Orrstown Financial Services, Inc. reported net income of $18.1 million, or $0.93 diluted earnings per share, for the first quarter ended March 31, 2025. This represents an increase from $13.7 million, or $0.71 diluted earnings per share, in the previous quarter. Excluding merger-related expenses, adjusted net income reached $19.3 million, or $1.00 diluted earnings per share.
Merger-related expenses continued to decline, totaling $1.6 million in Q1 2025, down from $3.9 million in Q4 2024. Management anticipates these expenses will not be material going forward, with operating results expected to normalize beginning later in the second quarter. This indicates the successful winding down of integration activities following the core system conversion.
Net interest income was $48.8 million, with a net interest margin of 4.00%. The net accretion impact of purchase accounting marks contributed $6.9 million, or 51 basis points, to the net interest margin. The company reported a recovery in the provision for credit losses of $0.6 million, a notable improvement from a provision expense of $2.1 million in the prior quarter.
Asset quality metrics showed further improvement, with classified loans decreasing by $12.4 million to $76.2 million and non-accrual loans decreasing by $1.4 million to $22.7 million. Loans held for investment decreased by $55.2 million due to strategic actions to reduce commercial real estate concentrations. Capital ratios strengthened, with tangible book value per share increasing to $21.99, tangible common equity ratio rising to 7.9%, total risk-based capital ratio to 13.1%, and Tier 1 leverage ratio to 8.6%.
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