Orrstown Financial Services, Inc. · NASDAQ:ORRF
Orrstown Financial Services — Investor Presentation (August 2021)
33 slides from Orrstown Financial Services's investor presentation, Aug 2, 2021
Slide 1: Orrstown Financial Services, Inc.
rstown Fin ial Services, In 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, inn
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 + Thispresentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21£ of the Securities Exc
Slide 3: Trendline: Profitable and Effective Franchise Expansion
Trendline: Profitable and Effective Franchise Expansion $3,500,000 % 1.40% 120% $3,000,000 1.00% $2,500,000 0.80% 0.64% 0.60% $2,000,000 0.40% $1,500,000 C4 - $1,000,000 0.00% ToraL ajai/2015 a7ja1/2016 aja1/2017 aj1/2018 aja1/2019 32/31/2020 yD 2021, = ASSETS (000s) TotalAssets emgeeReturn on Avera
Slide 4: Geographic Focus Driven by Relationship Banking Model
Geographic Focus Driven by Relationship Banking Model ~ + Four geographic regions: Market Presidents have full c—<| — authority and autonomy (within ERM guidelines) aa SS + Market Presidents are all seasoned best-in-class bankers 5 sien reaeg + Markets connected by significant highway infrastructure
Slide 5: Commercial Banking, Investments & Trust, Mortgage Banking, Personal Banking
COMMERCIAL BANKING INVESTMENTS & TRUST MORTGAGE BANKING PERSONAL BANKING Credit Cards Personal and Home Equity Loans and Lines of Credit Auto Loans (not indirect) Construction Speciaty Programs Insurance (e.g. key man coverage) Rd and CRE Lending + Wealth Management + Fixed-rate and Adjustable Mortg
Slide 6: 2021 / 2022 Strategic Focus: Optimizing Results
2021 / 2022 Strategic Focus: Optimizing Results SBA PPP portfolio provides significant earnings contribution: * Approximately $356 million in net PPP loans at June 30, 2021 + AtJune 30, 2021, total of $11.2 million in net deferred fees remaining - expect majority of fees to be earned by end of 2022
Slide 7: 2021 / 2022 Strategic Focus (continued)
2021 / 2022 Strategic Focus (continued) 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 changing client pr
Slide 8: Technology Transformation
Technology Tr: Digital Transformation knowledge is Power Nimbleness 2. Scalability, Operational Excellence Improving client interaction with new Commercial and Small Business loan op origination solution. Contactless capabilityin new ATM units. Enhanced card management features. Maximizing on electr
Slide 9: Company Overview—Balance Sheet Mix
Company Overview—Balance Sheet Mix Deposit Mix Loan une 30, 2024) une 30, 2024) State & Municipal Construction Jumbo CDs, 3% 1% 3% _-Consumer/HELOC Balance Sheet Management to Defend Net Interest Margin Utilize excess cash to fund commercial relationship loans + More than 2,800 PPP Loans forgiven as
Slide 10: Net Interest Income and Wealth Management Opportunity
Netinterest Wealth Income ae J Management 4 40% Opportunity to gain market share in growth markets > Wealth management and mortgage not yet to scale in growth markets — Recruit wealth management professionals and mortgage originators in growth markets > Focus on interchange income — Track card penet
Slide 11: Right People and Aligned for Success
Right People and Aligned for Success Significant Experience Compensation Aligned with Shareholder Value Experience ORRF Siem | 28D Average 27 years of banking experience resent cro) + Pay for profitability, not growth Neelesh Kalani A 16 years 2020 erage 9 years tenure at Orrstown eb Bia + Shortterm
Slide 12: Non-Guarantee Exposure and COVID-19 Modification Experience
$300.0 $2500 $200.0 150.0 $100.0 $50.0 $00 Non Guarantee Exposure as of June 30, 2021 Industry Segment Segment Total (S000) Hotel/Motel 47,836 Strip Ctr/Retail 82,137 Restaurant/Bar 35,628 Mixed Use 24,199 Commercial Construction 43,242 Multi Family CRE 138,119 Sr Housing 83,423 COVID-19 Modificatio
Slide 13: PPP: Generating Long-Term Opportunity
PPP: Generating Long-Term Opportunity * 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 + Hired 17 commercial lenders, primarily in the 20719 and 3Q’19. Produced strong results. + Fourth quart
Slide 14: Value Proposition
Value Proposition Financial Highlights Line Item 12/31/18 | 06/30/2021 ‘Recent Market Per formaice (as of 07'292021) PrkeO21 ke. Pri! CoreDepost [Tangible Book Value per Market Dried PriceLTM Estimated Estimated. Tangble rica’ Preniem [Share $1673 $21.61 10.8% | [.. = ie EPS Book Book Per Share ompa
Slide 15: Performance Ratios — Year Trend
rmance Ratios — 5 Year Tren Growth Growth YTD Pr ity Ratios 2016 2017 2018 2019 2020 | 1Year 3Year [Mj 6/30/21 [Reported iPre-tax Pre-provision Income 81 134 15.2 205 37.8 84% 182% 23.2 Pre-tax Pre-provision Inc/AvgAssets 0.61% 0.90% 0.89% 0.92% 1.43% 1.60%! Pre-tax Pre-provision Inc/ Avg Equity 5.9
Slide 16: For Additional Information
or Additional Information Thomas R. Quinn, Jr. President & CEO tquinn@orrstown.com 717-530-2602 Neil Kalani Chief Financial Officer nkalani@orrstown.com 717-510-7097 Matthew C. Schultheis, CFA Investor Relations mschultheis@orrstown.com 717-510-7127
Slide 17: Appendix and Supplemental Information
Appendix and Supplemental Information ORRSTOWN FINANCIAL SERVICES, INC.
Slide 18: Five Year Trends: Summary Financials
Five Year Trends: Summary Financials (Palas in thousands, except per share data, unless Inscies 2020 2019 2018 20172016 Results of Operations: Texcequivalentinterestincome 100,485 94037 67,084 «$3,900 44,185 Interest expense 16,026 2369913510 7644 5417 Tex-equivalentnetinterestincome 34,431 70338 «5
Slide 19: Five Year Trends: Key Performance Metrics
Five Year Trends: Key Performance Metrics 2020 2019 2018 2017 2016 Return on average assets 1.00 076 0.75 0.54 0.50 Return on average common equity 11.66 821 8.56 573 4.80 Yield on average interest-eaming assets 4.09 459 4.20 3.90 361 Rate on average interest-bearing liabilities 0.80 135 0.99 0.65 0
Slide 20: Five Quarter Trends: Summary Financials
Five Quarter Trends: Summary Financials (Palas in thousands, except per share dat, unless Indosted) 06/24 03124 42720 09120 06120 Results of Operations: Tex-equivalentinterestincome 23877 24,125 26617 24,423 25282 Interest expense 4788 2074 3,398 4728 Tex-equivalentnetinterestincome 22,122 22,081 21
Slide 21: Five Quarter Trends: Key Performance Indicators
Five Quarter Trends: Key Performance Indicators (Percent unless indicated) 06/21 03/21 12/20 09/20 06/20 Return on average assets 1.20 1.44 147 0.72 0.94 Return on average common equity 13.56 16.31 17.01 867 11.82 Yield on average interest-eaming assets 3.49 3.70 415 3.76 4.05 Rate on average intere
Slide 22: Performance Trends
Performance Trends Reported: Net Interest Mar 320 an 378 3.60 34a 331 380 aay 338 340 340 328 324 343 3.20 3.35 3.36 3.20 SS 3.00 3.00 280 220 2017 2018 2019 220 yrD06/21 06/20 09/20 12/20 03/21 06/21 me oRRF Me Peers em OnRF mee Peers Ratio (4) Ratio (4) 90.00 —ze.9¢ rtd i 80.00 aa aie 6585 70.00 :
Slide 23: Performance Trends (continued)
Performance Trends (continued) Reported: ROAA (%) 120 1.00 0.80 0.60 0.50 040 2016 1.00 0.75 0.76 2017 2018 2019 2020 —eoRRF Peers 200 17 ™ 150 120 098 100 0.50 072 0.00 06/20 09/20 12/20 03/21. 06/21. a oRRF Peers Reported: ROAE (*) 1400 12.00 10.00 8.00 én 480 400 2.00 0.00 2016 1186 356 21 373 20
Slide 24: Capital Trends
Capital Trends Leverage Ratio 4 Leverage Ratio 4 950 850 835 900 — ee 8a oe 810 8.02 850 02 790 781 3.05 807 8.00 782 ae 770 750 750 2017 2018 2019 2020 vip 906/21 06/20 09/20 12/20 03a 05/21 en ORRF me Peers On ORRF me Peers jer 4 Ratio 4 135 135 1316 a nn B nn 1248 1248 25 pay = 125 2 2 —a065 1201
Slide 25: Asset Quality Trends
Asset Quality Trends NPAS/ Assets (%) 1.00 080 060 —__ 034 040 020 0.00 06/20 09/20 12/20 03/21 06/21, er ORRF ee Peers NPAs/ Assets (9 0.80 0.60 os 040 Let 046 037 020 os 0.00 2017 2018 2019 2020 YTD 06/21 meonnF oe Peers Reserves/ Loans Held For Investment (%) eo 127 12 120 1.00 Pr 089 0.80 1.02 0
Slide 26: Income Statement Trends
Income Statement Trends dollar: in mi Growth Growth Income Statement 2016 2017 2018 2019 2020 1Year 3 Year Net Interest Income 36.5 438 52.2 693 83.6 21% 91% Non-Interest Income 18.3 188 20.0 23.8 283 19% 51% Net Securities Gains 14 12) 10 47° 00 (100%) -101% Total Revenue 56.3 638 73.2 97.8 111.9 1
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 1Year 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 Cons
Slide 28: Capital Adequacy
Capital Adequa Growth Growth 1Year 3 Year 2016 2017 2018 2019 2020 Tier 1 Capital $127.0 $138.8 $160.1 $196.5 $217.6 11% 57% Tier 2 Capital $12.0 $ 13.6 $ 469 S$ 47.6 S$ 53.6 13% 294% Total Regulatory Capital $139.0 $152.4 $207.0 $244.0 $271.2 11% 78% Tier 1 Leverage Ratio 9.3% 9.0% 8.4% 8.6% 8.1% C
Slide 29: ESG Initiatives and Focus
ESG Initiatives and Focus General Philosophy 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
Slide 30: Summary Financial Trends
Summary Financial Trends dollars in millions (except for per share information) Summary Trends (as of and for the year ended December 31, ) rangible Book Value / Share? 16.15% 17.22% 16.73% 17.66% 19.93% 13% 16% [Diluted Earnings / Share $0.81 $0.98 $1.50 $1.61 $2.40 49% 145% idend / Share $0.35 $0.
Slide 31: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation APPENDIX - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations Management believes providing certain “non-GAAP” financial information willassist investors in their understanding of the effect of acquisition activity on reported results, pa
Slide 32: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) (Sin millions, except per share data) Non GAAP Financial Measure Reconciliation Reporied 2016 2017 2018 2019 2020 365 438 522 693 836 Plus Non-Interest Income: 197 199 210 285 283 56.3 63.8 732 97.8 111.9) Net Interest Income Total Revenue (A) Efficiency R
Slide 33: GAAP to Non-GAAP Reconciliation (continued)
GAAP to Non-GAAP Reconciliation (continued) (Sin thousands) Non-interest expense (A) S$ 17,033 § 17,783 $ 18.080 S$ 19.265 S$ = 18,431 Net interest income (B) 21,901 21,855 23,728 20,818 20,798 Non-interest income (C) 6,664 7.544, 7.181 6.861 7.193, Total revenue (B + C)=D 28,565 29,399 30,909 27,67
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