Form 4: Orrstown Financial Services EVP Acquires Shares Following Merger with Codorus Valley Bancorp

Craig L. Kauffman, EVP and Chief Operating Officer of Orrstown Financial Services, acquired shares of common and restricted stock following the merger with Codorus Valley Bancorp.

Summary

• On July 1, 2024, Codorus Valley Bancorp, Inc. (CVLY) merged with and into Orrstown Financial Services, Inc. (ORRF).
• As a result of the merger, Craig L. Kauffman, an executive at Orrstown Financial Services, acquired 50,328 shares of ORRF common stock.
• This acquisition was due to the conversion of CVLY shares to ORRF shares at an exchange ratio of 0.875 shares of ORRF for each share of CVLY.
• Kauffman also acquired 13,333 shares of restricted stock of ORRF.
• These restricted shares will vest on July 28, 2025, contingent upon achieving targeted expense savings.
• The expense savings target is based on ORRF's annual expense run rate at June 30, 2025, compared to the combined reported expenses of ORRF and CVLY for the year ended December 31, 2023, excluding merger-related and other extraordinary expenses.

Sentiment

Score: 7

Explanation: The document primarily reflects a procedural filing related to a merger. The sentiment is neutral to slightly positive, as the merger is expected to create synergies and improve the company's financial performance. The vesting of restricted stock based on expense savings targets is a positive incentive for management.

Positives

• The merger with Codorus Valley Bancorp has resulted in an increased shareholding for the reporting person.
• The acquisition of restricted stock incentivizes management to achieve expense savings targets, potentially benefiting the company's financial performance.

Risks

• The vesting of the restricted stock is contingent upon achieving specific expense savings targets, which may not be met.
• Failure to achieve these targets could impact management's compensation and potentially affect their motivation.

Future Outlook

The document outlines the acquisition of shares and restricted stock by an executive following a merger, with the vesting of restricted stock tied to future expense savings. The future outlook depends on the company's ability to achieve these savings.

Industry Context

The merger between Orrstown Financial Services and Codorus Valley Bancorp reflects a trend of consolidation in the banking industry, where smaller institutions combine to achieve economies of scale and improve competitiveness. This is a common strategy to enhance profitability and market share in a challenging regulatory and economic environment.

Comparison to Industry Standards

• Mergers and acquisitions are common in the banking sector, with institutions like PNC acquiring BBVA USA and New York Community Bancorp acquiring Flagstar Bancorp as examples of larger deals.
• The exchange ratio of 0.875 shares is within the typical range for bank mergers, which often involve a combination of stock and cash.
• Expense savings targets are a standard component of merger synergies, with banks often aiming for cost reductions of 10-20% of the combined entity's expense base.
• The vesting of restricted stock based on performance metrics aligns with industry practices to incentivize management to achieve post-merger integration goals.

Stakeholder Impact

• Shareholders may benefit from the merger through increased efficiency and potential synergies.
• Employees may be affected by the expense savings initiatives, potentially leading to restructuring or job changes.
• Customers may experience changes in services or products as a result of the merger.

Next Steps

• Achievement of targeted expense savings by June 30, 2025, to enable the vesting of restricted stock on July 28, 2025.
• Continued integration of Codorus Valley Bancorp into Orrstown Financial Services.

Key Dates