Orrstown Financial Services (ORRF) Q2 2025 Earnings Call July 23, 2025 09:00 AM ET Company Participants Thomas Quinn - President & CEO Adam Metz - Senior EVP & COO Neelesh Kalani - EVP & CFO None - Executive Tim Switzer - Vice President David Long - Managing Director Dan Cardenas - Director - Banks & Thrifts Conference Call Participants Gregory Zingone - Research Analyst Operator Good morning. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to th ...

Financial Data and Key Metrics Changes - GAAP earnings were strong with core earnings continuing to increase, return on average assets was 1.51% and return on average equity was 15.12% for Q2 2025 compared to 1.45% and 14.97% respectively for Q1 2025 [5][6] - Net interest margin (NIM) increased to 4.07% in Q2 2025 from 4% in Q1 2025, with expectations for further upside [6][15] - Fee income as a percentage of operating revenue was 21% during the quarter, an improvement from prior periods, with noninterest income increasing by $1.3 million quarter over quarter [6][16] Business Line Data and Key Metrics Changes - Total loan growth was 6% on an annualized basis, with commercial loan growth at 2% [9][10] - Wealth management fees remained the largest component of fee income, with assets under management reaching $3 billion [7][16] - Noninterest expense declined by approximately $600,000 in the quarter, including merger-related expenses of almost $1 million [19][20] Market Data and Key Metrics Changes - The loan pipeline is reported to be the highest since the merger, reflecting a strong regional economy and engagement with clients [11][12] - Credit quality remains sound with net charge-offs being nominal and classified loans decreasing by 14% [12][22] - The average yield on loans was 6.5%, impacted by lower purchase accounting accretion [24] Company Strategy and Development Direction - The company is focused on enhancing liquidity, building capital, and accelerating commercial lending while considering share buybacks due to perceived undervaluation [27] - There is a strong emphasis on talent acquisition to support growth, particularly in the wealth management sector [48][55] - The company is open to future acquisitions that add value to the franchise, focusing on geographic proximity and complementary services [66][67] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a strong loan pipeline and positive client sentiment despite market noise [52] - The company anticipates continued improvement in profitability and efficiency, with expectations for expenses to decline further [8][20] - Management acknowledged the competitive lending environment but remains confident in their ability to grow loans prudently [11][16] Other Important Information - The board authorized a share repurchase program of up to 500,000 shares and increased the quarterly dividend by $0.01 per share [13] - Regulatory capital ratios are now at or above pre-merger levels, providing options for growth [26] Q&A Session Summary Question: Are there still other credits in the Codorus Valley deal that you are looking to move off of or sell? - Management indicated that while there might be a couple of loans to consider for sale, they have been successful in working them out with minimal charge-offs [32] Question: Is there a capital level you would like to reach before considering another acquisition? - Management stated they are at pre-merger levels and feel comfortable moving forward without needing outside capital for future deals [35] Question: How would potential Fed rate cuts impact NIM? - Management noted that while rate cuts could negatively impact net interest income, they would continue to push on the loan side to offset some of that impact [42][43] Question: What initiatives are in place for growth in the wealth management business? - Management highlighted opportunities for growth through talent acquisition and expansion in key markets [48][49] Question: How has the sentiment of commercial clients changed recently? - Management reported that the pipeline is the largest since the merger, indicating positive sentiment among commercial clients [52] Question: What is the current line utilization rate on the commercial portfolio? - Management stated that line utilization rates have remained stable and modest [58] Question: Are you ready for another transaction a year after the Codorus Valley deal? - Management expressed that they are looking for opportunities that add value and are focused on best practices for future acquisitions [66][67]

Financial Performance Highlights - Net income for 2Q25 was $19.4 million, a 7.7% increase quarter-over-quarter and a 151.3% increase year-over-year[7] - Adjusted net income for 2Q25 was $20.2 million, up 4.5% from the previous quarter and 131.2% compared to 2Q24[7] - Diluted EPS reached $1.01, showing a 7.7% increase from 1Q25 and a 37.1% increase from 2Q24[7] - Adjusted diluted EPS was $1.04, a 4% increase from 1Q25 and a 25.3% increase from 2Q24[7] - The company's assets totaled $5,387.6 million, representing a 68.4% increase compared to $3,198.8 million in 2Q24, but a decrease of 1% from $5,441.6 million in 1Q25[7] - Loans amounted to $3,931.4 million, a 1.4% increase from the previous quarter and a 67.5% increase from $2,347.6 million in 2Q24[7] - Deposits totaled $4,516.6 million, a decrease of 2.5% from the previous quarter but a 67.1% increase from $2,702.9 million in 2Q24[7] Profitability and Efficiency - Annualized ROAA was 1.45%, a 10 bps increase from the previous quarter and a 48 bps increase year-over-year[7] - Adjusted annualized ROAA was 1.51%, a 6 bps increase from 1Q25 and a 42 bps increase from 2Q24[7] - The efficiency ratio improved to 60.25%, a decrease of 297 bps from the previous quarter and 778 bps from 2Q24[7] - Adjusted efficiency ratio was 58.70%, a decrease of 180 bps from 1Q25 and 590 bps from 2Q24[7] - Net interest margin improved to 4.07%, a 7 bps increase from the previous quarter and a 52 bps increase year-over-year[7]

Exhibit 99.1 FOR IMMEDIATE RELEASE: Orrstown Financial Services, Inc. Reports Second Quarter 2025 Results and Announces Dividend Increase Loans Non-GAAP measure. See Appendix A for additional information. (1) HARRISBURG, PA (July 22, 2025) -- Orrstown Financial Services, Inc. (NASDAQ: ORRF), the parent company of Orrstown Bank (the "Bank"), announced earnings for the periods ended June 30, 2025. Net income totaled $19.4 million for the three months ended June 30, 2025, compared to net income of $18.1 millio ...

Orrstown Financial Services (ORRF) came out with quarterly earnings of $1.04 per share, beating the Zacks Consensus Estimate of $0.99 per share. This compares to earnings of $0.83 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +5.05%. A quarter ago, it was expected that this holding company for Orrstown Bank would post earnings of $0.95 per share when it actually produced earnings of $1, delivering a surprise of +5.26%.Over t ...

Net income of $19.4 million, or $1.01 per diluted share, for the three months ended June 30, 2025 compared to net income of $18.1 million, or $0.93 per diluted share, for the three months ended March 31, 2025; the second quarter of 2025 included $1.0 million in merger-related expenses compared to $1.6 million in merger-related expenses for the first quarter of 2025;Excluding the impact of the merger-related expenses referenced above, net of taxes, net income and diluted earnings per share were $20.2 million ...

Core Points - Orrstown Financial Services, Inc. will report its second quarter 2025 earnings on July 22, 2025, after market close [1] - A conference call and webcast to discuss the quarterly results will take place on July 23, 2025, at 9:00 am ET [1] Earnings Release Details - Earnings Release Date: July 22, 2025, After Market Close [1] - Conference Call and Webcast Date: July 23, 2025, 9:00 am ET [1] - Webcast Link: https://events.q4inc.com/attendee/935555390 [2] - Telephone Participation: - USA / International Toll: +1 (646) 307-1963 - USA - Toll-Free: (800) 715-9871 - Canada - Toronto: (647) 932-3411 - Canada - Toll-Free: (800) 715-9871 - Conference ID: 5555102 [2] Recorded Playback Information - Audio recording available until July 30, 2025 - US & Canada Toll-Free: (800) 770-2030 - US Toll: (609) 800-9909 - Canada Toll: (647) 362-9199 - Playback ID: 5555102 - Recording also accessible in the Investor Relations section of the Company's website [3] Company Overview - Orrstown Financial Services, Inc. has $5.4 billion in assets and offers a variety of consumer and business financial services across multiple counties in Pennsylvania and Maryland [4] - The lending area includes counties in Pennsylvania, Maryland, Delaware, Virginia, West Virginia, and the District of Columbia within a 75-mile radius of the Company's offices [4] - The Company's common stock is traded on NASDAQ under the symbol "ORRF" [4]

This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements reflect the current views of the Company's management with respect to, among other things, future events and the Company's financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "con ...

HARRISBURG, Pa., June 05, 2025 (GLOBE NEWSWIRE) -- Orrstown Bank, a wholly owned subsidiary of Orrstown Financial Services, Inc. (NASDAQ: ORRF), is pleased to announce the promotion of Zachary Khuri to Chief Revenue Officer and Joshua Hocker to Market President for the Central Pennsylvania Region, effective immediately. Zachary Khuri, who most recently served as Market President for Orrstown Bank’s Central Pennsylvania Region, brings more than 20 years of banking experience to his new role. Since joining Or ...

Financial Performance - For the three months ended March 31, 2025, net income was $18.1 million, a significant increase from $8.5 million in the same period of 2024, resulting in diluted earnings per share of $0.93 compared to $0.81[200]. - Net income for Q1 2025 was $18.1 million, up from $8.5 million in Q1 2024, with diluted earnings per share increasing to $0.93 from $0.81[222]. - Adjusted net income for the three months ended March 31, 2025 was $19.3 million, compared to $9.2 million for the same period in 2024[314]. - The Company reported total comprehensive income of $20.3 million for the three months ended March 31, 2025, an increase of $12.0 million from $8.3 million in the same period of 2024[300]. Assets and Liabilities - As of March 31, 2025, the Company reported total assets of $5.4 billion, total liabilities of $4.9 billion, and total shareholders' equity of $532.9 million[199]. - The Company had cash and cash equivalents of $287.1 million at March 31, 2025, up from $248.9 million at December 31, 2024[307]. - Total loans decreased by $55.2 million from December 31, 2024, primarily due to strategic actions to reduce risk in the portfolio, including a reduction in commercial real estate loan concentrations[261]. - As of March 31, 2025, the total loans amount to $22.727 billion, with nonaccrual loans at $400 million, compared to $24.111 billion and $641 million respectively on December 31, 2024[270]. Income and Expenses - Net interest income rose to $48.8 million in Q1 2025, compared to $26.9 million in Q1 2024, reflecting a $21.9 million increase[223]. - Noninterest income increased to $11.6 million in Q1 2025 from $6.6 million in Q1 2024, primarily due to a merger-related increase in wealth management income[224]. - Noninterest expenses totaled $38.2 million in Q1 2025, up from $22.5 million in Q1 2024, with a significant portion attributed to merger-related costs[226]. - The effective tax rate for Q1 2025 was 20.7%, slightly higher than 20.6% in Q1 2024, influenced by tax-exempt income[227]. Credit Losses and Provisions - The allowance for credit losses (ACL) is determined based on a quantitative assessment of loans, incorporating historical loss performance and forecasts of future economic conditions[213]. - The provision for credit losses showed a recovery of $554 thousand in Q1 2025, compared to an expense of $298 thousand in Q1 2024[223]. - The Allowance for Credit Losses (ACL) totaled $47.8 million at March 31, 2025, an increase of $18.6 million from March 31, 2024[287]. - The ACL as a percentage of the total loan portfolio was 1.23% at March 31, 2025, compared to 1.27% at March 31, 2024[287]. Loan Portfolio and Risk Management - The Company is focused on mitigating risks associated with inflation, interest rates, and geopolitical tensions that could impact financial estimates and credit losses[205]. - The company believes it has adequately provided for potential losses on evaluated relationships as of March 31, 2025[273]. - The company conducts annual internal loan reviews for all commercial relationships with committed loan balances exceeding $2 million[271]. - The company has maintained a strong risk rating of "Pass" for the majority of its loan portfolio, indicating overall financial health[276]. Market and Economic Conditions - Preliminary real GDP contracted by 0.3% on an annualized basis in Q1 2025, contrasting with a 2.4% increase in Q4 2024 and a 1.4% increase in Q1 2024[202]. - The national unemployment rate was 4.2% in March 2025, up from 4.1% in December 2024 and 3.8% in March 2024[203]. - The 10-year Treasury bond yield decreased to 4.23% as of March 31, 2025, down from 4.58% at December 31, 2024[204]. Interest Rate Sensitivity - As of March 31, 2025, the bank is asset sensitive, indicating that net interest income will increase with rising interest rates[322]. - The simulation analysis shows a projected 4.2% increase in net interest income with a 200 basis point rise in market interest rates for March 31, 2025[325]. - The bank's net interest income sensitivity analysis reflects a 2.4% increase with a 100 basis point rise in interest rates for March 31, 2025[325]. - The bank's funding costs are not expected to decline as quickly as historically modeled, which may affect asset sensitivity[322].