Orrstown Financial Services Inc. on Monday announced the termination of the formal agreement of regulatory action it made with the Pennsylvania Department of Banking — now Department of Banking and Securities — in March 2012.
The consent order had been in place to allow stricter government oversight of the holding company after Orrstown reported a $23 million loss in 2011.
Department spokesman Edward A. Novak III confirmed the order had been terminated.
The consent order was replaced with a memorandum of understanding between Orrstown and the Department of Banking and Securities. The memorandum of understanding is an informal regulatory action and considered by the department as a lower level of regulatory action than the consent order, according to a company filing with the Securities and Exchange Commission on Tuesday.
The memorandum of understanding requires periodic updates to the company’s three-year strategic plan, certain capital plans and the written plan for the reduction of adversely classified assets, according to Tuesday’s filing.
The Federal Reserve Bank of Philadelphia’s consent order — nearly identical to the state’s enforcement order, according to a SEC filing in 2012 from Orrstown — remains in effect.
The company was required in both the state and federal consent orders to adopt and implement plans to strengthen oversight of management and operations, reduce the bank’s interest in criticized or classified assets, and to create a capital plan that targets specific capital ratios, according to the 2012 SEC filing.
It also needed to adopt a plan to strengthen the bank’s credit-risk management practices.
The company also agreed not to pay out a dividend or take on additional debt without state and federal approval. It hasn’t paid a dividend since August 2011, according to Yahoo Finance.
“Since 2011 we have worked diligently to address issues cited in the consent order,” Orrstown Bank President and CEO Thomas R. Quinn Jr. said in a news release. “The termination of the consent order with the Pennsylvania Department of Banking and Securities is acknowledgment of the progress we continue to make.”
Marilyn Wimp, spokeswoman with the Federal Reserve Bank in Philadelphia, said the Fed works “independently” from the state so the federal enforcement doesn’t automatically end.