Sign in

You're signed outSign in or to get full access.

OF

ORRSTOWN FINANCIAL SERVICES INC (ORRF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean operational beat: normalized diluted EPS of $1.00 versus consensus $0.93, and revenue (total operating income) of ~$60.9M versus ~$53.5M consensus; GAAP diluted EPS was $0.93 as merger costs continued to fade [*S&P Global estimates].
  • Net interest margin held at a strong 4.00% (down 5bps q/q), aided by $6.9M purchase accounting accretion (51bps of NIM), while funding costs declined 15–16bps; efficiency ratio improved to 63.2% as merger and consultant costs tapered .
  • Credit quality improved: provision was a $0.6M recovery, nonaccrual loans fell to 0.59% of total loans, and classified loans declined 14% q/q; capital ratios rose across the board (Total RBC to 13.1%, Tier 1 leverage to 8.6%) .
  • Management reiterated mid‑single‑digit loan growth, flagged ~$1M q/q noninterest expense run-rate reduction by end of Q2, and sees core NIM near ~3.50% excluding purchase accretion; loan pipelines are up >40% since year‑end, despite macro/tariff uncertainty .
  • Potential stock catalysts: further capital deployment (management explicitly discussed buybacks and sub‑debt redemption), continued margin stability as deposit costs reprice lower, and accelerating loan growth off stronger pipelines .

What Went Well and What Went Wrong

What Went Well

  • Margin/resilience: “Net interest margin remained strong” at 4.00% with funding costs declining 15bps and deposit mix shifting toward DDA; accretion contributed 51bps to NIM in Q1 .
  • Cost control: Noninterest expense fell $4.7M q/q to $38.2M; merger-related expenses dropped to $1.6M; management expects ~$1M of Q1 noninterest expense to roll out of the run-rate by end of Q2 .
  • Credit clean-up: Provision was a recovery of $0.6M; nonaccrual ratio declined to 0.59%; classified loans fell by $12.4M q/q; net charge-offs were just $0.3M .
    Quote: “We do not believe that merger-related expenses will be material going forward and expect operating results to normalize beginning later in the second quarter” — CEO Thomas R. Quinn .

What Went Wrong

  • Loan contraction: Loans declined $55.2M q/q (commercial down $49.7M) as the bank proactively reduced CRE concentrations and exited higher‑risk credits; this also subdued loan yields by 23bps q/q .
  • Wealth management headwind: Management expects wealth fees to soften in Q2 given equity market conditions; mortgage servicing rights valuations also pressured mortgage banking income .
  • NIM normalization risk: CFO flagged core NIM ~3.50% ex‑accretion with competitive loan pricing and asset‑sensitivity; purchase accretion likely moderates to ~$6M, making retention of margins dependent on funding cost actions and mix .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Operating Income ($USD Millions)$33.51 $61.82 $60.39
Net Interest Income ($USD Millions)$26.88 $50.57 $48.76
Noninterest Income ($USD Millions)$6.63 $11.25 $11.62
Diluted EPS (GAAP) ($)$0.81 $0.71 $0.93
Diluted EPS (Adjusted) ($)$0.88 $0.87 $1.00
Net Interest Margin %3.77% 4.05% 4.00%
Efficiency Ratio %67.0% 69.4% 63.2%
ROA % (Annualized)1.11% 1.00% 1.35%
ROE % (Annualized)12.79% 10.54% 13.98%
Noninterest Income Breakdown ($USD Millions)Q1 2024Q4 2024Q1 2025
Wealth Management$3.10 $4.90 $5.42
Service Charges$1.20 $2.05 $2.40
Interchange$0.91 $1.61 $1.43
Mortgage Banking$0.46 $0.52 $0.30
Swap Fee Income$0.20 $0.60 $0.39
Other/Investments$0.76 / ($0.01) $1.58 / ($0.01) $1.68 / $0.01
Balance Sheet & Credit KPIsQ1 2024Q4 2024Q1 2025
Loans, net of ACL ($USD Millions)$2,273.91 $3,882.53 $3,828.18
Total Deposits ($USD Millions)$2,695.95 $4,623.10 $4,633.72
Loan-to-Deposit Ratio %—85% 84%
ACL / Total Loans %—1.24% 1.23%
Nonaccrual Loans / Total Loans %—0.61% 0.59%
Net Charge-offs ($USD Millions)—$3.00 $0.33
Cost of Interest-Bearing Deposits %2.51% 2.81% 2.65%
Results vs S&P Global ConsensusQ1 2024Q4 2024Q1 2025
EPS (Normalized) – Estimate ($)0.73*1.028*0.926*
EPS (Normalized) – Actual ($)0.88*0.87*1.00*
Revenue – Estimate ($USD Millions)27.94*52.10*53.50*
Revenue – Actual ($USD Millions)33.21*60.07*60.94*
Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Noninterest Expense Run-rateQ2 2025 exit—~$35.5–$36.0M quarterly run-rate; ~$1M of Q1 costs to roll off by end Q2 Lowered run-rate
Core NIM (ex purchase accretion)2025 near term—~3.50% core NIM; purchase accretion around ~$6M, potentially higher with payoffs Maintained/clarified
Loan Growth2025 full yearMid-single-digit growth (implied) Mid-single-digit growth; pipelines up >40% since YE Maintained with stronger pipeline
Deposit CostsNear termStabilizing Further declines expected as promotional balances roll off; DDA growth supports NIM Improving
Wealth Management FeesQ2 2025—Expected to decline in Q2 on market backdrop Lower
CRE ConcentrationOngoingInternal tolerance 350% 302% at Q1 end; selective growth allowed within tolerance Reduced concentration
Capital Actions2025—Considering share buybacks; contemplating sub-debt redemption New optionality
DividendQ1 2025$0.23 (Q4 2024) $0.26 declared, payable May 13, 2025 Raised prior quarter, maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Technology/AutomationCore conversion completed; cost saves targeted New CIO/COO hires; maximize automation to drive efficiency Building capabilities
Tariffs/Macro UncertaintyIntegration focus; macro commentary limited DOGE/tariffs introduced uncertainty; portfolios stress-tested; active client dialogue Heightened macro caution
Loan Growth/PipelinesPost-merger synergies; cautious CRE Pipelines up >40%; mid-single-digit loan growth reiterated Improving demand, prudent risk
Funding Costs/Deposit MixStabilizing; promotional balances a challenge DDA up ~$95M; cost of interest-bearing deposits -16bps q/q; further declines expected Tailwind to NIM
Credit QualityElevated provision in Q3; charge-offs in Q4 Provision recovery; nonaccruals down; classified loans down 14% Improving
Capital & OptionalityRatios dipped post-merger; recovering Total RBC 13.1%; discussing buybacks and sub-debt redemption Strengthening

Management Commentary

  • CEO: “Core earnings were solid and net interest margin remained strong… operating results to normalize beginning later in the second quarter.”
  • CFO: “Margin remains very strong at 4%… I remain cautious… but there is upside potential based on where our deposit rates are positioned… expect ~$1M of Q1 noninterest expenses to be out of our expense run-rate by end of Q2.”
  • COO: “Loan pipelines are up over 40% since year‑end… steps to reduce CRE concentration… positioned well for future loan growth.”

Q&A Highlights

  • Loan growth outlook: Management still targets mid‑single‑digit growth; borrowers may “wait‑and‑see,” but pipelines are strong and diverse (CRE, C&I, solar) .
  • Reserve methodology: Qualitative overlays previously raised; comfort with current ACL level given stress tests and portfolio actions around tariffs/DOGE .
  • NIM trajectory & accretion: Core NIM ~3.50%; purchase accretion about ~$6M, with variability from payoffs; reallocation of excess cash to loans/securities should support NII .
  • Expense run-rate: ~$1M of Q1 noninterest expense expected to roll out by end Q2; aiming for ~$35.5–$36.0M quarterly core run-rate (with selective talent investments) .
  • CRE exposure: CRE-to-capital at 302% vs 350% tolerance; selective growth acceptable for strong credits .
  • Liquidity/securities: Cash up from loan paydowns; ~$15M per month of securities runoff; opportunistic non‑agency MBS adds to margin with limited credit risk .
  • M&A: No imminent deals; disciplined approach focused on shareholder value and cultural fit .

Estimates Context

  • Q1 2025 beat: EPS normalized $1.00 vs $0.926 estimate; revenue ~$60.9M vs ~$53.5M estimate [*S&P Global estimates].
  • Trajectory: Q4 2024 missed normalized EPS ($0.87 actual vs $1.028 estimate) amid lingering merger costs; Q1 2024 was a beat ($0.88 vs $0.73) as the bank exited conversion and grew fee income [*S&P Global estimates] .
  • Implications: With deposit costs declining and cleaner expense run-rate, estimates likely move higher on NIM stability and operating leverage; wealth fee caution in Q2 may temper near-term upward revisions .

Key Takeaways for Investors

  • Margin durability plus falling funding costs create near-term support for NII and earnings, even as purchase accretion normalizes .
  • Expense run-rate is inflecting lower post-merger; expect visible operating leverage from Q2 onward as ~$1M rolls off and automation initiatives scale .
  • Risk posture remains disciplined: CRE concentrations reduced; credit metrics improved; ACL coverage maintained near top of peers per CFO .
  • Loan growth should resume off stronger pipelines; mid‑single‑digit target intact, with measured CRE and diversified C&I/solar opportunities .
  • Capital optionality is rising: improved ratios plus management openness to buybacks and sub‑debt redemption are potential stock catalysts .
  • Watch Q2 wealth management fees for market‑driven softness; any offset from swap activity and other fee initiatives will be supportive .
  • Near-term trading set-up: Q1 beat, improving efficiency, and deposit cost tailwinds argue for constructive sentiment; monitor NIM ex‑accretion and loan growth cadence through Q2.
Citations: 
Press release and 8‑K: **[826154_1ab57cc35cef461588040c0d767e1d2c_0]** **[826154_1ab57cc35cef461588040c0d767e1d2c_1]** **[826154_1ab57cc35cef461588040c0d767e1d2c_2]** **[826154_1ab57cc35cef461588040c0d767e1d2c_3]** **[826154_1ab57cc35cef461588040c0d767e1d2c_4]** **[826154_1ab57cc35cef461588040c0d767e1d2c_5]** **[826154_1ab57cc35cef461588040c0d767e1d2c_6]** **[826154_1ab57cc35cef461588040c0d767e1d2c_7]** **[826154_1ab57cc35cef461588040c0d767e1d2c_8]** **[826154_1ab57cc35cef461588040c0d767e1d2c_9]** **[826154_1ab57cc35cef461588040c0d767e1d2c_10]** **[826154_1ab57cc35cef461588040c0d767e1d2c_11]** **[826154_1ab57cc35cef461588040c0d767e1d2c_12]** **[826154_1ab57cc35cef461588040c0d767e1d2c_13]** **[826154_1ab57cc35cef461588040c0d767e1d2c_14]** **[826154_1ab57cc35cef461588040c0d767e1d2c_15]** **[826154_1ab57cc35cef461588040c0d767e1d2c_16]** **[826154_1ab57cc35cef461588040c0d767e1d2c_17]** **[826154_1ab57cc35cef461588040c0d767e1d2c_18]** **[826154_1ab57cc35cef461588040c0d767e1d2c_19]** **[826154_1ab57cc35cef461588040c0d767e1d2c_20]** **[826154_1ab57cc35cef461588040c0d767e1d2c_21]** **[826154_1ab57cc35cef461588040c0d767e1d2c_22]** **[826154_1ab57cc35cef461588040c0d767e1d2c_23]** **[826154_1ab57cc35cef461588040c0d767e1d2c_24]**; **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:1]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:2]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:3]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:4]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:5]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:6]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:7]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:8]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:9]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:10]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:11]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:12]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:13]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:14]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:15]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:16]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:17]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:18]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:19]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:20]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:21]** **[826154_0000826154-25-000095_ex9912025-q1earningsrelease.htm:22]** **[826154_0000826154-25-000095_orrf-20250422.htm:1]** **[826154_0000826154-25-000095_orrf-20250422.htm:2]**. 
Earnings call transcript: **[826154_ORRF_3422726_0]** **[826154_ORRF_3422726_1]** **[826154_ORRF_3422726_2]** **[826154_ORRF_3422726_3]** **[826154_ORRF_3422726_4]** **[826154_ORRF_3422726_5]** **[826154_ORRF_3422726_6]** **[826154_ORRF_3422726_7]** **[826154_ORRF_3422726_8]** **[826154_ORRF_3422726_9]** **[826154_ORRF_3422726_10]** **[826154_ORRF_3422726_11]** **[826154_ORRF_3422726_12]** **[826154_ORRF_3422726_13]** **[826154_ORRF_3422726_14]** **[826154_ORRF_3422726_15]**. 
Prior quarters press releases: **[826154_d0535a16ab4c49e3b7527675853cc17f_0]** **[826154_d0535a16ab4c49e3b7527675853cc17f_1]** **[826154_d0535a16ab4c49e3b7527675853cc17f_2]** **[826154_d0535a16ab4c49e3b7527675853cc17f_3]** **[826154_d0535a16ab4c49e3b7527675853cc17f_4]** **[826154_d0535a16ab4c49e3b7527675853cc17f_5]** **[826154_d0535a16ab4c49e3b7527675853cc17f_6]** **[826154_d0535a16ab4c49e3b7527675853cc17f_7]** **[826154_d0535a16ab4c49e3b7527675853cc17f_8]** **[826154_d0535a16ab4c49e3b7527675853cc17f_9]** **[826154_d0535a16ab4c49e3b7527675853cc17f_10]** **[826154_d0535a16ab4c49e3b7527675853cc17f_11]** **[826154_d0535a16ab4c49e3b7527675853cc17f_12]** **[826154_d0535a16ab4c49e3b7527675853cc17f_13]** **[826154_d0535a16ab4c49e3b7527675853cc17f_14]** **[826154_d0535a16ab4c49e3b7527675853cc17f_15]** **[826154_d0535a16ab4c49e3b7527675853cc17f_16]** **[826154_d0535a16ab4c49e3b7527675853cc17f_17]** **[826154_d0535a16ab4c49e3b7527675853cc17f_18]** **[826154_d0535a16ab4c49e3b7527675853cc17f_19]** **[826154_d0535a16ab4c49e3b7527675853cc17f_20]** **[826154_d0535a16ab4c49e3b7527675853cc17f_21]** **[826154_d0535a16ab4c49e3b7527675853cc17f_22]** **[826154_d0535a16ab4c49e3b7527675853cc17f_23]**. **[826154_0435b39ecca54003bb931d0d6a2d9c93_0]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_1]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_2]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_3]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_4]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_5]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_6]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_7]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_8]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_9]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_10]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_11]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_12]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_13]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_14]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_15]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_16]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_17]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_18]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_19]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_20]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_21]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_22]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_23]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_24]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_25]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_26]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_27]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_28]** **[826154_0435b39ecca54003bb931d0d6a2d9c93_29]**. 
Other relevant press releases: **[826154_e79d67fd4b214d2aae463f897cf8aac0_0]**. 
Estimates values marked with * are retrieved from S&P Global. ```