Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Investor Presentation (December 2019)
38 slides from Orrstown Financial Services's investor presentation, Dec 10, 2019
Slide 1: Orrstown Financial Services, Inc.
Orrstown Financial Services, Inc. Yedus, Celebrating 100 Years as an Independent and Growing Community Bank By Investing for the Future December 10, 2019
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 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements 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 merger and acquisition expenses, and net interest margin, excluding the impact of purchase accounting adjustments for interest accretion, which are a non-GAAP measures. For a reconci
Slide 4: Company Overview - Key Metrics
Sompany Overview 4 = - \ Key Metrics at 0/2019 duntingdon Market Cap? ~$245 million Assets ~$§2.3 billion Loans ~$§1.6 billion o . Deposits ~$1.9 billion SALA po ~ é QTD ROAE 12.37% . ah QTD ROAA 1.15% Efficiency Ratio 69.99% one LTD Ratio 82.83% * Four geographic regions: Market Presidents have ful
Slide 5: Company Overview (continued)
Company Overview (continued) GROWING REGIONAL FINANCIAL INSTITUTION BUSINESS MODEL WELL POSITIONED FOR SUSTAINED GROWTH WINNING THE TALENT WAR Favorable regional demographics in both South Central Pennsylvania and Maryland Continue to benefit from market disruption in PA and seeing similar benefit i
Slide 6: Experienced Leadership Team
Experienced Leadership Team Experience / Di: Name/Title Banking Joined Experience | ORRF Thomas R. Quinn, Jr. President & CEO Thomas R. Brugger 29 years 2009 CEO | Strategy | Sales | Executive Finance | Treasury | Citi, Fifth Third pve/chef raneelGieen years 2019 Bes eel Sun National, Customers, Sov
Slide 7: Demographics Trends & Market Share
Demographics Trends & Market Share... 2019 5 Year | 2019 Median 2019 May '19 Entered Branch Market Households Proj. Gr. HHI Businesses} Unemploy| Market Count Deposits* Share Geography (#) (%) ($) (#) (%) (Year) (#) ($000) (%) Cumberland, PA 103,264 3.55 73,270 9,335 3.2 1919 ZL 847,774 9.39 Dauphin
Slide 8: In an Unsettled Market
..In an Unsettled Market Deal Acq. Target Target Announce Target Merger of Value Branches Assets Deposits Buyer/ Target Name Status Date State Equals ($mm) ($mm) ($mm) Howard Bancorp, Inc./Patapsco Bancorp, Inc. Completed 03/03/15 226.4 Hamilton Bancorp, Inc./Fairmount Bancorp, Inc. Completed 04/16/
Slide 9: 2015-2019: Strategic Investments Continue
2015-2019: Strategic Investments Continue 2015 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” 2016 Investments in customer-faci
Slide 10: Peer Profitability Comparison
Peer Profitability Comparison As a Percentage of Average Assets 3Q19 Peers™ Orrstown Net Interest Income 3.34 2.97 | ...there is a path to -Loan Loss Provision 0.15 0.05 | improving returns. Current below-peer +Noninterest Income 0.97 1.46 |+ Branch ns are aresult -Noninterest Expense 2.71 3.01 opti
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 invest in new locations (York County, Capital Region, Greater Baltimore) in target markets Branch efficiency optimization using new c
Slide 12: Long Term Phases of Growth
Long Term Phases of Growth Phase 1 (completed) Phase 2 2021-2022 Phase 3 2022-2025 Phase 4 (ongoing) BUILD SCALE WITH ACQUISITIONS, ORGANIC GROWTH, AND KEY HIRES Market expansion efforts in Lancaster County, Capital Region, and Maryland (investments in customer facing talent and infrastructure to su
Slide 13: Legacy Markets Continue to be Economic Driver
Legacy Markets Continue to be Economic Driver Total Loan Outstandings in Legacy Market 820,000,000 800,000,000 780,000,000 760,000,000 740,000,000 720,000,000 700,000,000 680,000,000 660,000,000 640,000,000 620,000,000 600,000,000 9/30/15 9/30/16 9/30/17 9/30/18 9/30/19 * Legacy markets continue to
Slide 14: Proven Track Record of Organic Expansion in New Markets
Proven Track Record of Organic Expansion in New Markets Total Loans Outstanding in Lancaster County $50,000,000 $247,598,462 Rohrerstown Rd (Lancaster)*} 53 $42,594,542) a $234,816,759 Manheim Pike (Lancaster) 30 | $31,095,721 $230,000,000 New Holland (Lancaster) 26 $25,189,258 $210,000,000 $40,008
Slide 15: 2019: Investments in Organic Expansion
2019: Investments in Organic Expansion 2019 Commercial Loan Pipeline Trend Impact of lender recruiting Jan-19 Feb-19 Mar-19 Apr-19 May-19. Jun-19 Jul-19 Aug-19 Sep-19 Recruiting Philosophy: x w 6 ri = a 2 Bb 2 fe) Recruit experienced market presidents = 2% = £ from regional and super-regional banks.
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 Philad
Slide 17: Continued Technology Investments are Priority
Continued Technology Investments are Priority Defensive capabilities: * Real-time monitoring of malicious actor penetration attempts (left) * Real-time monitoring of network, core, and ancillary systems by location (right) Underwriting queue by processor and status Offensive capabilities: * Beginnin
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: Social
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 Year-end YD ‘475% 2014 2015 2016 2017 2018 oa302018 car Category (Smit) —_(%)_| (Smit) $ mil [Smit $mil) —_(%) $ mil) —_() Construction 30243 | 507 65 | 307 35 a0 3t a4 40 ma a2 | ae | ConsumerMELOc ess 136 | 1182 151 | 1273 144 | to 182 | 769 142 | 1087 125 | 107 ResidentalMongage | 1963 2
Slide 23: Asset Quality Trends
Asset Quality Trends NPAs/ Assets (2 NPAs/ Assets (2 150 = ogo ~ get 1.00 a0 el 050 0.68 0.40 037 ao 020 033 032 ~— 0.00 0.27 = 0.00 2015 2016 2017 2018 YTD 09/19 09/18 ape 03/19 06/19 09/19 en ORRF mee Peers em ORRF Me Peers Reserves/ Loans Held For Investment (% Reserves/ Loans Held For Investment
Slide 24: Deposit Mix
Deposit Mix Year-end Yio aI5¥ 2014 [206 2016 207 | 2018 cao019 | CAR Category Smiy GH) | Sm) GH] | Smiy | Sma) | Sma) GH) | ismiy oy] [| DDA 116.3 122 1314 127 150.7 13.4 1626 133 2088 134 2501 130 | 175 | Now 3537 372 | 3565 245 | 4aaa 385 | 476s 301 | sse9 357 | 5ea1 308 | 113 MMDA & Savings 2364
Slide 25: Key Metrics: 2015 to Current
Key Metrics: 2015 to Current eoRRF Peers Reported: ROAA (2) Return metrics improved due to: 1.20 + Capacity utilization 7" + Loan growth and mix shift 080 ge we oe A 054 * Capital deployment, and 0.60 a0. + The risk profile of the company Oe ie Ba Ba ee eon eo Peers NPAS/ Assets (4) Efficiency Ratio
Slide 26: For Additional Information
For Additional Information 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 (Dollars in thousands, unless indicated) Results of Operation: Tax-equivalent interest income Interest expense Tax-equivalent net interest income Tax-equivalent adjustment Provision (credit) for loan losses Non-interest income Non-interest expense Income before t
Slide 29: Performance Ratios
(Percent unless indicated) Performance Ratios: Return on average assets Return on average common equity Yield on average interest-earning assets Rate on average interest-bearing liabilities Net interest spread Net interest margin Efficiency ratio Capital Ratios: Tier 1 leverage Common equity tier 1
Slide 30: Five Quarter Trends: Summary Financials
Five Quarter Trends: Summary Financials (Dollars in thousands, unless indicated) 09/19 06/19 03/19 12/18 09/18 Tax-equivalent interest income 24,864 24,659 19,911 19,401 16,575 Interest expense 6,736 5,935, 4,876 4,383 3,522 Tax-equivalent net interest income 18,128 18,724 15,035 15,018 13,053 Tax-e
Slide 31: Five Quarter Trends: Key Performance Metrics
Five Quarter Trends: Key Performance Metrics Percent unless indicated) 09/19 06/19 03/19 12/18 09/18 Return on average assets 1.15 0.48 0.65 0.24 0.94 Return on average common equity 12.37 5.26 7.23 2.70 10.97 Yield on average interest-earning assets 4.49 4.76 4.52 4.33 4.17 Rate on average interest
Slide 32: Performance Trends
Performance Trends Reported: Net Interest Margin YTD (%) Reported: Net Interest Margin QTD (%) 4.00 3.80 3.80 3.60 —_ 3.61 3.40 3.40 43 3.41 #20 32 3.31 3.20 sn 3,35 3.00 3.14 314 ; 3:27 2.80 3.00 2015 2016 2017 2018 YTD 09/19 09/18 12/18 03/19 06/19 09/19 —=—@=— ORRF Peers —=@—ORRF Peers Data Sourc
Slide 33: Performance Trends (Continued)
Performance Trends (Continued) Reported: ROAA YTD (% Reported: ROAA QTD (%) 1.50 1.50 1.00 ——— eee ia 0.75. 0.77. 0.50 0.64 0.50 0.50 O-Sa 0.48 0.00 0.00 2015 2016 2017 2018 YTD 09/19 09/18 12/18 03/19 06/19 09/19 =@—ORRF =—@=—Peers —=@—ORRF =—@=Peers Reported: ROAE YTD (%) Reported: ROAE QTD (%) 12
Slide 34: Capital Trends
Capital Trends Leverage Ratio (%) Leverage Ratio (%) 10.00 10.00 9.50 9.50 9.77 ms 9.00 933 9.00 8.50 8.50 8.86 8.42 8.42 8.50 44 8.00 5200 8.00 8.20 7.50 7.50 2015 2016 2017 2018 9/2019 09/18 12/18 03/19 06/19 09/19 —O—ORRF —O=Peers —O@=ORRF —@=Peers 1 Ratio (%; Tier 1 Ratio (%) 16.00 12.50 12.22 1
Slide 35: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation APPENDIX - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconcili Management believes providing certain “non-GAAP” financial information will assist investors in their understanding of the effect of certain activity on reported results, particularl
Slide 36: S&P Global Reconciliation
S&P Global Reconciliation Appendix: Reconciliation of S&P Global Market Intelligence Efficiency Ratio YTD September 30, Full Year Dollars in th icated 2019 2017 2016 GAAP Total Expenses $ 57,657 $ 57,871 §$ 50,312 $ 47,958 $ 44,373 43,469 -Amortization of Intangible Assets 1,096 286 107 99 207 208 -
Slide 37: S&P Global Reconciliation
S&P Global Reconciliation Appendix: Reconciliation of S&P Global Market Intelligence Efficiency Ratio Quarter Ended Dollars in thousands unless indicat 09/30/19 06/30/19 03/31/19 12/31/18 _ 09/30/18 GAAP Total Expenses $ 18,161 $ 23,314 $ 16,182 $ 18305 $ 13,331 -Amortization of Intangible Assets 48
Slide 38: Orrstown Financial Services, Inc.
Orrstown Financial Services, Inc. Years4 - Celebrating 100 Years as an Independent and Growing Community Bank
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