Orrstown Financial Services (ORRF) Securities $15M Settlement

Orrstown Financial Services (ORRF) agreed to pay up to $15 million to settle a securities class action lawsuit to avoid further litigation.

As per the law firm's press release, the Defendants were facing legal action for violating the Securities Act of 1933 and the Securities and Exchange Act of 1934. The Complaint alleged that the Offering Documents for the March 2010 Offering were negligently prepared and failed to disclose crucial information about Orrstown's loan portfolio, underwriting practices, and internal controls. It further stated that despite this, Orrstown continued to make false and misleading statements about the quality of its loan portfolio, internal controls, and lending practices to the investing public after the March 2010 Offering.

On October 27, 2011, Orrstown announced that the Federal Reserve Bank of Philadelphia had refused to authorize the Bank's declaration of quarterly dividends, citing unsafe and unsound banking practices that could further deplete the Bank's capital base.

The Company also reported charge-offs of $9.4 million for that quarter alone and noted "decreases in asset quality ratios, including elevated levels of nonaccrual loans, restructured loans, and delinquencies." The disclosures made in July and October 2011 showed that Orrstown's prior representations were false and misleading as its loan portfolio was severely impaired, and its underwriting and management lead loan approval process was inadequate, resulting in the outsourcing of its loan review process to an independent party.

These revelations led to a correction in Orrstown's valuation, causing the stock price to plummet, indicating that Defendants' false assurances had caused Orrstown to trade at artificially high prices throughout the Class Period.