Orrstown Financial Services, Inc. Announces Fourth Consecutive Quarter of Positive Earnings; Posts Net Income of $2.1 Million for the Third Quarter of 2013

The Company has been able to effectively manage its cost of funds to partially offset lower yields earned on assets. The cost of funds declined to 0.44% and 0.46% for the three and nine months ended September 30, 2013, respectively, an improvement over 0.55% and 0.61% for the same periods in 2012.   

Provision for Loan Losses

The Company recorded no provision for loan losses for the three months ended September 30, 2013, and a negative provision for loan losses, or a reversal of amounts previously provided, of $1.4 million for the nine months ended September 30, 2013.  During the second quarter of 2013, the Company received payments on classified loans with partial charge-offs recorded. As payments received during the quarter exceeded the carrying value of these loans, the excess was included in recoveries of loan amounts previously charged off, and was taken into income through a negative provision for loan losses.  No provision was required for the third quarter of 2013, as net recoveries of $1.2 million recorded during the period were sufficient to cover the additional reserve required that has resulted from change in the volume and quality of the Company's loan portfolio.

Noninterest Income

Noninterest income, excluding securities gains, totaled $4.4 million for the three months ended September 30, 2013, compared to $4.9 million for the same period in 2012. Several factors led to the lower revenues for the three months ended September 30, 2013 compared to 2012.  The Company recorded a gain on the sale of its merchant service business of $149 thousand in the third quarter of 2012, with no similar benefit in 2013.   In addition, during the past several months, mortgage interest rates have risen, leading to a reduction in the number of customers refinancing their residential mortgages, resulting in a $204 thousand decline in mortgage banking revenues to $727 thousand for the quarter ended 2013, as compared to the same period in 2012.  The Company has experienced a decline in other services charges which is consistent with the downward trends in loan and deposit balances.  Partially offsetting these unfavorable variances were the revenues generated by Orrstown Financial Advisors, which generates trust and brokerage income.  Orrstown Financial Advisors recorded revenues of $1.7 million for the quarter ended September 30, 2013, an increase of 16.4% over the same period in the prior year. 

For the nine months ended September 30, 2013, noninterest income, excluding securities gains, totaled $13.4 million compared to $13.3 million for the nine months ended September 30, 2012.  On a year-to-date basis, mortgage banking revenue was favorably influenced by a low interest rate environment during the first six months of 2013, allowing for favorable refinancing conditions coupled with greater stability in the real estate market.  For the nine months ended September 30, 2013, mortgage banking revenues totaled $2.6 million, an increase of 20.6% over the same nine months in 2012.    Further, on a year-to-date basis, Orrstown Financial Advisors revenues totaled $5.1 million for the nine months ended September 30, 2013, a 12.4% increase over the same period in 2012. 

Securities gains (losses) totaled $157 thousand and $279 thousand for the three and nine months ended September 30, 2013, compared to ($2) thousand and $4.8 million for the same periods in 2012.  In 2013, asset/liability management strategies and interest rate conditions resulted in a limited number of security sales.  Strategic considerations and interest rate conditions, as well as a desire to maintain capital levels, factored into the extent and timing of securities gains taken in 2012.   

Noninterest expenses

Noninterest expenses totaled $10.5 million for the three months ended September 30, 2013, compared to $11.1 million for the corresponding prior year period, a decrease of 5.4%.  On a year-to-date basis, noninterest expenses amounted to $31.8 million, a decrease of $937 thousand, or 2.9%, from $32.7 million for the same period in 2012.  The components of the noninterest expenses between the two periods differed, and reflect the success of the Company's asset quality remediation efforts.

Asset quality related costs, including collection, problem loan and real estate owned expenses, totaled $239 thousand and $680 thousand, respectively, for the three and nine months ended September 30, 2013, reductions of $584 thousand and $1.9 million, respectively, from the same periods in 2012.  In addition, during the nine months ended September 30, 2013, the Company was able to lower its consulting expenses, which are included in professional services, by $524 thousand compared to the same period in 2012.  These reductions in expenses are consistent with the Company's previously disclosed 'Operation Bottom Line' initiative, in which certain expenses were targeted to be reduced by 25% over a two year period.   

Growth in salaries and employee benefits were experienced during 2013, with total expenses for the three and nine months ended September 30, 2013 totaling $5.6 million and $16.7 million, respectively, representing increases of $710 thousand and $2.2 million over the same periods in 2012.  A large component of the difference pertains to an increase in the Company's number of full-time equivalents, which has increased as we continue to enhance our enterprise risk management practices and procedures, and placed less reliance on outside consultants.  An additional factor contributing to the increase in salaries and benefit expense was the restoration of certain incentive based employee benefits as a result of the Company's return to profitability.   

Despite lower levels of noninterest expenses in 2013 compared to 2012, the Company's efficiency ratio increased for the three and nine months ended September 30, 2013 to 82.4% and 82.0%, respectively, compared to 75.1% and 71.7%, respectively, for the same periods in 2012.  The higher, or less favorable, ratios were the result of the declines in net interest income between the two periods, and lower levels of noninterest income for the three months ended September 30, 2013.  The efficiency ratio expresses noninterest expense as a percentage of tax equivalent net interest income and noninterest income, excluding securities gains, intangible asset amortization and other real estate income and expenses.

Income Taxes

Income tax expense (benefit) totaled ($281) thousand and ($221) thousand for the three and nine months ended September 30, 2013, on pre-tax income of $1.8 million and $6.9 million, respectively.  This compared to an income tax expense of $19.0 million and $7.0 million recorded on pre-tax loss of $2.3 million and $32.5 million, respectively, for the three and nine months ended September 30, 2012.  

During the third quarter of 2012, an evaluation was completed on the net deferred tax asset that existed at that time, which principally resulted from credit and credit related losses and expenses that the Company had experienced.  As a result of the taxable losses that were generated during 2012, and our inability to fully offset the tax to the two preceding carryback years allowed by tax regulation, our net deferred tax asset was dependent on tax planning strategies and future taxable income.  Based on forecasted taxable income at that time, combined with limited available tax planning strategies, we were not able to conclude that the deferred tax asset would more likely than not be realized in its entirety, and as such, a valuation allowance was established for the full amount beginning in the third quarter of 2012, which resulted in a charge at that time of $19.9 million.  An updated evaluation was completed at September 30, 2013, and we continue to believe that the valuation allowance is appropriate.  The net benefit recorded during the first nine months of 2013 pertains to a state income tax refund, offset by estimated federal alternative minimum tax. 

FINANCIAL CONDITION

Assets at September 30, 2013 were $1.21 billion, a $20.2 million decrease from $1.23 billion at December 31, 2012.   Gross loans, excluding those held for sale, totaled $684 million at September 30, 2013, a $20.1 million decrease from December 31, 2012, but a $10.9 million increase from the balance at June 30, 2013.  This growth in the loan portfolio experienced in the third quarter demonstrates the Company's ability to attract new business relationships.

As a result of the reduction in gross loans since the beginning of the year, the Company has allowed run-off in its deposits, particularly time deposits which have a higher interest cost associated with them, resulting in total deposits declining by $50.1 million, or 4.6% during the nine months ended September 30, 2013.   In addition, the Company invested some of its liquidity that was maintained in cash equivalents at December 31, 2012 into higher yielding securities available for sale.  Both of these deposit and securities initiatives were implemented to improve net interest margin, while retaining sufficient liquidity to fund future loan growth. 

Shareholders' Equity                          

Shareholders' equity totaled $89.6 million at September 30, 2013, an increase of $1.9 million, or 2.2%, since December 31, 2012.  This increase was primarily the result of net income of $7.1 million posted for the nine months ended September 30, 2013, offset by a $5.5 million decline in accumulated other comprehensive income.  The Company's regulatory capital ratios continue to exceed all regulatory minimums required to be considered well capitalized, and have shown improvement since December 31, 2012.  At September 30, 2013, the Company's regulatory capital ratios consisted of a Tier-1 leverage ratio of 7.9%, a Tier-1 risk-based capital ratio of 12.8%, and a total risk-based capital ratio of 14.1%, an increase over December 31, 2012's ratios of 6.8%, 10.9% and 12.2%, respectively.  Net income recorded for the period combined with a reduction in assets resulted in the improved ratios. 

Asset Quality

Risk assets, defined as nonaccrual loans, restructured loans, loans past due 90 days or more and still accruing, and real estate owned totaled $23.1 million at September 30, 2013, which was a 0.8% increase from December 31, 2012's balance of $22.9 million and a 64.1% reduction from $64.4 million at September 30, 2012.   The Company has been able to achieve its objective of reducing its level of risk assets from the highs that were recorded in 2012, and current levels are more consistent with pre-crisis levels.  During the third quarter of 2013, restructured loans still accruing increased by $3.6 million, primarily the result of one relationship in which the borrower was experiencing reduced cash flows.  The Bank has been working with the borrower through this period of reduced cash flow.   

The allowance for loan losses totaled $21.3 million at September 30, 2013, a decrease of $1.9 million from $23.2 million at December 31, 2012, principally due to net charge-offs of $500 thousand during the nine month period, combined with the negative provision for loan losses of $1.4 million recorded in the second quarter of 2013.   Despite the negative provision for loan losses and the net charge-offs recorded during 2013, the allowance for loan losses to total loans ratio was 3.11% at September 30, 2013, and the allowance for loan losses coverage ratio of nonaccrual loans and restructured loans remained strong at 96.2%. 

Asset quality remains a top priority of the Company.  Management will continue to identify, capture and monitor credit risk within the loan portfolio in order to mitigate future losses.    

Operating Highlights:	For the				For the
	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2013		2012		2013		2012
Net income (loss)	$           2,109		$                 (21,352)		$            7,077		$              (39,484)
Diluted earnings (loss) per share	$             0.26		$                     (2.65)		$              0.87		$                  (4.90)
Dividends per share	$             0.00		$                       0.00		$              0.00		$                   0.00
Return on average assets	0.71%		(6.52%)		0.79%		(3.80%)
Return on average equity	9.61%		(81.99%)		10.77%		(45.26%)
Net interest income	$           7,766		$                     9,029		$          23,574		$               29,417
Net interest margin	2.96%		3.10%		2.98%		3.16%
Balance Sheet Highlights:
			September 30,		December 31,		September 30,
(Dollars in thousands, except per share data)			2013		2012		2012
Assets			$1,212,478		$     1,232,668		$          1,269,319
Loans, gross			685,290		711,601		811,787
Allowance for loan losses			(21,252)		(23,166)		(36,700) Werbung Mehr Nachrichten zur Orrstown Financial Services In Aktie kostenlos abonnieren E-Mail-Adresse Bitte überprüfe deine die E-Mail-Adresse. Benachrichtigungen von ARIVA.DE (Mit der Bestellung akzeptierst du die Datenschutzhinweise) -1 Vielen Dank, dass du dich für unseren Newsletter angemeldet hast. Du erhältst in Kürze eine E-Mail mit einem Aktivierungslink. Hinweis: ARIVA.DE veröffentlicht in dieser Rubrik Analysen, Kolumnen und Nachrichten aus verschiedenen Quellen. Die ARIVA.DE AG ist nicht verantwortlich für Inhalte, die erkennbar von Dritten in den „News“-Bereich dieser Webseite eingestellt worden sind, und macht sich diese nicht zu Eigen. Diese Inhalte sind insbesondere durch eine entsprechende „von“-Kennzeichnung unterhalb der Artikelüberschrift und/oder durch den Link „Um den vollständigen Artikel zu lesen, klicken Sie bitte hier.“ erkennbar; verantwortlich für diese Inhalte ist allein der genannte Dritte. Andere Nutzer interessierten sich auch für folgende News 09:08 - PR Newswire Cohen & Steers Capital Management - Form 8.3 - Tritax Big Box REIT plc 08:29 - PR Newswire Samson Rock Capital LLP - Form 8.3 - Spirent Communications PLC 08:29 - PR Newswire Samson Rock Capital LLP - Form 8.3 - Shanta Gold Ltd Sehen Sie sich dieses Unternehmen an:    Foto: andreas160578 - Pixabay Rasanter Aufstieg, Branchenrevolution und Jahresumsatz von 50 Mio. $ weiterlesen» Anzeige wo-site-teaser-box-16764_site-teaser-box_2024-04-26_09%253A00%253A00_2024-04-27_09%253A00%253A59