SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 DIVISION OF
  CORPORATION FINANCE

March 25, 2011
   Thomas R. Quinn, Jr.  President and Chief Executive Officer  Orrstown Financial Services, Inc.
77 East King Street, P.O Box 250 Shippensburg, PA  17257
Re: Orrstown Financial Services, Inc.
 Form 10-K for the Fiscal Year Ended December 31, 2010   Filed March 11, 2011
File No.  1-34292
 Dear Mr. Quinn:

We have reviewed your filing and have the following comments. In some of our
comments, we may ask you to provide us w ith information so we may better understand
your disclosure.

Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advising us when you will provide the requested response. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your
response.
 After reviewing any amendment to your filing and the information you provide in
response to these comments, we ma y have additional comments
  Form 10-K for the Fiscal Year Ended December 31, 2010

Management’s Discussion and Analysis of Fi nancial Condition and Results of Operation

Asset Quality, Risk Elements page 45

1. We note your discussion of the four commercial rela tionships which encompass
the majority of the nonaccrual loan  balance at December 31, 2010.  Please
provide us with the following as it rela tes to each of these relationships:

Thomas R. Quinn, Jr.
Orrstown Financial Services, Inc.
March 25, 2011   Page 2
• when the loan was originated;
• the allowance for loan losses associat ed with the loan, as applicable;
• when the loan became non-accrual;
• the underlying collateral supporting the loan;
• the last appraisal obtained for the loan, as applicable;
• the amount of any charge-offs recorded to date; and
• any other pertinent information deemed necessary to understand your
review of the loan and related accounting for the loan as of December 31,
2010 and through the date of your response.

2. As it relates to your consid eration of guarantors in the determination of the
allowance for loan losses on loans which have personal guarantees, please address
the following:
• Tell us how the company evaluates the strength of the guarantor, including
the specific type of information re viewed, how current and objective the
information reviewed is, and how often the review is performed;
• Tell us how often you have pursued and successfully collected from a
guarantor during the past two years.  As part of your response, please
discuss the decision making process y ou go through in deciding whether
to pursue the guarantor and whethe r there are circumstances you would
not seek to enforce the guarantee; and
• Quantify the dollar amount of comme rcial loans in which your carrying
value is in excess of the appraised value but not consid ered impaired due
to the existence of guarantees.
 Credit Risk Management – Allowance for Loan Losses, page 47

3. We note your disclosure on page 49, that the Company modified its criteria for
identifying impaired loans, as performing substandard loans were no longer considered impaired. We also note th at you consider “Substandard loans, by
definition, to have a well-defined weakne ss, or weaknesses that jeopardize the
liquidation of the debt and these loans are characterized by the distinct possibility
that the Bank will sustain some loss if the deficiencies are not corrected.”  Please
tell us and revise your disclosures in future filings, as it relates to the definition of “substandard loans” to indicate that th is category includes loans that are
performing. Further, you should address th e reasons for including these types of
loans within this specific category, a nd not some other category, within your
internal risk rating syst em and why the change was made in 2010. Additionally,
you should quantify the amount of loan s included within the “substandard”
category that are performing. We refere nce the requirements of ASC  310-10-50-
28 as it relates to an entity’s  credit quality indicators.

Thomas R. Quinn, Jr.
Orrstown Financial Services, Inc.
March 25, 2011   Page 3
4. Please address and revise your future filings  to disclose the following information
related to your trouble d debt restructurings:

• TDRs or renegotiated loans quantified by loan type classified separately as
accrual/non-accrual;
• Policy regarding how many payments  the borrower n eeds to make on
restructured loans before retu rning loans to accrual status;
• Quantification of the types of concessions made (e.g. rate reductions, payment extensions, forgiveness of pr incipal, forbearance or other actions)
and discussion of your success with the different types of concessions.

5. We note the disclosure on page 51, that as of December 31, 2010, the Company changed how it determined its general lo an loss allowance from a rolling twelve
quarter equally weighted method to a rolli ng eight quarter with a 2/3 weight given
to the most recent four quarters. Please tell us and revise your future filings to more clearly describe the changes made  and the reasons why the change was
made,  quantify the effects of those changes on the provision for loan losses.  Also,
please tell us and revise to  address the following:

• The historical loss data you used as a starting point for estimating current
losses;
• How you specifically incorporated  economic factors affecting loan quality
into your allowance estimate;
• The level of specificity you used to  group loans for purposes of estimating
losses;
• Your non-accrual and charge-off policies;
• Your application of loss f actors to graded loans; and
• Any other estimation methods and assumptions you used.
   Notes to Consolidated Financial Statements

Note 4. Loans Receivable and Allowance for Loan Losses, page 82

6. Please tell us and revise your disclosures in future filings to address the following
as it relates to both the portfolio segments  and classes of financing receivables:

• A description of the risk characteri stics of each portfolio segment in
accordance with ASC 310-10-50-11B(a)(2);
• The policy for placing financing receivables on nonaccrual status in
accordance with ASC 310-10-50-6(a);
• The policy for recording payments received on nonaccrual accrual receivables in accordance with ASC 310-10-50-6(b);

Thomas R. Quinn, Jr.
Orrstown Financial Services, Inc.
March 25, 2011   Page 4
• The policy for resuming accrual of in terest in accordance with ASC 310-
10-50-6(c);
• The policy for determining past due or delinquency status in accordance
with ASC 310-10-50-6(e); and
• The policy for determining which loans the entity assesses for impairment
in accordance with ASC 310-10-50-15(d).

7. We note that the effective date s ection of the summary of ASU 2010-20
encourages, but does not require, comparativ e disclosure for earlier periods.  We
note you did not provide comp arative information for many of your credit quality
disclosures. To the extent the informati on required for comparat ive disclosure is
reasonably available, please consider providing comparative footnote disclosure
in all future filings considering the si gnificant benefit this information provides
investors and the objective of the ASU.

Note 20. Fair Value Disclosures

 Impaired Loans, page 102

8. Please address and disclose the following as  it relates to your appraisal policies:
• When the Company does not have a ne w appraisal on file, describe in
more detail the  procedures performed in determining whether the assumptions reflected in these original  appraisals are reflective of current
market conditions, particularly for thos e appraisals that are more than a
year old.
• Describe the procedures performed at each balance sheet date to determine
the fair value of collateral-dependent impaired loans and OREO.  Tell us how you define collateral dependent loan s.  In determining the fair value
address whether you make adjustments to original appraisals  to take into
consideration current market conditio ns.  If so, describe the types of
adjustments made.  Alternativel y, if you perform an internal  valuation  to
estimate fair value, please describe the valuation approaches used, the
significant assumptions used in each model, and if multiple valuation approaches are used, the relative weighting of each model. Clarify whether you make any adjustments to current appraisals and if so, describe the types of adjustments made and the reasons for such adjustments.

• When you receive new appraisals, describe  the type of appraisals received,
such as “retail valu e” or “as is value”;

• Address how partially charged-off loans measured for impairment based on the collateral value are classifi ed and accounted for subsequent to
receiving an updated appraisal.  For example, disclose whether the loans

Thomas R. Quinn, Jr.
Orrstown Financial Services, Inc.
March 25, 2011   Page 5
are returned to performing status  or whether they remain as
nonperforming;
• Address the typical timing surrounding  the recognition of a loan as
nonaccrual and recording of a ny provision or charge-off;

• Address the procedures performed be tween receipt of updated appraisals
to ensure impairment of loans measured for impairment based on collateral value are measured appropriately; and
• Address how you determine the amount to charge-off.

* * * *

 We urge all persons who are responsibl e for the accuracy an d adequacy of the
disclosure in the filing to be certain that the filing includes the information the Securities
Exchange Act of 1934 and all applicable Exch ange Act rules require. Since the company
and its management are in possession of all f acts relating to a company’s disclosure, they
are responsible for the accuracy and adequacy of the disclosures they have made.

In responding to our comments, please provi de a written statement from the company
acknowledging that:
• the company is responsible for the adequacy  and accuracy of the disclosure in the
filing;

• staff comments or changes to disclosure  in response to staff comments do not
foreclose the Commission from taking any act ion with respect to the filing; and

• the company may not assert staff comme nts as a defense in any proceeding
initiated by the Commission or any person under the federal secu rities laws of the
United States.   You may contact Marc Thomas, Staff Accountant, at (202)  551-3452 or me at
(202) 551-3492 if you have any questions regarding the above comments.
Sincerely,
          John P. Nolan         Sr Asst. Chief Accountant