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Shares of Orrstown Financial Inc. fell sharply Friday after the Shippensburg, Pa., company warned that it expects to take a larger-than-expected provision for loan losses in the second quarter.
July 15
Orrstown Financial Services Inc. in Shippensburg, Pa., said it expects to reach formal agreements with regulators that could require it to strengthen its credit risk management practices.
The $1.4 billion-asset company said in its annual report filed Thursday with the Securities and Exchange Commission that it had received drafts of the proposed agreements with the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking.
Orrstown said it expects the final agreements will require it to discontinue a number of practices and take several steps. The Fed may order the company to prepare and submit plans to strengthen underwriting and dispose of properties classified as other real estate owned and nonperforming or criticized assets. Orrstown may also have to submit plans regarding its allowance for loan losses and capital.
The agreements will also restrict the company's ability to pay dividends, repurchase stock or incur debt without prior regulatory approval, the filing said.
Orrstown said in the filing that it recently discontinued its quarterly cash dividend and suspended its stock repurchase program based on regulatory requirements and that it did not anticipate being able to resume either in the "near future."
