ORRSTOWN FINANCIAL SERVICES (ORRF) Katelyn Howard

Overview  Bank holding company for Orrstown Bank  Commercial banking  Trust services  Loan products  PA and MD  Market Cap.: $112.2M  52 week range: $14.00-$29.50  Annual Dividend Rate: $0.92

Key Stats  Recent Price : $13.20  Purchase Price : $37.40  Shares : 7  YTD Return: (51.8%)  Holding Return: (64.71%)  P/E: 42.7 Industry:  Debt/Equity:.3 Industry: 1.7  EPS Growth 3 Yr: 5.3 Industry: -2.5  Net Profit Margin: 3.5 Industry: 6.5  ROE: 1.6 Industry: 3.6

Recent News  Reported a net loss for the quarter ended June 30, 2011 of $10.6 million  Deteriorating net income and disappointing ROE (sign of weakness) Underperformed the industry and S&P 500  Decline in revenue (dropped 5.8%)  Decline in earnings  Stock’s performance fell 32.99% worse than the S&P 500

Analyst’s Recommendation  Buy: 35.04%  Hold: 38.14%  Sell: 26.82%

Recommendation: SELL  We should sell ORRF because they have declining net income, revenues and earnings. The stock performance has decreased from about $26 a share to $13.20 a share over 6 months and continues to decrease.  We should look at investing in American Express Co. and/or Discover Financial Services Inc.

American Express Co.  3 Main Businesses:  U.S. card services,  International card and global commercial services  Global network and merchant services  Advantages over competitors:  Issue its own cards and doesn't have to rely on merchant acquirers to process transactions  Service cardholders and merchants, as opposed to large financial institutions gives Amex pricing power

Key Factors  Strong buy right now  Price: $47.46  52 Week Range: $53.80-$37.33  Qualitative Risk Assessment: Low  S&P Quality Rating: A-  Market Cap: $57.91B  Dividend rate: $0.72  Fair Value: $48.60  P/E:13

Discover Financial Services Inc.  Issues credit cards and acquires transactions  Operates a closed-loop credit card network and also uses third parties to issue its cards  Extends card loans (receivables) to cardholders who wish to borrow through their credit cards  operates a PIN-based debit card network in the U.S. and owns Diners International, a global credit card network

Key Factors  Buy right now  Price: $25.03  52 Week Range: $27.92-$15.25  Qualitative Risk Assessment: Low  Morningstar: 4-star rating  Market Cap: $13.216B  Dividend rate: $0.24  Fair Value: $30.90  P/E: 8

Suggestions  Buy  65 shares of DFS ($ )  35 shares of AXP ($ )