Orrstown Financial Services, Inc. Announces 4th Quarter Earnings

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

SHIPPENSBURG, PA (January 27, 2011)
• Record earnings in 2010 of $16.6 million, a 24.0% improvement over 2009 results

• Assets climb to over $1.5 billion

• Record fourth quarter 2010 earnings, which increased 45.2% vs. fourth quarter 2009

• 10.0% reduction of risk assets in the fourth quarter 2010 compared to the prior quarter

• Nonperforming assets declined 32.2% since March 31, 2010

• Declaration of first quarter 2011 dividend of $0.23 per share, an increase of 4.6% over prior year


Orrstown Financial Services, Inc. (NASDAQ: ORRF) announced today that net income increased 45.2% to $4,375,000 for the quarter ended December 31, 2010, from $3,014,000 for the fourth quarter of 2009. Diluted earnings per share amounted to $0.55 for the quarter ended December 31, 2010, as compared to $0.46 for the corresponding prior year period. The Company also announced that its Board of Directors declared a first quarter cash dividend of $0.23 per share, an increase of 4.6% over the first quarter of 2010, for shareholders of record on February 11, 2011. The dividend will be paid on February 23, 2011.

Commenting on the Company’s results, Thomas R. Quinn, Jr., President and CEO, said, “Our performance in 2010 resulted in the best earnings (net income up 24%) ever in the 91-year history of the organization.”


“Of course 2010 was a challenging year for all community banks, but we nevertheless produced strong results which will be substantially above local peer levels once the year-end results are compiled. Additionally, we bolstered our reserves, added meaningfully to capital and were intensively focused on asset quality, which we believe remains quite solid.”

“While we cannot forecast what the national and regional economic conditions will be, we are cautiously optimistic that our strategies and the execution of our underlying business plan will deliver consistent ongoing returns for our shareholders. We have dedicated people, an experienced senior management team and a very engaged Board of Directors that know our market, recognize our Company’s competitive strengths and understand how to differentiate ourselves to our customers. We look forward to the year ahead and believe we will continue to compete well within our region”, Quinn concluded.

Results of Quarterly Operations

Net interest income for the quarter ended December 31, 2010 increased to $12,270,000 as compared to $10,257,000 in the same prior year period. The net interest margin decreased to 3.60% for the three months ended December 31, 2010, a reduction of ten basis points versus the same quarter in 2009. The Company continues to lower its cost of funds as evidenced by a decrease of 42 basis points to 0.86% for the three months ended December 31, 2010, as compared to 1.28% in the same prior year period. Average interest-earning assets increased by $315 million for the three months ended December 31, 2010, as compared to the same prior year period.

Other income increased to $5,536,000 for the three months ended December 31, 2010, as compared to $5,087,000 in the same prior year period. Noninterest income generation increased across all business lines, including Orrstown Financial Advisors, mortgage origination and deposit based fees. Operating expenses amounted to $10,450,000 for the three months ended December 31, 2010, as compared to $8,045,000 for the corresponding prior year period.

Results of Year-to-Date Operations
Net income totaled $16,581,000 for the year ended December 31, 2010, an increase of $3,208,000, or 24.0%, over 2009’s results. Diluted earnings per share totaled $2.17 for the year ended December 31, 2010, compared to $2.07 in 2009, an increase of 4.8%, despite the issuance of over 1.5 million shares during 2010.

Net interest income for the twelve months ended December 31, 2010, increased to $45,735,000 as compared to $36,570,000 in the same prior year period, reflecting a higher net interest margin on a year-to-date basis and higher levels of interest-earnings assets. The net interest margin increased to 3.72% for the twelve months ended December 31, 2010, a gain of six basis points versus the same period in 2009. The yield on interest-earning assets decreased to 4.71%, as compared to 5.26% in the prior year period. Year to date, the cost of funds decreased to 0.98% for the twelve months ended December 31, 2010, as compared to 1.60% in the same prior year period. Average interest-earning assets increased by $247 million for the twelve months ended December 31, 2010, as compared to the same prior year period.

The provision for loan losses increased to $8,925,000 for the twelve months ended December 31, 2010, as compared to $4,865,000 for the corresponding prior year period.

Other income increased to $23,793,000 for the twelve months ended December 31, 2010, as compared to $17,685,000 in the same prior year period. This includes an increase in securities gains from $1,661,000 through December 31, 2009, to $3,636,000 through December 31, 2010. Operating expenses amounted to $37,552,000 for the twelve months ended December 31, 2010, as compared to $31,967,000 for the corresponding prior year period.

Operating expense levels are often measured in the financial services industry by the efficiency ratio, which expresses non-interest expense, as a percentage of tax-equivalent net interest income and noninterest income. Despite an increase in other expenses primarily related to the growth experienced in all business lines, including Orrstown Financial Advisors, mortgage origination, and retail, the Company was able to improve on its efficiency ratio, which was 54.9% for the year ended December 31, 2010, compared to 58.9% in 2009.

Financial Condition

Assets grew $316 million to $1.512 billion at December 31, 2010, up from $1.196 billion at December 31, 2009. Securities available for sale have increased $235.5 million, or 120.0%, since December 31, 2009. Deposits increased to $1.188 billion at December 31, 2010, from $915 million at December 31, 2009. Stockholders’ equity increased to $160.5 million at December 31, 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
Improvement was made in asset quality through the reduction in the levels of non-accrual loans, loans past due 90 or more days and still accruing, other real estate owned and total delinquencies. The Company's non-accrual loans totaled $13.9 million at December 31, 2010, down $9.1 million, or 39.6%, from the high of $23.0 million at March 31, 2010. 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 $18.5 million as of December 31, 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 1.22% at December 31, 2010, similar 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 106% at December 31, 2010.
 
With over $1.5 billion in assets, Orrstown Financial Services, Inc. and its subsidiary, Orrstown Bank, provide a full range of consumer and business financial services through twenty 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.

Visit http://www.orrstown.com/ to view the complete release.

Orrstown Bank Supports The United Way

Shippensburg, PA (1/21/2011) — On January 12, 2011 Thomas R. Quinn, Jr., President and CEO of Orrstown Bank presented members of the Shippensburg United Way Board with a check representing the Bank’s $6,000 donation to the organization. In addition to last week’s donation, Orrstown Bank employees contributed $31,000 to the United Way in 2010 through the Bank’s employee giving campaign, with $5,697 earmarked for the Shippensburg United Way campaign.

United Way improves lives by mobilizing the caring power of communities around the world to advance the common good. More information can be found by visiting their website at www.liveunited.org. Donations for this Shippensburg United Way may be sent to P.O. Box 3, Shippensburg, PA 17257.

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 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. Member FDIC.

Orrstown Bank Welcomes Denise Pierce!

Shippensburg, PA (1/12/2011) — Orrstown Bank is pleased to welcome Denise Pierce, Mortgage Originator to the Company. Denise will join our growing West Shore region and will be based out of the Bank’s Camp Hill office.

Phil Dorn, Mortgage Sales Manager commented, “With more than 12 years of banking experience and her strong background in loan origination, Denise will be a valuable addition to our West Shore team.”

Denise was most recently employed by Northwest Savings Bank where she worked as a manager, originating over $25 million in mortgage and retail loan production. A graduate of Clarion University with a Bachelor of Science in Business Administration, Finance, Denise also attended the PBA Central Atlantic Advanced School of Banking at Bucknell University from 2006-2008.

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 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. Member FDIC.

###

Orrstown Bank Employees Donate to Women In Need!

 Shippensburg, PA (1/5/201) — Orrstown Bank employees continue to show their commitment to our communities, as more than 500 items ranging from personal toiletries to office supplies, laundry baskets, food, and household items were collected at the Bank’s North Pointe Operations Center and donated to Women In Need.

 

Lisa Dougherty, Director of Community Services, commented: “Most of the items will be used in the shelter and, with the donated items, we were able to create a 'care package' for a family (mother and child) moving from the shelter into a new home! The family received household and food items that will allow her to use her money for other important things in her new home.”

"Donations received from the community are essential to the work that we do," said Lisa. "They allow us to use our resources more efficiently and better serve the individuals and families that we work with. These items are often expensive and individuals and families often do without due to the need to pay other bills/expenses first. We truly appreciate Orrstown Bank’s support of Women In Need and the work that we do."

The donations were organized by Barb Thompson, Administrative Services Supervisor at Orrstown Bank, who noted “It's nice to know that something so small as our donations can mean a big difference to so many people. Orrstown Bank...what a great place to work!”

Women In Need has been working with victims of domestic violence and sexual assault in the Franklin and Fulton County Areas of Pennsylvania since 1976. Women In Need is a 501(c)(3) private, non-profit organization working within the community to obtain safety for victims of violence. All of their services are free and confidential to victims of domestic and sexual violence and to the significant others of victims. WIN serves approximately 1500 victims/significant others per year. If you have been a victim of any type of abuse in Franklin or Fulton Counties, Women In Need may be able to help you. If you have any questions about their services or simply need more information, call them at 717.264.4444 or 800.621.6660.

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 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. Member FDIC.

Orrstown Bank Welcomes Mike Hernley & Jeff Miller!

Shippensburg, PA (1/5/2011) — Orrstown Bank is pleased to welcome Mike Hernley, Business Banking Officer. Mike joins the Company’s West Shore team and will be based out of the Bank’s Silver Spring, Mechanicsburg office.

Mike was previously employed at Community Banks, and its successor Susquehanna Bank, where he most worked as a Relationship Manager. A graduate of Penn State University, Mike earned a Bachelor of Science degree in Business Administration, Marketing. Jeff Gayman, Senior Vice President, Chief Commercial Officer commented: “With more than eight years of banking experience as well as more than five years of cash management experience, Mike is an excellent addition to our team as we serve our West Shore clients.”

Orrstown Bank is also pleased to welcome Jeff Miller, Vice President and Business Development Officer. Jeff joins the Company’s Carlisle team and will be based out of the Bank’s Stonehedge, Carlisle office.

Jeff was previously employed at Community Banks, and its successor Susquehanna Bank, where he worked as a Commercial Lender. He has taken various Dale Carnegie courses, attended the Bucknell University School of Banking, Loan Officer Training at the University of Virginia, and is a graduate of Commercial Lending School. Jeff Gayman, Senior Vice President, Chief Commercial Officer commented: “With 30 years of banking experience, Jeff's wealth of knowledge will be instrumental in continuing the growth in this important market as Orrstown Bank continues the momentum from 2010 when we reached #1 market share.”

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 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. Member FDIC.