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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, 2002 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 (I.R.S. Employer
incorporation 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.
YES ____X____ NO ____________
Class Outstanding at October 22, 2002
- ---------------------------- -------------------------------
(Common Stock, no par value) 2,393,876
ORRSTOWN FINANCIAL SERVICES, INC.
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial statements (unaudited)
Condensed consolidated balance sheets - September 30, 2002
and December 31, 2001 4
Condensed consolidated statements of income - Three months
ended September 30, 2002 and 2001 5
Condensed consolidated statements of income - Nine months
ended September 30, 2002 and 2001 6
Condensed consolidated statements of comprehensive income -
three & nine months ended September 30, 2002 and 2001 7
Condensed consolidated statements of cash flows - Nine
months ended September 30, 2002 and 2001 8
Notes to condensed consolidated financial statements 9 - 10
Item 2. Management's discussion and analysis of financial
condition and results of operations 11 - 14
PART II - OTHER INFORMATION
Other Information 16
Signatures 17
Certifications of Principal Executive Officer and Principal Financial Officer 18 and 19
Exhibits 20 - 22
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)
(Unaudited) (Audited)*
September 30, December 31,
(Dollars in Thousands) 2002 2001
ASSETS
Cash and due from banks $ 11,464 $ 12,650
Interest bearing deposits with banks 1,235 679
Federal funds sold 19,901 24,347
Securities available for sale 83,397 68,422
Federal Home Loan Bank, Federal Reserve and Atlantic Central Bankers Bank
Stock, at cost which approximates market value 1,804 1,703
Loans 274,654 249,816
Allowance for loan losses (3,496) (3,104)
-------- --------
Net Loans 271,158 246,712
Premises and equipment, net 9,568 9,019
Accrued Interest receivable 1,631 1,541
Cash value-life insurance 6,781 5,923
Other assets 2,177 2,732
-------- --------
Total assets $409,116 $373,728
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 43,722 $ 39,881
Interest bearing 265,808 241,287
-------- --------
Total deposits 309,530 281,168
Federal funds purchased and other short
term borrowed funds 28,357 31,531
Long term borrowed funds 31,512 26,512
Accrued interest payable 259 373
Other liabilities 3,232 2,982
-------- --------
Total liabilities 372,890 342,566
-------- --------
Common stock, no par value-$.1041 stated value per share at September 30,
2002 and December 31, 2001, 10,000,000 shares authorized with
2,393,876 shares issued at September 30, 2002 and 2,378,608
issued at December 31, 2001 249 248
Additional paid - in capital 25,707 25,077
Retained earnings 8,727 5,557
Accumulated other comprehensive income 1,543 280
-------- --------
Total stockholders' equity 36,226 31,162
-------- --------
Total liabilities and stockholders' equity $409,116 $373,728
======== ========
* 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
September 30, September 30,
(Dollars in Thousands) 2002 2001
INTEREST INCOME
Interest and fees on loans $ 4,760 $ 5,047
Interest on federal funds sold 84 129
Interest and dividends on investment securities 1,084 1,026
Interest income on deposits with banks 5 5
----------- -----------
Total interest income 5,933 6,207
----------- -----------
INTEREST EXPENSE
Interest on deposits 1,526 2,096
Interest on borrowed money 511 585
----------- -----------
Total interest expense 2,037 2,681
----------- -----------
Net interest income 3,896 3,526
Provision for loan losses 150 170
----------- -----------
Net interest income after provision for loan losses 3,746 3,356
----------- -----------
OTHER INCOME
Service charges on deposits 589 478
Other service charges 217 54
Trust department income 344 310
Brokerage income 108 74
Other income 86 85
Securities gains / (losses) (6) (9)
----------- -----------
Total other income 1,338 992
----------- -----------
OTHER EXPENSES
Salaries and employee benefits 1,567 1,351
Net occupancy and equipment expenses 464 417
Other operating expenses 962 696
----------- -----------
Total other expense 2,993 2,464
----------- -----------
Income before income tax 2,091 1,884
Income tax expenses 509 501
----------- -----------
Net income $ 1,582 $ 1,383
=========== ===========
PER SHARE DATA
Earnings per share
Basic earnings per share $ 0.66 $ 0.58
Weighted average number of shares outstanding 2,392,993 2,369,508
Diluted earnings per share $ 0.64 $ 0.57
Weighted average number of shares outstanding 2,457,701 2,410,568
Dividends per share $ 0.18 $ 0.15
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 INCOME (UNAUDITED)
Nine Months Ended
September 30, September 30,
(Dollars in Thousands) 2002 2001
INTEREST INCOME
Interest and fees on loans $ 13,901 $ 14,517
Interest on federal funds sold 197 316
Interest and dividends on investment securities 3,152 3,177
Interest income on deposits with banks 15 11
---------- ----------
Total interest income 17,265 18,021
---------- ----------
INTEREST EXPENSE
Interest on deposits 4,678 6,444
Interest on borrowed money 1,455 1,766
---------- ----------
Total interest expense 6,133 8,210
---------- ----------
Net interest income 11,132 9,811
Provision for loan losses 450 290
---------- ----------
Net interest income after provision for loan losses 10,682 9,521
---------- ----------
OTHER INCOME
Service charges on deposits 1,613 1,390
Other service charges 685 508
Trust department income 1,047 918
Brokerage income 320 204
Other income 248 249
Securities gains / (losses) 12 22
---------- ----------
Total other income 3,925 3,291
---------- ----------
OTHER EXPENSES
Salaries and employee benefits 4,479 3,848
Net occupancy and equipment expenses 1,327 1,256
Other operating expenses 2,688 2,472
---------- ----------
Total other expense 8,494 7,576
---------- ----------
Income before income tax 6,113 5,236
Income tax expenses 1,700 1,437
---------- ----------
Net income $ 4,413 $ 3,799
---------- ----------
PER SHARE DATA
Earnings per share
Basic earnings per share $ 1.85 $ 1.61
Weighted average number of shares outstanding 2,388,497 2,363,531
Diluted earnings per share $ 1.81 $ 1.58
Weighted average number of shares outstanding 2,438,716 2,391,732
Dividends per share $ 0.52 $ 0.44
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 COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended
September 30, September 30,
(Dollars in Thousands) 2002 2001
COMPREHENSIVE INCOME
Net Income $ 1,582 $ 1,383
Other comprehensive income, net of tax
Unrealized gain (loss) on investment securities
available for sale 645 722
---------- ----------
Comprehensive Income $ 2,227 $ 2,105
========== ==========
Nine Months Ended
September 30, September 30,
(Dollars in Thousands) 2002 2001
COMPREHENSIVE INCOME
Net Income $ 4,413 $ 3,799
Other comprehensive income, net of tax
Unrealized gain (loss) on investment securities
available for sale 1,263 917
---------- ----------
Comprehensive Income $ 5,676 $ 4,716
========== ==========
The accompanying notes are an integral part of these
condensed financial statements.
Page 7
ORRSTOWN FINANCIAL SERVICES, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY, ORRSTOWN BANK
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30, September 30,
(Dollars in Thousands) 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,413 $ 3,799
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 588 569
Provision for loan losses 450 290
Other, net (897) (485)
-------------- --------------
Net cash provided by operating activities 4,554 4,173
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest bearing deposits with banks (556) (567)
Purchases of available for sale securities (24,407) (29,374)
Sales and maturities of available for sale securities 11,335 33,968
Net (purchases) redemption of FHLB Stock (101) 431
Net (increase) in loans (24,896) (38,789)
Purchases of bank premises and equipment (1,137) (295)
-------------- --------------
Net cash provided (used) by investing activities (39,762) (34,626)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 28,362 27,598
Cash dividends paid (1,244) (1,031)
Proceeds from sale of stock 632 718
Cash paid in lieu of fractional shares 0 (20)
Net increase (decrease) in short term purchased funds (3,174) 17,379
Proceeds in long term debt 5,000 8,000
Payments on long term debt 0 (316)
-------------- --------------
Net cash provided by financing activities 29,576 52,328
-------------- --------------
Net increase (decrease) in cash and cash equivalents (5,632) 21,875
Cash and cash equivalents at beginning of period 36,997 14,070
-------------- --------------
Cash and cash equivalents at end of period $ 31,365 $ 35,945
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 6,247 $ 8,412
Income Taxes 1,850 1,500
Supplemental schedule of noncash investing and financing activities:
Unrealized gain (loss) on investments available for sale (net
of deferred taxes of $650 and $470 at September 30, 2002 and
2001, respectively) 1,263 917
The accompanying notes are an integral part of these
condensed financial statements.
Page 8
ORRSTOWN FINANCIAL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
(UNAUDITED)
Review of Interim Financial Statements
The condensed consolidated financial statements as of and for the three and nine
month periods ended September 30, 2002 and 2001 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 and nine
months ended September 30, 2002 and 2001 is unaudited. Information presented at
December 31, 2001 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 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 as a result of tax exempt income earned primarily 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.
Page 9
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 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 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 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, 2002 fair value exceeded amortized cost by $ 2,337,000. In
stockholders' equity, the balance of accumulated other comprehensive income
increased to $ 1,543,000 after recognizing the tax effects of the unrealized
gains. At December 31, 2001, fair value exceeded amortized cost by $ 425,000
increasing accumulated other comprehensive income to $ 280,000 after recognizing
the tax effects of the unrealized gains.
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 $ 1,582,000 for the
third quarter of 2002 compared to $ 1,383,000 for the same period in 2001,
representing an increase of $ 199,000 or 14.4%. Basic earnings per share was
$ 0.66 for the third quarter of 2002 up $ 0.08 from the $ 0.58 earned during the
third quarter of 2001.
Net income for the first nine months of 2002 was $ 4,413,000 compared to
$ 3,799,000 for the same period in 2001, representing an increase of $ 614,000
or 16.2%. Net income per share for the first nine months of 2002 was $ 1.85 up
from the $ 1.61 per share realized during the nine months ended
September 30, 2001.
The following statistics compare 2002's third quarter and year-to-date
performance to that of 2001:
Three Months Ended Nine Months Ended
September September September September
2002 2001 2002 2001
Return on average assets 1.58% 1.57% 1.56% 1.54%
Return on average equity 17.81% 18.34% 17.62% 17.60%
Average equity / Average assets 8.88% 8.54% 8.84% 8.75%
A more detailed discussion of the elements having the greatest impact on net
income follows.
Net Interest Income
Net interest income for the third quarter of 2002 was $ 3,896,000 representing a
growth of $ 370,000, or 10.5% over the $ 3,526,000 realized during the third
quarter of 2001. Growth was due to volume as the net interest margin tightened
from 4.45% in the third quarter 2001 to 4.17% during third quarter 2002. Core
deposit growth was excellent with average daily balances up $ 40.3 million, or
31.7% from third quarter 2001 levels. Transaction account products have been
well received. In addition, commercial loan growth was strong with third quarter
average daily balances up $ 27.5 million, or 20.7% over third quarter 2001
levels.
Net interest income for the first nine months of 2002 was $ 11,132,000
representing an increase of $ 1,321,000, or 13.5% over the $ 9,811,000 generated
during the first nine months of 2001. Net interest income gains were due to
volume increases in core deposits and continued commercial loan demand.
The tables that follow state rates on a fully taxable equivalent basis (FTE) and
demonstrates the aforementioned effects:
(Dollars in Thousands) Three Months Ended
September 2002 September 2001
Avg Avg
Balance Rates Balance Rates
Interest earning assets $370,707 6.34% $325,925 7.71%
Interest bearing liabilities 315,844 2.56% 281,561 3.78%
-------- --------
Free Funds $ 54,863 $ 44,364
======== ========
Net interest income $ 3,896 $ 3,526
======== ========
Net interest spread 3.78% 3.93%
Free funds ratio 14.80% 13.61%
Net interest margin 4.17% 4.45%
Page 11
(Dollars in Thousands) Nine Months Ended
September 2002 September 2001
Avg Avg
Balance Rates Balance Rates
Interest earning assets $353,321 6.61% $305,700 8.01%
Interest bearing liabilities 302,868 2.71% 266,156 4.12%
-------- --------
Free Funds $ 50,453 $ 39,544
======== ========
Net interest income $ 11,132 $ 9,811
======== ========
Net interest spread 3.90% 3.89%
Free funds ratio 14.28% 12.94%
Net interest margin 4.29% 4.42%
Non-Interest Income and Expense
The following compares three months ended September 30, 2002 to three months
ended September 30, 2001:
Other income increased $ 346,000, or 34.9%, from $ 992,000 during the third
quarter of 2001 to $ 1,338,000 during the third quarter of 2002. Primary growth
areas included overdraft fees, asset management fees, insurance income, merchant
account fees and debit card fees.
Other expenses increased from $ 2,464,000 during the third quarter 2001 to
$ 2,993,000 during 2002's third quarter, resulting in an increase of $ 529,000,
or 21.5%. Salaries and benefits expense grew $ 216,000, or 16.0% due to annual
reviews, staff increases and the opening of our eleventh branch in Carlisle,
Pennsylvania on June 24, 2002. The opening of the eleventh branch and
renovations to the Stonehedge office added to the investment in premises and
equipment increase of $ 549,000 for the current year. Occupancy, equipment, data
processing and supplies expense all increased proportionally with growth.
The following compares nine months ended September 30, 2002 to nine months ended
September 30, 2001:
Other income grew $ 634,000, or 19.3%, from $ 3,291,000 during the first nine
months of 2001 to $ 3,925,000 during the same period of 2002. The primary areas
of increase were asset management fees up $ 245,000, overdraft fees up
$ 119,000, insurance fees net of reserves up $ 108,000, loan fees up $ 76,000,
merchant fees up $ 42,000 and debit card fees up $ 38,000.
Other expenses rose from $ 7,576,000 during the first nine months of 2001 to
$ 8,494,000 for the nine months ended September 30, 2002, growing $ 918,000, or
12.1%. Again, salary and benefit increases of $ 631,000 represented the largest
area of increase but other expense areas increased proportionally with the
company's overall growth.
Income Tax Expense
Income tax expense increased $ 8,000, or 1.6%, during the third quarter of 2002
versus the third quarter of 2001. For the first nine months of 2002 versus 2001,
income tax expense rose $ 263,000, or 18.3%. Tax exempt income has become a
smaller part of the revenue stream. Effective income tax rates were as follows:
Three Months Ended Nine Months Ended
September September September September
2002 2001 2002 2001
Effective income tax rate 24.3% 26.6% 27.8% 27.4%
The marginal federal income tax bracket is 34% for all periods presented.
Page 12
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 Nine Months Ended
September September September September
2002 2001 2002 2001
Balance at beginning of period $3,354 $2,803 $3,104 $2,691
Recoveries of loans previously charged off 4 1 9 3
Additions to allowance charged to expense 150 170 450 290
------ ------ ------ ------
Total 3,508 2,974 3,563 2,984
Loans charged off 12 74 67 84
------ ------ ------ ------
Balance at end of period $3,496 $2,900 $3,496 $2,900
====== ====== ====== ======
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 62% at September 30, 2002.
Nonperforming Assets / Risk Elements
Nonperforming assets at September 30, are as follows:
September 30
(Dollars in Thousands) 2002 2001
Loans on nonaccrual (cash) basis
Loans secured by real estate $ 28 $ 0
Installment loans 9 9
Commercial loans 0 30
Credit card 0 0
------ ------
Total nonaccrual loans 37 39
------ ------
Loans whose terms have been renegotiated
Loans secured by real estate 1,428 0
Installment loans 0 0
Commercial loans 0 0
Credit card 0 0
------ ------
Total renegotiated loans 1,428 0
------ ------
OREO 211 0
------ ------
Total nonperforming loans and OREO $1,676 $ 39
====== ======
Ratio of nonperforming assets to total loans and OREO 0.61% 0.02%
Ratio of nonperforming assets to total assets 0.41% 0.01%
Loans past due 90 or more days and still accruing
Loans secured by real estate $1,040 $ 504
Installment loans 9 71
Commercial loans 11 52
Credit card 0 5
------ ------
Total loans 90 or more days past due $1,060 $ 632
====== ======
Ratio of loans 90 or more days past due to total loans and
OREO 0.39% 0.25%
Ratio of loans 90 or more days past due to total assets 0.26% 0.17%
Total nonperforming and other risk assets $2,736 $ 671
====== ======
Ratio of total risk assets to total loans and OREO 1.00% 0.27%
Ratio of total risk assets to total assets 0.67% 0.18%
Page 13
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, Inc's capital ratios to regulatory
minimum requirements at September 30, 2002 is as follows:
Orrstown Financial Regulatory Minimum
Services Requirements
Leverage Ratio 8.68% 4%
Risk Based Capital Ratios:
Tier I Capital Ratio 12.51% 4%
Total (Tier II) Capital Ratio (core capital plus
allowance for loan losses 13.76% 8%
The growth experienced during 2002 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 $ 631,000 to equity as
of September 30, 2002. Equity represented 8.85% of assets at September 30, 2002
which is up from 8.34% at December 31, 2001.
All balance sheet fluctuations exceeding 5% have been created by either the
growth that has been experienced during 2002 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.
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 and Chief Financial officers.
Page 14
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
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 16
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, Vice President & CAO)
(Chief Accounting Officer)
Date November 4, 2002
----------------
Page 17
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 others 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 auditors any material weaknesses 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.
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.
Date: November 4, 2002 By:/s/Kenneth R. Shoemaker
------------------ --------------------------
Kenneth R. Shoemaker
President & CEO
(Principal Executive Officer)
Page 18
CERTIFICATION
I, Bradley S. Everly, Sr. Vice President and CFO, certify, that:
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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 others 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 auditors any material weaknesses 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.
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.
Date: November 4, 2002 By: /s/Bradley S. Everly
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Bradley S. Everly
Sr. Vice President and CFO
(Principal Financial Officer)
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