[Part I – FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended June 30, 2023, show increased total assets and net income, reflecting the adoption of the CECL standard [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached **$3.01 billion** by June 30, 2023, driven by loan growth, while liabilities and shareholders' equity also increased Condensed Consolidated Balance Sheet Highlights (Unaudited) | (Dollars in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $76,318 | $60,823 | | Securities available for sale | $508,612 | $513,728 | | Net loans | $2,206,034 | $2,126,054 | | **Total assets** | **$3,008,197** | **$2,922,408** | | **Liabilities** | | | | Total deposits | $2,522,861 | $2,476,246 | | FHLB advances and other borrowings | $136,727 | $106,139 | | **Total liabilities** | **$2,762,556** | **$2,693,512** | | **Shareholders' Equity** | | | | Retained earnings | $105,239 | $92,473 | | Accumulated other comprehensive loss | ($34,196) | ($39,913) | | **Total shareholders' equity** | **$245,641** | **$228,896** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income for Q2 2023 and the first six months increased to **$9.8 million** and **$19.0 million** respectively, driven by higher net interest income Key Income Statement Data (Unaudited) | (Dollars in thousands, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $26,375 | $24,118 | $52,669 | $46,691 | | Provision for credit losses | $399 | $1,775 | $1,128 | $2,075 | | Total noninterest income | $7,158 | $7,194 | $13,236 | $14,668 | | Total noninterest expenses | $20,749 | $18,794 | $41,004 | $38,158 | | **Net income** | **$9,838** | **$8,871** | **$18,994** | **$17,239** | | **Diluted earnings per share** | **$0.94** | **$0.83** | **$1.82** | **$1.59** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income for the first half of 2023 was **$24.7 million**, a significant improvement from a loss in the prior year, driven by net income and unrealized gains Comprehensive Income (Loss) Summary (Unaudited) | (Dollars in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net income | $18,994 | $17,239 | | Total other comprehensive income (loss), net of tax | $5,717 | ($33,819) | | **Total comprehensive income (loss)** | **$24,711** | **($16,580)** | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased to **$245.6 million** by June 30, 2023, primarily due to net income and comprehensive income, despite CECL adoption and dividends - For the six months ended June 30, 2023, shareholders' equity was impacted by a cumulative effect adjustment of **($1,984) thousand** to retained earnings due to the adoption of the CECL accounting principle[17](index=17&type=chunk) - Cash dividends of **$0.40 per share**, totaling **$4.2 million**, were paid during the first six months of 2023[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$21.7 million**, while investing activities used **$93.3 million** and financing activities provided **$87.1 million**, leading to a **$15.5 million** increase in cash Cash Flow Summary (Unaudited) | (Dollars in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $21,656 | $25,291 | | Net cash used in investing activities | ($93,297) | ($118,129) | | Net cash provided by (used in) financing activities | $87,136 | ($3,966) | | **Net increase (decrease) in cash and cash equivalents** | **$15,495** | **($96,804)** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including CECL adoption, investment securities unrealized losses, loan portfolio analysis, and the Bank's 'well-capitalized' regulatory status - The company adopted ASU 2016-13 (CECL) on January 1, 2023, using a modified retrospective method, resulting in a **$2.4 million** increase to the Allowance for Credit Losses (ACL) for loans and a **$2.0 million** decrease to retained earnings, net of taxes[42](index=42&type=chunk)[45](index=45&type=chunk) - The company also adopted ASU 2022-02, which eliminated the Troubled Debt Restructuring (TDR) accounting model and introduced new disclosure requirements for loan modifications to borrowers experiencing financial difficulty, referred to as 'financial difficulty modifications' (FDMs)[59](index=59&type=chunk) - At June 30, 2023, the investment securities portfolio had gross unrealized losses of **$44.8 million**, which management attributes to fluctuations in market interest rates and not credit deterioration[67](index=67&type=chunk)[70](index=70&type=chunk) - Nonaccrual loans totaled **$21.1 million** as of June 30, 2023, compared to **$20.6 million** at December 31, 2022[109](index=109&type=chunk) - The company and its bank subsidiary met all capital adequacy requirements and the bank was categorized as **'well capitalized'** under the regulatory framework for prompt corrective action[155](index=155&type=chunk)[156](index=156&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting increased net income driven by net interest income growth, reduced credit loss provisions, and strong liquidity and capital positions [Results of Operations](index=53&type=section&id=Results%20of%20Operations) Net income for the first half of 2023 increased to **$19.0 million**, driven by higher net interest income and margin expansion, despite declines in noninterest income and rising expenses Performance Summary - Six Months Ended June 30 | (Dollars in thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net Interest Income | $52,669 | $46,691 | | Provision for Credit Losses | $1,128 | $2,075 | | Noninterest Income | $13,236 | $14,668 | | Noninterest Expenses | $41,004 | $38,158 | | **Net Income** | **$19,004** | **$17,239** | - Taxable-equivalent net interest margin increased by **29 basis points** to **3.88%** for the six months ended June 30, 2023, from **3.59%** in the prior year period, as the yield on interest-earning assets rose faster than the cost of interest-bearing liabilities[238](index=238&type=chunk) - The provision for credit losses for the first six months of 2023 was driven by **$83.5 million** in commercial loan growth and an increase in a qualitative factor related to loan downgrades, though favorable economic forecasts for unemployment and GDP tempered the required amount[248](index=248&type=chunk) [Financial Condition](index=65&type=section&id=Financial%20Condition) Total assets reached **$3.0 billion** by June 30, 2023, with loan growth, stable asset quality, increased deposits, and strengthened shareholders' equity - Total loans increased by **$83.2 million** from December 31, 2022, to June 30, 2023, primarily from growth in commercial loans (**$83.5 million**) and residential mortgages (**$6.0 million**), partially offset by a **$6.6 million** decrease in SBA PPP loans[264](index=264&type=chunk) - Deposits grew by **$46.6 million** in the first half of 2023, with a notable shift in composition: time deposits increased by **$95.0 million** while noninterest-bearing demand deposits decreased by **$28.7 million** as customers sought higher yields[299](index=299&type=chunk) - Shareholders' equity increased by **$16.7 million** since year-end 2022, driven by **$19.0 million** in net income and a **$5.7 million** improvement in other comprehensive income, partially offset by dividends and a **$2.0 million** CECL adoption adjustment[307](index=307&type=chunk) - The company has strong liquidity, with cash and cash equivalents of **$76.3 million**, unencumbered investment securities of **$108.0 million**, and maximum borrowing capacity from the FHLB of **$1.1 billion** at June 30, 2023[314](index=314&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk, with simulations indicating short-term liability sensitivity where a 100 bps rate increase would decrease net interest income by **0.9%** and economic value of equity would increase by **4.8%** Interest Rate Sensitivity Analysis | Change in Market Interest Rates (bps) | % Change in Net Interest Income (at June 30, 2023) | % Change in Economic Value (at June 30, 2023) | | :--- | :--- | :--- | | (200) | (3.3)% | (26.5)% | | (100) | (1.2)% | (9.8)% | | 100 | (0.9)% | 4.8% | | 200 | (2.6)% | 6.1% | - The company is currently **liability sensitive**, as the model indicates that in a rising rate environment, funding costs are expected to increase more than yields on interest-earning assets[328](index=328&type=chunk) [Controls and Procedures](index=80&type=section&id=Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no significant changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2023[332](index=332&type=chunk)[333](index=333&type=chunk) - No significant changes were made to the Company's internal control over financial reporting during the period[333](index=333&type=chunk) [PART II – OTHER INFORMATION](index=82&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=82&type=section&id=Legal%20Proceedings) The company settled a class action lawsuit for **$13.0 million** and faces another putative class action regarding overdraft fees, which it believes is without merit - The class action lawsuit filed by SEPTA was settled, with the court giving final approval on May 19, 2023, and the case was dismissed with prejudice; the company contributed **$13.0 million** to the **$15.0 million** settlement[187](index=187&type=chunk) - A putative class action complaint was filed against the Bank on March 25, 2022, alleging improper overdraft fee charges, which the Bank believes are without merit[188](index=188&type=chunk) [Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[335](index=335&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **76,330 shares** at an average price of **$18.40** per share during Q2 2023, with **28,467 shares** remaining for repurchase Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | Shares Remaining for Purchase Under Program | | :--- | :--- | :--- | :--- | :--- | | April 2023 | 35,812 | $19.50 | 35,812 | 68,985 | | May 2023 | 31,177 | $17.14 | 31,177 | 37,808 | | June 2023 | 9,341 | $18.36 | 9,341 | 28,467 | | **Total** | **76,330** | **$18.40** | **76,330** | **28,467** | [Other Information](index=82&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the second quarter of 2023 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2023[339](index=339&type=chunk) [Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including required certifications and XBRL data files - Exhibits filed include CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350, as well as XBRL interactive data files[343](index=343&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 | Pennsylvania | | | 23-2530374 | | | --- | --- | --- | --- | --- | | (State or Other Jurisdiction of Incorporation or Organization) | | | (I.R.S. Employer Identification No.) | | | 77 East King Street | P. O. Box 250 Shippensburg | | Pennsylvania | 17257 | | (Address of Prin ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) | Pennsylvania | 23-2530374 | | --- | - ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) | Pennsylvania | | | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) | Pennsylvania | | | 23-2530374 | | | --- | --- | --- | --- | --- | | ( ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) | Pennsylvania | | | 23-2 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) Pennsylvania (State or Other Jurisdicti ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) | Pennsylvania | | | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34292 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.). Yes ☐ No x ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34292 ORRSTOWN FINANCIAL SERVICES, INC. (Exact Name of Registrant as Specified in its Charter) | Pennsylvania | | | 23-2 ...