-----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, Akbx+WM40VUbcjQkR4DdbA4wnsxKQO32bhloct7yhF4y4elVhogHn4f6ZTQKIC/j d2QVzrT1blHbwp0NjLlnfA== 0000826154-99-000005.txt : 19991117 0000826154-99-000005.hdr.sgml : 19991117 ACCESSION NUMBER: 0000826154-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99756364 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 September 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 October 31,1999 (Common Stock, no par value) 2,064,309 ORRSTOWN FINANCIAL SERVICES, INC. INDEX Page Part I - FINANCIAL INFORMATION Item 1. Financial statements ( unaudited ) Condensed consolidated balance sheets - September 30,1999 and December 31, 1998 3 Condensed consolidated statements of income - Three months ended September 30,1999 and 1998 4 Condensed consolidated statements of income - Nine months ended September 30,1999 and 1998 5 Condensed consolidated statements of comprehensive income - Three months & Nine months ended September 30,199 6 Condensed consolidated statements of cash flows - Nine months ended September 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) September 30, December 31, 1999 1998* (Unaudited) ASSETS (000 Omitted) Cash and due from banks 9,659 7,028 Interest - bearing deposits with banks 162 27 Federal funds sold 9,171 8,072 Securities available for sale 61,554 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 176,776 158,632 Allowance for loan losses (2,137) (1,971) ----------- - ----------- Net Loans 174,639 156,661 Bank premises and equipment, net 6,528 5,224 Accrued Interest receivable 1,331 1,235 Other assets 7,388 6,438 ----------- - ----------- Total assets 271,717 $ 235,822 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing $ 30,050 $ 22,020 Interest bearing 180,627 161,744 ----------- - ----------- Total deposits 210,677 183,764 Federal funds purchased and other short term borrowed funds 16,085 6,234 Long term borrowed funds 20,822 20,828 Accrued interest payable 389 2,129 Other liabilities 1,992 1,787 ----------- - ----------- Total liabilities 249,965 214,742 ----------- - ----------- STOCKHOLDERS' EQUITY Common stock, no par value - $ .1041 stated value per share at September 30, 1999 and December 31, 1998, 10,000,000 shares authorized with 2,062,053 shares issued at September 30, 1999 and 2,055,315 issued at December 31, 1998 215 214 Additional paid - in capital 12,694 12,476 Retained earnings 8,852 6,863 Unrealized holding gain, net of tax $(5) and $786 at September 30, 1999 and December 31, 1998, respectively (9) 1,527 ----------- - ----------- Total stockholders' equity 21,752 21,080 ----------- - ----------- Total liabilities and stockholders' equity $ 271,717 $ 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 September 30, 1999 and 1998 (UNAUDITED) 1999 1998 (Unaudited) (Unaudited) (000 Omitted) Interest Income Interest and fees on loans $ 3,735 $ 3,372 Interest on federal funds sold 85 23 Interest and dividends on investment securities 845 741 Interest income on deposits with banks 7 2 ----------- ----- - ------- Total interest income 4,672 4,138 Interest Expense Interest on deposits 1,635 1,648 Interest on borrowed money 398 209 ----------- ----- - ------- Total interest expense 2,033 1,857 ----------- ----- - ------- Net interest income 2,639 2,281 Provision for loan losses 90 75 ----------- ----- - ------- Net interest income after provision for loan losses 2,549 2,206 ----------- ----- - ------- Other Income Service charges on deposits 288 220 Other service charges 130 122 Trust department income 212 160 Brokerage income 90 34 Other income 81 14 Net gains on available for sale securities 271 11 ----------- ----- - ------- Total other income 1,072 561 ----------- ----- - ------- Other Expenses Salaries and employee benefits 1,164 864 Net occupancy and equipment expenses 297 212 Other operating expenses 841 491 ----------- ----- - ------- Total other expense 2,302 1,567 ----------- ----- - ------- Income before income taxes 1,319 1200 Income tax expenses 345 335 ----------- ----- - ------- Net income $ 974 $ 865 =========== ============ Weighted average number of shares outstanding 2,061,542 2,052,172 Net income per share $ 0.47 $ 0.42 Cash dividends declared per share $ 0.14 $ 0.12 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 Nine Months Ended September 30, 1999 and 1998 (UNAUDITED) 1999 1998 (Unaudited) (Unaudited) (000 Omitted) Interest Income Interest and fees on loans $ 10,750 $ 9,367 Interest on federal funds sold 244 198 Interest and dividends on investment securities 2,408 2,262 Interest income on deposits with banks 12 5 --------- -------- - --- Total interest income 13,414 11,832 Interest Expense Interest on deposits 4,806 4,838 Interest on borrowed money 1,090 526 --------- -------- - --- Total interest expense 5,896 5,364 --------- -------- - --- Net interest income 7,518 6,468 Provision for loan losses 270 225 --------- -------- - --- Net interest income after provision for loan losses 7,248 6,243 --------- -------- - --- Other Income Service charges on deposits 793 614 Other service charges 412 346 Trust department income 627 480 Brokerage income 292 91 Other income 252 45 Net gains on available for sale securities 256 (1) --------- -------- - --- Total other income 2,632 1,575 --------- -------- - --- Other Expenses Salaries and employee benefits 3,217 2,502 Net occupancy and equipment expenses 741 621 Other operating expenses 2,093 1,527 --------- -------- - --- Total other expense 6,051 4,650 --------- -------- - --- Income before income taxes 3,829 3,168 Income tax expenses 1,017 876 --------- -------- - --- Net income $ 2,812 $ 2,292 ========= =========== Weighted average number of shares outstanding ********* 2,050,856 Net income per share $ 1.36 $ 1.12 Cash dividends declared per share $ 0.40 $ 0.35 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 September 30, 1999 and 1998 (UNAUDITED) 1999 1998 (000 Omitted) Net Income $ 974 $ 865 Other comprehensive income, net of tax Unrealized gain (loss) on investment securities available for sale (660) 362 Comprehensive Income $ 314 $ 1,227 =========== ============ 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 Nine Months Ended Sept 30,1999 and 1998 (UNAUDITED) 1999 1998 (000 Omitted) Net Income $ 2,812 $ 2,292 Other comprehensive income, net of tax Unrealized gain (loss) on investment securities available for sale (1,536) 356 Comprehensive Income $ 1,276 $ 2,648 =========== ============ 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 Nine Months Ended September 30, 1999 and 1998 (UNAUDITED) 1999 1998 (Unaudited) (Unaudited) (000 Omitted) Cash flows from operating activities: Net income $ 2,812 $ 2,292 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 332 314 Provision for loan losses 270 225 Other, net (1,826) (37) ---------- - --------- Net cash provided by operating activities 1,588 2,794 Cash flows from investing activities: Net (increase) decrease in interest bearing deposits with banks (135) 2 Purchase of available for sale securities (19,601) (8,267) Maturities of available for sale securities 5,562 9,003 Net (increase) in loans (18,248) (27,857) Purchases of bank premises and equipment (1,636) (384) (Increase) in other assets (159) (4,969) (Increase) in other liabilitie 205 598 ---------- - --------- Net cash (used) by investing activities (34,012) (31,874) ---------- - --------- Cash flows from financing activities: Net increase in deposits 26,913 15,467 Cash dividends paid (823) (718) Dividend reinvestment plan purchases 219 59 Net increase in purchased funds 9,851 5,024 Payments on debt (6) (6) ---------- - --------- Net cash provided by financing activities 36,154 19,826 ---------- - --------- Net increase (decrease) in cash and cash equivalents 3,730 (1,758) Cash and cash equivalents at beginning of period 15,100 8,821 ---------- - --------- Cash and cash equivalents at end of period $ 18,830 $ 7,063 ========== ========= Supplemental disclosure of cash flows information: Cash paid during the period for: Interest $ 7,636 $ 4,839 Income Taxes 1,005 602 Supplemental schedule of noncash investing and financing activities: Unrealized gain (loss) on investments available for sale (net of deferred taxes of $(791) and $183 at September 30, 1999 and 1998, respectively (1,536) 356 The accompanying notes are an integral part of these condensed financial statements. ORRSTOWN FINANCIAL SERVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1999 (UNAUDITED) NOTE 1. Basis of Presentation The financial information presented at and for the three months ended and nine months ended September 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 / Subsequent Event 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. In October, 1999 the Board of Directors of Orrstown Financial Services, Inc. approved a 7 1/2 % stock dividend payable November 19, 1999 to shareholders of record November 1, 1999. 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 September 30, 1999 amortized cost exceeded fair value by $14,000. This resulted in a decrease in stockholders' equity of $9,000 after recognizing the tax effects of the unrealized losses. 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. Core commercial bank data processing was converted from a Y2K compliant third party processive system to a Y2K compliant in-house system during the third quarter of 1999. Nonrecurring costs of approximately $301,000 were recorded. The Corporation considered itself "Y2K ready" as of September 30, 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. Note 9. Nonrecurring Income and Expense Items During the third quarter of 1999 the Corporation realized $271,000 of gains from the sale of investment securities and recognized $301,000 of operating expenses related to the conversion of commercial bank core data processing systems from a third party processing solution to an in-house solution. 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 $ 974,000 for the third quarter of 1999 compared to $ 865,000 for the same period in 1998, representing an increase of $ 109,000 or 12.6 %. Net income per share was $ .47 during 1999's third quarter up $ .05 from the $ .42 earned during 1998's third quarter. Net income for the first nine months of 1999 was $ 2,812,000 compared to $ 2,292,000 for the same period in 1998, representing an increase of $520,000 or 22.7%. Net income per share for the first nine months of 1999 was $ 1.36 up $.24 from the $ 1.12 per share realized during the nine months ended September 30, 1998. The following statistics compare 1999's year to date performance to that of 1998: Third Quarter Nine Months Year to Date 1999 1998 1999 1998 Return on average assets 1.52% 1.60% 1.53 % 1.49 % Return on average equity 17.38% 17.42% 17.10 % 16.05 % Average equity / Average assets 8.73% 9.19% 8.95% 9.27% A more detailed discussion of the elements having the greatest impact on net income follows. Net Interest Income Third Quarter 1999 vs. Third Quarter 1998 Net interest income for the third quarter of 1999 was $ 2,639,000 representing a growth of $ 358,000, or 15.7 % , over the $ 2,281,000 realized during 1998's third quarter. The growth in net interest income is driven by volume factors since spreads have tightened slightly. Earning asset growth of 16.7 % has generated 15.7 % net interest income growth despite an 8 basis point tightening of net interest margin. Nine Months 1999 vs. Nine Months 1998 Net interest income for the first nine months of 1999 was $ 7,518,000 representing an increase of $ 1,050,000 or 16.2 %, over the $ 6,468,000 generated during the first nine months of 1998. Volume factors have driven the net interest income growth since net interest margin has tightened by 6 basis points. Earning asset growth of 17.2 % has increased net interest income 16.2 % year to date. The table that follows states rates on a fully taxable equivalent basis, ( F.T.E. ) and demonstrates the aforementioned effects: THIRD QUARTER NINE 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 $ 235,129 8.18% $ 201,492 8.48% $ 227,470 8.15% $ 194,096 8.44% Interest bearing liabilities 202,480 3.98% 169,611 4.39% 195,524 4.03% 164,089 4.37% --------- --------- ---------- - --------- ---------- -------- --------- ---- - ----- Free Funds $ 32,649 $ 31,881 $ 31,946 $ 30,007 ========= ========== ========== ========= Net interest income $ 2,639 $ 2,281 $ 7,518 $ 6,468 ========= ========== ========== ========= Net interest spread (F.T.E.) 4.20% 4.14% 4.12% 4.07% ========= ========= ======== ========= Free funds ratio 13.89% 15.82% 14.04% 15.46% ========= ========== ========== ========= Net interest margin ( F.T.E ) 4.75% 4.83% 4.69% 4.75% ========= ========= ======== ========= Other Income and Other Expenses Third Quarter 1999 vs. Third Quarter 1998 Other income increased $ 511,000, or 91.1%, from $ 561,000 during the third quarter of 1998 to $ 1,072,000 during the third quarter of 1999. Increases in service charges on deposit accounts accounted for $ 68,000 of the increase due to growth of the deposit base and the adoption of a new service charges effective May, 1999. Trust and brokerage incomes have contributed to an increase of $ 108,000, or 55.7%, over third quarter 1998 results and represent our fastest growing area. Nonrecurring securities gain of $ 271,000 contributed $ 260,000 of the $ 561,000 increase. Other income has risen $ 67,000 arising from benefits related single premium life insurance policies contributing most of the gains. Other expense rose $ 735,000, or 46.9 %, from $ 1,567,000 for third quarter 1998 to $ 2,302,000 for 1999's third quarter. Nonrecurring expenses of $ 301,000 arose related to a conversion of core commercial bank data processing systems. All expense categories grew due simply to overall bank growth. Nine Months 1999 vs. Nine Months 1998 Other income increased $ 1,057,000, or 67.1%, to $ 2,632,000 from $ 1,575,000 a year ago. A $ 348,000, or 60.9%, increase in trust and brokerage income, plus a $179,000 increase in service charges were primary contributors. In addition, nonrecurring securities gain increased $257,000 and other income rose $ 207,000 primarily related to the aforementioned single premium life insurance policy cash buildup. Other expenses rose $ 1,401,000, or 30.1 % from $ 4,650,000 during the first nine months of 1998 to $ 6,051,000 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. In addition, our eighth full service office was opened in September, 1999. This office was acquired from Soverign Bank and is our second Chambersburg, Pennsylvania branch. Deposits of approximately $ 5,000,000 and loans of approximately $ 500,000 were added along with additional staff and leased premises. 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 $ 10,000 or 3%, during 1999's third quarter versus third quarter 1998. Income tax expense rose $ 141,000, or 16.1 % for the first nine 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: Third Quarter Nine Months Year to Date 1999 1998 1999 1998 Effective income tax rate 26.2% 26.0% 26.6% 27.4% 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 Nine Months Ended September 30 September 30 1999 1998 1999 1998 Balance, beginning of period $ 2,049 $ 1,905 $ 1,971 $ 1,767 Recoveries 2 2 4 16 Provision for loan loss charged to income 90 75 270 225 --------- -------- -------- - --------- Total 2,141 1,982 2,245 2,008 Losses 4 11 108 37 --------- -------- -------- - --------- Balance, end of pe $ 2,137 $ 1,971 $ 2,137 $ 1,971 ========= ======== ======== ========= 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 exceeds 50% at September 30, 1999. Loans 90 days or more past due (still accruing interest) and those on nonaccrual status were as follows at September 30 (in thousands) : 90 Days or More Past Due Nonaccrual Status 1999 1998 1999 1998 Real estate mortgage $ 164 $ 241 $ 0 $ 0 Installment loans 67 81 25 24 Commercial loans 184 0 45 596 Credit card 5 1 0 0 --------- -------- -------- - --------- Total $ 420 $ 323 $ 70 $ 620 ========= ======== ======== ========= 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 September 30, 1999 is as follows: Orrstown Financia Regulatory Minimum Services Requirements Leverage ratio 8.35% 4 % Risk based capital ratios: Tier I (core capital) 12.65% 4 % Combined tier I and tier II (core capital plus allowance for loan losses) 13.90% 8 % The growth experienced during 1999 has been supported by capital growth in the form of retained earnings. Equity represented 8.01% of assets at September 30, 1999 which is down from 8.94 % at December 31, 1998. Available-for-sale investment securities markdowns have reduced equity by $1,536,000 since December 31, 1999 accounting for approximately 60 % of the decline in the equity to asset ratio. 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 September 30, 1999 EX-27 2 ARTICLE 9 FDS FOR 10-Q
9 1,000 9-MOS DEC-31-1998 SEP-30-1999 9,659 162 9,171 0 61,554 61,554 61,554 176,776 2,137 271,717 210,677 16,085 2,381 20,822 215 0 0 21,752 271,717 10,750 2,408 256 13,414 4,806 5,896 7,518 270 256 6,051 3,829 2,812 0 0 2,812 1.36 1.36 4.69 70 420 0 0 1,971 108 4 2,137 2,137 0 0
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