ORRF Orrstown Financial Services Inc

Orrstown Financial Services, Inc. (“Orrstown” or the “Company”) (NASDAQ: ORRF), the parent company of Orrstown Bank (the “Bank”), announced earnings for the three months ended September 30, 2023. Net income totaled $9.0 million for the three months ended September 30, 2023, compared to $9.8 million for the three months ended June 30, 2023 and a net loss of $4.8 million for the three months ended September 30, 2022, which included a restructuring charge for branch closures and other expense savings initiatives and a provision for legal settlement totaling $12.8 million, net of tax. Diluted earnings per share totaled $0.87 for the three months ended September 30, 2023, compared to $0.94 for the three months ended June 30, 2023 and diluted loss per share of $0.47 for the three months ended September 30, 2022.

“We are pleased with our third quarter results as Orrstown continues to generate strong earnings in a challenging environment. We remain focused on delivering strong earnings and building our long-term capital base through prudent balance sheet growth. While net interest margin compression has continued, the impact of higher funding costs has been controlled through disciplined loan and deposit pricing during the nine months ended September 30, 2023. Deposits continue to grow modestly as a result of our relationship-based approach. The Bank has diversified sources of non-interest income, which have allowed us to offset the impact of a difficult wealth and mortgage market. We believe we are well-positioned for future growth,” commented Thomas R. Quinn, Jr., President and Chief Executive Officer.

DISCUSSION OF RESULTS

Balance Sheet

Loans

Loans held for investment, which includes SBA PPP loans of $6.2 million at September 30, 2023, increased by $32.4 million from June 30, 2023 to September 30, 2023, or 6% annualized. Commercial loans, excluding SBA PPP loan forgiveness activity, increased by $17.7 million, or 4% annualized, from June 30, 2023 to September 30, 2023. The residential mortgage portfolio increased by $16.2 million, or 15% annualized, in the three months ended September 30, 2023 as there has been increased production of adjustable-rate mortgages, which have been retained in portfolio.

Investment Securities

Investment securities, which are all available-for-sale, decreased by $13.4 million to $495.2 million at September 30, 2023 compared to $508.6 million at June 30, 2023. During the third quarter of 2023, net purchases totaled $10.0 million, net unrealized losses increased by $14.4 million and paydowns were $7.8 million. The increase in net unrealized losses was primarily due to higher market interest rates. The overall duration of the Company's investment securities portfolio is 4.7 years at September 30, 2023. The Company has sufficient access to liquidity such that management does not believe it would be necessary to sell any of its investment securities at a loss to offset any unexpected deposit outflows. See Appendix B for a summary of the Bank's investment securities at September 30, 2023, highlighting their concentrations, credit ratings and credit enhancement levels.

Deposits

Deposits increased by $23.6 million, totaling approximately $2.5 billion at both September 30, 2023 and June 30, 2023. In the third quarter of 2023, time deposits increased by $31.4 million, or 36% annualized, money market deposits rose by $22.7 million, or 18% annualized, and interest-bearing demand deposits increased by $14.2 million, or 6% annualized. These increases were partially offset by decreases in noninterest-bearing demand deposits of $30.4 million, or 26% annualized, and savings deposits of $14.3 million, or 29% annualized. The increase in time deposits was attributable to promotional offerings of up to 18-month terms. The declines in the noninterest-bearing and savings deposit categories were primarily the result of clients seeking higher-yielding products, including reciprocal deposits, with the Bank. At September 30, 2023, deposits that are uninsured and not collateralized totaled $387.5 million, or 15%, of total deposits compared to $409.1 million, or 16%, of total deposits at June 30, 2023. The Bank's loan-to-deposit ratio was 89% at both September 30, 2023 and June 30, 2023.

Borrowings

The Bank actively manages its liquidity position through its various sources of funding to meet the credit needs of its clients. FHLB advances and other borrowings increased by $20.5 million to $157.2 million at September 30, 2023 compared to $136.7 million at June 30, 2023. The Bank seeks to maintain sufficient liquidity to ensure client needs can be addressed on a timely basis. The Bank had available alternative funding sources, such as the FHLB advances and other wholesale options, of approximately $1.0 billion at September 30, 2023.

Income Statement

Net Interest Income and Margin

Net interest income was $26.2 million for the three months ended September 30, 2023 compared to $26.4 million for the three months ended June 30, 2023. The net interest margin, on a tax equivalent basis, declined to 3.73% in the third quarter of 2023 from 3.83% in the second quarter of 2023. Net interest margin decreased primarily because funding costs continued to increase at a pace faster than assets repriced.

Interest income on loans increased by $1.7 million to $32.9 million for the three months ended September 30, 2023 compared to $31.2 million for the three months ended June 30, 2023. Loan growth and higher interest rates were the primary drivers of this increase. Interest income on loans for the three months ended September 30, 2023 included prepayment fee income of $0.4 million, an increase of $0.2 million from the three months ended June 30, 2023, which resulted in an increase of two basis points in net interest margin.

Interest income on investment securities was $5.5 million for the three months ended September 30, 2023 compared to $5.4 million in the second quarter of 2023. The investment portfolio continues to benefit from increasing yields on adjustable-rate securities.

Interest expense increased by $2.0 million to $12.5 million for the three months ended September 30, 2023 compared to $10.5 million for the three months ended June 30, 2023 due primarily to increasing deposit and borrowing rates for both existing and new balances. In addition, average interest-bearing deposits increased by $47.7 million; whereas, average borrowed funds decreased by $2.6 million during the three months ended September 30, 2023.

Provision for Credit Losses

The Company recorded a provision for credit losses of $0.1 million for the three months ended September 30, 2023 compared to $0.4 million for the three months ended June 30, 2023. The allowance for credit losses decreased by $0.1 million to $28.3 million at September 30, 2023 compared to $28.4 million at June 30, 2023. Although there was loan growth of $32.4 million during the third quarter of 2023, the allowance for credit losses was impacted by improvements in the macroeconomic conditions within the forecasted loss rate model. The allowance for credit losses to total loans was 1.25% at September 30, 2023 compared to 1.27% at June 30, 2023. Net charge-offs were $0.2 million for the three months ended September 30, 2023 compared to net charge-offs of $0.4 million for the three months ended June 30, 2023. Special mention loans decreased by $13.7 million from $45.5 million at June 30, 2023 to $31.8 million at September 30, 2023 due to repayments of $10.2 million and upgrades of $3.5 million. Classified loans increased by $7.3 million to $33.6 million at September 30, 2023 from $26.3 at June 30, 2023. The increase in classified loans was primarily due to downgrades to two commercial loans, within the owner-occupied and commercial and industrial loan classes, to one client totaling $6.3 million. The increase in classified loans was partially offset by repayments within this category. Non-accrual loans increased by $1.2 million to $22.3 million at September 30, 2023 from $21.1 million at June 30, 2023 primarily due to one loan in the owner-occupied loan class. Management believes the allowance for credit losses to be adequate based on current asset quality metrics and economic conditions.

Management regularly analyzes the commercial real estate portfolio, which includes the review of occupancy, cash flows, expenses and expiring leases, as well as the location of the real estate. At September 30, 2023, the Company had $244.7 million in loans related to office space, which had a weighted average loan-to-value ratio of 57% and a weighted average debt coverage ratio of 1.62x, compared to $236.7 million at June 30, 2023. Management believes that the office space portfolio is well-diversified and includes only limited exposure to properties located in major metro markets (approximately 3% of the total commercial real estate loan balance as of September 30, 2023).  

Noninterest Income

Noninterest income decreased by $1.3 million to $5.9 million in the three months ended September 30, 2023 compared to $7.2 million in the three months ended June 30, 2023. Other income in the three months ended June 30, 2023 includes a gain of $1.2 million from the sale of the Bank's Path Valley branch.

Mortgage banking income decreased by $0.2 million from income of $0.1 million in the second quarter of 2023 to a loss of $0.1 million in the third quarter of 2023. During the three months ended September 30, 2023, mortgage interest rates increased significantly, which resulted in a decline to the fair value mark of the Bank's held-for-sale loans of $0.4 million compared to a decrease in the fair value market of $0.1 million during the three months ended June 30, 2023. Market conditions and elevated interest rates continued to hinder mortgage production during the third quarter of 2023. Most mortgage production remains in adjustable-rate products, which are held in portfolio.

During the third quarter of 2023, the Company recorded swap fee income of $0.3 million compared to $0.2 million in the three months ended June 30, 2023. Swap fee income fluctuates based on market conditions and client demand.

Noninterest Expenses

Noninterest expenses decreased by $0.3 million to $20.4 million in the three months ended September 30, 2023 from $20.7 million in the three months ended June 30, 2023.

Salaries and benefits expense decreased by $0.2 million to $12.9 million for the three months ended September 30, 2023 compared to $13.1 million for the three months ended June 30, 2023. The decrease was attributed primarily to employee severance costs of $0.5 million during the second quarter of 2023 and a decline of $0.1 million in healthcare costs, partially offset by increases in merit-based salaries and incentive compensation of $0.5 million. The increase in merit-based salaries was a result of merit increases during the second quarter of 2023, the filling of vacancies and an additional day in the third quarter of 2023 compared to the second quarter of 2023, which impacts the accrual.

Advertising and bank promotions expense decreased by $0.6 million to $0.3 million in the three months ended September 30, 2023 from $0.9 million for the three months ended June 30, 2023 due to $0.5 million in contributions to tax credit programs during the second quarter of 2023. Taxes other than income increased by $0.3 million to $0.4 million in the three months ended September 30, 2023 compared to less than $0.1 million in the three months ended June 30, 2023. This increase reflects the tax credits recognized on the contributions during the second quarter of 2023.

Professional services expense increased by $0.5 million to $1.0 million in the three months ended September 30, 2023 from $0.5 million in the three months ended June 30, 2023 due primarily to an increase in consulting costs to support technology improvements and compliance enhancements.

Other operating expenses decreased by $0.5 million to $1.5 million during the third quarter of 2023 compared to $2.0 million during the second quarter of 2023. This decrease included a reduction of $0.3 million in credit value adjustments on derivatives for the three months ended September 30, 2023 compared to the three months ended June 30, 2023. The remaining fluctuation is attributable to normal business operations.

Income Taxes

The Company's effective tax rate for the third quarter of 2023 was 21.9% compared to 20.6% for the second quarter of 2023. The Company's effective tax rate for the three months ended September 30, 2023 is greater than the 21% federal statutory rate primarily due to an increase in state taxes in addition to 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, partially offset by tax-exempt income, including interest earned on tax-exempt loans and securities and income from life insurance policies and tax credits. The effective tax rate was 20.7% for the nine-months ended September 30, 2023 compared to 15.7% for the nine months ended September 30, 2022. The lower effective tax rate for the nine months ended September 30, 2022 was partially caused by the impact of the restructuring charge for branch closures and other expense savings initiatives and a provision for legal settlement during the third quarter of 2022. The Company regularly analyzes its projected taxable income and makes adjustments to the provision for income taxes accordingly.

Capital

Shareholders’ equity totaled $243.1 million at September 30, 2023, a decrease of $2.5 million from $245.6 million at June 30, 2023. The decrease was primarily attributable to other comprehensive losses of $10.1 million and dividends paid of $2.1 million partially offset by net income of $9.0 million. Other comprehensive losses increased during the third quarter of 2023 due to after-tax declines from $11.2 million in net unrealized losses on investment securities partially offset by net unrealized gains on cash flow hedges of $1.1 million.

Tangible book value per share(1) decreased to $20.94 per share at September 30, 2023 from $21.19 per share at June 30, 2023 due to the decrease in shareholders' equity.

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

The Company's tangible common equity ratio decreased to 7.3% at September 30, 2023 from 7.5% at June 30, 2023 primarily due to a decrease in tangible equity from net unrealized losses on investment securities and an increase in total tangible assets. The Company's total risk-based capital ratio was 13.0% at both September 30, 2023 and June 30, 2023. The Company's Tier 1 leverage ratio increased from 8.6% at June 30, 2023 to 8.7% at September 30, 2023. At September 30, 2023, 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.

The Board of Directors approved a cash dividend of $0.20 per share, payable on November 14, 2023, to shareholders of record as of November 7, 2023.

Investor Relations Contact:

Neelesh Kalani

Executive Vice President, Chief Financial Officer

Phone (717) 510-7097

ORRSTOWN FINANCIAL SERVICES, INC.
FINANCIAL HIGHLIGHTS (Unaudited)
	Three Months Ended								Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(Dollars in thousands)		2023				2022				2023				2022
Profitability for the period:
Net interest income	$	26,219			$	25,455			$	78,888			$	72,146
Provision for credit losses		136				1,500				1,264				3,575
Noninterest income		5,925				6,058				19,161				20,726
Noninterest expenses		20,447				36,412				61,451				74,570
Income (loss) before income tax expense (benefit)		11,561				(6,399	)			35,334				14,727
Income tax expense (benefit)		2,535				(1,571	)			7,314				2,316
Net income (loss) available to common shareholders	$	9,026			$	(4,828	)		$	28,020			$	12,411
Financial ratios:
Return on average assets (1)		1.18	%		(0.68)%					1.25	%			0.59	%
Return on average assets, adjusted (1) (2) (3)		1.18	%			1.12	%			1.25	%			1.19	%
Return on average equity (1)		14.42	%		(7.92)%					15.51	%			6.58	%
Return on average equity, adjusted (1) (2) (3)		14.42	%			13.02	%			15.51	%			13.35	%
Net interest margin (1)		3.73	%			3.92	%			3.83	%			3.70	%
Efficiency ratio		63.6	%			115.5	%			62.7	%			80.3	%
Efficiency ratio, adjusted (2) (3)		63.6	%			64.3	%			62.7	%			62.9	%
Income (loss) per common share:
Basic	$	0.87			$	(0.47	)		$	2.71			$	1.17
Basic, adjusted (2) (3)	$	0.87			$	0.77			$	2.71			$	2.37
Diluted	$	0.87			$	(0.47	)		$	2.68			$	1.16
Diluted, adjusted (2) (3)	$	0.87			$	0.75			$	2.68			$	2.34
Average equity to average assets		8.18	%			8.59	%			8.09	%			8.90	%
(1) Annualized.
(2) Ratio for the three and nine months ended September 30, 2022 has been adjusted for the restructuring charge and provision for legal settlement.
(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.
FINANCIAL HIGHLIGHTS (Unaudited)
(continued)
	September 30,				December 31,
(Dollars in thousands, except per share amounts)		2023				2022
At period-end:
Total assets	$	3,054,435			$	2,922,408
Total deposits		2,546,435				2,476,246
Loans, net of allowance for credit losses		2,238,558				2,126,054
Loans held-for-sale, at fair value		6,448				10,880
Securities available for sale, at fair value		495,162				513,728
Borrowings		175,241				123,390
Subordinated notes		32,076				32,026
Shareholders' equity		243,080				228,896
Credit quality and capital ratios (1):
Allowance for credit losses to total loans		1.25	%			1.17	%
Total nonaccrual loans to total loans		0.98	%			0.96	%
Nonperforming assets to total assets		0.73	%			0.70	%
Allowance for credit losses to nonaccrual loans		127	%			122	%
Total risk-based capital:
Orrstown Financial Services, Inc.		13.0	%			12.7	%
Orrstown Bank		12.5	%			12.3	%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc.		10.6	%			10.3	%
Orrstown Bank		11.4	%			11.2	%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc.		10.6	%			10.3	%
Orrstown Bank		11.4	%			11.2	%
Tier 1 leverage capital:
Orrstown Financial Services, Inc.		8.7	%			8.5	%
Orrstown Bank		9.3	%			9.2	%
Book value per common share	$	22.90			$	21.45
(1) Capital ratios are estimated, 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. In the first year of adoption 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.

ORRSTOWN FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)	September 30, 2023				December 31, 2022
Assets
Cash and due from banks	$	34,728			$	28,477
Interest-bearing deposits with banks		60,211				32,346
Cash and cash equivalents		94,939				60,823
Restricted investments in bank stocks		12,987				10,642
Securities available for sale (amortized cost of $553,222 and $563,278 at September 30, 2023 and December 31, 2022, respectively)		495,162				513,728
Loans held for sale, at fair value		6,448				10,880
Loans		2,266,836				2,151,232
Less: Allowance for credit losses		(28,278	)			(25,178	)
Net loans		2,238,558				2,126,054
Premises and equipment, net		29,385				29,328
Cash surrender value of life insurance		72,754				71,760
Goodwill		18,724				18,724
Other intangible assets, net		2,650				3,078
Accrued interest receivable		12,212				11,027
Deferred tax assets, net		25,500				24,031
Other assets		45,116				42,333
Total assets	$	3,054,435			$	2,922,408
Liabilities
Deposits:
Noninterest-bearing	$	435,488			$	494,131
Interest-bearing		2,110,947				1,950,807
Deposits held for assumption in connection with sale of bank branch		—				31,307
Total deposits		2,546,435				2,476,246
Securities sold under agreements to repurchase and federal funds purchased		17,991				17,251
FHLB advances and other borrowings		157,250				106,139
Subordinated notes		32,076				32,026
Accrued interest and other liabilities		57,603				61,850
Total liabilities		2,811,355				2,693,512
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; 11,206,480 shares issued and 10,613,271 outstanding at September 30, 2023; 11,229,242 shares issued and 10,671,413 outstanding at December 31, 2022		583				584
Additional paid—in capital		188,458				189,264
Retained earnings		112,144				92,473
Accumulated other comprehensive losses		(44,343	)			(39,913	)
Treasury stock— 593,209 and 557,829 shares, at cost at September 30, 2023 and December 31, 2022, respectively		(13,762	)			(13,512	)
Total shareholders’ equity		243,080				228,896
Total liabilities and shareholders’ equity	$	3,054,435			$	2,922,408

ORRSTOWN FINANCIAL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
		Three Months Ended								Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
(In thousands)			2023				2022				2023				2022
Interest income
Loans		$	32,738			$	23,152			$	92,685			$	66,548
Investment securities - taxable			4,459				2,907				13,244				6,462
Investment securities - tax-exempt			861				1,160				2,591				3,013
Short-term investments			633				200				1,349				536
Total interest income			38,691				27,419				109,869				76,559
Interest expense
Deposits			10,582				1,372				25,392				2,758
Securities sold under agreements to repurchase and federal funds purchased			31				10				84				24
FHLB advances and other borrowings			1,354				78				3,992				121
Subordinated notes			505				504				1,513				1,510
Total interest expense			12,472				1,964				30,981				4,413
Net interest income			26,219				25,455				78,888				72,146
Provision for credit losses			136				1,500				1,264				3,575
Net interest income after provision for credit losses			26,083				23,955				77,624				68,571
Noninterest income
Service charges			1,260				1,216				3,668				3,483
Interchange income			963				1,014				2,921				3,059
Swap fee income			255				197				451				1,935
Wealth management income			2,826				2,953				8,395				8,716
Mortgage banking activities			(142	)			(1,014	)			448				205
Investment securities gains (losses)			2				(14	)			(8	)			(163	)
Other income			761				1,706				3,286				3,491
Total noninterest income			5,925				6,058				19,161				20,726
Noninterest expenses
Salaries and employee benefits			12,885				12,705				38,135				35,354
Occupancy, furniture and equipment			2,460				2,380				7,059				7,370
Data processing			1,248				1,192				3,666				3,410
Advertising and bank promotions			332				278				1,656				1,514
FDIC insurance			477				294				1,500				767
Professional services			965				887				2,203				2,417
Taxes other than income			387				488				847				1,160
Intangible asset amortization			228				272				717				845
Other operating expenses			1,465				1,761				5,668				5,578
Total noninterest expenses			20,447				36,412				61,451				74,570
Income (loss) before income tax expense (benefit)			11,561				(6,399	)			35,334				14,727
Income tax expense (benefit)			2,535				(1,571	)			7,314				2,316
Net income (loss)		$	9,026			$	(4,828	)		$	28,020			$	12,411
Share information:
Basic earnings (loss) per share		$	0.87			$	(0.47	)		$	2.71			$	1.17
Diluted earnings (loss) per share		$	0.87			$	(0.47	)		$	2.68			$	1.16
Weighted average shares - basic			10,319				10,369				10,346				10,611
Weighted average shares - diluted			10,405				10,529				10,440				10,758

ORRSTOWN FINANCIAL SERVICES, INC.
ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)
	Three Months Ended
	9/30/2023										6/30/2023										3/31/2023										12/31/2022										9/30/2022
(Dollars in thousands)	AverageBalance			Taxable-EquivalentInterest				Taxable-EquivalentRate			AverageBalance			Taxable-EquivalentInterest				Taxable-EquivalentRate			AverageBalance			Taxable-EquivalentInterest				Taxable-EquivalentRate			AverageBalance			Taxable-EquivalentInterest				Taxable-EquivalentRate			AverageBalance			Taxable-EquivalentInterest				Taxable-EquivalentRate
Assets
Federal funds sold & interest-bearing bank balances	$	57,778		$	633			4.35	%		$	37,895		$	418			4.42	%		$	29,599		$	298			4.07	%		$	28,419		$	238			3.31	%		$	38,068		$	200			2.08	%
Investment securities (1)		521,234			5,548			4.26				526,225			5,510			4.19				525,685			5,465			4.18				512,779			5,170			4.03				528,988			4,377			3.31
Loans (1)(2)(3)		2,256,727			32,878			5.78				2,233,312			31,329			5.63				2,180,224			28,844			5.36				2,133,052			27,061			5.04				2,051,707			23,219			4.49
Total interest-earning assets		2,835,739			39,059			5.47				2,797,432			37,257			5.34				2,735,508			34,607			5.12				2,674,250			32,469			4.83				2,618,763			27,796			4.22
Other assets		200,447										191,983										197,620										202,384										196,277
Total assets	$	3,036,186									$	2,989,415									$	2,933,128									$	2,876,634									$	2,815,040
Liabilities and Shareholders' Equity
Interest-bearing demand deposits	$	1,541,728			7,476			1.92			$	1,511,468			6,273			1.66			$	1,503,421			4,862			1.31			$	1,459,109			2,838			0.77			$	1,379,082			912			0.26
Savings deposits		190,817			164			0.34				204,584			135			0.26				219,408			133			0.25				228,521			132			0.23				237,462			90			0.15
Time deposits		357,194			2,942			3.27				326,034			2,200			2.71				275,880			1,207			1.78				254,637			609			0.95				265,015			370			0.55
Total interest-bearing deposits		2,089,739			10,582			2.01				2,042,086			8,608			1.69				1,998,709			6,202			1.26				1,942,267			3,579			0.73				1,881,559			1,372			0.29
Securities sold under agreements to repurchase and federal funds purchased		15,006			31			0.83				13,685			28			0.82				13,868			25			0.72				18,211			20			0.46				23,480			10			0.18
FHLB advances and other borrowings		128,131			1,354			4.19				132,094			1,386			4.21				106,434			1,252			4.77				48,276			509			4.21				10,394			78			3.02
Subordinated notes		32,066			505			6.29				32,049			504			6.29				32,033			504			6.29				32,016			503			6.29				32,000			504			6.29
Total interest-bearing liabilities		2,264,942			12,472			2.19				2,219,914			10,526			1.90				2,151,044			7,983			1.50				2,040,770			4,611			0.90				1,947,433			1,964			0.40
Noninterest-bearing demand deposits		468,628										476,123										495,562										540,275										575,777
Other liabilities		54,353										50,851										52,630										74,602										49,964
Total liabilities		2,787,923										2,746,888										2,699,236										2,655,647										2,573,174
Shareholders' equity		248,263										242,527										233,892										220,987										241,866
Total	$	3,036,186									$	2,989,415									$	2,933,128									$	2,876,634									$	2,815,040
Taxable-equivalent net interest income / net interest spread					26,587			3.29	%						26,731			3.44	%						26,624			3.62	%						27,858			3.93	%						25,832			3.82	%
Taxable-equivalent net interest margin								3.73	%									3.83	%									3.94	%									4.14	%									3.92	%
Taxable-equivalent adjustment					(368	)									(356	)									(330	)									(374	)									(377	)
Net interest income				$	26,219									$	26,375									$	26,294									$	27,484									$	25,455
Ratio of average interest-earning assets to average interest-bearing liabilities								125	%									126	%									127	%									131	%									134	%
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 balances include nonaccrual loans.
(3) Interest income on loans includes prepayment and late fees, where applicable.

ORRSTOWN FINANCIAL SERVICES, INC.
ANALYSIS OF NET INTEREST INCOME
Average Balances and Interest Rates, Taxable-Equivalent Basis (Unaudited)
(continued)
	Nine Months Ended
	September 30, 2023										September 30, 2022
				Taxable-				Taxable-						Taxable-				Taxable-
	Average			Equivalent				Equivalent			Average			Equivalent				Equivalent
(Dollars in thousands)	Balance			Interest				Rate			Balance			Interest				Rate
Assets
Federal funds sold & interest-bearing bank balances	$	41,861		$	1,349			4.31	%		$	122,509		$	536			0.59	%
Investment securities (1)		524,365			16,523			4.21				508,582			10,276			2.70
Loans (1)(2)(3)		2,223,701			93,051			5.59				2,011,881			66,738			4.43
Total interest-earning assets		2,789,927			110,923			5.31				2,642,972			77,550			3.92
Other assets		196,694										191,090
Total assets	$	2,986,621									$	2,834,062
Liabilities and Shareholders' Equity
Interest-bearing demand deposits	$	1,519,013			18,611			1.64			$	1,399,035			1,470			0.14
Savings deposits		204,832			431			0.28				234,054			209			0.12
Time deposits		320,000			6,350			2.65				279,557			1,079			0.52
Total interest-bearing deposits		2,043,845			25,392			1.66				1,912,646			2,758			0.19
Securities sold under agreements to repurchase and federal funds purchased		14,190			84			0.79				23,685			24			0.14
FHLB advances and other		122,300			3,992			4.36				4,693			121			3.44
Subordinated notes		32,049			1,513			6.29				31,985			1,510			6.29
Total interest-bearing liabilities		2,212,384			30,981			1.87				1,973,009			4,413			0.30
Noninterest-bearing demand deposits		480,006										562,826
Other liabilities		52,618										46,058
Total liabilities		2,745,008										2,581,893
Shareholders' equity		241,613										252,169
Total liabilities and shareholders' equity	$	2,986,621									$	2,834,062
Taxable-equivalent net interest income / net interest spread					79,942			3.44	%						73,137			3.62	%
Taxable-equivalent net interest margin								3.83	%									3.70	%
Taxable-equivalent adjustment					(1,054	)									(991	)
Net interest income				$	78,888									$	72,146
Ratio of average interest-earning assets to average interest-bearing liabilities								126	%									134	%
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 balances include nonaccrual loans.
(3) Interest income on loans includes prepayment and late fees, where applicable.

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands)	September 30,2023				June 30,2023				March 31,2023				December 31,2022				September 30,2022
Profitability for the quarter:
Net interest income	$	26,219			$	26,375			$	26,294			$	27,484			$	25,455
Provision for credit losses		136				399				729				585				1,500
Noninterest income		5,925				7,158				6,078				6,226				6,058
Noninterest expenses		20,447				20,749				20,255				21,236				36,412
Income (loss) before income taxes		11,561				12,385				11,388				11,889				(6,399	)
Income tax expense (benefit)		2,535				2,547				2,232				2,263				(1,571	)
Net income (loss)	$	9,026			$	9,838			$	9,156			$	9,626			$	(4,828	)
Financial ratios:
Return on average assets (1)		1.18	%			1.32	%			1.27	%			1.33	%		(0.68)%
Return on average assets, adjusted (1)(2)(3)		1.18	%			1.32	%			1.27	%			1.33	%			1.12	%
Return on average equity (1)		14.42	%			16.27	%			15.88	%			17.28	%		(7.92)%
Return on average equity, adjusted (1)(2)(3)		14.42	%			16.27	%			15.88	%			17.28	%			13.02	%
Net interest margin (1)		3.73	%			3.83	%			3.94	%			4.14	%			3.92	%
Efficiency ratio		63.6	%			61.9	%			62.6	%			63.0	%			115.5	%
Efficiency ratio, adjusted (2)(3)		63.6	%			61.9	%			62.6	%			63.0	%			64.3	%
Per share information:
Income (loss) per common share:
Basic	$	0.87			$	0.95			$	0.88			$	0.93			$	(0.47	)
Basic, adjusted (2)(3)		0.87				0.95				0.88				0.93				0.77
Diluted		0.87				0.94				0.87				0.91				(0.47	)
Diluted, adjusted (2)(3)		0.87				0.94				0.87				0.91				0.75
Book value		22.90				23.15				22.46				21.45				20.34
Tangible book value		20.94				21.19				20.50				19.47				18.34
Cash dividends paid		0.20				0.20				0.20				0.19				0.19
Average basic shares		10,319				10,336				10,385				10,382				10,369
Average diluted shares		10,405				10,421				10,496				10,550				10,529
(1) Annualized.
(2) Ratio has been adjusted for the restructuring charge and provision for legal settlement for the three months ended September 30, 2022.
(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)	September 30,2023				June 30,2023				March 31,2023				December 31,2022			September 30,2022
Noninterest income:
Service charges	$	1,260			$	1,251			$	1,157			$	1,131		$	1,216
Interchange income		963				993				965				996			1,014
Swap fee income		255				196				—				697			197
Wealth management income		2,826				2,822				2,747				2,535			2,953
Mortgage banking activities		(142	)			112				478				202			(1,014	)
Other income		761				1,786				739				662			1,706
Investment securities gains (losses)		2				(2	)			(8	)			3			(14	)
Total noninterest income	$	5,925			$	7,158			$	6,078			$	6,226		$	6,058
Noninterest expenses:
Salaries and employee benefits	$	12,885			$	13,054			$	12,196			$	12,650		$	12,705
Occupancy, furniture and equipment		2,460				2,266				2,333				2,442			2,380
Data processing		1,248				1,201				1,217				1,150			1,192
Advertising and bank promotions		332				919				405				750			278
FDIC insurance		477				519				504				316			294
Professional services		965				504				734				837			887
Taxes other than income		387				3				457				231			488
Intangible asset amortization		228				239				250				260			272
Provision for legal settlement		—				—				—				—			13,000
Restructuring expenses		—				—				—				—			3,155
Other operating expenses		1,465				2,044				2,159				2,600			1,761
Total noninterest expenses	$	20,447			$	20,749			$	20,255			$	21,236		$	36,412

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(continued)
(In thousands)	September 30,2023				June 30,2023				March 31,2023				December 31,2022				September 30,2022
Balance Sheet at quarter end:
Cash and cash equivalents	$	94,939			$	76,318			$	98,323			$	60,823			$	66,927
Restricted investments in bank stocks		12,987				12,602				12,869				10,642				6,469
Securities available for sale		495,162				508,612				520,232				513,728				503,596
Loans held for sale, at fair value		6,448				6,450				7,341				10,880				10,175
Loans:
Commercial real estate:
Owner occupied		376,350				366,439				339,371				315,770				313,125
Non-owner occupied		630,514				626,140				603,396				608,043				573,605
Multi-family		143,437				145,257				144,053				138,832				114,561
Non-owner occupied residential		100,391				105,504				106,390				104,604				105,267
Commercial and industrial (1)		374,190				379,905				380,683				357,774				378,574
Acquisition and development:
1-4 family residential construction		25,642				20,461				20,941				25,068				20,810
Commercial and land development		153,279				143,177				174,556				158,308				148,512
Municipal		10,334				10,638				11,329				12,173				12,683
Total commercial loans		1,814,137				1,797,521				1,780,719				1,720,572				1,667,137
Residential mortgage:
First lien		248,335				235,813				227,031				229,849				220,970
Home equity – term		5,223				5,228				5,371				5,505				5,869
Home equity – lines of credit		188,736				185,099				183,340				183,241				180,267
Installment and other loans		10,405				10,756				11,040				12,065				13,684
Total loans		2,266,836				2,234,417				2,207,501				2,151,232				2,087,927
Allowance for credit losses (2)		(28,278	)			(28,383	)			(28,364	)			(25,178	)			(24,709	)
Net loans held-for-investment		2,238,558				2,206,034				2,179,137				2,126,054				2,063,218
Goodwill		18,724				18,724				18,724				18,724				18,724
Other intangible assets, net		2,650				2,589				2,828				3,078				3,338
Total assets		3,054,435				3,008,197				3,011,548				2,922,408				2,852,092
Total deposits		2,546,435				2,522,861				2,515,626				2,476,246				2,505,853
Borrowings		175,241				152,229				176,315				123,390				22,632
Subordinated notes		32,076				32,059				32,042				32,026				32,010
Total shareholders' equity		243,080				245,641				240,161				228,896				217,378

(1) This balance includes $6.2 million, $7.2 million, $10.8 million, $13.8 million and $17.0 million of SBA PPP loans, net of deferred fees and costs, at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, respectively.

(2) The balance includes $2.4 million in a one-time cumulative-effect adjustment that increased the allowance for credit losses from the adoption of the new CECL standard on January 1, 2023.

ORRSTOWN FINANCIAL SERVICES, INC.
HISTORICAL TRENDS IN QUARTERLY FINANCIAL DATA (Unaudited)
(continued)
	September 30,2023				June 30,2023				March 31,2023				December 31,2022				September 30,2022
Capital and credit quality measures (1):
Total risk-based capital:
Orrstown Financial Services, Inc		13.0	%			13.0	%			12.8	%			12.7	%			12.7	%
Orrstown Bank		12.5	%			12.5	%			12.4	%			12.3	%			12.9	%
Tier 1 risk-based capital:
Orrstown Financial Services, Inc		10.6	%			10.5	%			10.4	%			10.3	%			10.2	%
Orrstown Bank		11.4	%			11.4	%			11.2	%			11.2	%			11.8	%
Tier 1 common equity risk-based capital:
Orrstown Financial Services, Inc		10.6	%			10.5	%			10.4	%			10.3	%			10.2	%
Orrstown Bank		11.4	%			11.4	%			11.2	%			11.2	%			11.8	%
Tier 1 leverage capital:
Orrstown Financial Services, Inc		8.7	%			8.6	%			8.5	%			8.5	%			8.4	%
Orrstown Bank		9.3	%			9.3	%			9.2	%			9.2	%			9.6	%
Average equity to average assets		8.18	%			8.11	%			7.97	%			7.68	%			8.59	%
Allowance for credit losses to total loans		1.25	%			1.27	%			1.28	%			1.17	%			1.18	%
Total nonaccrual loans to total loans		0.98	%			0.94	%			0.96	%			0.96	%			0.25	%
Nonperforming assets to total assets		0.73	%			0.70	%			0.71	%			0.70	%			0.19	%
Allowance for credit losses to nonaccrual loans		127	%			135	%			134	%			122	%			466	%
Other information:
Net charge-offs (recoveries)	$	241			$	380			$	(34	)		$	116			$	70
Classified loans		33,593				26,347				34,024				36,325				19,576
Nonperforming and other risk assets:
Nonaccrual loans (2)		22,324				21,062				21,246				20,583				5,303
Other real estate owned		—				—				85				—				—
Total nonperforming assets		22,324				21,062				21,331				20,583				5,303
Financial difficulty modifications / Troubled debt restructurings still accruing (3)		—				—				—				682				689
Loans past due 90 days or more and still accruing (2)		277				539				28				439				232
Total nonperforming and other risk assets	$	22,601			$	21,601			$	21,359			$	21,704			$	6,224
(1) Capital ratios are estimated, 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. In the first year of adoption 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.
(2) Includes zero, zero, zero, $0.4 million and $0.2 million of purchased credit impaired loans at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively, in accordance with ASC 310-30. Upon adoption of the CECL standard, purchased credit deteriorated loans were evaluated on an individual loan level and reported on an individual loan basis under ASC 310-20, Nonrefundable Fees and Other Costs.
(3) On January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminated the troubled debt restructuring ("TDR") accounting model and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan. During 2023, the Company did not have loans meeting the “Financial Difficulty Modification” criteria in accordance with ASU 2022-02.

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

As a result of acquisitions, the Company has intangible assets consisting of goodwill and core deposit and other intangible assets, which totaled $21.4 million and $21.8 million at September 30, 2023 and December 31, 2022, respectively. Additionally, the Company incurred $3.2 million and $13.0 million in restructuring charges and a provision for legal settlement, respectively, during the three and nine months ended September 30, 2022.

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.

Tangible book value per common share and the impact of the restructuring charge and legal settlement 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:

(dollars and shares in thousands)

Tangible Book Value per Common Share		September 30,2023				June 30,2023				March 31,2023				December 31,2022				September 30,2022
Shareholders' equity (most directly comparable GAAP-based measure)		$	243,080			$	245,641			$	240,161			$	228,896			$	217,378
Less: Goodwill			18,724				18,724				18,724				18,724				18,724
Other intangible assets			2,650				2,589				2,828				3,078				3,338
Related tax effect			(557	)			(544	)			(594	)			(646	)			(701	)
Tangible common equity (non-GAAP)		$	222,263			$	224,872			$	219,203			$	207,740			$	196,017
Common shares outstanding			10,613				10,611				10,692				10,671				10,686
Book value per share (most directly comparable GAAP-based measure)		$	22.90			$	23.15			$	22.46			$	21.45			$	20.34
Intangible assets per share			1.96				1.96				1.96				1.98				2.00
Tangible book value per share (non-GAAP)		$	20.94			$	21.19			$	20.50			$	19.47			$	18.34

(dollars and shares in thousands)
Adjusted Ratios for Restructuring Charges and Provision for Legal Settlement	September 30,2023				September 30,2022				September 30,2023				September 30,2022
	Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
Net income (loss) (A) - most directly comparable GAAP-based measure	$	9,026			$	(4,828	)		$	28,020			$	12,411
Plus: Restructuring expenses (B)		—				3,155				—				3,155
Plus: Provision for legal settlement (B)		—				13,000				—				13,000
Less: Related tax effect (C)		—				(3,393	)			—				(3,393	)
Adjusted net income (D=A+B-C) - Non-GAAP	$	9,026			$	7,934			$	28,020			$	25,173
Average assets (E)	$	3,036,186			$	2,815,040			$	2,986,621			$	2,834,062
Return on average assets (= A / E) - most directly comparable GAAP-based measure		1.18	%		(0.68)%					1.25	%			0.59	%
Return on average assets, adjusted (= D / E) - Non-GAAP		1.18	%			1.12	%			1.25	%			1.19	%
Average equity (F)	$	248,263			$	241,866			$	241,613			$	252,169
Return on average equity (= A / F) - most directly comparable GAAP-based measure		14.42	%		(7.92)%					15.51	%			6.58	%
Return on average equity, adjusted (= D / F) - Non-GAAP		14.42	%			13.02	%			15.51	%			13.35	%
Weighted average shares - basic (G) - most directly comparable GAAP-based measure		10,319				10,369				10,346				10,611
Basic earnings (loss) per share (= A / G) - most directly comparable GAAP-based measure	$	0.87			$	(0.47	)		$	2.71			$	1.17
Basic earnings per share, adjusted (= D / G) - Non-GAAP	$	0.87			$	0.77			$	2.71			$	2.37
Weighted average shares - diluted (H) - most directly comparable GAAP-based measure		10,405				10,369				10,440				10,758
Diluted earnings (loss) per share (= A / H) - most directly comparable GAAP-based measure	$	0.87			$	(0.47	)		$	2.68			$	1.16
Weighted average shares - diluted (H) - Non-GAAP		10,405				10,529				10,440				10,758
Diluted earnings per share, adjusted (= D / H) - Non-GAAP	$	0.87			$	0.75			$	2.68			$	2.34
Noninterest expense (I) - most directly comparable GAAP-based measure	$	20,447			$	36,412			$	61,451			$	74,570
Less: Restructuring expenses (B)		—				(3,155	)			—				(3,155	)
Less: Provision for legal expenses (B)		—				(13,000	)			—				(13,000	)
Adjusted noninterest expense (J = I - B) - Non-GAAP	$	20,447			$	20,257			$	61,451			$	58,415
Net interest income (K)	$	26,219			$	25,455			$	78,888			$	72,146
Noninterest income (L)		5,925				6,058				19,161				20,726
Total operating income (M = K + L)	$	32,144			$	31,513			$	98,049			$	92,872
Efficiency ratio (= I / M) - most directly comparable GAAP-based measure		63.6	%			115.5	%			62.7	%			80.3	%
Efficiency ratio, adjusted (= J / M) - Non-GAAP		63.6	%			64.3	%			62.7	%			62.9	%

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 September 30, 2023:

(dollars in thousands)

Sector	Portfolio Mix			Amortized Book			Fair Value			Credit Enhancement			AAA			AA			A			BBB			NR			Collateral / Guarantee Type
Unsecured ABS	1	%		$	4,053		$	3,527		31	%		—	%		—	%		—	%		—	%		100	%		Unsecured Consumer Debt
Student Loan ABS	1				5,781			5,711		27			—			—			—			—			100			Seasoned Student Loans
Federal Family Education Loan ABS	18				101,485			100,565		9			7			80			—			13			—			Federal Family Education Loan (1)
PACE Loan ABS	—				2,362			1,983		6			100			—			—			—			—			PACE Loans (2)
Non-Agency CMBS	4				23,349			23,110		19			—			—			—			—			100
Non-Agency RMBS	3				16,699			12,666		14			100			—			—			—			—			Reverse Mortgages (3)
Municipal - General Obligation	19				103,818			88,804					10			83			7			—			—
Municipal - Revenue	22				119,989			99,313					—			82			12			—			6
SBA ReRemic (5)	1				3,855			3,732					—			100			—			—			—			SBA Guarantee (4)
Small Business Administration	1				8,562			9,100					—			100			—			—			—			SBA Guarantee (4)
Agency MBS	26				143,087			129,387					—			100			—			—			—			Residential Mortgages (4)
U.S. Treasury securities	4				20,060			17,143					—			100			—			—			—			U.S. Government Guarantee (4)
	100	%		$	553,102		$	495,042					7	%		80	%		4	%		2	%		7	%
(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 $3.1 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, 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, and include, but are not limited to, statements related to new business development, new loan opportunities, growth in the balance sheet and fee-based revenue lines of business, merger and acquisition activity, cost savings initiatives, reducing risk assets and mitigating losses in the future. 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, successful merger and acquisition activity, 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: ineffectiveness of the Company's strategic growth plan due to changes in current or future market conditions; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products and services; the integration of the Company's strategic acquisitions; the inability to fully achieve expected savings, efficiencies or synergies from mergers and acquisitions, or taking longer than estimated for such savings, efficiencies and synergies to be realized; changes in laws and regulations; interest rate movements; 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 pending litigation and legal proceedings; and other risks and uncertainties, including those detailed in our Annual Report on Form 10-K for the year ended December 31, 2022 under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in subsequently filings made with the Securities and Exchange Commission. The statements are valid only as of the date hereof and we disclaim any obligation to update this information. 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 does not undertake 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.