Return on average assets was 1.59% and return on average equity was 14.76% for the three months ended March 31, 2026, compared to 1.55% and 14.73%, respectively, for the three months ended December 31, 2025;
Net interest margin, on a tax equivalent basis, was 3.90% in the first quarter of 2026 compared to 4.00% in the fourth quarter of 2025;
Total loans increased by $40.6 million, or approximately 4% annualized, from December 31, 2025 to March 31, 2026;
Deposits increased by $98.7 million from December 31, 2025 to March 31, 2026; borrowings decreased by $68.0 million from December 31, 2025 to March 31, 2026;
Noninterest income increased by $1.2 million from $14.4 million for the three months ended December 31, 2025 to $15.6 million for the three months ended March 31, 2026;
Noninterest expenses decreased by $0.7 million from $37.4 million for the three months ended December 31, 2025 to $36.7 million for the three months ended March 31, 2026 due primarily to decreases in salaries and benefits expense and professional services expense;
Tangible common equity increased to 9.2% at March 31, 2026 from 9.0% at December 31, 2025; total risk-based capital improved to 13.5% at March 31, 2026 from 13.3% at December 31, 2025;
Tangible book value per common share(1) increased to $25.76 per share at March 31, 2026 from $25.21 per share at December 31, 2025 and
The Board of Directors declared a cash dividend of $0.30 per common share, payable May 12, 2026, to shareholders of record as of May 5, 2026.
HARRISBURG, Pa., April 21, 2026 (GLOBE NEWSWIRE) -- Orrstown Financial Services, Inc. (the "Company") (NASDAQ:ORRF), the parent company of Orrstown Bank (the "Bank"), announced earnings for the quarter ended March 31, 2026. Net income totaled $21.8 million for the three months ended March 31, 2026, compared to net income of $21.5 million and $18.1 million for the three months ended December 31, 2025 and March 31, 2025, respectively. Diluted earnings per share was $1.12 for the three months ended March 31, 2026, compared to $1.11 and $0.93 for the three months ended December 31, 2025 and March 31, 2025, respectively. For the first quarter of 2025, excluding the impact from the previously disclosed merger-related expenses, net of taxes, net income and diluted earnings per share were $19.3 million(1) and $1.00(1), respectively.
"Orrstown delivered strong results across the board in another successful quarter," said Thomas R. Quinn, Jr., President and Chief Executive Officer. "Net income and diluted earnings per share increased quarter to quarter. Return on average assets and return on average equity continued to exceed peer multiples. Noninterest income again was a substantial component of our earnings. Noninterest expense declined as we continue to focus on creating efficiencies throughout the organization. The loan portfolio experienced growth across the whole footprint while maintaining a focus on quality. We believe that deposit growth, which accelerated during the second half of the quarter, will enable us to successfully manage our funding costs and maintain a healthy net interest margin in a competitive funding environment. Our credit metrics remain sound and our capital ratios are consistently building from earnings generation."
Adam Metz, Senior Executive Vice President and Chief Operating Officer added "Having spent nearly a decade at Orrstown, I have seen first-hand the strength of our franchise, the power of our culture and the collective commitment the whole organization has to our clients and community. An incredibly talented team with common alignment to our core principles will continue to build upon the foundation already in place - driving growth, deepening client relationships, thoughtfully expanding fee‑based businesses, and continuing our unwavering commitment to sound risk management and long‑term shareholder value."
(1) Non-GAAP measure. See Appendix A for additional information.
DISCUSSION OF RESULTS
Balance Sheet
Loans
Loans held for investment increased by $40.6 million and totaled $4.1 billion at March 31, 2026 compared to $4.0 billion at December 31, 2025. Commercial loans increased by $31.5 million, or approximately 4% annualized, and residential mortgages increased by $10.1 million, or approximately 5% annualized, from December 31, 2025 to March 31, 2026. Loan growth was reduced by the impact of loan payoffs.
Investment Securities
Investment securities, all of which are classified as available-for-sale, decreased by $5.7 million to $947.0 million at March 31, 2026 from $952.7 million at December 31, 2025. During the three months ended March 31, 2026, paydowns totaled $23.4 million and net unrealized losses increased by $6.8 million due to higher market interest rates and widening of spreads at the end of the first quarter of 2026. The Bank purchased $23.1 million of investment securities, consisting of $15.1 million of agency mortgage backed securities and collateralized mortgage obligations, $6.9 million of non-agency collateralized mortgage obligations and $1.1 million of securities issued by state and political subdivisions during the first quarter of 2026. The remaining change in investment securities is due to net accretion recorded on the investment securities during the first quarter of 2026. The overall duration of the Company's investment securities portfolio was 4.7 years at March 31, 2026 compared to 4.6 years at December 31, 2025. See Appendix B for a summary of the Bank's investment securities at March 31, 2026, highlighting their concentrations, credit ratings and credit enhancement levels.
Deposits
During the first quarter of 2026, deposits increased by $98.7 million and totaled $4.6 billion at March 31, 2026 compared to $4.5 billion at December 31, 2025. Interest-bearing demand deposits, non-interest demand deposits, time deposits and money market deposits increased by $73.2 million, $11.7 million, $8.8 million and $7.6 million, respectively, from December 31, 2025 to March 31, 2026. Savings deposits decreased by $2.6 million from December 31, 2025 to March 31, 2026. Efforts to drive deposit generation were successful in the first quarter of 2026. The Bank's loan-to-deposit ratio was 88% at March 31, 2026 compared to 89% at December 31, 2025.
Borrowings
The Company actively manages its liquidity position through its various sources of funding to meet the needs of its clients. FHLB advances and other borrowings were $206.7 million at March 31, 2026 compared to $274.7 million at December 31, 2025. The decrease of $68.0 million was due to repayments during the first quarter of 2026 as the Bank utilized available liquidity from deposits to fund its operations. The Bank seeks to maintain sufficient liquidity to ensure that 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 $1.8 billion at March 31, 2026 compared to $1.7 billion at December 31, 2025.
Income Statement
Net Interest Income and Margin
Net interest income was $49.0 million for the three months ended March 31, 2026 compared to $50.5 million for the three months ended December 31, 2025. A significant portion of this decrease was due to two less days in the first quarter of 2026 compared to the fourth quarter of 2025. The net interest margin, on a tax equivalent basis, decreased to 3.90% in the first quarter of 2026 from 4.00% in the fourth quarter of 2025. This decrease is primarily the result of a decrease of 13 basis points in the yield on loans and a decrease of seven basis points in the yield on securities from the three months ended December 31, 2025 to the three months ended March 31, 2026. These decreases in the yield on interest-earning assets were partially offset by a decrease of two basis points in the cost of funds between the same periods. Net interest income reflects the net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings of $4.7 million during the first quarter of 2026 compared to $5.3 million for the fourth quarter of 2025.
Interest income on loans, on a tax equivalent basis, decreased by $1.4 million to $63.2 million for the three months ended March 31, 2026 compared to $64.6 million for the three months ended December 31, 2025. This decrease was primarily due to the impact of previous fed funds rate reductions on the Bank's variable rate loan portfolio. In addition, the net accretion impact of purchase accounting marks on loans was 33 basis points in the first quarter of 2026 compared to 36 basis points in the fourth quarter of 2025.
Interest income on investment securities, on a tax equivalent basis, was $11.1 million for the first quarter of 2026 compared to $11.2 million for the fourth quarter of 2025. The decrease in interest income is due to the decline in the market interest rates. Average investment securities increased by $7.1 million during the three months ended March 31, 2026 compared to the three months ended December 31, 2025 primarily due to net purchases.
Interest expense, on a tax equivalent basis, decreased by $0.3 million to $25.4 million for the three months ended March 31, 2026 compared to $25.7 million for the three months ended December 31, 2025. The cost of deposits decreased by two basis points during the three months ended March 31, 2026 compared to the three months ended December 31, 2025, and the borrowing costs from FHLB advances and other borrowings decreased by nine basis points during the three months ended March 31, 2026 compared to the three months ended December 31, 2025. This was the result of the recent reductions to FHLB borrowing rates. At the end of December 2025, the interest rate on the subordinated notes converted to a variable rate, which resulted in an increase of $0.3 million in interest expense and an increase of three basis points to the cost of interest-bearing liabilities for the first quarter of 2026. Average interest-bearing deposits increased by $54.0 million during the three months ended March 31, 2026 compared to the three months ended December 31, 2025. Average FHLB advances and other borrowings increased by $9.6 million from the three months ended December 31, 2025 to the three months ended March 31, 2026. Funding costs were elevated in the first half of the quarter due to seasonal deposit declines, which increased borrowing balances temporarily. Significant deposit inflow in the back half of the quarter enabled the Bank to significantly reduce its borrowing levels, but the average balance was still higher than the prior quarter.
Provision for Credit Losses on Loans
The allowance for credit losses ("ACL") on loans decreased to $47.5 million at March 31, 2026 from $47.7 million at December 31, 2025. The ACL to total loans was 1.17% at March 31, 2026 compared to 1.19% at December 31, 2025. The Company recorded provision expense on loans of $0.7 million for the three months ended March 31, 2026 compared to $0.1 million for the three months ended December 31, 2025. Net charge-offs were $0.9 million for the three months ended March 31, 2026 compared to $0.5 million for the three months ended December 31, 2025.
Classified loans decreased by $0.8 million to $57.6 million at March 31, 2026 from $58.4 million at December 31, 2025 due to repayments of $2.9 million and charge-offs of $0.9 million, offset by net downgrades. Non-accrual loans totaled $30.0 million at March 31, 2026 compared to $28.0 million at December 31, 2025. The increase of $2.0 million in nonaccrual loans was due to additions to nonaccrual status of $5.9 million of loans, primarily consisting of $4.2 million for one commercial and land development loan and $0.8 million in one commercial loan, partially offset by repayments totaling $2.3 million, an upgrade returning one commercial loan of $1.2 million to accruing status and net charge offs of $0.9 million. Nonaccrual loans to total loans increased to 0.74% at March 31, 2026 from 0.70% at December 31, 2025. Management believes the ACL to be adequate based on current asset quality metrics and economic forecasts.
Noninterest Income
Noninterest income increased by $1.2 million to $15.6 million for the three months ended March 31, 2026 from $14.4 million for the three months ended December 31, 2025.
Income from life insurance increased by $2.5 million to $3.8 million for the three months ended March 31, 2026 compared to $1.3 million for the three months ended December 31, 2025. During the first quarter of 2026, the Company recorded $2.4 million in income from life insurance policy death benefits.
Swap fee income increased by $0.2 million to $1.3 million for the three months ended March 31, 2026 compared to $1.1 million for the three months ended December 31, 2025. Swap fee income will fluctuate based on market conditions and client demand.
Wealth management income was $5.6 million for the three months ended March 31, 2026 compared to $5.7 million for the three months ended December 31, 2025, which reflects the strength of our wealth management platform despite a decline in market performance during the first quarter of 2026.
Income from service charges decreased by $0.3 million to $2.9 million for the three months ended March 31, 2026 from $3.2 million for the three months ended December 31, 2025 due to a decrease in interchange activity.
Other income decreased by $0.6 million to $0.2 million for the three months ended March 31, 2026 from $0.8 million for the three months ended December 31, 2025. The fourth quarter of 2025 includes $0.3 million in solar tax credit income and other one-time credits.
Noninterest Expenses
Noninterest expenses decreased by $0.7 million to $36.7 million for the three months ended March 31, 2026 from $37.4 million in the three months ended December 31, 2025.
Salaries and benefits expense decreased by $0.8 million to $21.2 million for the three months ended March 31, 2026 compared to $22.0 million for the three months ended December 31, 2025. This was elevated during the fourth quarter of 2025 primarily due to year-end incentive accruals.
Professional services expense decreased by $0.7 million from $1.9 million for the three months ended December 31, 2025 to $1.2 million for the three months ended March 31, 2026. The decrease was due to reduced reliance on third-party assistance with internal projects.
Taxes other than income increased by $0.5 million in the three months ended March 31, 2026 compared to the three months ended December 31, 2025. This increase reflects the tax credits recognized in the fourth quarter of 2025 as a result of charitable contributions.
Income Taxes
The Company's effective tax rate was 20.7% for the first quarter of 2026 compared to 21.8% for the fourth quarter of 2025. The Company's effective tax rate for the three months ended March 31, 2026 is less than the 21% federal statutory rate primarily due to tax-exempt income, including interest earned on tax-exempt loans and securities and non-taxable 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"). The Company regularly analyzes its projected taxable income and makes adjustments to the provision for income taxes accordingly.
Capital
Shareholders' equity totaled $603.2 million at March 31, 2026 compared to $591.5 million at December 31, 2025. The increase of $11.7 million is primarily due to net income of $21.8 million partially offset by dividends of $5.9 million and other comprehensive losses of $4.5 million.
Tangible book value per common share(1) increased to $25.76 per share at March 31, 2026 from $25.21 per share at December 31, 2025. The Company's tangible common equity ratio was 9.2% at March 31, 2026 compared to 9.0% at December 31, 2025. Return on average tangible common equity per common share(1) was 17.96% for the three months ended March 31, 2026 compared to 18.15% for the three months ended December 31, 2025. The decrease in the return on average tangible common equity per common share was primarily due to the increase in average shareholders' equity.
(1) Non-GAAP measure. See Appendix A for additional information.
The Company's capital ratios increased during the three months ended March 31, 2026 compared to the three months ended December 31, 2025 due to earnings. The Company's tier 1 common equity, tier 1 capital and total risk-based capital ratios were 11.8%, 12.0% and 13.5%, respectively, at March 31, 2026 compared to 11.5%, 11.7% and 13.3%, respectively, at December 31, 2025. The Company's Tier 1 leverage ratio increased to 9.7% at March 31, 2026 compared to 9.5% at December 31, 2025.
At March 31, 2026, 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.
Investor Relations Contact:
Neelesh Kalani
Executive Vice President, Chief Financial Officer
Phone (717) 510-7097
FINANCIAL HIGHLIGHTS (Unaudited)
Three Months Ended
March 31,
March 31,
(In thousands)
2026
2025
Profitability for the period:
Net interest income
$
49,005
$
48,761
Provision for (recovery of) credit losses - loans
728
(554
)
Recovery of credit losses - unfunded loan commitments
(376
)
—
Noninterest income
15,577
11,624
Noninterest expenses
36,728
38,176
Income before income tax expense
27,502
22,763
Income tax expense
5,693
4,712
Net income available to common shareholders
$
21,809
$
18,051
Financial ratios:
Return on average assets (1)
1.59
%
1.35
%
Return on average assets, adjusted (1) (2) (3)
n/a
1.45
%
Return on average equity (1)
14.76
%
13.98
%
Return on average equity, adjusted (1) (2) (3)
n/a
14.97
%
Net interest margin (1)
3.90
%
4.00
%
Efficiency ratio
56.9
%
63.2
%
Efficiency ratio, adjusted (2) (3)
n/a
60.5
%
Income per common share:
Basic
$
1.13
$
0.94
Basic, adjusted (2) (3)
n/a
$
1.01
Diluted
$
1.12
$
0.93
Diluted, adjusted (2) (3)
n/a
$
1.00
Average equity to average assets
10.80
%
9.65
%
(1) Annualized for the three months ended March 31, 2026 and 2025.
(2) Ratio has been adjusted for the non-recurring charges at March 31, 2025. There were no non-recurring charges for the three months ended March 31, 2026.
(3) Non-GAAP based financial measure at March 31, 2025. 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)
March 31,
December 31,
(Dollars in thousands, except per share amounts)
2026
2025
At period-end:
Total assets
$
5,576,972
$
5,542,255
Loans, net of allowance for credit losses
4,013,856
3,973,012
Loans held-for-sale, at fair value
3,366
6,090
Securities available for sale, at fair value
947,018
952,740
Total deposits
4,627,424
4,528,774
FHLB advances and other borrowings and Securities sold under agreements to repurchase
225,958
299,243
Subordinated notes and trust preferred debt
37,274
37,122
Shareholders' equity
603,184
591,535
Credit quality and capital ratios (1):
Allowance for credit losses to total loans
1.17
%
1.19
%
Total nonaccrual loans to total loans
0.74
%
0.70
%
Nonperforming assets to total assets
0.56
%
0.51
%
Allowance for credit losses to nonaccrual loans
158
%
170
%
Total risk-based capital:
Orrstown Financial Services, Inc.
13.5
%
13.3
%
Orrstown Bank
13.6
%
13.3
%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.
12.0
%
11.7
%
Orrstown Bank
12.5
%
12.2
%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.
11.8
%
11.5
%
Orrstown Bank
12.5
%
12.2
%
Tier 1 leverage capital:
Orrstown Financial Services, Inc.
9.7
%
9.5
%
Orrstown Bank
10.2
%
9.9
%
Book value per common share
$
30.76
$
30.32
(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. At December 31, 2025, 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. At March 31, 2026, the day-one impact of ASU 2016-13 was fully applied to the capital ratios.
ORRSTOWN FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
March 31, 2026
December 31, 2025
Assets
Cash and due from banks
$
49,014
$
42,083
Interest-bearing deposits with banks
112,122
107,691
Cash and cash equivalents
161,136
149,774
Restricted investments in bank stocks
23,984
26,717
Securities available for sale (amortized cost of $973,220 and $972,138 at March 31, 2026 and December 31, 2025, respectively)
947,018
952,740
Loans held for sale, at fair value
3,366
6,090
Loans
4,061,319
4,020,693
Less: Allowance for credit losses
(47,463
)
(47,681
)
Net loans
4,013,856
3,973,012
Premises and equipment, net
50,532
51,029
Cash surrender value of life insurance
145,964
146,994
Goodwill
69,751
69,751
Other intangible assets, net
35,751
37,990
Accrued interest receivable
21,176
21,473
Deferred tax assets, net
32,802
33,931
Other assets
71,636
72,754
Total assets
$
5,576,972
$
5,542,255
Liabilities
Deposits:
Noninterest-bearing
$
882,588
$
870,906
Interest-bearing
3,744,836
3,657,868
Total deposits
4,627,424
4,528,774
Securities sold under agreements to repurchase and federal funds purchased
19,264
24,542
FHLB advances and other borrowings
206,694
274,701
Subordinated notes and trust preferred debt
37,274
37,122
Other liabilities
83,132
85,581
Total liabilities
4,973,788
4,950,720
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; 19,711,628 shares issued and 19,611,427 outstanding at March 31, 2026; 19,711,628 shares issued and 19,507,208 outstanding at December 31, 2025
1,026
1,026
Additional paid—in capital
422,663
424,596
Retained earnings
202,704
186,752
Accumulated other comprehensive loss
(19,720
)
(15,201
)
Treasury stock— 100,201 and 204,420 shares, at cost at March 31, 2026 and December 31, 2025, respectively
(3,489
)
(5,638
)
Total shareholders' equity
603,184
591,535
Total liabilities and shareholders' equity
$
5,576,972
$
5,542,255
ORRSTOWN FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended
March 31,
March 31,
(Dollars in thousands, except per share amounts)
2026
2025
Interest income
Loans
$
62,995
$
63,432
Investment securities - taxable
9,851
8,944
Investment securities - tax-exempt
881
875
Short-term investments
637
2,268
Total interest income
74,364
75,519
Interest expense
Deposits
21,986
24,260
Securities sold under agreements to repurchase and federal funds purchased
97
84
FHLB advances and other borrowings
2,355
1,118
Subordinated notes and trust preferred debt
921
1,296
Total interest expense
25,359
26,758
Net interest income
49,005
48,761
Provision for (recovery of) credit losses - loans
728
(554
)
Recovery of credit losses - unfunded loan commitments
(376
)
—
Net interest income after provision for (recovery of) credit losses
48,653
49,315
Noninterest income
Service charges
2,871
2,395
Interchange income
1,513
1,427
Swap fee income
1,339
394
Wealth management income
5,557
5,415
Mortgage banking activities
326
302
Income from life insurance
3,761
1,289
Investment securities (losses) gains
(2
)
13
Other income
212
389
Total noninterest income
15,577
11,624
Noninterest expenses
Salaries and employee benefits
21,157
20,388
Occupancy, furniture and equipment
4,221
4,675
Data processing
1,537
924
Advertising and bank promotions
683
499
FDIC insurance
549
824
Professional services
1,221
1,826
Taxes other than income
1,025
942
Intangible asset amortization
2,239
2,535
Merger-related expenses
—
1,649
Restructuring expenses
—
91
Other operating expenses
4,096
3,823
Total noninterest expenses
36,728
38,176
Income before income tax expense
27,502
22,763
Income tax expense
5,693
4,712
Net income
$
21,809
$
18,051
Three Months Ended
March 31,
March 31,
2026
2025
Share information:
Basic earnings per share
$
1.13
$
0.94
Diluted earnings per share
$
1.12
$
0.93
Dividends paid per share
$
0.30
$
0.26
Weighted average shares - basic
19,274
19,157
Weighted average shares - diluted
19,410
19,328
ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)
Three Months Ended
3/31/2026
12/31/2025
9/30/2025
6/30/2025
3/31/2025
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
$
70,086
$
637
3.69
%
$
103,886
$
1,017
3.88
%
$
101,728
$
1,123
4.38
%
$
136,106
$
1,513
4.46
%
$
203,347
$
2,268
4.52
%
Investment securities(1)(2)
984,060
11,079
4.51
976,957
11,177
4.58
906,399
10,593
4.67
904,119
10,626
4.70
865,126
10,052
4.65
Loans(1)(3)(4)(5)
4,070,889
63,214
6.29
3,997,842
64,635
6.42
3,979,044
65,975
6.58
3,894,978
63,246
6.52
3,909,694
63,641
6.59
Total interest-earning assets
5,125,035
74,930
5.91
5,078,685
76,829
6.01
4,987,171
77,691
6.19
4,935,203
75,385
6.13
4,978,167
75,961
6.17
Other assets
423,779
426,626
433,659
439,569
447,530
Total assets
$
5,548,814
$
5,505,311
$
5,420,830
$
5,374,772
$
5,425,697
Liabilities and Shareholders' Equity
Interest-bearing demand deposits
$
2,534,291
13,796
2.21
$
2,471,895
14,078
2.26
$
2,450,034
14,145
2.29
$
2,463,687
13,880
2.26
$
2,473,543
14,156
2.32
Savings deposits
