Orrstown Financial Services, Inc.'s Quarterly Income Of $3.4 Million Doubles Over Prior Quarter

The Company has been able to effectively manage its cost of funds to partially offset lower yields earned on assets, which declined to 0.46% and 0.48% for the three and six months ended June 30, 2013, an improvement over the cost of funds of 0.63% and 0.65% for the same periods in 2012.   

Provision for Loan Losses

The Company recorded a negative provision for loan losses, or a reversal of amounts previously provided, of $1.4 million for the three months ended June 30, 2013.  During the quarter, the Company received $1.5 million of payments on previously charged off loans.  In connection with our quarterly evaluation of the adequacy of the allowance for loan losses, it was determined that large recoveries specific to one customer relationship were not needed to replenish the reserve, and were taken into income through a negative provision for loan losses. 

See further discussion in the "Asset Quality" section below. 

Noninterest Income

Noninterest income, excluding securities gains, totaled $4.7 million for the three months ended June 30, 2013, compared to $4.4 million for the same period in 2012.   For the six months ended June 30, 2013, non-interest income, excluding securities gains, totaled $9.0 million compared to $8.4 million for the six months ended June 30, 2012. 

The Company's mortgage banking and financial advisors lines of business benefited from favorable market conditions during the first half of 2013.  Mortgage banking revenue was favorably influenced by a low interest rate environment allowing for favorable refinancing conditions coupled with greater stability in the real estate market.  For the three and six months ended June 30, 2013, mortgage banking revenues totaled $1.1 million and $1.9 million, an increase of 53.5% and 53.2% over the same periods in the prior year.  Orrstown Financial Advisors, which generates trust and brokerage income, recorded revenues of $1.6 million and $3.4 million for the three and six months ended June 30, 2013, an increase of 3.4% and 10.5%  over the same periods in the prior year.  Favorable market conditions, combined with new business opportunities led to the enhanced revenue stream.  

Securities gains totaled $0 and $122 thousand for the three and six months ended June 30, 2013, compared to $2.6 million 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 $10.3 million for the three months ended June 30, 2013, compared to $10.7 million for the corresponding prior year period, a decrease of 3.8%.  On a year-to-date basis, noninterest expenses amounted to $21.3 million, a decrease of $340 thousand, or 1.6%, from $21.6 million for the same period in 2012.  The components of the noninterest expenses between the two periods differed, and reflect the Company's ongoing transition from a focus on asset quality concerns to investments that grow the balance sheet and fee based revenue generating lines of business. 

Asset quality related costs, including collection, problem loan and real estate owned expenses, totaled $216 thousand and $441 thousand for the three and six months ended June 30, 2013, reductions of $462 thousand and $1.3 million from the same periods in 2012.  In addition, during the six months ended June 30, 2013, the Company was able to lower its consulting expenses, which are included in professional services, by nearly $500 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 over a two year period.   

Growth in salaries and employee benefits were experienced during 2013, with total expenses for the three and six months ended June 30, 2013 totaling $5.4 million and $11.1 million, representing increases of $410 thousand and $1.5 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 enhance our enterprise risk management area and place less reliance on outside consultants.  In addition, in 2012, the Company had experienced favorable claims history on its self-insured employee health plan, allowing for the net reduction of a self-insured reserve in 2012.  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, which totaled $200 thousand and $420 thousand for the three and six months ended June 30, 2013, with no similar expenses recorded in 2012. 

As a result of the decline in net interest income, partially offset by a slight decrease in noninterest expense, the Company's efficiency ratio for the three and six months ended June 30, 2013 increased to 80.1% and 81.8%, respectively, compared to 72.7% and 70.1%, respectively, for the same periods in 2012.  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 totaled $30 thousand and $60 thousand for the three and six months ended June 30, 2013, on pre-tax income of $3.4 million and $5.0 million respectively.  This compared to an income tax benefit of $7.2 million and $12.1 million recorded on pre-tax loss of $17.2 and $30.2 million for the three and six months ended June 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.  An updated evaluation was completed at June 30, 2013, and we continue to believe that the valuation allowance is appropriate, and as such, the expense recorded during 2013 pertains to estimated alternative minimum tax. 

FINANCIAL CONDITION

Assets at June 30, 2013 were $1.19 billion, a $41.5 million decrease from $1.23 billion at December 31, 2012 and a $5.8 million, or 0.5% decrease from March 31, 2013.   During the second quarter of 2013, the Company transitioned its focus to growing its loan portfolio.  On a year-to-date basis, the loan repayments have outpaced loan originations by approximately $31.0 million.  In the past three months, however, the sales development efforts and related pipeline began to expand, and new loan originations nearly covered loan workouts and repayments, and resulted in only a 0.3% decrease in gross loans outstanding during the quarter. 

As a result in the reduction of the gross loan balance during 2013, the Company has allowed run-off in its deposits, particularly time deposits which have a higher cost associated with them. This resulted in total deposits declining by $49.6 million, or 4.6% during the six months ended June 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 support net interest margin, while still maintaining necessary liquidity to fund expected future loan growth. 

Shareholders' Equity

Shareholders' equity totaled $87.8 million at June 30, 2013, an increase of $110 thousand, or 0.1%, since December 31, 2012.  This increase was primarily the result of net income of $5.0 million posted for the six months ended June 30, 2013, offset by a similar 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 June 30, 2013, the Company's regulatory capital ratios consisted of a Tier-1 leverage ratio of 7.5%, a Tier-1 risk-based capital ratio of 12.6%, and a total risk-based capital ratio of 13.9%, an increase over December 31, 2012's ratios of 6.8%, 10.9% and 12.2%, respectively.  Net income recorded for the quarter 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 $20.8 million at June 30, 2013, which was a 9.2% decrease from December 31, 2012's balance of $22.9 million and a 67.2% reduction from $63.4 million at June 30, 2012.   The Company has achieved 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 second quarter of 2013, nonaccrual loans increased by $3.8 million, or 26.9%, primarily as a result of $1.4 million of previously performing restructured loans being moved to nonaccrual status, and one relationship experiencing financial difficulty due to increased competition, which was also moved to nonaccrual status.  

The allowance for loan losses totaled $20.1 million at June 30, 2013, a decrease of $3.1 million from $23.2 million at December 31, 2012, principally due to net charge-offs of $1.7 million during the six month period, combined with the negative provision for loan losses of $1.4 million discussed above.  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 2.99% at June, 30, 2013, and the allowance to loan losses coverage ratio of nonaccrual loans and restructured loans remained strong at 101.8%. 

Management believes that the enhancement of the Company's loan policies and operating procedures during the past 24 months has improved our ability to identify, capture and monitor credit risk within the loan portfolio and to mitigate losses in the future. 

Operating Highlights:	For the				For the
	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share data)	2013		2012		2013		2012
For Three Months Ended:
Net income (loss)	$            3,408		$           (9,914)		$            4,968		$        (18,132)
Diluted earnings (loss) per share	$              0.42		$             (1.23)		$              0.61		$            (2.25)
Dividends per share	$              0.00		$               0.00		$              0.00		$              0.00
Return on average assets	1.14%		(2.81%)		0.84%		(2.55%)
Return on average equity	15.39%		(33.81%)		11.35%		(29.63%)
Net interest income	$            7,701		$            9,546		$          15,808		$          20,388
Net interest margin	2.90%		2.96%		2.98%		3.16%
Balance Sheet Highlights:
			June 30,		December 31,		June 30,
(Dollars in thousands, except per share data)			2013		2012		2012
Assets			$1,191,217		$     1,232,668		$     1,328,475
Loans, gross			672,755		703,739		837,980
Allowance for loan losses			(20,098)		(23,166)		(36,235) 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 19.04.24 - PR Newswire Redde Northgate Plc - Transaction in Own Shares 19.04.24 - PR Newswire Rightmove Plc - Transaction in Own Shares 19.04.24 - PR Newswire Samson Rock Capital LLP - Form 8.3 - Mattioli Woods plc Auf zur INVEST am 26.+ 27.04.2024    Foto: Landesmesse Stuttgart GmbH - Jetzt kostenloses Ticket sichern! weiterlesen» Anzeige wo-site-teaser-box-16688_site-teaser-box_2024-04-17_09%253A00%253A00_2024-04-22_09%253A00%253A59