FORM 10 - Q/A
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 March 31, 2003 Commission file number 33-18888
-------------- --------
ORRSTOWN FINANCIAL SERVICES, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Commonwealth of Pennsylvania 23-2530374
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 East King Street 17257
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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.
YES X NO
----- -----
Class Outstanding at April 30, 2003
- -------------------------------- -----------------------------
(Common Stock, no par value ) 2,405,551
Page 1
ORRSTOWN FINANCIAL SERVICES, INC.
INDEX
Page
--------
Part I - FINANCIAL INFORMATION
Item 1. Financial statements (unaudited)
Condensed consolidated balance sheets
- March 31, 2003 and December 31, 2002. 4
Condensed consolidated statements of
income - Three months ended March 31,
2003 and 2002. 5
Condensed consolidated statements of
comprehensive income - Three months ended
March 31, 2003 and 2002. 6
Condensed consolidated statements of cash
flows - Three Months ended March 31, 2003
and 2002. 7
Notes to condensed consolidated financial
statements 8 - 10
Item 2. Management's discussion and analysis of financial
condition and results of operations 11 - 16
PART II - OTHER INFORMATION
Other Information 18
Signatures 19
Certifications of Principal Executive Officer and
Principal Financial Officer 20 - 23
Exhibits 24 - 26
Page 2
PART I - FINANCIAL INFORMATION
Page 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ORRSTOWN FINANCIAL SERVICES, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY, ORRSTOWN BANK
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Unaudited) (Audited)*
March 31, December
31,
(Dollars in Thousands) 2003 2002
- ----------------------------------------------------------------------
- -
ASSETS
Cash and due from banks $ 13,062 $ 10,656
Interest bearing deposits with banks 1,328 1,095
Federal funds sold 11,011 8,217
Securities available for sale 83,318 90,106
Federal Home Loan Bank, Federal
Reserve and Atlantic Central
Bankers Bank Stock, at cost which
approximates market value 2,918 2,268
Loans 299,698 281,391
Allowance for loan losses ( 3,979) ( 3,734)
-------- ---------
Net Loans 295,719 277,657
Premises and equipment, net 10,138 9,849
Accrued interest receivable 1,668 1,606
Cash value-life insurance 6,984 6,916
Other assets 2,394 1,928
--------- ---------
Total assets $ 428,540 $ 410,298
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 43,718 $ 42,704
Interest bearing 293,630 276,464
--------- ---------
Total deposits 337,348 319,168
--------- ---------
Federal funds purchased and other short
term borrowed funds 19,938 20,808
Long term borrowed funds 28,539 28,539
Accrued interest payable 247 248
Other liabilities 3,840 3,573
--------- ---------
Total liabilities 389,912 372,336
--------- ---------
Common stock, no par value-$.1041
stated value per share at March 31,
2003 and December 31, 2002,
10,000,000 shares authorized with
2,401,969 shares issued at March 31,
2003 and 2,398,405 issued at
December 31, 2002 250 250
Additional paid - in capital 26,089 25,913
Retained earnings 10,814 9,750
Accumulated other comprehensive income 1,475 2,049
--------- ---------
Total stockholders' equity 38,628 37,962
--------- ---------
Total liabilities and stockholders' equity $ 428,540 $ 410,298
========= =========
*Condensed from audited financial statements
The accompanying notes are an integral part of these condensed
financial statements.
Page 4
ORRSTOWN FINANCIAL SERVICES, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY, ORRSTOWN BANK
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
------------------
March March
(Dollars in Thousands) 2003 2002
- ---------------------------------------------------------------------
INTEREST INCOME
Interest and fees on loans $ 4,636 $ 4,542
Interest on federal funds sold 21 56
Interest and dividends on investment
securities 1,039 1,002
Interest income on deposits with banks 4 5
------- -------
Total interest income 5,700 5,605
------- -------
INTEREST EXPENSE
Interest on deposits 1,295 1,608
Interest on borrowed money 407 454
------- -------
Total interest expense 1,702 2,062
------- -------
Net interest income 3,998 3,543
Provision for loan losses 252 150
------- -------
Net interest income after provision for
loan losses 3,746 3,393
------- -------
OTHER INCOME
Service charges on deposits 610 476
Other service charges 254 219
Trust department income 319 322
Brokerage income 111 80
Other income 101 80
Securities gains / (losses) 178 1
------- -------
Total other income 1,573 1,178
------- -------
OTHER EXPENSES
Salaries and employee benefits 1,676 1,479
Net occupancy and equipment expenses 506 428
Other operating expenses 937 781
------- -------
Total other expense 3,119 2,688
------- -------
Income before income tax 2,200 1,883
Income tax expenses 656 549
------- -------
Net income $ 1,544 $ 1,334
======= =======
PER SHARE DATA
Earnings per share
Basic earnings per share $ 0.64 $ 0.56
Weighted average number of shares
outstanding 2,400,746 2,383,332
Diluted earnings per share $ 0.63 $ 0.55
Weighted average number of shares
outstanding 2,464,929 2,424,392
Dividends per share $ 0.20 $ 0.17
The accompanying notes are an integral part of these condensed
financial statements.
Page 5
ORRSTOWN FINANCIAL SERVICES, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY, ORRSTOWN BANK
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended
------------------
March March
(Dollars in Thousands) 2003 2002
- ---------------------------------------------------------------------------
COMPREHENSIVE INCOME
Net Income $ 1,544 $ 1,334
Other comprehensive income, net of tax
Unrealized gain (loss) on investment securities
available for sale ( 574) ( 104)
------- --------
Comprehensive Income $ 970 $ 1,230
======= =======
The accompanying notes are an integral part of these condensed
financial statements.
Page 6
ORRSTOWN FINANCIAL SERVICES, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY, ORRSTOWN BANK
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<s>
Three Months Ended
---------------------
March March
(Dollars in Thousands) 2003 2002
- ----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,544 $ 1,334
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 222 188
Provision for loan losses 252 150
Other, net ( 26) ( 192)
-------- --------
Net cash provided by operating activities 1,992 1,480
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest bearing ( 233) ( 369)
deposits with banks
Purchases of available for sale securities ( 12,369) ( 8,444)
Sales and maturities of available for sale
securities 18,279 4,906
Net (purchases) redemption of FHLB Stock ( 650) ( 100)
Net (increase) in loans ( 18,314) ( 3,993)
Purchases of bank premises and equipment ( 511) ( 487)
-------- --------
Net cash provided (used) by investing activities ( 13,798) ( 8,487)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 18,180 1,462
Cash dividends paid ( 480) ( 405)
Proceeds from sale of stock 176 257
Cash paid in lieu of fractional shares 0 0
Net increase (decrease) in short term purchased
funds ( 870) ( 5,359)
Proceeds in long term debt 0 5,000
Payments on long term debt 0 0
-------- --------
Net cash provided by financing activities 17,006 955
-------- --------
Net increase (decrease) in cash and cash equivalents 5,200 ( 6,052)
Cash and cash equivalents at beginning of period 18,873 36,997
-------- --------
Cash and cash equivalents at end of period $ 24,073 $ 30,945
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,703 $ 2,120
Income Taxes 0 0
Supplemental schedule of noncash investing
and financing activities:
Unrealized gain (loss) on investments available
for sale (net of deferred taxes of $296 and
$448 at March 31, 2003 and 2002,
respectively) ( 574) ( 104)
The accompanying notes are an integral part of these condensed financial
statements.
Page 7
ORRSTOWN FINANCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(UNAUDITED)
Review of Interim Financial Statements
The condensed consolidated financial statements as of and
for the three months ended March 31, 2003 and 2002 have been
reviewed by independent certified public accountants. Their
report on their review is attached as Exhibit 99 to this 10-
Q.
NOTE 1. Basis of Presentation
The financial information presented at and for the three
months ended March 31, 2003 and 2002 is unaudited.
Information presented at December 31, 2002 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 subsidiaries,
Orrstown Bank and Pennbanks Insurance Company Cell P1. 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 with banks, loans and deposits in the
Statement of Cash Flows.
Page 8
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, deferred compensation is 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 in depreciation expense,
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. Stock-Based Compensation
The Corporation grants stock options to employees and
directors with an exercise price equal to the fair value of
the shares at the date of grant. The Corporation accounts
for stock option grants using the intrinsic-value method in
accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related Interpretations. Under the
intrinsic-value method, because the exercise price of the
Corporation's employee stock options equals the market price
of the underlying stock on the date of grant, no
compensation expense is recognized. If grants are made
during a reporting period the pro forma effect on net income
and earnings per share are disclosed via footnote as if the
Corporation had applied the fair value recognition
provisions of FASB 123, "Accounting for Stock-Based
Compensation," to stock-based employee and/or director
compensation. No grants were made during the periods
presented herein.
NOTE 6. 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, 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 are classified as available for sale and carried at
fair value. Securities held for indefinite periods of
Page 9
NOTE 6. Investment Securities (Continued)
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 identification 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 other comprehensive income, whereas realized
gains and losses flow through the Corporation's results of
operations.
The Corporation has classified all investments securities as
"available for sale". At March 31, 2003 fair value exceeded
amortized cost by $ 2,235,000. This resulted in an increase
in shareholders' equity, the balance of accumulated other
comprehensive income increased to $ 1,475,000 after
recognizing the tax effects of the unrealized gains. At
December 31, 2002, fair value exceeded amortized cost by
$ 3,105,000 increasing accumulated other comprehensive
income to $ 2,049,000 after recognizing the tax effects of
the unrealized gains.
NOTE 7. 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 8. Subsequent Event
On April 29, 2003 a 5% stock dividend was declared. The
stock dividend will be paid May 30, 2003 to shareholders of
record on May 12, 2003. Per share amounts will be restated
in future filings to reflect the effects of the stock
dividend.
Page 10
ORRSTOWN FINANCIAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary
Orrstown Financial Services, Inc. recorded net income of $ 1,544,000
for the first quarter of 2003 compared to $ 1,334,000 for the same
period in 2002, representing an increase of $ 210,000 or 15.8%. Basic
earnings per share was $0.64 for the first quarter of 2003 up $ 0.08
from the $ 0.56 earned during the first quarter of 2002.
The following statistics compare 2003's first quarter to that of 2002:
Three Months Ended
------------------
March March
2003 2002
------------------
Return on average assets 1.52% 1.49%
Return on average equity 16.15% 16.93%
Average equity / Average assets 9.41% 8.82%
A more detailed discussion of the elements having the greatest impact
on net income follows.
Net Interest Income
Net interest income for the first quarter of 2003 was $ 3,998,000
representing a growth of $ 455,000, or 12.8% over the $ 3,543,000
realized during the first quarter of 2002. Growth was due to volume
increases. Commercial loans were up $ 32.9 million in average daily
balances versus the first quarter 2002. The net interest margin
tightened from 4.37% in the first quarter 2002 to 4.32% during the
first three months of 2003; while the net interest spread increased by
4 basis points for the same period. Core deposit growth was strong
with average daily balances up $ 46.0 million, or 25.8% over first
quarter 2002 levels. Growth continues to be sustained in the
commercial loan and core deposit areas. Reliance upon purchased funds
and noncore deposits has declined significantly and has helped to drop
the yield on interest bearing liabilities from 2.88% during first
quarter 2002 to 2.09% for first quarter 2003.
Page 11
The table that follows states rates on a fully taxable equivalent
basis (FTE) and demonstrates the aforementioned effects:
(Dollars in Thousands) Three Months Ended
March 2003 March 2002
Avg Balance Rates Avg Balance Rates
Interest earning assets 387,364 6.10% 338,028 6.85%
Interest bearing liabilities 329,705 2.09% 290,873 2.88%
--------- ---------
Free Funds 57,659 47,155
--------- ---------
Net interest income 3,998 3,543
Net interest spread 4.01% 3.97%
Free funds ratio 14.88% 13.95%
Net interest margin 4.32% 4.37%
Non-Interest Income and Expense
The following compares three months ended March 31, 2003 to three
months ended March 31, 2002:
Other income increased $ 395,000, or 33.5%, from $ 1,178,000 during
the first quarter of 2002 to $ 1,573,000 during the first quarter of
2003. Fees from deposit service charges grew $ 134,000, or 28.2% over
2002. Debit card fees, merchant fees and bounce protection fees were
the leading service charge gainers. Other contributing factors
included an increase in securities gains of $ 177,000, a $ 23,000
increase in insurance fees and a $ 28,000 increase in asset management
fees.
Other expenses rose from $ 2,688,000 during the first quarter 2002 to
$ 3,119,000 during 2003's first quarter for an increase of $ 431,000,
or 16.0%. Growth experienced over the past year has increased
operational expenses including salaries and benefits. In addition our
eleventh full service branch was opened during 2002's second quarter
and our twelfth is slated to open in Chambersburg, Pennsylvania during
the second quarter 2003, contributing to an increase in occupancy and
equipment expense of 18.2% over the prior year. Expenses related to
the credit life and disability cell were up by approximately $ 41,000
versus first quarter 2002.
Page 12
Income Tax Expense
Income tax expense increased $ 107,000, or 19.4%, during the first
quarter of 2003 versus the first quarter of 2002. Tax exempt income
has become a smaller part of the revenue stream. Effective income tax
rates were as follows:
Three Months Ended
March March
2003 2002
Effective income tax rate 29.8% 29.2%
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:
(Dollars in Thousands) Three Months Ended
March March
2003 2002
Balance at beginning of period $ 3,734 $ 3,104
Recoveries of loans previously charged off 10 1
Additions to allowance charged to expense 252 150
------- -------
Total 3,996 3,255
Loans charged off 17 47
------- -------
Balance at end of period $ 3,979 $ 3,208
======= =======
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 was approximately 58% at March 31, 2003.
Page 13
Nonperforming Assets / Risk Elements
Nonperforming assets at March 31, are as follows:
(Dollars in Thousands) 2003 2002
- ---------------------------------------------------------------------
Loans on nonaccrual (cash) basis
Loans secured by real estate $ 68 $ 10
Installment loans 18 12
Commercial loans 0 0
Credit card 0 0
------- -------
Total nonaccrual loans 86 22
------- -------
Loans whose terms have been renegotiated
Loans secured by real estate 1,420 1,428
Installment loans 0 0
Commercial loans 0 0
Credit card 0 0
------- -------
Total renegotiated loans 1,420 1,428
------- -------
OREO 211 211
------- -------
Total nonperforming loans and OREO $ 1,717 $ 1,661
======= =======
Ratio of nonperforming assets to total loans
and OREO 0.57% 0.65%
Ratio of nonperforming assets to total assets 0.40% 0.44%
Loans past due 90 or more days and still accruing
Loans secured by real estate $ 1,345 $ 836
Installment loans 0 14
Commercial loans 193 88
Credit card 0 7
------- -------
Total loans 90 or more days past due $ 1,538 $ 1,045
======= =======
Ratio of loans 90 or more days past due to total
Loans and OREO 0.51% 0.41%
Ratio of loans 90 or more days past due to total
assets 0.36% 0.28%
_______ _______
------- -------
Total nonperforming and other risk assets $ 3,255 $ 2,706
======= =======
Ratio of total risk assets to total loans and OREO 1.09% 1.07%
Ratio of total risk assets to total assets 0.76% 0.72%
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.
Page 14
Capital Resources and Balance Sheet Fluctuations
Orrstown Financial Services, Inc. is a financial holding company and,
as such must maintain a well capitalized status in its bank
subsidiary. A comparison of Orrstown Financial Services, Inc's
capital ratios to regulatory requirements at March 31, 2003 are as
follows:
Orrstown Rebulatory
Financial Regulatory Well Capitalized
Services, Inc. Minimums Minimums
Leverage Ratio 9.00% 4% 5%
Risk Based Capital Ratios:
Tier I Capital Ratio 12.28% 4% 6%
Total (Tier I & II) Capital
Ratio(core capital plus
allowance for loan losses) 13.53% 8% 10%
The growth experienced during 2003 has been supported by capital
growth in the form of retained earnings and capital infusion from the
dividend reinvestment plan. Dividend reinvestment plan participants
have added $ 177,000 to equity as of March 31, 2003. Equity
represented 9.01% of assets at March 31, 2003 which is down from 9.25%
at December 31, 2002 due to significant asset growth and an equity
markdown related to the investment portfolio during first quarter
2003.
All balance sheet fluctuations exceeding 5% have been created by
either the growth that has been experienced during 2003 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.
Sarbanes-Oxley Act 2002 Requirements
During first quarter 2003 the Board of Directors approved adoption of
a Code of Ethics for Financial Officers which applies to the Chief
Executive Officer, Chief Financial Officer and Chief Accounting
Officer and complies with Sarbanes-Oxley Act requirements.
The Corporation's audit committee held its regularly scheduled meeting
during first quarter 2003. The audit committee consists of four
outside directors with varied business and financial expertise.
Page 15
CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The company
maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the
company files or submits under the Securities Exchange Act of
1934 is recorded, processed, summarized, and reported within the
time periods specified in the rules and forms of the Securities
and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing
date of this report, the chief executive and chief financial
officers of the company concluded that the company's disclosure
controls and procedures were adequate.
(b) Changes in internal controls. The Company made no significant
changes in its internal controls or in other factors that could
significantly affect these controls subsequent to the date of the
evaluation of the controls by the Chief Executive or Chief
Financial officers.
Page 16
PART II - OTHER INFORMATION
Page 17
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
99 - Report of independent accountant's on interim
financial statements
99.1 - Certification of the Chief Executive Officer pursuant
to 18 U.S.C. Section 1350
99.2 - Certification of the Chief Financial Officer pursuant
to 18 U.S.C. Section 1350
(b) Reports on Form 8 - K
None
Page 18
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
---------------------------
(Kenneth R. Shoemaker,
President & CEO)
(Duly Authorized Officer)
/s/ Bradley S. Everly
---------------------------
(Bradley S. Everly, Sr. Vice
President & CFO)
(Chief Financial Officer)
/s/ Robert B. Russell
---------------------------
(Robert B. Russell, Controller)
(Chief Accounting Officer)
Date: April 30, 2003
-------------------------
Page 19
CERTIFICATION
I, Kenneth R. Shoemaker, President and CEO, certify, that:
---------------------------------------
1. I have reviewed this quarterly report on Form 10-Q of Orrstown
Financial Services, Inc.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by other within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of the
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditor any material
weakness in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
Page 20
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
By: /s/ Kenneth R. Shoemaker
---------------------
Kenneth R. Shoemaker
President and CEO
(Principal Executive
Officer)
April 30, 2003
Page 21
CERTIFICATION
I, Bradley S. Everly, Sr. Vice President and CFO, certify, that:
---------------------------------------------
1. I have reviewed this quarterly report on Form 10-Q of Orrstown
Financial Services, Inc.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by other within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of the
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditor any material
weakness in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls.
Page 22
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
By: /s/ Bradley S. Everly
---------------------------
Bradley S. Everly
Sr. Vice President and CFO
(Principal Financial Officer)
April 30, 2003
Page 23
EXHIBIT 99
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Orrstown Financial Services, Inc.
Shippensburg, Pennsylvania
We have reviewed the accompanying consolidated balance sheet
of Orrstown Financial Services, Inc. and it's subsidiaries as of
March 31, 2003 and the related consolidated statements of income for
the three months ended March 31, 2003 and 2002 and consolidated
statements of comprehensive income for the three months ended
March 31, 2003 and 2002 and consolidated statements of cash flows for
the three months ended March 31, 2003 and 2002. These financial
statements are the responsibility of the Corporation's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public Accountants.
A review of interim financial information consists principally of
applying analytical procedures to financial data and making inquiries
of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
/s/ Smith Elliott Kearns & Company, LLC
SMITH ELLIOTT KEARNS & COMPANY, LLC
Chambersburg, Pennsylvania
April 30, 2003
Page 24
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Orrstown
Financial Services, Inc. (the Corporation) on Form 10-Q for the period
ending March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Kenneth R. Shoemaker,
Chief Executive Officer of the Corporation, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly presents,
in all material respects, the final condition and results
of operations of the Corporation.
/s/ Kenneth R. Shoemaker
---------------------------
Kenneth R. Shoemaker
Chief Executive Officer
April 30, 2003
Page 25
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Orrstown
Financial Services, Inc. (the Corporation) on Form 10-Q for the period
ending March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Bradley S. Everly,
Chief Financial Officer of the Corporation, certify, pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the final condition and results of
operations of the Corporation.
/s/ Bradley S. Everly
---------------------------
Bradley S. Everly
Chief Financial Officer
April 30, 2003
Page 26