Orrstown Financial Services Inc. said this week it is recording a third-quarter net loss of more than $21 million but nearly $20 million of that is due to recognizing losses that it plans to recover by using them to offset future tax liabilities.
The parent company of Orrstown Bank on Monday reported a loss for the quarter ending Sept. 30 of $21.4 million, or $2.65 per diluted share, compared with earnings of $4.3 million, or 54 cents per diluted share, for the third quarter of 2011.
Orrstown said it has $19.9 million in recently incurred “credit and credit-related losses and expenses” that constitute a “deferred tax asset,” meaning it can be set against future taxable income. Because of uncertainty regarding when that will happen, however, Orrstown recorded a valuation allowance against the full amount.
“The valuation allowance represents a non-cash charge to income tax expense and will be recoverable in future years as the company returns to profitability,” Orrstown said.
Excluding the valuation allowance, Orrstown said it posted a loss of $1.5 million for the quarter and $19.6 million for the year through Sept. 30.
Orrstown is working to right itself after nonperforming loans pushed it to a loss of $32 million in 2011. The bank has strengthened its management team and significantly reduced the risk in its loan portfolio, CEO Thomas Quinn said in a statement.
Orrstown reported nonaccrual loans of $57.8 million as of Sept. 30, compared with $56.9 million in June and $83.7 million in December 2011.