster County in 2015, results have demonstrated the effectiveness of our M
Slide 9: Potential Opportunities in an Unsettled Market
Potential Opportunities in an Unsettled Market Deal Target Target Mergerof Value Deposits Buyer! Target Name State Equals ($m) Howard Bancorp, Inc/Patapsce Banco, Inc. Completed MD No 104 4 284 1835 Hamiton Bancom, IncJFairmount Bancorp, Inc Completed Mo No 184 1 738 548 IKopemik Bank/Koscluscko Fed
Slide 10: Peer Profitability Comparison
Peer Profitability Comparison As a Percentage of Average Assets Peers’ Orrstown iced ..there is a path to Current below-peer Net Interest Income 3.27 3.10 improving returns. returns area result -Loan Loss Provision 0.26 0.16 of prior investments +Noninterest Income 0.96 1.20 * Branch that have yet t
Slide 11: 2015-2019: Strategic Investments Continue
2015-2019: Strategic Investments Continue 2015 Investments customer-facing talent to take advantage of significant market disruption: * Cash Management Team * First investment in Lancaster County © “Acqui ithout the ‘angibles” 2016 Investments in continue: * 14 new customer- facing hires expansion e
Slide 12: Performance Ratios
Performance Ratios dollars in millions Growth Growth Profitability Ratios 2015 2016 2017 2018 2019 1Year 3 Year Reported Pre-tax Pre-provision Income 8.9 8.1 134 15.2 20.5 35% 152% Pre-tax Pre-provision Inc / Avg Assets 0.72% 0.61% 0.90% 0.89% 0.92% Pre-tax Pre-provision Inc / Avg Equity 6.8% 5.9% 9
Slide 13: Summary Financial Trends
ummary Financial Trends dollars in millions (except for per share information) Growth Growth Summary Trends 1Year 3 Year Assets 1,293 1,415 1,559 1,934 2,383 23% 68% Net Loans 774 873 1,003 1,237 1,639 33% 88% Deposits 1,032 1,152 1,220 1,559 1,876 20% 63% Equity 133 135, 145, 173 223 29% 66% Tangib
Slide 14: Income Statement Trends
Income Statem Trends Growth Growth dollars in milli Income Statement 2015 2016 2017 2018 2019 1Year 3 Year Net Interest Income 34.3 36.5 43.8 52.2 69.3 33% 90% Non-Interest Income 17.3 18.3 188 20.0 23.8 19% 30% Net Securities Gains 13 1.4 £2 1.0 47 372% 234% Total Revenue 535 56.3 63.8 73.2 97.8 34
Slide 15: Balance Sheet Trends
Balance Sheet Tren dollars in millions Loan Portfolio Mix 2015 2016 2017 2018 2019 Total Gross Loans 788 886 1,016 1,251 1,654 Residential Mortgage 16% 16% 16% 19% 20% Home Equity 16% 15% 14% 12% 11% Other Consumer 1% 1% 2% 3% 3% Total Consumer Loans 33% 32% 33% 34% 34% Construction Loans 6% 3% 3% 4
Slide 16: Tier 1 Capital
Tier 1 Capital Tier 2 Capital Total Regulatory Capital Tier 1 Leverage Ratio Common Equity Tier 1 Ratio Tier 1 Capital Ratio Total Risk Based Capital Ratio 123.8 10.7 134.6 9.8% 14.6% 14.6% 15.8% 127.0 12.0 139.0 9.3% 13.3% 13.3% 14.6% 138.8 13.6 152.4 9.0% 12.1% 12.1% 13.3% 160.1 46.9 207.0 8.4% 12
Slide 17: 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 18: 2019: Investments in Organic Expansion
2019: Investments in Organic Expansion Commercial Pipeline Trend 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 Recruiting Philosophy: Recruit experienced market presidents from regional and super-regional banks. smopuaTig9
Slide 19: COVID-19 Response
COVID-19 Response Orrstown Bank responded quickly by executing its business continuity plans to protect employees, clients, and the general public while serving all constituents as an essential business Initiated work-from-home (“WFH”) protocol on 3/18/2020* , 67% of employees telecommuted (more tha
Slide 20: 2020: Execution of SBA's Payroll Protection Program
2020: Execution of SBA’s Payroll Protection Program ‘Allhands on deck approach and solid technology frastructure enabled Orrstown to garner significant PPP clients, resulting in $13.5 million in income 2,889 PPP CLIENTS & PROSPECTS $468.0 MILLION. 1,733 New Commer Clients as a result of PPP (many fr
Slide 21: Short-Term Financial Priorities to Mitigate COVID-19 Risk
Short-Term Financial Priorities to Mitigate COVID-19 eve Risk Management = Conservative near term risk appetite = Help clients to manage through potentially difficult upcoming period = Provide solutions of loan payment deferrals and SBA PPP loans = Early identification of problem loans with quick re
Slide 22: Short-Term Financial Priorities to Mitigate COVID-19 Risk (continued)
ort-Term Financial Priorities to Mitigate COVID-19 eve Capture Fee Income = Mortgage banking refinance activity = Interest rate hedging revenue for commercial clients = Wealth management opportunity Capital = Maintain strong capital position = Slower balance sheet growth expected = Maintain common d
Slide 23: COVID-19 Response: Loan Portfolio
COVID-19 Response: Loan Portfolio Loan Category # of Loans Provided COVID-19 Relief! $ of Loans Provided COVID-19 Relie’ Commercial 385, $200.4 million Consumer ges $4.4 million Residential Mortgages 156 $17.2 million + Proactive approach to systematic client outreach and understanding of COVID-19 i
Slide 24: COVID-19 Response: CRE Concentrations
Response: CRE Conce Loans Modified as a Result of COVID-19 As Measured Against Segment Exposure/Count Portfolio Segmentation Exposure (%) ae enaos construction & Land Development 2.04% 2.05% 1,82 1-4 Family 0.00% 0.00% | Other 2.96% 3.09% 1,82 |commercial Real Estate(NOO) 22.73% «19.87% 88,017 Strip
Slide 25: 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 26: 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 27: Continued Technology Investments are Priority
Continued Technology Investments are Priority Data as a Differentiator actor penetration attempts (left) Real-time monitoring of network, core, and ancillary systems by location (right) Data as a Differentiator Underwriting queue by processorandstatus Offensive capabil + Begi telligence based on cli
Slide 28: Loan Mix
Orrstown Financial Loan Mi Year-end YTD. ABT 2016 2017 2018 2019 0373412020 CAGR. Category Gmi) | Sm) ey | Smil) ey | smi) a) (Smit) Ce) (%) Construction 30735 310 af 49440 or 35 24.38 50 Consumer/HELOC 1273 144 | 1540 182 1769 142 2169 134 2007 120 83 Residential Mortage 2166 245 | 2523 250 479 279
Slide 29: Asset Quality Trends
Asset Quality Trends NPAS/ Assets (%) NPAS/ Assets (9) 1.00 080 0.80 oe eee 0.60 040 04 052 oss oe 0.26 021 - 06. De 020 ue 020 027 0.00 0.00 2016 2017 2018 2019 wo 03/19 06/19 09/19 aps 03/20 a onRF Me Peers me ORFF ee Peers Reserves/ Loans Held For Investment (9 Reserves/ Loans Held For Investment
Slide 30: Deposit Mix
Deposit Mix Orrstown Financial Services, Inc. Deposit Mic Year-end YID G25Y0 2015 2016 2017 2018 2019 037312020 CAGR. Category (Smit) Ce) Sri) ey Sy Sm) LS min (a (Smil) Gey (a) DDA 131.4 12.7 160.7 13.4 162.6 13.3 2088 23.0 13 2674 14.1 82 Now 3566 34. 438 385 | 4765 391 56.9 098 32 6288 330 142 MM
Slide 31: Key Metrics: 2016 to March 31, 2020
Key Metrics: 2016 to March 31, 2020 Reported: ROAA (4) Return metrics improved due to: 1.20 + Capacity utilization 1.00 + Loan growth and mix shift 0.80 + Capital deployment, and bia A 0.40 + The risk profile of the company onic Sai, 2018 m5. Yi. en ORF me Peers NPAS/ Assets (4) Efficiency Ratio (24
Slide 32: 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 33: Appendix
Appendix * Five year performance metrics and operating results * Five quarter performance metrics and operating results * GAAP to non-GAAP reconciliations
Slide 34: Five Year Trends: Summary Financials
Five Year Trends: Summary Financials Clr in toucande nls nicsies 2019 2018 2017 2016 2015 Results of Operations: Texcequivalentinerestincome 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 a
Slide 35: 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 36: Five Quarter Trends: Summary Financials
Five Quarter Trends: Summary Financials fers thousands unless insisted) 03120 7 a osig Results of Operations: Tex-equivalentinterestincome 24164 24,225 25044 24.764 20,008 Interest expense S70S 6087757 S987 4.298 Tex-equivalentnetinerestincome 1845918198 13,287 «18807 15,108. Tex-equivalent adjustme
Slide 37: Five Quarter Performance Ratios
Five Qua (Percent unless indicated) 03/20 12/19 09/19 06/19 03/19 Performance Ratios: Return on average assets 0.86 072 115 0.48 0.65 Return on average common equity 8.96 7.53 1237 5.26 723 Yield on average interest-eaming assets 4.46 451 452 478 454 Rate on average interest-bearing liabilities 1.24
Slide 38: Performance Trends
Performance Trends Reported: jet Interest Margin (9 400 3.80 3.60 3.40 3.20 3.00 2.80 2016 2017 2018 2019 ¥70 03/20 3.80 3.60 3.40 3.20 3.00 03/19 06/19 09/19 eo onee pps Data Source: S&P Global Market Intelligence Data Source: S&P Global Market Intelligence Netinterest Margin YTD (24)! 400 350 2016
Slide 39: Performance Trends (Continued)
Performance Trends (Continued) 050 aise 050 om 075 076 bate oss 040 0.00 2015 2016 2017 2018 2019 03/19 06/19 09/19 ys 03/20 ee oRRF Peers en ORRF mee Peers Reported: ROAE (*4 Reported: ROAE (4 12.00 15.00 to.00 1237 2.00 10.00 526: cam 856 821 400 599 573 5.00 723 753 S00) as 5.25 0.00 0.00 2015 20
Slide 40: Capital Trends
Capital Trends Leverane Ratio (2 ‘everane Ratio 9.50 933 10.00 395 250 om 856 9.00 sae ee 350 eu a0 850 a 0 eas a0 a7 a0 750 2016 2017 2018 2019 ‘YTD 03/20 03/19 06/19 09/19 12/19 03/20 SO ORRF mg Peers: Om ORRF —e=Peers: ‘Ratio Tier Rati 5 3 1139 “3 8 L = SS “ a bad cre 11.62 2 — ee 22 1123 n ra 03
Slide 41: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation
Slide 42: GAAP to Non-GAAP Reconciliation (continued)
-GAAP Reconciliation (con (Sin millions, except per share data) Non GAAP Financial Measure Reconciliation ‘otal core Revenve(C) S16 549 424 722 951 Tolalcore Non-mieres Expense(0) 444 481 S03 S47 483 Core tfisieroyore (D/C) ee 8 com 7am Tom Tangible sock value (F) nding Feriod shares(6) angie soot V
Slide 43: Efficiency Ratio Reconciliation
Efficiency Ratio Reconciliation EFFICIENCY RATIO RECONCILIATION (ANNUAL): 2019 2018 201720162015 Non-interestexpense 77,302 57,985 50,330 48,140 44,607 Net interest income 69,295 52,156 43,809 36,545 34,334 Non-interestincome 28,541 21,024 19,949 19,739 19,178 Total revenue 97,836 73,180 63,758 56,2
Slide 44: 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 45: Environmental
Environmental Environmental responsibility is in alignment with strong business practices and our core values. Being good stewards of the environment, reducing energy consumption and eliminating waste through proactive and conscious planning reduces costs, enhances our profitability and helps mitiga
Slide 46: Social: 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 47: 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
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