[Orrstown Financial Services, Inc. Third Quarter 2025 Results Overview](index=1&type=section&id=Orrstown%20Financial%20Services%2C%20Inc.%20Reports%20Third%20Quarter%202025%20Results) This report provides a comprehensive overview of Orrstown Financial Services, Inc.'s financial performance and key operational highlights for the third quarter of 2025 [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) Orrstown Financial Services, Inc. reported record Q3 2025 earnings of **$21.9 million** and **$1.13 diluted EPS**, reflecting strong loan growth, increased fee income, and expense reduction | Metric | Q3 2025 (Ended Sep 30) | Q2 2025 (Ended Jun 30) | Q3 2024 (Ended Sep 30) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Income | $21.9 million | $19.4 million | $(7.9) million | | Diluted EPS | $1.13 | $1.01 | $(0.41) | | Return on Average Assets | 1.60% | 1.45% | (0.57)% | | Return on Average Equity | 15.72% | 14.56% | (5.85)% | | Net Interest Margin (tax equivalent) | 4.11% | 4.07% | 4.14% | | Noninterest Income | $13.4 million | $12.9 million | $12.4 million | | Noninterest Expenses | $36.3 million | $37.6 million | $60.3 million | | Efficiency Ratio | 56.4% | 60.3% | 94.1% | | Tangible Common Equity | 8.8% | 8.3% | N/A | | Tangible Book Value per Common Share | $24.12 | $22.77 | $21.12 | | Cash Dividend per Common Share | $0.27 | N/A | N/A | - CEO Thomas R. Quinn, Jr. highlighted **record earnings** for Q3, driven by **strong loan growth**, **increased fee income**, and **continued expense reduction**[4](index=4&type=chunk) - Synergies from the prior year merger were evident in financial metrics and **sound capital ratios**, even after subordinated debt redemption[4](index=4&type=chunk) [Discussion of Results](index=3&type=section&id=DISCUSSION%20OF%20RESULTS) This section provides a detailed analysis of the company's balance sheet, income statement, and capital position for the reporting period [Balance Sheet Analysis](index=3&type=section&id=Balance%20Sheet) The balance sheet for Q3 2025 showed growth in loans and investment securities, alongside an increase in deposits and borrowings, with active liquidity management including subordinated notes redemption [Loans](index=3&type=section&id=Loans) Loans held for investment increased by **$48.4 million** to **$4.0 billion** at September 30, 2025, driven by commercial loans and residential mortgages | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :------------------------ | :----------- | :----------- | :----------- | | Loans held for investment | $4.0 billion | $3.9 billion | +$48.4 million | | Commercial loans increase | N/A | N/A | +$38.2 million | | Residential mortgages increase | N/A | N/A | +$10.3 million | [Investment Securities](index=3&type=section&id=Investment%20Securities) Investment securities increased by **$5.0 million** to **$890.4 million**, with net unrealized losses declining by **$9.1 million** due to reduced market rates | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :-------------------------------- | :----------- | :----------- | :----------- | | Investment securities | $890.4 million | $885.4 million | +$5.0 million | | Net unrealized losses decline | N/A | N/A | -$9.1 million | | Overall duration | 4.4 years | 4.5 years | -0.1 years | [Deposits](index=3&type=section&id=Deposits) Total deposits increased by **$16.9 million** to **$4.5 billion**, primarily from money market and time deposits, raising the loan-to-deposit ratio to **88%** | Deposit Type | Change (Jun 30, 2025 to Sep 30, 2025) | | :-------------------------- | :------------------------------------ | | Total Deposits | +$16.9 million | | Money market deposits | +$64.0 million | | Time deposits | +$36.1 million | | Interest-bearing demand deposits | -$60.9 million | | Non-interest bearing demand deposits | -$16.7 million | | Saving deposits | -$5.6 million | | Loan-to-deposit ratio | 88% (up from 87%) | [Borrowings](index=3&type=section&id=Borrowings) The company redeemed **$32.5 million** in subordinated notes, while FHLB advances and other borrowings increased by **$72.9 million** to **$209.2 million** to support lending | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :------------------------------------ | :----------- | :----------- | :----------- | | Subordinated notes redeemed | $32.5 million | N/A | N/A | | Debt issuance costs amortized | $0.3 million | N/A | N/A | | FHLB advances and other borrowings | $209.2 million | $136.3 million | +$72.9 million | | Available alternative funding sources | ~$1.7 billion | ~$1.7 billion | Stable | [Income Statement Analysis](index=4&type=section&id=Income%20Statement) The income statement for Q3 2025 demonstrated strong performance with increased net interest income and noninterest income, coupled with a decrease in noninterest expenses, leading to a significant rise in net income and improved efficiency [Net Interest Income and Margin](index=4&type=section&id=Net%20Interest%20Income%20and%20Margin) Net interest income increased to **$51.0 million**, and net interest margin rose to **4.11%** in Q3 2025, driven by higher loan yields and positive purchase accounting marks | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :------------------------------------ | :------ | :------ | :----------- | | Net interest income | $51.0 million | $49.5 million | +$1.5 million | | Net interest margin (tax equivalent) | 4.11% | 4.07% | +0.04% | | Yield on loans increase | N/A | N/A | +6 basis points | | Cost of funds increase | N/A | N/A | +3 basis points | | Purchase accounting marks impact on NIM | +52 bps | +50 bps | +2 bps | [Provision for Credit Losses on Loans](index=4&type=section&id=Provision%20for%20Credit%20Losses%20on%20Loans) The allowance for credit losses (ACL) on loans slightly increased to **$48.1 million**, with provision expense rising to **$0.4 million**, while non-accrual loans increased to **$26.2 million** | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :-------------------------------- | :----------- | :----------- | :----------- | | Allowance for credit losses (ACL) | $48.1 million | $47.9 million | +$0.2 million | | ACL to total loans | 1.21% | 1.22% | -0.01% | | Provision expense | $0.4 million | $0.2 million | +$0.2 million | | Net charge-offs | $0.2 million | $0.1 million | +$0.1 million | | Classified loans | $64.1 million | $65.8 million | -$1.7 million | | Non-accrual loans | $26.2 million | $22.4 million | +$3.8 million | | Non-accrual loans to total loans | 0.66% | 0.57% | +0.09% | [Noninterest Income](index=5&type=section&id=Noninterest%20Income) Noninterest income increased by **$0.5 million** to **$13.4 million**, primarily due to higher service charges from increased interchange activity and swap fee income | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------- | :------ | :------ | :----------- | | Total Noninterest income | $13.4 million | $12.9 million | +$0.5 million | | Service charges | $3.0 million | $2.6 million | +$0.4 million | | Swap fee income | $0.8 million | $0.7 million | +$0.1 million | | Mortgage banking activities | $0.5 million | $0.5 million | Stable | | Other income | $2.1 million | $2.4 million | -$0.3 million | [Noninterest Expenses](index=5&type=section&id=Noninterest%20Expenses) Noninterest expenses decreased by **$1.3 million** to **$36.3 million**, mainly due to the absence of merger-related expenses and reduced advertising costs | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :-------------------------------- | :------ | :------ | :----------- | | Total Noninterest expenses | $36.3 million | $37.6 million | -$1.3 million | | Merger-related expenses | $0 | $1.0 million | -$1.0 million | | Advertising and bank promotions | $0.2 million | $1.1 million | -$0.9 million | | Salaries and benefits | $21.4 million | $21.4 million | Stable | | Professional services expense | $1.7 million | $2.0 million | -$0.3 million | [Income Taxes](index=5&type=section&id=Income%20Taxes) The effective tax rate for Q3 2025 was **21.0%**, slightly down from **21.3%** in Q2 2025, aligning with the federal statutory rate | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :----------------- | :------ | :------ | :----------- | | Effective tax rate | 21.0% | 21.3% | -0.3% | [Capital Position](index=5&type=section&id=Capital) Shareholders' equity increased to **$571.9 million**, improving tangible book value per common share and the tangible common equity ratio, with all capital ratios remaining above regulatory minimums | Metric | Sep 30, 2025 | Jun 30, 2025 | Change (QoQ) | | :------------------------------------ | :----------- | :----------- | :----------- | | Shareholders' equity | $571.9 million | $548.4 million | +$23.5 million | | Tangible book value per common share | $24.12 | $22.77 | +$1.35 | | Tangible common equity ratio | 8.8% | 8.3% | +0.5% | | Return on average tangible common equity | 19.7% | 18.4% | +1.3% | | Tier 1 common equity risk-based ratio | 11.1% | 10.9% | +0.2% | | Tier 1 risk-based capital ratio | 11.3% | 11.1% | +0.2% | | Total risk-based capital ratio | 13.1% | 13.3% | -0.2% | | Tier 1 leverage ratio | 9.3% | 9.0% | +0.3% | - The company's capital ratios remain above regulatory minimum levels to be deemed 'well capitalized,' and management believes capital is adequate to support inherent risks and growth requirements[29](index=29&type=chunk) [Financial Highlights (Unaudited)](index=7&type=section&id=FINANCIAL%20HIGHLIGHTS%20(Unaudited)) This section presents unaudited financial highlights, including profitability, period-end balances, and key ratios for various reporting periods [Profitability and Ratios (Three and Nine Months Ended September 30, 2025 & 2024)](index=7&type=section&id=Profitability%20and%20Ratios%20(Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202025%20%26%202024)) This section provides a consolidated overview of key profitability metrics and financial ratios for both the three and nine months ended September 30, 2025, compared to the same periods in 2024, highlighting significant improvements in net income, returns, and efficiency | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net interest income | $50,988 | $51,697 | $149,261 | $104,681 | | Provision for credit losses - loans | $396 | $14,115 | $51 | $15,348 | | Noninterest income | $13,382 | $12,386 | $37,921 | $26,188 | | Noninterest expenses | $36,297 | $60,299 | $112,087 | $105,407 | | Net income (loss) | $21,865 | $(7,903) | $59,364 | $8,366 | | Return on average assets | 1.60% | (0.57)% | 1.47% | 0.28% | | Return on average equity | 15.72% | (5.85)% | 14.77% | 3.10% | | Net interest margin | 4.11% | 4.14% | 4.06% | 3.88% | | Efficiency ratio | 56.4% | 94.1% | 59.9% | 80.5% | | Diluted EPS | $1.13 | $(0.41) | $3.07 | $0.62 | [Period-End Balances and Ratios (September 30, 2025 & December 31, 2024)](index=8&type=section&id=Period-End%20Balances%20and%20Ratios%20(September%2030%2C%202025%20%26%20December%2031%2C%202024)) This section presents key balance sheet items and credit quality and capital ratios at the end of September 30, 2025, compared to December 31, 2024, indicating overall asset growth, improved capital strength, and stable credit quality | Metric | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :----------- | :----------- | | Total assets | $5,470,233 | $5,441,589 | | Loans, net of ACL | $3,931,631 | $3,882,525 | | Securities available for sale | $890,357 | $829,711 | | Total deposits | $4,533,560 | $4,623,096 | | FHLB advances and other borrowings | $241,719 | $141,227 | | Subordinated notes and trust preferred debt | $36,970 | $68,680 | | Shareholders' equity | $571,936 | $516,682 | | ACL to total loans | 1.21% | 1.24% | | Total nonaccrual loans to total loans | 0.66% | 0.61% | | Nonperforming assets to total assets | 0.48% | 0.45% | | Total risk-based capital (Company) | 13.1% | 12.4% | | Tier 1 risk-based capital (Company) | 11.3% | 10.2% | | Tier 1 common equity risk-based capital (Company) | 11.1% | 10.0% | | Tier 1 leverage capital (Company) | 9.3% | 8.3% | | Book value per common share | $29.33 | $26.65 | [Consolidated Balance Sheets (Unaudited)](index=9&type=section&id=ORRSTOWN%20FINANCIAL%20SERVICES%2C%20INC.%20CONSOLIDATED%20BALANCE%20SHEETS%20(Unaudited)) The consolidated balance sheets provide a detailed breakdown of assets, liabilities, and shareholders' equity for Orrstown Financial Services, Inc. as of September 30, 2025, and December 31, 2024, showing an increase in total assets and shareholders' equity, alongside shifts in deposit and borrowing structures | (Dollars in thousands) | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------------------ | :----------- | :----------- | | **Assets:** | | | | Cash and cash equivalents | $184,146 | $248,874 | | Securities available for sale | $890,357 | $829,711 | | Loans, net | $3,931,631 | $3,882,525 | | Total assets | $5,470,233 | $5,441,589 | | **Liabilities:** | | | | Total deposits | $4,533,560 | $4,623,096 | | FHLB advances and other borrowings | $209,218 | $115,364 | | Subordinated notes and trust preferred debt | $36,970 | $68,680 | | Total liabilities | $4,898,297 | $4,924,907 | | **Shareholders' Equity:** | | | | Total shareholders' equity | $571,936 | $516,682 | | Total liabilities and shareholders' equity | $5,470,233 | $5,441,589 | [Condensed Consolidated Statements of Operations (Unaudited)](index=10&type=section&id=ORRSTOWN%20FINANCIAL%20SERVICES%2C%20INC.%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(Unaudited)) The condensed consolidated statements of operations present the financial performance for the three and nine months ended September 30, 2025, and 2024, showing significant growth in net income, particularly for the nine-month period, driven by increased net interest income and controlled expenses | (Dollars in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | **Interest income:** | | | | | | Loans | $65,751 | $70,647 | $192,219 | $142,417 | | Total interest income | $77,122 | $82,987 | $227,474 | $168,918 | | **Interest expense:** | | | | | | Deposits | $22,639 | $28,603 | $69,754 | $57,384 | | Total interest expense | $26,134 | $31,290 | $78,213 | $64,237 | | Net interest income | $50,988 | $51,697 | $149,261 | $104,681 | | Provision for credit losses - loans | $396 | $14,115 | $51 | $15,348 | | Total noninterest income | $13,382 | $12,386 | $37,921 | $26,188 | | Total noninterest expenses | $36,297 | $60,299 | $112,087 | $105,407 | | Income (loss) before income tax | $27,677 | $(9,897) | $75,144 | $10,671 | | Income tax expense (benefit) | $5,812 | $(1,994) | $15,780 | $2,305 | | Net income (loss) | $21,865 | $(7,903) | $59,364 | $8,366 | | Basic earnings (loss) per share | $1.14 | $(0.41) | $3.09 | $0.63 | | Diluted earnings (loss) per share | $1.13 | $(0.41) | $3.07 | $0.62 | | Dividends paid per share | $0.27 | $0.23 | $0.79 | $0.63 | [Analysis of Net Interest Income (Unaudited)](index=12&type=section&id=ANALYSIS%20OF%20NET%20INTEREST%20INCOME) This section provides a detailed analysis of net interest income and margin, including average balances and interest rates over quarterly and nine-month periods [Average Balances and Interest Rates (Quarterly Trends)](index=12&type=section&id=Average%20Balances%20and%20Interest%20Rates%2C%20Taxable-Equivalent%20Basis%20(Unaudited)) This section provides a detailed breakdown of average balances, interest income/expense, and rates for interest-earning assets and interest-bearing liabilities over the past five quarters, highlighting the trends in net interest income and margin | (In thousands) | 9/30/2025 | 6/30/2025 | 3/31/2025 | 12/31/2024 | 9/30/2024 | | :------------------------------------ | :-------- | :-------- | :-------- | :--------- | :-------- | | **Average Interest Earning Assets:** | | | | | | | Loans | $3,979,044 | $3,894,978 | $3,909,694 | $3,961,269 | $3,989,259 | | Total interest earning assets | $4,987,171 | $4,935,203 | $4,978,167 | $5,009,894 | $5,023,424 | | **Average Interest Bearing Liabilities:** | | | | | | | Total interest bearing deposits | $3,612,211 | $3,647,104 | $3,717,444 | $3,794,566 | $3,852,708 | | Total interest bearing liabilities | $3,877,671 | $3,845,999 | $3,925,205 | $4,000,082 | $4,059,570 | | **Net Interest Income/Margin:** | | | | | | | Taxable equivalent net interest income | $51,557 | $50,064 | $49,203 | $51,010 | $52,134 | | Taxable equivalent net interest margin | 4.11% | 4.07% | 4.00% | 4.05% | 4.14% | | Net interest income | $50,988 | $49,512 | $48,761 | $50,573 | $51,697 | [Average Balances and Interest Rates (Nine Months Ended September 30, 2025 & 2024)](index=14&type=section&id=Average%20Balances%20and%20Interest%20Rates%2C%20Taxable-Equivalent%20Basis%20(Unaudited)%20(continued)) This section provides a comparative analysis of average balances and interest rates for interest-earning assets and interest-bearing liabilities for the nine months ended September 30, 2025, versus 2024, illustrating the year-over-year changes in net interest income and margin | (In thousands) | 9M 2025 | 9M 2024 | | :------------------------------------ | :------ | :------ | | **Average Interest Earning Assets:** | | | | Loans | $3,928,159 | $2,878,171 | | Total interest-earning assets | $4,966,880 | $3,649,088 | | **Average Interest Bearing Liabilities:** | | | | Total interest-bearing deposits | $3,658,534 | $2,776,848 | | Total interest-bearing liabilities | $3,882,783 | $2,959,937 | | **Net Interest Income/Margin:** | | | | Taxable-equivalent net interest income | $150,928 | $105,887 | | Taxable-equivalent net interest margin | 4.06% | 3.88% | | Net interest income | $149,261 | $104,681 | [Historical Trends in Quarterly Financial Data (Unaudited)](index=16&type=section&id=ORRSTOWN%20FINANCIAL%20SERVICES%2C%20INC.%20HISTORICAL%20TRENDS%20IN%20QUARTERLY%20FINANCIAL%20DATA%20(Unaudited)) This section presents historical trends in quarterly financial data, covering profitability, noninterest income and expenses, balance sheet items, and capital and credit quality measures [Quarterly Profitability and Ratios](index=16&type=section&id=Profitability%20for%20the%20quarter) This section presents a five-quarter trend of key profitability metrics and financial ratios, illustrating the company's performance trajectory, including net income, returns, net interest margin, and efficiency | (In thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Net interest income | $50,988 | $49,512 | $48,761 | $50,573 | $51,697 | | Net income (loss) | $21,865 | $19,448 | $18,051 | $13,684 | $(7,903) | | Return on average assets | 1.60% | 1.45% | 1.35% | 1.00% | (0.57)% | | Return on average equity | 15.72% | 14.56% | 13.98% | 10.54% | (5.85)% | | Net interest margin | 4.11% | 4.07% | 4.00% | 4.05% | 4.14% | | Efficiency ratio | 56.4% | 60.3% | 63.2% | 69.4% | 94.1% | | Diluted EPS | $1.13 | $1.01 | $0.93 | $0.71 | $(0.41) | | Tangible book value | $24.12 | $22.77 | $21.99 | $21.19 | $21.12 | [Quarterly Noninterest Income and Expenses](index=17&type=section&id=Noninterest%20income%3A) This section details the quarterly trends in various noninterest income and expense categories over the past five quarters, showing the drivers of changes in fee income and operational costs | (In thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | **Noninterest income:** | | | | | | | Service charges | $2,997 | $2,630 | $2,395 | $2,050 | $2,360 | | Wealth management income | $5,277 | $5,267 | $5,415 | $4,902 | $5,037 | | Total noninterest income | $13,382 | $12,915 | $11,624 | $11,247 | $12,386 | | **Noninterest expenses:** | | | | | | | Salaries and employee benefits | $21,439 | $21,364 | $20,388 | $22,444 | $27,190 | | Professional services | $1,703 | $2,016 | $1,826 | $1,591 | $1,119 | | Merger-related expenses | $0 | $968 | $1,649 | $3,887 | $16,977 | | Total noninterest expenses | $36,297 | $37,614 | $38,176 | $42,930 | $60,299 | [Quarterly Balance Sheet at Quarter End](index=18&type=section&id=Balance%20Sheet%20at%20quarter%20end%3A) This section provides a five-quarter trend of key balance sheet items at quarter-end, including cash, securities, loans by type, deposits, and borrowings, offering insights into asset and liability composition changes | (In thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Total assets | $5,470,233 | $5,387,645 | $5,441,586 | $5,441,589 | $5,470,589 | | Securities available for sale | $890,357 | $885,373 | $855,456 | $829,711 | $826,828 | | Total loans | $3,979,736 | $3,931,379 | $3,875,985 | $3,931,214 | $3,981,437 | | Net loans held for investment | $3,931,631 | $3,883,481 | $3,828,181 | $3,882,525 | $3,931,807 | | Total deposits | $4,533,560 | $4,516,625 | $4,633,716 | $4,623,096 | $4,650,853 | | FHLB advances and other borrowings | $241,719 | $166,381 | $123,480 | $141,227 | $137,310 | | Total shareholders' equity | $571,936 | $548,448 | $532,936 | $516,682 | $516,206 | [Quarterly Capital and Credit Quality Measures](index=19&type=section&id=Capital%20and%20credit%20quality%20measures%20%3A) This section provides a five-quarter trend of capital and credit quality ratios, including risk-based capital, leverage, allowance for credit losses, nonaccrual loans, and nonperforming assets, demonstrating the company's financial health and asset quality management | (In thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Total risk-based capital (Company) | 13.1% | 13.3% | 13.1% | 12.4% | 12.4% | | Tier 1 risk-based capital (Company) | 11.3% | 11.1% | 10.8% | 10.2% | 10.0% | | Tier 1 leverage capital (Company) | 9.3% | 9.0% | 8.6% | 8.3% | 8.0% | | Allowance for credit losses to total loans | 1.21% | 1.22% | 1.23% | 1.24% | 1.25% | | Total nonaccrual loans to total loans | 0.66% | 0.57% | 0.59% | 0.61% | 0.68% | | Nonperforming assets to total assets | 0.48% | 0.42% | 0.42% | 0.45% | 0.49% | | Net charge-offs | $189 | $115 | $331 | $3,002 | $269 | | Classified loans | $64,089 | $65,754 | $76,211 | $88,628 | $105,465 | | Total nonperforming assets | $26,191 | $22,423 | $22,865 | $24,249 | $27,065 | [Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations](index=20&type=section&id=Appendix%20A-%20Supplemental%20Reporting%20of%20Non-GAAP%20Measures%20and%20GAAP%20to%20Non-GAAP%20Reconciliations) This appendix explains non-GAAP financial measures like tangible book value and adjusted net income, providing reconciliations to GAAP for enhanced financial insight - Management uses non-GAAP financial information to help investors understand the effect of **non-recurring charges** on recent financial results; these measures are supplementary to GAAP and not substitutes[50](index=50&type=chunk)[52](index=52&type=chunk) | (In thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Shareholders' equity (GAAP) | $571,936 | $548,448 | $532,936 | $516,682 | $516,206 | | Less: Goodwill | $69,751 | $69,751 | $68,106 | $68,106 | $70,655 | | Less: Other intangible assets | $40,338 | $42,748 | $45,230 | $47,765 | $46,144 | | Plus: Related tax effect | $8,471 | $8,977 | $9,498 | $10,031 | $9,690 | | Tangible common equity (Non-GAAP) | $470,318 | $444,926 | $429,098 | $410,842 | $409,097 | | Book value per share (GAAP) | $29.33 | $28.07 | $27.32 | $26.65 | $26.65 | | Tangible book value per share (Non-GAAP) | $24.12 | $22.77 | $21.99 | $21.19 | $21.12 | | (In thousands) | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | Net income (loss) (GAAP) | $21,865 | $19,448 | $18,051 | $13,684 | $(7,903) | | Plus: Merger-related expenses | $0 | $968 | $1,649 | $3,887 | $16,977 | | Plus: Executive retirement expenses | $0 | $0 | $0 | $35 | $4,758 | | Plus: Provision for credit losses on non-PCD loans | $0 | $0 | $0 | $0 | $15,504 | | Plus: Provision for legal settlement | $0 | $0 | $0 | $478 | $0 | | Less: Related tax effect | $0 | $(221) | $(368) | $(1,386) | $(7,915) | | Adjusted net income (Non-GAAP) | $21,865 | $20,195 | $19,332 | $16,698 | $21,421 | | Return on average assets (GAAP) | 1.60% | 1.45% | 1.35% | 1.00% | (0.57)% | | Return on average assets, adjusted (Non-GAAP) | 1.60% | 1.51% | 1.45% | 1.22% | 1.55% | | Efficiency ratio (GAAP) | 56.4% | 60.3% | 63.2% | 69.4% | 94.1% | | Efficiency ratio, adjusted (Non-GAAP) | 56.4% | 58.7% | 60.5% | 62.3% | 60.2% | [Appendix B - Investment Portfolio Concentrations](index=24&type=section&id=Appendix%20B-%20Investment%20Portfolio%20Concentrations) This appendix summarizes the company's diversified investment security portfolio as of September 30, 2025, detailing concentrations, values, and credit ratings | Sector | Portfolio Mix | Amortized Book | Fair Value | Credit Enhancement | AAA | AA | A | BBB | BB | NR | | :-------------------------------- | :------------ | :------------- | :--------- | :----------------- | :-- | :-- | :- | :-- | :- | :-- | | Federal Family Education Loan ABS | 8% | $73,927 | $73,552 | 11% | —% | 47% | 33% | 7% | 13% | —% | | Municipal - General Obligation | 11% | $99,301 | $92,050 | N/A | 17% | 77% | 6% | —% | —% | —% | | Municipal - Revenue | 13% | $120,030 | $108,063 | N/A | —% | 82% | 12% | —% | —% | 6% | | Agency MBS | 20% | $177,918 | $178,485 | N/A | —% | 100% | —% | —% | —% | —% | | Agency CMO | 40% | $360,574 | $359,449 | N/A | —% | 100% | —% | —% | —% | —% | | U.S. Treasury securities | 2% | $20,033 | $18,803 | N/A | —% | 100% | —% | —% | —% | —% | | Corporate bonds | —% | $1,944 | $1,994 | N/A | —% | —% | 52% | 48% | —% | —% | | **Total** | **100%** | **$912,539** | **$890,136** | | **4%** | **85%** | **5%** | **1%** | **1%** | **4%** | [About the Company and Disclosures](index=25&type=section&id=About%20the%20Company) This section provides an overview of Orrstown Financial Services, Inc. and includes important cautionary notes regarding forward-looking statements [About the Company](index=25&type=section&id=About%20the%20Company) Orrstown Financial Services, Inc., with **$5.5 billion** in assets, is the parent company of Orrstown Bank, providing a broad range of consumer and business financial services across multiple counties in Pennsylvania and Maryland - Orrstown Financial Services, Inc. has **$5.5 billion in assets** and operates through its wholly-owned subsidiary, Orrstown Bank[58](index=58&type=chunk) - The company provides consumer and business financial services in Berks, Cumberland, Dauphin, Franklin, Lancaster, Perry, and York Counties, Pennsylvania, and Anne Arundel, Baltimore, Harford, Howard, and Washington Counties, Maryland, including Baltimore City[58](index=58&type=chunk) - Orrstown Financial Services, Inc.'s common stock is traded on Nasdaq (**ORRF**)[58](index=58&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=25&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section serves as a cautionary note regarding forward-looking statements, emphasizing that such statements are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are not historical facts and are subject to **risks, assumptions, and uncertainties** that are difficult to predict[59](index=59&type=chunk) - Factors that could cause actual results to differ include **interest rate changes**, **general economic conditions**, **competition**, **changes in consumer behavior**, **regulatory changes**, **credit quality**, **inability to raise capital**, **market volatility**, **operational risks (e.g., cybersecurity)**, and **litigation expenses**[59](index=59&type=chunk) - The company disclaims any obligation to publicly update or review any forward-looking statement[60](index=60&type=chunk)

Core Insights - Orrstown Financial Services (ORRF) reported revenue of $64.37 million for Q3 2025, marking a year-over-year increase of 0.5% and a surprise of +2.01% over the Zacks Consensus Estimate of $63.1 million [1] - The earnings per share (EPS) for the same quarter was $1.13, compared to $1.11 a year ago, with an EPS surprise of +6.6% against the consensus estimate of $1.06 [1] Financial Performance Metrics - Efficiency ratio stood at 56.4%, slightly better than the three-analyst average estimate of 56.6% [4] - Average interest-earning assets were reported at $4.99 billion, exceeding the $4.97 billion average estimate [4] - Net interest margin was consistent at 4.1%, matching the three-analyst average estimate [4] - Total non-interest income reached $13.38 million, surpassing the three-analyst average estimate of $12.15 million [4] - Other income was reported at $2.1 million, slightly above the $2.02 million average estimate [4] - Interchange income was $1.62 million, exceeding the $1.22 million average estimate [4] - Service charges on deposit accounts totaled $3 million, higher than the two-analyst average estimate of $2.75 million [4] - Wealth management income was reported at $5.28 million, compared to the $5.07 million average estimate [4] - Net interest income was $50.99 million, slightly below the $51.28 million estimated by two analysts [4] Stock Performance - Shares of Orrstown have returned -5% over the past month, while the Zacks S&P 500 composite has increased by +1.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Orrstown Financial Services, Inc. reported a net income of $21.9 million for Q3 2025, an increase from $19.4 million in Q2 2025 and a recovery from a net loss of $7.9 million in Q3 2024 [1][2] - The diluted earnings per share (EPS) rose to $1.13 in Q3 2025, compared to $1.01 in Q2 2025 and a loss of $0.41 in Q3 2024 [1][2] - The company achieved its strongest quarter of earnings on record, with a return on assets of 1.60% and a return on equity of nearly 16% [2] Financial Performance - Net interest income for Q3 2025 was $51.0 million, up from $49.5 million in Q2 2025, with a net interest margin of 4.11% [8][9] - Noninterest income increased by $0.5 million to $13.4 million in Q3 2025 from $12.9 million in Q2 2025 [16] - Noninterest expenses decreased by $1.3 million to $36.3 million in Q3 2025, with no merger-related expenses incurred during this period [20] Balance Sheet Highlights - Loans held for investment increased by $48.4 million to $4.0 billion as of September 30, 2025, with commercial loans up by approximately 5% [3] - Total deposits remained stable at $4.5 billion, with increases in money market and time deposits [5] - The company redeemed $32.5 million in subordinated notes during Q3 2025, impacting its capital ratios [6][28] Capital and Equity - Shareholders' equity rose to $571.9 million at September 30, 2025, compared to $548.4 million at June 30, 2025 [26] - Tangible book value per common share increased to $24.12 from $22.77 during the same period [27] - The company's capital ratios remained above regulatory minimums, with tier 1 common equity at 11.1% [28][29] Credit Quality - The allowance for credit losses on loans increased slightly to $48.1 million, representing 1.21% of total loans [14] - Classified loans decreased to $64.1 million, with delinquent loans also showing a decline [15] - Nonaccrual loans increased to $26.2 million, reflecting a rise in nonaccrual status for certain commercial and residential loans [15]

Core Viewpoint - Orrstown Financial Services (ORRF) is positioned well to potentially beat earnings estimates in its upcoming quarterly report, supported by a solid history of exceeding expectations [1]. Group 1: Earnings Performance - Orrstown Financial Services has a track record of surpassing earnings estimates, particularly in the last two quarters, with an average surprise of 5.16% [2]. - In the last reported quarter, the company achieved earnings of $1.04 per share, exceeding the Zacks Consensus Estimate of $0.99 per share, resulting in a surprise of 5.05% [3]. - For the previous quarter, Orrstown was expected to report earnings of $0.95 per share but delivered $1 per share, yielding a surprise of 5.26% [3]. Group 2: Earnings Estimates and Predictions - Earnings estimates for Orrstown have been trending upward, influenced by its history of earnings surprises [6]. - The stock currently has a positive Zacks Earnings ESP (Expected Surprise Prediction) of +2.83%, indicating increased analyst optimism regarding its near-term earnings potential [9]. - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) suggests a strong possibility of another earnings beat in the upcoming report [9]. Group 3: Earnings ESP Insights - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [7]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [8]. - It is crucial for investors to check a company's Earnings ESP prior to quarterly releases to enhance the likelihood of successful investment decisions [11].

Core Points - Orrstown Financial Services, Inc. will report its third quarter 2025 earnings on October 21, 2025, after market close [1] - A conference call and webcast to discuss the quarterly results will take place on October 22, 2025, at 9:00 am ET [1] Earnings Release Details - Earnings Release Date: October 21, 2025, After Market Close [1] - Conference Call and Webcast Date: October 22, 2025, 9:00 am ET [1] - Webcast Link: https://events.q4inc.com/attendee/959187028 [2] - Telephone Participation: - USA / International Toll: +1 (646) 307-1963 - USA Toll-Free: (800) 715-9871 - Canada Toll: (647) 932-3411 - Canada Toll-Free: (800) 715-9871 - Conference ID: 5555102 [2] Recorded Playback Information - Audio Recording Availability: Until October 29, 2025 - Playback Numbers: - US & Canada Toll-Free: +1(800) 770-2030 - US Toll: +1(609) 800-9909 - Canada Toll: +1(647) 362-9199 - Playback ID: 5555102 [3] - Audio recording will also be available on 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 common stock of Orrstown Financial Services, Inc. is traded on NASDAQ under the symbol "ORRF" [4]

Core Viewpoint - Orrstown Financial Services (ORRF) has shown a downtrend recently, with a 7.4% loss over the past two weeks, but a hammer chart pattern suggests a potential trend reversal [1][2] Technical Analysis - The hammer chart pattern indicates a possible bottoming out, suggesting that selling pressure may be subsiding [2][5] - A hammer pattern forms when there is a small candle body with a long lower wick, indicating that buyers are starting to emerge after a downtrend [4][5] - The occurrence of this pattern at the bottom of a downtrend signals that bears may be losing control, which could lead to a trend reversal [5] Fundamental Analysis - There has been a positive trend in earnings estimate revisions for ORRF, which is a bullish indicator [7] - The consensus EPS estimate for the current year has increased by 2.8% over the last 30 days, indicating analysts' confidence in the company's earnings potential [8] - ORRF holds a Zacks Rank of 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which typically outperform the market [9][10]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and related disclosures. [Glossary of Defined Terms](index=3&type=section&id=Glossary%20of%20Defined%20Terms) This section defines key financial and operational terms and acronyms for clarity and consistent understanding. - Defines key financial and operational terms like ACL (Allowance for credit losses), CECL (Current expected credit losses), AFS (Available-for-sale), and various regulatory bodies and financial instruments[9](index=9&type=chunk) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements and notes on accounting policies and key financial items. - The company operates as a financial holding company through Orrstown Bank, providing banking and financial advisory services in Pennsylvania and Maryland[24](index=24&type=chunk) - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC rules[25](index=25&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) - Total assets decreased by $53.9 million to $5,387.6 million at June 30, 2025, from $5,441.6 million at December 31, 2024. Total liabilities decreased by $85.7 million, while total shareholders' equity increased by $31.8 million over the same period[11](index=11&type=chunk) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $5,387,645 | $5,441,589 | | Total liabilities | $4,839,197 | $4,924,907 | | Total shareholders' equity | $548,448 | $516,682 | | Cash and cash equivalents | $149,377 | $248,874 | | Securities available for sale | $885,373 | $829,711 | | Net loans | $3,883,481 | $3,882,525 | | Total deposits | $4,516,625 | $4,623,096 | [Condensed Consolidated Statements of Income (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)) - Net income for the three months ended June 30, 2025, was $19.4 million, up from $7.7 million in the prior year, and for the six months, it was $37.5 million, up from $16.3 million, primarily due to the Codorus Valley merger[12](index=12&type=chunk)[204](index=204&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income | $19,448 | $7,738 | $37,499 | $16,269 | | Diluted earnings per share | $1.01 | $0.73 | $1.94 | $1.55 | | Total interest income | $74,833 | $43,281 | $150,352 | $85,931 | | Total interest expense | $25,321 | $17,178 | $52,079 | $32,947 | | Net interest income | $49,512 | $26,103 | $98,273 | $52,984 | | Total noninterest income | $12,915 | $7,172 | $24,539 | $13,802 | | Total noninterest expenses | $37,614 | $22,639 | $75,790 | $45,108 | | Income tax expense | $5,256 | $2,086 | $9,968 | $4,299 | | Dividends paid per share | $0.26 | $0.20 | $0.52 | $0.40 | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) - Total comprehensive income increased significantly to **$18.99 million** for the three months and **$39.34 million** for the six months ended June 30, 2025, driven by higher net income and a shift from unrealized losses to gains on available-for-sale securities for the six-month period[15](index=15&type=chunk) - Unrealized gains on AFS securities arising during the six months ended June 30, 2025, were **$3,752 thousand**, a significant improvement from a **$1,769 thousand loss** in the prior year[15](index=15&type=chunk) - Unrealized losses on interest rate swaps used in cash flow hedges for the six months ended June 30, 2025, were **$(1,374) thousand**, compared to a **$1,862 thousand gain** in the prior year[15](index=15&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income | $19,448 | $7,738 | $37,499 | $16,269 | | Total other comprehensive (loss) income, net of tax | $(455) | $264 | $1,837 | $72 | | Total comprehensive income | $18,993 | $8,002 | $39,336 | $16,341 | [Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(Unaudited)) - Total shareholders' equity increased to **$548.4 million** at June 30, 2025, from **$516.7 million** at January 1, 2025, primarily due to net income of **$37.5 million** and other comprehensive income of **$1.8 million**, partially offset by **$10.1 million** in cash dividends[16](index=16&type=chunk)[329](index=329&type=chunk) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------- | :---------------------------------------- | :---------------------------------------- | | Balance, January 1 | $516,682 | $265,056 | | Net income | $37,499 | $16,269 | | Total other comprehensive income, net of taxes | $1,837 | $72 | | Cash dividends paid | $(10,116) | $(4,266) | | Balance, June 30 | $548,448 | $278,376 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) - Net cash provided by operating activities increased to **$35.4 million** for the six months ended June 30, 2025, from **$19.1 million** in the prior year, but overall cash and cash equivalents decreased by **$99.5 million** due to investing and financing activities[20](index=20&type=chunk) - Cash paid for interest increased to **$52,645 thousand** for the six months ended June 30, 2025, from **$33,044 thousand** in the prior year[21](index=21&type=chunk) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $35,430 | $19,103 | | Net cash used in investing activities | $(42,688) | $(73,312) | | Net cash (used in) provided by financing activities | $(92,239) | $121,557 | | Net (decrease) increase in cash and cash equivalents | $(99,497) | $67,348 | | Cash and cash equivalents at end of period | $149,377 | $132,509 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes provide detailed disclosures on significant accounting policies and various financial statement components. - The notes provide detailed disclosures on significant accounting policies, the Codorus Valley merger, investment securities, loans and allowance for credit losses, leases, goodwill and other intangible assets, share-based compensation, deposits, derivative financial instruments, shareholders

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][14] - Noninterest income increased by $1.3 million quarter-over-quarter, with fee income as a percentage of operating revenue improving to 21% [6][15] Business Line Data and Key Metrics Changes - Total loan growth was 6% on an annualized basis for the quarter, 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][15] - Noninterest expense declined by approximately $600,000 in the quarter, indicating improved cost management [18][19] Market Data and Key Metrics Changes - The loan pipeline is reported to be the strongest since the merger, reflecting a resilient regional economy [10][11] - Credit quality remains sound with net charge-offs being nominal and classified loans decreasing by 14% [11][21] - The average yield on loans was 6.5%, impacted by lower purchase accounting accretion [23] Company Strategy and Development Direction - The company aims to enhance its wealth management business and is focused on talent acquisition to support growth [7][48] - A share repurchase program of up to 500,000 shares was authorized, indicating confidence in the company's valuation [11][12] - The company is considering strategic opportunities, including potential acquisitions, while maintaining a focus on shareholder value [26][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future earnings growth as loan growth accelerates and expenses are expected to decline [5][8] - The competitive lending environment is acknowledged, but management remains confident in their ability to grow loans prudently [10][15] - The company is asset sensitive, and potential rate cuts could negatively impact net interest income, but management is focused on managing deposit costs [42][44] Other Important Information - The efficiency ratio improved to 58.7% in Q2 2025 from 60.5% in Q1 2025, with expectations for further improvement [8][19] - The board voted to increase the quarterly dividend by $0.01 per share, marking the third increase in the past year [12] 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 may be a couple of loans to consider selling, they have been successful in working them out with minimal charge-offs [31] Question: Is there a capital level you would like to reach before considering another acquisition? - Management stated they are at premerger capital levels and feel confident about their position for potential acquisitions [36] Question: Can you provide commentary on the potential for NIM expansion in Q3 with possible rate cuts? - Management acknowledged that rate cuts could negatively impact net interest income but emphasized the importance of properly pricing loans [42][44] Question: What initiatives are in place for growth in the wealth management business? - Management highlighted opportunities for growth through talent acquisition and expanding in markets like Maryland and Lancaster [48] Question: How has the sentiment of commercial clients changed recently? - Management reported that the loan pipeline is the largest since the merger, indicating positive sentiment among commercial clients [52] Question: What is the current line utilization rate in the commercial portfolio? - Management noted that line utilization rates have remained stable and modest [61] 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 [70]

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]