DEF 14A: Orrstown Financial Services Sets Date for 2024 Annual Shareholder Meeting, Seeks Proxy Votes

Orrstown Financial Services announces its 2024 Annual Meeting of Shareholders will be held virtually on April 30, 2024, and encourages shareholders to vote on key proposals.

Summary

• Orrstown Financial Services, Inc. will hold its 2024 Annual Meeting of Shareholders virtually on April 30, 2024, at 9:00 a.m. local time.
• Shareholders of record as of March 1, 2024, are entitled to vote on the election of three Class C directors, an advisory vote on executive compensation (Say-On-Pay), and the ratification of Crowe LLP as the company's independent auditor for the fiscal year ending December 31, 2024.
• The Board of Directors recommends voting 'FOR' all director nominees and proposals.
• The company will hold a separate special meeting to consider the proposed merger with Codorus Valley Bancorp, Inc., with proxy materials to be distributed at a later date.
• In 2023, the Orrstown Bank Foundation made charitable donations of $31,500 and awarded $21,000 in scholarships.
• The bank also made $1.1 million in contributions or sponsorship commitments to organizations within its communities, including $750,000 through the Commonwealth's Educational Improvement Tax Credit program.
• As of December 31, 2023, the Company had approximately $357,000 in solar-related investments and had approximately $24.8 million of solar-related loans outstanding.
• The Company used 3.1 megawatt hours in 2023, a 6.0% decrease from 2022 and an 7.1% decrease from 2020 (the beginning of the pandemic), excluding premises on a gross lease.
• The Company used 0.99 million gallons of water in 2023, excluding premises on a gross lease, a decrease of 11.4% from 2022 and a 15.6% decrease from 2020 (the beginning of the pandemic).

Sentiment

Score: 7

Explanation: The document is primarily informational and procedural, with a positive outlook on the proposed merger and the company's commitment to ESG and community engagement. The sentiment is neutral to slightly positive.

Positives

• The Board of Directors is actively recruiting additional qualified candidates who identify either as female, a member of an ethnic or racial minority, or LGBTQ+.
• The company has a Diversity & Inclusion Council comprised of employees from all levels of the organization to identify and implement strategies to make the Company's job applicant pool to be more diverse.
• The Company's President and Chief Executive Officer also signed the CEO ACTION for Diversity & Inclusion Pledge, which makes commitments to continue making our workplaces trusting places, implementing and expanding unconscious bias education, sharing best practices and creating and sharing strategic inclusion and diversity plans with our Board of Directors.
• The Company has a well-documented and regulated program covering the Bank Secrecy Act, Anti-Money Laundering, and Know Your Customer.
• The Company has a Chief Information Security Officer ('CISO') who reports to the Chief Risk Officer.

Negatives

• The company lacks an enterprise-wide environmental policy.
• At present, Orrstown does not have a policy regarding greenhouse emission or carbon footprint goals.
• The Company lacks measurement systems to fully assess carbon emissions.

Risks

• General economic conditions, including inflation and liquidity concerns, could impact the company's performance.
• Changes in interest rates and competition may affect the community banking model.
• Failure to complete the merger with Codorus Valley Bancorp, Inc. or unexpected delays could negatively impact the company.
• Cybersecurity incidents, fraud, natural disasters, and future pandemics pose operational risks.
• Geopolitical tensions and changes in laws and regulations could affect the company's business.

Future Outlook

The company anticipates long-term growth and profitability from the proposed merger with Codorus Valley Bancorp, Inc.

Management Comments

• The Board of Directors of the Company has determined that the affirmative vote 'FOR' all nominees for director and 'FOR' all proposals to be considered at the Annual Meeting is in the best interests of the Company and its shareholders and unanimously recommends a vote 'FOR' all nominees and proposals.
• We thank you for your continued support of the Company and Orrstown Bank, and look forward to your participation at the Annual Meeting.

Industry Context

The announcement reflects broader trends in the banking industry, including consolidation (merger with Codorus Valley Bancorp), increased focus on ESG matters, and the importance of cybersecurity and risk management.

Comparison to Industry Standards

• The Compensation Committee selected a peer group of banks which met the following basic criteria: Commercial banks; Having assets of approximately $2.2 billion to $6.0 billion at December 31, 2022, compared to the Company, which had approximately $2.9 billion in assets as of December 31, 2022; Domiciled in the states of MD, NJ, NY, PA, and VA, but not headquartered in New York City or on Long Island; and Having similar business models, including a commercial banking focus with a wealth and/or mortgage business.
• Applying these criteria resulted in the following 22 institutions, which the Compensation Committee determined to be most closely comparable to the Company: ACNB Corporation, American National Bankshares, Inc., Arrow Financial Corporation, BCB Bancorp, Inc., C&F Financial Corporation, Carter Bankshares, Inc., Chemung Financial Corporation, Citizens & Northern Corporation, City Holding Company, CNB Financial Corporation, Codorus Valley Bancorp, Inc., Evans Bancorp, Inc., Financial Institutions, Inc., First Bank, First Community Bancshares, Inc., Mid Penn Bancorp, Inc., Peapack-Gladstone Financial Corporation, Peoples Financial Services Corp., Primis Financial Corp., Summit Financial Group, Inc., The Community Financial Corporation, TrustCo Bank Corp NY.

Legal Proceedings

• In 2016, the Company entered into a settlement agreement with the SEC resolving an investigation by the SEC of accounting and related matters at the Company for the periods ended June 30, 2010 to December 31, 2011.
• As part of the settlement of the SECs administrative proceedings, and pursuant to the cease-and-desist order, without admitting or denying the SECs findings, the Company agreed to pay a civil money penalty of $1 million.
• As part of the settlement of the SECs administrative proceedings, and pursuant to the cease-and-desist order, without admitting or denying the SECs findings, Thomas R. Quinn, Jr., President and Chief Executive Officer of the Company, agreed to pay a civil money penalty to the SEC in the amount of $100,000, and to cease and desist from committing and/or causing the violations charged, as well as any future violations of these provisions.

Related Party Transactions

• During 2023, certain of the directors and executive officers of the Company and the Bank, members of their immediate families and some of the companies with which they are associated had banking transactions in the ordinary course of business with the Bank and may have similar transactions in the future.
• These transactions were made on substantially the same terms, including interest rates, collateral requirements and repayment terms, as those prevailing at the time for comparable transactions with non-affiliated persons and did not involve more than the normal risk of collectability or present other unfavorable features to the Company.

Stakeholder Impact

• Shareholders are encouraged to participate in the Annual Meeting and vote on key proposals.
• Employees are impacted by the company's commitment to diversity, equity, and inclusion, as well as its focus on safety, health, and wellness.
• Communities benefit from the company's charitable contributions and community engagement initiatives.
• Customers are served through the company's banking and financial advisory services.
• Stakeholders are impacted by the company's risk management and cybersecurity programs.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will hold a separate special meeting to consider the proposed merger with Codorus Valley Bancorp, Inc.
• The Nominating and Governance Committee is actively recruiting additional qualified candidates who identify either as female, a member of an ethnic or racial minority, or LGBTQ+.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Board of Directors, Shareholders, Executive Compensation, Director Election, Audit Committee, Crowe LLP, Merger, Codorus Valley Bancorp, ESG, Diversity, Inclusion, Risk Management, Financial Performance, Orrstown Financial Services, Orrstown Bank