MIL-OSI: Orrstown Financial Services, Inc. Reports Second Quarter 2021 Results and Announces Increased Quarterly Dividend

4

Source: GlobeNewswire (MIL-OSI)

  • Net income of $8.8 million for the quarter; diluted second quarter 2021 EPS of $0.79 per share versus $0.92 per share in the first quarter of 2021 and $0.58 per share in the second quarter of 2020
  • The Board of Directors declared a cash dividend of $0.19 per common share, payable August 9, 2021, to shareholders of record as of August 2, 2021, an increase from $0.18 per common share in the first quarter of 2021
  • Commercial loan growth for the quarter, excluding Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans, was 24% annualized as loan demand was robust late in the second quarter of 2021; momentum continues with a strong commercial pipeline
  • Provision expense of $0.6 million was recorded in the second quarter of 2021 as compared to a provision reversal of $1.0 million in the first quarter of 2021; commercial loan production drove the increase; the provision included $0.8 million and $1.0 million of COVID-19 reserve reductions for the three months ended June 30, 2021 and March 31, 2021, respectively
  • Noninterest expenses improved to $17.0 million in the second quarter of 2021 as compared to $17.8 million in the first quarter of 2021; the efficiency ratio was stable at 60% for first and second quarters of 2021
  • Noninterest income was $6.7 million in the second quarter of 2021 as compared to $7.5 million in the first quarter of 2021; the first quarter included a $0.6 million reduction of the mortgage servicing rights valuation reserve
  • Return on average assets totaled 1.2% in the second quarter of 2021 compared to 1.4% in the first quarter of 2021; second quarter provision increase caused the reduction
  • Tangible book value per share(1) increased to $21.61 at June 20, 2021 from $20.59 at March 31, 2021 and $19.93 at December 31, 2020
  • Net interest margin declined to 3.24% in the second quarter of 2021 from 3.38% in the first quarter of 2021 due primarily to increased liquidity that resulted from SBA PPP forgiveness
  • The SBA PPP portfolio averaged $471.2 million in the three months ended June 30, 2021 as compared to $463.0 million in the three months ended March 31, 2021
  • Deposits declined by $53.0 million, or 8% annualized, from the first quarter of 2021 as a result of the usage of stimulus and PPP funds; average deposits per branch remained strong at $97 million for the second quarter of 2021
  • Cost of deposits fell by six basis points in the quarter due to late first quarter rate adjustments and changes in mix

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

SHIPPENSBURG, Pa., July 20, 2021 (GLOBE NEWSWIRE) — Orrstown Financial Services, Inc. (“Orrstown” or the “Company”) (NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”), announced earnings for the three months ended June 30, 2021. Net income totaled $8.8 million for the three months ended June 30, 2021, compared with $10.2 million for the three months ended March 31, 2021 and $6.4 million in the three months ended June 30, 2020. Diluted earnings per share totaled $0.79 for the three months ended June 30, 2021, compared with $0.92 in the three months ended March 31, 2021 and $0.58 in the three months ended June 30, 2020.

Thomas R. Quinn, Jr., President & CEO, commented, “With another quarter of strong earnings and growing optimism for sustained future earnings, Orrstown’s Board saw an opportunity to further enhance shareholder value and approved an increase to its quarterly dividend. Orrstown strives to serve its community, employees and shareholders in the best way possible and this action along with the Company’s efforts in the past 15 months solidifies that message. After tirelessly devoting the past several quarters to SBA PPP efforts, our seasoned lending team quickly pivoted to commercial loan production. While we continue to service the needs of our PPP clients as we help them navigate through the forgiveness process, our primary focus has returned to growing our core business. The commercial loan pipeline is robust and we expect to see excellent production through the second half of the year. Orrstown continues to take advantage of market disruption which has resulted in both new client relationships and new talent that fits with our strategic vision and core values.”

Mr. Quinn continued, “With the economy re-opened and COVID-19 mandates lifted, our commercial lenders have been enabled to do what they do best, which is interacting with clients and driving new business opportunities. Recruitment will be the key to increasing mortgage banking revenue and replenishing the mortgage loan portfolio. As the profit boost from PPP activity wanes through 2022, our focus remains on replacing that income over the long-term. With interest rates expected to remain at historical lows in the near term, we plan to maintain discipline with our commercial lending and seek appropriate opportunities to utilize excess liquidity that fit within our relationship model and drive long-term growth.”

DISCUSSION OF RESULTS

Balance Sheet

Loans

Loans held for investment, which includes SBA PPP loans, declined by $99.6 million from March 31, 2021 to June 30, 2021, or 20% annualized, due to SBA PPP forgiveness and consumer loan reductions, partially offset by net commercial loan production. SBA PPP loans, net of deferred fees and costs, declined during the quarter by $148.7 million to $355.6 million at June 30, 2021 from $504.3 million at March 31, 2021. Commercial loans, excluding SBA PPP loans, increased by $68.8 million, or 24% annualized, from March 31, 2021 to June 30, 2021 resulting from strong commercial loan production. Loans held for investment are down by $34.3 million, or 2%, from December 31, 2020 to June 30, 2021. Loan demand has increased and is expected to continue for the remainder of the year as the COVID-19 related restrictions were lifted in the second quarter of 2021.

We expect most of the 2020 SBA PPP loan balances to be forgiven by the end of 2021. The SBA PPP loan originations in 2021 totaled $231.7 million at June 30, 2021. A number of the 2021 loans began to achieve forgiveness in the second quarter of 2021 and it is expected most of these 2021 originations will be forgiven by the end of 2022. Net deferred fees of $11.2 million remain at June 30, 2021, the majority of which is expected to be earned by the end of 2022.

Residential mortgage loans declined by $13.3 million, or 24% annualized in the three months ended June 30, 2021. In addition to experiencing an overall decline in mortgage volume, the low interest rate environment has reduced the Company’s appetite for portfolio mortgage loans. Despite this decline, overall loan growth in 2021, excluding SBA PPP, is expected to be mid-single digits with commercial lending growth exceeding 10%.

Deposits

Deposits declined by $53.0 million, or 8% annualized, but remained at $2.5 billion at June 30, 2021 compared to March 31, 2021. This decline is attributed to deposit customers’ utilization of stimulus funds received in the first quarter of 2021, as well as usage of SBA PPP funds. Non-interest bearing demand deposits declined by $19.0 million in the second quarter of 2021, or 14% annualized, and interest bearing checking deposits declined by $28.9 million, or 12% annualized. This decline was partially offset by money market and savings account growth of $19.3 million, or 12% annualized, from March 31, 2021 to June 30, 2021. Certificates of deposit declined by $24.3 million from March 31, 2021 to June 30, 2021, or 25% annualized. Deposits are up by $137.2 million, or 6%, from December 31, 2020 to June 30, 2021 due primarily to SBA PPP loan fundings. Deposit balances are expected to continue to gradually decline over time as clients access their remaining PPP funds and deploy their excess liquidity, which contributed to the Bank’s loan-to-deposit ratio of 78% at June 30, 2021. On a longer term basis, the Bank will continue to target a loan-to-deposit ratio of 90%.

Other

Investment securities increased by $42.1 million to $460.1 million at June 30, 2021 as compared to $418.0 million at March 31, 2021, due primarily to purchases of agency backed securities and municipal bonds. Longer term, the Bank will continue to seek to deploy excess liquidity to relationship lending strategies to maximize its net interest margin as rates rise. See Appendix C for a summary of the current investment portfolio that highlights the concentrations, quality and credit enhancement levels for the portfolio.

Income Statement

Net Interest Income and Margin

Net interest income remained consistent at $21.9 million for the three months ended June 30, 2021 compared to the three months ended March 31, 2021. The net interest margin declined to 3.24% in the second quarter of 2021 from 3.38% in the first quarter of 2021. The margin reduction was primarily a result of an increase in excess cash (17 basis points) and lower purchase accounting accretion (6 basis points), partially offset by a 13 basis point increase in yield on SBA PPP loans.

SBA PPP loans had an average outstanding balance of $471.2 million and yielded approximately 4.4% in the three months ended June 30, 2021. This yield increased from approximately 3.9% in the first quarter of 2021 due to the realization of fees on $197.5 million of SBA PPP loans forgiven in the second quarter of 2021 compared to $80.3 million forgiven in the first quarter of 2021. Net deferred SBA PPP fees of $3.8 million were earned in the second quarter of 2021.

Repricing actions by management at the end of the first quarter of 2021 led to a deposit cost reduction of six basis points in the second quarter of 2021 to 0.17%, which is down from 0.23% in the first quarter of 2021 and 0.60% in the second quarter of 2020.

Excess liquidity that has resulted from SBA PPP forgiveness and an inflow of deposit funds from the SBA PPP and government stimulus programs is expected to continue to negatively impact the margin in the short term as there is little spread on its earnings. We expect that this excess liquidity will exit the banking system in the future as our clients utilize these funds. Our objective of emphasizing balance sheet mix is expected to lead to a higher net interest margin over the long-term. These efforts may mute growth in assets, but should lead to growth in net interest income, earnings and return on assets. It is anticipated that the net interest margin will remain under pressure in 2021 due to excess liquidity combined with low interest rates anticipated for the remainder of the year, coupled with an asset sensitive balance sheet. We believe that our efforts on balance sheet mix enhancement, SBA PPP lending and fee income generation will be effective to manage through the currently challenging external environment.

Provision for Loan Losses

We continue to see favorable asset quality trends including most loans that we placed on payment deferral in 2020 having resumed paying status. The allowance for loan losses totaled $19.4 million at June 30, 2021, compared with $19.0 million at March 31, 2021. Total classified loans decreased by $3.7 million, or 11%, to $28.7 million from March 31, 2021 to June 30, 2021. As of June 30, 2021, the Bank had active COVID-19 related deferred loans totaling $3.9 million, or 0.25% of its total loan portfolio, excluding PPP loans. This compared to $7.5 million, or 0.49% of total loans, excluding PPP loans, at March 31, 2021 and $239.3 million, or 15.1% of total loans, excluding PPP loans, at June 30, 2020.

Net charge offs were $0.2 million, or 0.01% of total non-SBA PPP loans, for both the June 30, 2021 and March 31, 2021 quarters. Nonperforming loans totaled $9.9 million at both June 30, 2021 and March 31, 2021, which was 0.51% of gross loans at June 30, 2021 and 0.48% of gross loans at March 31, 2021. The ratio of the allowance for loan losses to nonperforming loans was 195% at June 30, 2021 compared to 192% at March 31, 2021. The allowance to non-SBA guaranteed loans(1) remained steady at 1.2% as of June 30, 2021 and March 31, 2021. Management believes the allowance for loan losses to be adequate based on current asset quality metrics.

Strong commercial loan growth and some charge-off activity resulted in provision expense of $0.6 million in the three months ended June 30, 2021 despite generally positive trends and sustained performance in the asset quality of the loan portfolio. This compares to a provision reversal of $1.0 million recorded in the three months ended March 31, 2021 and $1.9 million of provision expense recorded in the three months ended June 30, 2020. While there remains uncertainty in the external environment regarding the relative strength of the economy, management determined that a release of a portion of its COVID-19 qualitative reserve is appropriate. This was due to the satisfactory performance of borrowers in the commercial portfolio and consideration of the amount of deferrals that have resumed making regular monthly payments. Accordingly, the qualitative factor within the allowance designated for the impact of COVID-19 was lowered by $0.8 million from March 31, 2021 to $1.0 million at June 30, 2021.

The combination of active client relationship consultation, loan payment deferrals, increased risk management focus on higher risk loan concentrations (primarily hotels and restaurants) and significant client participation in the SBA PPP have contributed to the favorable delinquency and charge-off trends we experienced during the pandemic.

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

Noninterest Income

Noninterest income totaled $6.7 million in the three months ended June 30, 2021 compared with $7.5 million in the three months ended March 31, 2021 and $7.2 million in the three months ended June 30, 2020. Management continues to focus on opportunities to enhance fee income to offset potential net interest margin compression.

Total wealth management income for the three months ended June 30, 2021 grew to $2.9 million, as compared to $2.7 million for the three months ended March 31, 2021 and $2.3 million in the second quarter of 2020. Strong market conditions continue to drive wealth management income along with the addition of new clients.

Mortgage banking income declined by $1.0 million from the first quarter of 2021 to $1.2 million in the second quarter of 2021, partially due to a $0.5 million reduction in the fair value of the mortgages held for sale and interest rate lock commitments compared a reduction of $0.1 million in the first quarter of 2021. This was driven by declining production volume. Also, the second quarter of 2021 included a mortgage servicing valuation allowance reduction of $0.1 million as compared to $0.6 million in the first quarter of 2021. Mortgage loans sold totaled $51.8 million in the second quarter of 2021 compared with $57.3 million in the first quarter of 2021 and $49.5 million in the second quarter of 2020. As of June 30, 2021, the Bank services $480.4 million of loans for others, which is up by $16.4 million from March 31, 2021. On a year-to-date basis, mortgage activity has been strong. Mortgage banking income was $3.4 million for the six months ended June 30, 2021 as compared to $1.9 million for the six months ended June 30, 2020.

Debit card interchange income totaled $1.1 million in the second quarter of 2021, which is up $0.1 million from the prior quarter and up $0.2 million from the second quarter of 2020. Rising spending activity from the re-opening of the economy from COVID-19 and government stimulus payments drove this increase.

Noninterest Expenses

Noninterest expenses declined by $0.8 million to $17.0 million in the three months ended June 30, 2021 from the three months ended March 31, 2021. The decrease is due primarily to a $0.4 million reduction in the Bank’s unfunded commitment reserve in the three months ended June 30, 2021 as compared to an increase of $0.3 million in the same reserve for the three months ended March 31, 2021. There were also declines in occupancy, advertising and professional services due to normal fluctuations. Market disruption continues to present opportunities to add experienced lenders and other valuable contributors to the organization. As these opportunities arise to facilitate the Company’s growth, it could lead to increased expenses.

Income Taxes

The Company’s effective tax rate for the second quarter of 2021 was 19.3% compared with 19.1% for the first quarter of 2021. The Company’s effective tax rate 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 change in the effective rate reflects an increase in projected income for the full 2021 year.

Capital

Shareholders’ equity totaled $265.9 million at June 30, 2021, an increase of $11.5 million from $254.4 million at March 31, 2021. The increase was primarily attributable to net income and accumulated other comprehensive income from investment gains recorded in the three months ended June 30, 2021 offset by dividends paid in the period. Tangible book value per share grew from $19.93 per share at December 31, 2020 to $21.61 per share at June 30, 2021, an increase of 8%.

The Company’s tangible common equity ratio increased to 8.4% at June 30, 2021 from 7.8% at March 31, 2021. The Company’s Tier 1 leverage ratio was 8.0% at June 30, 2021 and 8.1% at March 31, 2021. The Company’s total risk-based capital ratio decreased from 16.2% at March 31, 2021 to 15.6% at June 30, 2021. A balance sheet shift to higher risk assets, including commercial loans, drove this reduction. As the balance of SBA PPP loans starts to decline, the Bank’s tier 1 leverage ratio is expected to gradually increase if the cash position remains stable or reduced. The ratio is still well above that required to be considered “well-capitalized” under applicable regulatory requirements. As a result of the Company’s performance in the first half of 2021 and a strong capital position, the Board of Directors approved a quarterly dividend increase from $0.18 per share to $0.19 per share. The dividend payout ratio totaled 24% for the three months ended June 30, 2021. The Company continues to believe that capital is adequate at this time to support the risks inherent in the balance sheet, as well as growth requirements.

Investor Relations Contact: Media Contact:
Matthew C. Schultheis, CFA Luke Bernstein
Director Strategic Planning and Investor Relations Corporate Communications Officer
Phone (717) 510-7127 Phone (717) 510-7107
ORRSTOWN FINANCIAL SERVICES, INC.              
FINANCIAL HIGHLIGHTS (Unaudited)              
               
               
  Three Months Ended   Six Months Ended
  June 30,   June 30,   June 30,   June 30,
(Dollars in thousands, except per share amounts) 2021   2020   2021   2020
               
Profitability for the period:              
Net interest income $ 21,901     $ 20,798     $ 43,756     $ 39,060  
Provision for loan losses 625     1,900     (375 )   2,825  
Noninterest income 6,664     7,193     14,208     14,267  
Noninterest expenses 17,033     18,431     34,816     36,735  
Income before income taxes 10,907     7,660     23,523     13,767  
Income tax expense 2,131     1,301     4,540     2,340  
Net income available to common shareholders $ 8,776     $ 6,359     $ 18,983     $ 11,427  
               
Financial ratios:              
Return on average assets (1) 1.20 %   0.94 %   1.33 %   0.90 %
Return on average equity (1) 13.56 %   11.82 %   15.04 %   10.36 %
Net interest margin (1) 3.24 %   3.37 %   3.31 %   3.39 %
Efficiency ratio 59.6 %   65.8 %   60.1 %   68.9 %
Income per common share:              
Basic $ 0.80     $ 0.58     $ 1.73     $ 1.04  
Diluted $ 0.79     $ 0.58     $ 1.71     $ 1.04  
               
Average equity to average assets 8.83 %   7.94 %   8.84 %   8.69 %
               
(1) Annualized.              
ORRSTOWN FINANCIAL SERVICES, INC.      
FINANCIAL HIGHLIGHTS (Unaudited)      
(continued)      
  June 30,   December 31,
  2021   2020
At period-end:      
Total assets $ 2,912,717     $ 2,750,572  
Total deposits 2,494,100     2,356,880  
Loans, net of allowance for loan losses 1,926,002     1,959,539  
Loans held-for-sale, at fair value 8,092     11,734  
Securities available for sale 450,402     466,465  
Borrowings 80,709     77,511  
Subordinated notes 31,932     31,903  
Shareholders’ equity 265,938     246,249  
       
Credit quality and capital ratios (1):      
Allowance for loan losses to total loans 1.00 %   1.02 %
Total nonaccrual loans to total loans 0.51 %   0.52 %
Nonperforming assets to total assets 0.34 %   0.37 %
Allowance for loan losses to nonaccrual loans 195 %   195 %
Total risk-based capital:      
Orrstown Financial Services, Inc. 15.6 %   15.6 %
Orrstown Bank 14.7 %   14.7 %
Tier 1 risk-based capital:      
Orrstown Financial Services, Inc. 12.8 %   12.5 %
Orrstown Bank 13.5 %   13.5 %
Tier 1 common equity risk-based capital:      
Orrstown Financial Services, Inc. 12.8 %   12.5 %
Orrstown Bank 13.5 %   13.5 %
Tier 1 leverage capital:      
Orrstown Financial Services, Inc. 8.0 %   8.1 %
Orrstown Bank 8.5 %   8.7 %
       
Book value per common share $ 23.61     $ 21.98  
       
(1) Capital ratios are estimated, subject to regulatory filings      
ORRSTOWN FINANCIAL SERVICES, INC.      
CONSOLIDATED BALANCE SHEETS (Unaudited)      
       
(Dollars in thousands, except per share amounts) June 30, 2021   December 31, 2020
Assets      
Cash and due from banks $ 27,623     $ 26,203  
Interest-bearing deposits with banks 309,139     99,055  
Cash and cash equivalents 336,762     125,258  
Restricted investments in bank stocks 9,691     10,563  
Securities available for sale (amortized cost of $440,411 and $460,999 at June 30, 2021 and December 31, 2020, respectively) 450,402     466,465  
Loans held for sale, at fair value 8,092     11,734  
Loans 1,945,383     1,979,690  
Less: Allowance for loan losses (19,381 )   (20,151 )
Net loans 1,926,002     1,959,539  
Premises and equipment, net 34,529     35,149  
Cash surrender value of life insurance 69,375     68,554  
Goodwill 18,724     18,724  
Other intangible assets, net 4,800     5,458  
Accrued interest receivable 7,930     8,927  
Other assets 46,410     40,201  
Total assets $ 2,912,717     $ 2,750,572  
Liabilities      
Deposits:      
Noninterest-bearing $ 529,137     $ 456,778  
Interest-bearing 1,964,963     1,900,102  
Total deposits 2,494,100     2,356,880  
Securities sold under agreements to repurchase 22,872     19,466  
FHLB advances and other 57,837     58,045  
Subordinated notes 31,932     31,903  
Accrued interest and other liabilities 40,038     38,029  
Total liabilities 2,646,779     2,504,323  
Shareholders’ Equity      
Preferred stock, $1.25 par value per share; 500,000 shares authorized; no shares issued or outstanding      
Common stock, no par value—$0.05205 stated value per share 50,000,000 shares authorized; 11,265,510 shares issued and 11,262,751 outstanding at June 30, 2021; 11,257,046 shares issued and 11,201,317 outstanding at December 31, 2020 586     586  
Additional paid—in capital 188,772     189,066  
Retained earnings 69,052     54,099  
Accumulated other comprehensive income 7,578     3,346  
Treasury stock— 2,759 and 55,729 shares, at cost at June 30, 2021 and December 31, 2020, respectively (50 )   (848 )
Total shareholders’ equity 265,938     246,249  
Total liabilities and shareholders’ equity $ 2,912,717     $ 2,750,572  
ORRSTOWN FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,   June 30,   June 30,
(In thousands, except per share amounts)   2021   2020   2021   2020
Interest income                
Loans   $ 21,323     $ 21,794     $ 42,834     $ 41,960  
Investment securities – taxable   1,614     2,795     3,493     6,233  
Investment securities – tax-exempt   638     420     1,138     704  
Short-term investments   81     13     120     92  
Total interest income   23,656     25,022     47,585     48,989  
Interest expense                
Deposits   1,081     3,310     2,473     7,664  
Securities sold under agreements to repurchase   8     152     17     184  
FHLB advances and other   164     260     335     1,078  
Subordinated notes   502     502     1,004     1,003  
Total interest expense   1,755     4,224     3,829     9,929  
Net interest income   21,901     20,798     43,756     39,060  
Provision for loan losses   625     1,900     (375 )   2,825  
Net interest income after provision for loan losses   21,276     18,898     44,131     36,235  
Noninterest income                
Service charges   880     719     1,765     1,706  
Interchange income   1,064     819     2,019     1,607  
Swap fee income   15     232     68     432  
Wealth management income   2,930     2,295     5,653     4,654  
Mortgage banking activities   1,162     1,609     3,351     1,941  
Gains on sale of portfolio loans       925         2,803  
Investment securities gains (losses)   11     9     156     (31 )
Other income   602     585     1,196     1,155  
Total noninterest income   6,664     7,193     14,208     14,267  
Noninterest expenses                
Salaries and employee benefits   10,212     10,063     20,409     21,657  
Occupancy, furniture and equipment   2,400     2,326     4,918     4,615  
Data processing, telephone, and communication   1,032     791     2,051     1,662  
Advertising and bank promotions   274     167     699     956  
FDIC insurance   158     214     352     261  
Professional services   579     1,021     1,300     1,737  
Taxes other than income   462     449     913     451  
Intangible asset amortization   324     404     658     867  
Insurance claim recovery               (486 )
Other operating expenses   1,592     2,996     3,516     5,015  
Total noninterest expenses   17,033     18,431     34,816     36,735  
Income before income tax expense   10,907     7,660     23,523     13,767  
Income tax expense   2,131     1,301     4,540     2,340  
Net income   $ 8,776     $ 6,359     $ 18,983     $ 11,427  
                 
Share information:                
Basic earnings per share   $ 0.80     $ 0.58     $ 1.73     $ 1.04  
Diluted earnings per share   $ 0.79     $ 0.58     $ 1.71     $ 1.04  
Weighted average shares – basic   10,975     10,916     10,975     10,937  
Weighted average shares – diluted   11,112     10,993     11,093     11,027  
ORRSTOWN FINANCIAL SERVICES, INC.        
ANALYSIS OF NET INTEREST INCOME        
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)    
  Three Months Ended
  6/30/2021   03/31/21   12/31/20   09/30/20   6/30/2020
      Taxable-   Taxable-       Taxable-   Taxable-       Taxable-   Taxable-       Taxable-   Taxable-       Taxable-   Taxable-
 (Dollars in thousands) Average   Equivalent   Equivalent   Average   Equivalent   Equivalent   Average   Equivalent   Equivalent   Average   Equivalent   Equivalent   Average   Equivalent   Equivalent
Balance   Interest   Rate   Balance   Interest   Rate   Balance   Interest   Rate   Balance   Interest   Rate   Balance   Interest   Rate
Assets                                                          
Federal funds sold & interest-bearing bank balances $ 290,039   $ 81     0.11 %   $ 145,595   $ 39     0.11 %   $ 48,019   $ 14     0.12 %   $ 31,087   $ 9     0.12 %   $ 27,949   $ 13     0.18 %
Investment securities (1) 438,110   2,421     2.22     468,273   2,512     2.18     486,613   2,643     2.16     496,107   2,673     2.14     493,847   3,327     2.71  
Loans (1)(2)(3) 2,014,600   21,375     4.26     2,033,219   21,574     4.30     2,015,749   23,960     4.73     2,054,193   21,741     4.21     1,988,114   21,912     4.43  
Total interest-earning assets 2,742,749   23,877     3.49     2,647,087   24,125     3.70     2,550,381   26,617     4.15     2,581,387   24,423     3.76     2,509,910   25,252     4.05  
Other assets 188,810           182,737           182,764           190,119           200,684        
Total $ 2,931,559           $ 2,829,824           $ 2,733,145           $ 2,771,506           $ 2,710,594        
Liabilities and Shareholders’ Equity                                                          
Interest-bearing demand deposits $ 1,394,384   292     0.08     $ 1,334,219   438     0.13     $ 1,283,024   655     0.20     $ 1,213,208   939     0.31     $ 1,154,434   1,259     0.44  
Savings deposits 200,439   50     0.10     183,576   45     0.10     172,068   52     0.12     168,377   67     0.16     160,738   63     0.16  
Time deposits 382,467   739     0.78     397,271   909     0.93     411,395   1,155     1.12     432,438   1,477     1.36     462,664   1,988     1.73  
Securities sold under agreements to repurchase 22,417   8     0.14     21,452   9     0.17     20,055   13     0.26     21,145   20     0.38     21,582   24     0.45  
FHLB advances and other 57,896   164     1.14     58,000   171     1.20     135,558   320     0.94     219,567   394     0.71     175,336   388     0.89  
Subordinated notes 31,924   502     6.29     31,909   502     6.29     31,895   502     6.29     31,881   501     6.28     31,867   502     6.33  
Total interest-bearing liabilities 2,089,527   1,755     0.34     2,026,427   2,074     0.42     2,053,995   2,697     0.52     2,086,616   3,398     0.65     2,006,621   4,224     0.85  
Noninterest-bearing demand deposits 545,617           516,849           406,454           417,939           452,253        
Other 37,561           36,244           36,216           37,330           36,511        
Total Liabilities 2,672,705           2,579,520           2,496,665           2,541,885           2,495,385        
Shareholders’ Equity 258,854           250,304           236,480           229,621           215,209        
Total $ 2,931,559           $ 2,829,824           $ 2,733,145           $ 2,771,506           $ 2,710,594        
Taxable-equivalent net interest income / net interest spread     22,122     3.15 %       22,051     3.28 %       23,920     3.63 %       21,025     3.12 %       21,028     3.20 %
Taxable-equivalent net interest margin         3.24 %           3.38 %           3.73 %           3.24 %           3.37 %
Taxable-equivalent adjustment     (221 )           (196 )           (192 )           (207 )           (230 )    
Net interest income     $ 21,901             $ 21,855             $ 23,728             $ 20,818             $ 20,798      
Ratio of average interest-earning assets to average interest-bearing liabilities         131 %           131 %           124 %           124 %           125 %
                                                           
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, prior periods have been adjusted to include these fees.
 
ORRSTOWN FINANCIAL SERVICES, INC.            
ANALYSIS OF NET INTEREST INCOME        
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)    
  Six Months Ended
  June 30, 2021   June 30, 2020
      Taxable-   Taxable-       Taxable-   Taxable-
  Average   Equivalent   Equivalent   Average   Equivalent   Equivalent
(Dollars in thousands) Balance   Interest   Rate   Balance   Interest   Rate
Assets                      
Federal funds sold & interest-bearing bank balances $ 218,216   $ 120     0.11 %   $ 25,409   $ 92     0.73 %
Investment securities (1) 453,108   4,933     2.20     497,418   7,124     2.88  
Loans (1)(2)(3) 2,023,858   42,949     4.28     1,820,830   42,199     4.66  
Total interest-earning assets 2,695,182   48,002     3.59     2,343,657   49,415     4.24  
Other assets 185,791           194,543        
Total $ 2,880,973           $ 2,538,200        
Liabilities and Shareholders’ Equity                      
Interest-bearing demand deposits $ 1,364,483   728     0.11     $ 1,063,460   3,161     0.60  
Savings deposits 192,039   96     0.10     155,966   127     0.16  
Time deposits 389,828   1,649     0.85     483,014   4,376     1.82  
Securities sold under agreements to repurchase 21,937   17     0.16     15,499   52     0.67  
FHLB advances and other 57,948   335     1.17     181,372   1,210     1.34  
Subordinated notes 31,916   1,004     6.29     31,860   1,003     6.29  
Total interest-bearing liabilities 2,058,151   3,829     0.38     1,931,171   9,929     1.03  
Noninterest-bearing demand deposits 531,313           351,208        
Other 36,906           35,139        
Total Liabilities 2,626,370           2,317,518        
Shareholders’ Equity 254,603           220,682        
Total $ 2,880,973           $ 2,538,200        
Taxable-equivalent net interest income / net interest spread     44,173     3.22 %       39,486     3.21 %
Taxable-equivalent net interest margin         3.31 %           3.39 %
Taxable-equivalent adjustment     (417 )           (426 )    
Net interest income     $ 43,756             $ 39,060      
Ratio of average interest-earning assets to average interest-bearing liabilities         131 %           121 %
                       
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, prior periods have been adjusted to include these fees.
ORRSTOWN FINANCIAL SERVICES, INC.        
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)        
                   
(In thousands, except per share amounts ) June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Profitability for the quarter:                  
Net interest income $ 21,901     $ 21,855     $ 23,729     $ 20,818     $ 20,798  
Provision for loan losses 625     (1,000 )   300     2,200     1,900  
Noninterest income 6,664     7,544     7,181     6,861     7,193  
Noninterest expenses 17,033     17,783     18,080     19,265     18,431  
Income before income taxes 10,907     12,616     12,530     6,214     7,660  
Income tax expense 2,131     2,409     2,471     1,237     1,301  
Net income $ 8,776     $ 10,207     $ 10,059     $ 4,977     $ 6,359  
                   
Financial ratios:                  
Return on average assets (1) 1.20 %   1.44 %   1.47 %   0.72 %   0.94 %
Return on average equity (1) 13.56 %   16.31 %   17.01 %   8.67 %   11.82 %
Net interest margin (1) 3.24 %   3.38 %   3.73 %   3.24 %   3.37 %
Efficiency ratio 59.6 %   60.5 %   58.5 %   69.6 %   65.8 %
                   
Per share information :                  
Income per common share:                  
Basic $ 0.80     $ 0.93     $ 0.92     $ 0.45     $ 0.58  
Diluted $ 0.79     $ 0.92     $ 0.91     $ 0.45     $ 0.58  
Book value $ 23.61     $ 22.62     $ 21.98     $ 20.78     $ 20.13  
Tangible book value (2) $ 21.61     $ 20.59     $ 19.93     $ 18.70     $ 18.03  
Cash dividends paid $ 0.18     $ 0.18     $ 0.17     $ 0.17     $ 0.17  
Average basic shares 10,975     10,975     10,953     10,941     10,916  
Average diluted shares 11,112     11,074     11,057     11,025     10,993  
 
(1) Annualized.
(2) Non-GAAP based financial measure. Please refer to Appendix B – 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)                  
  June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Noninterest income:                  
Service charges $ 880   $ 885   $ 999   $ 852     $ 719
Interchange income 1,064   955   916   900     819
Loan swap referral fees 15   53   320   95     232
Wealth management income 2,930   2,723   2,615   2,464     2,295
Mortgage banking activities 1,162   2,189   1,348   1,985     1,609
Other income 602   594   955   578     1,510
Investment securities gains (losses) 11   145   28   (13 )   9
Total noninterest income $ 6,664   $ 7,544   $ 7,181   $ 6,861     $ 7,193
                   
Noninterest expenses:                  
Salaries and employee benefits $ 10,212   $ 10,197   $ 10,998   $ 10,695     $ 10,063
Occupancy, furniture and equipment 2,400   2,518   2,467   2,434     2,326
Data processing, telephone, and communication 1,032   1,019   954   958     791
Advertising and bank promotions 274   425   507   197     167
FDIC insurance 158   194   195   230     214
Professional services 579   721   780   603     1,021
Taxes other than income 462   451   240   453     449
Intangible asset amortization 324   334   345   357     404
Merger related and branch consolidation expenses       1,310    
Other operating expenses 1,592   1,924   1,594   2,028     2,996
Total noninterest expenses $ 17,033   $ 17,783   $ 18,080   $ 19,265     $ 18,431
                   
 
ORRSTOWN FINANCIAL SERVICES, INC.                
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)            
(continued)                  
  June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Balance Sheet at quarter end:                  
Cash and cash equivalents $ 336,762     $ 326,245     $ 125,258     $ 87,307     $ 52,290  
Restricted investments in bank stocks 9,691     10,307     10,563     12,646     16,256  
Securities available for sale 450,402     407,690     466,465     478,288     483,936  
Loans held for sale, at fair value 8,092     11,449     11,734     12,804     13,594  
Loans:                  
Commercial real estate:                  
   Owner occupied 191,595     177,934     174,908     166,623     164,442  
   Non-owner occupied 471,541     415,219     409,567     403,138     390,980  
   Multi-family 112,420     111,757     113,635     110,153     111,016  
   Non-owner occupied residential 99,631     101,381     114,505     111,958     116,531  
Commercial and industrial (1) 599,123     750,831     647,368     690,330     665,312  
Acquisition and development:                  
   1-4 family residential construction 9,686     12,138     9,486     9,627     7,966  
   Commercial and land development 55,330     45,229     51,826     37,850     50,220  
Municipal 14,452     19,238     20,523     28,867     34,276  
   Total commercial loans 1,553,778     1,633,727     1,541,818     1,558,546     1,540,743  
Residential mortgage:                  
   First lien 211,918     225,247     244,321     273,149     295,736  
   Home equity – term 8,321     9,183     10,169     11,108     11,944  
   Home equity – lines of credit 149,601     153,169     157,021     158,106     160,842  
Installment and other loans 21,765     23,695     26,361     28,961     32,052  
 Total loans 1,945,383     2,045,021     1,979,690     2,029,870     2,041,317  
 Allowance for loan losses (19,381 )   (18,967 )   (20,151 )   (19,725 )   (17,517 )
 Net loans held-for-investment 1,926,002     2,026,054     1,959,539     2,010,145     2,023,800  
Goodwill 18,724     18,724     18,724     18,724     18,724  
Other intangible assets, net 4,800     5,124     5,458     5,803     6,160  
Total assets 2,912,717     2,963,534     2,750,572     2,781,667     2,772,796  
Total deposits 2,494,100     2,547,089     2,356,880     2,279,483     2,251,731  
Borrowings 80,709     80,736     77,511     200,818     226,520  
Subordinated notes 31,932     31,918     31,903     31,889     31,875  
Total shareholders’ equity 265,938     254,448     246,249     232,847     225,638  

(1) This balance includes $355.6 million, $504.3 million, $403.3 million, $458.1 million and $447.2 million of SBA PPP loans, net of deferred fees and costs, at June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020, respectively.

ORRSTOWN FINANCIAL SERVICES, INC.                
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)            
(continued)                  
  June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Capital and credit quality measures (1):                  
Total risk-based capital:                  
Orrstown Financial Services, Inc 15.6 %   16.2 %   15.6 %   15.0 %   14.5 %
Orrstown Bank 14.7 %   15.3 %   14.7 %   14.3 %   13.9 %
Tier 1 risk-based capital:                  
Orrstown Financial Services, Inc 12.8 %   13.2 %   12.5 %   12.0 %   11.7 %
Orrstown Bank 13.5 %   14.1 %   13.5 %   13.1 %   12.8 %
Tier 1 common equity risk-based capital:                  
Orrstown Financial Services, Inc 12.8 %   13.2 %   12.5 %   12.0 %   11.7 %
Orrstown Bank 13.5 %   14.1 %   13.5 %   13.1 %   12.8 %
Tier 1 leverage capital:                  
Orrstown Financial Services, Inc 8.0 %   8.1 %   8.1 %   7.8 %   7.6 %
Orrstown Bank 8.5 %   8.6 %   8.7 %   8.5 %   8.4 %
                   
Average equity to average assets 8.83 %   8.85 %   8.65 %   8.29 %   7.94 %
Allowance for loan losses to total loans 1.00 %   0.93 %   1.02 %   0.97 %   0.86 %
Total nonaccrual loans to total loans 0.51 %   0.48 %   0.52 %   0.39 %   0.36 %
Nonperforming assets to total assets 0.34 %   0.33 %   0.37 %   0.28 %   0.27 %
Allowance for loan losses to nonaccrual loans 195 %   192 %   195 %   250 %   237 %
                   
Other information:                  
Net charge-offs (recoveries) $ 211     $ 184     $ (126 )   $ (8 )   $ 186  
Classified loans 28,731     32,408     33,147     36,408     33,376  
Nonperforming and other risk assets:                  
Nonaccrual loans 9,941     9,895     10,310     7,899     7,404  
Other real estate owned                 17  
Total nonperforming assets 9,941     9,895     10,310     7,899     7,421  
Restructured loans still accruing 852     921     934     945     960  
Loans past due 90 days or more and still accruing (2) 212     196     554     520     909  
  Total nonperforming and other risk assets $ 11,005     $ 11,012     $ 11,798     $ 9,364     $ 9,290  
 
(1) Capital ratios are estimated, subject to regulatory filings.
(2) Includes $196 thousand, $179 thousand, $515 thousand, $520 thousand and $594 thousand of purchased credit impaired loans at June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020, and June 30, 2020, respectively.

Appendix A- Supplemental Reporting of Unusual Items

The following table presents unusual items that impacted each period shown. These items are presented to enable investors to better understand the magnitude of certain significant items on reported GAAP results in the context of the Company’s growth and acquisition activities.

  Three Months Ended   Year To Date
  6/30/2021   3/31/21   12/31/20   9/30/20   6/30/2020   6/30/2021   6/30/2020
(In thousands)                          
Pretax Items                          
Branch consolidation expenses $   $   $   $ 1,310     $   $   $  
Net securities gains (losses) 11   145   28   (13 )   9   156   (31 )
Gain on swap termination     226            
Earnings on life insurance proceeds     58            
Gains on sale of portfolio loans           925     2,803  
Accretion – recoveries on purchased credit impaired loans 23   256   779   294     1,021   278   1,232  
Insurance claim receivable recovery               486  

Appendix B- 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 totaling $23.5 million and $24.2 million at June 30, 2021 and December 31, 2020, respectively. Additionally, the Company incurred approximately $1.3 million in charges associated with branch consolidation efforts during the three months ended September 30, 2020.

Management believes providing certain “non-GAAP” financial information will assist investors in their understanding of the effect of acquisition activity on reported results, particularly to overcome comparability issues related to the influence of intangibles (principally goodwill) created in acquisitions. Management also believes providing certain other “non-GAAP” financial information will assist investors in their understanding of the effect on recent financial results of non-recurring charges associated with increasing operational efficiencies for the long-term, and provide investors with clarity on its allowance for loan losses to total loans ratio. The Company believes that excluding SBA PPP loans, due to its credit enhancement, from loans held for investment is useful to investors due to the size and effect on the total and ratio.

Tangible book value per common share and allowance to non-SBA guaranteed loans, 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 in thousands, except per share information)

Tangible Book Value per Common Share   June 30,
2021
  March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
Shareholders’ equity   $ 265,938     $ 254,448     $ 246,249     $ 232,847     $ 225,638  
Less: Goodwill   18,724     18,724     18,724     18,724     18,724  
Other intangible assets   4,800     5,124     5,458     5,803     6,160  
Related tax effect   (1,008 )   (1,076 )   (1,146 )   (1,219 )   (1,294 )
Tangible common equity (non-GAAP)   $ 243,422     $ 231,676     $ 223,213     $ 209,539     $ 202,048  
                     
Common shares outstanding   11,263     11,251     11,201     11,204     11,209  
                     
Book value per share (most directly comparable GAAP based measure)   $ 23.61     $ 22.62     $ 21.98     $ 20.78     $ 20.13  
Intangible assets per share   2.00     2.03     2.05     2.08     2.10  
Tangible book value per share (non-GAAP)   $ 21.61     $ 20.59     $ 19.93     $ 18.70     $ 18.03  
Allowance to Non-SBA Guaranteed Loans:      
       
  June 30, 2021   March 31, 2021
Allowance for loan losses $ 19,381     $ 18,967  
Gross loans 1,945,383     2,045,021  
less: SBA guaranteed loans (356,905 )   (506,296 )
Non-SBA guaranteed loans $ 1,588,478     $ 1,538,725  
       
Allowance to non-SBA guaranteed loans 1.2 %   1.2 %

Appendix C- Investment Portfolio Concentrations

The following table summarizes the credit ratings and collateral associated with the Company’s investment portfolio, excluding equity securities, at June 30, 2021:

(dollars in thousands)

Sector Portfolio Mix   Amortized Book   Fair Value   Credit Enhancement   AAA   AA   A   BBB   NR   Collateral Type
Unsecured ABS 1 %   $ 4,044     $ 4,086     53 %   %   %   %   %   100 %   Unsecured Consumer Debt
Student Loan ABS 2 %   9,945     9,882     26     %   %   %   %   100 %   Seasoned Student Loans
Federal Family Education Loan ABS 41 %   176,220     176,388     6     71 %   16 %   13 %   %   %   Federal Family Education Loan (1)
PACE Loan ABS 1 %   4,525     4,644     6     100 %   %   %   %   %   PACE Loans
Non-Agency RMBS 3 %   14,013     14,642     47     100 %   %   %   %   %   Reverse Mortgages (2)
Municipal – General Obligation 19 %   83,541     89,179         2 %   90 %   8 %   %   %    
Municipal – Revenue 15 %   66,344     70,237         %   70 %   15 %   %   15 %    
SBA ReRemic 2 %   9,783     9,772         %   100 %   %   %   %   SBA Guarantee (3)
Agency MBS 16 %   71,597     71,173         %   100 %   %   %   %   Residential Mortgages (3)
Bank CDs %   249     249         %   %   %   %   100 %   FDIC Insured CD
  100 %   $ 440,261     $ 450,252         33 %   52 %   9 %   %   6 %    
                                       
(1) Minimum of 97% guaranteed by U.S. government
(2) Reverse mortgages fund over time and credit enhancement is estimated based on prior experience
(3) 100% guaranteed by U.S. government agencies
                                       
Note : Ratings in table are the lowest of the three rating agencies (Standard & Poors, Moody’s & Fitch). Standard & Poors rates U.S. government obligations at AA+
Note: S&P rates US 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 of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. 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 be able to continue to successfully execute on its strategic growth plan into Dauphin, Lancaster, York and Berks counties, Pennsylvania, and the greater Baltimore market in Maryland, with newer markets continuing to be receptive to our community banking model; to take advantage of market disruption; to experience sustained growth in loans and deposits or maintain the momentum experienced to date from these actions. In addition to risks and uncertainties related to the COVID-19 pandemic (including those related to variants, such as the delta variant) 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, 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; deteriorating economic conditions; 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 set forth under the heading “Risk Factors” in the Company’s 2020 Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. 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.

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