Orrstown Financial Services, Inc. Reports Earnings for the Fourth Quarter 2022 and Full Year 2022 Results

المصدر: Nasdaq GlobeNewswire / 24 يناير 2023 16:03:23 America/New_York

Net income of $9.6 million and diluted earnings per share of $0.91 for the three months ended December 31, 2022 compared to a net loss of $4.8 million and diluted loss per share of $0.47 for the three months ended September 30, 2022; net income of $22.0 million and diluted earnings per share of $2.06 for the year ended December 31, 2022 compared to net income of $32.9 million and diluted earnings per share of $2.96 for the year ended December 31, 2021;
Excluding the impact from the third quarter provision for legal settlement ("legal settlement") and restructuring charge, net income and diluted earnings per share were $34.8 million⁽¹⁾ and $3.25⁽¹⁾, respectively, for the year ended December 31, 2022;
Fourth quarter return on average assets of 1.33% and return on average equity of 17.28%;
Net interest income increased to $27.5 million for the three months ended December 31, 2022 compared to $25.5 million for the three months ended September 30, 2022 reflecting net interest margin expansion over that period;
Net interest margin, on a tax equivalent basis, increased to 4.14% in the fourth quarter of 2022 from 3.92% in the third quarter of 2022; net interest margin has increased as a result of loan growth and the rising interest rate environment;
Fourth quarter commercial loan growth, excluding SBA PPP loans, was $56.6 million, or 14% annualized; full year commercial loan growth, excluding SBA PPP loans, was $299.9 million, or 21%; consumer loans increased by $9.9 million, or 9% annualized, during the fourth quarter of 2022 compared to the third quarter of 2022; full year consumer loan growth was $47.3 million, or 12%;
Noninterest expenses decreased by $15.2 million to $21.2 million in the three months ended December 31, 2022 from $36.4 million in the three months ended September 30, 2022; excluding the impact of the restructuring charge and legal settlement, noninterest expenses were $21.2 million in the fourth quarter of 2022 compared to $20.3 million⁽¹⁾ during the third quarter of 2022;
Provision for loan losses was $0.6 million in the fourth quarter of 2022 compared to $1.5 million in the third quarter of 2022;
The Board of Directors increased the Company's quarterly cash dividend, declaring a cash dividend of $0.20 per common share, payable February 14, 2023, to shareholders of record as of February 7, 2023.

SHIPPENSBURG, Pa., Jan. 24, 2023 (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 and year ended December 31, 2022. Net income totaled $9.6 million for the three months ended December 31, 2022, compared to a net loss of $4.8 million for the three months ended September 30, 2022 and net income of $6.7 million for the three months ended December 31, 2021. Diluted earnings per share totaled $0.91 for the three months ended December 31, 2022, compared to diluted loss per share of $0.47 for the three months ended September 30, 2022 and diluted earnings per share of $0.60 for the three months ended December 31, 2021. For the third quarter of 2022, excluding the impact from the restructuring charge and legal settlement, net income and diluted earnings per share were $7.9 million⁽¹⁾ and $0.75¹⁾, respectively.

Net income totaled $22.0 million and $32.9 million for the years ended December 31, 2022 and 2021, respectively. Diluted earnings per share totaled $2.06 for the year ended December 31, 2022, compared to diluted earnings per share of $2.96 for the year ended December 31, 2021. Excluding the impact from the restructuring charge and legal settlement, net income and diluted earnings per share were $34.8 million⁽¹⁾ and $3.25⁽¹⁾ for the year ended December 31, 2022, respectively.

⁽¹⁾ Non-GAAP measures. See Appendix A for additional information.

“Despite a decline of approximately $10.7 million in SBA PPP income from 2021 to 2022, Orrstown recorded net income of $34.8 million in 2022, excluding the impact of restructuring and legal settlement charges in the third quarter, compared to $32.9 million in 2021. Our performance demonstrates the payoff from the foundation that we have built over the past several years. Orrstown’s strong earnings power and the impact of past investments were further illustrated by our fourth quarter 2022 performance as we recorded a return on average assets of 1.33% and a return on average equity of 17.3%. We expect that the strategic actions taken in the third quarter will enable us to continue on our growth trajectory into 2023. We anticipate that the expected efficiencies from these actions will begin to positively impact the Company’s performance in 2023 and that the benefits of the reinvestment of resources into our digital footprint will be seen over time,” commented Thomas R. Quinn, Jr., President and Chief Executive Officer.

“We experienced net interest margin expansion to 4.14% in the fourth quarter due to the continued strong growth in our loan portfolio as well as the impact of interest rate increases. However, we do expect some margin contraction going forward due to competitive pressures on deposit pricing and increased usage of borrowings to fund growth. We are confident in the ability of our commercial and retail teams to continue to grow our balance sheet in the challenging economic environment that is anticipated in 2023. We believe that our disciplined approach to growth positions us for continued success.”

DISCUSSION OF RESULTS

Balance Sheet

Loans

Excluding SBA PPP loans, total loans increased by $66.5 million from September 30, 2022 to December 31, 2022, or 13% annualized. SBA PPP loans, net of deferred fees and costs, declined by $3.2 million to $13.8 million at December 31, 2022 from $17.0 million at September 30, 2022 due to forgiveness activity. Net deferred SBA PPP fees of $0.3 million remain at December 31, 2022. Commercial loans, excluding SBA PPP loans, increased by $56.6 million, or 14% annualized, from September 30, 2022 to December 31, 2022. Loans held for investment, which includes SBA PPP loans, increased by $63.3 million from September 30, 2022 to December 31, 2022, or 12% annualized, due to continued strong sales efforts.

The first lien residential mortgage portfolio grew by $8.9 million, or 16% annualized, in the three months ended December 31, 2022 from jumbo and adjustable-rate mortgage production. Home equity lines of credit increased by $3.0 million, or 7% annualized, in the three months ended December 31, 2022.

Investment Securities

Investment securities increased by $14.3 million to $524.4 million at December 31, 2022 compared to $510.1 million at September 30, 2022. During the fourth quarter of 2022, the Bank sold municipal securities totaling $28.2 million, which were offset by purchases of higher yielding securities totaling $42.0 million. These purchases were also offset by normal paydown activity of $7.7 million. Due to changes in market interest rates, net unrealized losses on investment securities declined by $4.9 million. In addition, FHLB stock increased $4.2 million due to an increase in borrowings during the fourth quarter of 2022. See Appendix B for a summary of the Bank's investment securities at December 31, 2022, highlighting the concentrations, credit ratings and credit enhancement levels of the investment securities portfolio at such date.

Deposits

Deposits decreased by $29.6 million, or 5% annualized, totaling approximately $2.5 billion at both December 31, 2022 and September 30, 2022. In the fourth quarter of 2022, noninterest-bearing demand deposits and time deposits decreased by $60.1 million, or 42% annualized, and $2.9 million, or 5% annualized, respectively. These decreases were partially offset by increases in interest-bearing demand deposits by $14.2 million, or 6% annualized, and money market and savings deposits of $19.2 million, or 11% annualized. The decrease in deposits resulted primarily from clients utilizing their funds at a higher frequency and certificate of deposit runoff. The Bank's loan-to-deposit ratio was 87% at December 31, 2022.

During the fourth quarter of 2022, the Bank announced that it had entered into a Purchase and Assumption Agreement providing for the sale of its Path Valley branch and associated deposit liabilities. Deposits held for assumption of approximately $31.7 million are reported within total deposits at cost and are comprised of $24.3 million in interest-bearing deposits and $7.4 million in non-interest bearing deposits. The transaction is expected to close in the second quarter of 2023.

Borrowings

FHLB advances and other borrowings increased by $104.5 million to $106.1 million at December 31, 2022 compared to $1.6 million at September 30, 2022. As utilization of excess liquidity by individuals and businesses and competition for deposits have increased, the Bank's deposit balances declined slightly during the fourth quarter of 2022. The Bank opted to borrow funds to provide additional liquidity to meet the credit needs of its clients.

Income Statement

Net Interest Income and Margin

Net interest income increased by $2.0 million to $27.5 million for the three months ended December 31, 2022 compared to $25.5 million for the three months ended September 30, 2022. The net interest margin, on a tax equivalent basis, increased to 4.14% in the fourth quarter of 2022 from 3.92% in the third quarter of 2022. The increase in net interest margin was the result of growth in, and the impact of the rising interest rates on the loan and investment securities portfolios, partially offset by an increase in the cost of funds.

Interest income on loans increased by $3.8 million to $27.0 million for the three months ended December 31, 2022 compared to $23.2 million for the three months ended September 30, 2022. Loan growth and higher interest rates were the primary drivers of this increase. Interest income on loans for the three months ended December 31, 2022 included prepayment fee income of $0.4 million, an increase of $0.3 million, from $0.1 million for the three months ended September 30, 2022.

Interest income recognized on SBA PPP loans totaled $0.2 million in the three months ended December 31, 2022 compared to $0.5 million in the three months ended September 30, 2022.

Interest income on investment securities increased by $0.6 million to $4.9 million for the three months ended December 31, 2022 from $4.3 million for the third quarter of 2022. The increase reflects the impact of rising interest rates on investments for which resets occur at various frequencies and the additional yield generated from investments purchased during the third and fourth quarters of 2022.

Interest expense on interest-bearing liabilities increased by $2.6 million to $4.6 million for the three months ended December 31, 2022 compared to $2.0 million for the three months ended September 30, 2022 due to the increase in average interest-bearing deposits and borrowings and rising interest rates.

Provision for Loan Losses

The Company recorded a provision for loan losses of $0.6 million for the three months ended December 31, 2022 compared to $1.5 million for the three months ended September 30, 2022. Net charge-offs were $0.1 million for the three months ended December 31, 2022. The allowance for loan losses totaled $25.2 million at December 31, 2022, compared to $24.7 million at September 30, 2022. The allowance for loan losses to total loans remained relatively consistent at 1.17% at December 31, 2022 compared to 1.18% at September 30, 2022.

During the fourth quarter of 2022, the Bank downgraded one commercial construction loan with an outstanding balance of $15.4 million to substandard and placed it into non-accrual status. Although the loan is not past due, management determined that it was appropriate to place the loan on non-accrual status due to other relevant factors. At this time, management deems the value of underlying collateral sufficient to cover any potential losses on this loan. Management does not believe that this credit is indicative of overall stress in the loan portfolio. As a result of this downgrade, total nonaccrual loans to total loans increased to 0.96% at December 31, 2022 from 0.25% at September 30, 2022. Management believes the allowance for loan losses to be adequate based on current asset quality metrics and economic conditions.

Noninterest Income

Noninterest income totaled $6.2 million in the three months ended December 31, 2022 compared to $6.1 million in the three months ended September 30, 2022.

Mortgage banking income increased by $1.2 million from a loss of $1.0 million in the third quarter of 2022 to income of $0.2 million in the fourth quarter of 2022. Market conditions negatively impacted mortgage production in the second half of the year, initially resulting from low housing inventory. In the fourth quarter of 2022, while inventory improved, higher interest rates drove a further drop in mortgage demand, which caused additional declines in in the residential mortgage loan pipeline and secondary market sales during the three months ended December 31, 2022. Mortgage loans sold totaled $8.6 million in the fourth quarter of 2022 compared to $12.7 million in the third quarter of 2022 and $43.7 million in the fourth quarter of 2021. The Company experienced marginal improvement in the fair value of held-for-sale loans during the fourth quarter of 2022 as compared to a loss of $1.4 million from a fair value reduction in the third quarter of 2022.

Swap fee income increased by $0.5 million to $0.7 million for the three months ended December 31, 2022 compared to $0.2 million for the three months ended September 30, 2022. Swap fee income fluctuates based on market conditions and client demand.

Wealth management income decreased by $0.5 million to $2.5 million during the fourth quarter of 2022 from $3.0 million during the third quarter of 2022 due to unfavorable conditions in the stock and bond markets.

Other income decreased by $1.0 million to $0.7 million for the three months ended December 31, 2022 from $1.7 million during the three months ended September 30, 2022. The third quarter of 2022 included income from distributions on investments in non-housing limited partnerships totaling $1.0 million.

Noninterest Expenses

Noninterest expenses decreased by $15.2 million to $21.2 million in the three months ended December 31, 2022 from $36.4 million in the three months ended September 30, 2022. During the third quarter of 2022, the Company recorded a restructuring charge of $3.2 million and a provision for legal settlement of $13.0 million. Excluding the impact from the restructuring charge and legal settlement, noninterest expenses increased by $0.9 million to $21.2 million in the fourth quarter of 2022 from $20.3 million⁽¹⁾ during the third quarter of 2022.

Advertising and bank promotions expense increased by $0.5 million to $0.8 million in the three months ended December 31, 2022 from $0.3 million for the three months ended September 30, 2022 due to $0.4 million in contributions to tax credit programs during the fourth quarter of 2022. Taxes other than income decreased by $0.3 million to $0.2 million in the three months ended December 31, 2022 compared to $0.5 million in the three months ended September 30, 2022. This decrease reflects the tax credits recognized on these contributions during the fourth quarter of 2022.

Other operating expenses increased $0.8 million to $2.6 million during the fourth quarter of 2022 compared to $1.8 million during the third quarter of 2022. This increase was primarily caused by an increase in mark-to-market losses on derivatives of $0.4 million and customer fraud losses of $0.2 million. The remaining fluctuation of approximately $0.2 million is attributable to normal business operations.

Salaries and benefits expense was $12.7 million for both the three months ended December 31, 2022 and September 30, 2022, which remained elevated in the latter part of 2022 due to incentive compensation increases, the filling of several vacancies, and higher healthcare costs.

Income Taxes

The Company's effective tax rate for the fourth quarter of 2022 was 19.0% compared to 24.6% for the third quarter of 2022. The net loss incurred during the third quarter of 2022, due to the restructuring charge and legal settlement, resulted in an income tax benefit. The Company's effective tax rate for the three months ended December 31, 2022 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 effective tax rate for the year ended December 31, 2022 is 17.2% compared to 19.6% for the year ended December 31, 2021. The decrease in the effective tax rate was primarily due to a decrease in taxable income resulting from the restructuring charge and legal settlement, an increase in tax-exempt interest income on loans and investment securities due to the rising interest rates, and additional tax credits.

Capital

Shareholders’ equity totaled $228.9 million at December 31, 2022, an increase of $11.5 million from $217.4 million at September 30, 2022. The increase was primarily attributable to net income of $9.6 million and other comprehensive income of $3.6 million, partially offset by dividends paid of $2.0 million for the three months ended December 31, 2022. Other comprehensive income increased primarily due to a decline of $3.9 million in net unrealized losses on investment securities. Tangible book value per share⁽¹⁾ increased from $18.34 per share at September 30, 2022 to $19.47 per share at December 31, 2022 primarily as a result of the increase in shareholders' equity.

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

The Company's tangible common equity ratio increased to 7.1% at December 31, 2022 from 6.9% at September 30, 2022 primarily due to an increase in tangible equity from net income and the decrease in unrealized losses on available-for-sale securities. The Company's total risk-based capital ratio was 12.7% at both December 31, 2022 and September 30, 2022. An increase in risk-based capital from net income was offset by an increase in risk weighted assets primarily caused by loan growth. The Company's Tier 1 leverage ratio increased to 8.5% at December 31, 2022 from 8.4% at September 30, 2022 primarily due to net income partially offset by the increase in average assets caused by loan growth. At December 31, 2022, all four capital ratios applicable to the Company were above regulatory minimum levels to be deemed “well capitalized” under current bank regulatory guidelines.

The Board of Directors approved an increase to the quarterly dividend to $0.20 per share, payable on February 14, 2023, to shareholders of record as of February 7, 2023. The dividend payout ratio totaled 21% for the three months ended December 31, 2022. At this time, the Company continues to believe that capital is adequate to support the risks inherent in the balance sheet, as well as growth requirements.

Investor Relations Contact:

Neelesh Kalani

Executive Vice President, Chief Financial Officer

Phone (717) 510-7097

ORRSTOWN FINANCIAL SERVICES, INC.
FINANCIAL HIGHLIGHTS (Unaudited)


	Three Months Ended						Twelve Months Ended
	December 31,			December 31,			December 31,			December 31,
(Dollars in thousands)		2022			2021			2022			2021

Profitability for the period:
Net interest income	$	27,484		$	22,598		$	99,630		$	86,974
Provision for loan losses		585			1,100			4,160			1,090
Noninterest income		6,226			7,293			26,952			29,152
Noninterest expenses		21,236			20,290			95,806			74,141
Income before income tax expense		11,889			8,501			26,616			40,895
Income tax expense		2,263			1,795			4,579			8,014
Net income available to common shareholders	$	9,626		$	6,706		$	22,037		$	32,881

Financial ratios:
Return on average assets⁽¹⁾		1.33	%		0.93	%		0.77	%		1.14	%
Return on average assets, adjusted^{(1) (2) (3)}		1.33	%		0.93	%		1.22	%		1.14	%
Return on average equity⁽¹⁾		17.28	%		9.93	%		9.02	%		12.54	%
Return on average equity, adjusted^{(1) (2) (3)}		17.28	%		9.93	%		14.25	%		12.54	%
Net interest margin⁽¹⁾		4.14	%		3.35	%		3.81	%		3.25	%
Efficiency ratio		63.0	%		67.9	%		75.7	%		63.8	%
Efficiency ratio, adjusted^{(2) (3)}		63.0	%		67.9	%		62.9	%		63.8	%
Income per common share:
Basic	$	0.93		$	0.61		$	2.09		$	3.00
Basic, adjusted^{(2) (3)}	$	0.93		$	0.61		$	3.30		$	3.00
Diluted	$	0.91		$	0.60		$	2.06		$	2.96
Diluted, adjusted^{(2) (3)}	$	0.91		$	0.60		$	3.25		$	2.96

Average equity to average assets		7.68	%		9.34	%		8.59	%		9.06	%

⁽¹⁾Annualized.
⁽²⁾Ratio has been adjusted for the restructuring charge and provision for legal settlement for the twelve months ended December 31, 2022.
⁽³⁾Non-GAAP based financial measure. Please refer to Appendix A - 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.
FINANCIAL HIGHLIGHTS(Unaudited)
(continued)
	December 31,			December 31,
(Dollars in thousands, except per share amounts)		2022			2021
At period-end:
Total assets	$	2,922,408		$	2,834,565
Total deposits		2,476,246			2,464,929
Loans, net of allowance for loan losses		2,126,054			1,958,806
Loans held-for-sale, at fair value		10,880			8,868
Securities available for sale		513,728			472,438
Borrowings		123,390			25,197
Subordinated notes		32,026			31,963
Shareholders' equity		228,896			271,656

Credit quality and capital ratios⁽¹⁾:
Allowance for loan losses to total loans		1.17	%		1.07	%
Total nonaccrual loans to total loans		0.96	%		0.33	%
Nonperforming assets to total assets		0.70	%		0.23	%
Allowance for loan losses to nonaccrual loans		122	%		328	%
Total risk-based capital:
Orrstown Financial Services, Inc.		12.7	%		15.0	%
Orrstown Bank		12.3	%		14.0	%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.		10.3	%		12.2	%
Orrstown Bank		11.2	%		12.9	%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.		10.3	%		12.2	%
Orrstown Bank		11.2	%		12.9	%
Tier 1 leverage capital:
Orrstown Financial Services, Inc.		8.5	%		8.5	%
Orrstown Bank		9.2	%		8.9	%

Book value per common share	$	21.45		$	24.29

⁽¹⁾Capital ratios are estimated, subject to regulatory filings

ORRSTOWN FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS(Unaudited)

(Dollars in thousands, except per share amounts)	December 31, 2022			December 31, 2021
Assets
Cash and due from banks	$	28,477		$	21,217
Interest-bearing deposits with banks		32,346			187,493
Cash and cash equivalents		60,823			208,710
Restricted investments in bank stocks		10,642			7,252
Securities available for sale (amortized cost of $563,278 and $466,806 at December 31, 2022 and December 31, 2021, respectively)		513,728			472,438
Loans held for sale, at fair value		10,880			8,868
Loans		2,151,232			1,979,986
Less: Allowance for loan losses		(25,178	)		(21,180	)
Net loans		2,126,054			1,958,806
Premises and equipment, net		29,328			34,045
Cash surrender value of life insurance		71,760			70,217
Goodwill		18,724			18,724
Other intangible assets, net		3,078			4,183
Accrued interest receivable		11,027			8,234
Deferred tax assets, net		24,031			11,648
Other assets		42,333			31,440
Total assets	$	2,922,408		$	2,834,565
Liabilities
Deposits:
Noninterest-bearing	$	501,963		$	553,238
Interest-bearing		1,974,283			1,911,691
Total deposits		2,476,246			2,464,929
Securities sold under agreements to repurchase		17,251			23,301
FHLB advances and other		106,139			1,896
Subordinated notes		32,026			31,963
Accrued interest and other liabilities		61,850			40,820
Total liabilities		2,693,512			2,562,909
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; 11,229,242 shares issued and 10,671,413 outstanding at December 31, 2022; 11,258,167 shares issued and 11,183,050 outstanding at December 31, 2021		584			586
Additional paid—in capital		189,264			189,689
Retained earnings		92,473			78,700
Accumulated other comprehensive (loss) income		(39,913	)		4,449
Treasury stock— 557,829 and 75,117 shares, at cost at December 31, 2022 and December 31, 2021, respectively		(13,512	)		(1,768	)
Total shareholders’ equity		228,896			271,656
Total liabilities and shareholders’ equity	$	2,922,408		$	2,834,565

ORRSTOWN FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

	Three Months Ended				Twelve Months Ended
	December 31,		December 31,		December 31,			December 31,
(In thousands)		2022		2021		2022			2021
Interest income
Loans	$	26,980	$	21,503	$	93,528		$	84,227
Investment securities - taxable		3,775		1,615		10,237			6,622
Investment securities - tax-exempt		1,102		703		4,115			2,493
Short-term investments		238		98		774			353
Total interest income		32,095		23,919		108,654			93,695
Interest expense
Deposits		3,579		789		6,337			4,199
Securities sold under agreements to repurchase		20		7		44			31
FHLB advances and other		509		23		630			482
Subordinated notes		503		502		2,013			2,009
Total interest expense		4,611		1,321		9,024			6,721
Net interest income		27,484		22,598		99,630			86,974
Provision for loan losses		585		1,100		4,160			1,090
Net interest income after provision for loan losses		26,899		21,498		95,470			85,884
Noninterest income
Service charges		1,131		935		4,614			3,693
Interchange income		996		1,080		4,055			4,129
Swap fee income		697		158		2,632			293
Wealth management income		2,535		2,897		11,251			11,467
Mortgage banking activities		202		1,225		407			5,909
Investment securities gains (losses)		3		3		(160	)		638
Other income		662		995		4,153			3,023
Total noninterest income		6,226		7,293		26,952			29,152
Noninterest expenses
Salaries and employee benefits		12,650		12,095		48,004			44,002
Occupancy, furniture and equipment		2,442		2,554		9,812			9,846
Data processing		1,150		1,020		4,560			4,061
Advertising and bank promotions		750		744		2,264			2,178
FDIC insurance		316		246		1,083			816
Professional services		837		693		3,254			2,555
Taxes other than income		231		392		1,391			1,321
Intangible asset amortization		260		303		1,105			1,275
Provision for legal settlement		—		—		13,000			—
Restructuring expenses		—		—		3,155			—
Other operating expenses		2,600		2,243		8,178			8,087
Total noninterest expenses		21,236		20,290		95,806			74,141
Income before income tax expense		11,889		8,501		26,616			40,895
Income tax expense		2,263		1,795		4,579			8,014
Net income	$	9,626	$	6,706	$	22,037		$	32,881

Share information:
Basic earnings per share	$	0.93	$	0.61	$	2.09		$	3.00
Diluted earnings per share	$	0.91	$	0.60	$	2.06		$	2.96
Weighted average shares - basic		10,382		10,939		10,553			10,967
Weighted average shares - diluted		10,550		11,113		10,706			11,106

ORRSTOWN FINANCIAL SERVICES, INC.
ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis(Unaudited)
	Three Months Ended
	12/31/2022							9/30/2022							6/30/2022							3/31/2022							12/31/2021
			Taxable-			Taxable-				Taxable-			Taxable-				Taxable-			Taxable-				Taxable-			Taxable-				Taxable-			Taxable-
	Average		Equivalent			Equivalent		Average		Equivalent			Equivalent		Average		Equivalent			Equivalent		Average		Equivalent			Equivalent		Average		Equivalent			Equivalent
(Dollars in thousands)	Balance		Interest			Rate		Balance		Interest			Rate		Balance		Interest			Rate		Balance		Interest			Rate		Balance		Interest			Rate
Assets
Federal funds sold & interest-bearing bank balances	$	28,419	$	238		3.31	%	$	38,068	$	200		2.08	%	$	131,449	$	235		0.72	%	$	199,788	$	101		0.20	%	$	250,336	$	98		0.16	%
Investment securities⁽¹⁾		512,779		5,170		4.03			528,988		4,377		3.31			523,940		3,388		2.59			472,195		2,512		2.13			477,217		2,506		2.08
Loans^(1)(2)(3)		2,133,052		27,061		5.04			2,051,707		23,219		4.49			2,008,283		22,090		4.41			1,974,804		21,429		4.39			1,975,014		21,559		4.33
Total interest-earning assets		2,674,250		32,469		4.83			2,618,763		27,796		4.22			2,663,672		25,713		3.87			2,646,787		24,042		3.67			2,702,567		24,163		3.55
Other assets		202,384							196,277							192,561							184,300							187,622
Total	$	2,876,634						$	2,815,040						$	2,856,233						$	2,831,087						$	2,890,189
Liabilities and Shareholders' Equity
Interest-bearing demand deposits	$	1,459,109		2,838		0.77		$	1,379,082		912		0.26		$	1,420,051		301		0.09		$	1,398,182		256		0.07		$	1,430,845		273		0.08
Savings deposits		228,521		132		0.23			237,462		90		0.15			236,916		63		0.11			227,676		57		0.10			215,957		55		0.10
Time deposits		254,637		609		0.95			265,015		370		0.55			275,408		337		0.49			298,618		372		0.51			313,148		461		0.58
Total interest-bearing deposits		1,942,267		3,579		0.73			1,881,559		1,372		0.29			1,932,375		701		0.15			1,924,476		685		0.14			1,959,950		789		0.16
Securities sold under agreements to repurchase		18,211		20		0.46			23,480		10		0.18			24,045		7		0.11			23,530		7		0.12			24,069		7		0.12
FHLB advances and other		48,276		509		4.21			10,394		78		3.02			1,741		21		4.74			1,850		22		4.74			1,956		23		4.70
Subordinated notes		32,016		503		6.29			32,000		504		6.29			31,985		503		6.29			31,969		503		6.29			31,954		503		6.29
Total interest-bearing liabilities		2,040,770		4,611		0.90			1,947,433		1,964		0.40			1,990,146		1,232		0.25			1,981,825		1,217		0.25			2,017,929		1,322		0.26
Noninterest-bearing demand deposits		540,275							575,777							572,171							540,139							559,882
Other		74,602							49,964							47,190							40,919							42,380
Total Liabilities		2,655,647							2,573,174							2,609,507							2,562,883							2,620,191
Shareholders' Equity		220,987							241,866							246,726							268,204							269,998
Total	$	2,876,634						$	2,815,040						$	2,856,233						$	2,831,087						$	2,890,189
Taxable-equivalent net interest income / net interest spread				27,858		3.93	%				25,832		3.82	%				24,481		3.62	%				22,825		3.42	%				22,841		3.29	%
Taxable-equivalent net interest margin						4.14	%						3.92	%						3.68	%						3.49	%						3.35	%
Taxable-equivalent adjustment				(374	)						(377	)						(363	)						(252	)						(243	)
Net interest income			$	27,484						$	25,455						$	24,118						$	22,573						$	22,598
Ratio of average interest-earning assets to average interest-bearing liabilities						131	%						134	%						134	%						134	%						134	%


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

ORRSTOWN FINANCIAL SERVICES, INC.
ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis(Unaudited)
	Twelve Months Ended
	December 31, 2022							December 31, 2021
			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	$	98,793	$	774		0.78	%	$	258,834	$	353		0.14	%
Investment securities⁽¹⁾		509,640		15,446		3.03			462,035		9,779		2.12
Loans^(1)(2)(3)		2,042,422		93,799		4.59			1,985,350		84,453		4.25
Total interest-earning assets		2,650,855		110,019		4.15			2,706,219		94,585		3.50
Other assets		193,945							188,596
Total	$	2,844,800						$	2,894,815
Liabilities and Shareholders' Equity
Interest-bearing demand deposits	$	1,414,177		4,308		0.30		$	1,392,996		1,287		0.09
Savings deposits		232,660		341		0.15			202,371		203		0.10
Time deposits		273,276		1,688		0.62			360,264		2,709		0.75
Total interest-bearing deposits		1,920,113		6,337		0.33			1,955,631		4,199		0.21
Securities sold under agreements to repurchase		22,305		44		0.20			22,888		32		0.14
FHLB advances and other		15,678		630		4.01			40,589		482		1.19
Subordinated notes		31,993		2,013		6.29			31,931		2,009		6.29
Total interest-bearing liabilities		1,990,089		9,024		0.45			2,051,039		6,722		0.33
Noninterest-bearing demand deposits		557,142							542,952
Other		53,288							38,665
Total Liabilities		2,600,519							2,632,656
Shareholders' equity		244,281							262,159
Total	$	2,844,800						$	2,894,815
Taxable-equivalent net interest income / net interest spread				100,995		3.70	%				87,863		3.17	%
Taxable-equivalent net interest margin						3.81	%						3.25	%
Taxable-equivalent adjustment				(1,365	)						(889	)
Net interest income			$	99,630						$	86,974
Ratio of average interest-earning assets to average interest-bearing liabilities						133	%						132	%

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

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

(In thousands)	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Profitability for the quarter:
Net interest income	$	27,484		$	25,455		$	24,118		$	22,573		$	22,598
Provision for loan losses		585			1,500			1,775			300			1,100
Noninterest income		6,226			6,058			7,194			7,474			7,293
Noninterest expenses		21,236			36,412			18,794			19,364			20,290
Income (loss) before income taxes		11,889			(6,399	)		10,743			10,383			8,501
Income tax expense (benefit)		2,263			(1,571	)		1,872			2,015			1,795
Net income (loss)	$	9,626		$	(4,828	)	$	8,871		$	8,368		$	6,706

Financial ratios:
Return on average assets⁽¹⁾		1.33	%	(0.68		)%		1.25	%		1.20	%		0.93	%
Return on average equity⁽¹⁾		17.28	%	(7.92		)%		14.42	%		12.65	%		9.93	%
Net interest margin⁽¹⁾		4.14	%		3.92	%		3.68	%		3.49	%		3.35	%
Efficiency ratio		63.0	%		115.5	%		60.0	%		64.4	%		67.9	%

Per share information:
Income (loss) per common share:
Basic	$	0.93		$	(0.47	)	$	0.84		$	0.77		$	0.61
Diluted		0.91			(0.47	)		0.83			0.76			0.60
Book value		21.45			20.34			22.25			23.00			24.29
Tangible book value⁽²⁾		19.47			18.34			20.23			21.03			22.32
Cash dividends paid		0.19			0.19			0.19			0.19			0.19

Average basic shares		10,382			10,369			10,610			10,860			10,939
Average diluted shares		10,550			10,529			10,744			11,007			11,113
⁽¹⁾Annualized.
⁽²⁾Non-GAAP based financial measure. Please refer to Appendix A - 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)
	December 31, 2022		September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Noninterest income:
Service charges	$	1,131	$	1,216		$	1,194		$	1,073		$	935
Interchange income		996		1,014			1,064			981			1,080
Swap fee income		697		197			785			953			158
Wealth management income		2,535		2,953			2,894			2,869			2,897
Mortgage banking activities		202		(1,014	)		498			721			1,225
Other income		662		1,706			762			1,023			995
Investment securities gains (losses)		3		(14	)		(3	)		(146	)		3
Total noninterest income	$	6,226	$	6,058		$	7,194		$	7,474		$	7,293

Noninterest expenses:
Salaries and employee benefits	$	12,650	$	12,705		$	11,312		$	11,337		$	12,095
Occupancy, furniture and equipment		2,442		2,380			2,423			2,567			2,554
Data processing		1,150		1,192			1,165			1,053			1,020
Advertising and bank promotions		750		278			881			355			744
FDIC insurance		316		294			190			283			246
Professional services		837		887			722			808			693
Taxes other than income		231		488			108			564			392
Intangible asset amortization		260		272			281			292			303
Provision for legal settlement		—		13,000			—			—			—
Restructuring expenses		—		3,155			—			—			—
Other operating expenses		2,600		1,761			1,712			2,105			2,243
Total noninterest expenses	$	21,236	$	36,412		$	18,794		$	19,364		$	20,290

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA(Unaudited)
(continued)
	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Balance Sheet at quarter end:
Cash and cash equivalents	$	60,823		$	66,927		$	111,906		$	214,238		$	208,710
Restricted investments in bank stocks		10,642			6,469			6,500			6,791			7,252
Securities available for sale		513,728			503,596			512,698			529,730			472,438
Loans held for sale, at fair value		10,880			10,175			7,824			7,403			8,868
Loans:
Commercial real estate:
Owner occupied		315,770			313,125			287,825			256,526			238,668
Non-owner occupied		608,043			573,605			559,309			558,999			551,783
Multi-family		138,832			114,561			116,110			93,158			93,255
Non-owner occupied residential		104,604			105,267			109,141			102,269			106,112
Commercial and industrial⁽¹⁾		357,774			378,574			379,729			443,170			485,728
Acquisition and development:
1-4 family residential construction		25,068			20,810			22,650			15,115			12,279
Commercial and land development		158,308			148,512			134,947			105,204			93,925
Municipal		12,173			12,683			12,957			14,626			14,989
Total commercial loans		1,720,572			1,667,137			1,622,668			1,589,067			1,596,739
Residential mortgage:
First lien		229,849			220,970			202,787			203,231			198,831
Home equity – term		5,505			5,869			5,996			5,820			6,081
Home equity – lines of credit		183,241			180,267			171,269			164,818			160,705
Installment and other loans		12,065			13,684			14,909			15,371			17,630
Total loans		2,151,232			2,087,927			2,017,629			1,978,307			1,979,986
Allowance for loan losses		(25,178	)		(24,709	)		(23,279	)		(21,508	)		(21,180	)
Net loans held-for-investment		2,126,054			2,063,218			1,994,350			1,956,799			1,958,806
Goodwill		18,724			18,724			18,724			18,724			18,724
Other intangible assets, net		3,078			3,338			3,610			3,891			4,183
Total assets		2,922,408			2,852,092			2,824,201			2,900,537			2,834,565
Total deposits⁽²⁾		2,476,246			2,505,853			2,478,616			2,545,992			2,464,929
Borrowings		123,390			22,632			25,965			26,412			25,197
Subordinated notes		32,026			32,010			31,994			31,978			31,963
Total shareholders' equity		228,896			217,378			237,527			254,804			271,656

⁽¹⁾ This balance includes $13.8 million, $17.0 million, $30.2 million, $122.5 million and $189.9 million of SBA PPP loans, net of deferred fees and costs, at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively.

⁽²⁾ This balance includes deposits held for assumption in connection with the sale of a bank branch of approximately $31.7 million, which is comprised of $24.3 million in interest-bearing deposits and $7.4 million in non-interest bearing deposits at December 31, 2022.

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA(Unaudited)
(continued)
	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Capital and credit quality measures⁽¹⁾:
Total risk-based capital:
Orrstown Financial Services, Inc		12.7	%		12.7	%		13.5	%		14.3	%		15.0	%
Orrstown Bank		12.3	%		12.9	%		13.3	%		13.8	%		14.0	%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc		10.3	%		10.2	%		10.9	%		11.7	%		12.2	%
Orrstown Bank		11.2	%		11.8	%		12.2	%		12.7	%		12.9	%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc		10.3	%		10.2	%		10.9	%		11.7	%		12.2	%
Orrstown Bank		11.2	%		11.8	%		12.2	%		12.7	%		12.9	%
Tier 1 leverage capital:
Orrstown Financial Services, Inc		8.5	%		8.4	%		8.5	%		8.8	%		8.5	%
Orrstown Bank		9.2	%		9.6	%		9.5	%		9.5	%		8.9	%

Average equity to average assets		7.68	%		8.59	%		8.64	%		9.47	%		9.34	%
Allowance for loan losses to total loans		1.17	%		1.18	%		1.15	%		1.09	%		1.07	%
Total nonaccrual loans to total loans		0.96	%		0.25	%		0.27	%		0.28	%		0.33	%
Nonperforming assets to total assets		0.70	%		0.19	%		0.19	%		0.19	%		0.23	%
Allowance for loan losses to nonaccrual loans		122	%		466	%		432	%		390	%		328	%

Other information:
Net charge-offs (recoveries)	$	116		$	70		$	4		$	(28	)	$	(115	)
Classified loans		36,325			19,576			19,682			23,421			23,050
Nonperforming and other risk assets:
Nonaccrual loans		20,583			5,303			5,387			5,510			6,449
Other real estate owned		—			—			—			—			—
Total nonperforming assets		20,583			5,303			5,387			5,510			6,449
Restructured loans still accruing		682			689			568			575			804
Loans past due 90 days or more and still accruing⁽²⁾		439			232			322			238			1,201
Total nonperforming and other risk assets	$	21,704		$	6,224		$	6,277		$	6,323		$	8,454
(1) Capital ratios are estimated, subject to regulatory filings.
(2) Includes $0.4 million, $0.2 million, $0.3 million, $0.2 million and $0.3 million of purchased credit impaired loans at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021, respectively. As of December 31, 2021, there was one loan for $0.9 million, which was in the process of collection and guaranteed by the SBA, and was subsequently collected during the first quarter of 2022.

Appendix A- 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, which totaled $21.8 million and $22.9 million at December 31, 2022 and December 31, 2021, respectively. Additionally, the Company incurred $3.2 million and $13.0 million in restructuring charges and a provision for legal settlement, respectively, during the three months ended September 30, 2022 and year ended December 31, 2022.

Management believes providing certain other “non-GAAP” financial information will assist investors in their understanding of the effect on recent financial results from non-recurring charges.

Tangible book value per common share and the impact of the restructuring charge and legal settlement on net income and associated ratios, 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 and shares in thousands)

Tangible Book Value per Common Share	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Shareholders' equity (most directly comparable GAAP based measure)	$	228,896		$	217,378		$	237,527		$	254,804		$	271,656
Less: Goodwill		18,724			18,724			18,724			18,724			18,724
Other intangible assets		3,078			3,338			3,610			3,891			4,183
Related tax effect		(646	)		(701	)		(758	)		(817	)		(878	)
Tangible common equity (non-GAAP)	$	207,740		$	196,017		$	215,951		$	233,006		$	249,627

Common shares outstanding		10,671			10,686			10,676			11,079			11,183

Book value per share (most directly comparable GAAP based measure)	$	21.45		$	20.34		$	22.25		$	23.00		$	24.29
Intangible assets per share		1.98			2.00			2.02			1.97			1.97
Tangible book value per share (non-GAAP)	$	19.47		$	18.34		$	20.23		$	21.03		$	22.32

(dollars and shares in thousands)
Adjusted Ratios for Restructuring Charges and Provision for Legal Settlement	September 30, 2022			December 31, 2022
	Three Months Ended			Twelve Months Ended
Net (loss) income (A) - most directly comparable GAAP based measure	$	(4,828	)	$	22,037
Plus: Restructuring expenses (B)		3,155			3,155
Plus: Provision for legal settlement (B)		13,000			13,000
Less: Related tax effect (C)		(3,393	)		(3,393	)
Adjusted net income (D=A+B-C) - Non-GAAP	$	7,934		$	34,799

Average assets (E)	$	2,815,040		$	2,844,800
Return on average assets⁽¹⁾(= A / E) - most directly comparable GAAP based measure	(0.68		)%		0.77	%
Return on average assets, adjusted⁽¹⁾(= D / E) - Non-GAAP		1.12	%		1.22	%

Average equity (F)	$	241,866		$	244,281
Return on average equity⁽¹⁾(= A / F) - most directly comparable GAAP based measure	(7.92		)%		9.02	%
Return on average equity, adjusted⁽¹⁾(= D / F) - Non-GAAP		13.02	%		14.25	%

Weighted average shares - basic (G) - most directly comparable GAAP based measure		10,369			10,553
Basic (loss) earnings per share (= A / G) - most directly comparable GAAP based measure	$	(0.47	)	$	2.09
Basic earnings per share, adjusted (= D / G) - Non-GAAP	$	0.77		$	3.30

Weighted average shares - diluted (H) - most directly comparable GAAP based measure		10,369			10,706
Diluted (loss) earnings per share (= A / H) - most directly comparable GAAP based measure	$	(0.47	)	$	2.06
Diluted earnings per share, adjusted (= D / H) - Non-GAAP	$	0.75		$	3.25

Noninterest expense (I) - most directly comparable GAAP based measure	$	36,412		$	95,806
Less: Restructuring expenses (B)		(3,155	)		(3,155	)
Less: Provision for legal expenses (B)		(13,000	)		(13,000	)
Adjusted noninterest expense (J = I - B) - Non-GAAP	$	20,257		$	79,651

Net interest income (K)	$	25,455		$	99,630
Noninterest income (L)		6,058			26,952
Total operating income (M = K + L)	$	31,513		$	126,582

Efficiency ratio (= I / M) - most directly comparable GAAP based measure		115.5	%		75.7	%
Efficiency ratio, adjusted (= J / M) - Non-GAAP		64.3	%		62.9	%
(1) Annualized

Appendix B- Investment Portfolio Concentrations

The following table summarizes the credit ratings and collateral associated with the Company's investment security portfolio, excluding equity securities, at December 31, 2022:

(dollars in thousands)

Sector	Portfolio Mix		Amortized Book		Fair Value		Credit Enhancement		AAA		AA		A		BBB		NR		Collateral / Guarantee Type
Unsecured ABS	1	%	$	4,899	$	4,319	30	%	—	%	—	%	—	%	—	%	100	%	Unsecured Consumer Debt
Student Loan ABS	1			6,900		6,658	26		—		—		—		—		100		Seasoned Student Loans
Federal Family Education Loan ABS	20			114,685		110,723	8		89		11		—		—		—		Federal Family Education Loan⁽¹⁾
PACE Loan ABS	—			2,685		2,467	6		100		—		—		—		—		PACE Loans⁽⁴⁾
Non-Agency CMBS	4			21,226		21,267	18		—		—		—		—		100
Non-Agency RMBS	3			16,948		14,926	14		100		—		—		—		—		Reverse Mortgages⁽²⁾
Municipal - General Obligation	19			105,055		92,961			4		90		6		—		—
Municipal - Revenue	21			120,770		104,453			—		82		12		—		6
SBA ReRemic⁽⁵⁾	1			5,532		5,371			—		100		—		—		—		SBA Guarantee⁽³⁾
Small Business Administration	1			4,907		5,135			—		100		—		—		—		SBA Guarantee⁽³⁾
Agency MBS	25			139,224		127,780			—		100		—		—		—		Residential Mortgages⁽³⁾
U.S. Treasury securities	4			20,070		17,291			—		100		—		—		—		U.S. Government Guarantee⁽³⁾
Bank CDs	—			249		249			—		—		—		—		100		FDIC Insured CD
	100	%	$	563,150	$	513,600			23	%	67	%	3	%	—	%	7	%

⁽¹⁾97% guaranteed by U.S. government
⁽²⁾Non-agency reverse mortgages with current structural credit enhancements
⁽³⁾Guaranteed by U.S. government or U.S. government agencies
⁽⁴⁾PACE acronym represents Property Assessed Clean Energy loans
⁽⁵⁾SBA ReRemic acronym represents Re-Securitization of Real Estate Mortgage Investment Conduits

Note: Ratings in table are the lowest of the six rating agencies (Standard & Poor's, Moody's, Fitch, Morningstar, DBRS and Kroll Bond Rating Agency). Standard & Poor's rates U.S. 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 and Section 21E of the Exchange Act. 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. Forward-looking statements are statements that include projections, predictions, expectations, estimates or beliefs about events or results or otherwise are not statements of historical factors, many of which, by their nature, are inherently uncertain and beyond the Company's control, and include, but are not limited to, statements related to new business development, new loan opportunities, growth in the balance sheet and fee-based revenue lines of business, merger and acquisition activity, cost savings initiatives, reducing risk assets and mitigating losses in the future. 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 achieve the desired level of new business development and new loans, growth in the balance sheet and fee-based revenue lines of business, successful merger and acquisition activity and cost savings initiatives and continued reductions in risk assets or mitigate losses in the future. In addition to risks and uncertainties related to the COVID-19 pandemic (including those related to variants) 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 and cost savings initiatives, 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; the demand for our products and services; deteriorating economic conditions; geopolitical tensions; changes in litigation matters, including the failure to obtain Court approval of proposed settlements, the number of plaintiffs who opt-out of proposed settlements and whether a proposed settlement is appealed; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; 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 detailed in our Annual Report on Form 10-K for the year ended December 31, 2021, and our Quarterly Reports on Form 10-Q under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other filings made with the SEC. The statements are valid only as of the date hereof and we disclaim any obligation to update this information. 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.

Orrstown Financial Services, Inc. Reports Earnings for the Fourth Quarter 2022 and Full Year 2022 Results

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