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Orrstown Financial Services Inc (ORRF)
NASDAQ:ORRF
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Orrstown Financial Services
(NASDAQ:ORRF)
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Rating:70Outperform
Price Target:
$38.00
â–²(5.50% Upside)
The score is driven primarily by improved financial performance (stronger profitability and cash conversion) and a supportive earnings-call outlook (loan growth, fee expansion, capital build, and higher dividend). Valuation is a clear positive due to the low P/E and solid yield. These strengths are partially offset by weak technical momentum and guidance sensitivity to assumed rate cuts alongside near-term NIM and deposit/funding-cost headwinds.
Positive Factors
Strong margins and profitability
Sustained high gross and net margins indicate durable cost discipline and pricing power in core banking and fee businesses. Combined with positive revenue growth, margins support lasting earnings resilience across rate cycles and provide capacity to reinvest or return capital to shareholders.
Robust free cash flow generation
Very strong free cash flow growth and high FCF-to-net-income conversion show the company converts earnings into cash efficiently. This enhances funding flexibility for loan growth, dividends, and capital actions while reducing reliance on external funding over the medium term.
Improving capital and low credit losses
Healthy capital ratios and conservative loan-loss provisioning provide a durable buffer against credit cycles. Low net charge-offs and a stable allowance suggest prudent underwriting, supporting the bank's ability to grow loans and maintain shareholder distributions through economic volatility.
Negative Factors
NIM compression and rate sensitivity
Margin erosion from lower variable loan yields and deposit rate lag is a structural risk to net interest income. If policy rates decline further or loan repricing slows, persistent NIM pressure could reduce core profitability absent offsetting fee growth or expense cuts over coming quarters.
Deposit growth and funding cost pressure
Flat deposit balances and elevated funding costs constrain low-cost funding availability for loan growth. A continued deposit mix or pricing mismatch reduces net yield and forces reliance on higher-cost funding or slower loan growth, limiting sustainable margin expansion.
Elevated noninterest expenses from talent investments
Sustained increases in personnel and technology spending may compress operating leverage if revenue ramps slower than planned. While strategic, elevated expense run-rate reduces near-term margin flexibility and creates execution risk that investments generate expected fee and loan growth over the medium term.
Orrstown Financial Services (ORRF) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$702.35M
Dividend Yield2.93%
Average Volume (3M)255.21K
Price to Earnings (P/E)8.5
Beta (1Y)0.79
Revenue Growth47.65%
EPS Growth101.00%
CountryUS
Employees607
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)1.11
Shares Outstanding19,498,770
10 Day Avg. Volume335,581
30 Day Avg. Volume255,211
Financial Highlights & Ratios
PEG Ratio-0.43
Price to Book (P/B)1.05
Price to Sales (P/S)1.90
P/FCF Ratio16.19
Enterprise Value/Market Cap1.42
Enterprise Value/Revenue2.82
Enterprise Value/Gross Profit4.08
Enterprise Value/Ebitda9.25
Forecast
1Y Price Target
$42.50Price Target Upside17.99% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Orrstown Financial Services Business Overview & Revenue Model
Company DescriptionOrrstown Financial Services, Inc. operates as the holding company for Orrstown Bank that provides commercial banking and trust services in the United States. The company accepts various deposits, including checking, savings, time, demand, and money market deposits. It also offers commercial loans, such as commercial real estate, equipment, construction, working capital, and other commercial purpose loans, as well as industrial loans; consumer loans comprising home equity and other consumer loans, as well as home equity lines of credit; residential mortgage loans; acquisition and development loans; municipal loans; and installment and other loans. In addition, the company provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as provides other fiduciary services under the Orrstown Financial Advisors name; and offers retail brokerage services through a third-party broker/dealer arrangement. Further, it offers investment advisory, insurance, and brokerage services. The company operates through offices in Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry, and York counties, Pennsylvania; and Anne Arundel, Baltimore, Howard, and Washington counties, Maryland, as well as Baltimore City, Maryland. Orrstown Financial Services, Inc. was founded in 1919 and is based in Shippensburg, Pennsylvania.
How the Company Makes MoneyOrrstown Financial Services generates revenue through several key streams. The primary source of income is from net interest income, which is derived from the interest earned on loans and securities, minus the interest paid on deposits. Additionally, the company earns non-interest income through fees associated with banking services, wealth management, and mortgage origination. Significant partnerships with local businesses and organizations enhance its market reach and customer base, contributing positively to its financial performance. Furthermore, investment in technology and customer service initiatives helps drive growth and retention, ultimately influencing the company's profitability.
Orrstown Financial Services Earnings Call Summary
Earnings Call Date:Jan 27, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 28, 2026
Earnings Call Sentiment Positive
The call was broadly positive: management reported record annual and strong quarterly earnings, solid loan growth and fee-income expansion, improved capital metrics, low credit losses, and strategic repositioning of the investment portfolio. Headwinds include quarter-to-quarter NIM compression driven by lower variable loan yields and deposit pricing lag, slightly elevated operating expenses due to targeted talent investments, flat deposit balances, and localized credit stress that increased non-accruals. Management presented conservative but constructive guidance and emphasized optionality in capital deployment.Q4-2025 Updates
Positive Updates
Record Annual Net Income
Reported highest annual net income in company history of $80.9 million, or $4.18 per diluted share; annual ROE 14.76% and ROA 1.49%.
Strong Quarterly Earnings
Fourth quarter net income of $21.5 million, or $1.11 per diluted share; quarterly ROA 1.55% and ROE 14.7%.
Healthy Net Interest Margin and Guidance
Reported net interest margin of 4.04% (4.00% in Q4 vs 4.11% in Q3); management projects 2026 NIM in the 3.90%–4.00% range and expects core margin to stabilize.
Fee and Noninterest Income Growth
Annual fee income $52.3 million (21% of operating income). Q4 noninterest income $14.4 million (up from $13.4M prior quarter); noninterest income represented ~22% of operating revenue in Q4 and the third straight quarter above 20%.
Loan Growth and Robust Pipeline
Loans grew 4% in the quarter with $207 million of loan production; management expects 2026 loan growth of 5% or better and describes a strong pipeline and middle-market traction.
Solid Credit Metrics and Low Losses
Minimal provision expense (~$0.075–$0.1 million) in Q4, net charge-offs of $0.5 million, allowance for credit losses at 1.19% (vs 1.21% prior quarter), and classified loans decreased by $5.7 million quarter‑to‑quarter.
Capital Build and Shareholder Returns
Capital ratios increased quarter-to-quarter; tangible common equity (TCE) ~9% and tangible book value per share growing. Board increased quarterly dividend by $0.03 to $0.30 (11.1% increase quarter-over-quarter; dividend up 50% since merger).
Strategic Investment Portfolio Actions
Purchased $125 million of Agency MBS and CMO (average yield on purchases ~4.92%) and sold ~$42 million of securities to address asset sensitivity; investment portfolio yield 4.58% (down from 4.67%) and positioned to generate earnings as rates decline.
Ongoing Talent Investments and Business Expansion
Hired a Chief Wealth Officer and expanded middle-market lending team; management emphasized investments in wealth, merchant services (now ~17% of treasury management revenue), CRM/technology and recruitment to drive future fee and loan growth.
Negative Updates
NIM Compression and Rate Sensitivity
Net interest margin declined from 4.11% in Q3 to 4.00% in Q4; margin excluding purchase accounting fell to 3.53% from 3.59% (down ~6 bps). Management attributes compression to lower variable loan yields after Fed cuts and lag in deposit rate reductions.
Deposit Pricing Lag and Flat Deposit Balances
Deposits were essentially flat, declining slightly by $5 million in the quarter; cost of deposits remained elevated at 1.98% with management noting a lag in deposit rate reductions and expecting funding cost relief in Q1 2026.
Elevated Noninterest Expenses
Noninterest expense rose to $37.4 million in Q4 (up $1.1 million from Q3) driven by higher salaries & benefits, health care costs and professional services; management expects a roughly $37M quarterly expense run rate while reserving room for further talent investments.
Portfolio and Revenue Volatility
Noninterest income components (e.g., swap fees, mortgage) can be volatile quarter-to-quarter; management project a noninterest income run rate of $13M–$14M for 2026, acknowledging variability.
Slight Credit Watch Items
Delinquencies increased and non-accruals rose quarter-to-quarter primarily due to one relationship (management states not indicative of a broader trend), highlighting a localized credit stress point.
Dependence on Assumed Rate Cuts in Guidance
Management guidance and NIM outlook assume interest rate cuts in 2026 (modeled as ~75 bps via three 25 bp cuts). If cuts do not occur, margin and guidance could differ materially.
Company Guidance
Management provided conservative 2026 guidance calling for a net interest margin of 3.90%–4.00% (Q4 core NIM ex‑purchase accounting 3.53%; core NIM expected to tick up in Q1), assuming roughly 75 bps of policy rate cuts in 2026 and purchase‑accounting accretion declining about 2–3 bps per quarter; they expect loan growth of 5%+ for 2026 after 4% Q4 growth and $207M of Q4 loan production, a quarterly noninterest income run‑rate of $13M–$14M (Q4 noninterest income $14.4M, 22% of revenue; annual fee income $52.3M = 21% of operating income), and a quarterly noninterest expense run‑rate around $37M (Q4 expense $37.4M). Additional metrics underpinning the outlook include Q4 deposit cost of 1.98% with funding costs expected to decline beginning in Q1, a loan‑to‑deposit ratio of 89%, allowance for loan losses of 1.19% of loans (Q4 provision ~$75k; Q4 net charge‑offs $0.5M), investment portfolio yield ~4.58% (recent purchases averaging 4.92%), and improving capital (TCE ~9%); management emphasized the plan is conservative and could exceed current analyst consensus.Orrstown Financial Services Financial Statement Overview
Summary
Profitability and cash generation improved materially in the latest TTM period (higher margins, stronger ROE, and solid free-cash-flow-to-net-income alignment). Offsetting factors include slightly negative TTM revenue growth, historical volatility/anomalies in past metrics, and some ratio consistency issues (e.g., TTM debt-to-equity shown as 0.0 despite listed debt/equity).Income Statement
Profitability improved meaningfully in TTM (Trailing-Twelve-Months) versus 2024, with net margin rising from ~7.8% (2024) to ~20.7% (TTM) and operating profitability also stepping up. Revenue, however, declined in TTM (Trailing-Twelve-Months) (about -1.4% growth), and results have shown some historical volatility (including clearly anomalous margin readings in 2022), which tempers the score despite the strong latest profitability.74
Positive
Balance Sheet
The balance sheet shows moderate leverage overall: debt is meaningful but covered by a solid equity base (2024 debt-to-equity ~0.41; 2023 ~0.68). Returns on equity strengthened to ~14.4% in TTM (Trailing-Twelve-Months) from ~4.3% in 2024, signaling better capital efficiency. Key watchout: reported debt-to-equity is shown as 0.0 in TTM (Trailing-Twelve-Months), which looks inconsistent with the listed debt and equity values, limiting confidence in the latest leverage snapshot.68
Positive
Cash Flow
Cash generation looks healthy and improving: free cash flow increased sharply in TTM (Trailing-Twelve-Months) (about +32.5%), and free cash flow is closely aligned with net income (TTM ~0.93x; similarly strong in prior years), suggesting earnings quality is generally supported by cash. Volatility exists in year-to-year cash flow growth (including declines in 2022 and 2024), and the provided operating cash flow coverage ratios appear inconsistent/very low in some periods, which adds some reporting-noise risk.77
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 353.67M | 284.09M | 174.30M | 134.32M | 121.64M | 126.88M |
| Gross Profit | 244.31M | 173.86M | 127.62M | 121.11M | 113.83M | 105.53M |
| EBITDA | 107.80M | 37.50M | 49.37M | 31.24M | 46.20M | 39.08M |
| Net Income | 73.05M | 22.05M | 35.66M | 22.04M | 32.88M | 26.46M |
Balance Sheet | ||||||
| Total Assets | 5.47B | 5.44B | 3.06B | 2.92B | 2.83B | 2.75B |
| Cash, Cash Equivalents and Short-Term Investments | 851.35M | 1.08B | 578.68M | 574.55M | 681.15M | 591.72M |
| Total Debt | 278.69M | 209.91M | 179.38M | 155.42M | 57.16M | 109.41M |
| Total Liabilities | 4.90B | 4.92B | 2.80B | 2.69B | 2.56B | 2.50B |
| Stockholders Equity | 571.94M | 516.68M | 265.06M | 228.90M | 271.66M | 246.25M |
Cash Flow | ||||||
| Free Cash Flow | 61.88M | 33.38M | 41.41M | 35.30M | 39.56M | 28.87M |
| Operating Cash Flow | 66.61M | 34.96M | 43.70M | 36.19M | 40.81M | 30.17M |
| Investing Cash Flow | -51.37M | 60.99M | -153.25M | -270.99M | -2.01M | -292.56M |
| Financing Cash Flow | -67.87M | 87.76M | 113.89M | 86.91M | 44.65M | 331.47M |
Orrstown Financial Services Technical Analysis
Positive
36.02
Price Trends
36.19
Negative
35.01
Positive
33.16
Positive
Market Momentum
-0.08
Positive
49.71
Neutral
25.05
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ORRF, the sentiment is Positive. The current price of 36.02 is above the 20-day moving average (MA) of 36.01, below the 50-day MA of 36.19, and above the 200-day MA of 33.16, indicating a neutral trend. The MACD of -0.08 indicates Positive momentum. The RSI at 49.71 is Neutral, neither overbought nor oversold. The STOCH value of 25.05 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ORRF.
Orrstown Financial Services Risk Analysis
Orrstown Financial Services disclosed 52 risk factors in its most recent earnings report. Orrstown Financial Services reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Orrstown Financial Services Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $846.58M | 13.62 | 13.95% | 2.18% | 22.24% | 18.63% | |
75 Outperform | $804.99M | 12.15 | 9.49% | 3.66% | 24.08% | 9.83% | |
74 Outperform | $772.19M | 10.20 | 12.46% | 3.19% | 16.57% | 69.64% | |
73 Outperform | $926.42M | 16.03 | 7.84% | 0.67% | 14.04% | 337.54% | |
70 Outperform | $702.35M | 8.47 | 14.59% | 2.93% | 47.65% | 101.00% | |
69 Neutral | $686.80M | 9.84 | 11.18% | 2.48% | 0.67% | 17.88% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% |
* Financial Sector Average
ORRF
Orrstown Financial Services
36.02
2.50
7.45%
CAC
Camden National
47.57
4.97
11.66%
THFF
First Financial Indiana
65.16
18.93
40.95%
GSBC
Great Southern Bancorp
61.38
4.72
8.33%
FSBC
Five Star
39.62
10.64
36.73%
NBBK
NB Bancorp, Inc.
21.72
3.04
16.27%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.