KBRA Affirms Ratings for Orrstown Financial Services, Inc.

KBRA affirms the senior unsecured debt rating of BBB, the subordinated debt rating of BBB-, and the short-term debt rating of K3 for Harrisburg, Pennsylvania-based Orrstown Financial Services, Inc. (NASDAQ: ORRF) (“the company”). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+, the subordinated debt rating of BBB, and the short-term deposit and debt ratings of K2 for the subsidiary, Orrstown Bank. The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by the company’s branch-based deposit franchise, which operates primarily in secondary Pennsylvania markets and underpins a stable core funding base – core deposits represented 89% of total funding at 3Q25 (five-year average of 92%). Additionally, despite a comparatively lower concentration of noninterest bearing deposits (20% of 3Q35), the company has maintained funding costs below rated peer averages, reflective of its limited reliance on wholesale funding and less rate sensitive operating footprint. Excluding non-recurring items, the core earnings profile has proven to be rather durable with core ROA of 1.46% through 9M25, underpinned by an above peer average NIM (4.00% at 9M25). While its higher reported NIM in 2025 is, in large part, related to accretion income ($18 million, or 0.47% of average earning assets through 9M25), on adjusted basis, NIM tracked above the peer average, benefiting from its lower funding costs (2.13% for 3Q25) as well as a higher yielding investment portfolio (4.43% for 3Q25). Supporting the earnings base is ORRF’s diversified revenue stream that includes meaningful wealth management and interchange fees along with other fee income. Altogether, noninterest income has generally tracked near 20% of total revenues in recent years, representing 0.9% - 1.0% of average assets. The ratings also reflect conservative underwriting, a relatively granular loan portfolio, and manageable concentrations. Following an uptick in NPAs, largely stemming from the merger with Codorus Valley Bancorp, NPAs have tracked in line with similarly rated peers, and overall credit losses have been well contained over time as the annual NCO ratio has tracked below 0.15% since 2015. The ratings are further supported by a rebuild in capital metrics as the CET1 ratio increased ~130 bps from 9.8% at 3Q24 to 11.1% at 3Q25. Moving forward, KBRA expects capital metrics to remain in line with the rated peer group supported by modest loan growth and consistent earnings performance.

Rating Sensitivities

Sustained strong asset quality with low credit costs supplementing core earnings that track in line with higher rated peers, coupled with the meaningful rebuild of capital as well as the company’s continued efforts to better diversify both its revenues as well as its geographic footprint could lead to positive rating momentum over time. Conversely, significant deterioration in credit quality metrics evidenced by elevated credit costs adversely impacting earnings over an extended period, inability to demonstrate improvement in capital metrics, or significant runoff of core deposits could result in negative rating action.

To access ratings and relevant documents, click here.

Methodologies