Orrstown Financial Services, Inc. Announces Record Quarterly Earnings, Fourth Quarter Dividend and Reduction in Risk Assets

Please visit our website, http://www.orrstown.com/, for the complete earnings release.

SHIPPENSBURG, PA (October 28, 2010)
• Third quarter 2010 earnings increased 26.2% vs. third quarter 2009

• 11.0% reduction of risk assets in the third quarter 2010

• Nonperforming assets declined 29.0% since March 31, 2010

• Basic earnings per share of $0.61 for the third quarter 2010, matches third quarter 2009, despite an increase in the number of shares from the March 2010 stock offering

• The Company announced a 2.3% increase in the quarterly dividend over the fourth quarter 2009

Orrstown Financial Services, Inc. (NASDAQ: ORRF) announced today that net income increased 26.2% to $4,896,000 for the quarter ended September 30, 2010, from $3,880,000 for the third quarter of 2009. Diluted earnings per share amounted to $0.61 for the quarter ended September 30, 2010, as compared to $0.60 for the corresponding prior year period. The Company also announced that its Board of Directors declared a fourth quarter cash dividend of $0.225 per share for shareholders of record on November 12, 2010. The dividend will be paid on November 24, 2010.

Commenting on the Company’s results, Thomas R. Quinn, Jr., President and CEO, said, “We are very pleased to report record net income, by quarter, for three sequential quarters and a 17.8% increase in year-to-date earnings compared to the same period last year.”

“Our capital raise in the first quarter of 2010, which increased capital by $37.6 million, combined with our ability to generate deposit growth, allowed us to grow assets 27.4% since September 30, 2009. Our regulatory capital ratios of 9.5% Tier 1 leverage, 13.7% Tier 1 risk-based, and 14.9% Total risk-based are well above the minimums to be considered well capitalized, and position the Company to take advantage of future opportunities.”

Quinn concluded, “Despite a tough banking environment, we have been able to produce consistent operating results, bolster our reserves and capital, and continue our efforts in addressing asset quality. This forward momentum will continue to serve us well during the remainder of 2010 and into 2011.”

Results of Quarterly Operations

Net interest income for the quarter ended September 30, 2010 increased to $11,668,000 as compared to $9,479,000 in the same prior year period. The net interest margin decreased slightly to 3.62% for the three months ended September 30, 2010, a reduction of one basis point versus the same quarter in 2009. The Company continues to lower its cost of funds as evidenced by a decrease of 62 basis points to 0.92% for the three months ended September 30, 2010, as compared to 1.54% in the same prior year period. Average interest-earning assets increased by $286 million for the three months ended September 30, 2010, as compared to the same prior year period.

Other income increased to $6.2 million for the three months ended September 30, 2010, as compared to $4.4 million in the same prior year period. This includes an increase in securities gains from $338,000 during third quarter 2009, to $1,074,000 during third quarter 2010. Noninterest income generation increased across all business lines, including Orrstown Financial Advisors, mortgage origination and deposit based fees. Operating expenses amounted to $9.7 million for the three months ended September 30, 2010, as compared to $8.0 million for the corresponding prior year period.

Results of Year-to-Date Operations

Net interest income for the nine months ended September 30, 2010, increased to $33,465,000 as compared to $26,313,000 in the same prior year period, reflecting a higher net interest margin and higher levels of interest-earnings assets. The net interest margin increased to 3.72% for the nine months ended September 30, 2010, a gain of 19 basis points versus the same period in 2009. The yield on interest-earning assets decreased to 4.76%, as compared to 5.25% in the prior year period. Year to date, the cost of funds decreased to 1.04% for the nine months ended September 30, 2010, as compared to 1.72% in the same prior year period. Average interest-earning assets increased by $225 million for the nine months ended September 30, 2010, as compared to the same prior year period. The provision for loan losses increased to $7,550,000 for the nine months ended September 30, 2010, as compared to $1,265,000 for the corresponding prior year period.

Other income increased to $18.3 million for the nine months ended September 30, 2010, as compared to $12.6 million in the same prior year period. This includes an increase in securities gains from $796,000 through September 30, 2009, to $3,253,000 through September 30, 2010. Operating expenses amounted to $27.1 million for the nine months ended September 30, 2010, as compared to $23.9 million for the corresponding prior year period.

Financial Condition

Assets grew $282 million to $1.478 billion at September 30, 2010, up from $1.196 billion at December 31, 2009. Securities available for sale have increased $232.9 million, or 118.7%, since December 31, 2009. Deposits increased to $1.139 billion at September 30, 2010, from $915 million at December 31, 2009. Stockholders’ equity increased to $163.9 million at September 30, 2010, as compared to $110.9 million at December 31, 2009, boosted by the completion of a common stock offering, in March 2010, that netted approximately $37.6 million in additional capital.

Asset Quality

The Company’s non-accrual loans totaled $14.4 million at September 30, 2010, down $8.6 million, or 37%, from the high of $23.0 million at March 31, 2010. Improvement was made through the reduction in the level of non-accrual loans, loans past due 90 or more days and still accruing, and total delinquency. The Company continues to be diligent in its handling of nonperforming and other risk assets and has been able to reduce the level of risk assets from a high of $32.8 million at March 31, 2010, to $20.5 million as of September 30, 2010. Two large credits, totaling $7.6 million, have been worked off the books since March 2010, which resulted in a $2.0 million charge off in the second quarter. Although the Company’s ratio of total risk assets to total assets increased from 0.96% at December 31, 2009, to 1.39% at September 30, 2010, increases have been noted across the financial services industry and within our peer group. The Company’s allowance for loan losses covered its nonperforming loans and stood at 107% at September 30, 2010.

With over $1.4 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.

Safe Harbor Statement: This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: ineffectiveness of the Corporation's business strategy due to changes in current or future market conditions; the effects of competition, including industry consolidation and development of competing financial products and services; changes in laws and regulations, including the recent Dodd-Frank Wall Street Reform and Consumer Protection Act; interest rate movements; changes in credit quality; volatilities in the securities markets; and deteriorating economic conditions, and other risks and uncertainties, including those detailed in Orrstown Financial Services, Inc.'s filings with the Securities and Exchange Commission. The statements are valid only as of the date hereof and Orrstown Financial Services, Inc. disclaims any obligation to update this information.

The review period for subsequent events extends up to and including 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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Orrstown Bank Announces 4 Promotions!

Shippensburg, PA (10/21/2010) Orrstown Bank (NASDAQ: ORRF) is pleased to announce that Zachary Flynn has been promoted to the position of Senior Vice President & Regional Senior Loan Officer for the Bank’s Carlisle, West Shore & Perry County Markets. Zach came to Orrstown Bank in December of 2009 as a SVP & Regional Senior Loan Officer for the West Shore & Perry County Markets.

Jeff Gayman, SVP and Chief Commercial Officer commented: “With over 25 years of experience in the Financial Services industry, the expertise and knowledge Zach brings to this position will be an asset to the Carlisle region.”

Orrstown Bank (NASDAQ: ORRF) is pleased to announce that Lew Davey, Vice President, Business Development Officer for the Bank’s West Shore region, will be expanding his role to include activities as a Business Banking Officer in Perry County.

Jeff Gayman, SVP and Chief Commercial Officer commented: “With over 20 years experience working in the East and West Shores, Davey brings a wealth of expertise and knowledge to his new role, and I am confident that he will do all he can to help our customers in Perry County realize their dreams.”

Orrstown Bank (NASDAQ: ORRF) is pleased to announce that Colby Windholz has been promoted to Commercial Loan Officer for the Bank’s Carlisle region.

Jeff Gayman, SVP and Chief Commercial Officer commented: “Colby has built a foundation of solid customer service in the Carlisle region since becoming a Business Banking Officer in 2007, and his work as a Commercial Loan Officer will be an additional asset to the business banking community.”

Orrstown Bank (NASDAQ: ORRF) is pleased to announce that Angela Tatum has been promoted to Commercial Loan Officer for the Bank’s West Shore region. Employed with the Bank since 2002, Tatum has worked as a Business Banking Officer in the West Shore since 2008.

 

Jeff Gayman, SVP and Chief Commercial Officer commented: “Angela’s commitment and dedication to the organization and to our customers is outstanding, and her expertise continues to be an asset to our commercial lending team in the West Shore.”

With over $1.3 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.

 

Orrstown Bank Promotes National Protect Your Identity Week

Shippensburg, PA (October 15, 2010) – In recognition of National Protect Your Identity week on Oct. 17-22, Orrstown Bank is urging customers to pay particular attention to identity theft prevention.

“Orrstown Bank works diligently to protect our customers from identity theft,” said Jeff Embly, EVP and Chief Credit/Risk Officer. “We use a combination of safeguards to protect customer information, such as employee training, strict privacy policies, and rigorous security standards. But we can’t do it alone. Customers can help us protect them by following a few simple precautions.”

Orrstown Bank encourages customers to follow some simple steps to avoid becoming a victim:

• Shred or tear up statements and other personal information. Criminals may be able to get access to your accounts and personal information by “dumpster diving” (retrieving canceled checks, deposit receipts or bank statements from dumpsters or trash bins).

• Keep an eye out for any missing mail, particularly account statements and bills that do not arrive when expected.

• Review your monthly accounts regularly for any unauthorized charges through the Internet, phone or ATM statements.

• Order free copies of your credit report once a year from each of the credit reporting agencies to ensure accuracy. Go to the Federal Trade Commission’s authorized web site www.annualcreditreport.com for your free credit report.

• Choose to do business with companies you know are reputable, particularly online. When conducting business online, use firewalls, anti-spyware and anti-virus software and do not respond to unsolicited requests for personal information.

• Protect your PINs and passwords. Use a combination of letters and numbers for your passwords and change them periodically.

• Report any suspected fraud immediately to your bank and the fraud units of the three credit reporting agencies.

A special website is available that offers consumer tips, steps for victims and a state-by-state list of Protect Your Identity Week events. There’s also an online ID quiz that can help determine how prone one may be to identity theft. Click here to visit the site: http://www.protectyouridnow.org/.

With over $1.3 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.

Colby Windholz Completes PBA School of Commerical Lending with Honors

Shippensburg, PA (October 14, 2010) – Colby Windholz, Commercial Loan Officer at Orrstown Bank completed coursework with an Honors recognition at the 2010 PBA School of Commercial Lending, July 25 - 30, at the Penn Stater Conference Center, State College, PA. Colby has worked for Orrstown Bank since 2007 and was recently promoted from Business Banking Officer to his current role as Commercial Loan Officer for the Bank’s Carlisle, PA market.

The PBA School of Commercial Lending supports the business development and leadership schools of experienced and potential commercial lenders. Students studied how the economy drives the commercial lending business, business development calling, negotiation skills, analyzing financial statements, presenting to the institution’s loan committee and loan workouts.

The Pennsylvania Bankers Association, located in Harrisburg, is the state’s largest banking trade association representing an expansive and diverse membership. The association offers extensive continuing education programs, government relations representation on behalf of the industry, and provides numerous products and services for banks and their employees.

With over $1.3 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.

Crystal Stine Earns CFMP Designation

Shippensburg, PA (October 14, 2010) – Orrstown Bank is pleased to announce that the American Bankers Association Institute of Certified Bankers has awarded Crystal Stine, Corporate Communications/Public Relations Officer, the Certified Financial Marketing Professional (CFMP) designation. The Certified Financial Marketing Professional certification is designed to:

• Establish a recognized standard of knowledge and competence for marketing professionals working in the financial services industry
• Formally recognize those who meet these standards
• Provide employers with a tool to identify skilled, knowledgeable professionals
• Support the benefits of professional continuing education and development

“Crystal is to be commended on achieving her CFMP designation. Her diligence in improving her knowledge and skill set are a benefit to her and the organization as a whole,” commented Mark Bayer, VP, Director of Marketing.

Stine is a 2001 Shippensburg High School graduate who also holds both Bachelor of Arts and Master of Arts degrees from Villanova University. Crystal earned her American Bankers Association AIB Bank Marketing Diploma earlier this year, which qualified her to sit for the CFMP exam in September.

With over $1.3 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.

Orrstown Bank Welcomes Phil Dorn!

Shippensburg, PA (October 12, 2010) – Orrstown Bank is pleased to welcome Phil Dorn, Mortgage Sales Director to the Company. Based out of the Bank’s Camp Hill office, Phil will manage the mortgage loan origination team while reviewing existing client relationships and developing sales strategies to grow the Bank’s mortgage business.

Dorn brings over 25 years of mortgage loan origination experience to the position and is currently a licensed originator under the Nationwide Mortgage Licensing System. Phil has also received certifications from government agencies such as Fannie Mae, HUD, Pennsylvania Housing and Rural Housing.

With over $1.3 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty-one banking offices and two remote service facilities located in Cumberland, Franklin and Perry Counties, Pennsylvania and Washington County, Maryland. Orrstown Financial Services, Inc.’s stock is traded on the NASDAQ Capital Market under the symbol ORRF.

Orrstown Bank Video From Top 50 Ceremony

Orrstown Bank (NASDAQ: ORRF) Following record earnings in 2009, Orrstown Bank was selected as one of the Top 50 Fasting Growing Companies in Central Pennsylvania for the 8th time. This recognition follows the announcement earlier this summer by US Banker Magazine that Orrstown was named one of the top performing community banks in the nation for the 5th year in a row. Below is a video (courtesy of Rutan Productions) from the awards ceremony.