Orrstown Financial posts lower Q2 profit after subordinated note redemption charge

Orrstown Financial Services reported net income of $21.2 million, or $1.09 per diluted share, for the second quarter of 2026, down from $21.8 million, or $1.12 per diluted share, in the first quarter, as a one-time charge tied to the redemption of subordinated notes weighed on margin. The company redeemed $31.0 million of subordinated notes on June 30, 2026 and amortized the remaining fair value mark of $1.6 million through interest expense in the quarter. Net interest margin on a tax-equivalent basis edged down to 3.87% from 3.90% in the prior quarter, but was 4.00% on an adjusted basis excluding the redemption-related amortization. Loans held for investment increased by $51.7 million during the quarter, with residential mortgages up $32.8 million and commercial loans up $18.9 million. Asset quality improved as classified loans fell by $8.4 million and nonaccrual loans declined by $6.2 million, bringing nonaccrual loans to 0.58% of total loans at June 30 from 0.74% at March 31. The allowance for credit losses on loans fell to $46.6 million from $47.5 million, or 1.13% of total loans versus 1.17%. Noninterest income declined to $13.8 million from $15.6 million, largely because the first quarter included $2.4 million of income from life insurance policy death benefits. Wealth management income rose to a record quarterly $5.9 million from $5.6 million. The purchase of federal income tax credits reduced income tax expense by $1.6 million, helping lower the effective tax rate to 14.2% from 20.7%. Capital strengthened during the quarter. Tangible common equity rose to 9.5% of total tangible assets from 9.2%, and tangible book value per common share increased to $26.71 from $25.76. Shareholders' equity increased to $621.7 million from $603.2 million. The board declared a cash dividend of $0.30 per common share, payable Aug. 11, 2026, to shareholders of record on Aug. 4, 2026.