EXHIBIT 99.1
Filed by Orrstown Financial Services, Inc.
Commission File No.: 033-18888
Strategy + Execution = Success
Orrstown Financial Services, Inc.
Fourth Quarter Report • December 31, 2007
To Our Shareholders, Customers, and Friends:
The final quarter of 2007 produced total consolidated earnings of $3,048,000, an increase of 2.1% over the $2,984,000 reported for the same period in 2006. Primary earnings per share for the quarter were $.47 compared to $.46 for the fourth quarter last year. Net income for the full year ending December 31, 2007 was $12,558,000, an increase of 8% over the $11,632,000 earned during 2006. Primary earnings per share grew 4.3% from $1.87 during 2006 to $1.95 in 2007.
Total assets for the Company grew 9.4% during 2007 to $884,979,000 while loans increased 13.4% to $701,964,000. Deposits grew at a rate of 1.2% to $646,356,000. Total equity at the end of 2007 stood at $96,124,000, an increase of 7.5% over the amount recorded on December 31, 2006. Return on Average Assets, Return on Average Equity, and Return on Average Tangible Equity for the year 2007 were 1.50%, 13.64%, and 18.02%, respectively.
Dividends per share for the year amounted to $.82, an increase of 10.4% over the $.7428 paid for the year 2006. Based on the continued strong performance of the company, the Board of Directors approved a 2008 first quarter cash dividend of $.21 which is an increase of 5.0% over the dividend of $.20 paid for the same period in 2007. Per share amounts have been restated to reflect the 5% stock dividend declared in May 2007.
Orrstown Bank, the Company’s subsidiary, continues to benefit from the Reward Checking product that was rolled out in May 2007. Since the inception date of offering this unique product, we have opened a significant number of new customer relationships. During 2008 we expect the popularity of this product to continue. If you want to earn an above market interest rate and benefit from free ATM usage nationwide, Reward Checking is for you!
The problems associated with the subprime lending crisis continue to plague the financial industry. However, it is important to point out that this national issue was not caused by community banks like Orrstown. The simple fact is that if home buyers had obtained their mortgage through insured depository institutions instead of mortgage brokers and other service vendors, most people would not be facing the problems that so many are encountering today. Orrstown has not made subprime loans in the past and certainly does not intend to in the future.
We expect the current downward trend in the economy to continue during 2008 which will create earnings pressure on most financial institutions. However, we remain confident of our success and will do everything we can to maintain our position as one of the best performing financial institutions in the country.
The 2007 Annual Report, which will be issued in April, will contain detailed information about last year’s results. I encourage you to review the report in its entirety. Thank you for your continued interest in this exceptional Company!
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Kenneth R. Shoemaker |
President and CEO |
Consolidated Balance Sheets
(Unaudited) | December 31, | |||||||
(Dollars in thousands, except per share) | 2007 | 2006 | ||||||
ASSETS | ||||||||
Cash and due from banks | $ | 17,625 | $ | 20,730 | ||||
Federal funds sold | 808 | 18,404 | ||||||
Interest bearing deposits with banks | 231 | 895 | ||||||
Investment securities | 96,355 | 91,393 | ||||||
Loans | 701,964 | 618,827 | ||||||
Less: allowance for loan losses | (6,141 | ) | (5,520 | ) | ||||
Net loans | 695,823 | 613,307 | ||||||
Premises and equipment, net | 25,980 | 19,852 | ||||||
Goodwill and intangible assets | 21,368 | 21,567 | ||||||
Cash surrender value of life insurance | 16,067 | 15,573 | ||||||
Accrued interest receivable | 3,490 | 3,279 | ||||||
Other assets | 7,232 | 4,031 | ||||||
Total assets | $ | 884,979 | $ | 809,031 | ||||
LIABILITIES | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 91,365 | $ | 85,420 | ||||
Interest bearing | 554,991 | 553,299 | ||||||
Total deposits | 646,356 | 638,719 | ||||||
Short term borrowings | 58,130 | 41,703 | ||||||
Long term debt | 75,903 | 32,440 | ||||||
Accrued interest payable | 1,172 | 1,094 | ||||||
Other liabilities | 7,294 | 5,687 | ||||||
Total liabilities | 788,855 | 719,643 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock | 336 | 320 | ||||||
Additional paid-in capital | 82,488 | 72,023 | ||||||
Retained earnings | 13,868 | 16,934 | ||||||
Accumulated other comprehensive income | 567 | 507 | ||||||
Treasury stock | (1,135 | ) | (396 | ) | ||||
Total shareholders’ equity | 96,124 | 89,388 | ||||||
Total liabilities and shareholders’ equity | $ | 884,979 | $ | 809,031 |
Market Makers
Ferris, Baker Watts, Inc. | Ryan, Beck & Co., Inc. | Boenning & Scattergood, Inc. | ||
1405 McFarland Road | 18 Columbia Turnpike | Four Tower Bridge | ||
Pittsburgh, PA 15216 | Florham Park, NJ 07932 | 200 Barr Harbor Drive, Suite 300 | ||
877.282.1941 | 800.342.2325 | West Conshohocken, PA 19428 | ||
800.883.1212 | ||||
Janney Montgomery Scott, LLC | ||||
1801 Market Street | ||||
10th Floor | ||||
Philadelphia, PA 19103 | ||||
800.526.6397 |
Certain statements in this report may constitute “forward looking statements” under the Private Securities Litigation Reform Act of 1995, which involve risk and uncertainties. Orrstown Financial’s actual results may differ significantly from the results discussed in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, economic conditions, competition in the geographic and business areas in which Orrstown Financial conducts its operations, fluctuations in interest rates, credit quality, and government regulation.
Consolidated Statements of Income
(Unaudited) | 3 Months Ended December 31, | 12 Months Ended December 31, | ||||||||||||||
(Dollars in thousands, except per share) | 2007 | 2006 | 2007 | 2006 | ||||||||||||
INTEREST INCOME | ||||||||||||||||
Interest and fees on loans | $ | 12,650 | $ | 11,411 | $ | 48,329 | $ | 40,086 | ||||||||
Interest and dividends on investment securities | 1,167 | 1,025 | 4,167 | 3,746 | ||||||||||||
Interest on short term investments | 54 | 153 | 610 | 956 | ||||||||||||
Total interest and dividend income | 13,871 | 12,589 | 53,106 | 44,788 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Interest on deposits | 4,557 | 4,408 | 18,649 | 14,189 | ||||||||||||
Interest on short term borrowings | 573 | 547 | 2,295 | 1,877 | ||||||||||||
Interest on long term debt | 826 | 315 | 2,042 | 1,305 | ||||||||||||
Total interest expense | 5,956 | 5,270 | 22,986 | 17,371 | ||||||||||||
Net interest income | 7,915 | 7,319 | 30,120 | 27,417 | ||||||||||||
Provision for loan losses | 510 | 282 | 750 | 390 | ||||||||||||
Net interest income after provision | 7,405 | 7,037 | 29,370 | 27,027 | ||||||||||||
Securities gains / (losses) | — | 2 | 58 | 41 | ||||||||||||
Other income | 3,469 | 3,024 | 13,248 | 11,042 | ||||||||||||
Other expense | 6,607 | 5,865 | 24,921 | 21,628 | ||||||||||||
Income before income tax | 4,267 | 4,198 | 17,755 | 16,482 | ||||||||||||
Income tax expense | 1,219 | 1,214 | 5,197 | 4,850 | ||||||||||||
Net income | $ | 3,048 | $ | 2,984 | 12,558 | 11,632 | ||||||||||
PER SHARE DATA* | ||||||||||||||||
Basic earnings per share | $ | 0.47 | $ | 0.46 | $ | 1.95 | $ | 1.87 | ||||||||
Diluted earnings per share | $ | 0.45 | $ | 0.44 | $ | 1.86 | $ | 1.79 | ||||||||
Dividends per share | $ | 0.21 | $ | 0.19 | $ | 0.82 | $ | 0.7428 | ||||||||
PERFORMANCE STATISTICS | ||||||||||||||||
Return on average assets | 1.38 | % | 1.48 | % | 1.50 | % | 1.61 | % | ||||||||
Return on average tangible assets | 1.43 | % | 1.54 | % | 1.56 | % | 1.66 | % | ||||||||
Return on average equity | 12.75 | % | 13.44 | % | 13.64 | % | 15.10 | % | ||||||||
Return on average tangible equity | 16.69 | % | 18.06 | % | 18.02 | % | 18.98 | % |
* | All per share amounts have been restated to give retroactive recognition to the 5% stock dividend paid on June 15, 2007. |
2007 Common Stock Information
Market Price | Quarterly Dividend | |||||||||||
High | Low | Close | ||||||||||
First Quarter | $ | 36.19 | $ | 33.67 | $ | 33.81 | $ | 0.20 | ||||
Second Quarter | 35.60 | 31.00 | 32.78 | 0.20 | ||||||||
Third Quarter | 33.40 | 28.00 | 31.74 | 0.21 | ||||||||
Fourth Quarter | 34.00 | 30.00 | 30.00 | 0.21 |
Total Trust Assets $415 Million
Board of Directors
Dr. Anthony F. Ceddia | Gregory A. Rosenberry | John S. Ward | DIRECTORS EMERITI | |||
President Emeritus, | President & General Partner, | President, Modern | ||||
Shippensburg University | Rosenberry Family Limited | Transit Partnership; | Richard M. Diffenbaugh | |||
Partnership | Retired, Chief Clerk of | Eldon E. Funk | ||||
Jeffrey W. Coy | Cumberland County | Frank S. Heberlig | ||||
Vice Chairman of the Board | Kenneth R. Shoemaker | Robert T. Henry | ||||
Commissioner, | President and CEO, | Peter C. Zimmerman | William O. Hykes | |||
PA Gaming Control Board | Orrstown Bank | Executive Vice President and | Galen L. Myers | |||
Senior Operations Officer, | Raymond I. Pugh | |||||
Andrea Pugh | Glenn W. Snoke | Orrstown Bank | ||||
Self-Employed, | President, Snoke’s Excavating | |||||
PharmCare Consultants, LLC | and Paving, Inc. | Joel R. Zullinger | ||||
Chairman of the Board, | ||||||
Denver L. Tuckey | Attorney-at-Law, | |||||
Secretary of the Board, | Zullinger Davis, P.C. | |||||
Retired, Tuckey Mechanical | ||||||
Services, Inc. |
Executive Officers
Kenneth R. Shoemaker | Philip E. Fague | Bradley S. Everly | Jeffrey W. Embly | |||
President and | Executive Vice President | Senior Vice President, | Senior Vice President | |||
Chief Executive Officer | and Treasurer | Assistant Secretary and | ||||
Chief Financial Officer | ||||||
Peter C. Zimmerman | ||||||
Executive Vice President |
Office Locations
CAMP HILL | CHAMBERSBURG | HAGERSTOWN | NEW BLOOMFIELD | |||
Market Street Office* | Norland Avenue Office* | Hagerstown Office* | New Bloomfield Office* | |||
3045 Market Street | 625 Norland Avenue | 201 S. Cleveland Avenue | 1 South Carlisle Street | |||
Camp Hill, PA 17011 | Chambersburg, PA 17201 | Hagerstown, MD 21740 | New Bloomfield, PA 17068 | |||
717.612.1220 | 717.262.4290 | 301.739.5024 | 717.582.8188 | |||
CARLISLE | Lincoln Way Office* | MECHANICSBURG | ORRSTOWN | |||
Hanover Street Office* | 1725 Lincoln Way East | Silver Spring Office* | Orrstown Office* | |||
22 South Hanover Street | Chambersburg, PA 17202 | 3 Baden Powell Lane | 3580 Orrstown Road | |||
Carlisle, PA 17013 | 717.262.0023 | Mechanicsburg, PA 17050 | Orrstown, PA 17244 | |||
717.241.2001 | 717.791.2780 | 717.530.2630 | ||||
Orchard Drive Office* | ||||||
Stonehedge Office* | 1355 Orchard Drive | Simpson Ferry Office* | SHIPPENSBURG | |||
427 Village Drive | Chambersburg, PA 17201 | 1110 East Simpson Street | King Street Office* | |||
Carlisle, PA 17015 | 717.263.7246 | Mechanicsburg, PA 17055 | 77 East King Street | |||
717.240.0801 | 717.697.9002 | Shippensburg, PA 17257 | ||||
DUNCANNON | 717.530.3530 | |||||
North Middleton Office* | Duncannon Office * | NEWPORT | ||||
2250 Spring Road | 403 North Market Street | Main Office* | Lurgan Avenue Office | |||
Carlisle, PA 17013 | Duncannon, PA 17020 | Center Square | 121 Lurgan Avenue | |||
717.243.5844 | 717.834.3137 | Newport, PA 17074 | Shippensburg, PA 17257 | |||
717.567.3414 | 717.530.2640 | |||||
Seven Gables Office* | GREENCASTLE | |||||
1 Giant Lane | Greencastle Office* | Red Hill Office* | SPRING RUN | |||
Carlisle, PA 17013 | 308 Carolle Street | 18 Newport Plaza | Fannett-Metal Office* | |||
717.258.1129 | Greencastle, PA 17225 | Newport, PA 17074 | 16400 Path Valley Road | |||
717.593.9428 | 717.567.6555 | Spring Run, PA 17262 | ||||
717.349.7895 | ||||||
* | ATM Availability |
717.530.3530 or 1.888.ORRSTOWN • www.orrstown.com | ![]() |