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SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL SHAREHOLDERS’ EQUITY AND REGULATORY CAPITAL
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Under the Basel Committee on Banking Supervision's capital guidelines for U.S. Banks ("Basel III rules"), an entity must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The Company and the Bank have elected not to include net unrealized gain or losses included in AOCI in computing regulatory capital.
On January 1, 2023, the Company adopted ASU No. 2016-13, which replaced the existing incurred loss model for recognizing credit losses with an expected loss model referred to as the CECL model, and resulted in a reduction to opening retained earnings, net of income tax, and an increase to the ACL for loans of approximately $2.4 million and ACL for off-balance sheet exposures of $100 thousand, which combined totals $2.5 million. The federal bank regulatory agencies issued a rule, which provided for the option to elect a three-year transition provision of the day-one impact of the CECL model beginning with regulatory capital at March 31, 2023. The Company elected the three-year phase in option.
The Company and the Bank met all capital adequacy requirements to which they are subject at December 31, 2023 and 2022. Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank's classification.
The following table presents capital amounts and ratios at December 31, 2023 and 2022.
 Actual
For Capital Adequacy Purposes
 (includes applicable capital conservation buffer)
To Be Well
Capitalized Under
Prompt Corrective
Action Regulations
AmountRatioAmountRatioAmountRatio
December 31, 2023
Total risk-based capital:
Orrstown Financial Services, Inc.$326,878 13.0 %$264,019 10.5 %n/an/a
Orrstown Bank320,687 12.8 %263,942 10.5 %$251,373 10.0 %
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.272,677 10.8 %213,730 8.5 %n/an/a
Orrstown Bank292,160 11.6 %213,667 8.5 %201,099 8.0 %
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.272,677 10.8 %176,013 7.0 %n/an/a
Orrstown Bank292,160 11.6 %175,961 7.0 %163,393 6.5 %
Tier 1 leverage capital:
Orrstown Financial Services, Inc.272,677 8.9 %122,907 4.0 %n/an/a
Orrstown Bank292,160 9.5 %122,907 4.0 %153,634 5.0 %
December 31, 2022
Total risk-based capital:
Orrstown Financial Services, Inc.$304,589 12.7 %$250,939 10.5 %n/an/a
Orrstown Bank292,933 12.3 %250,566 10.5 %$238,634 10.0 %
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.245,752 10.3 %203,141 8.5 %n/an/a
Orrstown Bank266,122 11.2 %202,839 8.5 %190,907 8.0 %
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.245,752 10.3 %167,293 7.0 %n/an/a
Orrstown Bank266,122 11.2 %167,044 7.0 %155,112 6.5 %
Tier 1 leverage capital:
Orrstown Financial Services, Inc.245,752 8.5 %116,325 4.0 %n/an/a
Orrstown Bank266,122 9.2 %116,219 4.0 %145,273 5.0 %
The Company maintains a stockholder dividend reinvestment and stock purchase plan. Under the plan, shareholders may purchase additional shares of the Company’s common stock at the prevailing market prices with reinvestment dividends and voluntary cash payments. The Company reserved 1,045,000 shares of its common stock to be issued under the dividend reinvestment and stock purchase plan. At December 31, 2023, approximately 665,000 shares were available to be issued under the plan.
In September 2015, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company could repurchase up to 416,000 shares of the Company's outstanding shares of common stock, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act. On April 19, 2021, the Board of Directors authorized the additional future repurchase of up to 562,000 shares of its outstanding common stock for a total of 978,000 shares. When and if appropriate, repurchases may be made in open market or privately negotiated transactions, depending on market conditions, regulatory requirements and other corporate considerations, as determined by management. Share repurchases may not occur and may be discontinued at any time. At December 31, 2023, 949,533 shares had been repurchased under the program at a total cost of $21.2 million, or $22.36 per share. Common stock available for future repurchase totals 28,467 shares, or 0.3%, of the Company's outstanding common stock at December 31, 2023.
On January 23, 2024, the Board declared a cash dividend of $0.20 per common share, which was paid on February 13, 2024 to shareholders of record on February 6, 2024.
Banking regulations limit the ability of the Bank to pay dividends or make loans or advances to the Parent Company. Dividends that may be paid in any calendar year are limited to the current year's net profits, combined with the retained net
profits of the preceding two years. At December 31, 2023, dividends from the Bank available to be paid to the Parent Company, without prior approval of the Bank's regulatory agency, totaled $55.0 million, subject to the Bank meeting or exceeding regulatory capital requirements. The Parent Company's principal source of funds for dividend payments to shareholders is dividends received from the Bank. In addition, any dividend increases prior to the completion of the merger of equals with Codorus Valley Bancorp, Inc. must be approve by Codorus Valley Bancorp, Inc.
At December 31, 2023, there were no loans from the Bank to any nonbank affiliate, including the Parent Company. The Bank's loans to a single affiliate may not exceed 10%, and loans to all affiliates may not exceed 20%, of the Bank’s capital stock, surplus, and undivided profits, plus the ACL (as defined by regulation). Loans from the Bank to nonbank affiliates, including the Parent Company, are also required to be collateralized according to regulatory guidelines. At December 31, 2023 and 2022, the maximum amount the Bank had available to loan to a nonbank affiliate was $32.1 million and $29.3 million, respectively.