Orrstown Financial Services(US:ORRF)2023-05-09 21:00Financial Performance - Net income for the three months ended March 31, 2023, was $9.2 million, an increase from $8.4 million for the same period in 2022[207]. - Diluted earnings per share rose to $0.87 for the three months ended March 31, 2023, compared to $0.76 for the same period in 2022[207]. - Total comprehensive income for the three months ended March 31, 2023, was $16.2 million, a significant increase of $27.0 million from a total comprehensive loss of $10.8 million in the same period of 2022[286]. - Shareholders' equity increased by $11.3 million, or 5%, to $240.2 million as of March 31, 2023, primarily due to net income of $9.2 million and other comprehensive income of $7.1 million[285]. Interest Income and Expenses - Net interest income increased by $3.7 million to $26.3 million for the three months ended March 31, 2023, from $22.6 million in the same period in 2022[212]. - Interest income on loans rose by $7.3 million to $28.7 million, while interest income on investment securities increased by $2.9 million to $5.2 million compared to the prior year[212]. - Interest expense on interest-bearing liabilities increased by $6.8 million year-over-year, with the cost rising by 125 basis points to 1.50% for the three months ended March 31, 2023[223]. - The net interest spread rose by 20 basis points to 3.62% for the three months ended March 31, 2023, up from 3.42% in the prior year[215]. - Taxable-equivalent net interest margin increased by 45 basis points to 3.94% for the three months ended March 31, 2023, compared to 3.49% for the same period in 2022[216]. Loan Portfolio and Credit Quality - Average loans increased by $205.4 million to $2.2 billion for the three months ended March 31, 2023, from $2.0 billion in the same period in 2022[217]. - Nonaccrual loans were 0.96% of gross loans at March 31, 2023, compared to 0.28% at March 31, 2022[227]. - The allowance for credit losses (ACL) to total loans increased to 1.28% from 1.17% at the end of 2022[249]. - The provision for credit losses on loans was $729 thousand for the three months ended March 31, 2023, compared to $300 thousand for the same period in 2022[209]. - Total nonperforming assets reached $21.331 million, up from $20.583 million at the end of 2022[249]. Noninterest Income and Expenses - Noninterest income decreased to $6.1 million for the three months ended March 31, 2023, down from $7.5 million in the same period in 2022, primarily due to lower swap fee income and gains on sales of SBA-guaranteed loans[210]. - Noninterest expenses totaled $20.3 million for the three months ended March 31, 2023, an increase from $19.4 million in the same period in 2022, mainly due to higher salaries and employee benefits[211]. - Salaries and employee benefits rose by $859 thousand, primarily due to staff additions and higher employee benefit costs[232]. Deposits and Liquidity - Deposits grew by $39.4 million, or 2%, remaining at $2.5 billion as of March 31, 2023, with time deposits increasing by $51.6 million, or 21%[277]. - The Bank purchased $10.0 million in brokered money market deposits during the first quarter of 2023, reflecting efforts to enhance liquidity[277]. - The Company has sufficient access to liquidity, mitigating the need to sell investment securities at a loss[237]. Market Conditions and Economic Indicators - The 10-year Treasury bond rate was 3.48% as of March 31, 2023, down from 3.83% at December 31, 2022, reflecting ongoing inflationary pressures[203]. - The unemployment rate in Pennsylvania decreased from 4.4% in March 2022 to 4.2% in March 2023, indicating improvements in the local job market[202]. Investment Securities - The investment securities portfolio totaled $520.2 million at March 31, 2023, an increase of $6.5 million from $513.7 million at December 31, 2022[237]. - Net unrealized losses on investment securities decreased from $49.6 million at December 31, 2022, to $40.8 million at March 31, 2023, a reduction of $8.8 million[237]. - The overall duration of the investment securities portfolio is 4.8 years as of March 31, 2023[237]. Credit Losses and Risk Management - The company maintains a comprehensive analysis of the ACL on a quarterly basis, evaluating the adequacy based on historical loss experiences and current economic conditions[261]. - The company believes it has adequately provided for potential losses on evaluated loans as of March 31, 2023, but acknowledges that additional information may lead to increased reserve allocations[259]. - The company’s approach to credit risk management is designed to comply with relevant accounting and regulatory guidance for both collectively and individually evaluated loans[260].