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| 8-K - FORM 8-K - ORRSTOWN FINANCIAL SERVICES INC | f8k_031212-0489.htm |
FOR IMMEDIATE RELEASE:
Contact:
Bradley S. Everly
EVP, Chief Financial Officer
Phone 717.530.2604
77 East King Street | Shippensburg PA
Orrstown Financial Services, Inc. Reports Updated Earnings for December 31, 2011
SHIPPENSBURG, PA (March 12, 2012)
Orrstown Financial Services, Inc. (the “Company”) (NASDAQ: ORRF) announced today an update to its originally reported earnings for the quarter and year ended December 31, 2011. The updated earnings release was prompted by events that arose subsequent to the original earnings release on January 26, 2012 that resulted in additional asset impairments. These additional impairments necessitated an increase of $13.7 million in the provision for loan losses for the quarter ended December 31, 2011 above the previously-announced level. This additional provision, net of deferred tax benefit of $4.7 million, lowered previously reported earnings by $9.0 million. As a result of the additional $9.0 million of provision for loan losses, net of deferred tax benefit, for the quarter ended December 31, 2011, the Company reported a net loss of $29.5 million, or $3.66 per diluted share, compared to net income of $4.4 million, or $0.55 per diluted share, for the quarter ended December 31, 2010. On a year to date basis, net loss for the year ended December 31, 2011 was $32.0 million, or $3.98 per diluted share, compared to net income of $16.6 million, or $2.17 per diluted share, for the year ended December 31, 2010.
In the period subsequent to the January 26th earnings release, additional information on seven lending relationships was learned, which resulted in an evaluation as to whether increases to impairment reserves should be recognized as of December 31, 2011. It was concluded that the additional reserves should be recognized at December 31, 2011, as the information provided additional evidence about conditions that existed at the balance sheet date, including key assumptions used in the estimation process of preparing the financial statements. The additional information received in the intervening period included the receipt of updated appraisals on several loans, which resulted in management’s determination that the related loan was either impaired, or the impairment reserve previously allocated to the loans was not sufficient. Additionally, on two lending relationships with loan balances totaling $28.3 million, our estimate of the impairment on these relationships was adjusted to reflect the relationships’ observable market price based on third party bids on the notes. The loan impairments were previously determined on a discounted cash flows or collateral dependent approach. As a result, the impairment reserves on these two relationships were increased by $5.9 million through an increase in the provision for loan losses, and now total $10.5 million. Management anticipates that the sale of these notes will take place in the first quarter of 2012, and will result in cash proceeds of $17.8 million and a charge-off of the remaining loan balances equal to the $10.5 million reserve established.
In addition, loans totaling $12.7 million were moved into nonaccrual (cash basis) status at December 31, 2011, including $5.2 million that were previously presented as accruing troubled debt restructurings.
Updated unaudited financial information is included in this press release.
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About the Company:
With nearly $1.5 billion in assets, Orrstown Financial Services, Inc. and its wholly-owned subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.
Safe Harbor Statement:
This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: ineffectiveness of the Company's business strategy due to changes in current or future market conditions; the effects of competition, including industry consolidation and development of competing financial products and services; changes in laws and regulations, including the recent Dodd-Frank Wall Street Reform and Consumer Protection Act; interest rate movements; changes in credit quality; volatilities in the securities markets; and deteriorating economic conditions, and other risks and uncertainties, including those detailed in Orrstown Financial Services, Inc.'s filings with the Securities and Exchange Commission. The statements are valid only as of the date hereof and Orrstown Financial Services, Inc. disclaims any obligation to update this information.
The review period for subsequent events extends up to and including 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.
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ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
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(Unaudited)
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(Audited)*
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December 31,
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December 31,
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(Dollars in thousands, Except per Share Data)
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2011
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2010
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Assets
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||||||||
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Cash and due from banks
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$ | 19,630 | $ | 10,400 | ||||
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Federal funds sold
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0 | 8,800 | ||||||
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Cash and cash equivalents
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19,630 | 19,200 | ||||||
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Short-term investments
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0 | 2,728 | ||||||
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Interest bearing deposits with banks
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90,039 | 925 | ||||||
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Restricted investments in bank stock
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11,758 | 8,798 | ||||||
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Securities available for sale
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310,365 | 431,772 | ||||||
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Loans held for sale
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2,553 | 2,693 | ||||||
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Loans
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965,440 | 964,293 | ||||||
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Less: Allowance for loan losses
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(43,715 | ) | (16,020 | ) | ||||
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Net Loans
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924,278 | 950,966 | ||||||
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Premises and equipment, net
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27,183 | 27,774 | ||||||
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Cash surrender value of life insurance
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24,147 | 22,649 | ||||||
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Goodwill and intangible assets
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1,041 | 20,698 | ||||||
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Accrued interest receivable
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4,548 | 5,715 | ||||||
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Other assets
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31,108 | 20,497 | ||||||
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Total assets
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$ | 1,444,097 | $ | 1,511,722 | ||||
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Liabilities
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Deposits:
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Non-interest bearing
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$ | 111,930 | $ | 104,646 | ||||
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Interest bearing
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1,104,972 | 1,083,731 | ||||||
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Total deposits
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1,216,902 | 1,188,377 | ||||||
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Short-term borrowings
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35,013 | 87,850 | ||||||
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Long-term debt
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53,798 | 65,178 | ||||||
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Accrued interest and other liabilities
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10,187 | 9,833 | ||||||
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Total liabilities
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1,315,900 | 1,351,238 | ||||||
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Shareholders' Equity
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||||||||
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Preferred Stock, $1.25 par value per share; 500,000 shares authorized;
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no shares issued or outstanding
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0 | 0 | ||||||
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Common stock, no par value - $ 0.05205 stated value per share
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50,000,000 shares authorized; 8,055,787, and 7,986,966
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shares issued; 8,054,975; and 7,985,667
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shares outstanding
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419 | 416 | ||||||
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Additional paid - in capital
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122,514 | 121,508 | ||||||
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Retained earnings
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1,195 | 38,680 | ||||||
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Accumulated other comprehensive income (loss)
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4,089 | (88 | ) | |||||
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Treasury stock - common, 812 and 1,299 shares, at cost
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(20 | ) | (32 | ) | ||||
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Total shareholders' equity
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128,197 | 160,484 | ||||||
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Total liabilities and shareholders' equity
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$ | 1,444,097 | $ | 1,511,722 | ||||
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*The consolidated balance sheet at December 31, 2010 has been derived from audited financial statements at that date.
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ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three Months Ended
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December 31,
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December 31,
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(Dollars in thousands, Except per Share Data)
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2011
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2010
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Interest and dividend income
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Interest and fees on loans
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$ | 11,693 | $ | 12,328 | ||||
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Interest and dividends on investment securities
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Taxable
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1,588 | 2,292 | ||||||
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Tax-exempt
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676 | 682 | ||||||
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Short-term investments
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51 | 22 | ||||||
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Total interest and dividend income
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14,008 | 15,324 | ||||||
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Interest expense
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||||||||
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Interest on deposits
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2,162 | 2,610 | ||||||
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Interest on short-term borrowings
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28 | 147 | ||||||
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Interest on long-term debt
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234 | 297 | ||||||
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Total interest expense
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2,424 | 3,054 | ||||||
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Net interest income
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11,584 | 12,270 | ||||||
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Provision for loan losses
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26,250 | 1,375 | ||||||
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Net interest income after provision for loan losses
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(14,666 | ) | 10,895 | |||||
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Other income
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||||||||
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Service charges on deposit accounts
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1,608 | 1,673 | ||||||
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Other service charges, commissions and fees
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290 | 575 | ||||||
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Trust department income
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1,125 | 977 | ||||||
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Brokerage income
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313 | 349 | ||||||
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Mortgage banking activities
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748 | 559 | ||||||
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Earnings on life insurance
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273 | 308 | ||||||
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Merchant processing revenue
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0 | 276 | ||||||
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Other income
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(3 | ) | 24 | |||||
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Investment securities gains
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3,025 | 383 | ||||||
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Total other income
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7,379 | 5,124 | ||||||
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Other expenses
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||||||||
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Salaries and employee benefits
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3,808 | 5,033 | ||||||
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Occupancy expense
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471 | 462 | ||||||
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Furniture and equipment
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661 | 762 | ||||||
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Data processing
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125 | 356 | ||||||
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Telephone
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180 | 185 | ||||||
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Advertising and bank promotions
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416 | 414 | ||||||
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FDIC Insurance
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415 | 659 | ||||||
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Professional services
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1,537 | 287 | ||||||
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Taxes other than income
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205 | 177 | ||||||
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Goodwill amortization and Intangible asset amortization
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19,500 | 53 | ||||||
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Other operating expenses
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3,168 | 1,650 | ||||||
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Total other expenses
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30,486 | 10,038 | ||||||
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Income (loss) before income tax (benefit)
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(37,773 | ) | 5,981 | |||||
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Income tax expense (benefit)
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(8,292 | ) | 1,606 | |||||
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Net income (loss)
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$ | (29,481 | ) | $ | 4,375 | |||
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Per share information:
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Basic earnings (loss) per share
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$ | (3.66 | ) | $ | 0.55 | |||
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Diluted earnings (loss) per share
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(3.66 | ) | 0.55 | |||||
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Dividends per share
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0.00 | 0.225 | ||||||
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Average shares and common stock equivalents outstanding
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8,053,955 | 8,015,735 | ||||||
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ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Twelve Months Ended | ||||||||||
| December 31, | December 31, | |||||||||
| (Dollars in thousands, Except per Share Data) |
2011
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2010 | ||||||||
| Interest and dividend income | ||||||||||
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Interest and fees on loans
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$ | 48,917 | $ | 48,494 | ||||||
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Interest and dividends on investment securities
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||||||||||
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Taxable
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8,334 | 7,744 | ||||||||
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Tax-exempt
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2,972 | 2,069 | ||||||||
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Short-term investments
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138 | 116 | ||||||||
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Total interest and dividend income
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60,361 | 58,423 | ||||||||
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Interest expense
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||||||||||
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Interest on deposits
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9,368 | 10,682 | ||||||||
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Interest on short-term borrowings
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314 | 487 | ||||||||
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Interest on long-term debt
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1,072 | 1,519 | ||||||||
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Total interest expense
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10,754 | 12,688 | ||||||||
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Net interest income
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49,607 | 45,735 | ||||||||
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Provision for loan losses
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58,575 | 8,925 | ||||||||
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Net interest income after provision for loan losses
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(8,968 | ) | 36,810 | |||||||
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Other income
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||||||||||
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Service charges on deposit accounts
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6,411 | 6,388 | ||||||||
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Other service charges, commissions and fees
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1,313 | 2,272 | ||||||||
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Trust department income
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4,216 | 3,606 | ||||||||
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Brokerage income
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1,573 | 1,450 | ||||||||
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Mortgage banking activities
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3,007 | 2,290 | ||||||||
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Earnings on life insurance
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1,110 | 1,192 | ||||||||
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Merchant processing revenue
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1,850 | 1,118 | ||||||||
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Other income
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916 | 1,024 | ||||||||
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Investment securities gains
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6,224 | 3,636 | ||||||||
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Total other income
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26,620 | 22,976 | ||||||||
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Other expenses
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||||||||||
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Salaries and employee benefits
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17,506 | 19,120 | ||||||||
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Occupancy expense
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1,987 | 2,002 | ||||||||
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Furniture and equipment
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2,705 | 2,742 | ||||||||
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Data processing
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1,161 | 1,278 | ||||||||
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Telephone
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662 | 730 | ||||||||
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Advertising and bank promotions
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1,246 | 1,209 | ||||||||
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FDIC Insurance
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2,417 | 1,798 | ||||||||
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Professional services
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3,531 | 856 | ||||||||
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Taxes other than income
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841 | 764 | ||||||||
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Goodwill impairment and Intangible asset amortization
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19,657 | 240 | ||||||||
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Other operating expenses
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8,766 | 5,996 | ||||||||
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Total other expenses
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60,479 | 36,735 | ||||||||
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Income (loss) before income tax (benefit)
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(42,827 | ) | 23,051 | |||||||
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Income tax expense (benefit)
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(10,863 | ) | 6,470 | |||||||
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Net income (loss)
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$ | (31,964 | ) | $ | 16,581 | |||||
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Per share information:
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||||||||||
| Basic earnings (loss) per share | $ | (3.98 | ) | $ | 2.18 | |||||
| Diluted earnings (loss) per share | (3.98 | ) | 2.17 | |||||||
| Dividends per share | 0.69 | 0.89 | ||||||||
| Average shares and common stock equivalents outstanding |
8,026,726
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7,637,824 | ||||||||
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Nonperforming Assets / Risk Elements
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December 31,
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September 30,
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June 30,
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March 31,
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December 31,
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(Dollars in Thousands)
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2011
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2011
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2011
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2011
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2010
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Nonaccrual loans (cash basis)
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$ | 83,697 | $ | 31,174 | $ | 14,762 | $ | 13,106 | $ | 13,896 | ||||||||||
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Other real estate (OREO)
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2,165 | 2,754 | 1,240 | 847 | 1,112 | |||||||||||||||
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Total nonperforming assets
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85,862 | 33,928 | 16,002 | 13,953 | 15,008 | |||||||||||||||
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Restructured loans still accruing
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27,917 | 37,725 | 34,844 | 1,177 | 1,181 | |||||||||||||||
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Loans past due 90 days or more and still accruing
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0 | 2,956 | 3,617 | 3,687 | 2,248 | |||||||||||||||
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Total risk assets
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$ | 113,779 | $ | 74,609 | $ | 54,463 | $ | 18,817 | $ | 18,437 | ||||||||||
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Loans 30-89 days past due
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6,723 | 21,365 | 11,021 | 14,272 | 5,335 | |||||||||||||||
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Asset quality ratios:
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Total nonaccrual loans to loans
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8.67 | % | 3.15 | % | 1.48 | % | 1.33 | % | 1.44 | % | ||||||||||
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Total nonperforming assets to assets
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5.95 | % | 2.24 | % | 1.05 | % | 0.92 | % | 0.99 | % | ||||||||||
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Total nonperforming assets to total loans and OREO
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8.87 | % | 3.42 | % | 1.60 | % | 1.42 | % | 1.55 | % | ||||||||||
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Total risk assets to total loans and OREO
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11.76 | % | 7.52 | % | 5.44 | % | 1.91 | % | 1.91 | % | ||||||||||
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Total risk assets to total assets
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7.88 | % | 4.92 | % | 3.56 | % | 1.24 | % | 1.22 | % | ||||||||||
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Allowance for loan losses to total loans
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4.53 | % | 2.60 | % | 2.72 | % | 1.87 | % | 1.66 | % | ||||||||||
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Allowance for loan losses to nonaccrual loans
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52.23 | % | 82.37 | % | 184.34 | % | 140.31 | % | 115.28 | % | ||||||||||
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Allowance for loan losses to nonaccrual and
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||||||||||||||||||||
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restructured loans still accruing
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39.17 | % | 37.27 | % | 54.86 | % | 128.80 | % | 106.25 | % | ||||||||||
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Roll forward of Allowance for Loan Losses
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Three Months Ended
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Twelve Months Ended
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December 31,
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December 31,
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December 31,
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December 31,
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(Dollars in Thousands)
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2011
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2010
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2011
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2010
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Balance at beginning of period
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$ | 25,677 | $ | 15,386 | $ | 16,020 | $ | 11,067 | ||||||||
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Provision for loan losses
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26,250 | 1,375 | 58,575 | 8,925 | ||||||||||||
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Recoveries
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23 | 4 | 52 | 95 | ||||||||||||
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Loans charged-off
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(8,235 | ) | (745 | ) | (30,932 | ) | (4,067 | ) | ||||||||
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Balance at end of period
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$ | 43,715 | $ | 16,020 | $ | 43,715 | $ | 16,020 | ||||||||
# # #
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