Earnings call transcript: Orrstown Q2 2025 earnings exceed expectations

Orrstown Financial Services Inc. reported a strong financial performance for the second quarter of 2025, surpassing market expectations. The company posted an earnings per share (EPS) of $1.04, compared to the forecasted $0.98, representing a 6.12% surprise. Revenue also topped estimates, reaching $62.4 million against a forecast of $61 million, a 2.3% beat. Following the announcement, Orrstown’s stock price rose by 2.79% to $34.49 in pre-market trading. According to InvestingPro data, the company has maintained dividend payments for 11 consecutive years, with an impressive 30% dividend growth over the last twelve months, demonstrating strong financial stability.

Key Takeaways

• Orrstown’s EPS and revenue both exceeded market forecasts.
• The company’s net interest margin improved to 4.07%.
• Stock price increased by 2.79% in pre-market trading.
• Wealth management assets under management grew to $3 billion.

Company Performance

Orrstown Financial Services Inc. demonstrated robust performance in Q2 2025, with significant improvements in key financial metrics. The company reported a return on average assets of 1.51% and a return on average equity of 15.12%. The net interest margin rose to 4.07%, up from 4.0% in the previous quarter, highlighting efficient asset management and cost control. InvestingPro analysis indicates the company maintains a GOOD overall financial health score, with particularly strong momentum metrics. Get access to 8 more exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports.

Financial Highlights

• Revenue: $62.4 million, up from the forecasted $61 million.
• Earnings per share: $1.04, exceeding the forecast of $0.98.
• Noninterest income increased by $1.3 million quarter-over-quarter.

Earnings vs. Forecast

Orrstown’s actual EPS of $1.04 surpassed the forecast of $0.98, resulting in a 6.12% surprise. The revenue of $62.4 million also exceeded expectations, marking a 2.3% positive variance. This performance underscores the company’s strong operational execution and market positioning.

Market Reaction

Following the earnings announcement, Orrstown’s stock price rose by 2.79% to $34.49 in pre-market trading. The stock’s movement reflects investor optimism, supported by the company’s better-than-expected financial results. Orrstown’s current price is within its 52-week range, indicating a positive market sentiment.

Outlook & Guidance

Looking forward, Orrstown anticipates stronger net income as loan growth accelerates and net interest margin potentially expands further in Q3. The company is focused on expense management, aiming for a 55% efficiency ratio by early 2026. Orrstown is also exploring strategic opportunities for growth, including potential acquisitions. Based on InvestingPro analysis, analysts have set price targets ranging from $35 to $39, suggesting potential upside. The company’s current market valuation appears to be slightly above InvestingPro’s Fair Value assessment, with a P/E ratio of 18.31 and a price-to-book ratio of 1.24.

Executive Commentary

Adam Metz, Chief Operating Officer, emphasized the importance of talent, stating, "Talent matters, and we feel confident in the team we have in place." CEO Tom Quinn highlighted the company’s strategic focus, saying, "We’re looking for bankers, not just people that can lend money." Metz also noted, "Our pipeline is the largest it’s been since the merger of the two companies."

Risks and Challenges

• Potential margin pressure with anticipated rate cuts.
• Integration challenges following the Codorus Valley merger.
• Competitive lending environment impacting loan pricing.
• Economic uncertainties that could affect loan demand.

Q&A

During the earnings call, analysts inquired about the potential impact of rate cuts on net interest income and the company’s credit quality. Executives confirmed a strong commercial loan pipeline and highlighted their talent acquisition strategy, addressing concerns about maintaining credit quality amidst loan portfolio stress testing.

Full transcript - Orrstown Financial Services Inc (ORRF) Q2 2025:

Kate, Conference Operator: Good morning. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Arsound Financial Services, Inc. Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question and answer I will now turn the call over to Tom Quinn, President and Chief Executive Officer of Orsdowne Financial Services, Inc. And Orsdowne Bank, who will begin the conference. Mr. Quinn, please go ahead.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Thank you, Kate, and good morning. I’d like to thank everyone for participating in Orestown’s second quarter twenty twenty five earnings conference call, both by telephone and through the webcast. If you have not read the earnings release we issued yesterday afternoon, you may access it along with the financial tables and schedules by going to our website, wwwoorristown.com. Once there, you may click on the investor relations link and then on the Events and Presentations link. Also, we start, I would like to mention that today’s presentation may contain forward looking information.

Cautionary statements about this information are included in the earnings release, the investor presentation, and our SEC filings. The presentation also includes non GAAP financial measures as identified in the earnings release and investor presentation. The appropriate reconciliations to GAAP are included in the appendices. Joining me on the call this morning are Orestown Bank senior executive vice president and chief operating officer, Adam Metz, as well as our executive vice president and chief financial officer, Neil Kalani. Our chief risk officer, Bob Carrotti, and our chief credit officer, Dave Chakowski, will also participate on the call.

Our financial highlights for the quarter are summarized on slide three of the deck. Despite some lingering merger related expenses, GAAP earnings were strong and core earnings continued to increase. Excluding certain merger related charges, return on average assets was 1.51%, and return on average equity was 15.12% for the ’25 compared to one point four five and fourteen point nine seven, respectively, for the first quarter of twenty twenty five. We expect stronger net income going forward as loan growth accelerates. Net interest margin also increased.

NIM was four zero seven in the 2025 compared to 4% in the ’25 with the possibility of further upside. We believe that we are pricing loans prudently and managing funding costs well, which is evidenced by the improving margin. Fee income remained a core strength of the organization during the second quarter. Fee income as a percentage of operating revenue was 21% during the quarter, an improvement from prior periods. Noninterest income increased 1,300,000.0 quarter to quarter.

The team has been doing an excellent job of generating fee income from various sources. Led by our wealth management fees remaining remained the largest component of our fee income. Now at 3,000,000,000 in assets under management, there is significant opportunity to build this business. While expenses remain slightly more elevated than we would like, they are coming down over the time, over time, and our core operating expenses are in line with expectations. The team remains focused on establishing a foundation to support future growth.

Excluding the impact of merger related expenses, the efficiency ratio is 58.7% for the second quarter compared to 60.5 for the first quarter of twenty twenty five. We do not anticipate any meaningful merger related expenses going forward. We do expect expenses to continue to decline throughout the year, which will further boost our already strong earnings stream. We believe that we consistently have demonstrated the ability to maintain strong profitability in any environment. I would now like to turn it over to Adam Metz for a discussion on our balance sheet.

Adam?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Thank you, Tom, and good morning, everybody. Loan growth was relatively modest this quarter, but we believe that the loan pipeline is strong. Total loan growth was 6% for the quarter on an annualized basis. Annualized commercial loan growth was 2%. During the quarter, we saw a good mix of C and I and CRE and also a good mix between floating and fixed.

We believe our overall loan pipeline is strong. Currently, it’s the highest it’s been since the merger of the two companies. This reflects the strength and resilience of our regional economy, the deep engagement of our team with our clients, and the impact of new talent we’ve attracted, including individuals with middle market experience. As I’ve said before, talent matters, and we feel confident in the team we have in place and continue to build upon. It does remain a competitive lending environment, but we remain confident in our ability to grow loans the right way.

And credit quality remains sound. We believe that the work we have done since the merger to protect credit quality has been very beneficial. Net charge offs were again nominal in the second quarter. Classified loans and nonaccrual loans decreased quarter to quarter. Nonaccrual loans to total loans

Kate, Conference Operator: decreased to 0.57% for the second quarter compared to 0.59% for the first quarter. And we continue to build capital,

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Capital ratios increased across the board quarter to quarter. We remain well capitalized by all measures. We can continue to prioritize shareholder value. Late in the second quarter, the board of directors authorized a share repurchase program of up to 500,000 shares of common stock.

The company repurchased 2,134 common shares during the quarter. We plan to utilize this authorization judiciously to support our currency as well as we believe we remain undervalued. The board voted to increase our quarterly dividend by $01 per share from $0.26 to $0.27 per share. This is the third dividend increase in the past year, and our dividend has increased 35% since the merger. Neil Kalani, our CFO, will now discuss our second quarter results in more detail.

Neil?

Neil Kalani, Executive Vice President and Chief Financial Officer, Orestown Financial Services, Inc.: Thanks, Adam. Good morning, everyone. We had a very strong second quarter both from a GAAP basis and adjusted for some of the residual merger related noise. We’ve achieved normalized ROA over 1.5% and expect improvement from there. Tom already walked through the numbers at a high level, so I’ll just jump into the details starting on slide four.

The margin remained very strong and improved to four point o 7% in the second quarter. Cost of deposits declined by 12 basis points. This was partially offset by loan yields declining by seven basis points due to the lower purchase loan accretion than prior quarter. Absent the impact of the loan accretion, loan yields remained relatively flat compared to the previous quarter. This highlights our continued discipline on both loan and deposit pricing.

The environment remains very competitive on both fronts, so the potential for margin pressure is real. But I do see further upside in the margin into the third quarter with the expectation that stabilizes after that point, assuming rates remain unchanged, and we do remain asset sensitive. As noted on slide five, fee income was 12,900,000.0 for the second quarter, up by 1,300,000.0 from the prior quarter. For the second quarter, fee income was almost at 21% of total revenues, but our goal remains to to to be to to continue to exceed 20%. The team had an excellent quarter from a swap fee generation standpoint with just short of 700,000 in swap fees.

Service charges increased by 200,000 as our treasury management team continues to successfully grow its base, and the broad fee waivers that we’ve discussed previously that we’d temporarily implemented are no longer in place. Wealth management had a very another very strong quarter and remains a significant focus for Orestown to boost our noninterest income going forward. Obviously, there was a rough start to the stock market in the beginning of the quarter that did have some impact quarter over quarter, but we’re very happy with the income generated from that business and the opportunities that lie ahead. The quarter also included some solar tax credit income and other items that are not necessarily consistent from quarter to quarter. I don’t expect the current fee income run rate to to continue in the near term.

It is, longer term expect expectation for us, but several components do remain dependent on timing. A quarterly run rate around 12,000,000 is is likely reasonable there, but certainly within the range of 11 and a half to to 12 and a half million. Noninterest expense is covered on slide six. While we had a little more noise than we expected during the second quarter, the picture of our efforts on expenses is becoming more evident. Noninterest expense declined by approximately 600,000 in the quarter, and that includes merger related expenses of almost a million and severance costs of approximately 600,000.

The efficiency ratio continues to come down as Tom noted. And I’ve I’ve been messaging a go forward run rate around 35,000,000 each quarter. If you if you back out the items I just talked about and and about a 1,000,000 about 1,000,000 of consulting fees kinda in excess of normal in the quarter associated with the continued process improvement work that we have going, it gets you to that 35,000,000 number. Merger related expenses this quarter were associated with the final components of our core system conversion, and we don’t anticipate any any associated costs of significance going forward associated with the merger. The excess consulting costs are expected to decline over the next couple of quarters, so I expect the quarterly expense run rate in the 35 to $36,000,000 range for the next few quarters and and early next year approaching a 55% efficiency ratio inclusive of amortization costs.

However, I will continue to reiterate that the primary reason for our success over the years has been our ability to attract strong talent to set us up for growth. So that approach will continue and could potentially impact the expense run rate. We would obviously expect that those decisions, if they do happen, would impact the revenue side of the equation over time as well. Credit quality is covered on slide seven. Recorded a small provision this quarter primarily from a negligible amount of charge offs on a net basis.

Classified loans decreased by 14%. Nonaccruals were down slightly as well. Our allowance coverage ratio was 1.22%, which we continue to believe adequately addresses the risk in the loan portfolio. Slide eight highlights our key performance metrics as adjusted for merger related expenses. In the second quarter, normalized EPS reached one zero four, adjusted ROA was one fifty one, and adjusted ROE was 15.1%.

With both the expected impact of our loan pipeline on interest income and the momentum we have on expenses, we do see some upside in those numbers, which puts us near the top of our peer group. In addition, now that we’re a year out from the merger, we built TCE back over eight percent. Moving to the balance sheet slide on on on slide nine. Total loans grew to 3,930,000,000.00, while commercial loans, as Adam mentioned, growing by 2% annualized. We do have a strong pipeline heading into the third quarter, and we remain prudent in our lending decisions and continue to focus on risk and long term relationships.

The average yield on loans was six and a half percent. As mentioned earlier, the yield was impacted by the lower purchase accounting accretion, which will vary, each quarter based on timing of prepayments of acquired loans. On slide 10, deposits did decline by a 117,000,000 as we continue to shift away from promotional time deposits and money markets. Cost of deposits declined from two fourteen to 201% in the quarter due to the impact of pricing decisions in the first quarter and new funding at that lower cost. The 87% loan to deposit ratio provides us with sufficient liquidity to fund our loan pipeline without placing heavy reliance on alternative funding sources.

As I’ve indicated in the past, we’re we’re fairly comfortable in the the low 90% range, so we feel good about where we are from that standpoint. And then as communicated previously and shown on slide 11, we use some of our liquidity to enhance the securities portfolio and generate additional interest income as loan production ramps up. We purchased 50,000,000 of securities in the quarter, and the portfolio is now up to 885,000,000. And we’ll continue to look for opportunities as the market creates them to strengthen our balance sheet and create strong yields. The duration remains relatively short at four and a half years, and that in unrealized losses are still around 3% of the book balance at June 30.

On slide 12, you can see that our regulatory capital ratios are now at or above premerger levels. As we’ve said previously, the capital levels and expected growth in the ratios as we move forward present us with many options to continue our growth trajectory. I’d like to now turn the call back over to Adam Metz for some closing remarks. Adam?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Thank you, Neil. We believe that the work we have done since the merger to protect credit quality, enhance liquidity, and build capital has presented us with significant strategic flexibility going forward, capacity to accelerate commercial lending for strong relationships, considering buybacks as we believe our stock is undervalued, contemplating redemption of sub debt, and ability to take advantage of other strategic opportunities. We remain optimistic about the future both in the short and long term. We would now like to open the call to questions. Before we get started, the operator will briefly review the instructions with you.

Kate, Conference Operator: Your first question comes from the line of Gregory Zengorn with Piper Sandler. Your line is open.

Gregory Zengorn, Analyst, Piper Sandler: Hey, good morning guys. How are you?

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Good morning.

Neil Kalani, Executive Vice President and Chief Financial Officer, Orestown Financial Services, Inc.: Good morning, Greg.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Good morning.

Gregory Zengorn, Analyst, Piper Sandler: You guys had a pretty clean quarter on credit. I was wondering though, are there still other credits in the Codorus Valley deal that you were still looking to move off of or sell?

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Are there other credits in the in the, Codorus Valley deal that we wanted to

Unidentified Executive: Well, we’ve, you know, in the past, we have we have engaged in some loan sales. We haven’t in the past two quarters because we’ve as you’ve seen, you know, we’ve been relatively successful working them out with very little in the way of of any charge offs. There might be a couple of loans that we we may see that as an opportunity in in the next couple of quarters, but I I wouldn’t, you know, look for anything real substantial in terms of, you know, major loan sales.

Gregory Zengorn, Analyst, Piper Sandler: Okay. Thank you. And then, as a follow-up, is there a capital level that you guys have in mind that you would like to reach before seriously considering another acquisition? Thank you.

Neil Kalani, Executive Vice President and Chief Financial Officer, Orestown Financial Services, Inc.: I’m sorry. You’re you’re asked, was there a capital level we wanna achieve before another Okay. Correct. Yeah. I like we’ve kind of said before, I I think we’re there.

We need to continue to, we’re at premerger levels now. We’ll continue to build to a good spot over the next couple quarters. I I think we’re at the point where we don’t have to get any outside capital to to do something. Obviously, it depends on the the type of deal and the size and all that, but, we feel we’re in a good spot now and particularly over the next quarters can can build it up even more next several quarters.

Gregory Zengorn, Analyst, Piper Sandler: Thank you.

Kate, Conference Operator: Your next question comes from the line of Tim Fudzer with KBW. Your line is open.

Tim Fudzer, Analyst, KBW: Hey, good morning. Thank you for taking my question.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Good morning, Tim.

Tim Fudzer, Analyst, KBW: I wanted to follow-up on your comments about the potential for NIM expansion in Q3 and then maybe some stabilization. It sounds like that assumes rates stay unchanged. Can you provide some commentary on how you know, two to three rate cuts in the back half of the year could impact that, particularly, you know, going into 2026, maybe where where the exit NIM would be?

Neil Kalani, Executive Vice President and Chief Financial Officer, Orestown Financial Services, Inc.: So what was the the end of your question? Where the what would be?

Tim Fudzer, Analyst, KBW: Where would the exit NIM be at the end of this year, say, we get, you know, two to three Fed rate cuts?

Neil Kalani, Executive Vice President and Chief Financial Officer, Orestown Financial Services, Inc.: So we are like I said, we are asset sensitive, so we we were there would be negative impact to overall net interest income going forward, with the floating rate loans resetting, but we would certainly have opportunity to continue to bring the deposit cost down. So it would have couple rate cuts would negatively impact us, but we’ll need to keep pushing on the the loan side to to offset some of that impact. So that’s really kinda where we’re at from a kinda margin projection standpoint. I I deposit costs are probably it’s still very competitive. I I think we’ve seen, the reduction that we’re gonna experience probably stay relatively flat from here without rate reductions.

But, as I’ve always said, the it is a difficult question to answer to a certain extent going forward if rates get cut is how how hard can we push on deposit costs and how competitive it is. But, certainly, there’s some some downside as risk come down as rates come down.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: I I will add to that, something Adam mentioned, that our our pipelines have not been bigger since the two companies came together. And so properly pricing those those loans will be critical as we see rate cuts.

Tim Fudzer, Analyst, KBW: Great. Okay. And I’d love to follow-up on some of your commentary about the wealth management business. Obviously, you had a pretty good quarter, but it sounds like it’s an area where you guys see a lot of opportunity for growth. I’m sure there’s maybe some synergies you can achieve with Kadorsa, but I’d love to get some more details on maybe what initiatives you have there, where the growth is coming from, and, you know, your outlook for that business.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: I I think it’s encouraging to the bank right now when you see in the RIA space that Ozaik snapped up CW advisors 13 and a half billion dollar acquisition of assets under management for for 900 $950,000,000. And you you’re sitting on 3,000,000,000 in AUM, and you realize that you grow the franchise there, the value of your franchise should should only improve. And I think Adam’s got a a real strong strategic mindset towards bringing in more advisers, and I’ll let you talk about it, Adam, and just share with them kinda some of the things we’re doing, not only in Maryland, but in but in Lancaster as well. Yeah.

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Yeah. And I I I I do think we have an opportunity in front of us. And a lot of that will be through talent acquisition, and and I think we’re pretty close on some fronts there. We also have as I said before, we we have a lot of opportunity in what I say are growth markets. And so we are just sort of scratching the surface as it relates to our Maryland market, and there’s a lot of opportunity there, but also in Lancaster and Harrisburg as well.

Tim Fudzer, Analyst, KBW: Great. Thank you, guys.

Kate, Conference Operator: Your next question comes from the line of David Long with Raymond James. Your line is open.

David Long, Analyst, Raymond James: Good morning, everyone, and thanks for taking my questions. The in your prepared remarks, you talked about the strength of the economic backdrop, within your footprint. And I just on top of that, I wanted to to get some color from you guys as far as what are you hearing from your business customers? You know, when we when we talked in April, I think sentiment was pretty poor. As you said, the market was was was was much lower than where we are today.

And coming off of Liberation Day, how is the your the sentiment of your commercial clients adjusted or changed over the last few months?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Yeah. I would just answer that question by saying our pipeline is the largest it’s been since the merger of the two companies. You know, we’re having daily conversations with our clients. But I would tell you, we’ve seen the pipeline not only grow, but a fund, here in July, and and and and we expect it to continue. So, yes, there is some noise, on the headlines on any given day, but right now, they’re moving forward, and and, we feel good about where we are.

David Long, Analyst, Raymond James: Got it. Thanks for that. And then as a follow-up, can you maybe elaborate a little bit more on your appetite to add middle market bankers? And are these bankers are what do you have in your model today for ads? And with with growing the team, is it coming from bankers from larger institutions, smaller institutions?

Where are you finding the best opportunities? Thank you.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Yeah. This is Tom. I’ll turn it over to Adam in a second. But but in in recent weeks, we hired the number one lender from a $40,000,000,000 regional bank. That individual was the number one person in that company in the middle market space.

And I I think Adam can elaborate on some of the other areas that he wants to focus on. Adam?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Yeah. I I I think we do have some upside there to sort of balance out the team. We’re very we’re very pleased to to hire this individual. Brings a lot of experience in a variety of industries. But we we’ve also been successful in hiring individual for our Lancaster York market, another one for our York market.

So that again, talent matters, and we’ve been very you know, we we we allow them the ability to, service their clients in a way that’s meaningful for them, but we also, you know, as as we always lead with risk. And and so we we’ve feel like we’ve been telling a pretty compelling story, and and we’ve been successful in attracting talent. And we’re always on the lookout for great talent. So I think that will continue.

David Long, Analyst, Raymond James: Great. Thanks a lot for the color. Appreciate it.

Kate, Conference Operator: Your next question comes from the line of Dan Cardenas with Janney Montgomery Scott. Your line is open.

Dan Cardenas, Analyst, Janney Montgomery Scott: Hey, good morning, everybody. Good morning. Just a quick couple of follow-up questions on lending side. Maybe can you give us some color on what the line utilization rate is on your commercial portfolio? And how does that compare to historical levels?

Unidentified Executive: Yeah. We’ve not seen a material change in line utilization in the quarter. I think it’s remained fairly stable. Utilization rates are fairly modest right now, in the commercial portfolio.

Dan Cardenas, Analyst, Janney Montgomery Scott: Alright. So then as as you look at growth in the back half of the year, is that gonna be primarily, CRE driven? Or or, I mean, what’s where where do you see the most opportunity, within your footprint?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Yeah. I I would tell you, the first half of this last quarter, the loan growth came mostly from c and I. The second half of the last quarter, we had some good CRE deals. We are now at 293% of of risk based capital in our CRE bucket. So we do have, as we’ve talked about earlier, there are a number of measures to reduce that.

But we now feel like we have capacity to to go out and and do the right CRE deals with the right relationship. So I I feel like right now, we’re pretty pretty well mixed, for as we look forward in our pipeline, but we do have a we do we do have room for additional CRE.

Dan Cardenas, Analyst, Janney Montgomery Scott: So so the wins on those deals are are is that primarily pricing driven, or or what’s what’s kind of the secret sauce that that will allow you to to get to get the transactions, that you want?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Yeah. I’m sorry. I I I didn’t necessarily hear your question there.

Dan Cardenas, Analyst, Janney Montgomery Scott: Yeah. I’m just I was just wondering if if no. To to win the loans, you know, I know it’s competitive out there, but are are those wins primarily driven by pricing, or or are there some other factors that come into play that that allow you to win a customer over?

Adam Metz, Senior Executive Vice President and Chief Operating Officer, Orestown Bank: Yeah. I mean, I I would I would speak to our relationship model there. I mean, it’s not just you know, certainly, we have to be competitive on the loan pricing, but I think we we we we constantly speak about earning an extra you know, we earn what we what we price our loans at. So we have to, you know, speak to our relationship driven model. And it’s not just the commercial lender.

It’s the treasury management. It’s the retail franchise. It’s the wealth management as well. So

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Yeah. I I would add to that that if you go back to 2020 when our lending team embraced clients to help them with PPP when they couldn’t get them at the banks they were at. When you go back to the SIVV failure, and we contacted all our clients to to to help them if they were nervous about, you know, liquidity challenges they might have or might not have. When you look at the consultative nature of how we approach, we’re looking for bankers, not just people that can lend money. And so sometimes you’re saying no to the client and and and winning a relationship because the client truly appreciates what you’re doing in long term.

And I think Adam has has spoken at length to our lending team about the importance of managing the relationship, being there for relationship, and fostering kind of a an attitude that, you know, we’re there to help them and their businesses. And and that approach seems to work, right, and and it’s it’s paid long term dividends.

Dan Cardenas, Analyst, Janney Montgomery Scott: Excellent. And then my my last question. It’s been a year since the Caderous Valley deal has been consummated. Are are you guys ready to do another transaction? And what what’s kind of the parameters that you’re looking for in in potential targets in terms of size and geographic location?

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Yeah. I I think it’s a question we don’t typically answer publicly. What I would tell you is that the bank has done a a really fantastic job of integrating the Peoples Bank merger in the sense that by the end of twenty twenty four, we had we have pushed 18% cost saves out, and that was a target we had for this past June 30. So we exceeded that. We continued to move on integrating.

Clearly, there are some loans we wanted to move out of the bank. We did did that pretty judiciously as well. And and I and I think we’re we’re now looking at, you know, best idea, best practice wins long term for the clients, And we’ve got a few other things we’re rounding out. But as we look to the future, we would want something that added tremendous value to the franchise, a product or service we don’t currently have in a geography that was, you know, close to where we are or, you know, within a state or two we we’ve always focused on. But but I think that’s something that we’ve we’ve done three acquisitions of of of banks in a hundred and six years.

So it’s something we take and and discuss at length with our board and and and move move through that. I don’t think we it’s not ego driven. It’s what’s right for the shareholders, and we we live by that every day.

Dan Cardenas, Analyst, Janney Montgomery Scott: Great. Thank you for taking my questions.

Kate, Conference Operator: Your next question comes from the line of Tim Swizzler with KBW. Your line is open.

Tim Fudzer, Analyst, KBW: Hey, thanks for letting me back on. I just had one follow-up. I appreciate you guys have gone through, I think most of the work derisking the loan book from Codorus has resulted in some good credit trends. But I’d love to hear the details on what kind of loan review you guys have done to gauge the risk of tariffs and what the outcome of that has been.

Unidentified Executive: Yeah. Sure. We took a a couple different approaches on how we tried to assess the risk relative to tariffs. The the one thing we did was we just did a a full stress of the entire c and I book. We stressed their NOI at 1020%.

And, you know, the the outcome of that was that, under that 20% stress scenario, our classifieds total risk based capital ratio would still be below our 25% threshold that, that we’ve set internally. So we feel we feel pretty good about the resiliency of of the portfolio as it relates to any risk, around tariffs.

Tim Fudzer, Analyst, KBW: Great. That’s all I had. Thank you, guys.

Kate, Conference Operator: That concludes the Q and A portion of the presentation. Mr. Quinn, I turn the call back over to you for concluding remarks.

Tom Quinn, President and Chief Executive Officer, Orestown Financial Services, Inc.: Thank you again, Kate, and thank you all for participating today. As always, if we can, clarify any of the items discussed on this call or in the earnings release, please feel free to give us give us a call. Wishing you all a wonderful day. Thank you very much.

Kate, Conference Operator: This concludes the Orstown Financial Services Inc. Second quarter twenty twenty five earnings conference call. You may disconnect your line at this time.

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