Market Overview

Orrstown Financial Services, Inc. Reports First Quarter 2020 diluted EPS of $0.46 and Announces Quarterly Dividend of $0.17 per Share

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  • Announced initiatives in March 2020 to assist clients, employees and communities affected by COVID-19
  • Began to see impact of COVID-19 in Q1 with provision for loan losses of $0.9 million, mortgage servicing impairment of $0.5 million, wealth management fee pressure and a reduction in commercial loan closings due to project delays
  • Initiated proactive risk mitigation efforts, which included contacting existing clients representing over 70% of the commercial loan portfolio, completing loan deferral arrangements for clients with balances totaling $35.7 million through March 31, 2020 and actively participating in the Small Business Administration Paycheck Protection Program (the "SBA PPP") in April 2020
  • In April 2020, expected closings of SBA PPP loans total approximately $370 million with approximately $9 million of processing fees to be earned primarily over Q2 and Q3
  • Classified loans fell by $10.3 million to $30.5 million at March 31, 2020 from $40.8 million at December 31, 2019; non-performing loans to total loans fell by 18 basis points to 0.47% at March 31, 2020 as compared to 0.65% at December 31, 2019; net recoveries of $0.2 million were recorded in the three months ended March 31, 2020
  • Due to the hiring of commercial relationship managers in the second half of 2019, commercial loan growth was strong for a second quarter in a row, at 15% annualized, after 20% annualized growth in the fourth quarter of 2019; however, the impact of COVID-19 will make it difficult to maintain that growth throughout the remainder of 2020
  • Annualized gross loan growth of 3.0%, despite sales of portfolio loans and high payoffs in the mortgage portfolio due to heavy refinance activity
  • With market uncertainty, deposits grew by $54.3 million, or 16% annualized, in checking, money market and savings accounts; continued planned runoff of an additional $25 million of brokered and subscription deposits
  • With rapidly falling interest rates and an asset sensitive balance sheet, margin management was active, resulting in a four basis point expansion in the net interest margin to 3.41% for the three months ended March 31, 2020 as compared to 3.37% for the three months ended December 31, 2019
  • Repriced deposits quickly, leading to a nine basis point reduction in the cost of deposits, replaced maturing funding with lower cost alternatives, and new origination loan spreads were widened
  • Noninterest income totaled $7.1 million, or 28% of revenues, for the three months ended March 31, 2020, negatively impacted by seasonal reductions in many fee categories and the COVID-19 event, which was more than offset by $1.9 million of gains from the sale of acquired classified loans and an acquired recreational vehicle portfolio
  • Announced that the annual shareholder meeting will be held virtually on April 28, 2020 at 9:00 AM
  • Declared a cash dividend of $0.17 per common share, payable May 11, 2020, to shareholders of record as of May 4, 2020, maintaining the dividend declared in the previous quarter

SHIPPENSBURG, Pa., April 21, 2020 (GLOBE NEWSWIRE) -- Orrstown Financial Services, Inc. ("Orrstown" or the "Company") (NASDAQ:ORRF), the parent company of Orrstown Bank (the "Bank") and Wheatland Advisors, Inc., announced earnings for the three months ended March 31, 2020. Net income totaled $5.1 million for the first quarter of 2020, compared with $4.2 million for the fourth quarter of 2019 and $3.1 million in the first quarter of 2019.  Diluted earnings per share totaled $0.46 for the three months ended March 31, 2020, compared with $0.38 for the three months ended December 31, 2019 and $0.33 for the three months ended March 31, 2019.

Thomas R. Quinn, Jr., President & CEO, commented, "The first quarter saw a progression of our strategy, which carried on even as the COVID-19 pandemic changed how Orrstown conducts business.  Commercial loans grew as recent hires of commercial lenders brought high quality relationships to the Bank.  Additionally, through two loan sales, we further aligned our existing portfolio with our risk tolerances.  However, as the quarter passed, the disruptive impact of the COVID-19 outbreak became more and more evident.  We pivoted to providing service through electronic channels.  We engaged in direct outreach to clients to assess their needs and provide assistance where needed. 

Though the SBA Paycheck Protection Program was not introduced until second quarter 2020, work done in the first quarter of 2020 and before laid the foundation for successful implementation at Orrstown.  Investments in 2019 in Baltimore and Harrisburg, as well as our 2015 expansion into Lancaster while maintaining our focus in our historic Cumberland Valley footprint, allowed us to accept almost 1,500 applications.  Many of these represent new relationships to the Bank, for which our intention is to bring the whole relationship to Orrstown over time; however, the associated loans will all be underwritten with the same prudence as our existing portfolio.  We look forward to returning to business as usual, as do our clients, employees, and shareholders, just as soon as it is safe to do so."

COVID-19 Response Efforts

Orrstown has implemented the following steps to mitigate the potential spread of this virus, and to help our clients during this challenging time:

  • Temporarily closed all branch lobbies for transaction purposes; drive thru lanes remain open.
  • Encouraged clients to utilize the Bank's online, mobile, and telephone banking services, as well as night drops and ATMs.
  • Implemented a by-appointment only process, where we will meet with clients face-to-face for critical and essential needs that cannot be serviced remotely or via a drive-up, such as a loan settlement or safe deposit box access request.
  • Waived Orrstown fees on all foreign ATM transactions from March 18, 2020 through May 15, 2020.
  • Waived late fees on all loan payments for 60 days.
  • Designated loan experts available to work with clients to assist them during this challenging time.
  • Implemented a work-from-home policy for employees whose primary responsibilities can be completed in this manner.
  • Enhanced staffing levels at our Client Service Center to manage our increased call volume.
  • Instituted additional preventative measures by providing guidance to all employees on hygiene and social distancing.
  • Educated clients and consumers to explore programs provided by the U.S. Small Business Administration ("SBA").
  • Changed Annual Meeting to a Virtual Meeting.

Loss Mitigation Efforts / Loan Concentration

Management initiated numerous proactive efforts to prepare for the difficult economic environment that is imminent, including contacting most commercial loan clients, initiating a loan payment deferral program for consumers and business clients of up to six months, actively participating in the SBA PPP, performing stress testing of higher risk concentrations in the loan portfolio and tighter underwriting for new loans.  Due to the change in the external environment, management increased the qualitative factors for certain loan segments in the Bank's allowance for loan loss analysis, which resulted in the recording of $0.9 million of provision for loan losses in the quarter.  At March 31, 2020, eight consumer clients with loans totaling $0.8 million were granted payment deferrals while 22 clients with commercial loans totaling $34.9 million also had payment deferrals.  Subsequently, as of April 20, 2020, additional consumer and commercial deferrals were granted totaling $12.1 million and $101.4 million respectively.  These conversations are on-going and we expect more deferrals to be granted in the second quarter of 2020. 

The Bank is also actively consulting with clients on the benefits of the many government lending programs currently available, with the most interest expressed in the SBA PPP.  To date, the Bank has taken almost 1,500 applications and expects to close approximately $370 million of these loans in April 2020.  These loans are fully guaranteed by the SBA and forgivable if certain conditions are met by the borrower, including the client using 75% of the loan for payroll.

The combination of active client relationship consultation, loan payment deferrals, increased risk management focus on higher risk loan concentrations and significant client participation in the SBA PPP is expected to help offset potential future period losses.  Due to the current economic environment, we do expect charge offs to increase in the coming quarters, but more time is needed to fully understand the magnitude and length of the pending economic downturn and its impact on our loan portfolio.

Below is a summary of select loan concentrations as a percentage of total loans and the Bank's total risk-based capital as of March 31, 2020:

  As a Percentage of
Category Total Loans Risk-based Capital
     
Office 10.1 % 70.8 %
Multifamily residential 6.7   47.3  
Strip Center / Retail 3.1   21.7  
Commercial Construction 2.9   20.4  
Hotel / Motel 2.8   19.6  
Warehouses 2.3   16.4  
Restaurants & Bars 1.5   10.8  
Storage Units 1.5   10.7  
Residential Construction 0.8   5.5  
         

DISCUSSION OF RESULTS

Balance Sheet

Loans
Due to the significant addition of commercial relationship managers in the second half of 2019, commercial loans grew $39.9 million, or 15% annualized, in the quarter ended March 31, 2020, despite the aforementioned classified loan sale.  This follows the fourth quarter 2019 growth of 20% annualized, or $52.7 million.  As previously disclosed, the Bank intends to focus growth efforts in relationship commercial lending.  We expect that growth will slow in the coming quarters as the team focuses more effort on managing its existing clients given the change in the economic environment.  Home equity loans were relatively flat at $178.7 million at March 31, 2020 as first mortgage refinance activity reduced home equity loan balances as many clients consolidated debt. Mortgage loan originations grew with the fall in interest rates, but the Bank continues to sell most of its loan production in the secondary market. First lien residential mortgages fell $11.6 million, or 14% annualized, in the three months ended March 31, 2020 as the Bank continues to execute its balance sheet mix optimization strategy. Installment loans fell by $15.1 million in the three months ended March 31, 2020 due to the sale of $11.0 million of acquired RV loans for risk management purposes, plus normal amortization. Overall, period end gross loans grew by $12.6 million, or 3% annualized, in the first quarter of 2020 as compared with December 31, 2019, as the mix continues to shift away from lower margin consumer loans to relationship commercial loans.

Deposits
Given the market uncertainty, the Bank saw a notable inflow of deposits into checking, money market and savings accounts.  Total core (non-maturity) deposits increased $54.3 million in the first quarter, or 16% annualized, to $1.42 billion. Time deposits, net of brokered and subscription accounts, fell $7.7 million in the quarter, or 6% annualized. Planned reductions in brokered deposits and subscription service deposits continued with $23.8 million of runoff.  The loan to deposit ratio remained stable at 86% at March 31, 2020 as net loans grew by $11.5 million and deposits increased $21.8 million. The Bank will selectively use brokered channels as needed and is targeting a 90-95% loan to deposit ratio over the long term.

Other
Borrowings fell by $5.9 million to $212.0 million in the three months ended March 31, 2020; however, the Bank shifted strategies with regard to borrowings due to the decrease in interest rates.  Initially, maturing long-term borrowings and brokered CDs were replaced with overnight borrowings. This led to an initial reduction in the cost of borrowings as rates fell.  After rates fell significantly, the Bank extended the duration of $100.0 million of borrowings for a weighted average term of six years at a cost of funds of 0.54%.

During the three months ended March 31, 2020, securities available for sale decreased by $11.3 million as $26.7 million of purchases were offset by $20.5 million of principal repayments and a $17.3 million reduction in the fair value of investments. Due to bond market turmoil in the quarter, spreads widened in many segments of the investment portfolio as liquidity in the market was temporarily constrained.  Many funds liquidated holdings and buying demand was limited, thereby putting pressure on prices.  Given the strength of the investment counterparty or deal credit enhancement for asset-backed securities, this reduction in fair value is likely to be temporary.  In addition, the Bank has the ability and intent to hold these bonds to maturity, so no other than temporary impairment charges were recorded.  As the Bank continues to execute its plan to grow relationship loans, it will look to reduce its investment portfolio concentration to fund some of this loan growth through investment repayments. Total asset growth was limited at $4.2 million for the three months ended March 31, 2020 and we expect limited total balance sheet growth in 2020 as the Company reinvests lower margin investments and mortgages into relationship commercial and consumer loans.

Income Statement

Net Interest Income and Margin
The Bank actively managed its balance sheet to optimize its net interest margin, given the rapid decline in interest rates.  The Bank focused on shifting borrowings short and repricing non-maturity deposits quickly to preserve the margin for the near term to offset the reductions in variable rate loan and investment yield reductions.  Adding to the margin stability was the continued balance sheet mix shift as commercial loans grew by $39.9 million, mortgage loans fell by $11.6 million, brokered and subscription service deposits fell by $23.8 million and core deposit balances rose by $54.3 million from December 31, 2019 to March 31, 2020.  As a result of these efforts, net interest income totaled $18.3 million in the first quarter of 2020 compared with $17.9 million in the fourth quarter of 2019. Average interest-earning assets rose by $44.8 million in the three months ended March 31, 2020 due primarily to average commercial loan growth of $64.5 million over the same period. The net interest margin increased by four basis points in the three months ended March 31, 2020 to 3.41% as the earning asset yield fell by five basis points while the cost of interest-bearing liabilities fell by nine basis points.

As previously disclosed, the Company has an asset sensitive balance sheet with concentrations in variable rate commercial loans and investment securities. It also has significant concentrations in core deposits with a low cost of funds. With this profile, the Bank will normally experience net interest margin pressure as interest rates fall and net interest margin expansion as rates rise. If the external environment continues to favor low interest rates, the Company will continue to focus on mix optimization to preserve margin, while also obtaining its fair share of rate sensitive fee revenues from mortgage loans to be sold in the secondary market and loan swap referral income for commercial real estate clients. The first quarter of 2020 saw record low interest rates and they are expected to stay low throughout 2020. 

Provision for Loan Losses
The allowance for loan losses totaled $15.8 million at March 31, 2020, compared with $14.7 million at December 31, 2019. Total classified loans fell in the quarter by 25%, or $10.3 million. Management initiated a strategy in the first quarter of 2020 to pursue the sale or workout of classified loans.  During the three months ended March 31, 2020, the Bank sold $9.2 million of a portfolio of acquired classified loans, recording a gain on sale of $1.6 million.  While asset quality trends continue to exhibit low levels of charge-offs and non-performing loans, management decided to increase its qualitative reserves in anticipation of an increase in charge-offs in future periods due to the COVID-19 pandemic.  The provision for loan losses totaled $0.9 million in the first quarter of 2020, compared with $0 in the fourth quarter of 2019. Management believes the allowance for loan losses to total loans ratio remains adequate at 0.95% at March 31, 2020. At December 31, 2019, the allowance for loan losses to total loans ratio totaled 0.89%. 

Successful workout efforts led to net recoveries in the quarter ended March 31, 2020 of $0.2 million, as compared with net charge-offs totaling $0.2 million in the quarter ended December 31, 2019. Nonperforming loans decreased by $2.9 million to $8.0 million at March 31, 2020 from $10.9 million at December 31, 2019, due principally to a measurement period adjustment for the transfer of a $2.6 million loan from the Hamilton Bank acquisition into the purchased credit impaired pool during the three months ended March 31, 2020. Nonperforming loans totaled 0.47% of gross loans at March 31, 2020, compared with 0.65% of gross loans at December 31, 2019.  Overall, asset quality continued to be solid and the allowance for loan losses to nonperforming loans ratio was 202% at March 31, 2020.

Noninterest Income
Noninterest income for the quarter ended March 31, 2020, excluding securities gains, totaled $7.1 million, compared with $7.0 million in the quarter ended December 31, 2019. The Bank completed the sale of two portfolios of loans for risk management purposes, which resulted in gains of $1.9 million in the three months ended March 31, 2020. These gains were partially offset by reduced fee revenue as the Bank began to see the negative impact of the COVID-19 pandemic during the second half of the quarter.

Total wealth management income for the quarter ended March 31, 2020 was $2.4 million, as compared to $2.5 million for the quarter ended December 31, 2019. A significant portion of the fees earned in wealth management are from fees assessed as a percentage of assets under management.  With the fall in the market in the latter half of the first quarter of 2020, these fees came under pressure.  If markets do not recover, growth of assets under management may be constrained.  While the Bank continues to acquire new clients, fee growth from these efforts will be muted in the near term if market weakness continues.

In the first quarter of 2020, service charges totaled $1.0 million and interchange income on debit cards totaled $0.8 million, which combined, are down $0.2 million from the quarter ended December 31, 2019. These stable sources of fee revenue should grow over time as we add retail and commercial clients, but the combination of fee waivers from foreign ATMs and a reduction in economic activity due to the COVID-19 pandemic will constrain growth. Growth in these sources continues to be an area of opportunity and focus in future years.

During the three months ended March 31, 2020, the Bank sold two portfolios of loans for risk management purposes.  The first was a portfolio of purchased RV loans that were acquired in the Hamilton Bank merger.  A decision was made to exit this portfolio for risk management purposes and the $11.0 million portfolio was sold for a gain of $0.3 million.  The second portfolio was a pool of $9.2 million in classified commercial loans primarily acquired from Hamilton Bank.  The strategy was to reduce complexity and risk by selling the loans given the favorable pricing in the secondary market.  The sale of these classified loans resulted in a gain on sale of $1.6 million in the three months ended March 31, 2020.

Mortgage banking income for the quarter ended March 31, 2020 fell by $1.0 million to $0.3 million. In the first quarter of 2020, a $0.5 million impairment charge was recognized on the mortgage servicing rights asset ("MSR") due to falling interest rates. In the fourth quarter 2019, $0.2 million of the MSR impairment was recovered due to an increase in interest rates.  Thus $0.7 million of the reduction in mortgage banking income was caused by volatility in the MSR valuation.  Loans sold in the three months ended March 31, 2020 totaled $22.0 million compared with $32.2 million in the three months ended December 31, 2019. The mortgage market was disrupted in the quarter, which delayed closings. The Bank ended the quarter with an elevated amount of locked loans that were not closed, totaling $22.7 million. Since the Bank records gains on closed and locked loans, income was not impacted by these delays.

Loan swap referral fees totaled $0.2 million in the first quarter of 2020, a reduction of $0.4 million from the previous quarter. There were opportunities in the pipeline, scheduled to close in the first quarter of 2020, that did not occur primarily due to the impact of the COVID-19 pandemic.  These fees for interest rate hedge referral income are related to commercial real estate lending.  With the market turmoil, many commercial real estate projects were put on hold or cancelled.  This fee revenue will fluctuate from quarter to quarter, but we expect to continue to see client demand to convert to fixed loan interest rates in this current rate environment once markets stabilize.

Noninterest Expenses
Noninterest expenses totaled $18.3 million in the first quarter of 2020 compared with $19.7 million in the fourth quarter of 2019. The fourth quarter of 2019 results included $1.0 million of branch consolidation expenses.

Salaries and employee benefits totaled $11.6 million in the first quarter of 2020 as compared with $11.4 million in the previous quarter. The normal seasonal first quarter increase in payroll taxes led to a $0.3 million increase.  Overtime increased with the complexities related to the COVID-19 pandemic leading to a $0.2 million increase in salary expense in the three months ended March 31, 2020.  Bonuses and incentives, which were elevated in the fourth quarter of 2019 due primarily to new hiring efforts, normalized as expected in the first quarter of 2020 and fell by $0.6 million.  Health insurance expenses remained above average under the Company's self-insured group health plan, but fell $0.2 million in the three months ended March 31, 2020.

Occupancy expense decreased by $0.1 million from the three months ended December 31, 2019 to the three months ended March 31, 2020 due primarily to savings from the consolidation of five branches in the first quarter of 2020.  Professional fees fell by $0.2 million in the three months ended March 31, 2020 as many projects from 2019 ended prior to year-end.  First quarter 2020 advertising and bank promotions expense increased by $0.2 million from the previous quarter due to an increase in charitable contributions. The Company received certain tax credits associated with a portion of these increased contributions related to Pennsylvania's Educational Improvement Tax Credit program, which allowed the Company to reduce its Pennsylvania bank shares tax expense, included in taxes other than income, by $0.1 million in the first quarter of 2020 to $0. 

FDIC insurance expense reflects credits received in the first quarter of 2020, similar to those received in the third and fourth quarters of 2019, under the FDIC's regulations to provide credits to banks with consolidated assets under $10 billion, when the reserve ratio reaches 1.38%. The Company exhausted its credits in the first quarter of 2020 and expects FDIC insurance expense to return to customary levels in the second quarter of 2020.

Capital

At March 31, 2020, the Company had a tier 1 leverage ratio of 8.5%, total risk-based capital ratio of 14.0% and tier 1 risk-based capital ratio of 11.2%. The Bank's capital ratios remain solid with the tier 1 leverage ratio of 9.4%, total risk-based capital ratio of 13.4% and tier 1 risk-based capital ratio of 12.5% at March 31, 2020.  Shareholders' equity totaled $210.6 million at March 31, 2020, a decrease of $12.7 million from $223.2 million at December 31, 2019. The decrease was primarily attributable to an increase in accumulated other comprehensive loss from changes in net unrealized gains and losses in securities available for sale, which fell by $13.6 million from December 31, 2019 to March 31, 2020 due to declining interest rates. The Company repurchased 71,955 shares in the first quarter of 2020 at a weighted average price of $16.27, thus reducing equity by $1.2 million.  This repurchase program was suspended on March 21, 2020 due to the COVID-19 pandemic.  The Bank intends to utilize the new Paycheck Protection Program Liquidity Facility (the "PPPLF") to fund the growth in loan closings expected for the SBA PPP in the second quarter of 2020.  SBA loans are 100% guaranteed by the SBA and, therefore, do not impact risk-based capital.  We also intend on pledging the SBA PPP loans to the PPPLF, which would reduce or eliminate the leverage capital impact, depending on how much is actually borrowed.

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
    March 31,   March 31,
(Dollars in thousands, except per share amounts)   2020   2019
         
Profitability for the period:        
Net interest income   $ 18,262     $ 14,760  
Provision for loan losses   925     400  
Noninterest income   7,074     5,135  
Noninterest expenses   18,304     16,161  
Income before income taxes   6,107     3,334  
Income tax expense   1,039     232  
Net income available to common shareholders   $ 5,068     $ 3,102  
         
Financial ratios:        
Return on average assets (1)   0.86 %   0.65 %
Return on average equity (1)   8.96 %   7.23 %
Net interest margin (1)   3.41 %   3.41 %
Efficiency ratio   72.2 %   81.2 %
Income per common share:        
Basic   $ 0.46     $ 0.34  
Diluted   $ 0.46     $ 0.33  
         
Average equity to average assets   9.56 %   9.05 %
         
(1) Quarterly ratios are annualized.        
         


ORRSTOWN FINANCIAL SERVICES, INC.      
FINANCIAL HIGHLIGHTS (Unaudited)      
(continued)      
  March 31,   December 31,
  2020   2019
At period-end:      
Total assets $ 2,387,488     $ 2,383,274  
Total deposits 1,897,296     1,875,522  
Loans, net of allowance for loan losses 1,641,145     1,629,675  
Loans held-for-sale, at fair value 7,900     9,364  
Securities available for sale 479,599     490,885  
Borrowings 212,034     217,936  
Subordinated notes 31,861     31,847  
Shareholders' equity 210,570     223,249  
       
Credit quality and capital ratios (1):      
Allowance for loan losses to total loans 0.95 %   0.89 %
Total nonaccrual loans to total loans 0.47 %   0.65 %
Nonperforming assets to total assets 0.34 %   0.46 %
Allowance for loan losses to nonaccrual loans 202 %   138 %
Total risk-based capital:      
Orrstown Financial Services, Inc. 14.0 %   14.1 %
Orrstown Bank 13.4 %   13.4 %
Tier 1 risk-based capital:      
Orrstown Financial Services, Inc. 11.2 %   11.3 %
Orrstown Bank 12.5 %   12.5 %
Tier 1 common equity risk-based capital:      
Orrstown Financial Services, Inc. 11.2 %   11.3 %
Orrstown Bank 12.5 %   12.5 %
Tier 1 leverage capital:      
Orrstown Financial Services, Inc. 8.5 %   8.6 %
Orrstown Bank 9.4 %   9.4 %
       
Book value per common share $ 18.81     $ 19.93  
       
(1) Capital ratios are estimated, subject to regulatory filings      


ORRSTOWN FINANCIAL SERVICES, INC.      
CONSOLIDATED BALANCE SHEETS (Unaudited)      
       
(Dollars in thousands, except per share amounts) March 31, 2020   December 31, 2019
Assets      
Cash and due from banks $ 33,974     $ 25,969  
Interest-bearing deposits with banks 23,163     29,994  
Cash and cash equivalents 57,137     55,963  
Restricted investments in bank stocks 15,823     16,184  
Securities available for sale (amortized cost of $497,454 and $491,492 at March 31, 2020 and December 31, 2019, respectively) 479,599     490,885  
Loans held for sale, at fair value 7,900     9,364  
Loans 1,656,948     1,644,330  
Less: Allowance for loan losses (15,803 )   (14,655 )
Net loans 1,641,145     1,629,675  
Premises and equipment, net 37,098     37,524  
Cash surrender value of life insurance 64,016     63,613  
Goodwill 20,142     19,925  
Other intangible assets, net 6,717     7,180  
Accrued interest receivable 6,697     6,040  
Other assets 51,214     46,921  
Total assets $ 2,387,488     $ 2,383,274  
Liabilities      
Deposits:      
Noninterest-bearing $ 263,502     $ 249,450  
Interest-bearing 1,633,794     1,626,072  
Total deposits 1,897,296     1,875,522  
Short-term borrowings 189,065     154,869  
Long-term debt 22,969     63,067  
Subordinated notes 31,861     31,847  
Accrued interest and other liabilities 35,727     34,720  
Total liabilities 2,176,918     2,160,025  
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; 11,268,679 shares issued and 11,196,724 outstanding at March 31, 2020; 11,220,604 shares issued and 11,199,874 outstanding at December 31, 2019 586     584  
Additional paid—in capital 187,843     188,365  
Retained earnings 38,408     35,246  
Accumulated other comprehensive loss (15,097 )   (480 )
Treasury stock— 71,955 and 20,730 shares, at cost at March 31, 2020 and December 31, 2019, respectively (1,170 )   (466 )
Total shareholders' equity 210,570     223,249  
Total liabilities and shareholders' equity $ 2,387,488     $ 2,383,274  


ORRSTOWN FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
       
  Three Months Ended
  March 31,   March 31,
(In thousands, except per share amounts) 2020   2019
Interest income      
Loans $ 20,166     $ 15,151  
Investment securities - taxable 3,438     3,492  
Investment securities - tax-exempt 284     842  
Short-term investments 79     173  
Total interest income 23,967     19,658  
Interest expense      
Deposits 4,354     3,715  
Short-term borrowings 562     243  
Long-term debt 288     443  
Subordinated notes 501     497  
Total interest expense 5,705     4,898  
Net interest income 18,262     14,760  
Provision for loan losses 925     400  
Net interest income after provision for loan losses 17,337     14,360  
Noninterest income      
Service charges 987     902  
Interchange Income 788     736  
Loan swap referral fees 200      
Wealth management income 2,359     2,236  
Mortgage banking activities 332     468  
Other income 2,448     454  
Investment securities (losses) gains (40 )   339  
Total noninterest income 7,074     5,135  
Noninterest expenses      
Salaries and employee benefits 11,594     8,677  
Occupancy, furniture and equipment 2,289     2,024  
Data processing, telephone, and communication 871     770  
Advertising and bank promotions 789     521  
FDIC insurance 47     185  
Professional services 716     557  
Taxes other than income     306  
Intangible asset amortization 463     208  
Merger related and branch consolidation expenses     645  
Insurance claim receivable (recovery) write-off (486 )   615  
Other operating expenses 2,021     1,653  
Total noninterest expenses 18,304     16,161  
Income before income tax expense 6,107     3,334  
Income tax expense 1,039     232  
Net income $ 5,068     $ 3,102  
       
Share information:      
Basic earnings per share $ 0.46     $ 0.34  
Diluted earnings per share $ 0.46     $ 0.33  
Weighted average shares - basic 10,959     9,160  
Weighted average shares - diluted 11,062     9,326  
           

ORRSTOWN FINANCIAL SERVICES, INC.
ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)

  Three Months Ended
  3/31/2020   12/31/19   09/30/19   06/30/19   3/31/2019
(Dollars in thousands)   Average Balance       Taxable-Equivalent Interest       Taxable-Equivalent Rate       Average Balance       Taxable-Equivalent Interest       Taxable-Equivalent Rate       Average Balance       Taxable-Equivalent Interest       Taxable-Equivalent Rate       Average Balance       Taxable-Equivalent Interest       Taxable-Equivalent Rate       Average Balance       Taxable-Equivalent Interest       Taxable-Equivalent Rate  
Assets                                                                                                                      
Federal funds sold & interest-bearing bank balances $ 23,368     $ 79       1.37 %   $ 21,895     $ 102       1.84 %   $ 96,212     $ 561       2.31 %   $ 84,843     $ 503       2.38 %   $ 29,108     $ 173       2.41 %
Securities (1) 500,488     3,797       3.05     504,072     3,916       3.08     496,482     4,177       3.34     496,803     4,479       3.62     499,755     4,558       3.70  
Loans (1)(2)(3) 1,653,547     20,288       4.93     1,606,608     20,207       4.99     1,604,491     20,306       5.02     1,497,445     19,782       5.30     1,257,654     15,273       4.93  
Total interest-earning assets 2,177,403     24,164       4.46     2,132,575     24,225       4.51     2,197,185     25,044       4.52     2,079,091     24,764       4.78     1,786,517     20,004       4.54  
Other assets 188,400             191,585             193,946             175,566             137,802          
Total $ 2,365,803             $ 2,324,160             $ 2,391,131             $ 2,254,657             $ 1,924,319          
Liabilities and Shareholders' Equity                                                          
Interest-bearing demand deposits $ 972,487     1,903       0.79     $ 955,975     2,136       0.89     $ 954,824     2,206       0.92     $ 922,612     2,062       0.90     $ 845,092     1,850       0.89  
Savings deposits 151,194     55       0.15     142,524     55       0.15     151,692     81       0.21     146,063     81       0.22     114,314     43       0.15  
Time deposits (4) 503,364     2,396       1.91     559,486     2,717       1.93     658,587     3,508       2.11     575,660     2,749       1.92     403,095     1,822       1.83  
Short-term borrowings 147,645     562       1.53     65,767     307       1.85     10,497     39       1.48     9,594     34       1.41     42,124     243       2.34  
Long-term debt 49,179     288       2.36     63,122     371       2.33     74,524     433       2.30     97,161     532       2.19     88,076     443       2.04  
Subordinated notes 31,853     501       6.32     31,839     501       6.23     31,826     490       6.10     31,819     499       6.28     31,886     497       6.32  
Total interest-bearing liabilities 1,855,722     5,705       1.24     1,818,713     6,087       1.33     1,881,950     6,757       1.42     1,782,909     5,957       1.34     1,524,587     4,898       1.30  
Noninterest-bearing demand deposits 250,163             247,107             252,211             235,046             202,365          
Other 33,763             35,282             35,720             31,692             23,310          
Total Liabilities 2,139,648             2,101,102             2,169,881             2,049,647             1,750,262          
Shareholders' Equity 226,155             223,058             221,250             205,010             174,057          
Total $ 2,365,803             $ 2,324,160             $ 2,391,131             $ 2,254,657             $ 1,924,319          
Taxable-equivalent net interest income / net interest spread     18,459       3.22 %       18,138       3.18 %       18,287       3.10 %       18,807       3.44 %       15,106       3.24 %
Taxable-equivalent net interest margin         3.41 %           3.37 %           3.30 %           3.63 %           3.43 %
Taxable-equivalent adjustment     (197 )             (197 )             (208 )             (292 )             (346 )      
Net interest income     $ 18,262               $ 17,941               $ 18,079               $ 18,515               $ 14,760        
Ratio of average interest-earning assets to average interest-bearing liabilities         117 %           117 %           117 %           117 %           117 %


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.
(4)  For the three months ended September 30, 2019, expenses associated with the early redemption of brokered time deposits totaled $0.2 million, and increased the cost of funds by 13 basis points.
 

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)

(In thousands, except per share amounts) March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
 
Profitability for the quarter:                            
Net interest income $ 18,262     $ 17,941     $ 18,079     $ 18,515     $ 14,760  
Provision for loan losses 925         300     200     400  
Noninterest income 7,074     7,028     8,602     7,774     5,135  
Noninterest expenses 18,304     19,707     18,140     23,292     16,161  
Income before income taxes 6,107     5,262     8,241     2,797     3,334  
Income tax expense 1,039     1,028     1,340     110     232  
Net income $ 5,068     $ 4,234     $ 6,901     $ 2,687     $ 3,102  
                             
Financial ratios:                            
Return on average assets (1) 0.86 %   0.72 %   1.15 %   0.48 %   0.65 %
Return on average equity (1) 8.96 %   7.53 %   12.37 %   5.26 %   7.23 %
Net interest margin (1) 3.41 %   3.37 %   3.30 %   3.63 %   3.43 %
Efficiency ratio 72.25 %   78.93 %   67.99 %   88.60 %   81.23 %
Efficiency ratio, adjusted (2) 72.13 %   75.02 %   72.55 %   67.83 %   79.34 %
                             
Per share information :                            
Income per common share:                            
Basic $ 0.46     $ 0.39     $ 0.63     $ 0.26     $ 0.34  
Diluted $ 0.46     $ 0.38     $ 0.62     $ 0.26     $ 0.33  
Book value $ 18.81     $ 19.93     $ 20.00     $ 19.59     $ 18.89  
Tangible book value (3) $ 16.53     $ 17.65     $ 17.67     $ 17.27     $ 17.25  
Cash dividends paid $ 0.17     $ 0.15     $ 0.15     $ 0.15     $ 0.15  
Average basic shares 10,959     10,966     10,949     10,349     9,160  
Average diluted shares 11,062     11,097     11,094     10,514     9,326  
 
(1)  Annualized.
(2) Efficiency ratio has been adjusted for merger related fees and investment securities (losses) gains.
(3) 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)

  March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
  March 31,
2019
Noninterest income:                        
Service charges $ 987     $ 1,119     $ 1,110     $ 1,078   $ 902
Interchange income 788     859     843     843   736
Loan swap referral fees 200     568     629      
Wealth management income 2,359     2,478     2,546     2,421   2,236
Mortgage banking activities 332     1,304     623     652   468
Other income 2,448     682     523     716   454
Investment securities (losses) gains (40 )   18     2,328     2,064   339
Total noninterest income $ 7,074     $ 7,028     $ 8,602     $ 7,774   $ 5,135
                         
Noninterest expenses:                        
Salaries and employee benefits $ 11,594     $ 11,407     $ 10,489     $ 8,922   $ 8,677
Occupancy, furniture and equipment 2,289     2,433     2,385     2,206   2,024
Data processing, telephone, and communication 871     941     1,028     1,260   770
Advertising and bank promotions 789     619     279     548   521
FDIC insurance 47     (30 )   (9 )   221   185
Professional services 716     876     814     707   557
Taxes other than income     92     306     314   306
Intangible asset amortization 463     474     486     402   208
Merger related and branch consolidation expenses     988     471     6,860   645
Insurance claim receivable (recovery) write-off (486 )             615
Other operating expenses 2,021     1,907     1,891     1,852   1,653
Total noninterest expenses $ 18,304     $ 19,707     $ 18,140     $ 23,292   $ 16,161
                         




ORRSTOWN FINANCIAL SERVICES, INC.                
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)            
(continued)                  
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
  March 31,
2019
Balance Sheet at quarter end:                  
Cash and cash equivalents $ 57,137     $ 56,462     $ 50,923     $ 116,879     $ 77,217  
Restricted investments in bank stocks 15,823     16,184     11,399     10,105     10,292  
Securities available for sale 479,599     490,386     481,120     496,930     490,221  
Loans held for sale, at fair value 7,900     9,364              
Loans held for sale, at cost         7,610     7,152     4,787  
Loans:                  
Commercial real estate:                  
Owner occupied 168,586     170,884     171,327     170,272     123,100  
Non-owner occupied 377,933     361,050     310,334     298,989     264,869  
Multi-family 107,797     106,893     108,751     93,342     83,009  
Non-owner occupied residential 118,773     120,038     120,395     121,364     101,312  
Commercial and industrial 235,791     214,554     215,734     219,551     169,651  
Total commercial loans 1,008,880     973,419     926,541     903,518     741,941  
Acquisition and development:                  
1-4 family residential construction 13,037     15,865     12,257     12,801     6,361  
Commercial and land development 49,348     41,538     38,494     57,027     49,784  
Municipal 46,551     47,057     47,920     48,358     50,599  
Residential mortgage:                  
First lien 324,766     336,372     353,811     363,946     231,243  
Home equity – term 13,337     14,030     15,175     15,989     11,828  
Home equity – lines of credit 165,375     165,314     159,930     157,645     143,308  
Installment and other loans 35,654     50,735     38,977     42,386     30,475  
Total loans 1,656,948     1,644,330     1,593,105     1,601,670     1,265,539  
Allowance for loan losses (15,803 )   (14,655 )   (14,809 )   (14,460 )   (14,283 )
Net loans held-for-investment 1,641,145     1,629,675     1,578,296     1,587,210     1,251,256  
Goodwill 20,142     19,925     19,925     19,621     12,592  
Other intangible assets, net 6,717     7,180     7,654     8,140     3,702  
Total assets 2,387,488     2,383,274     2,313,677     2,399,508     1,973,283  
Total deposits 1,897,296     1,875,522     1,923,454     2,015,541     1,620,696  
Borrowings 212,034     217,936     99,770     92,634     112,935  
Subordinated notes 31,861     31,847     31,834     31,821     31,810  
Total shareholders' equity 210,570     223,249     223,493     219,868     179,167  
                             


ORRSTOWN FINANCIAL SERVICES, INC.                
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)            
(continued)                  
  March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
  March 31,
2019
Capital and credit quality measures (1):                  
Total risk-based capital:                  
Orrstown Financial Services, Inc 14.0 %   14.1 %   14.5 %   14.1 %   15.3 %
Orrstown Bank 13.4 %   13.4 %   13.6 %   13.0 %   13.2 %
Tier 1 risk-based capital:                  
Orrstown Financial Services, Inc 11.2 %   11.3 %   11.6 %   11.2 %   11.9 %
Orrstown Bank 12.5 %   12.5 %   12.7 %   12.1 %   12.1 %
Tier 1 common equity risk-based capital:                  
Orrstown Financial Services, Inc 11.2 %   11.3 %   11.6 %   11.2 %   11.9 %
Orrstown Bank 12.5 %   12.5 %   12.7 %   12.1 %   12.1 %
Tier 1 leverage capital:                  
Orrstown Financial Services, Inc 8.5 %   8.6 %   8.2 %   8.5 %   8.5 %
Orrstown Bank 9.4 %   9.4 %   8.9 %   8.6 %   8.6 %
                   
Average equity to average assets 9.56 %   9.60 %   9.25 %   9.09 %   9.05 %
Allowance for loan losses to total loans 0.95 %   0.89 %   0.93 %   0.90 %   1.13 %
Total nonaccrual loans to total loans 0.47 %   0.65 %   0.44 %   0.27 %   0.37 %
Nonperforming assets to total assets 0.34 %   0.46 %   0.33 %   0.21 %   0.26 %
Allowance for loan losses to nonaccrual loans 202 %   138 %   214 %   330 %   301 %
                   
Other information:                  
Net (recoveries) charge-offs $ (223 )   $ 154     $ (49 )   $ 23     $ 131  
Classified loans 30,470     40,808     37,535     27,742     17,782  
Nonperforming and other risk assets:                  
Nonaccrual loans 7,805     10,657     6,931     4,387     4,743  
Other real estate owned 197     197     642     735     454  
Total nonperforming assets 8,002     10,854     7,573     5,122     5,197  
Restructured loans still accruing 971     979     1,042     1,104     1,116  
Loans past due 90 days or more and still accruing (2) 2,115     2,232     2,982     1,661     295  
Total nonperforming and other risk assets $ 11,088     $ 14,065     $ 11,597     $ 7,887     $ 6,608  
(1) Capital ratios are estimated, subject to regulatory filings.
(2) Includes $1.9 million, $2.0 million, $2.4 million, $1.7 million, and $0.3 million of purchased credit impaired loans at March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019 and March 31, 2019, 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
  3/31/2020   12/31/19   9/30/19   6/30/19   3/31/2019
(In thousands)                  
Pretax Items                  
Merger related expenses $     $     $ (471 )   $ (6,860 )   $ (645 )
Branch consolidation expenses     (988 )            
Net securities (losses) gains (40 )   18     2,328     2,064     339  
Accelerated payoff of brokered deposits and borrowings penalty         223          
Life insurance proceeds             255      
Restricted stock forfeiture expense benefit             350      
Accretion -  recoveries on purchased credit impaired loans 211     109     21     715      
Insurance claim receivable recovery (write-off) 486                 (615 )
                   
Income Tax Expense Items                  
Tax benefit from state deferred tax asset rate change             334      
Tax benefit from acquired life insurance assets                 185  
                   

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 $26.9 million and $27.1 million at March 31, 2020 and December 31, 2019, respectively.

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.

Tangible book value per share and net interest margin excluding the impact of purchase accounting, 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 table presents the computation of each non-GAAP based measure shown together with its most directly comparable GAAP based measure.

(in thousands, except per share information)  
Tangible Book Value per Common Share March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
  March 31,
2019
Shareholders' equity $ 210,570     $ 223,249     $ 223,493     $ 219,868     $ 179,167  
Less:                            
Goodwill 20,142     19,925     19,925     19,621     12,592  
Other intangible assets 6,717     7,180     7,654     8,140     3,702  
Related tax effect (1,411 )   (1,508 )   (1,607 )   (1,709 )   (777 )
Tangible common equity (non-GAAP) $ 185,122     $ 197,652     $ 197,521     $ 193,816     $ 163,650  
                   
Common shares outstanding 11,197     11,200     11,175     11,224     9,485  
                   
Book value per share (most directly comparable GAAP based measure) $ 18.81     $ 19.93     $ 20.00     $ 19.59     $ 18.89  
Intangible assets per share 2.28     2.28     2.33     2.32     1.64  
Tangible book value per share (non-GAAP) $ 16.53     $ 17.65     $ 17.67     $ 17.27     $ 17.25  
                                       


    Three Months Ended
(dollars in thousands)   March 31,
2020
  December 31,
2019
  September 30,
2019
  June 30,
2019
  March 31,
2019
Taxable-Equivalent Net Interest Margin (excluding the effect of purchase accounting)
                                               
Taxable-equivalent net interest income/margin, as reported $ 18,459     3.41 %   $ 18,138     3.37 %   $ 18,287     3.30 %   $ 18,807     3.63 %   $ 15,106     3.43 %
Effect of purchase accounting:                                      
Loans Income (899 )   (0.19 )%   (1,241 )   (0.24 )%   (879 )   (0.17 )%   (1,385 )   (0.29 )%   (253 )   (0.07 )%
Time deposits Expense 28     (0.01 )%   32     (0.01 )%   36     (0.01 )%   24     (0.01 )%   (9 )   0.00 %
Purchase accounting effect on taxable-equivalent income/margin (927 )   (0.20 )%   (1,273 )   (0.25 )%   (915 )   (0.18 )%   (1,409 )   (0.30 )%   (244 )   (0.07 )%
Taxable-equivalent net interest income/margin (excluding the effect of purchase accounting) (non-GAAP) $ 17,532     3.21 %   $ 16,865     3.12 %   $ 17,372     3.12 %   $ 17,398     3.33 %   $ 14,862     3.36 %
                                                                     

About the Company

With $2.4 billion in assets, Orrstown Financial Services, Inc. and its wholly-owned subsidiaries, Orrstown Bank and Wheatland Advisors, Inc., provide a wide range of consumer and business financial services through banking and financial advisory offices 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. For more information about Wheatland Advisors, Inc., visit www.wheatlandadvisors.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 our 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; and to realize cost savings from our branch consolidation efforts. In addition to risks and uncertainties related to the COVID-19 pandemic 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; volatilities 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; and other risks and uncertainties, including those set forth under the heading "Risk Factors" in the Company's 2019 Annual Report on Form 10-K and subsequent filings. The foregoing list of factors is not exhaustive.

If one or more events related to these or other risks or uncertainties materialize, 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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