-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DgEp9sX+cbwGmCLIbUYTl1BYaYUYKdFvk2mPQMCLIV3aCIOlzFp7V9f5uUDh1Ua3 vw1vanu9A/C6nIbPHeyEqg== 0000826154-99-000004.txt : 19990812 0000826154-99-000004.hdr.sgml : 19990812 ACCESSION NUMBER: 0000826154-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORRSTOWN FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0000826154 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 232530374 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-18888 FILM NUMBER: 99684008 BUSINESS ADDRESS: STREET 1: 77 E KING STREET STREET 2: P O BOX 250 CITY: SHIPPENSBURG STATE: PA ZIP: 17257 BUSINESS PHONE: 7175326114 MAIL ADDRESS: STREET 1: 77 EAST KING STREET CITY: SHIPPANSBURG STATE: PA ZIP: 17257 10-Q 1 FORM 10 - Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended June 30,1999 Commission file number: 33-18888 ORRSTOWN FINANCIAL SERVICES, INC. (Exact name of registrant as specified in its charter) Commonwealth of Pennsylvania 23-2530374 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 77 East King Street 17257 P.O. Box 250, Shippensburg, Pennsylvania (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (717) 532-6114 Indicate by check mark whether the registrant (1) has filed all reports required to be filled by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X YES --------------- N-------------- Class Outstanding at July 31,1999 (Common Stock, no par value) 2,062,054 ORRSTOWN FINANCIAL SERVICES, INC. INDEX Page Part I - FINANCIAL INFORMATION Item 1. Financial statements ( unaudited ) Condensed consolidated balance sheets - June 30,1999 and December 31, 1998 3 Condensed consolidated statements of income - Three months ended June 30,1999 and 1998 4 Condensed consolidated statements of income - Six months ended June 30,1999 and 1998 5 Condensed consolidated statements of comprehensive income - Three months & Six months ended June 30,1999 and 6 Condensed consolidated statements of cash flows - Six months ended June 30,1999 and 1998 7 Notes to condensed consolidated financial statements 8-9 Item 2. Management's discussion and analysis of financial condition and results of operations 10-13 PART II - OTHER INFORMATION Other Information 15 Signatures 16 PART I - FINANCIAL INFORMATION PART I - FINANCIAL INFORMATION Item 1. Financial Statements ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY - OWNED SUBSIDIARY, ORRSTOWN BANK CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, 1999 1998* (Unaudited) ASSETS (000 Omitted) Cash and due from banks 6,733 7,028 Interest - bearing deposits with banks 21 27 Federal funds sold 0 8,072 Securities available for sale 53,705 49,852 Federal Home Loan Bank, Federal Reserve and Atlantic Central Bankers Bank Stock, at cost which approximates market value 1,285 1,285 Loans 169,902 158,632 Allowance for loan losses (2,049) (1,971) ----------- - ----------- Net Loans 167,853 156,661 Bank premises and equipment, net 5,565 5,224 Accrued interest receivable 1,401 1,235 Cash surrender value of life insurance 5,217 5,099 Other assets 1,594 1,339 ----------- - ----------- Total assets 243,374 $ 235,822 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing $ 23,889 $ 22,020 Interest bearing 164,646 161,744 ----------- - ----------- Total deposits 188,535 183,764 Federal funds purchased and other borrowed money 8,876 6,234 Other borrowed funds 20,822 20,828 Accrued interest payable 2,105 2,129 Other liabilities 1,385 1,787 ----------- - ----------- Total liabilities 221,723 214,742 ----------- - ----------- STOCKHOLDERS' EQUITY Common stock, no par value - $ .1041 stated value per share at June 30, 1999 and December 31, 1998, 10,000,000 shares authorized with 2,059,915 shares issued at June 30, 1999 and 2,055,315 issued at December 31, 1998 214 214 Additional paid - in capital 12,619 12,476 Retained earnings 8,167 6,863 Unrealized holding gain, net of tax $335 and $786 at June 30, 1999 and December 31, 1998, respectively 651 1527 ----------- - ----------- Total stockholders' equity 21,651 21,080 ----------- - ----------- Total liabilities and stockholders' equity $ 243,374 $ 235,822 =========== =========== * Condensed from audited financial statements The accompanying notes are an integral part of these condensed financial statements. ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY - OWNED SUBSIDIARY, ORRSTOWN BANK CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30, 1999 and 1998 (UNAUDITED) 1999 1998 (Unaudited) (Unaudited) (000 Omitted) Interest Income Interest and fees on loans $ 3,550 $ 3,105 Interest on federal funds sold 79 85 Interest and dividends on investment securities 801 787 Interest income on deposits with banks 3 2 ----------- - ------------ Total interest income 4,433 3,979 Interest Expense Interest on deposits 1,590 1,630 Interest on borrowed money 351 170 ----------- - ------------ Total interest expense 1,941 1,800 ----------- - ------------ Net interest income 2,492 2,179 Provision for loan losses 90 75 ----------- - ------------ Net interest income after provision for loan losses 2,402 2,104 ----------- - ------------ Other Income Service charges on deposits 298 208 Other service charges 130 128 Trust department income 231 154 Brokerage income 120 31 Other income 83 14 Net gains on available for sale securities (6) (2) ----------- - ------------ Total other income 856 533 ----------- - ------------ Other Expenses Salaries and employee benefits 1,052 830 Net occupancy and equipment expenses 229 207 Other operating expenses 639 519 ----------- - ------------ Total other expense 1,920 1,556 ----------- - ------------ Income before income taxes 1,338 1081 Income tax expenses 349 296 ----------- - ------------ Net income $ 989 $ 785 =========== ============ Weighted average number of shares outstanding 2,059,406 2,050,190 Net income per share $ 0.48 $ 0.38 Cash dividends declared per share $ 0.13 $ 0.115 The accompanying notes are an integral part of these condensed financial statements. All per share amounts have been adjusted to give retroactive recognition to a 2 for 1 stock split effective November 21,1998 ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY - OWNED SUBSIDIARY, ORRSTOWN BANK CONDENSED CONSOLIDATED STATEMENTS OF INCOME Six Months Ended June 30, 1999 and 1998 (UNAUDITED) 1999 1998 (Unaudited) (Unaudited) (000 Omitted) Interest Income Interest and fees on loans $ 7,015 $ 5,995 Interest on federal funds sold 159 175 Interest and dividends on investment securities 1,563 1,521 Interest income on deposits with banks 5 3 --------- - --------- Total interest income 8,742 7,694 Interest Expense Interest on deposits 3,171 3,190 Interest on borrowed money 692 317 --------- - --------- Total interest expense 3,863 3,507 --------- - --------- Net interest income 4,879 4,187 Provision for loan losses 180 150 --------- - --------- Net interest income after provision for loan losses 4,699 4,037 --------- - --------- Other Income Service charges on deposits 505 394 Other service charges 282 224 Trust department income 415 320 Brokerage income 202 57 Other income 171 31 Net gains on available for sale securities (15) (12) --------- - --------- Total other income 1,560 1,014 --------- - --------- Other Expenses Salaries and employee benefits 2,053 1,638 Net occupancy and equipment expenses 444 409 Other operating expenses 1,252 1,036 --------- - --------- Total other expense 3,749 3,083 --------- - --------- Income before income taxes 2,510 1,968 Income tax expenses 672 541 --------- - --------- Net income $ 1,838 $ 1,427 ========= ========= Weighted average number of shares outstanding ********* ********* Net income per share $ 0.89 $ 0.70 Cash dividends declared per share $ 0.26 $ 0.23 The accompanying notes are an integral part of these condensed financial statements. All per share amounts have been adjusted to give retroactive recognition to a 2 for 1 stock split effective November 21,1998 ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY - OWNED SUBSIDIARY, ORRSTOWN BANK CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended June 30, 1999 and 1998 (UNAUDITED) 1999 1998 (000 Omitted) Net Income $ 989 $ 785 Other comprehensive income, net of tax Unrealized gain (loss) on investment securities available for sale (666) 182 Comprehensive Income $ 323 $ 967 =========== ============ The accompanying notes are integral part of these condensed financial statements. *********************************************************************** ****************** ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY - OWNED SUBSIDIARY, ORRSTOWN BANK CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Six Months Ended June 30,1999 and 1998 (UNAUDITED) 1999 1998 (000 Omitted) Net Income $ 1,838 $ 1,427 Other comprehensive income, net of tax Unrealized gain (loss) on investment securities available for sale (876) (7) Comprehensive Income $ 962 $ 1,420 =========== ============ The accompanying notes are integral part of these condensed financial statements. ORRSTOWN FINANCIAL SERVICES, INC. AND ITS WHOLLY - OWNED SUBSIDIARY, ORRSTOWN BANK CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 1999 and 1998 (UNAUDITED) 1999 1998 (Unaudited) (Unaudited) (000 Omitted) Cash flows from operating activities: Net income $ 1,838 $ 1,427 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 232 200 Provision for loan losses 180 150 Other, net 24 134 ---- - ------ --------- Net cash provided by operating activities 2,274 1,911 Cash flows from investing activities: Net (increase) decrease in interest bearing deposits with banks 6 (73) Purchase of available for sale securities (9,016) (8,205) Maturities of available for sale securities 3,829 3,576 Net (increase) in loans (11,372) (14,924) Purchases of bank premises and equipment (542) (115) (Increase) in other assets (562) ---- - ------ --------- Net cash (used) by investing activities (17,657) (19,741) ---- - ------ --------- Cash flows from financing activities: Net increase in deposits 4,771 14,889 Cash dividends paid (534) (472) Dividend reinvestment plan purchases 143 0 Net increase in purchased funds 2,642 3,387 Payments on debt (6) (6) ---- - ------ --------- Net cash provided by financing activities 7,016 17,798 ---- - ------ --------- Net increase (decrease) in cash and cash equivalents (8,367) (32) Cash and cash equivalents at beginning of period 15,100 8,821 ---- - ------ --------- Cash and cash equivalents at end of period $ 6,733 $ 8,789 ========== ========= Supplemental disclosure of cash flows information: Cash paid during the period for: Interest $ 3,887 $ 3,159 Income Taxes 650 602 Supplemental schedule of noncash investing and financing activities: Unrealized gain (loss) on investments available for sale (net of deferred taxes of $(450) and $(4) at June 30, 1999 and 1998, respectively (876) (7) The accompanying notes are an integral part of these condensed financial statements. ORRSTOWN FINANCIAL SERVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 (UNAUDITED) NOTE 1. Basis of Presentation The financial information presented at and for the three months ended and six months ended June 30, 1999 and 1998 is unaudited. Information presented at December 31, 1998 is condensed from audited year-end financial statements. However, unaudited information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim period. NOTE 2. Principles of Consolidation The consolidated financial statements include the accounts of the corporation and its wholly-owned subsidiary, Orrstown Bank. All significant intercompany transactions and accounts have been eliminated. NOTE 3. Cash Flows For purposes of the statements of cash flows, the corporation has defined cash and cash equivalents as those amounts included in the balance sheet captions " cash and due from banks " and " federal funds sold ". As permitted by Statement of Financial Accounting Standards No. 104, the corporation has elected to present the net increase or decrease in deposits in banks, loans and time deposits in the statement of cash flows. NOTE 4. Federal Income Taxes For financial reporting purposes the provision for loan losses charged to operating expense is based on management's judgment, whereas for federal income tax purposes, the amount allowable under present tax law is deducted. Additionally, certain expenses are charged to operating expense in the period the liability is incurred for financial reporting purposes, whereas for federal income tax purposes, these expenses are deducted when paid. As a result of these timing differences, deferred income taxes are provided in the financial statements. Income tax expense is less than the amount calculated using the statutory tax rate primarily as a result of tax exempt income earned from state and political subdivision obligations. NOTE 5. Other Commitments In the normal course of business, the bank makes various commitments and incurs certain contingent liabilities which are not reflected in the accompanying financial statements. These commitments include various guarantees and commitments to extend credit and the bank does not anticipate any losses as a result of these transactions. Note 6. Changes in Common Stock In October, 1998 the Board of Directors of Orrstown Financial Services, Inc. approved a two for one stock split effective November 21, 1998 for shareholders of record on November 2, 1998. Earnings per share, dividends per share and weighted average shares outstanding references have been restated to reflect the two for one stock split for all periods presented. Note 7. Investment Securities Management determines the appropriate classification of securities at the time of purchase. If management has the intent and the corporation has the ability at the time of purchase to hold securities until maturity or on a long - term basis, they are classified as securities held to maturity and carried at amortized historical cost. Securities to be held for indefinite periods of time and not intended to be held to maturity or on a long - term basis are classified as available for sale and carried at fair value. Securities held for indefinite periods of time include securities that management intends to use as part of its asset and liability management strategy and that may be sold in response to changes in interest rates, resultant prepayment risk and other factors related to interest rate and resultant prepayment risk changes. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific indentification method. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to shareholders' equity, whereas realized gains and losses flow through the corporation's operations. Management has classified all investments securities as "available for sale". At June 30 1999 fair value exceeded amortized cost by $987,000. This resulted in an increase in stockholders' equity of $651,000 after recognizing the tax effects of the unrealized gains. At December 31, 1998, fair market value exceeded amortized cost by $ 2,313,000 resulting in an increase in stockholders' equity of $1,527,000 after recognizing the tax effects of the unrealized gains. Note 8. Year 2000 (Y2K) Data Processing Position The Corporation's last mission critical function, check processing, was converted to a Y2K compliant system effective May 6, 1999. Renovation of other systems has been completed and a Phase II regulatory examination was satisfactorily completed during February, 1999. Thus, the Corporation does not expect Y2K expenses recorded in 1999 to have a material effect on its liquidity, capital position or results of operations. ORRSTOWN FINANCIAL SERVICES, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Summary Orrstown Financial Services, Inc. recorded net income of $ 989,000 for the second quarter of 1999 compared to $ 785,000 for the same period in 1998, representing an increase of $ 204,000 or 26.0 %. Net income per share was $ .48 during 1999's second quarter up $ .10 from the $ .38 earned during 1998's second quarter. Net income for the first six months of 1999 was $ 1,838,000 compared to $ 1,427,000 for the same period in 1998, representing an increase of $ 411,000 or 28.8 %. Net income per share for the first six months of 1999 was $ .89 up $ .19 from the .70 per share realized during the six months ended June 30, 1998. Robust balance sheet growth has fueled 1999's earnings gains. Despite slightly narrowing interest rate margins versus those of 1998, net income has grown significantly due to volume factors. Average daily earning assets are up 17.5% during the first half of 1999 versus the first six months of 1998. In addition, noninterest income has grown at a rate more than double that of noninterest income increases. In addition, second quarter 1999 results have improved considerably over first quarter 1999 results. Net income of $ 989,000 represents an increase of 16.5 % over the $ 849,000 earned during the first quarter of 1999. A net interest margin increase from 4.63% during first quarter 1999 to 4.67% during second quarter 1999 has contributed to the gain. Continued steady loan growth has fueled the net interest margin increase. The following statistics compare 1999's year to date performance to that of 1998: Second Quarter Six Months Year to Date 1999 1998 1999 1998 Return on average assets 1.62 % 1.51 % 1.54 % 1.43 % Return on average equity 17.92 % 16.61 % 16.95 % 15.32 % Average equity / Average assets 9.06 % 9.11 % 9.07 % 9.31 % A more detailed discussion of the elements having the greatest impact on net income follows. Net Interest Income Second Quarter 1999 vs. Second Quarter 1998 Net interest income for the second quarter of 1999 was $ 2,492,000 representing a growth of $ 313,000, or 14.4 % , over the $ 2,179,000 realized during 1998's second quarter. The growth in net interest income is driven by volume factors since spreads have tightened. Earning asset growth of 15.5 % has generated 14.4 % net interest income growth despite a 7 basis point tightening of net interest margin. Six Months 1999 vs. Six Months 1998 Net interest income for the first six months of 1999 was $ 4,879,000 representing an increase of $ 692,000, or 16.5 %, over the $ 4,187,000 generated during the first six months of 1998. Volume factors have generated the increase a 5 basis point tightening of net interest margin versus 1998. Spreads have improved as we have progressed through 1999, however. The table that follows states rates on a fully taxable equivalent basis, ( F.T.E. ) and demonstrates the aforementioned effects: SECOND QUARTER SIX MONTHS YEAR TO DATE 1999 1998 1999 1998 (in thousands) Avg. Balances Rates Avg. Balances Rates Avg. Balances Rates Avg. Balances Rates Interest earning assets $ 226,613 8.11% $ 196,248 8.42% $ 223,578 8.13% $ 190,336 8.42% Interest bearing liabilities 193,720 4.01% 166,230 4.34% 191,989 4.05% 161,283 4.38% --------- --------- ---- - ------ --------- ---------- -------- - --------- --------- Free Funds $ 32,893 $ 30,018 $ 31,589 $ 29,053 ========= ========== ========== ========= Net interest income $ 2,492 $ 2,179 $ 4,879 $ 4,187 ========= ========== ========== ========= Net interest sprted (F.T.E.) 4.10% 4.08% 4.08% 4.04% ========= ========= ======== ========= Free funds ratio 14.52% 15.30% 14.13% 15.26% ========= ========== ========== ========= Net interest margin ( F.T.E ) 4.67% 4.74% 4.65% 4.70% ========= ========= ======== ========= Other Income and Other Expenses Second Quarter 1999 vs. Second Quarter 1998 Other income increased $ 323,000, or 60.6 %, from $ 533,000 during the second quarter of 1998 to $ 856,000 during the second quarter of 1999. Increases in service charges on deposit accounts accounted for $ 90,000 of the increase due to growth of the deposit base and the adoption of a new service charge schedule effective May, 1999. Trust and brokerage services have contributed a combined increase of $ 166,000, or 89.7 %, over second quarter 1998 results and represent our fastest growing area. Other expense rose $ 364,000, or 23.4 %, from $ 1,556,000 for second quarter 1998 to $ 1,920,000 for 1999's second quarter. Salary and benefit increases contributed $ 222,000 of the growth. All expense categories grew due to general growth of the bank. Six Months 1999 vs. Six Months 1998 Other income increased $ 546,000, or 53.8 %, to $ 1,560,000 from $ 1,014,000 a year ago. A $ 240,000, or 63.7 %, increase in trust and brokerage income, plus a $169,000 increase in service charges were the primary contributors. Other expenses rose $ 666,000, or 21.6 % from $ 3,083,000 during the first six months of 1998 to $ 3,749,000 for the same period of 1999. All categories of noninterest expense rose due to the aforementioned growth plus a material change in backroom operations including a change in check processing and a change in commercial bank data processing from a third party processor to an in-house system that was completed during July, 1999. These system changes will enable us to handle the growth we have been experiencing more economically moving forward. Staff increases contributed to growth in salaries and benefits of $ 415,000, the largest single component of increase. Third quarter 1999 should bring the opening of our eighth full service office as we are scheduled to complete the aqcuisition of a branch located in Chambersburg, Pennsylvania from Sovereign Bank in early September. The completion of this transaction is dependant upon regulatory approval and will add approximately $ 6,000,000 to our deposit base and provide our second Chambersburg office enabling increased service to that market. Preliminary work has begun on the proposed expansion of our operations area, which will include increased retail space in Shippensburg, Pennsylvania and the opening of a ninth full service branch in Mechanicsburg, Pennsylvania. Both projects are expected to be completed in early 2000. Income Tax Expense Income tax expense increased $ 53,000, or 17.9 %, during 1999's second quarter versus second quarter 1998. Income tax expense rose $ 131,000, or 24.2 % for the first six months of 1999 versus the same period a year ago. The growth in income tax expense is the byproduct of similar increases in pretax income since effective federal income tax rates has remained relatively stable, as shown below: Second Quarter Six Months Year to Date 1999 1998 1999 1998 Effective income tax rate 26.1% 27.4% 26.8% 27.5% The marginal federal income tax bracket is 34 % for all periods presented. PROVISION AND ALLOWANCE FOR LOAN LOSSES The provision for loan losses and the other changes in the allowance for loan losses are shown below (in thousands) : Quarter Ended Six Months Ended June 30 June 30 1999 1998 1999 1998 Balance, beginning of period $ 2,057 $ 1,846 $ 1,971 $ 1,767 Recoveries 1 3 2 14 Provision for loan loss charged to income 90 75 180 150 --------- -------- ----- - --- --------- Total 2,148 1,924 2,153 1,931 Losses 99 19 104 26 --------- -------- ----- - --- --------- Balance, end of pe $ 2,049 $ 1,905 $ 2,049 $ 1,905 ========= ======== ======== ========= In the opinion of management, the allowance, when taken as a whole, is adequate to absorb reasonably estimated loan losses inherent in the Bank's loan portfolio. The unallocated portion of the allowance for loan losses approximates 50% at June 30, 1999. Loans 90 days or more past due (still accruing interest) and those on nonaccrual status were as follows at June 30 (in thousands) : 90 Days or More Past Due Nonaccrual Status 1999 1998 1999 1998 Real estate mortgage $ 242 $ 255 $ 0 $ 68 Installment loans 44 5 19 0 Commercial loans 0 588 45 454 Credit card 2 3 0 1 --------- -------- ----- - --- --------- Total $ 288 $ 851 $ 64 $ 523 ========= ======== ======== ========= There were no restructured loans for any of the time periods set forth above. Any loans classified for regulatory purposes as loss, doubtful, substandard or special mention that have not been disclosed under Item III of Industry Guide 3 do not represent or result from trends or uncertainties which management reasonably expects will materially impact future operating results, liquidity or capital resources. CAPITAL RESOURCES AND BALANCE SHEET FLUCTUATIONS A comparison of Orrstown Financial Services' capital ratios to regulatory minimum requirements at June 30, 1999 is as follows: Orrstown Financia Regulatory Minimum Services Requirements Leverage ratio 8.42 % 4 % Risk based capital ratios: Tier I (core capital) 13.04 % 4 % Combined tier I and tier II (core capital plus allowance for loan losses) 14.29 % 8 % The growth experienced during 1999 has been supported by capital growth in the form of retained earnings. Equity represented 8.90 % of assets at June 30, 1999 which is down slightly from 8.94 % at December 31, 1998. All balance sheet fluctuations exceeding 5 % have been created by either the growth that has been experienced during 1999 or single day fluctuations. Management is not aware of any current recommendations by regulatory authorities which, if implemented, would have a material effect on the corporation's liquidity, capital resources or operations. PART II - OTHER INFORMATION OTHER INFORMATION Item 1 - Legal Proceedings None Item 2 - Changes in Securities None Item 3 - Defaults Upon Senior Securities Not applicable Item 4 - Submission of Matters to a Vote of Security Holders None Item 5 - Other Information None Item 6 - Exhibits and Reports on Form 8 - K (a) Exhibits - None (b) Reports on Form 8 - K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. /s/ ----------------- - ------------------- (Kenneth R. Shoemaker, President) (Duly Authorized Officer) /s/ ------------------ ----------------- - ------------------- (Bradley S. Everly, Senior Vice President) (Chief Financial Officer) /s/ ----------------- - ------------------- (Robert B. Russell, Controller) (Chief Accounting Officer) DATA TABLE FOR 10-Q AT JUNE 30, 1999 EX-27 2 ARTICLE 9 FDS FOR 10-Q
9 1,000 6-MOS DEC-31-1998 JUN-30-1999 6,733 21 0 0 53,705 53,705 53,705 169,902 2,049 243,374 188,535 8,876 3,490 20,822 214 0 0 21,651 243,374 7,015 1,563 164 8,742 3,171 3,863 4,879 180 (15) 3,749 2,510 1,838 0 0 1,838 0.89 0.89 4.65 64 288 0 0 1,971 104 2 2,049 2,049 0 0
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