Cuộc họp công bố kết quả kinh doanh Q3 2026 của Orrstown Financial Services (ORRF): NIM đạt 4,12%

Điểm tin chính

• Orrstown Financial Services đã báo cáo lợi nhuận ròng quý 3/2026 đạt 22,8 triệu USD, tương đương 1,17 USD trên mỗi cổ phiếu pha loãng. Tỷ suất lợi nhuận trên tài sản bình quân đạt 1,60%, trong khi tỷ suất lợi nhuận trên vốn chủ sở hữu bình quân đạt 14,62%.
• Thu nhập lãi thuần tăng 4,5 triệu USD lên 53,3 triệu USD. Biên thu nhập lãi thuần mở rộng lên 4,12%, tăng 25 điểm cơ bản theo báo cáo và tăng 12 điểm cơ bản sau khi điều chỉnh quý 2 cho khoản chi phí chuộc nợ thứ cấp một lần.
• Tổng dư nợ cho vay tăng 95,3 triệu USD, tương đương mức tăng trưởng quy năm 9%. Công ty đã hoàn thành mục tiêu tăng trưởng dư nợ 5% cho cả năm vào ngày 30 tháng 9 năm 2026.
• Các chỉ số tín dụng duy trì ổn định. Dư nợ nhóm phân loại giảm 4 triệu USD, nợ không dồn tích lãi giảm 900.000 USD và ban lãnh đạo cho biết chưa ghi nhận dấu hiệu căng thẳng tài chính ở các bên vay thương mại hoặc cá nhân.
• Tỷ lệ chi phí trên thu nhập cải thiện lên 56% từ mức 58,6% đã điều chỉnh trong quý 2, do chi phí ngoài lãi giảm 400.000 USD xuống 37,3 triệu USD.
• Ban lãnh đạo dự báo biên thu nhập lãi thuần đạt từ 4,05% đến 4,15% cho đến cuối năm 2027, dựa trên mô hình giả định có thêm hai đợt tăng lãi suất 25 điểm cơ bản trong năm tới.

Dữ liệu tài chính cốt lõi

Kết quả kinh doanh và hoạt động

Tăng trưởng dư nợ cho vay diễn ra trên diện rộng ở các danh mục cho vay thương mại, tiêu dùng và thế chấp nhà ở. Orrstown đã phát hành 166 triệu USD khoản vay thương mại mới trong quý, trong đó ban lãnh đạo cho biết phần lớn mức tăng trưởng mảng cho vay thương mại và công nghiệp đến từ nỗ lực cấp tín dụng cho phân khúc thị trường tầm trung thấp và tầm trung trên toàn hệ thống.

Tăng trưởng dư nợ cốt lõi đạt 7% không bao gồm các khoản vay mua lại. Orrstown cũng đã mua lại 15,5 triệu USD khoản vay thế chấp nhà bằng vốn chủ sở hữu trong một giao dịch cơ hội. Theo ban lãnh đạo, danh mục mua lại có lãi suất danh nghĩa bình quân gia quyền là 8,58%, thời gian đáo hạn trung bình ước tính 6 năm và đặc điểm tín dụng người vay tốt.

Việc định giá khoản vay tiếp tục duy trì kỷ luật. Các khoản vay lãi suất thả nổi mới có biên độ chênh lệch bình quân khoảng 225 đến 250 điểm cơ bản, trong khi các khoản vay lãi suất cố định mới được định giá ở vùng thấp của khoảng 7%. Hoạt động trả nợ trước hạn vẫn tiếp diễn nhưng thấp hơn so với đầu năm.

Doanh thu quản lý tài sản tăng lên 6,0 triệu USD từ 5,9 triệu USD, đánh dấu quý thứ hai liên tiếp đạt doanh thu kỷ lục cho Orrstown Financial Advisors. Thu nhập từ thế chấp giảm chủ yếu do điều chỉnh theo giá thị trường đối với danh mục giữ để bán và các khoản vay đang xử lý, trong khi phí giao dịch hoán đổi giảm nhẹ do yếu tố thời điểm.

Tiền gửi tăng 53 triệu USD từ đầu năm đến nay bất chấp dòng tiền ra mang tính mùa vụ trong quý 3. Tiền gửi không trả lãi tăng khoảng 40 triệu USD so với cùng kỳ năm ngoái. Orrstown đã sử dụng thêm các khoản vay nợ để hỗ trợ tăng trưởng dư nợ cho vay, trong khi các nguồn vốn thay thế khả dụng vẫn duy trì ở mức 1,7 tỷ USD.

Danh mục đầu tư đạt tỷ suất sinh lời 4,54%. Tuy nhiên, lãi suất Trái phiếu Kho bạc cao hơn và biên độ chênh lệch tín dụng mở rộng đã làm tăng lỗ đầu tư chưa thực hiện thêm 41,6 triệu USD, làm giảm tỷ lệ vốn cổ phần phổ thông hữu hình và giá trị sổ sách hữu hình trên mỗi cổ phiếu.

Dự báo của Ban lãnh đạo

• Biên thu nhập lãi thuần: Ban lãnh đạo dự kiến đạt khoảng 4,05% đến 4,15% cho đến cuối năm 2027. Dự báo này giả định có thêm hai đợt tăng lãi suất 25 điểm cơ bản trong năm tới và sẽ được đánh giá lại trong quý tiếp theo.
• Tăng trưởng dư nợ cho vay: Công ty tiếp tục đặt mục tiêu tăng trưởng ở mức trung bình một chữ số. Tùy thuộc vào lãi suất và nhu cầu khách hàng, mức tăng trưởng có thể tiệm cận vùng thấp của khoảng này, mặc dù ban lãnh đạo cho biết quy mô phát hành mới có khả năng vượt 5%.
• Thu nhập từ phí: Dự báo thu nhập từ phí quy năm cho đến năm 2027 là 54 triệu USD đến 56 triệu USD.
• Chi phí: Ban lãnh đạo dự báo tỷ lệ chi phí quy năm đạt 153 triệu USD đến 157 triệu USD, bao gồm lạm phát bình thường, tuyển dụng bổ sung và đầu tư công nghệ. Chi phí quý 4/2026 dự kiến về cơ bản sẽ tương đương với quý 3 trước khi tăng dần trong năm 2027.
• Mức độ nhạy cảm với lãi suất: Ban lãnh đạo ước tính mỗi đợt tăng lãi suất 25 điểm cơ bản sẽ đóng góp thêm khoảng 500.000 USD vào thu nhập lãi thuần quy năm và khoảng 5 điểm cơ bản vào biên thu nhập lãi thuần.

Rủi ro và các yếu tố cần theo dõi

Công ty xác định môi trường kinh tế vĩ mô và lãi suất nói chung là yếu tố không chắc chắn chính đối với triển vọng năm 2027. Lãi suất cao hơn có thể ảnh hưởng đến nhu cầu vay của khách hàng và làm tăng sự cạnh tranh về tiền gửi.

Ban lãnh đạo dự kiến hệ số nhạy cảm tiền gửi (deposit beta) sẽ cao hơn mức khoảng 25% trong chu kỳ tăng lãi suất trước đó, mặc dù mức độ cuối cùng sẽ phụ thuộc vào sự cạnh tranh trên thị trường. Trong ngắn hạn, Orrstown vẫn thoải mái sử dụng tiền gửi có kỳ hạn, nguồn vốn thị trường tiền tệ và tiền gửi bán buôn, nhưng ưu tiên dài hạn của ngân hàng là tăng trưởng tiền gửi cốt lõi và cơ cấu nguồn vốn tốt hơn.

Tăng trưởng dư nợ cho vay mạnh mẽ cùng dòng tiền gửi rút ra theo mùa đã đẩy tỷ lệ dư nợ cho vay trên tổng tiền gửi lên 92%, làm tăng sự phụ thuộc vào các khoản vay nợ. Các khoản lỗ đầu tư chưa thực hiện cũng vẫn là một yếu tố cần cân nhắc về vốn, mặc dù ban lãnh đạo cho biết các tỷ lệ vốn an toàn tối thiểu theo quy định đã tăng nhẹ trong quý.

Điểm nổi bật trong phần Hỏi & Đáp với chuyên gia phân tích

Ban lãnh đạo cho biết các khoản vay tiềm năng vẫn duy trì mạnh mẽ và sự cạnh tranh nhìn chung là hợp lý, mặc dù có những giao dịch đơn lẻ có mức giá hoặc cấu trúc tín dụng không hấp dẫn. Công ty dự định tiếp tục đầu tư vào mảng cho vay phân khúc thị trường tầm trung thấp, nhân sự bán hàng và công nghệ.

Các bài kiểm tra ứng phó rủi ro tín dụng đối với danh mục cho vay thương mại và công nghiệp vẫn nằm trong ngưỡng chịu đựng của ngân hàng. Một cuộc rà soát riêng biệt đối với các khoản vay lãi suất cố định dự kiến sẽ điều chỉnh lại trong vòng 12 tháng không ghi nhận dự báo về việc hạ xếp hạng rủi ro hay tổn thất nào.

Orrstown kỳ vọng biên thu nhập lãi thuần cốt lõi sẽ tiếp tục cải thiện nhờ quy mô phát hành khoản vay mới, việc định giá và mức độ nhạy cảm của tài sản bù đắp cho sự sụt giảm tích lũy kế toán từ việc mua lại. NIM cốt lõi không bao gồm kế toán mua lại đạt 3,72%, so với mức khoảng 3,40% đến 3,50% của vài quý trước đó.

Về phân bổ vốn, ban lãnh đạo nhấn mạnh tính linh hoạt giữa cổ tức, mua lại cổ phiếu, chiêu mộ đội ngũ nhân sự chuyên môn, tối ưu hóa chi nhánh và các thương vụ mua lại tiềm năng. Tuy nhiên, trọng tâm chiến lược hiện tại vẫn là tăng trưởng hữu cơ, và hoạt động M&A chỉ được xem xét khi có sự phù hợp về tài chính, văn hóa và địa lý.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good morning. My name is Holly and I will be your conference operator today. At this time, I would like to welcome everyone to the Orrstown Financial Services, Inc. Third Quarter 2026 Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. [Operator Instructions]

I will now turn the call over to Adam Metz, President and Chief Executive Officer of Orrstown Financial Services, Inc. and Orrstown, who will begin the conference. Mr. Metz, please go ahead.

Adam Metz

Thank you, Holly, and good morning, everyone. I would like to thank everyone for participating in Orrstown's third quarter 2026 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 aid, tables, and schedules by going to our website, orstown.com. There you can click on the investor relations link and then on the events and presentations link. Also, before 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 earnings release and investor presentation also include non-GAAP financial measures. The appropriate reconciliations to GAAP are included in those documents. Joining me today on the call is Neelesh Kalani, Orrstown's Chief Financial Officer.

Also participating in the discussion are Zach Corey, Chief Revenue Officer, Bob Carotti, Chief Risk Officer, and Dave Chikowsky, Chief Credit Officer. Orrstown delivered another strong quarter with solid execution across the franchise. Net income was $22.8 million, or $1.17 per diluted share. Return on average equity and return on average assets both increased quarter to quarter and continued to exceed peer multiples. Net interest income rose $4.5 million to $53.3 million. Net interest margin improved to 4.12%, an increase of 25 basis points on an absolute basis, and 12 basis points after adjusting the prior quarter for a one-time charge. Total loans increased by $95.3 million, or 9% annualized, with growth across the commercial, consumer, and residential mortgage portfolios.

Significant loan growth combined with net deposit outflows, some of which were seasonal, required increased reliance on borrowings. Available alternative funding sources remained strong at $1.7 billion. Our efficiency ratio declined to 56% from adjusted 58.6% the prior quarter, reflecting improved operating leverage. Credit quality remains sound. Classified loans and non-accrual loans both decreased quarter to quarter. We remain prudent in our lending decisions, but we believe that the credit environment remains stable and without significant signs of stress, even in a rising rate environment. Neelesh Kalani, our CFO, will now discuss our quarterly results in more detail.

Neelesh Kalani

Thanks, Adam, and good morning, everyone. We had an outstanding quarter with return on average assets of 1.60% and return on average equity was 14.62%. As noted on slide four of the earnings deck, our net interest margin expanded this quarter to 4.12%. This is 12 basis points higher than the prior quarter margin adjusted for the one-time $1.6 million charge from the subordinated debt redemption. During the third quarter, our asset yields increased by eight basis points and our cost of interest bearing liabilities decreased to 2.40%. We continue to maintain a disciplined loan pricing philosophy and also had the benefit of lower funding costs after redeeming our subordinated debt. Since we remain asset sensitive, our asset yields will benefit from the rate increase in September as well as any subsequent hikes.

Through the end of 2027, I'm projecting net interest margin range of 4.05% to 4.15%. We'll reevaluate this range next quarter as we get a better sense of the market dynamics. Since the Cadence Valley merger in 2024, we've been focused on replacing the loan accretion as it winds down. We've been addressing this with strong loan growth and prudent pricing. While we've been achieving that goal, it hasn't been clearly evident given some of the purchase accounting noise. This quarter we can clearly demonstrate that accomplishment. Our interest income on loans, excluding purchase accounting accretion was $62.6 million for the third quarter of '26 compared to $59.0 million in the second quarter.

We believe our loan production capability along with pricing and overall balance sheet management approach will lead to continued net interest income growth going forward. On slide five, fee income decreased to $13.4 million in the quarter from $13.8 million in the second quarter. Wealth management income increased to $6.0 million from $5.9 million in the second quarter. This is the second consecutive quarter in which Orrstown Financial Advisors recorded historical revenues. Swap fees declined slightly due to the impact of timing. And mortgage income also declined mainly due to mark to market adjustments on the held for sale portfolio and pipeline. In the third quarter, non-interest income was 20% of total revenue.

While this is down from the second quarter, it was driven by the growth in non-interest income noted earlier. Fee income remains a meaningful contributor to earnings, supported by continued strength across multiple fee categories. Annualized guidance for fee income into 2027 is in the range of $54 million to $56 million. Moving to slide six, non-interest expenses decreased by $400,000 to $37.3 million in the third quarter of '26. We maintain a focus on managing expenses and have continued to reduce reliance on outside professional services. The efficiency ratio came down to 56% in the third quarter. And on an annualized basis, I'm projecting the expense run rate to be between $153 million and $157 million.

In addition to normal inflationary increases, this assumes some investments in our sales force and technology to ultimately drive higher revenues. Our credit quality is discussed on slide seven. Provision expense was $1.1 million for the third quarter of '26. This is inclusive of $1.0 million of net charge-offs. There were several moving parts to the provision this quarter with the impact of the strong loan production and qualitative factor adjustments being offset by the impact of improving economic data on the quantitative inputs. Our allowance coverage ratio was 1.11% at September 30th, '26, which we believe is adequately aligned with the risk profile of our loan portfolio. Classified loans declined by another $4 million in the third quarter, and non-accrual loans also declined by $900,000 from the second quarter.

We continue to see solid credit metrics in our portfolio. The earnings and performance metrics are on slide eight. Our earnings metrics increased meaningfully in the third quarter. We believe we have the opportunity and ability to continue our growth trajectory. We did experience a decline in the tangible common equity ratio to 9.1% at September 30th, '26 from 9.5% at June 30th, as well as a decline in tangible book value per share. These decreases were directly the result of a $41.6 million increase in unrealized losses investment portfolio, which was driven by the increase in market rates and spreads. The loan portfolio is covered on slide nine.

Loans grew by 9% on an annualized basis in the quarter with loan yields increasing. We had $166 million of commercial loan production during the third quarter and consumer loan growth remained a strength. We have reached our full year 5% loan growth goal at September 30th, 2026. Our loan growth goal remains in mid-single digits going forward. Depending on how rates move and how it impacts client demand, we can see that growth potentially being on the lower end of the mid-single digit range. But we remain confident in our team's ability continue to replicate their success from 2026. Moving over to slide 10, deposits remain up $53 million year to date, despite some seasonal pressure during the quarter. The cost of total deposits declined to 1.83% for the third quarter from 1.88% in the second quarter, reflecting our focus on overall mix.

The loan to deposit ratio increased to 92% at September 30th, '26, as we utilized borrowings to fund the loan growth. The team will maintain its attention on the deposit mix and driving growth in low-cost deposits. The investment portfolio is covered on slide 11. The yield in the portfolio is very strong at 4.54%. The higher unrealized losses I referenced earlier were driven by rapid increase in treasury rates and widening of credit spreads. While it's had a substantial impact on the fair value of the investment portfolio, we are comfortable with the positions that we hold. Slide 12 highlights our capital position.

There was a modest increase in the ratios during the third quarter of '26. The deferred tax asset associated with the increased investment losses partially offset the increase in the capital ratios. We remain confident in further capital generation being driven by strong earnings. Overall, the third quarter of '26 highlighted our ability to achieve substantial loan growth and also effectively manage our balance sheet. Fee income continues to be a significant source of earnings and our declining efficiency ratio demonstrates our enhanced operating leverage. Looking forward, we plan to prudently invest in technology and people while continuing our growth story at the same time. Thank you for your time this morning, and I'll turn the call back to Adam Metz for his closing remarks.

Adam Metz

Thank you, Neil. We are proud of our third quarter performance, which reflected continued expansion in net interest margin, robust loan growth across several segments, successful management of funding costs, and disciplined expense control. Although the economic interest rate and competitive environments remain dynamic, we enter the remainder of the year from a position of strength and remain confident in our ability to execute across a range of economic conditions. As we approach 2027, we believe the company is operating from a position of strength. Our Core banking and wealth management business are all contributing to growth, while credit quality, capital levels, and expense discipline remain favorable. As always, I'd like to thank our employees for their dedication and our shareholders for the trust they place in us. We appreciate your continued support and look forward to updating you on our achievements next quarter. Before I close, I want to share a piece of exciting external recognition that we received this morning.

We are proud to share that Orrstown Bank has been ranked 77th on the Fortune 100 fastest growing companies list for 2026, which is based on annualized total return alongside our revenue and earnings growth over the last three years. A testament to the hard work of our team and the momentum we are building. We would now like to open the call to questions. Before we get started, Holly will briefly review the instructions with you.

Operator

[Operator Instructions]

Your first question comes from the line of Emily Graves with [Hathdate Group]. Emily, your line is now open. Please go ahead.

Unknown Speaker

Good morning everyone. I'm stepping in for Dave Bishop today. I want to start off with, you know, third quarter loan growth was very good driven by multiple portfolios. What additional factors would need to improve for loan growth outlook to move even higher from here? And then also, what have prepayment volumes looked like over the past quarter?

Adam Metz

Yes, we remain confident in our team's ability to generate loan growth. The pipeline, as we look at it today, remains robust. And so our guidance is the mid-single digits, but the team is focused. We're also cognizant of our rising interest rates and our team's ability to adapt and talk to our clients. But as of right now, as we look at going into 2027, we're pretty confident in our ability to produce.

Neelesh Kalani

And on the prepayment side, where the volume's lower, we're still experiencing some prepayment activity. It's certainly lower than what it was earlier in the year.

Unknown Speaker

Great, thank you. And then, do you have a new loan origination yield versus roll off yields?

Neelesh Kalani

Yes, the new spreads on the floating rate loans are probably in the 225 to 250 range on average. Fixed rates are coming in at the low sevens.

Unknown Speaker

Okay. And then, sorry, go ahead. You highlighted overall very sound credit quality in the quarter. I might've missed it. Are you seeing any signs of stress among commercial or consumer borrowers from these higher rates?

Neelesh Kalani

No, that's it. Sorry. No, we've not seen anything yet.

Unknown Speaker

You know, we routinely, proactively look at the portfolio, form various stress tests. We've stressed the entire C&I portfolio under our most conservative stress test. It's the portfolio still holds up within our tolerance ranges. We recently conducted a repricing analysis for any fixed rate loans that are due to reset within the next 12 months. The results of that analysis have been very favorable as well. We've not identified anything where we would anticipate any risk ratings downgrades or losses of any kind. Great. Thank you guys for your time. Thank you.

Operator

Your next question comes from the line of Ken Kohut with Raymond James. Ken, your line is now open. Please go ahead.

Phần hỏi đáp

Kenneth Kohut

Hi, good morning guys. Hope you're doing well.

Adam Metz

Morning, Ken.

Kenneth Kohut

Yes, good morning. Maybe starting with the C&I loan growth during the quarter, it looked really impressive. I'm just wondering how much of that growth is attributable to the middle market lending team that you've been building out over the last year. And where are you seeing these strong growth opportunities? Is it in certain markets or certain industries? So any color there would be great. Thanks.

Adam Metz

Yes, Ken, I don't have the exact number. I would say a significant portion of that increase was driven by our lower and middle market efforts. And it does span the entire footprint. And so as we brought in this expertise, we've enabled the teams to sort of serve that lower end middle market client more effectively. And so we continue to want to invest in that space and it's been very beneficial to us.

Kenneth Kohut

Great. Thanks. And then also on loans, I noticed you guys purchased $15.5 million of home equity loans during the quarter, and you recently discussed home equity as an area of focus. I don't recall you ever discussing purchases specifically, so I'm just wondering if this was organic growth or was it just like an opportunistic transaction that you guys took advantage of? We really, it was an opportunistic transaction.

Neelesh Kalani

If opportunities come up with loan portfolios that become available, if it makes sense from a, certainly from a yield standpoint, and if it fits in with our portfolio, that's something we, something we monitor, but I wouldn't necessarily say it's part of our overall growth strategy.

Adam Metz

But the core of the growth, Ken, has come from our clients. Just as the mortgage market has been a little soft, our home equity product remains a very viable solution to our clients. And so we do have a very good product.

Neelesh Kalani

It's performed. And I would add that our core loan growth for the quarter was 7%, even without the purchases. So that is our priority.

Kenneth Kohut

Primary focus and will continue to be. Thanks for that, caller. Lastly for me, just on expenses, so you guide to 153, 157 annualized through 2027. I think Neil, you said it's primarily coming from technology and people. So do you expect to be at that low end of the range, or annualized range in 4Q, and then kind of gradually increase throughout 2027? Is that the right way to think about it?

Neelesh Kalani

Yes, 4Q, I would expect to be somewhat consistent with third quarter. We'll see, we'll continue to see the impact of new hires and obviously once we hit mid-year next year, salary increases. So it'll slowly build up, but I do have some assumptions in there of hiring new team members so that's built in. And continued investments on the technology side, but ultimately will facilitate our, really with the goal of setting up our sales teams with all the data and ability to do what we need them to do.

Kenneth Kohut

Got it. Thanks. Really appreciate you guys taking my questions.

Operator

Thank you. Your next question comes from the line of Jacob Civiello with D.A. Davidson. Jacob, your line is now open. Please go ahead.

Jacob Civiello

Great. Thank you. Good morning, Adam.

Adam Metz

Good morning, everybody.

Jacob Civiello

So the new '27 outlook calls for NIM of the range of 405 to 415. Is it fair to say that core NIM would probably be expected to be flat-ish and then accretion income will continue to trail lower through next year?

Neelesh Kalani

I would expect some increase in the core NIM. And as we have shown, the core NIM, if we exclude the purchase accounting, we're at 372. If you recall a couple of quarters ago, we were in the 340, 350 range. So we continue to see some gains growth there. I do think we'll get some benefit from increasing as well to help push the core NIM forward. And like I indicated in my comments, it is the focus of ours to which we have accomplished is replacing that accretion.

Jacob Civiello

That's helpful. I mean, what rate assumptions do you have kind of baked in for, for that 405 to 415 range?

Neelesh Kalani

So our modeling assumes another two increases over the course of the next year. Yes, yes. 25 basis points, I assume.

Jacob Civiello

Yes. Okay. Thank you. The... wanted to ask about... really, this is kind of the first outlook extending through '27. What do you think are the biggest risks to hitting what your expectations are? And then ultimately, I guess what my question is driving at is, how do you drive incremental profitability improvement?

Neelesh Kalani

The biggest risk is just the economic environment, some of the assumptions we've laid out, whether they do occur. So that is a focus of ours and ultimately the team is pushing towards hitting our goals. The opportunities that we have continue to be the lending team maintaining and improving upon the loan production volumes. We do think we can potentially do higher higher than the 5% that we put out there. And that is the internal focus for the team. And so both on the lending side, and we've talked about OFA and opportunities there. And continued focus there. And we're internally having a lot of discussions on formalizing full relationships where they don't exist currently. So there's a lot of opportunity there and the investments that we're putting in on the technology side, which again, will arm our sales teams with more data. One example of that is some of that HELOC growth that we've seen in the last couple of quarters is because of the availability of more client data.

We're targeting certain groups, which is that haven't necessarily had the utilization in the past and we're starting to see the benefit from that. And we expect to continue to improve upon that.

Adam Metz

No, I would just echo what Neil said. I think we're very well poised to laser focus on the goals. But the biggest unknown certainly is the economic factors and what that could play into the forecast. But right now as we look here and sit here today, are very engaged. They're moving forward with projects. Our pipelines remain strong.

Jacob Civiello

That's helpful. Thank you both. And just one more question following up on Neil's comments about the kind of hopefulness for loan growth to either exceed that 5% number for next year. So how how comfortable are you funding loan growth with wholesale borrowings versus core deposits if the deposit efforts don't come to fruition as expected?

Neelesh Kalani

Our focus right now in the short term is there will be some reliance on time deposits, money markets wholesale deposits but overall the company's got a mid to longer term strategy that impacts the short term as well. But to focus on driving core deposits that It's across the sales team, the commercial side, as much as the retail side is heavily focused on that. And also on mix. So we've seen the bulk of that increase in deposits for the full year is on the at least from a mixed standpoint is on the non non-interest bearing deposit side, we've increased about $40 million year over year there and that's also benefited the margin. We continue to focus on that, but, so yes, So there will be near-term reliance on, to answer your primary question, we're comfortable with that strategy, but internally we're heavily focused on driving core deposit growth over time.

Adam Metz

Yes, I would just add that our teams are laser focused on our deposit efforts and not only the growth but also the mix which I think we've demonstrated year to date. One of the key strengths of Orrstown Bank is our relationship centric approach and we'll be leaning into that more. We'll also be exploring additional talent and our efforts along with sort of our product suite and our technology offering. So it is a laser focus on it and we remain confident in our ability to execute.

Jacob Civiello

I appreciate it. Thank you both. Yep.

Operator

Your next question comes from the line of Daniel Cardenas with [Breen Capital]. Daniel, your line is now open. Please go ahead.

Daniel Cardenas

Good morning, everybody. Good morning. So just a couple of follow-up questions here on the lending front. Maybe if you could give us some color on the lending front. What competitive factors are looking like? I'm assuming they're still fairly intense, but you know, you know, is the market still rational or are you beginning to see some irrational actions from competitors?

Adam Metz

Now, I would not say that, you know, you certainly have those one-off situations where you scratch your head and you take a pass, whether it's pricing or credit structure. But for the most part, I would say that it's still, you know, people are acting in their normal fashion. And our ability to add value to the relationship really is what differentiates and leads to our success and our growth today, and we'll continue to focus on that. But I would not describe the market yet as irrational.

Daniel Cardenas

Okay, good, good. And then maybe just some color on the $15 million of home equity loans that you bought. What kind of yield were coming with those loans? Just maybe some additional information on the ventures and how average, you know, what's the average age of the portfolio that you bought?

Neelesh Kalani

So the yields are in the 8% range to confirm if we have the average life. I mean, I'm trying to see if I can get that answer for you as we're talking here. Let me see if I can get that answered for you.

Daniel Cardenas

Okay. Right. And they're all high quality performing products. Low loan values, et cetera.

Unknown Speaker

Yes, it's all strong, strong FICO, good quality HELOCs for sure. Average weighted coupon is 8.58. Okay.

Neelesh Kalani

8.58 on the rate. Okay. Average life.

Daniel Cardenas

Are those in market loans?

Neelesh Kalani

They are not.

Daniel Cardenas

They're spread there throughout the country. Okay. The remaining average remaining term is 357 months.

Unknown Speaker

The seasoning on those was the average seasoning was only three months. They were 360 month long.

Daniel Cardenas

Okay. So relatively new with their third year. Okay. All right, perfect, perfect.

Daniel Cardenas

As I think about capital levels for you guys, the capital levels themselves. And just kind of wondering if you could give us a little bit of color as to what you're seeing on the M&A front of anything.

Adam Metz

Yes, I mean, I would say our focus remains internal. We feel like we have an incredible internal growth story. And, you know, we certainly are open to discussions if it makes right financial sense and culturally it makes sense, geographically it makes sense. But right now we're focused on the internal growth story.

Neelesh Kalani

Just backing up on your previous question, that's the estimated.

Unknown Speaker

With our projected average life on the HELOC of six years. All right.

Daniel Cardenas

Great. And then, a last question for me. Just on the margin. Appreciate all the information you've provided. So for every 25 basis point increase that we see from the Fed, what kind of impact does that have on your net interest?

Neelesh Kalani

So from a net interest income standpoint, every 100 basis points is about $2 million. So about a quarter, so about $500,000 impact for every 25 on a run basis. And that would equate to about five basis points for every quarter to the margin.

Daniel Cardenas

Great. Great. Perfect. Appreciate that. I'll step back. Thank you guys. Great quarter. Thank you.

Operator

Your next question comes from the line of Timothy Switzer with KBW. Timothy, your line is now open. Please go ahead.

Timothy Switzer

Hey, good morning. Thank you for taking my question.

Adam Metz

Good morning, Tim.

Timothy Switzer

One quick follow up on the impact of a Fed rate hike there. What are your deposit beta expectations? And how does that change maybe over the course of a Fed rate hike cycle? Say we get like three or four over the next year. Does that beta start to creep up a little bit higher as competition gets more intense?

Neelesh Kalani

Um, so we're still in the process of assessing that because this is a little early in this cycle. I can point to the previous, the previous rate hike cycle where our beta was on the lower side, 25 basis points. I do expect in this environment it'll be something higher than that. And that's what we've modeled. To your other question, it's a little bit unknown what's going to happen. Um, with it's going to be market driven and competition driven. So it's a little hard to predict whether that would change. We do see significant and are feeling it now as there is competition out there from a rate perspective, but I can't directly say whether the beta would significantly increase with each rate hike. It is something we've focused heavily on.

We've been successful, certainly, in the past in managing our funding costs, and both increasing and decreasing rate environments will continue to heavily focus on that on how to manage that.

Timothy Switzer

Okay, how has deposit competition in your markets trended so far? Is it mostly in line with your expectations or a little bit more promos than you would have expected or rate increases?

Neelesh Kalani

It's mostly in line. There's some outliers out there with SP. I'm sure everybody's seeing these significant cash handouts particularly from some of the larger banks so it's interesting seeing the cities of the world and and those institutions getting getting heavily involved here and paying significant dollars. So I would say it's probably a little more than what I expected, but not complete surprise either.

Adam Metz

But that beta in the last rate sort of cycle was low because of our relationship model and we will continue to lean into that. You know, we've modeled slightly more than what our historical performance has been, but, you know, we will continue to lean into that relationship model.

Timothy Switzer

Okay, and then one last one for me, it sounds like you guys don't have a lot of interest in M&A right now. What would be your plans for capital deployment just given the excess capital levels you're sitting at right now? Is it continued dividend increases? Like, you've done more recently. Or should we see you kind of turn on the buyback at some point?

Adam Metz

Yeah, we like the optionality that we have, Tim. I mean, certainly if the right M&A opportunity came up, we would explore that. But we also would look at our dividend share repurchase. Whether it's team lift outs, branch optimization, but that there are a number of things that we look at from a capital allocation perspective. And like I said, we sort of like the optionality that we have today.

Timothy Switzer

All right, thank you for taking my question. Thank you.

Operator

That concludes the Q&A portion of the presentation. Mr. Metz, I turn the call back over to you for concluding remarks.

Adam Metz

Thank you, Holly, and thanks, everybody, for participating today. As always, if we can clarify any of the items discussed on this call or in the earnings release, please contact us. Have a great day.

Operator

This concludes the Orrstown Financial Services, Inc. Third Quarter 2026 Earnings Conference Call. You may now disconnect your line at this time.

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