Investors accuse the $1.4 billion-asset Orrstown of failing to reveal info about the standard of its loan portfolio and other relevant info about its underwriting policies, according to the plaintiffs ‘ counsels. The court action names 10 Orrstown directors as accused, including president and Manager Thomas Quinn Jr, and chairman Joel Zullinger. Now they need a securities fraud lawyer for this case.
The Southeastern Pennsylvania Transport Authority, which operates Philadephia’s mass-transit system, is the lead complainant for the legal action, which searches for class-action status.
Lawyers accuse Orrstown of looking for quick expansion in its mortgage business at the expense of risk control. Specifically , Orrstown added new mortgage products and a new software platform that allow purchasers submit mortgage applications online and allowed the bank to confirm them quicker. Orrstown didn't implement stricter risk controls, despite the shorter period of time for approving applications, the lawsuit says.
In a press release filed Thursday with the SEC Commission, Orrstown said, “the company believes the claims in the complaint are without merit and intends to vigorously protect against these claims.”
The plaintiffs ‘ law firm, Chimicles & Tikellis of Haverford, Pa, filed the lawsuit on Fri. in U.S. District Court for the Middle District of Pennsylvania. Orrstown claimed it received a copy of the legal action on Wednesday.
Orrstown’s shares have lost more than 70% of their worth in the year as the company’s problem loans have mounted. Its stock closed at $7.58 Thursday.
Orrstown’s chief money officer, Brad Everly, resigned earlier in the month after 14 years in the position. Everly’s exit came amid ongoing struggles at the company. It reported a Q1 $8.2 million loss and earlier in the year was placed under an enforcing order requiring it to reduce problem loans. Separately, 2 proxy advisory firms had commended that investors reject the organization's executive pay plan, in a say-on-pay vote, during this year’s annual meeting. Orrstown did nevertheless , receive approval from investors in the non-binding vote.
At the time of his resignation, Orrstown related Everly’s decision “was not due to any feud” with the company or to accounting-related matters.