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Orrstown Financial Services, Inc. Reports Record Earnings for Full Year 2021 and Fourth Quarter Results

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  • Net income of $32.9 million and diluted earnings per share of $2.96 for the year ended December 31, 2021 compared to $26.5 million and diluted earnings per share of $2.40 for the year ended December 31, 2020; net income of $6.7 million for the quarter; diluted fourth quarter 2021 earnings per share of $0.60 compared to diluted earnings per share of $0.65 in the third quarter of 2021 and $0.91 in the fourth quarter of 2020

  • Fourth quarter commercial loan growth, excluding Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans, was $110.5 million, or 34% annualized; full year commercial loan growth, excluding SBA PPP loans, was $268.3 million, or 24%

  • Net interest margin increased to 3.35% in the fourth quarter of 2021 from 3.03% in the third quarter of 2021; some excess liquidity was deployed into commercial loan production and the cost of funds continued to decline

  • Tangible book value per share(1) increased to $22.32 at December 31, 2021 from $21.98 at September 30, 2021, and $19.93 at December 31, 2020

  • Noninterest income of $7.3 million in the fourth quarter of 2021 compared to $7.7 million in the third quarter of 2021; the third quarter included $0.5 million in gains from the sales of asset-backed securities

  • A provision for loan losses of $1.1 million was recorded in the fourth quarter of 2021 compared to $0.4 million in the third quarter of 2021 reflecting continued commercial loan growth in both periods; the provision for loan losses in the third quarter of 2021 included a COVID-19 reserve reversal of $1.0 million

  • The SBA PPP loan portfolio averaged $232.2 million in the three months ended December 31, 2021 as compared to $303.2 million in the three months ended September 30, 2021

  • Noninterest expenses increased by $1.3 million to $20.3 million in the fourth quarter of 2021 from $19.0 million in the third quarter of 2021; performance-based compensation increases were earned in the period due to individual production, the Company's performance exceeding targets and other employee incentives

  • The Company repurchased 32,652 shares of its common stock at an average price of $24.17 per share during the three months ended December 31, 2021

  • The Board of Directors declared a cash dividend of $0.19 per common share, payable February 8, 2022, to shareholders of record as of February 1, 2022

(1) Non-GAAP measure. See Appendix B for additional information.

SHIPPENSBURG, Pa., Jan. 19, 2022 (GLOBE NEWSWIRE) -- Orrstown Financial Services, Inc. ("Orrstown" or the “Company”) (NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”), announced earnings for the three months ended December 31, 2021. Net income totaled $6.7 million for the three months ended December 31, 2021, compared with $7.2 million for the three months ended September 30, 2021 and $10.1 million for the three months ended December 31, 2020. Diluted earnings per share totaled $0.60 for the three months ended December 31, 2021, compared with $0.65 for the three months ended September 30, 2021 and $0.91 for the three months ended December 31, 2020.

Thomas R. Quinn, Jr., President & CEO, commented, “Orrstown generated record earnings in 2021 in a challenging and unprecedented operating environment. The past two years have highlighted the dedication and commitment of our employees to both the Company and the communities we serve. In the fourth quarter, our exceptional commercial lending team continued to originate loans at a tremendous pace with the momentum expected to continue into 2022. The deployment of excess cash into higher earning assets drove a substantial improvement in our net interest margin. We expect that commercial loan production will contribute significantly towards offsetting a decline in PPP income in 2022. Orrstown continues to benefit from the new relationships formed through the SBA PPP program. Our team will be rewarded for our record performance in 2021 and this resulted in elevated expenses in the fourth quarter. We will continue to invest in our people and infrastructure as opportunities arise to build on the growth trajectory of the Company.”

Mr. Quinn continued, “Despite a strong economic recovery in 2021 and anticipated market interest rate increases over the next year, many challenges remain nationwide including the continued impact of COVID-19, wage pressures and inflation. In this unique environment, Orrstown is making every effort to ensure the safety and well-being of our employees and clients. As we proactively work through these concerns, the Company remains well positioned for a rising rate environment and we anticipate another successful year in 2022. This should further enable us to transform the Company through an increased focus on automation and digital banking.”

DISCUSSION OF RESULTS

Balance Sheet

Loans

Loans held for investment, which includes SBA PPP loans, increased by $40.2 million from September 30, 2021 to December 31, 2021, or 8% annualized, as the impact of SBA PPP loan forgiveness was offset by net commercial loan production. Excluding SBA PPP loans, total loans increased by $110.2 million from September 30, 2021 to December 31, 2021, or 26% annualized. SBA PPP loans, net of deferred fees and costs, declined by $70.0 million to $189.9 million at December 31, 2021 from $259.9 million at September 30, 2021 due to forgiveness activity. Commercial loans, excluding SBA PPP loans, increased by $110.5 million, or 34% annualized, from September 30, 2021 to December 31, 2021. The commercial loan pipeline is strong heading into the first quarter of 2022.

The remaining gross balance of SBA PPP loans is $195.3 million at December 31, 2021. Net deferred SBA PPP fees of $5.5 million remain at December 31, 2021, which are expected to mostly be earned by the end of 2022.

Home equity lines of credit increased by $6.7 million, or 17% annualized, in the fourth quarter of 2021. Residential mortgage loans declined by $4.5 million, or 9% annualized, in the three months ended December 31, 2021. Other installment loans decreased by $1.5 million, or 30% annualized, in the three months ended December 31, 2021. Consumer portfolio net runoff has slowed since the beginning of 2021. Overall loan growth, excluding SBA PPP loans, was 14% for the year ended December 31, 2021.

Investment Securities

Investment securities increased by $27.6 million to $479.7 million at December 31, 2021 compared to $452.1 million at September 30, 2021. During the fourth quarter of 2021, the Bank purchased mortgage-backed securities and municipal securities totaling $38.1 million. See Appendix C for a summary of the Bank's investment securities at December 31, 2021, highlighting the concentrations, credit ratings and credit enhancement levels of the portfolio at such date.

Deposits

Deposits decreased by $37.2 million, or 6% annualized, remaining at $2.5 billion at December 31, 2021 compared to September 30, 2021. In the fourth quarter of 2021, interest-bearing demand deposits decreased by $33.1 million, or 14.0% annualized and certificates of deposit decreased by $25.4 million, or 31% annualized. These decreases were partially offset by increases in noninterest-bearing demand deposits of $7.9 million, or 6% annualized and money market and savings deposits of $13.4 million, or 8% annualized. Deposits rose by $108.0 million, or 5%, from December 31, 2020 to December 31, 2021 due primarily to SBA PPP loan funding combined with clients continuing to maintain deposit balances in excess of historical norms. The Bank's loan-to-deposit ratio was 80% at December 31, 2021, an increase of 2% from September 30, 2021. On a longer-term basis, the Bank is targeting a loan-to-deposit ratio of 90%.

Income Statement

Net Interest Income and Margin

Net interest income increased by $2.0 million to $22.6 million for the three months ended December 31, 2021 compared to the three months ended September 30, 2021. The net interest margin increased to 3.35% in the fourth quarter of 2021 from 3.03% in the third quarter of 2021. The increase in net interest margin was a result of an increase in interest income from SBA PPP loan forgiveness (12 basis points) and commercial loan production (4 basis points), a decrease in average cash (11 basis points) and a decrease in cost of funds (3 basis points).

For the three months ended December 31, 2021 and September 30, 2021, there were $66.9 million and $98.2 million of SBA PPP loans forgiven, respectively. Interest income recognized on SBA PPP loans totaled $3.8 million in the three months ended December 31, 2021 as compared to $3.4 million in the three months ended September 30, 2021. This increase is due to the accretion and forgiveness of the remaining SBA PPP loans with higher fees.

The cost of deposits was 0.12% in the fourth quarter of 2021, which is down from 0.15% in the third quarter of 2021 and 0.33% in the fourth quarter of 2020. Rate reductions in the first and third quarters of 2021 combined with the continued maturity of higher yielding certificates of deposit drove this decrease.

Average cash and cash equivalents decreased from $347.2 million in the three months ended September 30, 2021 to $250.3 million in the three months ended December 31, 2021. The decrease reflects the Company’s strategy to reduce excess cash balances through increased commercial loan production.

Provision for Loan Losses

Asset quality metrics remained strong and trended positively in the fourth quarter. The allowance for loan losses totaled $21.2 million at December 31, 2021, compared with $20.0 million at September 30, 2021, due to continued commercial loan growth. Total classified loans decreased by $3.8 million, or 14%, to $23.1 million at December 31, 2021 from $26.9 million at September 30, 2021.

Net recoveries were $0.1 million for the three months ended December 31, 2021 compared to net recoveries of $0.2 million for the three months ended September 30, 2021. Nonperforming loans decreased by $2.6 million to $6.5 million at December 31, 2021 from $9.1 million at September 30, 2021 due to the payoff of one loan. Nonperforming loans were 0.33% of gross loans at December 31, 2021 and 0.47% of gross loans at September 30, 2021. The ratio of the allowance for loan losses to nonaccrual loans was 328% at December 31, 2021 compared to 219% at September 30, 2021. The allowance for loan losses to non-SBA guaranteed loans(1) remained steady at 1.2% at December 31, 2021 and September 30, 2021. Management believes the allowance for loan losses to be adequate based on current asset quality metrics.

Commercial loan growth drove provision expense of $1.1 million in the three months ended December 31, 2021. This compares to provision expense of $0.4 million and $0.3 million recorded in the three months ended September 30, 2021 and December 31, 2020, respectively. The provision for loan losses in the third quarter of 2021 included a COVID-19 reserve reversal of $1.0 million.

(1) Non-GAAP measure. See Appendix B for additional information.

Noninterest Income

Noninterest income totaled $7.3 million in the three months ended December 31, 2021 compared with $7.7 million in the three months ended September 30, 2021 and $7.2 million in the three months ended December 31, 2020.

Investment securities gains decreased by $0.5 million in the fourth quarter of 2021. The decrease reflects gains on the sales of $72.8 million of asset-backed securities in the third quarter of 2021 compared to no such sales during the fourth quarter of 2021.

Total wealth management income was $2.9 million for both the three months ended December 31, 2021 and September 30, 2021 compared to $2.6 million in the fourth quarter of 2020. Assets under management have increased by $149.1 million to $1.9 billion at December 31, 2021 from $1.7 billion at December 31, 2020.

Mortgage banking income decreased by $0.1 million from the third quarter of 2021 to $1.2 million in the fourth quarter of 2021. There was a decrease of $0.3 million in the fair value of the residential mortgage loans held for sale and interest rate lock commitments due a reduced pipeline during the fourth quarter. Offsetting this was a reduction of $0.3 million in the mortgage servicing rights valuation allowance. Mortgage loans sold totaled $43.7 million in the fourth quarter of 2021 compared with $48.0 million in the third quarter of 2021 and $60.7 million in the fourth quarter of 2020. As of December 31, 2021, the Bank serviced $502.5 million of residential mortgage loans, which is up by $13.9 million from September 30, 2021. Mortgage banking income was $5.9 million for the year ended December 31, 2021 compared to $5.3 million for the year ended December 31, 2020.

Other income increased by $0.2 million to $1.0 million in the fourth quarter of 2021 compared to the third quarter of 2021. The fourth quarter included $0.3 million in gains from the sales of two properties, while the third quarter included $0.2 million in tax credits from the Bank's investment in solar renewable energy partnerships.

Noninterest Expenses

Noninterest expenses increased by $1.3 million to $20.3 million in the three months ended December 31, 2021 from the three months ended September 30, 2021.

Salaries and benefits increased by $0.6 million to $12.1 million for the three months ended December 31, 2021 from the three months ended September 30, 2021. The increase was primarily attributed to performance-based incentive compensation earned in the period of $0.5 million resulting from strong individual production, Company performance exceeding targets and other employee incentives, and a liability of $0.3 million recorded for the carryover of paid time off, which increases were partially offset by a decrease of $0.3 million in employee benefit costs.

For the three months ended December 31, 2021, professional services expense increased $0.1 million to $0.7 million from the three months ended September 30, 2021 due to legal and consulting services.

Taxes other than income increased by $0.4 million for the three months ended December 31, 2021 from the three months ended September 30, 2021 due to an increase in Pennsylvania Bank Shares Tax expense and decrease in tax credits associated with contributions to the Pennsylvania Educational Improvement Tax Credit Program.

Other operating expenses decreased by $0.1 million to $2.2 million for the three months ended December 31, 2021 from the three months ended September 30, 2021. During the third quarter of 2021, the Company recognized a $0.5 million loss from the termination of a cash flow hedge derivative. For the three months ended December 31, 2021, there was an increase in the unfunded commitment reserve of $0.2 million due to the increase in commercial construction lines compared to no reserve in the three months ended September 30, 2021.

Income Taxes

The Company's effective tax rate for the fourth quarter of 2021 was 21.1% compared with 18.9% for the third quarter of 2021. For the years ended December 31, 2021 and 2020, the effective tax rates were 19.6% and 18.6%, respectively. The Company's effective tax rate for the year ended December 31, 2021 and 2020 are less than the 21% federal statutory rate due to tax-exempt income, including interest earned on tax-exempt loans and securities and income from life insurance policies, as well as tax credits. The higher effective tax rate is consistent with higher levels of pre-tax income and the impact it had on our tax rate for the year.

Capital

Shareholders’ equity totaled $271.7 million at December 31, 2021, an increase of $3.1 million from $268.6 million at September 30, 2021. The increase was primarily attributable to net income, partially offset by dividends paid and a decrease in unrealized gains on available-for-sale securities. Tangible book value per share(1) has grown from $19.93 per share at December 31, 2020 to $22.32 per share at December 31, 2021, an increase of 12.0%.

The Company's tangible common equity ratio increased to 8.8% at December 31, 2021 from 8.6% at September 30, 2021. The Company's Tier 1 leverage ratio was 8.5% at December 31, 2021 and 8.3% at September 30, 2021. The Company's total risk-based capital ratio was 15.0% at December 31, 2021 and 15.6% at September 30, 2021 as the Company has been deploying its cash into commercial lending.

The Board of Directors approved a quarterly dividend of $0.19 per share, payable February 8, 2022, to shareholders of record as of February 1, 2022. The dividend payout ratio totaled 31% for the three months ended December 31, 2021 compared to 29% for the three months ended September 30, 2021. The Company continues to believe that capital is adequate at this time to support the risks inherent in the balance sheet, as well as growth requirements.

(1) Non-GAAP measure. See Appendix B for additional information.

Investor Relations Contact:

Media Contact:

Matthew C. Schultheis, CFA

Luke Bernstein

Director Strategic Planning and Investor Relations

Corporate Communications Officer

Phone (717) 510-7127

Phone (717) 510-7107


ORRSTOWN FINANCIAL SERVICES, INC.

FINANCIAL HIGHLIGHTS (Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

(Dollars in thousands, except per share amounts)

2021

2020

2021

2020

Profitability for the period:

Net interest income

$

22,598

$

23,729

$

86,974

$

83,607

Provision for loan losses

1,100

300

1,090

5,325

Noninterest income

7,293

7,181

29,152

28,309

Noninterest expenses

20,290

18,080

74,141

74,080

Income before income taxes

8,501

12,530

40,895

32,511

Income tax expense

1,795

2,471

8,014

6,048

Net income available to common shareholders

$

6,706

$

10,059

$

32,881

$

26,463

Financial ratios:

Return on average assets (1)

0.93

%

1.47

%

1.14

%

1.00

%

Return on average equity (1)

9.93

%

17.01

%

12.54

%

11.66

%

Net interest margin (1)

3.35

%

3.73

%

3.25

%

3.44

%

Efficiency ratio

67.9

%

58.5

%

63.8

%

66.2

%

Income per common share:

Basic

$

0.61

$

0.92

$

3.00

$

2.42

Diluted

$

0.60

$

0.91

$

2.96

$

2.40

Average equity to average assets

9.34

%

8.65

%

9.06

%

8.58

%

(1) Annualized.


ORRSTOWN FINANCIAL SERVICES, INC.

FINANCIAL HIGHLIGHTS (Unaudited)

(continued)

December 31,

December 31,

2021

2020

At period-end:

Total assets

$

2,834,565

$

2,750,572

Total deposits

2,464,929

2,356,880

Loans, net of allowance for loan losses

1,958,806

1,959,539

Loans held-for-sale, at fair value

8,868

11,734

Securities available for sale

472,438

466,465

Borrowings

25,197

77,511

Subordinated notes

31,963

31,903

Shareholders' equity

271,656

246,249

Credit quality and capital ratios (1):

Allowance for loan losses to total loans

1.07

%

1.02

%

Total nonaccrual loans to total loans

0.33

%

0.52

%

Nonperforming assets to total assets

0.23

%

0.37

%

Allowance for loan losses to nonaccrual loans

328

%

195

%

Total risk-based capital:

Orrstown Financial Services, Inc.

15.0

%

15.6

%

Orrstown Bank

14.0

%

14.7

%

Tier 1 risk-based capital:

Orrstown Financial Services, Inc.

12.2

%

12.5

%

Orrstown Bank

12.9

%

13.5

%

Tier 1 common equity risk-based capital:

Orrstown Financial Services, Inc.

12.2

%

12.5

%

Orrstown Bank

12.9

%

13.5

%

Tier 1 leverage capital:

Orrstown Financial Services, Inc.

8.5

%

8.1

%

Orrstown Bank

8.9

%

8.7

%

Book value per common share

$

24.29

$

21.98

(1) Capital ratios are estimated, subject to regulatory filings


ORRSTOWN FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands, except per share amounts)

December 31, 2021

December 31, 2020

Assets

Cash and due from banks

$

21,217

$

26,203

Interest-bearing deposits with banks

187,493

99,055

Cash and cash equivalents

208,710

125,258

Restricted investments in bank stocks

7,252

10,563

Securities available for sale (amortized cost of $466,806 and $460,999 at December 31, 2021 and December 31, 2020, respectively)

472,438

466,465

Loans held for sale, at fair value

8,868

11,734

Loans

1,979,986

1,979,690

Less: Allowance for loan losses

(21,180

)

(20,151

)

Net loans

1,958,806

1,959,539

Premises and equipment, net

34,045

35,149

Cash surrender value of life insurance

70,217

68,554

Goodwill

18,724

18,724

Other intangible assets, net

4,183

5,458

Accrued interest receivable

8,234

8,927

Other assets

43,088

40,201

Total assets

$

2,834,565

$

2,750,572

Liabilities

Deposits:

Noninterest-bearing

$

553,238

$

456,778

Interest-bearing

1,911,691

1,900,102

Total deposits

2,464,929

2,356,880

Securities sold under agreements to repurchase

23,301

19,466

FHLB advances and other

1,896

58,045

Subordinated notes

31,963

31,903

Accrued interest and other liabilities

40,820

38,029

Total liabilities

2,562,909

2,504,323

Shareholders’ Equity

Preferred stock, $1.25 par value per share; 500,000 shares authorized; no shares issued or outstanding

Common stock, no par value—$0.05205 stated value per share 50,000,000 shares authorized; 11,258,167 shares issued and 11,183,050 outstanding at December 31, 2021; 11,257,046 shares issued and 11,201,317 outstanding at December 31, 2020

586

586

Additional paid—in capital

189,689

189,066

Retained earnings

78,700

54,099

Accumulated other comprehensive income

4,449

3,346

Treasury stock— 75,117 and 55,729 shares, at cost at December 31, 2021 and December 31, 2020, respectively

(1,768

)

(848

)

Total shareholders’ equity

271,656

246,249

Total liabilities and shareholders’ equity

$

2,834,565

$

2,750,572


ORRSTOWN FINANCIAL SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

December 31,

December 31,

(In thousands, except per share amounts)

2021

2020

2021

2020

Interest income

Loans

$

21,503

$

23,887

$

84,227

$

87,492

Investment securities - taxable

1,615

2,080

6,622

10,458

Investment securities - tax-exempt

703

445

2,493

1,566

Short-term investments

98

14

353

115

Total interest income

23,919

26,426

93,695

99,631

Interest expense

Deposits

789

1,862

4,199

12,009

Securities sold under agreements to repurchase

7

13

31

85

FHLB advances and other

23

320

482

1,924

Subordinated notes

502

502

2,009

2,006

Total interest expense

1,321

2,697

6,721

16,024

Net interest income

22,598

23,729

86,974

83,607

Provision for loan losses

1,100

300

1,090

5,325

Net interest income after provision for loan losses

21,498

23,429

85,884

78,282

Noninterest income

Service charges

960

999

3,718

3,557

Interchange income

1,080

916

4,129

3,423

Swap fee income

158

320

293

847

Wealth management income

2,897

2,615

11,467

9,733

Mortgage banking activities

1,225

1,348

5,909

5,274

Gains on sale of portfolio loans

2,803

Investment securities gains (losses)

3

28

638

(16

)

Other income

970

955

2,998

2,688

Total noninterest income

7,293

7,181

29,152

28,309

Noninterest expenses

Salaries and employee benefits

12,095

10,998

44,002

43,350

Occupancy, furniture and equipment

2,554

2,467

9,846

9,516

Data processing, telephone, and communication

1,020

954

4,061

3,574

Advertising and bank promotions

744

507

2,178

1,660

FDIC insurance

246

195

816

686

Professional services

693

780

2,555

3,120

Taxes other than income

392

240

1,321

1,144

Intangible asset amortization

303

345

1,275

1,569

Merger related and branch consolidation expenses

1,310

Insurance claim recovery

(486

)

Other operating expenses

2,243

1,594

8,087

8,637

Total noninterest expenses

20,290

18,080

74,141

74,080

Income before income tax expense

8,501

12,530

40,895

32,511

Income tax expense

1,795

2,471

8,014

6,048

Net income

$

6,706

$

10,059

$

32,881

$

26,463

Share information:

Basic earnings per share

$

0.61

$

0.92

$

3.00

$

2.42

Diluted earnings per share

$

0.60

$

0.91

$

2.96

$

2.40

Weighted average shares - basic

10,939

10,953

10,967

10,942

Weighted average shares - diluted

11,113

11,057

11,106

11,034


ORRSTOWN FINANCIAL SERVICES, INC.

ANALYSIS OF NET INTEREST INCOME

Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)

Three Months Ended

12/31/2021

9/30/2021

6/30/2021

3/31/2021

12/31/2020

Taxable-

Taxable-

Taxable-

Taxable-

Taxable-

Taxable-

Taxable-

Taxable-

Taxable-

Taxable-

(Dollars in thousands)

Average

Equivalent

Equivalent

Average

Equivalent

Equivalent

Average

Equivalent

Equivalent

Average

Equivalent

Equivalent

Average

Equivalent

Equivalent

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Balance

Interest

Rate

Assets

Federal funds sold & interest-bearing bank balances

$

250,336

$

98

0.16

%

$

347,242

$

135

0.15

%

$

290,039

$

81

0.11

%

$

145,595

$

39

0.11

%

$

48,019

$

14

0.12

%

Investment securities (1)

477,217

2,506

2.08

464,417

2,339

2.00

438,110

2,421

2.22

468,273

2,512

2.18

486,613

2,643

2.16

Loans (1)(2)(3)

1,975,014

21,559

4.33

1,919,926

19,945

4.12

2,014,600

21,375

4.26

2,033,219

21,574

4.30

2,015,749

23,960

4.73

Total interest-earning assets

2,702,567

24,163

3.55

2,731,585

22,419

3.26

2,742,749

23,877

3.49

2,647,087

24,125

3.70

2,550,381

26,617

4.15

Other assets

187,622

195,089

188,810

182,737

182,764

Total

$

2,890,189

$

2,926,674

$

2,931,559

$

2,829,824

$

2,733,145

Liabilities and Shareholders' Equity

Interest-bearing demand deposits

$

1,430,845

273

0.08

$

1,411,243

286

0.08

$

1,394,384

292

0.08

$

1,334,219

438

0.13

$

1,283,024

655

0.20

Savings deposits

215,957

55

0.10

209,112

53

0.10

200,439

50

0.10

183,576

45

0.10

172,068

52

0.12

Time deposits

313,148

461

0.58

349,215

598

0.68

382,467

739

0.78

397,271

909

0.93

411,395

1,155

1.12

Total interest-bearing deposits

1,959,950

789

0.16

1,969,570

937

0.19

1,977,290

1,081

0.22

1,915,066

1,392

0.29

1,866,487

1,862

0.40

Securities sold under agreements to repurchase

24,069

7

0.12

23,578

8

0.13

22,417

8

0.14

21,452

9

0.17

20,055

13

0.26

FHLB advances and other

1,956

23

4.70

45,071

123

1.09

57,896

164

1.14

58,000

171

1.20

135,558

320

0.94

Subordinated notes

31,954

503

6.29

31,938

503

6.29

31,924

502

6.29

31,909

502

6.29

31,895

502

6.29

Total interest-bearing liabilities

2,017,929

1,322

0.26

2,070,157

1,571

0.30

2,089,527

1,755

0.34

2,026,427

2,074

0.42

2,053,995

2,697

0.52

Noninterest-bearing demand deposits

559,882

548,923

545,617

516,849

406,454

Other

42,380

38,409

37,561

36,244

36,216

Total Liabilities

2,620,191

2,657,489

2,672,705

2,579,520

2,496,665

Shareholders' Equity

269,998

269,185

258,854

250,304

236,480

Total

$

2,890,189

$

2,926,674

$

2,931,559

$

2,829,824

$

2,733,145

Taxable-equivalent net interest income / net interest spread

22,841

3.29

%

20,848

2.96

%

22,122

3.15

%

22,051

3.28

%

23,920

3.63

%

Taxable-equivalent net interest margin

3.35

%

3.03

%

3.24

%

3.38

%

3.73

%

Taxable-equivalent adjustment

(243

)

(228

)

(221

)

(196

)

(192

)

Net interest income

$

22,598

$

20,620

$

21,901

$

21,855

$

23,728

Ratio of average interest-earning assets to average interest-bearing liabilities

134

%

132

%

131

%

131

%

124

%

NOTES:

(1) Yields and interest income on tax-exempt assets have been computed on a taxable-equivalent basis assuming a 21% tax rate.

(2) Average balances include nonaccrual loans.

(3) Interest income on loans includes prepayment and late fees, where applicable


ORRSTOWN FINANCIAL SERVICES, INC.

ANALYSIS OF NET INTEREST INCOME

Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)

Twelve Months Ended

December 31, 2021

December 31, 2020

Taxable-

Taxable-

Taxable-

Taxable-

Average

Equivalent

Equivalent

Average

Equivalent

Equivalent

(Dollars in thousands)

Balance

Interest

Rate

Balance

Interest

Rate

Assets

Federal funds sold & interest-bearing bank balances

$

258,834

$

353

0.14

%

$

32,519

$

115

0.35

%

Investment securities (1)

462,035

9,779

2.12

494,372

12,440

2.52

Loans (1)(2)(3)

1,985,350

84,453

4.25

1,928,486

87,900

4.56

Total interest-earning assets

2,706,219

94,585

3.50

2,455,377

100,455

4.09

Other assets

188,596

190,470

Total

$

2,894,815

$

2,645,847

Liabilities and Shareholders' Equity

Interest-bearing demand deposits

$

1,392,996

1,287

0.09

$

1,156,292

4,755

0.41

Savings deposits

202,371

203

0.10

163,133

246

0.15

Time deposits

360,264

2,709

0.75

452,298

7,008

1.55

Total interest-bearing deposits

1,955,631

4,199

0.21

1,771,723

12,009

0.68

Securities sold under agreements to repurchase

22,888

32