Head-To-Head Survey: Orrstown Financial Services (NASDAQ:ORRF) and Arrow Financial (NASDAQ:AROW)

Arrow Financial (NASDAQ:AROW) and Orrstown Financial Services (NASDAQ:ORRF) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.

Institutional and Insider Ownership

46.7% of Arrow Financial shares are held by institutional investors. Comparatively, 44.3% of Orrstown Financial Services shares are held by institutional investors. 3.3% of Arrow Financial shares are held by company insiders. Comparatively, 4.7% of Orrstown Financial Services shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and target prices for Arrow Financial and Orrstown Financial Services, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arrow Financial	0	3	0	0	2.00
Orrstown Financial Services	0	1	4	0	2.80

Arrow Financial presently has a consensus price target of $31.25, indicating a potential downside of 6.20%. Orrstown Financial Services has a consensus price target of $39.67, indicating a potential upside of 10.31%. Given Orrstown Financial Services’ stronger consensus rating and higher probable upside, analysts plainly believe Orrstown Financial Services is more favorable than Arrow Financial.

Risk & Volatility

Arrow Financial has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500. Comparatively, Orrstown Financial Services has a beta of 0.83, indicating that its stock price is 17% less volatile than the S&P 500.

Dividends

Arrow Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.6%. Orrstown Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 3.3%. Arrow Financial pays out 45.3% of its earnings in the form of a dividend. Orrstown Financial Services pays out 28.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Arrow Financial has raised its dividend for 7 consecutive years and Orrstown Financial Services has raised its dividend for 10 consecutive years.

Earnings and Valuation

This table compares Arrow Financial and Orrstown Financial Services”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arrow Financial	$165.60 million	3.31	$43.95 million	$2.65	12.57
Orrstown Financial Services	$356.05 million	1.97	$80.86 million	$4.18	8.60

Orrstown Financial Services has higher revenue and earnings than Arrow Financial. Orrstown Financial Services is trading at a lower price-to-earnings ratio than Arrow Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Arrow Financial and Orrstown Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arrow Financial	18.12%	10.92%	1.00%
Orrstown Financial Services	22.71%	15.04%	1.53%

Summary

Orrstown Financial Services beats Arrow Financial on 13 of the 17 factors compared between the two stocks.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.

About Orrstown Financial Services

Orrstown Financial Services, Inc. operates as the financial holding company for Orrstown Bank that provides commercial banking and financial advisory services to retail, commercial, non-profit, and government clients in the United States. It accepts various deposits, including checking, savings, time, demand, and money market deposits, as well as certificates of deposit. The company 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, such as 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, it provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as other fiduciary services under the Orrstown Financial Advisors name; and retail brokerage services through a third-party broker/dealer arrangement. Further, the company offers fiduciary, investment advisory, insurance, and brokerage services. Orrstown Financial Services, Inc. was founded in 1919 and is headquartered in Shippensburg, Pennsylvania.