ORRSTOWN FINANCIAL SERVICES INC

Previous wording

The Company, headquartered in Harrisburg, Pennsylvania, is a one-bank holding company that has elected status as a financial holding company. The consolidated financial information presented herein reflects the Company and its wholly-owned subsidiary, the Bank. At March 31, 2025, the Company had total assets of $5.4 billion, total liabilities of $4.9 billion and total shareholders’ equity of $532.9 million as reported in the unaudited consolidated balance sheet.

Current wording

The Company, headquartered in Harrisburg, Pennsylvania, is a one-bank holding company that has elected status as a financial holding company. The consolidated financial information presented herein reflects the Company and its wholly-owned subsidiary, the Bank. At June 30, 2025, the Company had total assets of $5.4 billion, total liabilities of $4.8 billion and total shareholders’ equity of $548.4 million as reported in the unaudited consolidated balance sheets.

Previous wording

For the three months ended March 31, 2025 and 2024, the Company had net income of $18.1 million and $8.5 million, respectively. Diluted earnings per share was $0.93 and $0.81 for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025 and 2024, the Company incurred merger-related expenses of $1.6 million and $672 thousand, respectively. The merger-related expenses are included in non-interest expenses in the unaudited consolidated statements of income.

Current wording

For the three months ended June 30, 2025 and 2024, the Company had net income of $19.4 million and $7.7 million, respectively. For the six months ended June 30, 2025 and 2024, the Company had net income of $37.5 million and $16.3 million, respectively. Diluted earnings per share were $1.01 and $0.73 for the three months ended June 30, 2025 and 2024, respectively. Diluted earnings per share were $1.94 and $1.55 for the six months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025 and 2024, the Company incurred merger-related expenses of $1.0 million and $1.1 million, respectively. For the six months ended June 30, 2025 and 2024, the Company incurred merger-related expenses of $2.6 million and $1.8 million, respectively. The merger-related expenses are included in non-interest expenses in the unaudited consolidated statements of income.

Previous wording

Certain statements appearing herein, which are not historical in nature, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, we may make other written and oral communications, from time to time, that contain such statements. Such 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. Forward-looking statements are statements that include projections, predictions, expectations, estimates or beliefs about events or results or otherwise are not statements of historical facts, 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, cost savings initiatives, and continued reductions in risk assets or mitigate losses in the future. Factors which could cause the actual results to differ from those expressed or implied by the forward-looking statements include, but are not limited to, the following: interest rate changes or volatility; 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; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products a…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements appearing herein, which are not historical in nature, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, we may make other written and oral communications, from time to time, that contain such statements. Such 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. Forward-looking statements are statements that include projections, predictions, expectations, estimates or beliefs about events or results or otherwise are not statements of historical facts, 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, cost savings initiatives, and continued reductions in risk assets or mitigate losses in the future. Factors which could cause the actual results to differ from those expressed or implied by the forward-looking statements include, but are not limited to, the following: interest rate changes or volatility; 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; the effects of competition and how it may impact our community banking model, including industry consolidation and development of competing financial products a…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Preliminary real GDP contracted by 0.3% on an annualized basis for the first quarter of 2025, compared to an increase of 2.4% for the fourth quarter of 2024 and an increase of 1.4% during the first quarter of 2024. This was the first quarterly decline since the first quarter of 2022. The contraction was primarily driven by a surge in imports and a decrease in government spending, partially offset by increases in investment, consumer spending and exports. There are growing concerns regarding the potential impact of wide-ranging tariffs on the U.S. economy and the potential of a recession. The personal consumption expenditures ("PCE") price index increased by 2.3% in the first quarter of 2025 compared to an increase of 2.4% for fourth quarter of 2024 and 3.4% for the first quarter of 2024. Excluding food and energy prices, the PCE price index increased by 2.6% in the first quarter of 2025 compared to 2.6% in the fourth quarter of 2024 and 3.7% in the first quarter of 2024.

Current wording

Preliminary real GDP increased by 3.0% on an annualized basis for the second quarter of 2025, compared to a decrease of 0.5% for the first quarter of 2025 and an increase of 2.8% during the second quarter of 2024. The increase during the second quarter of 2025 compared to the prior periods was primarily driven by consumer spending and a decrease in imports. There continues to be concerns regarding the potential impact of wide-ranging tariffs on the U.S. economy and the potential of a recession. The personal consumption expenditures ("PCE") price index increased by 2.1% in the second quarter of 2025 compared to an increase of 3.7% for first quarter of 2025 and 2.5% for the second quarter of 2024. Excluding food and energy prices, the PCE price index increased by 2.5% in the second quarter of 2025 compared to 3.5% in the first quarter of 2025 and 3.7% in the second quarter of 2024.

Previous wording

The national unemployment rate was 4.2% in March 2025 compared to 4.1% in December 2024 and 3.8% in March 2024. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 3.8% in March 2025 compared to 3.7% in December 2024 and 3.4% in March 2024. The unemployment rate increased in Maryland from 2.5% in March 2024 to 3.0% in March 2025; however, it remains below the national level. These state-wide unemployment rates are consistent with those experienced by the counties in which the Company operates branches and other corporate offices. There were notable job gains nationally in healthcare, social assistance, retail trade, transportation and warehousing during the first quarter of 2025.

Current wording

The national unemployment rate was 4.1% in June 2025 compared to 4.2% in March 2025 and 4.1% in June 2024. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 4.0% in June 2025 compared to 3.8% in March 2025 and 3.4% in June 2024. The unemployment rate increased in Maryland from 2.8% in June 2024 and 3.0% in March 2025 to 3.3% in June 2025; however, it remains below the national level. These state-wide unemployment rates are consistent with those experienced by the counties in which the Company operates branches and other corporate offices. There were notable job gains nationally in healthcare and state government, which includes education, during the second quarter of 2025.

Previous wording

At March 31, 2025, the 10-year Treasury bond yield was 4.23%, a decrease from 4.58% at December 31, 2024 and 4.62% at March 31, 2024 which was attributed to the FOMC's decision to reduce the Federal Funds rate by 75 basis points in 2024. The decrease was based on the progress towards the FOMC's 2.0% inflation target and the unemployment rate remaining low despite recent slowing in job gains.

Current wording

At June 30, 2025, the 10-year Treasury bond yield was 4.24%, a slight increase from 4.23% at March 31, 2025 and a decrease from 4.36% at June 30, 2024. The decrease was based on the progress towards the FOMC's 2.0% inflation target and the unemployment rate remaining low despite recent slowing in job gains.

Previous wording

The majority of the assets and liabilities of a financial institution are monetary in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, employment shortages, the interest rate environment, and geopolitical tensions. It is possible that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including expected credit losses on loans and the fair value of financial instruments that are carried at fair value.

Current wording

The majority of the assets and liabilities of a financial institution are monetary in nature and, therefore, differ greatly from most commercial and industrial companies that have significant investments in fixed assets or inventories. However, inflation does have an impact on the Company, particularly with respect to the growth of total assets and noninterest expenses, which tend to rise during periods of general inflation. Risks also exist due to supply and demand imbalances, employment shortages, the interest rate environment, geopolitical tensions and uncertainty related to the scope and timing of changes to fiscal, regulatory and trade policies. It is possible that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including expected credit losses on loans and the fair value of financial instruments that are carried at fair value.

Previous wording

See Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Credit Losses, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statements and Supplemental Data," for details on the ACL evaluation.

Current wording

See Note 1, Summary of Significant Accounting Policies, and Note 4, Loans and Allowance for Credit Losses, to the unaudited condensed consolidated financial statements under Part I, Item 1, "Financial Information."

Previous wording

Average loans increased by $1.6 billion to $3.9 billion for the three months ended March 31, 2025 compared to $2.3 billion for the three months ended March 31, 2024. Average investment securities increased by $345.2 million from $519.9 million for the three months ended March 31, 2024 to $865.1 million for the three months ended March 31, 2025. Average interest-bearing liabilities increased by $1.5 billion to $3.9 billion for the three months ended March 31, 2025 from $2.4 billion for the three months ended March 31, 2024.

Current wording

Average loans increased by $1.6 billion to $3.9 billion for the three months ended June 30, 2025 compared to $2.3 billion for the three months ended June 30, 2024. Average investment securities increased by $365.6 million from $538.5 million for the three months ended June 30, 2024 to $904.1 million for the three months ended June 30, 2025. Average interest-bearing liabilities increased by $1.3 billion to $3.8 billion for the three months ended June 30, 2025 from $2.5 billion for the three months ended June 30, 2024.

Previous wording

The average yield on loans increased by 25 basis points to 6.59% for the three months ended March 31, 2025 compared to 6.34% for the three months ended March 31, 2024. Taxable-equivalent interest income earned on loans increased by $27.3 million primarily due to an increase in the average balances, which was attributed to the acquired loans from the Merger and from the impact of the accretion of the fair value marks on loans.

Current wording

The yield on loans increased by 35 basis points to 6.52% for the three months ended June 30, 2025 compared to 6.17% for the three months ended June 30, 2024. Taxable-equivalent interest income earned on loans increased by $27.6 million primarily due to an increase in the average balances, which was attributed to the acquired loans from the Merger and from the impact of the accretion of the fair value marks on loans.

Previous wording

$188.4 million from $273.4 million during the three months ended March 31, 2024 to $461.8 million during the three months ended March 31, 2025. Average home equity loans increased by $96.7 million from $192.0 million for the three months ended March 31, 2024 to $288.7 million for the three months ended March 31, 2025. Average installment and other consumer loans increased by $28.5 million from $17.4 million for the three months ended March 31, 2024 to $45.9 million for the three months ended March 31, 2025.

Current wording

The average balance of commercial loans increased by $1.3 billion to $3.1 billion for the three months ended June 30, 2025 from $1.8 billion for the three months ended June 30, 2024. Average residential mortgage loans increased by $196.3 million from $276.7 million during the three months ended June 30, 2024 to $473.0 million during the three months ended June 30, 2025. Average home equity loans increased by $92.9 million from $197.2 million for the three months ended June 30, 2024 to $290.1 million for the three months ended June 30, 2025. Average installment and other consumer loans increased by

Previous wording

Interest income on investment securities on a tax-equivalent basis increased by $4.4 million to $10.1 million for the three months ended March 31, 2025 from $5.7 million for the three months ended March 31, 2024, with the taxable equivalent yield increasing from 4.39% for the three months ended March 31, 2024 to 4.65% for the three months ended March 31, 2025. The 26 basis point increase reflects the impact from thehigher interest rates as well as the accretion of discounts recorded on investment securities assumed from the Merger. Accretion on acquired investment securities was $839 thousand for the three months ended March 31, 2025. The average balance of investment securities increased by $345.2 million to $865.1 million for the three months ended March 31, 2025 from $519.9 million for the three months ended March 31, 2024 due primarily to the Merger.

Current wording

Interest income on investment securities on a tax-equivalent basis increased by $4.5 million to $10.6 million for the three months ended June 30, 2025 from $6.1 million for the three months ended June 30, 2024, with the taxable equivalent yield increasing from 4.54% for the three months ended June 30, 2024 to 4.70% for the three months ended June 30, 2025. The 16 basis point increase primarily reflects the impact fromthe accretion of discounts recorded on investment securities assumed from the Merger. Accretion on acquired investment securities was $795 thousand for the three months ended June 30, 2025. The average balance of investment securities increased by $365.6 million to $904.1 million for the three months ended June 30, 2025 from $538.5 million for the three months ended June 30, 2024 due primarily to the Merger and purchases during 2025. There were no security sales during the three months ended June 30, 2025.

Previous wording

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis increased by $1.3 million to $2.3 million for the three months ended March 31, 2025 from $1.0 million for the three months ended March 31, 2024. The average balance of federal funds sold and interest-bearing bank balances increased by $128.8 million from $74.5 million for the three months ended March 31, 2024 to $203.3 million for the three months ended March 31, 2025. The Federal Funds rate had remained unchanged from the prior rate increase of 25 basis points in July 2023 until the FOMC cut the Federal Funds rate by 50 basis points in September 2024 and 25 basis points in December 2024.

Current wording

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis decreased by $351 thousand to $1.5 million for the three months ended June 30, 2025 from $1.9 million for the three months ended June 30, 2024. The average balance of federal funds sold and interest-bearing bank balances decreased by $6.8 million from $142.9 million for the three months ended June 30, 2024 to $136.1 million for the three months ended June 30, 2025. The FOMC cut the Federal Funds rate by 50 basis points in September 2024 and 25 basis points in December 2024. The Federal Funds rate had remained unchanged from the prior rate increase of 25 basis points in July 2023.

Previous wording

Interest expense on borrowings increased by $245 thousand to $2.5 million for the three months ended March 31, 2025 from $2.3 million for the three months ended March 31, 2024. The cost of borrowings decreased by 11 basis points to 4.88% for the three months ended March 31, 2025 from 4.99% for the three months ended March 31, 2024. Average borrowings increased by $26.2 million from $181.6 million for the three months ended March 31, 2024 to $207.8 million for the three months ended March 31, 2025, which included average subordinated debt and trust preferred debt of $68.7 million for the three months ended March 31, 2025, an increase of $36.6 million, from an average of $32.1 million for the three months ended March 31, 2024. The increase is due primarily to the assumed subordinated debt of $31.0 million and trust preferred debt of $10.3 million from the Merger. The subordinated notes assumed from the Merger have a fixed rate of interest equal to 4.50% until December 30, 2025. The trust preferred debt has a variable rate of three-month CME term SOFR rate, plus a spread adjustment and margin. The interest rate on Orrstown Financial Services, Inc.'s subordinated notes was 7.75% at March 31, 2025 compared to 8.77% at March 31, 2024. Amortization of fair value marks on acquired borrowings was $152 thousand for the three months ended March 31, 2025.

Current wording

Interest expense on borrowings was $2.5 million for the three months ended June 30, 2025 compared to $1.9 million for the three months ended June 30, 2024. The cost of borrowings increased by 18 basis points to 4.97% for the three months ended June 30, 2025 from 4.79% for the three months ended June 30, 2024. Average borrowings increased by $38.4 million from $160.5 million for the three months ended June 30, 2024 to $198.9 million for the three months ended June 30, 2025, which included average subordinated debt and trust preferred debt of $68.9 million for the three months ended June 30, 2025, an increase of $36.8 million, from an average of $32.1 million for the three months ended June 30, 2024. This increase is due to the assumed subordinated debt with an average balance of $29.0 million and trust preferred debt with an average balance of $7.8 million from the Merger, net of fair value marks.

Previous wording

Net charge-offs for the three months ended March 31, 2025 totaled $331 thousand compared to net recoveries of $42 thousand for the three months ended March 31, 2024. Nonaccrual loans were 0.59% of gross loans at March 31, 2025 compared with 0.56% of gross loans at March 31, 2024. Nonaccrual loans increased by $9.8 million from $12.9 million at March 31, 2024 to $22.7 million at March 31, 2025. This reflects $12.8 million of nonaccrual loans assumed in the Merger and other additions in commercial and industrial and commercial real estate loans, partially offset by repayments and charge offs totaling $8.2 million on nonaccrual loans from March 31, 2024.

Current wording

Net charge-offs for the three months ended June 30, 2025 totaled $115 thousand compared to net charge-offs of $113 thousand for the three months ended June 30, 2024. Nonaccrual loans were 0.57% of gross loans at June 30, 2025, compared with 0.36% of gross loans at June 30, 2024. Nonaccrual loans increased by $14.1 million from $8.4 million at June 30, 2024 to $22.4 million at June 30, 2025. This increase reflects $12.8 million of nonaccrual loans assumed in the Merger and other additions of $6.4 million, partially offset by repayments and charge-offs totaling $5.2 million.

Previous wording

Noninterest income increased by $5.0 million from $6.6 million for the three months ended March 31, 2024 to $11.6 million for the three months ended March 31, 2025. The primary driver of the overall increase was the impact of the Merger in the three months ended March 31, 2025. The following were significant components of the change in this line item that did not result from the Merger:

Current wording

Noninterest income increased by $5.7 million from $7.2 million for the three months ended June 30, 2024 to $12.9 million for the three months ended June 30, 2025. The primary driver of the overall increase was the impact of the Merger. The following were significant components of the change in this line item that did not result from the Merger:

Previous wording

•Swap fee income increased by $195 thousand as swap fee income will fluctuate based on market conditions and client demand.

Current wording

•Swap fee income increased by $294 thousand as it will fluctuate based on market conditions and client demand.

Previous wording

Noninterest expense increased by $15.7 million from $22.5 million for the three months ended March 31, 2024 to $38.2 million for the three months ended March 31, 2025. The primary driver of the overall increase was the impact of the Merger in the three months ended March 31, 2025. The following were additional significant components of the change in this line item:

Current wording

Noninterest expense increased by $15.0 million from $22.6 million for the three months ended June 30, 2024 to $37.6 million for the three months ended June 30, 2025. The primary driver of the overall increase was the impact of the Merger. The following were additional significant components of the change in this line item:

Previous wording

•Other operating expenses increased by $1.6 million partially due to an increase in credit valuation adjustments on derivatives of $372 thousand. The remaining change is attributed to the impact of the merger and normal business operations, which included increases of $424 thousand in printing and postage charges, $248 thousand in insurance expenses, $169 thousand in telecommunication expenses, $163 thousand in loan-related expenses.

Current wording

•Other operating expenses increased by $1.2 million, partially due to an increase in credit valuation adjustments on derivatives of $166 thousand. The remaining change is attributed to the impact of the merger and normal business operations, which included increases of $294 thousand in printing and postage charges, $246 thousand in insurance expenses, $157 thousand in loan-related expenses and $137 thousand in telecommunication expenses.

Previous wording

Income tax expense totaled $4.7 million, an effective tax rate of 20.7%, for the three months ended March 31, 2025 compared with $2.2 million and an effective tax rate of 20.6% for the three months ended March 31, 2024. The Company’s effective tax rate is less than the 21% federal statutory rate due to interest earned on tax-exempt loans and investment securities and income from life insurance policies, partially offset by disallowed interest expense and state income taxes.

Current wording

Income tax expense totaled $5.3 million, an effective tax rate of 21.3%, for the three months ended June 30, 2025 compared with income tax expense of $2.1 million and an effective tax rate of 21.2% for the three months ended June 30, 2024. The Company’s effective tax rate is greater than the 21% federal statutory rate due to disallowed interest expenses, partially offset by interest earned on tax-exempt loans and investment securities, income from life insurance policies and tax credits.

Previous wording

Net income totaled $18.1 million for the three months ended March 31, 2025 compared to $8.5 million for the same period in 2024. Diluted earnings per share for the three months ended March 31, 2025 totaled $0.93 compared to $0.81 for the three months ended March 31, 2024. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $6.9 million for the three months ended March 31, 2025, For the three months ended March 31, 2025 and 2024, the Company incurred merger-related expenses of $1.6 million and $672 thousand, respectively, which were included in non-interest expenses of the unaudited condensed consolidated statements of income. Excluding these non-recurring expenses, net income and diluted earnings per common share totaled $19.3 million and $1.00, respectively, for the three months ended March 31, 2025. For the three months ended March 31, 2024, excluding these non-recurring expenses, net income and diluted earnings per common share totaled $9.2 million and $0.88, respectively. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Current wording

Net income totaled $37.5 million for the six months ended June 30, 2025 compared to $16.3 million for the same period in 2024. Diluted earnings per share for the six months ended June 30, 2025 totaled $1.94 compared to $1.55 for the six months ended June 30, 2024. The 2025 period reflects the impact of the Merger completed on July 1, 2024. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $12.1 million for the six months ended June 30, 2025. For the six months ended June 30, 2025 and 2024, the Company incurred merger-related expenses of $2.6 million and $1.8 million, respectively, which were included in non-interest expenses of the unaudited condensed consolidated statements of income. Excluding these non-recurring expenses, net income and diluted earnings per common share totaled $39.5 million and $2.04, respectively, for the six months ended June 30, 2025. For the six months ended June 30, 2024, excluding these non-recurring expenses, net income and diluted earnings per common share totaled $17.9 million and $1.71, respectively. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Previous wording

The provision for credit losses on loans and off-balance sheet reserves totaled a recovery of $554 thousand and expense of $298 thousand for the three months ended March 31, 2025 and 2024, respectively.

Current wording

The provision for credit losses on loans and off-balance sheet reserves totaled a recovery of $445 thousand and expense of $1.1 million for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

Noninterest income totaled $11.6 million and $6.6 million for the three months ended March 31, 2025 and 2024, respectively. The increase of $5.0 million was primarily due to a merger-related increase in wealth management income of $2.3 million, increases in service charges and interchange income totaling $1.7 million and an increase in income from life insurance policies of $655 thousand.

Current wording

Noninterest income totaled $24.5 million and $13.8 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $10.7 million was primarily due to an increase in wealth management income of $4.3 million, increases in service charges and interchange income totaling $3.5 million, and an increase in income from life insurance policies of $1.3 million.

Previous wording

Noninterest expenses totaled $38.2 million and $22.5 million for the three months ended March 31, 2025 and 2024, respectively. The increase of $15.7 million included an increase of $2.3 million in intangible asset amortization from intangibles generated through the Merger and an increase of $977 thousand in merger-related expenses. The remainder of the increase is across several line items due to the Merger, primarily salaries and employee benefits.

Current wording

Noninterest expenses totaled $75.8 million and $45.1 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $30.7 million included an increase of $4.6 million in intangible asset amortization from intangibles generated through the Merger and an increase of $810 thousand in merger-related expenses. The remainder of the increase is across several line items due to the Merger, primarily salaries and employee benefits.

Previous wording

The following table presents the impact of rate and volume on the change in taxable-equivalent net interest income from the three months ended March 31, 2024 to three months ended March 31, 2025:

Current wording

The following table presents the impact of rate and volume on the change in taxable-equivalent net interest income from the six months ended June 30, 2024 to six months ended June 30, 2025:

Previous wording

Taxable-equivalent net interest margin increased by 23 basis points to 4.00% for the three months ended March 31, 2025 from 3.77% for the three months ended March 31, 2024. The taxable-equivalent yield on interest-earning assets increased by 21 basis points from 5.96% for the three months ended March 31, 2024 to 6.17% for the three months ended March 31, 2025, due primarily to the accretion recognized on fair value marks to loans and securities assumed in the Merger, the impact of which was partially offset by a decline in the Fed Funds rate. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $6.9 million, which represented 51 basis points of net interest margin during the first quarter of 2025. The increase in yield on interest earning assets was partially offset by the increase of six basis points in the cost of interest-bearing liabilities from 2.70% to 2.76% due primarily to increased funding costs on deposits, subordinated notes and trust preferred debt assumed in the Merger. The recognition of interest income previously applied to principal of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status contributed five basis points to the Company's net interest margin during the three months ended March 31, 2024.

Current wording

Taxable-equivalent net interest margin increased by 39 basis points to 4.04% for the six months ended June 30, 2025 from 3.65% for the six months ended June 30, 2024. The taxable-equivalent yield on interest-earning assets increased by 25 basis points from 5.90% for the six months ended June 30, 2024 to 6.15% for the six months ended June 30, 2025 due primarily to the accretion recognized on fair value marks to loans and securities assumed in the Merger, the impact of which was partially offset by the impact of a decline in the Fed Funds rate. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $12.1 million, which represented 57 basis points of net interest margin during the six months ended June 30, 2025. The increase in net interest margin also benefited from the decrease of six basis points in the cost of interest-bearing liabilities from 2.76% to 2.70%, which reflects the impact of deposit rate reductions implemented in the first quarter of 2025 and the runoff of higher rate time deposits and money market balances. The recognition of interest income previously applied to principal of $1.6 million from the payoff of a commercial real estate loan on nonaccrual status contributed five basis points to the Company's net interest margin during the six months ended June 30, 2024.

Previous wording

The average balance of commercial loans increased by $1.3 billion from $1.8 billion for the three months ended March 31, 2024 to $3.1 billion for the three months ended March 31, 2025. Average residential mortgage loans increased by

Current wording

The average balance of commercial loans increased by $1.3 billion from $1.8 billion for the six months ended June 30, 2024 to $3.1 billion for the six months ended June 30, 2025. Average residential mortgage loans increased by $192.3 million from $275.1 million during the six months ended June 30, 2024 to $467.4 million during the six months ended June 30, 2025. Average home equity loans increased by $94.8 million from $194.6 million for the six months ended June 30, 2024 to $289.4 million for the six months ended June 30, 2025. Average installment and other consumer loans increased by $28.1 million from $16.8 million for the six months ended June 30, 2024 to $44.9 million for the six months ended June 30, 2025.

Previous wording

Accretion of purchase accounting adjustments included in interest income was $6.6 million and $147 thousand for the three months ended March 31, 2025 and 2024, respectively. The increase in accretion was due to the recognition of fair value marks from the Merger. Accelerated accretion totaled $1.4 million and $66 thousand during the three months ended March 31, 2025 and 2024, respectively. Prepayment income on loans increased from $56 thousand for the three months ended March 31, 2024 to $300 thousand for the three months ended March 31, 2025.

Current wording

Accretion of purchase accounting adjustments included in interest income was $11.5 million and $298 thousand for the six months ended June 30, 2025 and 2024, respectively. The increase in accretion was due to the recognition of fair value marks from the Merger. Accelerated accretion totaled $2.7 million and $138 thousand during the six months ended June 30, 2025 and 2024, respectively. Prepayment income on loans increased from $257 thousand for the six months ended June 30, 2024 to $807 thousand for the six months ended June 30, 2025.

Previous wording

Interest expense on interest-bearing liabilities increased by $11.0 million from $15.8 million for the three months ended March 31, 2024 to $26.8 million for the three months ended March 31, 2025. The cost of interest-bearing liabilities increased by six basis points from 2.70% for the three months ended March 31, 2024 to 2.76% for the three months ended March 31, 2025 due primarily to increased funding costs on deposits, subordinated notes and trust preferred debt assumed in the Merger. The average balance of interest-bearing deposits increased by $1.5 billion to $3.7 billion for the three months ended March 31, 2025 from $2.2 billion for the three months ended March 31, 2024. Average interest-bearing demand deposits increased by $902.9 million, average time deposits increased by $542.1 million and average savings deposits increased by $103.3 million for the three months ended March 31, 2025 in relation to the comparable prior period due primarily to the impact of the Merger. Amortization of fair value marks on acquired time deposits was $452 thousand for the three months ended March 31, 2025.

Current wording

Interest expense on interest-bearing liabilities increased by $19.2 million from $32.9 million for the six months ended June 30, 2024 to $52.1 million for the six months ended June 30, 2025. The cost of interest-bearing liabilities decreased by six basis points from 2.76% for the six months ended June 30, 2024 to 2.70% for the six months ended June 30, 2025 due to the impact of deposit rate reductions implemented in the first quarter of 2025 and the runoff of higher rate time deposits and money market balances. The average balance of interest-bearing deposits increased by $1.5 billion to $3.7 billion for the six months ended June 30, 2025 from $2.2 billion for the six months ended June 30, 2024. Average interest-bearing demand deposits increased by $858.4 million, average time deposits increased by $486.7 million and average savings deposits increased by $104.0 million for the six months ended June 30, 2025 in relation to the comparable prior period due primarily to the impact of the Merger. Amortization of fair value marks on acquired time deposits was $707 thousand for the six months ended June 30, 2025.

Previous wording

The ACL as a percentage of the total loan portfolio was 1.23% at March 31, 2025 compared to 1.27% at March 31, 2024. The Company recorded a recovery of provision for credit losses on loans of $554 thousand for the three months ended March 31, 2025 compared to expense of $421 thousand for the same period in 2024. For the three months ended March 31, 2025, the provision for credit losses was primarily impacted by the decrease in loans of $55.2 million, partially offset by increases in certain qualitative factors. A qualitative factor was added for Other External Factorsat a minor level for all loan classes due to the uncertainty created within the global and domestic markets from changes in U.S. economic policy, including the recently implemented tariffs, the Economic Conditions qualitative factor at a minor level and the Delinquency and Classified Loan Trends qualitative factor at a moderate level were added for the residential senior liens loan class and the Delinquency and Classified Loan Trends qualitative factor at a moderate level was added for the home equity loan class. An adjustment to the Economic Conditions qualitative factor was based on current market interest rates and prepayment speeds, and the adjustment to Delinquency and Classified Loan Trends was based on delinquencies and downgrades within the aforementioned loan classes.

Current wording

For the six months ended June 30, 2025, the provision for credit losses was primarily impacted by the changes in certain qualitative factors as loan balances were relatively flat over that period. During the first quarter of 2025, a qualitative factor was added for Other External Factorsat a minor level for all loan classes due to the uncertainty created within the global and domestic markets from changes in U.S. economic policy, including the recently implemented tariffs. The Economic Conditions qualitative factor, at a minor level, and the Delinquency and Classified Loan Trends qualitative factor, at a moderate level, were added for the residential senior liens loan class. The Delinquency and Classified Loan Trends qualitative factor was added for the home equity loan class at a moderate level. The addition of the Economic Conditions qualitative factor was based on current market interest rates and prepayment speeds, and the addition of the Delinquency and Classified Loan Trends was based on delinquencies and downgrades within the aforementioned loan classes. During the second quarter of 2025, the Other External Factors qualitative factor was removed for all loan classes as the impact from the changes in U.S. economic policy was then reflected in the macroeconomic conditions within the quantitative ACL model.

Previous wording

•Data processing expense decreased by $341 thousand due to the reduction in core system costs following a system conversion in the fourth quarter of 2024.

Current wording

•Data processing expense decreased by $613 thousand due to the reduction in core system costs following a system conversion in the fourth quarter of 2024.

Previous wording

•Professional services expense increased by $1.2 million, partly due to the Merger, but also due to higher utilization of consultants and other third-party service providers during the integration and system conversion process.

Current wording

•Professional services expense increased by $2.4 million, partly due to the Merger, but also due to higher utilization of consultants and other third-party service providers during the integration and system conversion process.

Previous wording

•Intangible asset amortization expense increased by $2.3 million due to the amortization recognized on the core deposit intangible and wealth customer relationship intangible established from the Merger.

Current wording

•Intangible asset amortization expense increased by $4.6 million due to the amortization recognized on the core deposit intangible and wealth customer relationship intangible established from the Merger.

Previous wording

•Merger-related expenses increased by $977 thousand. The merger costs incurred during the first quarter of 2025 included software conversion costs and professional fees, including external audit, associated with the conversion.

Current wording

•Merger-related expenses increased by $810 thousand due to the timing of conversion work. The merger costs incurred during 2025 included software conversion costs and professional fees, including external audit, associated with the conversion.

Previous wording

•Restructuring expense of $91 thousand was recorded in the three months ended March 31, 2025, which is related to the closure of six branch locations during the fourth quarter of 2024.

Current wording

•Restructuring expense of $91 thousand was related to the closure of six branch locations during the fourth quarter of 2024.

Previous wording

Income tax expense totaled $4.7 million and $2.2 million for the three months ended March 31, 2025 and 2024, respectively. The Company's effective tax rate was 20.7% for the three months ended March 31, 2025 compared to 20.6% for the three months ended March 31, 2024. The Company’s effective tax rate is less than the 21% federal statutory rate due to tax-exempt income, including interest earned on tax-exempt loans and investment securities and income from life insurance policies and partially offset by disallowed interest expense and state income taxes.

Current wording

Income tax expense totaled $10.0 million, an effective tax rate of 21.0%, for the six months ended June 30, 2025 compared with $4.3 million and an effective tax rate of 20.9% for the six months ended June 30, 2024. The Company’s effective tax rate is equal to the 21% federal statutory rate; however, it is impacted by interest earned on tax-exempt loans and investment securities and income from life insurance policies, partially offset by disallowed interest expense and state income taxes.

Previous wording

At March 31, 2025, AFS securities totaled $855.5 million, an increase of $25.8 million, from $829.7 million at December 31, 2024. During the three months ended March 31, 2025, the Company purchased $39.6 million of AFS securities, consisting of agency MBS and CMO securities, which were partially offset by paydowns of $18.4 million. The balance of investment securities included net unrealized losses of $31.3 million at March 31, 2025 compared to net unrealized losses of $35.2 million at December 31, 2024 for a decrease of $3.9 million. This decrease in net unrealized losses was primarily due to lower treasury rates compared to December 31, 2024. The overall duration of the Company's investment securities portfolio was 4.3 years at March 31, 2025 compared to 4.1 years at December 31, 2024. 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. Management believes the structure of the Company's investment security portfolio is appropriately aligned with the rest of the balance sheet to protect against volatile interest rate environments, to provide a source of liquidity and to generate steady earnings.

Current wording

At June 30, 2025, AFS securities totaled $885.4 million, an increase of $55.7 million from $829.7 million at December 31, 2024. During the six months ended June 30, 2025, the Company purchased $89.7 million of AFS securities, consisting of agency and non-agency MBS and CMO securities and securities issued by state and political subdivisions, which were partially offset by paydowns of $38.8 million. The balance of investment securities included net unrealized losses of $31.5 million at June 30, 2025 compared to net unrealized losses of $35.2 million at December 31, 2024 for a decrease of $3.7 million. This decrease in net unrealized losses was primarily due to lower treasury rates compared to December 31, 2024. The overall duration of the Company's investment securities portfolio was 4.5 years at June 30, 2025 compared to 4.1 years at December 31, 2024. 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. Management believes the structure of the Company's investment security portfolio is appropriately aligned with the rest of the balance sheet to protect against volatile interest rate environments, to provide a source of liquidity and to generate steady earnings.

Previous wording

Total loans decreased by $55.2 million from December 31, 2024 to March 31, 2025. This decrease was primarily due to strategic actions to reduce risk in the portfolio, including reducing commercial real estate loan concentrations during the three months ended March 31, 2025.

Current wording

Total loans increased by $165 thousand from December 31, 2024 to June 30, 2025. Overall, loan balances were relatively flat over this period. During the six months ended June 30, 2025, the Company had taken strategic actions to reduce risk in the portfolio, including reducing commercial real estate loan concentrations. The Company purchased property assessed clean energy ("PACE") loans totaling $25.4 million during the second quarter of 2025 totaling $25.4 million.

Previous wording

Nonperforming assets include nonaccrual loans and foreclosed real estate. Risk assets, which include nonperforming assets, FDMs still accruing and loans past due 90 days or more and still accruing, totaled $28.4 million at March 31, 2025, a decrease of $1.4 million from $29.8 million at December 31, 2024. Nonaccrual loans decreased by $1.4 million from December 31, 2024 to March 31, 2025 due primarily to repayments of $4.2 million and charge offs of $581 thousand, partially offset by additions consisting mostly of loans in the commercial and residential mortgage segments.

Current wording

Nonperforming assets include nonaccrual loans and foreclosed real estate. Risk assets, which include nonperforming assets, FDMs still accruing and loans past due 90 days or more and still accruing, totaled $29.5 million at June 30, 2025, a decrease of $293 thousand from $29.8 million at December 31, 2024. Nonaccrual loans decreased by $1.7 million from December 31, 2024 to June 30, 2025 due primarily to repayments of $6.5 million and charge-offs of $907 thousand, partially offset by additions consisting mostly of loans in the commercial and residential mortgage segments.

Previous wording

At March 31, 2025, the Company had $6.8 million in loan modifications meeting the FDM criteria under ASU 2022-02 compared to $9.3 million at December 31, 2024. At March 31, 2025, the FDM balance included $5.2 million in acquired loans from the Merger and new loan modifications during the first quarter of 2025 totaling $269 thousand. The decrease in FDM during the first quarter of 2025 was due to repayments. There were $1.7 million in FDM loans in nonaccrual status at March 31, 2025.

Current wording

At June 30, 2025, the Company had $6.5 million in loan modifications meeting the FDM criteria under ASU 2022-02 compared to $9.3 million at December 31, 2024. At June 30, 2025, the FDM balance included $5.1 million in acquired loans from the Merger and new loan modifications totaling $995 thousand during the six months ended June 30, 2025. During the six months ended June 30, 2025, there were payoffs of $4.1 million in FDMs. There were $750 thousand in FDM loans in nonaccrual status at June 30, 2025 compared to $4.6 million at December 31, 2024.