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 June 30, 2026, the Company had total assets of $5.6 billion, total liabilities of $5.0 billion and total shareholders’ equity of $621.7 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 September 30, 2026, the Company had total assets of $5.7 billion, total liabilities of $5.1 billion and total shareholders’ equity of $605.2 million as reported in the unaudited condensed consolidated balance sheet.

Previous wording

For the three and six months ended June 30, 2026, the Company had net income of $21.2 million and $43.0 million, respectively, compared to net income of $19.4 million and $37.5 million for the three and six months ended June 30, 2025, respectively. Diluted earnings per share was $1.09 and $1.01 for the three months ended June 30, 2026 and 2025, respectively. Diluted earnings per share was $2.21 and $1.94 for the six months ended June 30, 2026 and 2025, respectively. For the three and six months ended June 30, 2025, the Company incurred merger-related expenses of $968 thousand and $2.6 million, respectively. The Company did not incur merger-related expenses during the three and six months ended June 30, 2026. The merger-related expenses are included in non-interest expenses in the unaudited consolidated statements of income.

Current wording

For the three and nine months ended September 30, 2026, the Company had net income of $22.8 million and $65.8 million, respectively, compared to net income of $21.9 million and $59.4 million for the three and nine months ended September 30, 2025, respectively. Diluted earnings per share was $1.17 and $1.13 for the three months ended September 30, 2026 and 2025, respectively. Diluted earnings per share was $3.38 and $3.07 for the nine months ended September 30, 2026 and 2025, respectively. For the three and nine months ended September 30, 2025, the Company incurred merger-related expenses of zero and $2.6 million, respectively. The Company did not incur merger-related expenses during the three and nine months ended September 30, 2026. The merger-related expenses are included in noninterest expenses in the unaudited condensed 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 increased at a rate of 1.5% on an annualized basis for the second quarter of 2026, which was a decrease from 2.1% during the first quarter of 2026 and from 3.0% during the second quarter of 2025. The decrease during the second quarter of 2026 was primarily due to an increase in imports and decrease in government spending, partially offset by an increase in consumer spending and investments. The increase in imports, which reduces GDP, was primarily impacted by capital goods, which includes industrial equipment and semiconductors. Nondefense spending declined due to an increase in sales of crude oil. The increase in consumer spending was primarily driven by nondurable goods, including personal healthcare, motor vehicles and furniture. Investment in intellectual property products continues to rise.

Current wording

Preliminary real GDP increased at a rate of 3.4% on an annualized basis for the third quarter of 2026, which was an increase from 2.2% during the second quarter of 2026 and a decrease from 4.4% during the third quarter of 2025. The increase during the third quarter of 2026 compared to the second quarter of 2026 was primarily due to increases in consumer and government spending, in addition to investments in private inventory and equipment, partially offset by a decline in exports. Within equipment, the primary drivers to the increase were within computers and peripheral equipment. Consumer spending was led by increases in healthcare services. Nondefense spending was impacted by the sale activity of crude oil.

Previous wording

The personal consumption expenditures ("PCE") price index increased by 5.1% in the second quarter of 2026 compared to an increase of 4.6% for the first quarter of 2026 and 2.1% during the second quarter of 2025. Excluding food and energy prices, the PCE price index increased by 3.4% in the second quarter of 2026, 4.4% in the first quarter of 2025 and 2.5% in the second quarter of 2025. The increase in the PCE price index reflects the rising costs from energy prices, which have been impacted by the geopolitical conflict in the Middle East, and pass-through costs on goods impacted by tariffs. Despite the inflationary pressures, consumer demand has allowed for prices to hold.

Current wording

The personal consumption expenditures ("PCE") price index increased by 2.1% in the third quarter of 2026 compared to an increase of 5.0% for the second quarter of 2026 and 2.8% during the third quarter of 2025. Excluding food and energy prices, the PCE price index increased by 2.5% in the third quarter of 2026, 3.3% in the second quarter of 2026 and 2.9% in the third quarter of 2025. The increases in the PCE price index reflect the rising costs from energy prices, which have been impacted by the geopolitical conflict in the Middle East, and pass-through costs on goods impacted by tariffs. Despite the inflationary pressures, consumer demand has allowed for prices to hold.

Previous wording

The national unemployment rate was 4.2% in June 2026 compared to 4.3% in March 2026 and 4.1% in June 2025. During the second quarter of 2026, there continued to be job gains in healthcare, professional services and social assistance; however, there was a decline in employment within leisure and hospitality. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 4.1% in June 2026 compared to 4.3% in March 2026 and 4.3% in June 2026. The unemployment rates in Pennsylvania and Maryland both remain aligned with 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.

Current wording

The national unemployment rate was 4.2% in September and June 2026 compared to 4.3% in September 2025. During the third quarter of 2026, there continued to be job gains in most labor categories. Within the Company's geographic footprint, the unemployment rate in Pennsylvania was 3.6% in September 2026 compared to 4.1% in June 2026 and 4.4% in September 2025. The Maryland unemployment rate was 3.9% in September 2026 compared to 4.3% in June 2026 and 4.3% in September 2025. These state-wide unemployment rates are consistent with those experienced by the counties in which the Company operates branches and other corporate offices.

Previous wording

During 2025, the FOMC implemented rate cuts of 25 basis points in September 2025, October 2025 and December 2025, reducing the target range to 3.50% to 3.75%. These changes were based on the FOMC's assessment of inflation, the unemployment rate and jobs report. There have been no rate changes in 2026.

Current wording

During 2025, the FOMC implemented rate cuts of 25 basis points in September 2025, October 2025 and December 2025, reducing the target range to 3.50% to 3.75%. These changes were based on the FOMC's assessment of inflation, the unemployment rate and jobs report. In September 2026, the FOMC increased the rate by 25 basis points, which raised the target range to 3.75% to 4.00%, to contend with elevated inflation.

Previous wording

The Company’s accounting and reporting policies are in accordance with GAAP and follow accounting and reporting guidelines prescribed by bank regulatory authorities and general practices within the financial services industry in which it operates. Our financial position and results of operations are affected by management's application of accounting policies, including estimates, and assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the balance sheet date and through the date the financial statements are filed with the SEC. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations and related disclosures. The more critical accounting estimates include accounting for business combinations, accounting for credit losses and accounting for income taxes.

Current wording

The Company’s accounting and reporting policies are in accordance with GAAP and follow accounting and reporting guidelines prescribed by bank regulatory authorities and general practices within the financial services industry in which it operates. Our financial position and results of operations are affected by management's application of accounting policies, including estimates, and assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the balance sheet date and through the date the financial statements are filed with the SEC. Different assumptions in the application of these policies could result in material changes in the consolidated financial position and/or consolidated results of operations and related disclosures. The more critical accounting estimates include accounting for business combinations, accounting for credit losses on loans and accounting for income taxes.

Previous wording

The valuations are based upon management’s assumptions of future growth rates, future attrition, discount rates and other relevant factors, which involves a significant level of estimation and uncertainty. In addition, management engaged independent third-party specialists to assist in the development of the fair values of the acquired assets and assumed liabilities. The preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the merger date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments would be recorded to goodwill during the current reporting period. Examples of the impacted acquired loans and assumed liabilities includes loans, deposits, identifiable intangible assets, borrowings and certain other assets and liabilities.

Current wording

The valuations are based upon management’s assumptions of future growth rates, future attrition, discount rates and other relevant factors, which involve a significant level of estimation and uncertainty. In addition, management engaged independent third-party specialists to assist in the development of the fair values of the acquired assets and assumed liabilities. The preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the merger date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments would be recorded to goodwill during the current reporting period. Examples of the impacted acquired loans and assumed liabilities include loans, deposits, identifiable intangible assets, borrowings and certain other assets and liabilities. For the Merger, the measurement period to finalize the fair values of the acquired assets and assumed liabilities ended on June 30, 2025. No further adjustments to the fair values were recorded subsequent to twelve months following the Merger date.

Previous wording

The ACL on loans is measured on a collective basis when similar risk characteristics exist within the Company's loan segments between commercial and consumer. Each of these loan segments are broken down into multiple loan classes, which are characterized by loan type, collateral type, risk attributions and the manner in which management monitors the performance of the borrower. The risks associated with lending activities differ and are subject to the impact of changes in interest rates, market conditions, the collateral securing the loans, and general economic conditions.

Current wording

The ACL on loans is measured on a collective basis when similar risk characteristics exist within the Company's loan segments. Each of these loan segments are broken down into multiple loan classes, which are characterized by loan type, collateral type, risk attributions and the manner in which management monitors the performance of the borrower. The risks associated with lending activities differ and are subject to the impact of changes in interest rates, market conditions, the collateral securing the loans, and general economic conditions. Any of these factors may adversely impact a borrower’s ability to repay loans, and also impact the associated collateral.

Previous wording

The ACL for loans collectively evaluated is measured using a lifetime expected loss rate model under the vendor's neutral scenario that considers historical loss performance and past events in addition to forecasts of future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default to future cash flows, using a loss driver model and loss given default factors, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived through the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP and can be obtained from the Federal Reserve Economic Database. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows. The model incorporates an annualized prepayment rate and a twelve-month rate for curtailment based on a "statistical tendency to repay." Changes in the prepayment and curtailment speeds that vary from the current model inputs could result in inaccurate expected credit losses. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates, which a four-quarter forecast period followed by a four-quarter straight-line reversion period were applied.

Current wording

The ACL for loans collectively evaluated is measured using a lifetime expected loss rate model under the vendor's neutral scenario that considers historical loss performance and past events in addition to forecasts of future economic conditions. The Company elected to use the DCF methodology for the quantitative analysis for the majority of its loan segments, which applies the probability of default to future cash flows, using a loss driver model and loss given default factors, and then adjusts to the net present value to derive the required reserve. The probability of default estimates are derived through the application of reasonable and supportable economic forecasts to the regression models, which incorporates the Company's and peer loss-rate data, unemployment rate and GDP and can be obtained from the Federal Reserve Economic Database. The reasonable and supportable forecasts of the selected economic metrics are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The prepayment and curtailment assumptions adjust the contractual terms of the loan to arrive at the expected cash flows. The model incorporates an annualized prepayment rate and a twelve-month rate for curtailment based on a "statistical tendency to repay." Changes in the prepayment and curtailment speeds that vary from the current model inputs could result in inaccurate expected credit losses. The development and validation of credit models also included determining the length of the reasonable and supportable forecast and regression period and utilizing national peer group historical loss rates, which a four-quarter forecast period followed by a four-quarter straight-line reversion period were applied. The regression period is the historical timeframe used to establish a statistical relationship between macroeconomic factors and historical loan losses.

Previous wording

The taxable-equivalent yield on interest-earning assets decreased by 23 basis points from 6.13% for the three months ended June 30, 2025 to 5.90% for the three months ended June 30, 2026 due primarily to the impact of the decline in the Fed Funds rate during the fourth quarter of 2025 and the decrease in the net accretion income recognized on purchase accounting marks for acquired loans and securities, partially offset by the increase in average loans and investment securities. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $3.2 million during the three months ended June 30, 2026 compared to $5.2 million during the three months ended June 30, 2025. The decrease in the purchase accounting marks was primarily due to the accelerated amortization expense of the remaining fair value mark of $1.6 million on the subordinated notes redeemed on June 30, 2026. Offsetting the impact from the redeemed subordinated notes, net interest margin benefited from a decrease of 13 basis points in the cost of deposits from 2.01% for the three months ended June 30, 2025 to 1.88% for the three months ended June 30, 2026, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits.

Current wording

Taxable-equivalent net interest margin increased by one basis point to 4.12% for the three months ended September 30, 2026 from 4.11% for the three months ended September 30, 2025. The taxable-equivalent yield on interest-earning assets decreased by 21 basis points from 6.19% for the three months ended September 30, 2025 to 5.98% for the three months ended September 30, 2026 due primarily to the three reductions in the Fed Funds rate from September 2025 through December 2025. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $4.6 million during the three months ended September 30, 2026 compared to $5.8 million during the three months ended September 30, 2025. The cost of interest-bearing liabilities decreased by 27 basis points from 2.67% for the three months ended September 30, 2025 to 2.40% for the three months ended September 30, 2026 due primarily to the Fed Funds rate reductions. Net interest margin benefited from a decrease of 16 basis points in the cost of deposits from 1.99% for the three months ended September 30, 2025 to 1.83% for the three months ended September 30, 2026, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits. On June 30, 2026, the Company redeemed its subordinated notes and did not incur interest expense on such notes during the third quarter of 2026. For the three months ended September 30, 2025, interest expense on such notes, inclusive of amortization expense on debt issuance costs and fair value marks, totaled $1.4 million.

Previous wording

Average loans increased by $180.3 million from $3.9 billion for the three months ended June 30, 2025 to $4.1 billion for the three months ended June 30, 2026. Average investment securities increased by $67.8 million from $904.1 million for the three months ended June 30, 2025 to $971.9 million for the three months ended June 30, 2026. Average interest-bearing liabilities increased by $117.5 million to $4.0 billion for the three months ended June 30, 2026 from $3.8 billion for the three months ended June 30, 2025.

Current wording

Average loans increased by $188.8 million from $4.0 billion for the three months ended September 30, 2025 to $4.2 billion for the three months ended September 30, 2026. Average investment securities increased by $66.9 million from $906.4 million for the three months ended September 30, 2025 to $973.3 million for the three months ended September 30, 2026. Average interest-bearing liabilities increased by $150.4 million to $4.0 billion for the three months ended September 30, 2026 from $3.9 billion for the three months ended September 30, 2025.

Previous wording

The yield on loans decreased by 27 basis points to 6.25% for the three months ended June 30, 2026 compared to 6.52% for the three months ended June 30, 2025. Taxable-equivalent interest income earned on loans increased by $296 thousand primarily due to the impact of a decline in the Fed Funds rate during the fourth quarter of 2025 and the decrease in the accretion income recognized on fair value marks to acquired loans, partially offset by an increase in the average loan balances.

Current wording

The yield on loans decreased by 23 basis points to 6.35% for the three months ended September 30, 2026 compared to 6.58% for the three months ended September 30, 2025 due to the impact of a decline in the Fed Funds rate during the fourth quarter of 2025 and the decrease in the accretion income recognized on fair value marks to acquired loans, partially offset by an increase in the average loan balances.

Previous wording

The average balance of commercial loans increased by $106.0 million to $3.2 billion for the three months ended June 30, 2026 from $3.1 billion for the three months ended June 30, 2025. Average residential mortgage loans increased by $43.3 million from $473.0 million during the three months ended June 30, 2025 to $516.3 million during the three months ended June 30, 2026. Average home equity loans increased by $34.9 million from $290.1 million for the three months ended June 30, 2025 to $325.0 million for the three months ended June 30, 2026. Average installment and other consumer loans decreased by $3.9 million from $43.9 million for the three months ended June 30, 2025 to $40.0 million for the three months ended June 30, 2026.

Current wording

The average balance of commercial loans increased by $108.2 million to $3.2 billion for the three months ended September 30, 2026 from $3.1 billion for the three months ended September 30, 2025. Average residential mortgage loans increased by $29.1 million from $500.5 million during the three months ended September 30, 2025 to $529.6 million during the three months ended September 30, 2026. Average home equity loans increased by $54.1 million from $297.2 million for the three months ended September 30, 2025 to $351.3 million for the three months ended September 30, 2026, which includes purchases of home equity lines of credit during the third quarter of 2026. Average installment and other consumer loans decreased by $2.6 million from $42.0 million for the three months ended September 30, 2025 to $39.4 million for the three months ended September 30, 2026.

Previous wording

Accretion of purchase accounting adjustments on loans included in interest income was $4.3 million and $4.9 million for the three months ended June 30, 2026 and 2025, respectively. Accelerated accretion on loans totaled $731 thousand and $1.3 million for the three months ended June 30, 2026 and 2025, respectively. Prepayment fee income on loans decreased from $507 thousand for the three months ended June 30, 2025 to $343 thousand for the three months ended June 30, 2026.

Current wording

Accretion of purchase accounting adjustments on loans included in interest income was $3.9 million and $5.3 million for the three months ended September 30, 2026 and 2025, respectively. Accelerated accretion on loans totaled $1.2 million and $1.4 million for the three months ended September 30, 2026 and 2025, respectively. Prepayment fee income on loans increased from $318 thousand for the three months ended September 30, 2025 to $677 thousand for the three months ended September 30, 2026.

Previous wording

Interest income on investment securities on a tax-equivalent basis increased by $470 thousand to $11.1 million for the three months ended June 30, 2026 from $10.6 million for the three months ended June 30, 2025, with the taxable equivalent yield decreasing from 4.70% for the three months ended June 30, 2025 to 4.57% for the three months ended June 30, 2026. The 13 basis point decrease reflects the impact from the decline in the market interest rates and the decrease in the accretion recognized on fair value marks to acquired securities. Accretion on acquired investment securities was $698 thousand for the three months ended June 30, 2026 compared to $795 thousand for the three months ended June 30, 2025. The average balance of investment securities increased by $67.8 million to $971.9 million for the three months ended June 30, 2026 from $904.1 million for the three months ended June 30, 2025 due primarily to investment security purchases. During the three months ended June 30, 2026 and 2025, the Company did not sell any investment securities.

Current wording

Interest income on investment securities on a tax-equivalent basis increased by $471 thousand to $11.1 million for the three months ended September 30, 2026 from $10.6 million for the three months ended September 30, 2025, with the taxable equivalent yield decreasing from 4.67% for the three months ended September 30, 2025 to 4.54% for the three months ended September 30, 2026. The 13 basis point decrease reflects the impact from the decline in market interest rates. Accretion on acquired investment securities was $785 thousand for the three months ended September 30, 2026 compared to $806 thousand for the three months ended September 30, 2025. The average balance of investment securities increased by $66.9 million to $973.3 million for the three months ended September 30, 2026 from $906.4 million for the three months ended September 30, 2025 due primarily to investment security purchases. During the three months ended September 30, 2026, the Company did not sell any investment securities. During the three months ended September 30, 2025, the Company sold $41.6 million in GSE residential MBS securities, which resulted in a gain of $44 thousand.

Previous wording

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis decreased by $874 thousand to $639 thousand for the three months ended June 30, 2026 from $1.5 million for the three months ended June 30, 2025. The average balance of federal funds sold and interest-bearing bank balances decreased by $66.3 million from $136.1 million for the three months ended June 30, 2025 to $69.8 million for the three months ended June 30, 2026, which was impacted by the increase in average loans and investment securities. This decrease was partially offset by the increase in average interest-bearing liabilities. The FOMC cut the Federal Funds rate by 75 basis points from September 2025 to December 2025.

Current wording

Interest income on federal funds sold and interest-bearing bank balances on a tax-equivalent basis decreased by $556 thousand to $567 thousand for the three months ended September 30, 2026 from $1.1 million for the three months ended September 30, 2025. The average balance of federal funds sold and interest-bearing bank balances decreased by $39.6 million from $101.7 million for the three months ended September 30, 2025 to $62.2 million for the three months ended September 30, 2026, which was impacted by the increase in average loans and investment securities. This decrease was partially offset by the increase in average interest-bearing liabilities. The FOMC had cut the Federal Funds rate by 75 basis points from September 2025 to December 2025, followed by an increase in the rate of 25 basis points in September 2026.

Previous wording

Interest expense on interest-bearing liabilities increased by $550 thousand from $25.3 million for the three months ended June 30, 2025 to $25.9 million for the three months ended June 30, 2026. The cost of interest-bearing liabilities decreased by two basis points from 2.64% for the three months ended June 30, 2025 to 2.62% for the three months ended June 30, 2026, reflecting the impact of deposit rate reductions and the runoff of higher rate time deposits, partially offset by the increase in the average balance of interest-bearing deposits and FHLB advances and other borrowings and the accelerated amortization of $1.6 million from the redemption of subordinated notes. Excluding the impact of the subordinated notes redemption, the cost of interest-bearing liabilities was 2.45% for the three months ended June 30, 2026, a decrease of 17 basis points, from 2.62% during the three months ended June 30, 2025.

Current wording

Interest expense on interest-bearing liabilities decreased by $1.7 million from $26.1 million for the three months ended September 30, 2025 to $24.4 million for the three months ended September 30, 2026. The cost of interest-bearing liabilities decreased by 27 basis points from 2.67% for the three months ended September 30, 2025 to 2.40% for the three months ended September 30, 2026, reflecting the impact of deposit rate reductions and the runoff of higher rate time deposits, in addition to the subordinated notes redemption on June 30, 2026, partially offset by the increase in the average balance of interest-bearing deposits and FHLB advances.

Previous wording

Interest expense on deposits was $21.7 million for the three months ended June 30, 2026 compared to $22.9 million for the three months ended June 30, 2025. The cost of deposits was 1.88% for the three months ended June 30, 2026 compared to 2.01% for the three months ended June 30, 2025. The average balance of interest-bearing deposits increased by $91.9 million to $3.7 billion for the three months ended June 30, 2026 from $3.6 billion for the three months ended June 30, 2025. Average interest-bearing demand deposits increased by $114.2 million to $2.6 billion for the three months ended June 30, 2026 from $2.5 billion for the three months ended June 30, 2025. Average time deposits decreased by $13.7 million to $900.4 million for the three months ended June 30, 2026 from $914.1 million for the three months ended June 30, 2025. Average savings deposits decreased by $8.6 million to $260.7 million for the three months ended June 30, 2026 from $269.3 million for the three months ended June 30, 2025. Amortization of fair value marks on acquired time deposits was $25 thousand for the three months ended June 30, 2026 compared to $254 thousand for the three months ended June 30, 2025.

Current wording

Interest expense on deposits was $21.3 million for the three months ended September 30, 2026 compared to $22.6 million for the three months ended September 30, 2025. The cost of deposits was 1.83% for the three months ended September 30, 2026 compared to 1.99% for the three months ended September 30, 2025. The average balance of interest-bearing deposits increased by $98.9 million to $3.7 billion for the three months ended September 30, 2026 from $3.6 billion for the three months ended September 30, 2025. Average interest-bearing demand deposits increased by $143.0 million to $2.6 billion for the three months ended September 30, 2026 from $2.5 billion for the three months ended September 30, 2025. Average time deposits decreased by $33.8 million to $863.6 million for the three months ended September 30, 2026 from $897.4 million for the three months ended September 30, 2025. Average savings deposits decreased by $10.3 million to $254.5 million for the three months ended September 30, 2026 from $264.8 million for the three months ended September 30, 2025. Amortization of fair value marks on acquired time deposits was $18 thousand for the three months ended September 30, 2026 compared to $138 thousand for the three months ended September 30, 2025.

Previous wording

$211.8 million for the six months ended June 30, 2026, an increase of $103.4 million, from an average of $108.4 million for the six months ended June 30, 2025. The increase was due to higher utilization of borrowings primarily to fund loan and investment growth.

Current wording

Interest expense on borrowings was $3.1 million for the three months ended September 30, 2026 compared to $3.5 million for the three months ended September 30, 2025. The cost of borrowings was 3.94% for the three months ended September 30, 2026 compared to 5.22% for the three months ended September 30, 2025. Average borrowings increased by $51.4 million from $265.5 million for the three months ended September 30, 2025 to $316.9 million for the three months ended September 30, 2026. Average borrowings included average FHLB advances and other borrowings of $306.3 million for the three months ended September 30, 2026, an increase of $137.4 million, from an average of $168.9 million for the three months ended September 30, 2025. The increase was due to higher utilization of borrowings primarily to fund loan growth. Average subordinated notes and trust preferred debt decreased by $60.6 million to $8.1 million for the three months ended September 30, 2026 from $68.7 million during the three months ended September 30, 2025.

Previous wording

The cost of the Company's subordinated notes, excluding the fair value mark, was 7.92% for the three months ended June 30, 2026 compared to 6.46% for the three months ended June 30, 2025, which was due to the interest rate on the $31.0 million subordinated notes, assumed from the Company's merger with Codorus Valley, converting to a variable rate on December 30, 2025. For the three months ended June 30, 2026 and 2025, the cost of the variable-rate trust preferred debt, excluding the fair value mark, was 5.70% and 6.30%, respectively. Amortization of fair value marks on acquired borrowings was $1.8 million and $150 thousand for the three months ended June 30, 2026 and 2025, respectively, which increased due to the redemption of the subordinated notes in 2026.

Current wording

At September 30, 2026, subordinated notes payable totaled zero. On June 30, 2026, the Company redeemed the $31.0 million outstanding 4.50% fixed-to-floating rate subordinated notes due December 9, 2030, which were assumed in the Merger. Previously, on September 30, 2025, the Company redeemed its $32.5 million outstanding 6.0% fixed-to-floating subordinated notes due December 30, 2028. The Company did not incur interest expense on subordinated notes during the three months ended September 30, 2026. The redemption of subordinated notes on September 30, 2025 resulted in the amortization of remaining debt issuance costs totaling $298 thousand for the three months ended September 30, 2025. The cost of the Company's subordinated notes was impacted by the interest rate on the $31.0 million subordinated notes, assumed from the Company's merger with Codorus Valley, converting to a variable rate on December 30, 2025. Amortization of fair value marks on acquired borrowings was $60 thousand and $153 thousand for the three months ended September 30, 2026 and 2025, respectively, which decreased due to the redemption of the subordinated notes.

Previous wording

The ACL to total loan ratio was 1.13% at June 30, 2026 and 1.22% at June 30, 2025. The Company recorded a net provision for credit losses on loans and unfunded loan commitments of $338 thousand for the three months ended June 30, 2026 compared to $109 thousand for the same period in 2025. There was no change in the reserve for unfunded loan commitments during the three months ended June 30, 2026.

Current wording

The ACL to total loan ratio was 1.11% at September 30, 2026 and 1.21% at September 30, 2025. The Company recorded a provision for credit losses on loans of $1.1 million for the three months ended September 30, 2026 compared to $396 thousand for the same period in 2025. There was a decrease of $84 thousand in the reserve for unfunded loan commitments during the three months ended September 30, 2026. There was no change in the reserve for unfunded loan commitments during the three months ended September 30, 2025.

Previous wording

Net charge-offs for the six months ended June 30, 2026 totaled $2.1 million compared to net charge-offs of $446 thousand for the six months ended June 30, 2025. The increase in net charge-offs during the six months ended June 30, 2026 included charge-offs of $1.0 million between two commercial and industrial loans and $753 thousand for a commercial and land development loan. Nonaccrual loans were 0.58% of gross loans at June 30, 2026 compared with 0.57% of gross loans at June 30, 2025.

Current wording

Net charge-offs for the three months ended September 30, 2026 and 2025 totaled $1.0 million and $189 thousand, respectively. The gross charge-offs totaling $1.1 million during the third quarter of 2026 included charge-offs of $744 thousand between two commercial and industrial loans and a charge off of $234 thousand for one owner-occupied commercial real estate loan. Nonaccrual loans were 0.54% of gross loans at September 30, 2026, compared with 0.66% of gross loans at September 30, 2025.

Previous wording

For the three months ended June 30, 2026, the provision for credit losses on loans reflects loan growth of $51.7 million during the second quarter of 2026, partially offset by adjustments to certain qualitative factors as a result of improvements in the underlying criteria. The qualitative factor for Collateral Valuation Trends, which was at a minor level at March 31, 2026, was reduced to no risk level for the commercial real estate segment based on improved trends in collateral valuations as supposed by the FRB's Financial Stability Report. The qualitative factor for Concentrations of Credit and Changes within Credit Concentrations, which was at a minor level at March 31, 2026, was reduced to no risk level for the acquisition and development loan segment as the concentration as a percentage of total risk-based capital was below the Bank's risk indicator for consecutive periods. A qualitative factor for Other External Factorswas increased to a minor level for all loan classes based on the potential impact to loan performance from the uncertainty stemming from the geopolitical conflict in the Middle East and inflationary pressures.

Current wording

The qualitative factor for Economic Conditions, which was at a minor level at June 30, 2026, was elevated during the third quarter of 2026 to a moderate risk level for all loan segments based on impact from the geopolitical conflict in the Middle East and inflationary pressures. The qualitative factor for Other External Factors, previously added at June 30, 2026, was subsequently removed during the third quarter of 2026. The qualitative factor for Delinquency and Classified Loan Trends was reduced to a minor level for the residential mortgage loan segment and removed for the acquisition and development loan segment based on sustained stabilization in credit quality. The qualitative factor for Collateral Valuation Trends, which was at a minor level at March 31, 2026, was reduced during the second quarter of 2026 to no risk level for the commercial real estate segment based on improved trends in collateral valuations as supported by the FRB's Financial Stability Report. The qualitative factor for Concentrations of Credit and Changes within Credit Concentrations, which was at a minor level at March 31, 2026, was reduced during the second quarter of 2026 to no risk level for the acquisition and development loan segment as the concentration as a percentage of total risk-based capital was below the Bank's risk indicator for consecutive periods.

Previous wording

Noninterest income increased by $921 thousand from $12.9 million for the three months ended June 30, 2025 to $13.8 million for the three months ended June 30, 2026. The following were significant components of the change in this line item:

Current wording

Noninterest income was $13.4 million for both the three months ended September 30, 2026 and 2025. The following were significant components which changed in this line item:

Previous wording

•Wealth management income, which includes trust and investment management income and brokerage income, increased by $679 thousand due to improvement in market performance combined with new account generation driving an increase in managed assets.

Current wording

•Wealth management income, which includes trust and investment management income and brokerage income, increased by $691 thousand due to market growth and new production.

Previous wording

Noninterest expenses increased by $52 thousand from $37.6 million for the three months ended June 30, 2025 to $37.7 million for the three months ended June 30, 2026. The following were additional significant components of the change in this line item:

Current wording

Noninterest expenses increased by $1.0 million from $36.3 million for the three months ended September 30, 2025 to $37.3 million for the three months ended September 30, 2026. The following were additional significant components of the change in this line item:

Previous wording

•Salaries and employee benefits expense increased by $865 thousand due to staff additions that filled vacancies, thereby reducing use of third-party consultants, and merit salary increases effective in May.

Current wording

•Salaries and employee benefits expense increased by $961 thousand due to staff additions that filled vacancies, thereby reducing use of third-party consultants, and merit salary increases effective in May of 2026.

Previous wording

•Data processing expenses increased by $738 thousand due to investments in technology as the Company focuses on the evolving needs of its clients.

Current wording

•Data processing expenses increased by $636 thousand due to investments in technology as the Company focuses on the evolving needs of its clients.

Previous wording

•Automated teller machine and interchange fee expense increased by $552 thousand due to an increase in debit card activity and costs incurred for enhanced ATM services.

Current wording

•Automated teller machine and interchange fee expense increased by $214 thousand due to an increase in costs incurred for enhanced ATM services.

Previous wording

Income tax expense totaled $3.5 million, an effective tax rate of 14.2%, for the three months ended June 30, 2026 compared to income tax expense of $5.3 million and an effective tax rate of 21.3% for the three months ended June 30, 2025. The Company’s effective tax rate is less than the 21% federal statutory rate primarily due to the purchase of federal income tax credits, which reduced income tax expense by $1.6 million. In addition, the effective tax rate was impacted by tax-exempt income, including interest earned on tax-exempt loans and securities and non-taxable income from life insurance policies and tax credits partially offset by the disallowed portion of interest expense against earnings in association with the Bank's tax-exempt investments under the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") and other nondeductible items.

Current wording

Income tax expense totaled $5.5 million, an effective tax rate of 19.4%, for the three months ended September 30, 2026 compared to income tax expense of $5.8 million and an effective tax rate of 21.0% for the three months ended September 30, 2025. The Company’s effective tax rate is less than the 21% federal statutory rate primarily due to the purchase of federal income tax credits, which reduced income tax expense by $356 thousand during the three months ended September 30, 2026. In addition, the effective tax rate was impacted by tax-exempt income, including interest earned on tax-exempt loans and securities and non-taxable income from life insurance policies and tax credits partially offset by the disallowed portion of interest expense against earnings in association with the Bank's tax-exempt investments under the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") and other nondeductible items.

Previous wording

Net income totaled $43.0 million for the six months ended June 30, 2026 compared to $37.5 million for the same period in 2025. Diluted earnings per share for the six months ended June 30, 2026 totaled $2.21 compared to $1.94 for the six months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, the Company incurred merger-related expenses of zero and $2.6 million, respectively, which were included in non-interest expenses of the unaudited condensed consolidated statements of income. For the six months ended June 30, 2025, excluding these non-recurring expenses, net income and diluted earnings per common share totaled $39.5 million and $2.04, respectively. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Current wording

Net income totaled $65.8 million for the nine months ended September 30, 2026 compared to $59.4 million for the same period in 2025. Diluted earnings per share for the nine months ended September 30, 2026 totaled $3.38 compared to $3.07 for the nine months ended September 30, 2025. For the nine months ended September 30, 2026 and 2025, the Company incurred merger-related expenses of zero and $2.6 million, respectively, which were included in noninterest expenses of the unaudited condensed consolidated statements of income. For the nine months ended September 30, 2025, excluding these non-recurring expenses, net income and diluted earnings per common share totaled $61.4 million and $3.17, respectively. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Previous wording

Income tax expense totaled $9.2 million and $10.0 million for the six months ended June 30, 2026 and 2025, respectively. The Company's effective tax rate was 17.6% for the six months ended June 30, 2026 compared to 21.0% for the six months ended June 30, 2025.

Current wording

Income tax expense totaled $14.7 million and $15.8 million for the nine months ended September 30, 2026 and 2025, respectively. The Company's effective tax rate was 18.3% for the nine months ended September 30, 2026 compared to 21.0% for the nine months ended September 30, 2025.

Previous wording

The following table presents net interest income, net interest spread and net interest margin for the six months ended June 30, 2026 and 2025 on a taxable-equivalent basis:

Current wording

The following table presents net interest income, net interest spread and net interest margin for the nine months ended September 30, 2026 and 2025 on a taxable-equivalent basis:

Previous wording

The following table presents the impact of rate and volume on the change in taxable-equivalent net interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2026:

Current wording

The following table presents the impact of rate and volume on the change in taxable-equivalent net interest income for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2026:

Previous wording

Net interest income on a taxable-equivalent basis decreased by $659 thousand to $49.4 million for the three months ended June 30, 2026 from $50.1 million for the three months ended June 30, 2025. The Company's net interest spread decreased by 21 basis points from 3.49% for the three months ended June 30, 2025 to 3.28% for the three months ended June 30, 2026.

Current wording

Net interest income on a taxable-equivalent basis increased by $2.0 million to $152.9 million for the nine months ended September 30, 2026 from $150.9 million for the nine months ended September 30, 2025. The Company's net interest spread decreased by seven basis points from 3.47% for the nine months ended September 30, 2025 to 3.40% for the nine months ended September 30, 2026.

Previous wording

Taxable-equivalent net interest margin decreased by 15 basis points to 3.89% for the six months ended June 30, 2026 from 4.04% for the six months ended June 30, 2025. During the six months ended June 30, 2026, the Company redeemed the subordinated notes and accelerated the amortization of the related fair value mark of $1.6 million to interest expense, which reduced net interest margin by six basis points. Excluding the accelerated amortization of the fair value mark on the redeemed subordinated notes, net interest margin was 3.95% for the six months ended June 30, 2026. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Current wording

Taxable-equivalent net interest margin decreased by nine basis points to 3.97% for the nine months ended September 30, 2026 from 4.06% for the nine months ended September 30, 2025. During the nine months ended September 30, 2026, the Company redeemed the subordinated notes and accelerated the amortization of the related fair value mark of $1.6 million to interest expense, which reduced net interest margin by four basis points. Excluding the accelerated amortization of the fair value mark on the redeemed subordinated notes, net interest margin was 4.01% for the nine months ended September 30, 2026. See “Supplemental Reporting of Non-GAAP Measures” for additional information.

Previous wording

The taxable-equivalent yield on interest-earning assets decreased by 25 basis points from 6.15% for the six months ended June 30, 2025 to 5.90% for the six months ended June 30, 2026 due primarily to the impact of the decline in the Fed Funds rate during the fourth quarter of 2025 and the decrease in the accretion income recognized on purchase accounting marks for acquired loans and securities. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $7.9 million during the six months ended June 30, 2026 compared to $12.1 million during the six months ended June 30, 2025. The decrease was partially due to the accelerated amortization of the fair value mark of $1.6 million on the subordinated notes redeemed on June 30, 2026. Offsetting the impact from the redeemed subordinated notes, the net interest margin benefited from the decrease of 16 basis points in the cost of deposits from 2.08% for the six months ended June 30, 2025 to 1.92% for the six months ended June 30, 2026, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits.

Current wording

The taxable-equivalent yield on interest-earning assets decreased by 24 basis points from 6.17% for the nine months ended September 30, 2025 to 5.93% for the nine months ended September 30, 2026 due primarily to the impact of the three declines in the Fed Funds rate from September 2025 to December 2025. The net accretion impact of purchase accounting marks on loans, securities, deposits and borrowings was $12.5 million during the nine months ended September 30, 2026 compared to $17.9 million during the nine months ended September 30, 2025. The cost of interest-bearing liabilities decreased by 16 basis points from 2.69% for the nine months ended September 30, 2025 to 2.53% for the nine months ended September 30, 2026 due primarily to the Fed Funds rate reductions. The net interest margin benefited from the decrease of 16 basis points in the cost of deposits from 2.05% for the nine months ended September 30, 2025 to 1.89% for the nine months ended September 30, 2026, reflecting the impact of deposit rate reductions over that time period and the runoff of higher rate time deposits. The decrease was also due to the accelerated amortization of the fair value mark of $1.6 million on the subordinated notes redeemed on June 30, 2026.

Previous wording

Average loans increased by $170.8 million to $4.1 billion for the six months ended June 30, 2026 from $3.9 billion for the six months ended June 30, 2025. Average investment securities increased by $93.3 million to $978.0 million for the six months ended June 30, 2026 from $884.7 million for the six months ended June 30, 2025. Average interest-bearing liabilities increased by $101.2 million to $4.0 billion for the six months ended June 30, 2026 from $3.9 billion for the six months ended June 30, 2025.

Current wording

Average loans increased by $176.9 million to $4.1 billion for the nine months ended September 30, 2026 from $3.9 billion for the nine months ended September 30, 2025. Average investment securities increased by $84.4 million to $976.4 million for the nine months ended September 30, 2026 from $892.0 million for the nine months ended September 30, 2025. Average interest-bearing liabilities increased by $117.8 million to $4.0 billion for the nine months ended September 30, 2026 from $3.9 billion for the nine months ended September 30, 2025.