Orrstown Financial (ORRF) Reports Additional Impairments to Q4, FY11 Results
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Price: $42.02 -0.19%
Financial Fact:
Total interest and dividend income: 10.65M
Today's EPS Names:
BTTX, VAXX, ELYS, More
Financial Fact:
Total interest and dividend income: 10.65M
Today's EPS Names:
BTTX, VAXX, ELYS, More
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Orrstown Financial Services, Inc. (Nasdaq: ORRF) has made an update to its originally reported earnings for the quarter and year ended December 31, 2011. The updated earnings release was prompted by events that arose subsequent to the original earnings release on January 26, 2012 that resulted in additional asset impairments. These additional impairments necessitated an increase of $13.7 million in the provision for loan losses for the quarter ended December 31, 2011 above the previously-announced level. This additional provision, net of deferred tax benefit of $4.7 million, lowered previously reported earnings by $9.0 million. As a result of the additional $9.0 million of provision for loan losses, net of deferred tax benefit, for the quarter ended December 31, 2011, the Company reported a net loss of $29.5 million, or $3.66 per diluted share, compared to net income of $4.4 million, or $0.55 per diluted share, for the quarter ended December 31, 2010. On a year to date basis, net loss for the year ended December 31, 2011 was $32.0 million, or $3.98 per diluted share, compared to net income of $16.6 million, or $2.17 per diluted share, for the year ended December 31, 2010.
In the period subsequent to the January 26th earnings release, additional information on seven lending relationships was learned, which resulted in an evaluation as to whether increases to impairment reserves should be recognized as of December 31, 2011. It was concluded that the additional reserves should be recognized at December 31, 2011, as the information provided additional evidence about conditions that existed at the balance sheet date, including key assumptions used in the estimation process of preparing the financial statements. The additional information received in the intervening period included the receipt of updated appraisals on several loans, which resulted in management’s determination that the related loan was either impaired, or the impairment reserve previously allocated to the loans was not sufficient. Additionally, on two lending relationships with loan balances totaling $28.3 million, our estimate of the impairment on these relationships was adjusted to reflect the relationships’ observable market price based on third party bids on the notes. The loan impairments were previously determined on a discounted cash flows or collateral dependent approach. As a result, the impairment reserves on these two relationships were increased by $5.9 million through an increase in the provision for loan losses, and now total $10.5 million. Management anticipates that the sale of these notes will take place in the first quarter of 2012, and will result in cash proceeds of $17.8 million and a charge-off of the remaining loan balances equal to the $10.5 million reserve established.
In addition, loans totaling $12.7 million were moved into nonaccrual (cash basis) status at December 31, 2011, including $5.2 million that were previously presented as accruing troubled debt restructurings.
In the period subsequent to the January 26th earnings release, additional information on seven lending relationships was learned, which resulted in an evaluation as to whether increases to impairment reserves should be recognized as of December 31, 2011. It was concluded that the additional reserves should be recognized at December 31, 2011, as the information provided additional evidence about conditions that existed at the balance sheet date, including key assumptions used in the estimation process of preparing the financial statements. The additional information received in the intervening period included the receipt of updated appraisals on several loans, which resulted in management’s determination that the related loan was either impaired, or the impairment reserve previously allocated to the loans was not sufficient. Additionally, on two lending relationships with loan balances totaling $28.3 million, our estimate of the impairment on these relationships was adjusted to reflect the relationships’ observable market price based on third party bids on the notes. The loan impairments were previously determined on a discounted cash flows or collateral dependent approach. As a result, the impairment reserves on these two relationships were increased by $5.9 million through an increase in the provision for loan losses, and now total $10.5 million. Management anticipates that the sale of these notes will take place in the first quarter of 2012, and will result in cash proceeds of $17.8 million and a charge-off of the remaining loan balances equal to the $10.5 million reserve established.
In addition, loans totaling $12.7 million were moved into nonaccrual (cash basis) status at December 31, 2011, including $5.2 million that were previously presented as accruing troubled debt restructurings.
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