Orrstown Financial Services, Inc. Reports Earnings for the Fourth Quarter 2022 and Full Year 2022 Results
01/24/2023 - 04:03 PM
Net income of $9.6 million and diluted earnings per share of $0.91 for the three months ended December 31, 2022 compared to a net loss of $4.8 million and diluted loss per share of $0.47 for the three months ended September 30, 2022; net income of $22.0 million and diluted earnings per share of $2.06 for the year ended December 31, 2022 compared to net income of $32.9 million and diluted earnings per share of $2.96 for the year ended December 31, 2021; Excluding the impact from the third quarter provision for legal settlement ("legal settlement") and restructuring charge, net income and diluted earnings per share were $34.8 million (1) and $3.25 (1) , respectively, for the year ended December 31, 2022; Fourth quarter return on average assets of 1.33% and return on average equity of 17.28% ; Net interest income increased to $27.5 million for the three months ended December 31, 2022 compared to $25.5 million for the three months ended September 30, 2022 reflecting net interest margin expansion over that period; Net interest margin, on a tax equivalent basis, increased to 4.14% in the fourth quarter of 2022 from 3.92% in the third quarter of 2022; net interest margin has increased as a result of loan growth and the rising interest rate environment; Fourth quarter commercial loan growth, excluding SBA PPP loans, was $56.6 million , or 14% annualized; full year commercial loan growth, excluding SBA PPP loans, was $299.9 million , or 21% ; consumer loans increased by $9.9 million , or 9% annualized, during the fourth quarter of 2022 compared to the third quarter of 2022; full year consumer loan growth was $47.3 million , or 12% ; Noninterest expenses decreased by $15.2 million to $21.2 million in the three months ended December 31, 2022 from $36.4 million in the three months ended September 30, 2022; excluding the impact of the restructuring charge and legal settlement, noninterest expenses were $21.2 million in the fourth quarter of 2022 compared to $20.3 million (1) during the third quarter of 2022; Provision for loan losses was $0.6 million in the fourth quarter of 2022 compared to $1.5 million in the third quarter of 2022; The Board of Directors increased the Company's quarterly cash dividend, declaring a cash dividend of $0.20 per common share, payable February 14, 2023, to shareholders of record as of February 7, 2023. SHIPPENSBURG, Pa., Jan. 24, 2023 (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 and year ended December 31, 2022. Net income totaled $9.6 million for the three months ended December 31, 2022, compared to a net loss of $4.8 million for the three months ended September 30, 2022 and net income of $6.7 million for the three months ended December 31, 2021. Diluted earnings per share totaled $0.91 for the three months ended December 31, 2022, compared to diluted loss per share of $0.47 for the three months ended September 30, 2022 and diluted earnings per share of $0.60 for the three months ended December 31, 2021. For the third quarter of 2022, excluding the impact from the restructuring charge and legal settlement, net income and diluted earnings per share were $7.9 million (1) and $0.75 1) , respectively.
Net income totaled $22.0 million and $32.9 million for the years ended December 31, 2022 and 2021, respectively. Diluted earnings per share totaled $2.06 for the year ended December 31, 2022, compared to diluted earnings per share of $2.96 for the year ended December 31, 2021. Excluding the impact from the restructuring charge and legal settlement, net income and diluted earnings per share were $34.8 million (1) and $3.25 (1) for the year ended December 31, 2022, respectively.
(1) Non-GAAP measures. See Appendix A for additional information.
“Despite a decline of approximately $10.7 million in SBA PPP income from 2021 to 2022, Orrstown recorded net income of $34.8 million in 2022, excluding the impact of restructuring and legal settlement charges in the third quarter, compared to $32.9 million in 2021. Our performance demonstrates the payoff from the foundation that we have built over the past several years. Orrstown’s strong earnings power and the impact of past investments were further illustrated by our fourth quarter 2022 performance as we recorded a return on average assets of 1.33% and a return on average equity of 17.3% . We expect that the strategic actions taken in the third quarter will enable us to continue on our growth trajectory into 2023. We anticipate that the expected efficiencies from these actions will begin to positively impact the Company’s performance in 2023 and that the benefits of the reinvestment of resources into our digital footprint will be seen over time,” commented Thomas R. Quinn, Jr., President and Chief Executive Officer.
“We experienced net interest margin expansion to 4.14% in the fourth quarter due to the continued strong growth in our loan portfolio as well as the impact of interest rate increases. However, we do expect some margin contraction going forward due to competitive pressures on deposit pricing and increased usage of borrowings to fund growth. We are confident in the ability of our commercial and retail teams to continue to grow our balance sheet in the challenging economic environment that is anticipated in 2023. We believe that our disciplined approach to growth positions us for continued success.”
DISCUSSION OF RESULTS
Balance Sheet
Loans
Excluding SBA PPP loans, total loans increased by $66.5 million from September 30, 2022 to December 31, 2022, or 13% annualized. SBA PPP loans, net of deferred fees and costs, declined by $3.2 million to $13.8 million at December 31, 2022 from $17.0 million at September 30, 2022 due to forgiveness activity. Net deferred SBA PPP fees of $0.3 million remain at December 31, 2022. Commercial loans, excluding SBA PPP loans, increased by $56.6 million , or 14% annualized, from September 30, 2022 to December 31, 2022. Loans held for investment, which includes SBA PPP loans, increased by $63.3 million from September 30, 2022 to December 31, 2022, or 12% annualized, due to continued strong sales efforts.
The first lien residential mortgage portfolio grew by $8.9 million , or 16% annualized, in the three months ended December 31, 2022 from jumbo and adjustable-rate mortgage production. Home equity lines of credit increased by $3.0 million , or 7% annualized, in the three months ended December 31, 2022.
Investment Securities
Investment securities increased by $14.3 million to $524.4 million at December 31, 2022 compared to $510.1 million at September 30, 2022. During the fourth quarter of 2022, the Bank sold municipal securities totaling $28.2 million , which were offset by purchases of higher yielding securities totaling $42.0 million . These purchases were also offset by normal paydown activity of $7.7 million . Due to changes in market interest rates, net unrealized losses on investment securities declined by $4.9 million . In addition, FHLB stock increased $4.2 million due to an increase in borrowings during the fourth quarter of 2022. See Appendix B for a summary of the Bank's investment securities at December 31, 2022, highlighting the concentrations, credit ratings and credit enhancement levels of the investment securities portfolio at such date.
Deposits
Deposits decreased by $29.6 million , or 5% annualized, totaling approximately $2.5 billion at both December 31, 2022 and September 30, 2022. In the fourth quarter of 2022, noninterest-bearing demand deposits and time deposits decreased by $60.1 million , or 42% annualized, and $2.9 million , or 5% annualized, respectively. These decreases were partially offset by increases in interest-bearing demand deposits by $14.2 million , or 6% annualized, and money market and savings deposits of $19.2 million , or 11% annualized. The decrease in deposits resulted primarily from clients utilizing their funds at a higher frequency and certificate of deposit runoff. The Bank's loan-to-deposit ratio was 87% at December 31, 2022.
During the fourth quarter of 2022, the Bank announced that it had entered into a Purchase and Assumption Agreement providing for the sale of its Path Valley branch and associated deposit liabilities. Deposits held for assumption of approximately $31.7 million are reported within total deposits at cost and are comprised of $24.3 million in interest-bearing deposits and $7.4 million in non-interest bearing deposits. The transaction is expected to close in the second quarter of 2023.
Borrowings
FHLB advances and other borrowings increased by $104.5 million to $106.1 million at December 31, 2022 compared to $1.6 million at September 30, 2022. As utilization of excess liquidity by individuals and businesses and competition for deposits have increased, the Bank's deposit balances declined slightly during the fourth quarter of 2022. The Bank opted to borrow funds to provide additional liquidity to meet the credit needs of its clients.
Income Statement
Net Interest Income and Margin
Net interest income increased by $2.0 million to $27.5 million for the three months ended December 31, 2022 compared to $25.5 million for the three months ended September 30, 2022. The net interest margin, on a tax equivalent basis, increased to 4.14% in the fourth quarter of 2022 from 3.92% in the third quarter of 2022. The increase in net interest margin was the result of growth in, and the impact of the rising interest rates on the loan and investment securities portfolios, partially offset by an increase in the cost of funds.
Interest income on loans increased by $3.8 million to $27.0 million for the three months ended December 31, 2022 compared to $23.2 million for the three months ended September 30, 2022. Loan growth and higher interest rates were the primary drivers of this increase. Interest income on loans for the three months ended December 31, 2022 included prepayment fee income of $0.4 million , an increase of $0.3 million , from $0.1 million for the three months ended September 30, 2022.
Interest income recognized on SBA PPP loans totaled $0.2 million in the three months ended December 31, 2022 compared to $0.5 million in the three months ended September 30, 2022.
Interest income on investment securities increased by $0.6 million to $4.9 million for the three months ended December 31, 2022 from $4.3 million for the third quarter of 2022. The increase reflects the impact of rising interest rates on investments for which resets occur at various frequencies and the additional yield generated from investments purchased during the third and fourth quarters of 2022.
Interest expense on interest-bearing liabilities increased by $2.6 million to $4.6 million for the three months ended December 31, 2022 compared to $2.0 million for the three months ended September 30, 2022 due to the increase in average interest-bearing deposits and borrowings and rising interest rates.
Provision for Loan Losses
The Company recorded a provision for loan losses of $0.6 million for the three months ended December 31, 2022 compared to $1.5 million for the three months ended September 30, 2022. Net charge-offs were $0.1 million for the three months ended December 31, 2022. The allowance for loan losses totaled $25.2 million at December 31, 2022, compared to $24.7 million at September 30, 2022. The allowance for loan losses to total loans remained relatively consistent at 1.17% at December 31, 2022 compared to 1.18% at September 30, 2022.
During the fourth quarter of 2022, the Bank downgraded one commercial construction loan with an outstanding balance of $15.4 million to substandard and placed it into non-accrual status. Although the loan is not past due, management determined that it was appropriate to place the loan on non-accrual status due to other relevant factors. At this time, management deems the value of underlying collateral sufficient to cover any potential losses on this loan. Management does not believe that this credit is indicative of overall stress in the loan portfolio. As a result of this downgrade, total nonaccrual loans to total loans increased to 0.96% at December 31, 2022 from 0.25% at September 30, 2022. Management believes the allowance for loan losses to be adequate based on current asset quality metrics and economic conditions.
Noninterest Income
Noninterest income totaled $6.2 million in the three months ended December 31, 2022 compared to $6.1 million in the three months ended September 30, 2022.
Mortgage banking income increased by $1.2 million from a loss of $1.0 million in the third quarter of 2022 to income of $0.2 million in the fourth quarter of 2022. Market conditions negatively impacted mortgage production in the second half of the year, initially resulting from low housing inventory. In the fourth quarter of 2022, while inventory improved, higher interest rates drove a further drop in mortgage demand, which caused additional declines in in the residential mortgage loan pipeline and secondary market sales during the three months ended December 31, 2022. Mortgage loans sold totaled $8.6 million in the fourth quarter of 2022 compared to $12.7 million in the third quarter of 2022 and $43.7 million in the fourth quarter of 2021. The Company experienced marginal improvement in the fair value of held-for-sale loans during the fourth quarter of 2022 as compared to a loss of $1.4 million from a fair value reduction in the third quarter of 2022.
Swap fee income increased by $0.5 million to $0.7 million for the three months ended December 31, 2022 compared to $0.2 million for the three months ended September 30, 2022. Swap fee income fluctuates based on market conditions and client demand.
Wealth management income decreased by $0.5 million to $2.5 million during the fourth quarter of 2022 from $3.0 million during the third quarter of 2022 due to unfavorable conditions in the stock and bond markets.
Other income decreased by $1.0 million to $0.7 million for the three months ended December 31, 2022 from $1.7 million during the three months ended September 30, 2022. The third quarter of 2022 included income from distributions on investments in non-housing limited partnerships totaling $1.0 million .
Noninterest Expenses
Noninterest expenses decreased by $15.2 million to $21.2 million in the three months ended December 31, 2022 from $36.4 million in the three months ended September 30, 2022. During the third quarter of 2022, the Company recorded a restructuring charge of $3.2 million and a provision for legal settlement of $13.0 million . Excluding the impact from the restructuring charge and legal settlement, noninterest expenses increased by $0.9 million to $21.2 million in the fourth quarter of 2022 from $20.3 million (1) during the third quarter of 2022.
Advertising and bank promotions expense increased by $0.5 million to $0.8 million in the three months ended December 31, 2022 from $0.3 million for the three months ended September 30, 2022 due to $0.4 million in contributions to tax credit programs during the fourth quarter of 2022. Taxes other than income decreased by $0.3 million to $0.2 million in the three months ended December 31, 2022 compared to $0.5 million in the three months ended September 30, 2022. This decrease reflects the tax credits recognized on these contributions during the fourth quarter of 2022.
Other operating expenses increased $0.8 million to $2.6 million during the fourth quarter of 2022 compared to $1.8 million during the third quarter of 2022. This increase was primarily caused by an increase in mark-to-market losses on derivatives of $0.4 million and customer fraud losses of $0.2 million . The remaining fluctuation of approximately $0.2 million is attributable to normal business operations.
Salaries and benefits expense was $12.7 million for both the three months ended December 31, 2022 and September 30, 2022, which remained elevated in the latter part of 2022 due to incentive compensation increases, the filling of several vacancies, and higher healthcare costs.
Income Taxes
The Company's effective tax rate for the fourth quarter of 2022 was 19.0% compared to 24.6% for the third quarter of 2022. The net loss incurred during the third quarter of 2022, due to the restructuring charge and legal settlement, resulted in an income tax benefit. The Company's effective tax rate for the three months ended December 31, 2022 is 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 effective tax rate for the year ended December 31, 2022 is 17.2% compared to 19.6% for the year ended December 31, 2021. The decrease in the effective tax rate was primarily due to a decrease in taxable income resulting from the restructuring charge and legal settlement, an increase in tax-exempt interest income on loans and investment securities due to the rising interest rates, and additional tax credits.
Capital
Shareholders’ equity totaled $228.9 million at December 31, 2022, an increase of $11.5 million from $217.4 million at September 30, 2022. The increase was primarily attributable to net income of $9.6 million and other comprehensive income of $3.6 million , partially offset by dividends paid of $2.0 million for the three months ended December 31, 2022. Other comprehensive income increased primarily due to a decline of $3.9 million in net unrealized losses on investment securities. Tangible book value per share(1) increased from $18.34 per share at September 30, 2022 to $19.47 per share at December 31, 2022 primarily as a result of the increase in shareholders' equity.
(1) Non-GAAP measure. See Appendix A for additional information.
The Company's tangible common equity ratio increased to 7.1% at December 31, 2022 from 6.9% at September 30, 2022 primarily due to an increase in tangible equity from net income and the decrease in unrealized losses on available-for-sale securities. The Company's total risk-based capital ratio was 12.7% at both December 31, 2022 and September 30, 2022. An increase in risk-based capital from net income was offset by an increase in risk weighted assets primarily caused by loan growth. The Company's Tier 1 leverage ratio increased to 8.5% at December 31, 2022 from 8.4% at September 30, 2022 primarily due to net income partially offset by the increase in average assets caused by loan growth. At December 31, 2022, all four capital ratios applicable to the Company were above regulatory minimum levels to be deemed “well capitalized” under current bank regulatory guidelines.
The Board of Directors approved an increase to the quarterly dividend to $0.20 per share, payable on February 14, 2023, to shareholders of record as of February 7, 2023. The dividend payout ratio totaled 21% for the three months ended December 31, 2022. At this time, the Company continues to believe that capital is adequate to support the risks inherent in the balance sheet, as well as growth requirements.
Investor Relations Contact: Neelesh Kalani Executive Vice President, Chief Financial Officer Phone (717) 510-7097
ORRSTOWN FINANCIAL SERVICES, INC. FINANCIAL HIGHLIGHTS (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, (Dollars in thousands) 2022 2021 2022 2021 Profitability for the period: Net interest income $ 27,484 $ 22,598 $ 99,630 $ 86,974 Provision for loan losses 585 1,100 4,160 1,090 Noninterest income 6,226 7,293 26,952 29,152 Noninterest expenses 21,236 20,290 95,806 74,141 Income before income tax expense 11,889 8,501 26,616 40,895 Income tax expense 2,263 1,795 4,579 8,014 Net income available to common shareholders $ 9,626 $ 6,706 $ 22,037 $ 32,881 Financial ratios: Return on average assets(1) 1.33 % 0.93 % 0.77 % 1.14 % Return on average assets, adjusted(1) (2) (3) 1.33 % 0.93 % 1.22 % 1.14 % Return on average equity(1) 17.28 % 9.93 % 9.02 % 12.54 % Return on average equity, adjusted(1) (2) (3) 17.28 % 9.93 % 14.25 % 12.54 % Net interest margin(1) 4.14 % 3.35 % 3.81 % 3.25 % Efficiency ratio 63.0 % 67.9 % 75.7 % 63.8 % Efficiency ratio, adjusted(2) (3) 63.0 % 67.9 % 62.9 % 63.8 % Income per common share: Basic $ 0.93 $ 0.61 $ 2.09 $ 3.00 Basic, adjusted(2) (3) $ 0.93 $ 0.61 $ 3.30 $ 3.00 Diluted $ 0.91 $ 0.60 $ 2.06 $ 2.96 Diluted, adjusted(2) (3) $ 0.91 $ 0.60 $ 3.25 $ 2.96 Average equity to average assets 7.68 % 9.34 % 8.59 % 9.06 % (1) Annualized. (2) Ratio has been adjusted for the restructuring charge and provision for legal settlement for the twelve months ended December 31, 2022.(3) Non-GAAP based financial measure. Please refer to Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations for a discussion of our use of non-GAAP based financial measures, including tables reconciling GAAP and non-GAAP financial measures appearing herein.
ORRSTOWN FINANCIAL SERVICES, INC. FINANCIAL HIGHLIGHTS (Unaudited) (continued) December 31, December 31, (Dollars in thousands, except per share amounts) 2022 2021 At period-end: Total assets $ 2,922,408 $ 2,834,565 Total deposits 2,476,246 2,464,929 Loans, net of allowance for loan losses 2,126,054 1,958,806 Loans held-for-sale, at fair value 10,880 8,868 Securities available for sale 513,728 472,438 Borrowings 123,390 25,197 Subordinated notes 32,026 31,963 Shareholders' equity 228,896 271,656 Credit quality and capital ratios(1) : Allowance for loan losses to total loans 1.17 % 1.07 % Total nonaccrual loans to total loans 0.96 % 0.33 % Nonperforming assets to total assets 0.70 % 0.23 % Allowance for loan losses to nonaccrual loans 122 % 328 % Total risk-based capital: Orrstown Financial Services, Inc. 12.7 % 15.0 % Orrstown Bank 12.3 % 14.0 % Tier 1 risk-based capital: Orrstown Financial Services, Inc. 10.3 % 12.2 % Orrstown Bank 11.2 % 12.9 % Tier 1 common equity risk-based capital: Orrstown Financial Services, Inc. 10.3 % 12.2 % Orrstown Bank 11.2 % 12.9 % Tier 1 leverage capital: Orrstown Financial Services, Inc. 8.5 % 8.5 % Orrstown Bank 9.2 % 8.9 % Book value per common share $ 21.45 $ 24.29 (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, 2022 December 31, 2021 Assets Cash and due from banks $ 28,477 $ 21,217 Interest-bearing deposits with banks 32,346 187,493 Cash and cash equivalents 60,823 208,710 Restricted investments in bank stocks 10,642 7,252 Securities available for sale (amortized cost of $563,278 and $466,806 at December 31, 2022 and December 31, 2021, respectively) 513,728 472,438 Loans held for sale, at fair value 10,880 8,868 Loans 2,151,232 1,979,986 Less: Allowance for loan losses (25,178 ) (21,180 ) Net loans 2,126,054 1,958,806 Premises and equipment, net 29,328 34,045 Cash surrender value of life insurance 71,760 70,217 Goodwill 18,724 18,724 Other intangible assets, net 3,078 4,183 Accrued interest receivable 11,027 8,234 Deferred tax assets, net 24,031 11,648 Other assets 42,333 31,440 Total assets $ 2,922,408 $ 2,834,565 Liabilities Deposits: Noninterest-bearing $ 501,963 $ 553,238 Interest-bearing 1,974,283 1,911,691 Total deposits 2,476,246 2,464,929 Securities sold under agreements to repurchase 17,251 23,301 FHLB advances and other 106,139 1,896 Subordinated notes 32,026 31,963 Accrued interest and other liabilities 61,850 40,820 Total liabilities 2,693,512 2,562,909 Shareholders’ Equity Preferred stock, $1.25 par value per share; 500,000 shares authorized; no shares issued or outstanding — — Common stock, no par value—$0.05 205 stated value per share 50,000,000 shares authorized; 11,229,242 shares issued and 10,671,413 outstanding at December 31, 2022; 11,258,167 shares issued and 11,183,050 outstanding at December 31, 2021 584 586 Additional paid—in capital 189,264 189,689 Retained earnings 92,473 78,700 Accumulated other comprehensive (loss) income (39,913 ) 4,449 Treasury stock— 557,829 and 75,117 shares, at cost at December 31, 2022 and December 31, 2021, respectively (13,512 ) (1,768 ) Total shareholders’ equity 228,896 271,656 Total liabilities and shareholders’ equity $ 2,922,408 $ 2,834,565
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) 2022 2021 2022 2021 Interest income Loans $ 26,980 $ 21,503 $ 93,528 $ 84,227 Investment securities - taxable 3,775 1,615 10,237 6,622 Investment securities - tax-exempt 1,102 703 4,115 2,493 Short-term investments 238 98 774 353 Total interest income 32,095 23,919 108,654 93,695 Interest expense Deposits 3,579 789 6,337 4,199 Securities sold under agreements to repurchase 20 7 44 31 FHLB advances and other 509 23 630 482 Subordinated notes 503 502 2,013 2,009 Total interest expense 4,611 1,321 9,024 6,721 Net interest income 27,484 22,598 99,630 86,974 Provision for loan losses 585 1,100 4,160 1,090 Net interest income after provision for loan losses 26,899 21,498 95,470 85,884 Noninterest income Service charges 1,131 935 4,614 3,693 Interchange income 996 1,080 4,055 4,129 Swap fee income 697 158 2,632 293 Wealth management income 2,535 2,897 11,251 11,467 Mortgage banking activities 202 1,225 407 5,909 Investment securities gains (losses) 3 3 (160 ) 638 Other income 662 995 4,153 3,023 Total noninterest income 6,226 7,293 26,952 29,152 Noninterest expenses Salaries and employee benefits 12,650 12,095 48,004 44,002 Occupancy, furniture and equipment 2,442 2,554 9,812 9,846 Data processing 1,150 1,020 4,560 4,061 Advertising and bank promotions 750 744 2,264 2,178 FDIC insurance 316 246 1,083 816 Professional services 837 693 3,254 2,555 Taxes other than income 231 392 1,391 1,321 Intangible asset amortization 260 303 1,105 1,275 Provision for legal settlement — — 13,000 — Restructuring expenses — — 3,155 — Other operating expenses 2,600 2,243 8,178 8,087 Total noninterest expenses 21,236 20,290 95,806 74,141 Income before income tax expense 11,889 8,501 26,616 40,895 Income tax expense 2,263 1,795 4,579 8,014 Net income $ 9,626 $ 6,706 $ 22,037 $ 32,881 Share information: Basic earnings per share $ 0.93 $ 0.61 $ 2.09 $ 3.00 Diluted earnings per share $ 0.91 $ 0.60 $ 2.06 $ 2.96 Weighted average shares - basic 10,382 10,939 10,553 10,967 Weighted average shares - diluted 10,550 11,113 10,706 11,106
ORRSTOWN FINANCIAL SERVICES, INC. ANALYSIS OF NET INTEREST INCOME Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited) Three Months Ended 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Taxable- Taxable- Taxable- Taxable- Taxable- Taxable- Taxable- Taxable- Taxable- Taxable- Average Equivalent Equivalent Average Equivalent Equivalent Average Equivalent Equivalent Average Equivalent Equivalent Average Equivalent Equivalent (Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets Federal funds sold & interest-bearing bank balances $ 28,419 $ 238 3.31 % $ 38,068 $ 200 2.08 % $ 131,449 $ 235 0.72 % $ 199,788 $ 101 0.20 % $ 250,336 $ 98 0.16 % Investment securities(1) 512,779 5,170 4.03 528,988 4,377 3.31 523,940 3,388 2.59 472,195 2,512 2.13 477,217 2,506 2.08 Loans(1)(2)(3) 2,133,052 27,061 5.04 2,051,707 23,219 4.49 2,008,283 22,090 4.41 1,974,804 21,429 4.39 1,975,014 21,559 4.33 Total interest-earning assets 2,674,250 32,469 4.83 2,618,763 27,796 4.22 2,663,672 25,713 3.87 2,646,787 24,042 3.67 2,702,567 24,163 3.55 Other assets 202,384 196,277 192,561 184,300 187,622 Total $ 2,876,634 $ 2,815,040 $ 2,856,233 $ 2,831,087 $ 2,890,189 Liabilities and Shareholders' Equity Interest-bearing demand deposits $ 1,459,109 2,838 0.77 $ 1,379,082 912 0.26 $ 1,420,051 301 0.09 $ 1,398,182 256 0.07 $ 1,430,845 273 0.08 Savings deposits 228,521 132 0.23 237,462 90 0.15 236,916 63 0.11 227,676 57 0.10 215,957 55 0.10 Time deposits 254,637 609 0.95 265,015 370 0.55 275,408 337 0.49 298,618 372 0.51 313,148 461 0.58 Total interest-bearing deposits 1,942,267 3,579 0.73 1,881,559 1,372 0.29 1,932,375 701 0.15 1,924,476 685 0.14 1,959,950 789 0.16 Securities sold under agreements to repurchase 18,211 20 0.46 23,480 10 0.18 24,045 7 0.11 23,530 7 0.12 24,069 7 0.12 FHLB advances and other 48,276 509 4.21 10,394 78 3.02 1,741 21 4.74 1,850 22 4.74 1,956 23 4.70 Subordinated notes 32,016 503 6.29 32,000 504 6.29 31,985 503 6.29 31,969 503 6.29 31,954 503 6.29 Total interest-bearing liabilities 2,040,770 4,611 0.90 1,947,433 1,964 0.40 1,990,146 1,232 0.25 1,981,825 1,217 0.25 2,017,929 1,322 0.26 Noninterest-bearing demand deposits 540,275 575,777 572,171 540,139 559,882 Other 74,602 49,964 47,190 40,919 42,380 Total Liabilities 2,655,647 2,573,174 2,609,507 2,562,883 2,620,191 Shareholders' Equity 220,987 241,866 246,726 268,204 269,998 Total $ 2,876,634 $ 2,815,040 $ 2,856,233 $ 2,831,087 $ 2,890,189 Taxable-equivalent net interest income / net interest spread 27,858 3.93 % 25,832 3.82 % 24,481 3.62 % 22,825 3.42 % 22,841 3.29 % Taxable-equivalent net interest margin 4.14 % 3.92 % 3.68 % 3.49 % 3.35 % Taxable-equivalent adjustment (374 ) (377 ) (363 ) (252 ) (243 ) Net interest income $ 27,484 $ 25,455 $ 24,118 $ 22,573 $ 22,598 Ratio of average interest-earning assets to average interest-bearing liabilities 131 % 134 % 134 % 134 % 134 % 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, 2022 December 31, 2021 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 $ 98,793 $ 774 0.78 % $ 258,834 $ 353 0.14 % Investment securities(1) 509,640 15,446 3.03 462,035 9,779 2.12 Loans(1)(2)(3) 2,042,422 93,799 4.59 1,985,350 84,453 4.25 Total interest-earning assets 2,650,855 110,019 4.15 2,706,219 94,585 3.50 Other assets 193,945 188,596 Total $ 2,844,800 $ 2,894,815 Liabilities and Shareholders' Equity Interest-bearing demand deposits $ 1,414,177 4,308 0.30 $ 1,392,996 1,287 0.09 Savings deposits 232,660 341 0.15 202,371 203 0.10 Time deposits 273,276 1,688 0.62 360,264 2,709 0.75 Total interest-bearing deposits 1,920,113 6,337 0.33 1,955,631 4,199 0.21 Securities sold under agreements to repurchase 22,305 44 0.20 22,888 32 0.14 FHLB advances and other 15,678 630 4.01 40,589 482 1.19 Subordinated notes 31,993 2,013 6.29 31,931 2,009 6.29 Total interest-bearing liabilities 1,990,089 9,024 0.45 2,051,039 6,722 0.33 Noninterest-bearing demand deposits 557,142 542,952 Other 53,288 38,665 Total Liabilities 2,600,519 2,632,656 Shareholders' equity 244,281 262,159 Total $ 2,844,800 $ 2,894,815 Taxable-equivalent net interest income / net interest spread 100,995 3.70 % 87,863 3.17 % Taxable-equivalent net interest margin 3.81 % 3.25 % Taxable-equivalent adjustment (1,365 ) (889 ) Net interest income $ 99,630 $ 86,974 Ratio of average interest-earning assets to average interest-bearing liabilities 133 % 132 % NOTES TO ANALYSIS OF NET INTEREST INCOME: (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. HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) (In thousands) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Profitability for the quarter: Net interest income $ 27,484 $ 25,455 $ 24,118 $ 22,573 $ 22,598 Provision for loan losses 585 1,500 1,775 300 1,100 Noninterest income 6,226 6,058 7,194 7,474 7,293 Noninterest expenses 21,236 36,412 18,794 19,364 20,290 Income (loss) before income taxes 11,889 (6,399 ) 10,743 10,383 8,501 Income tax expense (benefit) 2,263 (1,571 ) 1,872 2,015 1,795 Net income (loss) $ 9,626 $ (4,828 ) $ 8,871 $ 8,368 $ 6,706 Financial ratios: Return on average assets(1) 1.33 % (0.68 )% 1.25 % 1.20 % 0.93 % Return on average equity(1) 17.28 % (7.92 )% 14.42 % 12.65 % 9.93 % Net interest margin(1) 4.14 % 3.92 % 3.68 % 3.49 % 3.35 % Efficiency ratio 63.0 % 115.5 % 60.0 % 64.4 % 67.9 % Per share information: Income (loss) per common share: Basic $ 0.93 $ (0.47 ) $ 0.84 $ 0.77 $ 0.61 Diluted 0.91 (0.47 ) 0.83 0.76 0.60 Book value 21.45 20.34 22.25 23.00 24.29 Tangible book value(2) 19.47 18.34 20.23 21.03 22.32 Cash dividends paid 0.19 0.19 0.19 0.19 0.19 Average basic shares 10,382 10,369 10,610 10,860 10,939 Average diluted shares 10,550 10,529 10,744 11,007 11,113 (1) Annualized.(2) Non-GAAP based financial measure. Please refer to Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations for a discussion of our use of non-GAAP based financial measures, including tables reconciling GAAP and non-GAAP financial measures appearing herein.
ORRSTOWN FINANCIAL SERVICES, INC. HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) (continued) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Noninterest income: Service charges $ 1,131 $ 1,216 $ 1,194 $ 1,073 $ 935 Interchange income 996 1,014 1,064 981 1,080 Swap fee income 697 197 785 953 158 Wealth management income 2,535 2,953 2,894 2,869 2,897 Mortgage banking activities 202 (1,014 ) 498 721 1,225 Other income 662 1,706 762 1,023 995 Investment securities gains (losses) 3 (14 ) (3 ) (146 ) 3 Total noninterest income $ 6,226 $ 6,058 $ 7,194 $ 7,474 $ 7,293 Noninterest expenses: Salaries and employee benefits $ 12,650 $ 12,705 $ 11,312 $ 11,337 $ 12,095 Occupancy, furniture and equipment 2,442 2,380 2,423 2,567 2,554 Data processing 1,150 1,192 1,165 1,053 1,020 Advertising and bank promotions 750 278 881 355 744 FDIC insurance 316 294 190 283 246 Professional services 837 887 722 808 693 Taxes other than income 231 488 108 564 392 Intangible asset amortization 260 272 281 292 303 Provision for legal settlement — 13,000 — — — Restructuring expenses — 3,155 — — — Other operating expenses 2,600 1,761 1,712 2,105 2,243 Total noninterest expenses $ 21,236 $ 36,412 $ 18,794 $ 19,364 $ 20,290
ORRSTOWN FINANCIAL SERVICES, INC. HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) (continued) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Balance Sheet at quarter end: Cash and cash equivalents $ 60,823 $ 66,927 $ 111,906 $ 214,238 $ 208,710 Restricted investments in bank stocks 10,642 6,469 6,500 6,791 7,252 Securities available for sale 513,728 503,596 512,698 529,730 472,438 Loans held for sale, at fair value 10,880 10,175 7,824 7,403 8,868 Loans: Commercial real estate: Owner occupied 315,770 313,125 287,825 256,526 238,668 Non-owner occupied 608,043 573,605 559,309 558,999 551,783 Multi-family 138,832 114,561 116,110 93,158 93,255 Non-owner occupied residential 104,604 105,267 109,141 102,269 106,112 Commercial and industrial(1) 357,774 378,574 379,729 443,170 485,728 Acquisition and development: 1-4 family residential construction 25,068 20,810 22,650 15,115 12,279 Commercial and land development 158,308 148,512 134,947 105,204 93,925 Municipal 12,173 12,683 12,957 14,626 14,989 Total commercial loans 1,720,572 1,667,137 1,622,668 1,589,067 1,596,739 Residential mortgage: First lien 229,849 220,970 202,787 203,231 198,831 Home equity – term 5,505 5,869 5,996 5,820 6,081 Home equity – lines of credit 183,241 180,267 171,269 164,818 160,705 Installment and other loans 12,065 13,684 14,909 15,371 17,630 Total loans 2,151,232 2,087,927 2,017,629 1,978,307 1,979,986 Allowance for loan losses (25,178 ) (24,709 ) (23,279 ) (21,508 ) (21,180 ) Net loans held-for-investment 2,126,054 2,063,218 1,994,350 1,956,799 1,958,806 Goodwill 18,724 18,724 18,724 18,724 18,724 Other intangible assets, net 3,078 3,338 3,610 3,891 4,183 Total assets 2,922,408 2,852,092 2,824,201 2,900,537 2,834,565 Total deposits(2) 2,476,246 2,505,853 2,478,616 2,545,992 2,464,929 Borrowings 123,390 22,632 25,965 26,412 25,197 Subordinated notes 32,026 32,010 31,994 31,978 31,963 Total shareholders' equity 228,896 217,378 237,527 254,804 271,656
(1) This balance includes $13.8 million , $17.0 million , $30.2 million , $122.5 million and $189.9 million of SBA PPP loans, net of deferred fees and costs, at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.
(2) This balance includes deposits held for assumption in connection with the sale of a bank branch of approximately $31.7 million , which is comprised of $24.3 million in interest-bearing deposits and $7.4 million in non-interest bearing deposits at December 31, 2022.
ORRSTOWN FINANCIAL SERVICES, INC. HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited) (continued) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Capital and credit quality measures(1) : Total risk-based capital: Orrstown Financial Services, Inc 12.7 % 12.7 % 13.5 % 14.3 % 15.0 % Orrstown Bank 12.3 % 12.9 % 13.3 % 13.8 % 14.0 % Tier 1 risk-based capital: Orrstown Financial Services, Inc 10.3 % 10.2 % 10.9 % 11.7 % 12.2 % Orrstown Bank 11.2 % 11.8 % 12.2 % 12.7 % 12.9 % Tier 1 common equity risk-based capital: Orrstown Financial Services, Inc 10.3 % 10.2 % 10.9 % 11.7 % 12.2 % Orrstown Bank 11.2 % 11.8 % 12.2 % 12.7 % 12.9 % Tier 1 leverage capital: Orrstown Financial Services, Inc 8.5 % 8.4 % 8.5 % 8.8 % 8.5 % Orrstown Bank 9.2 % 9.6 % 9.5 % 9.5 % 8.9 % Average equity to average assets 7.68 % 8.59 % 8.64 % 9.47 % 9.34 % Allowance for loan losses to total loans 1.17 % 1.18 % 1.15 % 1.09 % 1.07 % Total nonaccrual loans to total loans 0.96 % 0.25 % 0.27 % 0.28 % 0.33 % Nonperforming assets to total assets 0.70 % 0.19 % 0.19 % 0.19 % 0.23 % Allowance for loan losses to nonaccrual loans 122 % 466 % 432 % 390 % 328 % Other information: Net charge-offs (recoveries) $ 116 $ 70 $ 4 $ (28 ) $ (115 ) Classified loans 36,325 19,576 19,682 23,421 23,050 Nonperforming and other risk assets: Nonaccrual loans 20,583 5,303 5,387 5,510 6,449 Other real estate owned — — — — — Total nonperforming assets 20,583 5,303 5,387 5,510 6,449 Restructured loans still accruing 682 689 568 575 804 Loans past due 90 days or more and still accruing(2) 439 232 322 238 1,201 Total nonperforming and other risk assets $ 21,704 $ 6,224 $ 6,277 $ 6,323 $ 8,454 (1) Capital ratios are estimated, subject to regulatory filings. (2) Includes $0.4 million , $0.2 million , $0.3 million , $0.2 million and $0.3 million of purchased credit impaired loans at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively. As of December 31, 2021, there was one loan for $0.9 million , which was in the process of collection and guaranteed by the SBA, and was subsequently collected during the first quarter of 2022.
Appendix A- Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations
As a result of acquisitions, the Company has intangible assets consisting of goodwill and core deposit and other intangible assets, which totaled $21.8 million and $22.9 million at December 31, 2022 and December 31, 2021, respectively. Additionally, the Company incurred $3.2 million and $13.0 million in restructuring charges and a provision for legal settlement, respectively, during the three months ended September 30, 2022 and year ended December 31, 2022.
Management believes providing certain other “non-GAAP” financial information will assist investors in their understanding of the effect on recent financial results from non-recurring charges.
Tangible book value per common share and the impact of the restructuring charge and legal settlement on net income and associated ratios, as used by the Company in this earnings release, are determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). While we believe this information is a useful supplement to GAAP based measures presented in this earnings release, readers are cautioned that this non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results and financial condition as reported under GAAP, nor are such measures necessarily comparable to non-GAAP performance measures that may be presented by other companies. This supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to be determined in accordance with GAAP.
The following tables present the computation of each non-GAAP based measure:
(dollars and shares in thousands)
Tangible Book Value per Common Share December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Shareholders' equity (most directly comparable GAAP based measure) $ 228,896 $ 217,378 $ 237,527 $ 254,804 $ 271,656 Less: Goodwill 18,724 18,724 18,724 18,724 18,724 Other intangible assets 3,078 3,338 3,610 3,891 4,183 Related tax effect (646 ) (701 ) (758 ) (817 ) (878 ) Tangible common equity (non-GAAP) $ 207,740 $ 196,017 $ 215,951 $ 233,006 $ 249,627 Common shares outstanding 10,671 10,686 10,676 11,079 11,183 Book value per share (most directly comparable GAAP based measure) $ 21.45 $ 20.34 $ 22.25 $ 23.00 $ 24.29 Intangible assets per share 1.98 2.00 2.02 1.97 1.97 Tangible book value per share (non-GAAP) $ 19.47 $ 18.34 $ 20.23 $ 21.03 $ 22.32
(dollars and shares in thousands) Adjusted Ratios for Restructuring Charges and Provision for Legal Settlement September 30, 2022 December 31, 2022 Three Months Ended Twelve Months Ended Net (loss) income (A) - most directly comparable GAAP based measure $ (4,828 ) $ 22,037 Plus: Restructuring expenses (B) 3,155 3,155 Plus: Provision for legal settlement (B) 13,000 13,000 Less: Related tax effect (C) (3,393 ) (3,393 ) Adjusted net income (D=A+B-C) - Non-GAAP $ 7,934 $ 34,799 Average assets (E) $ 2,815,040 $ 2,844,800 Return on average assets (1) (= A / E) - most directly comparable GAAP based measure (0.68 )% 0.77 % Return on average assets, adjusted (1) (= D / E) - Non-GAAP 1.12 % 1.22 % Average equity (F) $ 241,866 $ 244,281 Return on average equity (1) (= A / F) - most directly comparable GAAP based measure (7.92 )% 9.02 % Return on average equity, adjusted (1) (= D / F) - Non-GAAP 13.02 % 14.25 % Weighted average shares - basic (G) - most directly comparable GAAP based measure 10,369 10,553 Basic (loss) earnings per share (= A / G) - most directly comparable GAAP based measure $ (0.47 ) $ 2.09 Basic earnings per share, adjusted (= D / G) - Non-GAAP $ 0.77 $ 3.30 Weighted average shares - diluted (H) - most directly comparable GAAP based measure 10,369 10,706 Diluted (loss) earnings per share (= A / H) - most directly comparable GAAP based measure $ (0.47 ) $ 2.06 Diluted earnings per share, adjusted (= D / H) - Non-GAAP $ 0.75 $ 3.25 Noninterest expense (I) - most directly comparable GAAP based measure $ 36,412 $ 95,806 Less: Restructuring expenses (B) (3,155 ) (3,155 ) Less: Provision for legal expenses (B) (13,000 ) (13,000 ) Adjusted noninterest expense (J = I - B) - Non-GAAP $ 20,257 $ 79,651 Net interest income (K) $ 25,455 $ 99,630 Noninterest income (L) 6,058 26,952 Total operating income (M = K + L) $ 31,513 $ 126,582 Efficiency ratio (= I / M) - most directly comparable GAAP based measure 115.5 % 75.7 % Efficiency ratio, adjusted (= J / M) - Non-GAAP 64.3 % 62.9 % (1) Annualized
Appendix B- Investment Portfolio Concentrations
The following table summarizes the credit ratings and collateral associated with the Company's investment security portfolio, excluding equity securities, at December 31, 2022:
(dollars in thousands)
Sector Portfolio Mix Amortized Book Fair Value Credit Enhancement AAA AA A BBB NR Collateral / Guarantee Type Unsecured ABS 1 % $ 4,899 $ 4,319 30 % — % — % — % — % 100 % Unsecured Consumer Debt Student Loan ABS 1 6,900 6,658 26 — — — — 100 Seasoned Student Loans Federal Family Education Loan ABS 20 114,685 110,723 8 89 11 — — — Federal Family Education Loan(1) PACE Loan ABS — 2,685 2,467 6 100 — — — — PACE Loans(4) Non-Agency CMBS 4 21,226 21,267 18 — — — — 100 Non-Agency RMBS 3 16,948 14,926 14 100 — — — — Reverse Mortgages(2) Municipal - General Obligation 19 105,055 92,961 4 90 6 — — Municipal - Revenue 21 120,770 104,453 — 82 12 — 6 SBA ReRemic(5) 1 5,532 5,371 — 100 — — — SBA Guarantee(3) Small Business Administration 1 4,907 5,135 — 100 — — — SBA Guarantee(3) Agency MBS 25 139,224 127,780 — 100 — — — Residential Mortgages(3) U.S. Treasury securities 4 20,070 17,291 — 100 — — — U.S. Government Guarantee(3) Bank CDs — 249 249 — — — — 100 FDIC Insured CD 100 % $ 563,150 $ 513,600 23 % 67 % 3 % — % 7 % (1) 97% guaranteed by U.S. government(2) Non-agency reverse mortgages with current structural credit enhancements(3) Guaranteed by U.S. government or U.S. government agencies(4) PACE acronym represents Property Assessed Clean Energy loans(5) SBA ReRemic acronym represents Re-Securitization of Real Estate Mortgage Investment Conduits Note: Ratings in table are the lowest of the six rating agencies (Standard & Poor's, Moody's, Fitch, Morningstar, DBRS and Kroll Bond Rating Agency). Standard & Poor's rates U.S. government obligations at AA+
About the Company
With $2.9 billion in assets, Orrstown Financial Services, Inc. and its wholly-owned subsidiary, Orrstown Bank, provide a wide range of consumer and business financial services in Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry, and York Counties, Pennsylvania and Anne Arundel, Baltimore, Howard, and Washington Counties, Maryland, as well as Baltimore City, Maryland. Orrstown Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the FDIC. Orrstown Financial Services, Inc.’s common stock is traded on Nasdaq (ORRF). For more information about Orrstown Financial Services, Inc. and Orrstown Bank, visit www.orrstown.com.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements reflect the current views of the Company's management with respect to, among other things, future events and the Company's financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Company's industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company's control. Forward-looking statements are statements that include projections, predictions, expectations, estimates or beliefs about events or results or otherwise are not statements of historical factors, many of which, by their nature, are inherently uncertain and beyond the Company's control, and include, but are not limited to, statements related to new business development, new loan opportunities, growth in the balance sheet and fee-based revenue lines of business, merger and acquisition activity, cost savings initiatives, reducing risk assets and mitigating losses in the future. Accordingly, the Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements and there can be no assurances that the Company will achieve the desired level of new business development and new loans, growth in the balance sheet and fee-based revenue lines of business, successful merger and acquisition activity and cost savings initiatives and continued reductions in risk assets or mitigate losses in the future. In addition to risks and uncertainties related to the COVID-19 pandemic (including those related to variants) and resulting governmental and societal responses, factors which could cause the actual results of the Company's operations to differ materially from expectations include, but are not limited to: ineffectiveness of the Company's strategic growth plan due to changes in current or future market conditions; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products and services; the integration of the Company's strategic acquisitions; the inability to fully achieve expected savings, efficiencies or synergies from mergers and acquisitions and cost savings initiatives, or taking longer than estimated for such savings, efficiencies and synergies to be realized; changes in laws and regulations; interest rate movements; changes in credit quality; inability to raise capital, if necessary, under favorable conditions; volatility in the securities markets; the demand for our products and services; deteriorating economic conditions; geopolitical tensions; changes in litigation matters, including the failure to obtain Court approval of proposed settlements, the number of plaintiffs who opt-out of proposed settlements and whether a proposed settlement is appealed; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; expenses associated with pending litigation and legal proceedings; the failure of the SBA to honor its guarantee of loans issued under the SBA PPP; the timing of the repayment of SBA PPP loans and the impact it has on fee recognition; our ability to convert new relationships gained through the SBA PPP efforts to full banking relationships; and other risks and uncertainties, including those detailed in our Annual Report on Form 10-K for the year ended December 31, 2021, and our Quarterly Reports on Form 10-Q under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other filings made with the SEC. The statements are valid only as of the date hereof and we disclaim any obligation to update this information. The foregoing list of factors is not exhaustive.
If one or more events related to these or other risks or uncertainties materializes, or if the Company's underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for the Company to predict those events or how they may affect it. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on the Company's behalf may issue.
The review period for subsequent events extends up to and includes the filing date of a public company’s financial statements, when filed with the Securities and Exchange Commission. Accordingly, the consolidated financial information presented in this announcement is subject to change.
