EXHIBIT 99.1
| Filed by Orrstown Financial Services, Inc. | ||
| Commission File No.: 033-18888 |
Taking it to THE NEXT LEVEL |
Third Quarter Report • September 30, 2008 |
To our Shareholders, Customers, and Friends
Let’s face it; there hasn’t been much good news lately about banks in this country, or globally for that matter. However, it is important to know that not all banks are the same. Unlike some of the largest financial institutions, Orrstown Bank has never made one sub-prime or Alt-A (low documentation/no documentation) loan, nor did we purchase any preferred stock in government subsidized organizations like Fannie Mae or Freddie Mac. Throughout this financial crisis, Orrstown has continued to do business as usual—helping our customers and the communities we serve.
Despite the challenging national economic conditions, our core operating results across all business lines continue to be very solid. While our third quarter net consolidated income reflects a decrease over the same period last year, on a year-to-date basis our net earnings are up 5.3%. We are also pleased to note that total consolidated assets as of September 30, 2008 surpassed the one billion dollar mark for the first time, a significant milestone for our company.
Net income for the third quarter of 2008 was $3,163,000, compared to $3,427,000 during the same period last year. Primary earnings per share were $.49 for the third quarter of 2008, compared to $.53 per share during the third quarter of 2007. Increased provisions to the loan loss reserve, tighter net interest margins, and full integration of our state of the art operations center were primary contributors to lower earnings on a comparative quarter basis.
Net income for the nine months ending September 30, 2008 was $10,016,000, an increase of $506,000 compared to the same period last year. Primary earnings per share grew 5.4% for the first nine months from $1.48 per share in 2007 to $1.56 for 2008. Key year-to-date metrics continue to be very strong. Return on average tangible assets and return on average tangible equity were 1.49% and 17.55%, respectively, well above industry standards. The fourth quarter dividend of $.22 per share represents a 4.8% increase over the dividend of $.21 declared for the fourth quarter of 2007. For the year of 2008, total dividends increased 6.1% from $.82 per share to $.87 per share.
We are very proud to inform you that Orrstown continues to be recognized for significant accomplishments. This quarter I’m pleased to note that our institution was named one of Central Pennsylvania’s fastest growing companies for the seventh consecutive year! We were also chosen as a finalist by the Central Penn Business Journal as Business of the Year in the category of companies with 101 or more employees. These accolades demonstrate the quality of our growing organization.
Finally, I am pleased to report a very successful opening of our newest office located on Professional Court, just off the newly improved Eastern Boulevard in Hagerstown, Maryland. Our style of “hometown” personalized service is proving to be very popular in this new market and we are very excited about ongoing opportunities for growth. Vice President and Regional Senior Loan Officer, Terry Reiber, continues to do an outstanding job for our bank in the Hagerstown area. Recent additions to our Maryland team of banking professionals include Ed Hose, Business Banking Officer, and JD Pearl, Branch Executive Officer. Both men are seasoned bankers and have served the Washington County area for many years.
Orrstown is successfully weathering the current economic downturn and we are well positioned to take advantage of opportunities that may lie ahead. You can sleep at night knowing that Orrstown Financial Services, Inc. is strong, safe, and secure.
| /s/ Kenneth R. Shoemaker |
Kenneth R. Shoemaker President and Chief Executive Officer |
Consolidated Balance Sheets
(Unaudited) (Dollars in thousands, except per share) | September 30, | |||||||
| 2008 | 2007 | |||||||
Assets | ||||||||
Cash and due from banks | $ | 17,397 | $ | 14,769 | ||||
Federal funds sold | 2,362 | 6,530 | ||||||
Interest bearing deposits with banks | 89 | 393 | ||||||
Investment securities | 129,514 | 102,740 | ||||||
Loans | 784,074 | 684,430 | ||||||
Less: allowance for loan losses | (6,588 | ) | (5,643 | ) | ||||
Net loans | 777,486 | 678,787 | ||||||
Premises and equipment, net | 30,898 | 22,217 | ||||||
Goodwill and intangible assets | 21,249 | 21,430 | ||||||
Cash surrender value of life insurance | 16,412 | 15,873 | ||||||
Accrued interest receivable | 3,688 | 3,536 | ||||||
Other assets | 9,196 | 5,838 | ||||||
Total assets | $ | 1,008,291 | $ | 872,113 | ||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest bearing | $ | 90,999 | $ | 87,152 | ||||
Interest bearing | 617,803 | 571,719 | ||||||
Total deposits | 708,802 | 658,871 | ||||||
Short term borrowings | 87,353 | 59,804 | ||||||
Long term debt | 103,616 | 52,250 | ||||||
Accrued interest payable | 1,081 | 1,045 | ||||||
Other liabilities | 6,263 | 5,877 | ||||||
Total liabilities | 907,115 | 777,847 | ||||||
Shareholders’ Equity | ||||||||
Common stock | 336 | 336 | ||||||
Additional paid-in capital | 82,581 | 82,515 | ||||||
Retained earnings | 19,447 | 12,169 | ||||||
Accumulated other comprehensive income | (236 | ) | 333 | |||||
Treasury stock | (952 | ) | (1,087 | ) | ||||
Total shareholders’ equity | 101,176 | 94,266 | ||||||
Total liabilities and shareholders’ equity | $ | 1,008,291 | $ | 872,113 | ||||
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 | ||||
| 100 Light Street | Janney Montgomery Scott, LLC | |||
| Baltimore, MD 21202 | 1801 Market Street | |||
| 877.840.0012 | 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 September 30, | 9 Months Ended September 30, | ||||||||||||||
(Dollars in thousands, except per share) | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Interest Income | ||||||||||||||||
Interest and fees on loans | $ | 12,111 | $ | 12,481 | $ | 36,082 | $ | 35,679 | ||||||||
Interest and dividends on investment securities | 959 | 1,020 | 2,882 | 3,000 | ||||||||||||
Interest on short term investments | 28 | 155 | 207 | 556 | ||||||||||||
Total interest and dividend income | 13,098 | 13,656 | 39,171 | 39,235 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest on deposits | 3,252 | 4,924 | 10,636 | 14,092 | ||||||||||||
Interest on short-term borrowings | 379 | 642 | 1,029 | 1,722 | ||||||||||||
Interest on long-term debt | 1,059 | 405 | 3,017 | 1,216 | ||||||||||||
Total interest expense | 4,690 | 5,971 | 14,682 | 17,030 | ||||||||||||
Net interest income | 8,408 | 7,685 | 24,489 | 22,205 | ||||||||||||
Provision for loan losses | 257 | 90 | 672 | 240 | ||||||||||||
Net interest income after provision | 8,151 | 7,595 | 23,817 | 21,965 | ||||||||||||
Securities gains / (losses) | (75 | ) | (12 | ) | (27 | ) | 58 | |||||||||
Other income | 3,820 | 3,535 | 11,527 | 9,779 | ||||||||||||
Other expense | 7,316 | 6,220 | 20,901 | 18,314 | ||||||||||||
Income before income tax | 4,580 | 4,898 | 14,416 | 13,488 | ||||||||||||
Income tax expense | 1,417 | 1,471 | 4,400 | 3,978 | ||||||||||||
Net income | $ | 3,163 | $ | 3,427 | 10,016 | 9,510 | ||||||||||
Per Share Data | ||||||||||||||||
Basic earnings per share | $ | 0.49 | $ | 0.53 | $ | 1.56 | $ | 1.48 | ||||||||
Diluted earnings per share | $ | 0.46 | $ | 0.51 | $ | 1.48 | $ | 1.41 | ||||||||
Dividends per share | $ | 0.22 | $ | 0.21 | $ | 0.65 | $ | 0.61 | ||||||||
Performance Statistics | ||||||||||||||||
Return on average assets | 1.31 | % | 1.61 | % | 1.44 | % | 1.54 | % | ||||||||
Return on average tangible assets | 1.36 | % | 1.67 | % | 1.49 | % | 1.60 | % | ||||||||
Return on average equity | 12.57 | % | 14.70 | % | 13.59 | % | 13.95 | % | ||||||||
Return on average tangible equity | 16.17 | % | 19.36 | % | 17.55 | % | 18.49 | % | ||||||||
2008 Common Stock Information
| Market Price | Quarterly Dividend | |||||||||||
| High | Low | Close | ||||||||||
First Quarter | $ | 31.50 | $ | 29.50 | $ | 30.10 | $ | 0.21 | ||||
Second Quarter | 33.96 | 29.10 | 30.00 | 0.22 | ||||||||
Third Quarter | 31.75 | 29.00 | 30.50 | 0.22 | ||||||||
Total Trust Assets $393 Million
Board of Directors
| Dr. Anthony F. Ceddia | Kenneth R. Shoemaker | Peter C. Zimmerman | DIRECTORS EMERITI | |||
| President Emeritus, | President and CEO, | Executive Vice President, | ||||
| Shippensburg University | Orrstown Bank | Senior Operations Officer, | Richard M. Diffenbaugh | |||
| Orrstown Bank | Eldon E. Funk | |||||
| Jeffrey W. Coy | Glenn W. Snoke | Frank S. Heberlig | ||||
| Vice Chairman of the Board, | President, | Joel R. Zullinger | Robert T. Henry | |||
| Commissioner, | Snoke’s Excavating | Chairman of the Board, | William O. Hykes | |||
| PA Gaming Control Board | and Paving, Inc. | Attorney-at-Law, | Galen L. Myers | |||
| Zullinger Davis, P.C. | Raymond I. Pugh | |||||
| Andrea Pugh | Denver L. Tuckey | |||||
| President, | Secretary of the Board, | Mark K. Keller | ||||
| PharmCare Consultants, LLC | Retired, | State Representative, | ||||
| Tuckey Mechanical Services, Inc. | 86th District | |||||
| Gregory A. Rosenberry | Orrstown Bank Board only | |||||
| President & General Partner, | John S. Ward | |||||
| Rosenberry Family Limited | President, | |||||
| Partnership | Modern Transit Partnership | |||||
| Executive Officers | ||||||
| Kenneth R. Shoemaker | Philip E. Fague | Bradley S. Everly | Jeffrey W. Embly | |||
| President, | Executive Vice President, | Senior Vice President, | Executive Vice President, | |||
| Chief Executive Officer | Treasurer and | Assistant Secretary and | Chief Commercial Officer | |||
| Chief Retail Officer | Chief Financial Officer | |||||
| Peter C. Zimmerman | ||||||
| Executive Vice President, | ||||||
| Senior Operations Officer | ||||||
| Office Locations | ||||||
| CAMP HILL | CHAMBERSBURG | HAGERSTOWN | NEW BLOOMFIELD | |||
| 3045 Market Street | 625 Norland Avenue | 201 South Cleveland Avenue | 1 South Carlisle Street | |||
| Camp Hill, PA 17011 | Chambersburg, PA 17201 | Hagerstown, MD 21740 | New Bloomfield, PA 17068 | |||
| CARLISLE | 1725 Lincoln Way East | 1020 Professional Court | ORRSTOWN | |||
| 22 South Hanover Street | Chambersburg, PA 17202 | Hagerstown, MD 21740 | 3580 Orrstown Road | |||
| Carlisle, PA 17013 | Orrstown, PA 17244 | |||||
| 1355 Orchard Drive | MECHANICSBURG | |||||
| 427 Village Drive | Chambersburg, PA 17201 | 3 Baden Powell Lane | SHIPPENSBURG | |||
| Carlisle, PA 17015 | Mechanicsburg, PA 17050 | 77 East King Street | ||||
| DUNCANNON | Shippensburg, PA 17257 | |||||
| 2250 Spring Road | 403 North Market Street | 1110 East Simpson Street | ||||
| Carlisle, PA 17013 | Duncannon, PA 17020 | Mechanicsburg, PA 17055 | ||||
| 121 Lurgan Avenue | ||||||
| 1 Giant Lane | GREENCASTLE | NEWPORT | Shippensburg, PA 17257 | |||
| Carlisle, PA 17013 | 308 Carolle Street | 15 North 2nd Street | ||||
| Greencastle, PA 17225 | Newport, PA 17074 | SPRING RUN | ||||
| 16400 Path Valley Road | ||||||
| 18 Newport Plaza | Spring Run, PA 17262 | |||||
| Newport, PA 17074 | ||||||
| 717.530.3530 or 1.888.ORRSTOWN • www.orrstown.com |  |