According to the law firm press release, this action was brought against Defendants for violations of the Securities Act of 1933 and the Securities and Exchange Act of 1934. The complaint alleges that the Offering Documents for the March 2010 Offering were negligently prepared and failed to disclose material information about Orrstown's loan portfolio, underwriting practices, and internal controls. The complaint further alleges that Orrstown knowingly and/or recklessly continued to make false and misleading statements after the March 2010 Offering concerning the quality of Orrstown's loan portfolio, internal controls and lending practices while simultaneously assuring the investing public about the quality of Orrstown's management, underwriting procedures, and internal controls.
On October 27, 2011, Orrstown announced that the Federal Reserve Bank of Philadelphia, one of the Bank's primary regulators, refused to authorize Orrstown's requested declaration of quarterly dividends. The Federal Reserve took this step to prevent the Company from engaging in an unsafe and unsound banking practice which would further deplete the Company's capital base. In addition, the Company reported it had $9.4 million of charge-offs in that quarter alone and that there were "decreases in asset quality ratios, including elevated levels of nonaccrual loans, restructured loans and delinquencies." The October 27, 2011 disclosures, along with those made in July 2011, revealed that the Bank's prior representations were false and misleading as the 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. After these disclosures, the market corrected its valuation of Orrstown such that the stock price plummeted indicating that Defendants' false assurances had caused Orrstown to trade at artificially high prices throughout the Class Period.
On August 20, 2012, the Court issued an Order appointing Lead Plaintiff and approving the selection of Lead Counsel. Lead Plaintiff filed an amended Complaint on March 4, 2013. Lead plaintiff filed a second amended Complaint on February 8, 2016. On March 18, Defendants filed Motions to Dismiss the second amended Complaint. On December 7, the Court issued an Order granting in part and denying in part Defendants' Motions to Dismiss.