Introduction
The purpose of this ex-post risk analysis is to determine the profitability, earnings and future financial ratios for Orrston Finacial services. It addresses threats, vulnerability and place mitigating factors in place to shield against bankruptcy and future lawsuit by customer, competitors and the government. The report outlines the actual stability and paints a factual picture of its performance in the market since 2006.
In the mid 2011 Orrstown bank faced a federal class action for misrepresenting its financial status, which was in decline after receiving $32 million loss due to series of bad commercial loans in 2011. In June 2012 it lost again $17 million in a span of only six months (Orrstown Financial case study; Annual Reports, 2006-2011).
Writing about the loan of Yorktown Funding Inc. was one of the major undoing of the bank for failing to properly evaluate the companies’ viability and the market trend before offering loans.
The scope of the ex-post analysis is based on the financial statement report starting from 2006 to determine the stability of Orrston Finacial services in the near future. The report also compares the approach used by M&T Bank, which prides itself for having a conservative credit strategy though difference in size, reputation, financial and balance sheet statements.
Challenges currently faced by Orrstown bank
The biggest challenge that Orrstown bank faced was the cost of complying with the new regulations by the US government regarding accountability and transparency.
Inability to pay its short-term liabilities in end of 2001 and first two quarters of 2012 posted negatively. However, operating income and cash ratio improved significantly.
Market valuation for Orrstown is rather low and volatile compared to M&T Bank’s marketing.
Proportional capital to assets level is 7-9% compared to M&T with 10-13%. This ratio might create problem for Orrstown bank (Orrstown Financial case study; Annual Reports, 2006-2011”8).
This table shows Orrstown Bank degree of survival in the market against M&T
Recommendations
- Strictly Abiding US government financial regulation policy.
- Factual representation of the bank at all times to prevent any future lawsuit by investors.
- Thorough evaluations of companies before loans are released.
- Timely research of economy and market trends to reduce dangers of none performing loans and take the right steps at the right time.
- Developing business that improves leadership.
Works Cited
Orrstown Financial case study, Annual Reports, 2006-2011. Print.
Orrstown-M&T Financial Draft 2, Annual Report, 2006-2011. Print.