ORRF Orrstown Financial Services Inc

Orrstown Financial Services, Inc. (NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”), announced earnings for the three months ended December 31, 2024. Net income totaled $13.7 million for the three months ended December 31, 2024, compared to net loss of $7.9 million for the three months ended September 30, 2024 and net income of $7.6 million for the three months ended December 31, 2023. Diluted earnings per share was $0.71 for the three months ended December 31, 2024, compared to diluted loss per share of $0.41 for the three months ended September 30, 2024 and diluted earnings per share of $0.73 for the three months ended December 31, 2023. For the fourth quarter of 2024, excluding the impact of merger-related expenses and other non-recurring charges, net of taxes, net income and diluted earnings per share were $16.7 million(1) and $0.87(1), respectively. For the third quarter of 2024, excluding the impact of the merger-related expenses, net of taxes, net income and diluted earnings per share were $21.4 million(1) and $1.11(1), respectively. For the fourth quarter of 2023, excluding the impact from the merger-related expenses, net income and diluted earnings per share were $8.6 million(1) and $0.83(1), respectively.

“While we are pleased with another year of strong core earnings, we are even more excited about what lies ahead,” said Thomas R. Quinn, Jr., President and Chief Executive Officer. “We successfully completed our core conversion in November and have achieved the targeted 18% cost savings in our future operating run rate of the two banks’ combined noninterest expense base. With the integration behind us, we look forward to returning our focus to growing the company, enhancing shareholder value and building the premier community banking franchise in our Pennsylvania and Maryland markets.”

(1) Non-GAAP measure. See Appendix A for additional information.

DISCUSSION OF RESULTS

Balance Sheet

Loans

Loans held for investment was $3.9 billion at December 31, 2024, a decrease of $50.2 million, compared to $4.0 billion at September 30, 2024. The decrease from the third quarter of 2024 was primarily due to strategic actions to reduce risk in the portfolio, including reducing CRE loan concentrations.

Investment Securities

Investment securities, all of which are classified as available-for-sale, increased by $2.9 million to $829.7 million at December 31, 2024 from $826.8 million at September 30, 2024. During the fourth quarter of 2024, investment securities totaling $37.7 million were purchased, partially offset by paydowns of $18.1 million and net unrealized losses of $16.2 million. The overall duration of the Company's investment securities portfolio was 4.1 years at December 31, 2024 compared to 4.6 years at September 30, 2024. See Appendix B for a summary of the Bank's investment securities at December 31, 2024, highlighting their concentrations, credit ratings and credit enhancement levels.

Deposits

During the fourth quarter of 2024, deposits decreased by $35.1 million to $4.6 billion at December 31, 2024 compared to $4.7 billion at September 30, 2024 due to normal seasonal activity. The Bank's loan-to-deposit ratio decreased slightly to 85% at December 31, 2024 from 86% at September 30, 2024.

Borrowings

The Bank actively manages its liquidity position through its various sources of funding to meet the needs of its clients. FHLB advances and other borrowings remained at $115.4 million at December 31, 2024 and September 30, 2024. The Bank seeks to maintain sufficient liquidity to ensure client needs can be addressed in a timely basis. The Bank had available alternative funding sources, such as FHLB advances and other wholesale options, of approximately $1.7 billion at December 31, 2024.

Goodwill and Intangible Assets

Goodwill decreased by $2.5 million from September 30, 2024 to December 31, 2024 due to certain purchase accounting adjustments, primarily an increase in the core deposit intangible of $4.1 million.

Income Statement

Net Interest Income and Margin

Net interest income was $50.6 million for the three months ended December 31, 2024 compared to $51.7 million for the three months ended September 30, 2024. The net interest margin, on a tax equivalent basis, decreased to 4.05% in the fourth quarter of 2024 from 4.14% in the third quarter of 2024. The net interest margin was positively impacted by the net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings of $7.2 million, which represents 52 basis points of net interest margin during the fourth quarter of 2024. During the third quarter of 2024, the net accretion impact of purchase accounting marks was $5.8 million, which represented 42 basis points of net interest margin. Funding costs show signs of stabilizing.

Interest income on loans, on a tax equivalent basis, decreased by $2.7 million to $68.1 million for the three months ended December 31, 2024 compared to $70.8 million for the three months ended September 30, 2024. Average loans decreased by $28.0 million during the three months ended December 31, 2024 compared to the three months ended September 30, 2024.

Interest income on investment securities, on a tax equivalent basis, was $9.9 million for the fourth quarter of 2024 compared to $10.1 million in the third quarter of 2024.

Interest expense, on a tax equivalent basis, decreased by $1.9 million to $29.4 million for the three months ended December 31, 2024 compared to $31.3 million for the three months ended September 30, 2024. Average interest-bearing deposits decreased by $58.1 million during the three months ended December 31, 2024 compared to the three months ended September 30, 2024. Average borrowings decreased by $1.3 million during the three months ended December 31, 2024 compared to the three months ended September 30, 2024. Interest expense includes $0.9 million and $1.5 million of amortization of purchase accounting marks for the three months ended December 31, 2024 and September 30, 2024, respectively.

Provision for Credit Losses

The allowance for credit losses ("ACL") on loans decreased to $48.7 million at December 31, 2024 from $49.6 million at September 30, 2024. The ACL to total loans was 1.24% at December 31, 2024 compared to 1.25% at September 30, 2024. The Company recorded a provision for credit losses on loans of $2.1 million for the three months ended December 31, 2024 compared to $14.1 million for the three months ended September 30, 2024. Net charge-offs were $3.0 million for the three months ended December 31, 2024 compared to net charge-offs of $0.3 million for the three months ended September 30, 2024. During the fourth quarter of 2024, the Bank sold $6.0 million of mostly C&I loans, which resulted in a charge-off totaling $0.6 million. There was also a corresponding $0.6 million of purchase accounting accretion associated with these loans.

Classified loans decreased by $16.9 million to $88.6 million at December 31, 2024 from $105.5 million at September 30, 2024 primarily due to a combination of repayments and net rating upgrades, in addition to the loan sale. Non-accrual loans decreased by $2.8 million to $24.1 million at December 31, 2024 from $26.9 million at September 30, 2024 partially due to a sale of mostly C&I loans on nonaccrual status totaling $2.6 million during the fourth quarter of 2024. Nonaccrual loans to total loans decreased to 0.61% at December 31, 2024 compared to 0.68% at September 30, 2024 and decreased from 1.11% at December 31, 2023. Management believes the ACL to be adequate based on current asset quality metrics and economic conditions.

Noninterest Income

Noninterest income decreased by $1.2 million to $11.2 million in the three months ended December 31, 2024 from $12.4 million in the three months ended September 30, 2024. There were reduced service charges in the fourth quarter due to fee waivers provided to clients in the post-conversion period from November through the end of the year.

Wealth management income decreased to $4.9 million in the three months ended December 31, 2024 compared to $5.0 million for the three months ended September 30, 2024. The team continues to provide value added services to clients and deliver strong results.

Other income decreased by $0.3 million to $1.6 million in the three months ended December 31, 2024 compared to $1.9 million in the three months ended September 30, 2024 due to income from solar tax credits totaling $0.3 million recorded during the third quarter of 2024.

Noninterest Expenses

Noninterest expenses decreased by $17.4 million to $42.9 million in the three months ended December 31, 2024 from $60.3 million in the three months ended September 30, 2024.

The Company’s financial results for any periods ended prior to July 1, 2024 reflect Orrstown’s results only on a standalone basis. As a result of this factor and the merger-related items below, the Company’s financial results for the fourth quarter of 2024 may not be directly comparable to prior reported periods.

For the three months ended December 31, 2024, merger-related expenses totaled $3.9 million, a decrease of $13.1 million, compared to $17.0 million for the three months ended September 30, 2024. The merger costs incurred during the fourth quarter of 2024 include employee separation costs, software conversion costs and professional fees. The Company expect to incur some additional merger-related expenses in the first quarter of 2025.

Salaries and benefits expense decreased by $4.8 million to $22.4 million for the three months ended December 31, 2024 compared to $27.2 million for the three months ended September 30, 2024. The three months ended September 30, 2024 included $4.8 million of expenses associated with the retirement of an executive.

Intangible asset amortization increased to $2.8 million for the three months ended December 31, 2024 compared to $2.5 million for the three months ended September 30, 2024. This increase is due to the amortization expense recognized on the core deposit intangible of $40.1 million and wealth customer relationship intangible of $10.4 million established on July 1, 2024 from the merger. Due to the aforementioned purchase accounting adjustment, the three months ended December 31, 2024 included $0.4 million of additional amortization expense associated with this adjustment.

Taxes other than income decreased by $0.8 million in the three months ended December 31, 2024 compared to the three months ended September 30, 2024. This decrease reflects tax credits recognized during the fourth quarter of 2024.

Income Taxes

The Company's effective tax rate was 20.1% for both the fourth and third quarters of 2024. The Company's effective tax rate for the three months ended December 31, 2024 is less than the 21% federal statutory rate primarily due to tax-exempt income, including interest earned on tax-exempt loans and securities and income from life insurance policies and tax credits partially offset by the disallowed portion of interest expense against earnings in association with the Bank's tax-exempt investments under the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") and the impact of nondeductible merger-related costs. The Company regularly analyzes its projected taxable income and makes adjustments to the provision for income taxes accordingly.

Capital

Shareholders’ equity totaled $516.7 million at December 31, 2024 compared to $516.2 million at September 30, 2024. The impact of net income of $13.7 million was offset by a reduction of $10.4 million in accumulated other comprehensive loss from an increase in unrealized losses in the investment portfolio and dividend payments of $4.4 million.

Tangible book value per share(1) increased to $21.19 per share at December 31, 2024 from $21.12 per share at September 30, 2024.

The Company's tangible common equity ratio was 7.5% at both December 31, 2024 and September 30, 2024. The Company's total risk-based capital ratio was 12.4% at both December 31, 2024 and September 30, 2024. The Company's Tier 1 leverage ratio increased to 8.3% at December 31, 2024 compared to 8.0% at September 30, 2024 driven by earnings and a decrease in average assets during the fourth quarter of 2024.

At December 31, 2024, all four capital ratios applicable to the Company were above regulatory minimum levels to be deemed “well capitalized” under current bank regulatory guidelines. The Company continues to believe that capital is adequate to support the risks inherent in the balance sheet, as well as growth requirements.

(1) Non-GAAP measure. See Appendix A for additional information.

Investor Relations Contact:

Neelesh Kalani

Executive Vice President, Chief Financial Officer

Phone (717) 510-7097

 

FINANCIAL HIGHLIGHTS (Unaudited)
	Three Months Ended								Twelve Months Ended
	December 31,				December 31,				December 31,				December 31,
(In thousands)		2024				2023				2024				2023
Profitability for the period:
Net interest income	$	50,573			$	26,018			$	155,254			$	104,906
Provision for credit losses		1,755				418				16,546				1,682
Noninterest income		11,247				6,491				37,435				25,652
Noninterest expenses		42,930				22,392				148,337				83,843
Income before income tax expense		17,135				9,699				27,806				45,033
Income tax expense		3,451				2,056				5,756				9,370
Net income available to common shareholders	$	13,684			$	7,643			$	22,050			$	35,663
Financial ratios:
Return on average assets (1)		1.00	%			1.00	%			0.51	%			1.19	%
Return on average assets, adjusted (1) (2) (3)		1.22	%			1.13	%			1.30	%			1.22	%
Return on average equity (1)		10.54	%			12.21	%			5.62	%			14.66	%
Return on average equity, adjusted (1) (2) (3)		12.86	%			13.77	%			14.29	%			15.06	%
Net interest margin (1)		4.05	%			3.71	%			3.92	%			3.80	%
Efficiency ratio		69.4	%			68.9	%			77.0	%			64.2	%
Efficiency ratio, adjusted (2) (3)		62.3	%			65.6	%			62.5	%			63.4	%
Income per common share:
Basic	$	0.72			$	0.74			$	1.49			$	3.45
Basic, adjusted (2) (3)	$	0.87			$	0.84			$	3.80			$	3.54
Diluted	$	0.71			$	0.73			$	1.48			$	3.42
Diluted, adjusted (2) (3)	$	0.87			$	0.83			$	3.76			$	3.51
Average equity to average assets		9.45	%			8.18	%			9.08	%			8.11	%
(1) Annualized for the three months ended December 31, 2024 and 2023.
(2) Ratio has been adjusted for the non-recurring charges for all periods presented.
(3) Non-GAAP based financial measure. Please refer to Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations for a discussion of our use of non-GAAP based financial measures, including tables reconciling GAAP and non-GAAP financial measures appearing herein.

 

FINANCIAL HIGHLIGHTS (Unaudited)
(continued)
	December 31,				December 31,
(Dollars in thousands, except per share amounts)		2024				2023
At period-end:
Total assets	$	5,431,023			$	3,064,240
Loans, net of allowance for credit losses		3,882,525				2,269,611
Loans held-for-sale, at fair value		6,614				5,816
Securities available for sale, at fair value		829,711				513,519
Total deposits		4,615,706				2,558,814
FHLB advances and other borrowings and Securities sold under agreements to repurchase		141,227				147,285
Subordinated notes and trust preferred debt		68,680				32,093
Shareholders' equity		516,682				265,056
Credit quality and capital ratios (1):
Allowance for credit losses to total loans		1.24	%			1.25	%
Total nonaccrual loans to total loans		0.61	%			1.11	%
Nonperforming assets to total assets		0.45	%			0.83	%
Allowance for credit losses to nonaccrual loans		202	%			112	%
Total risk-based capital:
Orrstown Financial Services, Inc.		12.4	%			13.0	%
Orrstown Bank		12.4	%			12.8	%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.		10.2	%			10.8	%
Orrstown Bank		11.2	%			11.6	%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.		10.0	%			10.8	%
Orrstown Bank		11.2	%			11.6	%
Tier 1 leverage capital:
Orrstown Financial Services, Inc.		8.3	%			8.9	%
Orrstown Bank		9.1	%			9.5	%
Book value per common share	$	26.65			$	24.98
(1) Capital ratios are estimated for the current period, subject to regulatory filings. The Company elected the three-year phase in option for the day-one impact of ASU 2016-13 for current expected credit losses ("CECL") to regulatory capital. Beginning in 2023, the Company adjusted retained earnings, allowance for credit losses includable in tier 2 capital and the deferred tax assets from temporary differences in risk weighted assets by the permitted percentage of the day-one impact from adopting the CECL standard.

 

CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)	December 31, 2024				December 31, 2023
Assets
Cash and due from banks	$	51,026			$	32,586
Interest-bearing deposits with banks		187,282				32,575
Cash and cash equivalents		238,308				65,161
Restricted investments in bank stocks		20,232				11,992
Securities available for sale (amortized cost of $864,920 and $549,089 at December 31, 2024 and December 31, 2023, respectively)		829,711				513,519
Loans held for sale, at fair value		6,614				5,816
Loans		3,931,214				2,298,313
Less: Allowance for credit losses		(48,689	)			(28,702	)
Net loans		3,882,525				2,269,611
Premises and equipment, net		50,217				29,393
Cash surrender value of life insurance		143,854				73,204
Goodwill		68,106				18,724
Other intangible assets, net		47,765				2,414
Accrued interest receivable		21,058				13,630
Deferred tax assets, net		42,647				22,017
Other assets		79,986				38,759
Total assets	$	5,431,023			$	3,064,240
Liabilities
Deposits:
Noninterest-bearing	$	886,786			$	430,959
Interest-bearing		3,728,920				2,127,855
Total deposits		4,615,706				2,558,814
Securities sold under agreements to repurchase and federal funds purchased		25,863				9,785
FHLB advances and other borrowings		115,364				137,500
Subordinated notes and trust preferred debt		68,680				32,093
Other liabilities		88,728				60,992
Total liabilities		4,914,341				2,799,184
Shareholders’ Equity
Preferred stock, $1.25 par value per share; 500,000 shares authorized; no shares issued or outstanding		—				—
Common stock, no par value—$0.05205 stated value per share; 50,000,000 shares authorized; 19,722,640 shares issued and 19,389,967 outstanding at December 31, 2024; 11,204,599 shares issued and 10,612,390 outstanding at December 31, 2023		1,027				583
Additional paid—in capital		423,274				189,027
Retained earnings		126,540				117,667
Accumulated other comprehensive loss		(26,316	)			(28,476	)
Treasury stock— 332,673 and 592,209 shares, at cost at December 31, 2024 and December 31, 2023, respectively		(7,843	)			(13,745	)
Total shareholders’ equity		516,682				265,056
Total liabilities and shareholders’ equity	$	5,431,023			$	3,064,240

 

ORRSTOWN FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
		Three Months Ended								Twelve Months Ended
		December 31,				December 31,				December 31,				December 31,
(Dollars in thousands, except per share amounts)			2024				2023				2024				2023
Interest income
Loans		$	67,870			$	33,910			$	210,287			$	126,595
Investment securities - taxable			8,773				4,787				27,361				18,031
Investment securities - tax-exempt			880				871				3,521				3,462
Short-term investments			2,492				460				7,764				1,809
Total interest income			80,015				40,028				248,933				149,897
Interest expense
Deposits			26,850				12,118				84,234				37,510
Securities sold under agreements to repurchase and federal funds purchased			67				30				215				114
FHLB advances and other borrowings			1,165				1,358				4,945				5,350
Subordinated notes and trust preferred debt			1,360				504				4,285				2,017
Total interest expense			29,442				14,010				93,679				44,991
Net interest income			50,573				26,018				155,254				104,906
Provision for credit losses			1,755				418				16,546				1,682
Net interest income after provision for credit losses			48,818				25,600				138,708				103,224
Noninterest income
Service charges			2,050				1,198				6,893				4,866
Interchange income			1,608				952				5,259				3,873
Swap fee income			597				588				1,676				1,039
Wealth management income			4,902				2,945				16,353				11,340
Mortgage banking activities			517				143				1,835				591
Investment securities (losses) gains			(5	)			(39	)			249				(47	)
Other income			1,578				704				5,170				3,990
Total noninterest income			11,247				6,491				37,435				25,652
Noninterest expenses
Salaries and employee benefits			22,444				12,848				76,581				50,983
Occupancy, furniture and equipment			4,893				2,534				14,570				9,593
Data processing			1,540				1,247				6,088				4,913
Advertising and bank promotions			878				501				2,587				2,157
FDIC insurance			955				460				2,677				1,960
Professional services			1,591				702				4,142				2,905
Taxes other than income			(312	)			203				734				1,050
Intangible asset amortization			2,838				236				5,742				953
Merger-related expenses			3,887				1,059				22,671				1,059
Restructuring expenses			39				—				296				—
Other operating expenses			4,177				2,602				12,249				8,270
Total noninterest expenses			42,930				22,392				148,337				83,843
Income before income tax expense			17,135				9,699				27,806				45,033
Income tax expense			3,451				2,056				5,756				9,370
Net income		$	13,684			$	7,643			$	22,050			$	35,663
continued
		Three Months Ended								Twelve Months Ended
		December 31,				December 31,				December 31,				December 31,
			2024				2023				2024				2023
Share information:
Basic earnings per share		$	0.72			$	0.74			$	1.49			$	3.45
Diluted earnings per share		$	0.71			$	0.73			$	1.48			$	3.42
Dividends paid per share		$	0.23			$	0.20			$	0.86			$	0.80
Weighted average shares - basic			19,118				10,321				14,761				10,340
Weighted average shares - diluted			19,300				10,419				14,914				10,435

ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)
	Three Months Ended
	12/31/2024										9/30/2024										6/30/2024										3/31/2024										12/31/2023
				Taxable-				Taxable-						Taxable-				Taxable-						Taxable-				Taxable-						Taxable-				Taxable-						Taxable-				Taxable-
	Average			Equivalent				Equivalent			Average			Equivalent				Equivalent			Average			Equivalent				Equivalent			Average			Equivalent				Equivalent			Average			Equivalent				Equivalent
(In thousands)	Balance			Interest				Rate			Balance			Interest				Rate			Balance			Interest				Rate			Balance			Interest				Rate			Balance			Interest				Rate
Assets
Federal funds sold & interest-bearing bank balances	$	199,236		$	2,492			4.96	%		$	184,465		$	2,452			5.29	%		$	142,868		$	1,864			5.25	%		$	74,523		$	956			5.16	%		$	37,873		$	460			4.82	%
Investment securities (1)(2)		849,389			9,887			4.66				849,700			10,123			4.77				538,451			6,114			4.54				519,851			5,694			4.39				508,891			5,890			4.63
Loans (1)(3)(4)(5)(6)		3,961,269			68,073			6.82				3,989,259			70,849			7.07				2,324,942			35,690			6.17				2,308,103			36,382			6.34				2,286,678			34,055			5.91
Total interest-earning assets		5,009,894			80,452			6.38				5,023,424			83,424			6.61				3,006,261			43,668			5.84				2,902,477			43,032			5.96				2,833,442			40,405			5.67
Other assets		454,271										491,719										204,863										196,295										204,382
Total assets	$	5,464,165									$	5,515,143									$	3,211,124									$	3,098,772									$	3,037,824
Liabilities and Shareholders' Equity
Interest-bearing demand deposits(7)	$	1,257,316			5,360			1.69			$	2,554,743			16,165			2.52			$	1,649,753			10,118			2.47			$	1,570,622			9,192			2.35			$	1,543,575			8,333			2.14
Savings deposits(7)		1,538,287			10,381			2.68				283,337			148			0.21				165,467			140			0.34				170,005			144			0.34				178,351			153			0.34
Time deposits		998,963			11,109			4.41				1,014,628			12,290			4.82				481,721			5,007			4.18				428,443			4,180			3.92				392,085			3,632			3.67
Total interest-bearing deposits		3,794,566			26,850			2.81				3,852,708			28,603			2.95				2,296,941			15,265			2.67				2,169,070			13,516			2.51				2,114,011			12,118			2.27
Securities sold under agreements to repurchase and federal funds purchased		21,572			67			1.23				23,075			96			1.66				13,412			27			0.81				12,010			25			0.85				13,874			30			0.85
FHLB advances and other borrowings		115,373			1,165			4.01				115,388			1,154			3.98				115,000			1,152			4.03				137,505			1,474			4.31				127,843			1,358			4.21
Subordinated notes and trust preferred debt		68,571			1,360			7.88				68,399			1,437			8.36				32,118			734			9.19				32,100			754			9.45				32,083			504			6.29
Total interest-bearing liabilities		4,000,082			29,442			2.92				4,059,570			31,290			3.07				2,457,471			17,178			2.81				2,350,685			15,769			2.70				2,287,811			14,010			2.43
Noninterest-bearing demand deposits		849,999										807,886										423,037										417,469										441,695
Other liabilities		97,685										110,017										57,828										62,329										59,876
Total liabilities		4,947,766										4,977,473										2,938,336										2,830,483										2,789,382
Shareholders' equity		516,399										537,670										272,788										268,289										248,442
Total	$	5,464,165									$	5,515,143									$	3,211,124									$	3,098,772									$	3,037,824
Taxable-equivalent net interest income / net interest spread					51,010			3.46	%						52,134			3.55	%						26,490			3.02	%						27,263			3.26	%						26,395			3.24	%
Taxable-equivalent net interest margin								4.05	%									4.14	%									3.54	%									3.77	%									3.71	%
Taxable-equivalent adjustment					(437	)									(437	)									(387	)									(382	)									(377	)
Net interest income				$	50,573									$	51,697									$	26,103									$	26,881									$	26,018
Ratio of average interest-earning assets to average interest-bearing liabilities								125	%									124	%									122	%									123	%									124	%
NOTES:
(1) Yields and interest income on tax-exempt assets have been computed on a taxable-equivalent basis assuming a 21% tax rate.
(2) Average balance of investment securities is computed at fair value.
(3) Average balances include nonaccrual loans.
(4) Interest income on loans includes prepayment and late fees, where applicable.
(5) Interest income on loans includes interest recovered of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status in the three months ended March 31, 2024.
(6) Interest income on loans includes accretion on purchase accounting marks of $7.6 million, $7.3 million, $0.2 million, $0.1 million and $0.1 million for the three months ended December 31, 2024, September 30, 2024, June 30, 2024, March 31, 2024 and December 31, 2023, respectively.
(7) Changes between average deposit type balances are due to operational updates for deposit sweeps during the three months ended December 31, 2024.

 

ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)
(continued)
	Twelve Months Ended
	December 31, 2024												December 31, 2023
					Taxable-				Taxable-								Taxable-				Taxable-
	Average				Equivalent				Equivalent				Average				Equivalent				Equivalent
(In thousands)	Balance				Interest				Rate				Balance				Interest				Rate
Assets
Federal funds sold & interest-bearing bank balances	$	150,500			$	7,764				5.14	%		$	40,856			$	1,809				4.43	%
Investment securities (1)(2)		690,223				31,817				4.60				520,465				22,414				4.31
Loans (1)(3)(4)(5)(6)		3,150,425				210,994				6.68				2,239,574				127,107				5.68
Total interest-earning assets		3,991,148				250,575				6.26				2,800,895				151,330				5.40
Other assets		330,324												198,632
Total assets	$	4,321,472											$	2,999,527
Liabilities and Shareholders' Equity
Interest-bearing demand deposits(7)	$	1,147,124				21,455				1.87			$	1,525,204				26,944				1.77
Savings deposits(7)		1,153,097				30,193				2.61				198,157				585				0.30
Time deposits		732,446				32,586				4.44				338,170				9,981				2.95
Total interest-bearing deposits		3,032,667				84,234				2.77				2,061,531				37,510				1.82
Securities sold under agreements to repurchase and federal funds purchased		17,543				215				1.22				14,111				114				0.80
FHLB advances and other borrowings		120,787				4,945				4.08				123,697				5,350				4.32
Subordinated notes and trust preferred debt		50,397				4,285				8.48				32,058				2,017				6.29
Total interest-bearing liabilities		3,221,394				93,679				2.91				2,231,397				44,991				2.02
Noninterest-bearing demand deposits		625,714												470,349
Other liabilities		82,084												54,447
Total liabilities		3,929,192												2,756,193
Shareholders' equity		392,280												243,334
Total liabilities and shareholders' equity	$	4,321,472											$	2,999,527
Taxable-equivalent net interest income / net interest spread						156,896				3.36	%							106,339				3.39	%
Taxable-equivalent net interest margin										3.92	%											3.80	%
Taxable-equivalent adjustment						(1,642	)											(1,433	)
Net interest income					$	155,254											$	104,906
Ratio of average interest-earning assets to average interest-bearing liabilities										124	%											126	%
NOTES TO ANALYSIS OF NET INTEREST INCOME:
(1) Yields and interest income on tax-exempt assets have been computed on a taxable-equivalent basis assuming a 21% tax rate.
(2) Average balance of investment securities is computed at fair value.
(3) Average balances include nonaccrual loans.
(4) Interest income on loans includes prepayment and late fees, where applicable.
(5) Interest income on loans includes interest recovered of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status for the twelve months ended December 31, 2024.
(6) Interest income on loans includes accretion on purchase accounting marks of $15.2 million and $0.7 million for the twelve months ended December 31, 2024 and 2023, respectively.
(7) Changes between average deposit type balances are due to operational updates for deposit sweeps during the three months ended December 31, 2024.

 

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands)	December 31,2024				September 30,2024				June 30,2024				March 31,2024				December 31,2023
Profitability for the quarter:
Net interest income	$	50,573			$	51,697			$	26,103			$	26,881			$	26,018
Provision for credit losses		1,755				13,681				812				298				418
Noninterest income		11,247				12,386				7,172				6,630				6,491
Noninterest expenses		42,930				60,299				22,639				22,469				22,392
Income (loss) before income taxes		17,135				(9,897	)			9,824				10,744				9,699
Income tax expense (benefit)		3,451				(1,994	)			2,086				2,213				2,056
Net income (loss)	$	13,684			$	(7,903	)		$	7,738			$	8,531			$	7,643
Financial ratios:
Return on average assets (1)		1.00	%			(0.57)	%			0.97	%			1.11	%			1.00	%
Return on average assets, adjusted (1)(2)(3)		1.22	%			1.55	%			1.09	%			1.19	%			1.13	%
Return on average equity (1)		10.54	%			(5.85)	%			11.41	%			12.79	%			12.21	%
Return on average equity, adjusted (1)(2)(3)		12.86	%			15.85	%			12.88	%			13.79	%			13.77	%
Net interest margin (1)		4.05	%			4.14	%			3.54	%			3.77	%			3.71	%
Efficiency ratio		69.4	%			94.1	%			68.0	%			67.0	%			68.9	%
Efficiency ratio, adjusted (2)(3)		62.3	%			67.2	%			64.6	%			65.0	%			65.6	%
Per share information:
Income (loss) per common share:
Basic	$	0.72			$	(0.41	)		$	0.74			$	0.82			$	0.74
Basic, adjusted (2)(3)		0.87				1.12				0.84				0.89				0.84
Diluted		0.71				(0.41	)			0.73				0.81				0.73
Diluted, adjusted (2)(3)		0.87				1.11				0.83				0.88				0.83
Book value		26.65				26.65				25.97				25.38				24.98
Book value, adjusted (2) (3)		28.40				28.24				26.12				25.44				25.07
Tangible book value (3)		21.19				21.12				24.08				23.47				23.03
Tangible book value, adjusted (2) (3)		22.94				22.72				24.23				23.53				23.12
Cash dividends paid		0.23				0.23				0.20				0.20				0.20
Average basic shares		19,118				19,088				10,393				10,349				10,321
Average diluted shares		19,300				19,226				10,553				10,482				10,419
(1) Annualized.
(2) Ratio has been adjusted for non-recurring expenses for all periods presented.
(3) Non-GAAP based financial measure. Please refer to Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations for a discussion of our use of non-GAAP based financial measures, including tables reconciling GAAP and non-GAAP financial measures appearing herein.

 

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(continued)
(In thousands)	December 31,2024				September 30,2024				June 30,2024				March 31,2024				December 31,2023
Noninterest income:
Service charges	$	2,050			$	2,360			$	1,283			$	1,200			$	1,198
Interchange income		1,608				1,779				961				911				952
Swap fee income		597				505				375				199				588
Wealth management income		4,902				5,037				3,312				3,102				2,945
Mortgage banking activities		517				491				369				458				143
Other income		1,578				1,943				884				765				704
Investment securities (losses) gains		(5	)			271				(12	)			(5	)			(39	)
Total noninterest income	$	11,247			$	12,386			$	7,172			$	6,630			$	6,491
Noninterest expenses:
Salaries and employee benefits	$	22,444			$	27,190			$	13,195			$	13,752			$	12,848
Occupancy, furniture and equipment		4,893				4,333				2,705				2,639				2,534
Data processing		1,540				2,046				1,237				1,265				1,247
Advertising and bank promotions		878				537				774				398				501
FDIC insurance		955				862				419				441				460
Professional services		1,591				1,119				801				631				702
Taxes other than income		(312	)			503				49				494				203
Intangible asset amortization		2,838				2,464				215				225				236
Merger-related expenses		3,887				16,977				1,135				672				1,059
Restructuring expenses		39				257				—				—				—
Other operating expenses		4,177				4,011				2,109				1,952				2,602
Total noninterest expenses	$	42,930			$	60,299			$	22,639			$	22,469			$	22,392

 

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(continued)
(In thousands)	December 31,2024				September 30,2024				June 30,2024				March 31,2024				December 31,2023
Balance Sheet at quarter end:
Cash and cash equivalents	$	238,308			$	236,780			$	132,509			$	182,722			$	65,161
Restricted investments in bank stocks		20,232				20,247				11,147				11,453				11,992
Securities available for sale		829,711				826,828				529,082				514,909				513,519
Loans held for sale, at fair value		6,614				3,561				1,562				535				5,816
Loans:
Commercial real estate:
Owner occupied		633,567				622,726				371,301				364,280				373,757
Non-owner occupied		1,160,238				1,164,501				710,477				707,871				694,638
Multi-family		274,135				276,296				151,542				147,773				150,675
Non-owner occupied residential		179,512				190,786				89,156				91,858				95,040
Agricultural		125,156				129,486				25,551				25,909				26,847
Commercial and industrial		451,384				471,983				349,425				339,615				340,238
Acquisition and development:
1-4 family residential construction		47,432				56,383				32,439				22,277				24,516
Commercial and land development		241,424				262,317				129,883				118,010				115,249
Municipal		30,044				27,960				10,594				10,925				9,812
Total commercial loans		3,142,892				3,202,438				1,870,368				1,828,518				1,830,772
Residential mortgage:
First lien		460,297				451,195				271,153				270,748				266,239
Home equity – term		5,988				6,508				4,633				4,966				5,078
Home equity – lines of credit		303,561				303,165				192,736				189,966				186,450
Installment and other loans		18,476				18,131				8,713				8,875				9,774
Total loans		3,931,214				3,981,437				2,347,603				2,303,073				2,298,313
Allowance for credit losses		(48,689	)			(49,630	)			(29,864	)			(29,165	)			(28,702	)
Net loans held for investment		3,882,525				3,931,807				2,317,739				2,273,908				2,269,611
Goodwill		68,106				70,655				18,724				18,724				18,724
Other intangible assets, net		47,765				46,144				1,974				2,189				2,414
Total assets		5,431,023				5,470,589				3,198,782				3,183,331				3,064,240
Total deposits		4,615,706				4,650,853				2,702,884				2,695,951				2,558,814
FHLB advances and other borrowings and Securities sold under agreements to repurchase		141,227				137,310				129,625				127,099				147,285
Subordinated notes and trust preferred debt		68,680				68,510				32,128				32,111				32,093
Total shareholders' equity		516,682				516,206				278,376				271,682				265,056

 

HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(continued)
	December 31,2024				September 30,2024				June 30,2024				March 31,2024				December 31,2023
Capital and credit quality measures (1):
Total risk-based capital:
Orrstown Financial Services, Inc.		12.4	%			12.4	%			13.3	%			13.4	%			13.0	%
Orrstown Bank		12.4	%			12.2	%			13.1	%			13.1	%			12.8	%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.		10.2	%			10.0	%			11.1	%			11.2	%			10.8	%
Orrstown Bank		11.2	%			11.0	%			12.0	%			11.9	%			11.6	%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.		10.0	%			9.8	%			11.1	%			11.2	%			10.8	%
Orrstown Bank		11.2	%			11.0	%			12.0	%			11.9	%			11.6	%
Tier 1 leverage capital:
Orrstown Financial Services, Inc.		8.3	%			8.0	%			8.9	%			9.0	%			8.9	%
Orrstown Bank		9.1	%			8.8	%			9.5	%			9.6	%			9.5	%
Average equity to average assets		9.45	%			9.75	%			8.50	%			8.66	%			8.18	%
Allowance for credit losses to total loans		1.24	%			1.25	%			1.27	%			1.27	%			1.25	%
Total nonaccrual loans to total loans		0.61	%			0.68	%			0.36	%			0.56	%			1.11	%
Nonperforming assets to total assets		0.45	%			0.49	%			0.26	%			0.40	%			0.83	%
Allowance for credit losses to nonaccrual loans		202	%			184	%			357	%			226	%			112	%
Other information:
Net charge-offs (recoveries)	$	3,002			$	269			$	113			$	(42	)		$	(6	)
Classified loans		88,628				105,465				48,722				48,997				55,030
Nonperforming and other risk assets:
Nonaccrual loans		24,111				26,927				8,363				12,886				25,527
Other real estate owned		138				138				—				—				—
Total nonperforming assets		24,249				27,065				8,363				12,886				25,527
Financial difficulty modifications still accruing		4,897				9,497				—				—				9
Loans past due 90 days or more and still accruing		641				337				187				99				66
Total nonperforming and other risk assets	$	29,787			$	36,899			$	8,550			$	12,985			$	25,602
(1) Capital ratios are estimated for the current period, subject to regulatory filings. The Company elected the three-year phase in option for the day-one impact of ASU 2016-13 for current expected credit losses ("CECL") to regulatory capital. Beginning in 2023, the Company adjusted retained earnings, allowance for credit losses includable in tier 2 capital and the deferred tax assets from temporary differences in risk weighted assets by the permitted percentage of the day-one impact from adopting the new CECL standard.

Appendix A - Supplemental Reporting of Non-GAAP Measures and GAAP to Non-GAAP Reconciliations

Management believes providing certain other “non-GAAP” financial information will assist investors in their understanding of the effect on recent financial results from non-recurring charges.

As a result of acquisitions, the Company has intangible assets consisting of goodwill, core deposit and other intangible assets, which totaled $115.9 million and $21.1 million at December 31, 2024 and December 31, 2023, respectively. In addition, during the three months ended December 31, 2024, September 30, 2024, June 30, 2024, March 31, 2024 and December 31, 2023, the Company incurred $3.9 million, $17.0 million, $1.1 million, $0.7 million and $1.1 million in merger-related expenses, respectively. During the three months ended December 31, 2024 and September 30, 2024, the Company incurred other non-recurring charges totaling $0.5 million and $20.2 million, respectively.

Tangible book value per common share and the impact of the non-recurring expenses on net income and associated ratios, as used by the Company in this earnings release, are determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). While we believe this information is a useful supplement to GAAP based measures presented in this earnings release, readers are cautioned that this non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial measures determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results and financial condition as reported under GAAP, nor are such measures necessarily comparable to non-GAAP performance measures that may be presented by other companies. This supplemental presentation should not be construed as an inference that our future results will be unaffected by similar adjustments to be determined in accordance with GAAP.

The following tables present the computation of each non-GAAP based measure:

(In thousands)

Tangible Book Value per Common Share		December 31,2024				September 30,2024				June 30,2024				March 31,2024				December 31,2023
Shareholders' equity (most directly comparable GAAP-based measure)		$	516,682			$	516,206			$	278,376			$	271,682			$	265,056
Less: Goodwill			68,106				70,655				18,724				18,724				18,724
Other intangible assets			47,765				46,144				1,974				2,189				2,414
Related tax effect			(10,031	)			(9,690	)			(415	)			(460	)			(507	)
Tangible common equity (non-GAAP)		$	410,842			$	409,097			$	258,093			$	251,229			$	244,425
Common shares outstanding			19,390				19,373				10,720				10,705				10,612
Book value per share (most directly comparable GAAP-based measure)		$	26.65			$	26.65			$	25.97			$	25.38			$	24.98
Intangible assets per share			5.46				5.53				1.89				1.91				1.95
Tangible book value per share (non-GAAP)		$	21.19			$	21.12			$	24.08			$	23.47			$	23.03

(In thousands)	Three Months Ended																				Twelve Months Ended
Adjusted Ratios for Non-recurring Charges	December 31,2024				September 30, 2024				June 30,2024				March 31,2024				December 31,2023				December 31,2024				December 31,2023
Net income (loss) (A) - most directly comparable GAAP-based measure	$	13,684			$	(7,903	)		$	7,738			$	8,531			$	7,643			$	22,050			$	35,663
Plus: Merger-related expenses (B)		3,887				16,977				1,135				672				1,059				22,671				1,059
Plus: Executive retirement expenses (B)		35				4,758				—				—				—				4,793				—
Plus: Provision for credit losses on non-PCD loans (B)		—				15,504				—				—				—				15,504				—
Plus: Provision for legal settlement (B)		478				—				—				—				—				478				—
Less: Related tax effect (C)		(1,386	)			(7,915	)			(139	)			(1	)			(79	)			(9,442	)			(79	)
Adjusted net income (D=A+B-C) - Non-GAAP	$	16,698			$	21,421			$	8,734			$	9,202			$	8,623			$	56,054			$	36,643
Average assets (E)	$	5,464,165			$	5,515,143			$	3,211,124			$	3,098,772			$	3,037,824			$	4,321,472			$	2,999,527
Return on average assets (= A / E) - most directly comparable GAAP-based measure (1)		1.00	%			(0.57)	%			0.97	%			1.11	%			1.00	%			0.51	%			1.19	%
Return on average assets, adjusted (= D / E) - Non-GAAP (1)		1.22	%			1.55	%			1.09	%			1.19	%			1.13	%			1.30	%			1.22	%
Average equity (F)	$	516,399			$	537,670			$	272,788			$	268,289			$	248,442			$	392,280			$	243,334
Return on average equity (= A / F) - most directly comparable GAAP-based measure (1)		10.54	%			(5.85)	%			11.41	%			12.79	%			12.21	%			5.62	%			14.66	%
Return on average equity, adjusted (= D / F) - Non-GAAP (1)		12.86	%			15.85	%			12.88	%			13.79	%			13.77	%			14.29	%			15.06	%
Weighted average shares - basic (G) - most directly comparable GAAP-based measure		19,118				19,088				10,393				10,349				10,321				14,761				10,340
Basic earnings (loss) per share (= A / G) - most directly comparable GAAP-based measure	$	0.72			$	(0.41	)		$	0.74			$	0.82			$	0.74			$	1.49			$	3.45
Basic earnings per share, adjusted (= D / G) - Non-GAAP	$	0.87			$	1.12			$	0.84			$	0.89			$	0.84			$	3.80			$	3.54
Weighted average shares - diluted (H) - most directly comparable GAAP-based measure		19,300				19,226				10,553				10,482				10,419				14,914				10,435
Diluted earnings (loss) per share (= A / H) - most directly comparable GAAP-based measure	$	0.71			$	(0.41	)		$	0.73			$	0.81			$	0.73			$	1.48			$	3.42
Diluted earnings per share, adjusted (= D / H) - Non-GAAP	$	0.87			$	1.11			$	0.83			$	0.88			$	0.83			$	3.76			$	3.51
continued
(1) Annualized

	Three Months Ended																				Twelve Months Ended
	December 31,2024				September 30, 2024				June 30,2024				March 31,2024				December 31,2023				December 31,2024				December 31,2023
Noninterest expense (I) - most directly comparable GAAP-based measure	$	42,930			$	60,299			$	22,639			$	22,469			$	22,392			$	148,337			$	83,843
Less: Merger-related expenses (B)		(3,887	)			(16,977	)			(1,135	)			(672	)			(1,059	)			(22,671	)			(1,059	)
Less: Executive retirement expenses (B)		(35	)			(4,758	)			—				—				—				(4,793	)			—
Less: Provision for legal settlement (B)		(478	)			—				—				—				—				(478	)			—
Adjusted noninterest expense (J = I - B) - Non-GAAP	$	38,531			$	38,564			$	21,504			$	21,797			$	21,333			$	120,396			$	82,784
Net interest income (K)	$	50,573			$	51,697			$	26,103			$	26,881			$	26,018			$	155,254			$	104,906
Noninterest income (L)		11,247				12,386				7,172				6,630				6,491				37,435				25,652
Total operating income (M = K + L)	$	61,820			$	64,083			$	33,275			$	33,511			$	32,509			$	192,689			$	130,558
Efficiency ratio (= I / M) - most directly comparable GAAP-based measure		69.4	%			94.1	%			68.0	%			67.0	%			68.9	%			77.0	%			64.2	%
Efficiency ratio, adjusted (= J / M) - Non-GAAP		62.3	%			60.2	%			64.6	%			65.0	%			65.6	%			62.5	%			63.4	%
(1) Annualized

Appendix B - Investment Portfolio Concentrations

The following table summarizes the credit ratings and collateral associated with the Company's investment security portfolio, excluding equity securities, at December 31, 2024:

(In thousands)

Sector	PortfolioMix			AmortizedBook			Fair Value			Credit Enhancement			AAA			AA			A			BBB			NR			Collateral / Guarantee Type
Unsecured ABS	—	%		$	3,073		$	2,854		27	%		—	%		—	%		—	%		—	%		100	%		Unsecured Consumer Debt
Student Loan ABS	1				4,060			4,035		27			—			—			—			—			100			Seasoned Student Loans
Federal Family Education Loan ABS	9				80,121			80,063		11			7			81			—			12			—			Federal Family Education Loan (1)
PACE Loan ABS	—				1,985			1,727		7			100			—			—			—			—			PACE Loans (2)
Non-Agency CMBS	2				15,920			15,901		27			—			—			—			—			100
Non-Agency RMBS	2				16,555			14,528		16			100			—			—			—			—			Reverse Mortgages (3)
Municipal - General Obligation	12				99,515			90,767					11			82			7			—			—
Municipal - Revenue	14				120,903			109,261					—			82			12			—			6
SBA ReRemic (5)	—				2,283			2,278					—			100			—			—			—			SBA Guarantee (4)
Small Business Administration	1				5,926			6,263					—			100			—			—			—			SBA Guarantee (4)
Agency MBS	19				160,027			155,778					—			100			—			—			—			Residential Mortgages (4)
Agency CMO	38				332,380			326,045					—			100			—			—			—
U.S. Treasury securities	2				20,043			18,063					—			100			—			—			—			U.S. Government Guarantee (4)
Corporate bonds	—				1,935			1,954					—			—			52			48			—
	100	%		$	864,726		$	829,517					4	%		89	%		3	%		1	%		3	%
(1) 97% guaranteed by U.S. government
(2) PACE acronym represents Property Assessed Clean Energy loans
(3) Non-agency reverse mortgages with current structural credit enhancements
(4) Guaranteed by U.S. government or U.S. government agencies
(5) SBA ReRemic acronym represents Re-Securitization of Real Estate Mortgage Investment Conduits
Note: Ratings in table are the lowest of the six rating agencies (Standard & Poor's, Moody's, Fitch, Morningstar, DBRS and Kroll Bond Rating Agency). Standard & Poor's rates U.S. government obligations at AA+.

About the Company

With $5.4 billion in assets, Orrstown Financial Services, Inc. and its wholly-owned subsidiary, Orrstown Bank, provide a wide range of 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, as well as Baltimore City, Maryland. The Company's lending area also includes adjacent counties in Pennsylvania and Maryland, as well as Loudon County, Virginia and Berkeley, Jefferson and Morgan Counties, West Virginia. Orrstown Bank is an Equal Housing Lender and its deposits are insured up to the legal maximum by the FDIC. Orrstown Financial Services, Inc.’s common stock is traded on Nasdaq (ORRF). For more information about Orrstown Financial Services, Inc. and Orrstown Bank, visit www.orrstown.com.

Cautionary Note Regarding Forward-Looking Statements

This press release 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,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates, predictions or projections about events or the Company's industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company's control. Accordingly, the Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements and there can be no assurances that the Company will achieve the desired level of new business development and new loans, growth in the balance sheet and fee-based revenue lines of business, cost savings initiatives and continued reductions in risk assets or mitigation of losses in the future. Factors which could cause the actual results of the Company's operations to differ materially from expectations include, but are not limited to: general economic conditions (including inflation and concerns about liquidity) on a national basis or in the local markets in which the Company operates; ineffectiveness of the Company's strategic growth plan due to changes in current or future market conditions; changes in interest rates; the diversion of management's attention from ongoing business operations and opportunities; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products and services; changes in consumer behavior due to changing political, business and economic conditions, or legislative or regulatory initiatives; changes in laws and regulations; changes in credit quality; inability to raise capital, if necessary, under favorable conditions; volatility in the securities markets; the demand for our products and services; deteriorating economic conditions; geopolitical tensions; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; expenses associated with litigation and legal proceedings; the possibility that the anticipated benefits of the merger with Codorus (the “Merger”) are not realized when expected or at all; the possibility that the Merger may be more expensive to complete than anticipated; the possibility that revenues following the Merger may be lower than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the Merger; the ability to complete the integration of the two companies successfully; the dilution caused by the Company’s issuance of additional shares of its capital stock in connection with the Merger; and other risks and uncertainties, including those detailed in our Annual Report on Form 10-K for the year ended December 31, 2023 under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in subsequent filings made with the Securities and Exchange Commission.

The foregoing list of factors is not exhaustive. If one or more events related to these or other risks or uncertainties materializes, or if the Company's underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company disclaims any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for the Company to predict those events or how they may affect it. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on the Company's behalf may issue.

The review period for subsequent events extends up to and includes the filing date of a public company’s financial statements, when filed with the Securities and Exchange Commission. Accordingly, the consolidated financial information presented in this announcement is subject to change. Annualized, pro forma, projected and estimated numbers in this document are used for illustrative purposes only and are not forecasts and may not reflect actual results.